10-K

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2005

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

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

Maryland	11-3233650
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
225 Broadhollow Road,	11747
Melville, NY	(Zip Code)
(Address of principal executive offices)
Registrant’s telephone number, including area code: (631) 694-6900
Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Name of Each Exchange on Which Registered
Common stock, $.01 par value	New York Stock Exchange

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

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes      No

Indicate by a check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes      No

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      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.

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check One):

Large Accelerated Filer                Accelerated Filer                Non-Accelerated Filer

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes      No

The aggregate market value of the shares of common stock held by non-affiliates was approximately $3.4 billion based on the closing price on the New York Stock Exchange for such shares on March 7, 2006.

The Company has one class of common stock, issued at $.01 par value per share, with 83,033,195 shares outstanding on March 7, 2006.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Proxy Statement for the Annual Shareholder’s Meeting to be held May 25, 2006 are incorporated by reference into Part III.

TABLE OF CONTENTS

Item No.		Page
	Part I
1.	Business	I-1
1A.	Risk Factors	I-17
1B.	Unresolved Staff Comments	I-27
2.	Properties	I-27
3.	Legal Proceedings	I-39
4.	Submission of Matters to a Vote of Security Holders	I-39
	Part II
5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer               Purchases of Equity Securities	II-1
6.	Selected Financial Data	II-3
7.	Management’s Discussion and Analysis of Financial Condition and Results               of Operations	II-5
7A.	Quantitative and Qualitative Disclosures about Market Risk	II-35
8.	Financial Statements and Supplementary Data	II-36
9.	Changes in and Disagreements with Accountants on Accounting and               Financial Disclosure	II-36
9A.	Controls and Procedures	II-37
9B.	Other Information	II-37
	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 and Related               Stockholder Matters	III-1
13.	Certain Relationships and Related Transactions	III-1
14.	Principal Accountant Fees and Services	III-1
	Part IV
15.	Exhibits and Financial Statement Schedules	IV-1

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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 (the “IPO”) 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 approximately 50 years, Reckson has been engaged in the business of owning, developing, acquiring, constructing, managing and leasing office and industrial properties in the New York City 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 central business district (“CBD”) and suburban office properties in the Tri-State Area. The Company operates as a fully integrated, self- administered and self-managed real estate investment trust (“REIT”). At December 31, 2005 the Company owned 103 properties (inclusive of twenty-five office properties owned through joint ventures) in the Tri-State Area CBD and suburban markets, encompassing approximately 20.3 million rentable square feet, all of which are managed by us. The properties include 17 Class A CBD office properties encompassing approximately 7.2 million rentable square feet. The CBD office properties consist of six properties located in New York City, nine properties located in Stamford, CT and two properties located in White Plains, NY. The CBD office properties comprised 52.1% of our net operating income (property operating revenues less property operating expenses) for the three months ended December 31, 2005. These properties also include 78 Class A suburban office properties encompassing approximately 12.2 million rentable square feet, of which 59 of these properties, or 46.8% as measured by square footage, are located within our 14 office parks. We have historically emphasized the development and acquisition of suburban office properties in large-scale office parks. We believe that owning properties in planned office parks provides strategic and synergistic advantages, including the following: (i) certain tenants prefer locating in a park with other high quality companies to enhance their corporate image, (ii) parks afford tenants certain aesthetic amenities such as a common landscaping plan, standardization of signage and common dining and recreational facilities, (iii) tenants may expand (or contract) their business within a park, enabling them to centralize business functions and (iv) a park provides tenants with access to other tenants and may facilitate business relationships between tenants. Additionally, the properties include eight flex properties encompassing approximately 863,000 rentable square feet.

Through our ownership of properties in the key CBD and suburban office markets in the Tri-State Area, we believe we have a unique competitive advantage as the trend toward the regional decentralization of the workplace increases. Subsequent to the events of September 11, 2001, as well as the impact of technological advances, which further enable decentralization, companies are strategically re-evaluating the benefits and feasibility of regional decentralization and reassessing their long- term space needs. We believe this multi-location regional decentralization will continue to take place, increasing as companies begin to have better visibility as to the future of the economy, further validating its regional strategy of maintaining a significant market share in the key CBD and suburban office markets in the Tri-State Area.

We also own certain land parcels throughout our markets in the Tri-State Area which we hold for current and future development (the “Development Parcels”). During July 2004, we commenced the ground-up development on one of the Development Parcels of a 300,000 square foot Class A office building located within our existing three building executive office park in Melville, NY with a total anticipated investment of approximately $64.0 million. This development was recently completed and is approximately 67% leased. During July 2005, we commenced the ground-up development on one of the Development Parcels of a 37,000 square foot Class A retail property located within our existing six building Landmark Square office park in Stamford, Connecticut with a total anticipated investment of approximately $10.1 million. In August 2005, we recommenced the ground-up development of one of the Development Parcels of a 316,000 square foot Class A office building located within our existing three building office park located in Princeton, NJ with an anticipated incremental investment of approximately $47.0 million. There can be no assurances that the actual cost of these ground-up development projects will not exceed their anticipated amounts. Further, one of the Development Parcels, aggregating approximately 4.1 acres, is classified as held for sale on our balance sheets

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and is expected to close during September 2006 for aggregate consideration of $2.0 million. In addition, as previously discussed, in May 2005, we entered into a contract to sell approximately 60 acres of vacant land in Chatham Township, NJ, subject to a change in zoning and other conditions. There can be no assurances that such conditions will be met or that the transaction will be consummated. Excluding the foregoing, at December 31, 2005 our inventory of Development Parcels aggregated approximately 309 acres of land in 10 separate parcels of which we can, based on current estimates, develop approximately 3.6 million square feet of office space and which we had invested approximately $123.8 million.

Our core business strategy is based on a long-term outlook considering real estate as a cyclical business. We seek to accomplish long-term stability and success by developing and maintaining an infrastructure and franchise that is modeled for success over the long-term. This approach allows us to recognize different points in the market cycle and adjust our strategy accordingly. We are reasonably optimistic about the prospects for continued economic recovery in our markets. We still choose to maintain our conservative operating strategy of focusing on retaining high occupancies, controlling operating expenses, maintaining a high level of investment discipline and preserving financial flexibility.

Historically we have opportunistically purchased underdeveloped land, vacant buildings or buildings that were under managed or under performing. We apply our real estate expertise to develop, redevelop, renovate and reposition our assets with the goal of creating value in these real estate assets. Since the IPO we have developed, redeveloped, renovated or repositioned 20 properties encompassing approximately 3.3 million square feet of office and industrial/flex space.

As of December 31, 2005, we had invested approximately $55.2 million in loans and REIT-qualified joint ventures with Reckson Strategic Venture Partners, LLC (“RSVP”), a real estate venture capital fund created in 1997 as a research and development vehicle for us to invest in alternative real estate sectors outside our core office focus (see “Recent Developments-Other Investing Activities” for further discussion).

All of our interests in our properties, land held for development, the note receivable investments and joint ventures are held directly or indirectly by, and all of our 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, 2005, owned approximately 96.8% of the Operating Partnership’s outstanding common units of limited partnership interest (“OP Units”).

We have established an unsecured credit facility (the “Credit Facility”) with a maximum borrowing amount of $500 million scheduled to mature in August 2008. The Credit Facility requires us to comply with a number of financial and other covenants on an ongoing basis.

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

In order to protect our ability to qualify as a REIT, ownership of our common stock by any single stockholder is limited to 9%, subject to certain exceptions. In June 2003, we amended this provision of our charter to ensure that the ownership limit may only be used to protect our REIT status.

Our principal executive offices are located at 225 Broadhollow Road, Melville, New York 11747 and our telephone number at this location is (631) 694-6900. At December 31, 2005, the Company had approximately 300 employees.

We make certain filings with the Securities and Exchange Commission, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports, available free of charge through our website, www.reckson.com, as soon as reasonably practicable after they are filed with the Securities and Exchange Commission. The Company’s annual report to shareholders, press releases and recent presentations are also available free of charge on the website.

Recent Developments

     Acquisitions, Dispositions and Investing Activities

During January 2005, we acquired, in two separate transactions, two Class A office properties located at One and Seven Giralda Farms in Madison, New Jersey for total consideration of approximately $78 million. One Giralda Farms encompasses approximately 150,000 rentable square feet and Seven Giralda Farms

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encompasses approximately 203,000 rentable square feet. We made these acquisitions through advances under our Credit Facility.

In May 2005, we acquired a 1.4 million square foot, 50-story, Class A office tower located at One Court Square, Long Island City, NY, for approximately $471.0 million, inclusive of transfer taxes and transactional costs. One Court Square is 100% leased to the seller, Citibank N.A., under a 15-year net lease. The lease contains partial cancellation options effective during 2011 and 2012 for up to 20% of the leased space and in 2014 and 2015 for up to an additional 20% of the originally leased space, subject to notice and the payment of early termination penalties. On November 30, 2005, we sold a 70% joint venture interest in One Court Square (the “Court Square JV”) to certain institutional funds advised by JPMorgan Investment Management (the “JPM Investor”) for approximately $329.7 million, including the assumption of $220.5 million of the property’s mortgage debt. The operating agreement of the Court Square JV requires approvals from members on certain decisions including annual budgets, sale of the property, refinancing of the property’s mortgage debt and material renovations to the property. In addition, after September 20, 2009, the members each have the right to recommend the sale of the property, subject to the terms of the mortgage debt, and to dissolve the Court Square JV.

On May 26, 2005, we entered into a contract to sell approximately 60 acres of vacant land located in Chatham Township, NJ for up to approximately $30.0 million, which is based upon a final approved site plan. The closing is anticipated to occur upon receiving final re-zoning approvals and other customary due diligence and approvals. The sale is contingent upon due diligence, environmental assessment, re-zoning and other customary approvals. There can be no assurances that any of the aforementioned contingences will be achieved and the sale ultimately completed.

On June 8, 2005, we sold a three-acre vacant land parcel located on Long Island for approximately $1.4 million which resulted in a net gain of approximately $175,000, net of limited partner’s minority interest.

On June 20, 2005, we acquired our joint venture partner’s 40% interest in a 172,000 square foot office property located at 520 White Plains Road, Tarrytown, NY for approximately $8.1 million which consisted of the issuance of 127,510 OP Units valued at $31.37 per OP Unit and the assumption of approximately $4.1 million of secured mortgage indebtedness of the joint venture.

On July 14, 2005, we acquired two adjacent Class A suburban office buildings aggregating approximately 228,000 square feet located at 225 High Ridge Road in Stamford, CT for approximately $76.3 million. This acquisition was made through a borrowing under our Credit Facility. On August 26, 2005 this property was encumbered, along with eight other properties, with an interest only mortgage in the amount of approximately $55.3 million and on September 21, 2005 was sold to a newly formed joint venture, Reckson Australia Operating Company LLC (the “RAOC JV”) for approximately $76.5 million which included the assignment of the property’s mortgage debt.

On August 18, 2005, we entered into (i) an underwriting agreement relating to the public offering in Australia of approximately A$263.0 million (approximately US$202.0 million) of units (“LPT Units”) in a newly-formed Reckson-sponsored Australian listed property trust, Reckson New York Property Trust (“Reckson LPT”), a newly-formed listed property trust which is traded on the Australian Stock Exchange and (ii) contribution and sale agreements pursuant to which, among other things, we agreed to transfer 25 of our properties for an aggregate purchase price of approximately $563.0 million and containing an aggregate of 3.4 million square feet, in three separate tranches, to the RAOC JV in exchange for a 25% interest in the RAOC JV and approximately $502.0 million in cash (inclusive of proceeds from mortgage debt to be assumed by the RAOC JV). On September 21, 2005, Reckson LPT completed its public offering and the closing of the first of three tranches (“Tranche I”) of this transaction.

In connection with the Tranche I closing, the RAOC JV acquired from us 17 of our suburban office properties containing approximately 2.0 million square feet for approximately $367.0 million (including the assumption of approximately $196.1 million in mortgage debt which had been incurred by us in August 2005). In return, we received a 25% interest in the RAOC JV and approximately $128.1 million in cash resulting in an aggregate gain of approximately $103.6 million. Approximately $22.0 million of the cash received was used to repay certain of our secured mortgage indebtedness on September 30, 2005 and approximately $105.7 million of the cash received was used to establish an escrow account with a qualified

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intermediary for a future exchange of real property pursuant to Section 1031 of the Code (a “Section 1031 Exchange”). A Section 1031 Exchange allows for the deferral of taxes related to the gain attributable to the sale of property if a qualified replacement property is identified within 45 days and such qualified replacement property is acquired within 180 days from the initial sale. As described below, on October 7, 2005 we acquired a qualified replacement property for purposes of this Section 1031 Exchange and thereby deferred a portion of the tax gain from the Tranche I sale.

In connection with the foregoing, on September 21, 2005, Reckson Australia Holdings LLC (“Reckson Holdings”), a wholly-owned subsidiary of the Operating Partnership, and Reckson Australia LPT Corporation (“LPT REIT”), a U.S. real estate investment trust which is wholly-owned by Reckson LPT, entered into the Amended and Restated Limited Liability Company Agreement governing the RAOC JV (the “Operating Agreement”). Pursuant to the Operating Agreement, LPT REIT holds a 75% interest in, and acts as the managing member for, the RAOC JV, and Reckson Holdings holds a 25% non-managing member interest therein. The Operating Agreement provides that, if at any time additional capital contributions are made to the RAOC JV, Reckson Holdings will have a right to make additional capital contributions up to an amount necessary to maintain its 25% interest therein on the same terms and conditions as such other capital contributions.

As the managing member of the RAOC JV, LPT REIT has the sole responsibility for managing its business and affairs on a day-to-day basis, other than with respect to certain identified “major decisions,” including but not limited to a merger or consolidation involving the RAOC JV, a disposition of all or substantially all of its assets, or the liquidation or dissolution of the RAOC JV. Such major decisions require the prior written consent of a majority of the non-managing members.

On January 6, 2006, Reckson LPT completed the second Tranche of this transaction (“Tranche II”) whereby the RAOC JV acquired three of our suburban office properties; 6800 and 6900 Jericho Turnpike, Jericho, NY and 710 Bridgeport Avenue, Shelton, CT, aggregating approximately 761,000 square feet for approximately $84.6 million, including the assignment of approximately $20.1 million of mortgage debt. Approximately $25.1 million of sales proceeds was used to establish an escrow account for the purpose of a future Section 1031 Exchange. The balance of the cash proceeds was used to fund our development activities and for general corporate purposes.

The Tranche III closing (“Tranche III”), consisting of five of our properties valued at approximately $111.8 million, is scheduled to close in October 2006 and will include the assumption of approximately $51.5 million of existing mortgage debt. The Tranche III closing is subject to customary closing conditions.

Our Service Companies provide asset management, property management, leasing, construction and other services to the RAOC JV and affiliates of ours are entitled to transaction fees and ongoing fees for providing services to the RAOC JV. As of December 31, 2005, we earned and received approximately $3.6 million in transaction related fees and approximately $966,000 of ongoing fees from the RAOC JV. In addition, we also formed Reckson Australia Management Limited (“RAML”), a wholly owned subsidiary, that will manage Reckson LPT and serve as its “Responsible Entity”. The Responsible Entity will be managed by a six member board that includes three independent directors domiciled in Australia. To address and mitigate any potential conflicts of interest with Reckson LPT or its affiliates the Company has adopted the following policies: (i) all transactions between the Company and Reckson LPT or its affiliates shall require the approval of a majority of the independent directors of both the Company and Reckson LPT, (ii) executive officers and directors of the Company are prohibited from owning equity in the Reckson LPT, and (iii) the adoption of an express policy which mandates that property services and leasing decisions shall be made without regard to the Company’s percentage ownership of any property.

Under the Operating Agreement, Reckson Holdings will have the right, beginning September 21, 2007, to require LPT REIT to redeem all or a portion of Reckson Holdings’ membership interest in the RAOC JV for cash or, at LPT REIT’s option, shares of LPT REIT’s common stock (which may be exchanged for LPT Units) on a one-for-one basis. Reckson Holdings also has the right to cause the liquidation of the RAOC JV in the event that RAML is replaced as Reckson LPT’s Responsible Entity. In addition, the Operating Agreement contains a right of first refusal granting Reckson Holdings the right to acquire any asset of the RAOC JV, at fair market value, in the event of an attempted sale of such asset or the exercise of Reckson Holdings’ right to liquidate the RAOC JV.

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In connection with the Tranche I closing, on September 21, 2005 the Company, RAOC JV and LPT REIT entered into an Option Agreement (the “Option Agreement”) pursuant to which we granted RAOC JV options to acquire ten additional properties from the Operating Partnership over a two year period, beginning January 1, 2006. The properties contain an aggregate of approximately 1.2 million square feet and will be priced based on the fair market value at the time of each transfer to RAOC JV. The Option Agreement contains a right of first refusal granting RAOC JV the right to acquire any option property from Reckson in the event we receive, and are amenable to, an offer from a third party to purchase such option property. The Option Agreement will terminate under certain circumstances, including if (i) RAOC JV sends notice of its intent to exercise its option but fails to close as obligated, (ii) RAOC JV is in default under the Option Agreement, the contribution agreement or the sale agreement or (iii) RAML or an affiliate of ours is no longer the Responsible Entity of Reckson LPT.

In connection with the mortgage indebtedness securing nine of the Tranche I properties, which were transferred to the RAOC JV on September 21, 2005, and three of the Tranche III properties scheduled to be transferred to the RAOC JV during October 2006, we have guaranteed to the lender certain customary non-recourse carve-outs, as well as certain obligations relating to the potential termination of a number of leases at four of these properties. We have also guaranteed to the lender certain capital requirements related to these properties. We will be relieved of the customary non-recourse carve-outs and capital requirements upon transfer of the respective properties to the RAOC JV and the RAOC JV meeting a net worth test of at least $100.0 million. We will be relieved of all but two of the lease related obligations upon transfer of the respective properties to the RAOC JV and the RAOC JV meeting a net worth test of at least $200.0 million. The RAOC JV has agreed to indemnify us for any loss, cost or damage it may incur pursuant to our guaranty of these obligations. As of December 31, 2005, the RAOC JV met the $100.0 million net worth threshold and there remain approximately $18 million of aggregate guarantees outstanding.

During September 2005, we entered into a letter of intent with an entity owned by the owner of the New York Islanders professional hockey team to enter into a 50/50 joint venture to potentially develop over five million square feet of office, residential, retail and hotel space in the Mitchel Field, Long Island sub-market in and around Nassau County’s Veterans Memorial Coliseum where we are currently the largest owner of office properties. In February 2006, we were selected as one of the two finalists to continue to negotiate with the County of Nassau prior to the County’s final selection. If selected by the County, the development will remain subject to numerous governmental approvals, compliance, zoning and other customary approvals. In addition, if selected we would serve as the master developer of the development. There can be no assurances that we will enter into the aforementioned joint venture, that the joint venture will be selected as the developer or that all required approvals, zoning and compliance can be obtained.

On September 22, 2005, we sold two suburban office properties, aggregating approximately 69,000 square feet, located at 310 and 333 East Shore Road in Great Neck, Long Island for aggregate consideration of approximately $17.3 million. As a result, we recorded an aggregate gain, net of limited partners’ minority interest, of approximately $13.6 million. For federal income tax purposes we recognized a tax gain of approximately $12.6 million. Such tax gain did not affect our REIT distribution requirements.

On October 7, 2005, we acquired a 1.1 million square foot Class A office complex located in Uniondale, NY, commonly referred to as “EAB Plaza”, for approximately $240 million and changed the name of the complex to Reckson Plaza. The property is encumbered by a long-term ground lease which has a remaining term in excess of 75 years, including renewal options. The acquisition of Reckson Plaza was financed, in part, (i) from sales proceeds being held by a qualified intermediary pursuant to a Section 1031 Exchange as the property was an identified, qualified replacement property, (ii) a borrowing under our Credit Facility, (iii) the satisfaction of our $27.6 million junior participating mezzanine loan which was secured by a pledge of an indirect interest of an entity which owned the ground leasehold estate and (iv) cash on hand. In connection with this acquisition we also acquired an adjoining 8.2 acre development site for approximately $19.0 million which was financed through a borrowing under our Credit Facility.

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On October 20, 2005, we acquired a 118,000 square foot suburban office property situated on ten acres of land located at 711 Westchester Avenue in White Plains, NY for approximately $24.8 million. This acquisition was financed through the assumption of approximately $12.5 million of existing debt on the property and a borrowing under our Credit Facility.

On December 20, 2005, we sold our property located at 48 Harbor Park Drive, Port Washington, NY for approximately $6.4 million and recorded a gain on sales of real estate of approximately $2.7 million, net of limited partners’ minority interest.

On December 20, 2005, we sold our property located at 100 Wall Street, New York, NY for approximately $134.0 million and recorded a gain on sales of real estate of approximately $45.0 million, net of limited partners’ minority interest. The property was secured by a first mortgage and cross collateralized with another one of our New York City properties. In order to effectuate the sale and not incur prepayment penalties which would be due under a prepayment of the mortgage, we provided the lender with replacement collateral and assigned this mortgage debt to the replacement collateral properties. In connection with the assignment, we paid a substitution of collateral fee and other costs aggregating approximately $2.0 million. In addition, we provided the purchaser with a mezzanine loan in the amount of $30.0 million which bears interest at 15.0% per annum, requires payments of interest only and has a term of two years. Cash proceeds of approximately $100.9 million were used, in part, to acquire a 14 building suburban office portfolio as discussed below.

On December 29, 2005, we acquired a 1.6 million square foot suburban office portfolio, consisting of 14 buildings, concentrated within five business parks, located in Westchester County, for approximately $255.0 million. We made this acquisition through a borrowing under a $250 million term loan from Goldman Sachs Mortgage Company (the “Term Loan”) and cash sales proceeds from the sale of our property located at 100 Wall Street, New York, NY.

On March 16, 2005, a wholly owned subsidiary of the Operating Partnership advanced under separate mezzanine loan agreements, each of which bears interest at 9% per annum, (i) approximately $8.0 million which matures in April 2010 and is secured, in part, by indirect ownership interests in ten suburban office properties located in adjacent office parks in Long Island, NY and (ii) approximately $20.4 million which matures in April 2012 and is secured, in part, by indirect ownership interests in twenty-two suburban office properties located in adjacent office parks in Long Island, NY. Each mezzanine loan is additionally secured by other guaranties, pledges and assurances and is pre-payable without penalty after 18 months from the initial funding. We made these investments through a borrowing under our Credit Facility.

     Notes Receivable Investment Activity

In May 2005, we acquired a 65% interest in an $85 million, 15-year loan secured by an indirect interest in a 550,000 square foot condominium in a Class A office tower located at 1166 Avenue of the Americas, New York, NY for approximately $55.3 million. The loan accrues interest compounded at 9.0% and pays interest at an annual rate of 6.0% through March 2010, 8.5% thereafter through March 2015 and 11.0% thereafter through maturity in 2020. The loan is pre-payable only under certain circumstances and, in any case, not before 2009. Upon a capital event related to the indirect interest in the property which secures the loan, we are entitled to participate in 30% of the net proceeds derived from such capital event. This investment replaced our $34.0 million mezzanine loan, including accrued and unpaid interest, to one of the partners owning such condominium interest. We also acquired an approximately 5% indirect ownership interest in the property for a purchase price of approximately $6.2 million. The property is currently 100% leased. The balance of these investments was funded through a borrowing under our Credit Facility and cash on hand.

On September 30, 2005, we advanced $20.0 million to entities that are each controlled by Cappelli Enterprises under a junior mezzanine loan. This mezzanine loan bore interest at 15.0% per annum, was secured by a subordinate pledge of an indirect ownership interest in a 550,000 square foot office condominium in a Class A office tower located at 1166 Avenue of the Americas, New York, NY and had a scheduled maturity date of March 31, 2006. As described above, during May 2005, we made a $55.3 million participating loan investment secured by interests in this property (including the interests securing this new mezzanine loan). We also advanced a $10.0 million bridge loan to Louis Cappelli, an affiliate, under a promissory note (the “Promissory Note”) in anticipation of closing a longer-term structured finance transaction.

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The Promissory Note bore interest at 4.86% per annum, matured on November 30, 2005, was secured by a security interest in a reserve account owned by the borrower and was pre-payable in whole or in part without penalty. These investments were funded through a borrowing under our Credit Facility. On November 30, 2005, the Promissory Note was repaid, we advanced an additional $5.0 million under the mezzanine loan and adjusted its interest rate to 17.5% per annum and extended its maturity date to November 30, 2009. The refinanced junior mezzanine loan is secured by interests in the 1166 Avenue of the Americas condominium and guaranteed by Mr. Cappelli.

On October 7, 2005, a wholly owned subsidiary of the Operating Partnership advanced under a second mortgage loan agreement $10.0 million to an entity which owns a 60,000 square foot office property located on Madison Avenue in New York City which is currently slated for residential conversion. The borrower is an affiliate of the seller of EAB Plaza which we acquired on October 7, 2005. This mortgage loan bears interest at 20.0% per annum, requires monthly payments of interest only, matures on October 7, 2007 and is secured by the underlying property. The mortgage loan is not pre-payable until the earlier of January 10, 2007 or the sale of the underlying property and upon notice. In addition to this mortgage loan, Reckson Construction and Development, LLC (“RCD”) entered into a development agreement with the owner of the property to perform certain predevelopment, development and/or other services with respect to the property. In exchange for its services, RCD will receive a development fee of $2.0 million which is payable in equal monthly installments over a two-year period. Interest due under the mortgage note during its term and the entire development fee are currently being held in a segregated account under our control.

At December 31, 2005, we had invested approximately $93.4 million in mezzanine loans and approximately $55.3 million in a participating loan investment. In general these investments are secured by a pledge of either a direct or indirect ownership interest in the underlying real estate or leasehold, other guaranties, pledges and assurances.

The following table sets forth the terms of the mezzanine loans at December 31, 2005 (in thousands):

Property	Amount		Interest Rate		Funding		Maturity
Long Island office portfolio	$	8,031		9.00%		Mar., 2005		Apr., 2010	(a)
Long Island office portfolio		20,356		9.00%		Mar., 2005		Apr., 2012	(a)
72 Madison Avenue, NY, NY		10,000		20.00%		Oct., 2005		Oct., 2007
1166 Avenue of the Americas, NY, NY (b)		25,000		17.50%		Nov., 2005		Nov., 2009
100 Wall Street, NY, NY		30,000		15.00%		Dec., 2005		Dec., 2007
	$	93,387

(a) Prepayable without penalty after 18 months from initial funding.

(b) Junior mezzanine loan secured by interests in a 550,000 square foot condominium interest.

At December 31, 2005, we also held a $17.0 million note receivable, which bore interest at 12% per annum and was secured by a minority partnership interest in Omni Partners, L.P., owner of the Omni, a 579,000 square foot Class A office property located in Uniondale, NY (the “Omni Note”).

As of December 31, 2005, we held one other note receivable, which aggregated $1.0 million and carried an interest rate of 10.50% per annum (the “Other Note”) and collectively with the Omni Note, our mezzanine loans and preferred loan investments (the “Note Receivable Investments”). The Other Note matures on January 31, 2010 and is secured in part by a minority partner’s preferred unit interest in the Operating Partnership.

As of December 31, 2005, management has made subjective assessments as to the underlying security value on the Note Receivable Investments. These assessments indicate an excess of market value over the carrying value and, based on these assessments, we believe there is no impairment to their carrying value.

     Other Investing Activities

During 1997, the Company formed FrontLine Capital Group (“FrontLine”) and RSVP, a real estate venture capital fund whose common equity is held indirectly by FrontLine. In connection with the formation and

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subsequent spin-off of FrontLine, the Operating Partnership established an unsecured credit facility with FrontLine (the “FrontLine Facility”) in the amount of $100.0 million. The Operating Partnership also approved the funding of investments of up to $110.0 million relating to REIT-qualified investments through RSVP-controlled joint ventures or advances made to FrontLine under an additional unsecured loan facility (the “RSVP Facility”) having terms similar to the FrontLine Facility (advances made under the RSVP Facility and the FrontLine Facility hereafter, the “FrontLine Loans”). To date, approximately $59.8 million has been funded to RSVP-controlled joint ventures and $142.7 million through the FrontLine Loans (collectively, the “RSVP/FLCG Investments”) on which we accrued interest (net of reserves) of approximately $19.6 million.

A committee of the Board of Directors, comprised solely of independent directors, considers any actions to be taken by the Company in connection with the RSVP/FLCG Investments and during 2001, based on our assessment of value and recoverability of the RSVP/FLCG Investments and considering the findings and recommendations of the committee and its financial advisor, we recorded a $163.0 million valuation reserve charge, inclusive of anticipated costs against the carrying cost of the RSVP/FLCG Investments. In addition, we have discontinued the accrual of interest income with respect to the FrontLine Loans and have also reserved against our share of GAAP equity in earnings, if any, from the RSVP-controlled joint ventures funded until such income is realized through cash distributions.

FrontLine is in default under the FrontLine Loans and on June 12, 2002, filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code.

In September 2003, RSVP completed the restructuring of its capital structure and management arrangements whereby a management company formed by its former managing directors, whose contracts as managing directors were terminated, has been retained to manage RSVP pursuant to a management agreement. The management agreement, which has a term of three years and is subject to early termination in the event of the disposition of all of the assets of RSVP, provides for an annual base management fee and disposition fees equal to 2% of the net proceeds received by RSVP on asset sales (the “Fees”). The Fees are subject to a maximum over the term of the agreement of $7.5 million. In addition, the former managing directors of RSVP retained a one-third residual interest in RSVP’s assets which is subordinated to the distribution of an aggregate amount of $75.0 million to RSVP and/or us in respect of RSVP-controlled joint ventures.

In connection with RSVP’s capital restructuring, RSVP and certain of its affiliates obtained a $60.0 million secured loan (the “RSVP Secured Loan”). On November 3, 2005, the outstanding balance of the RSVP Secured Loan was repaid primarily with proceeds received from the sale of certain assisted living related assets.

The net carrying value of our investments in the RSVP/FLCG Investments of approximately $55.2 million was reassessed with no change by management as of December 31, 2005.

Scott H. Rechler, who serves as our Chief Executive Officer, President and Chairman of the Board, serves as CEO and Chairman of the Board of Directors of FrontLine and is its sole board member. Scott H. Rechler also serves as a member of the management committee of RSVP and serves as a member of the Board of Directors of American Campus Communities, a company formally owned by RSVP.

In November 2004, a joint venture in which RSVP owns approximately 47% executed a binding agreement to contribute its Catskills, NY resort properties (excluding residentially zoned land) to Empire Resorts Inc. (NASDAQ: NYNY) (“Empire”) for consideration of 18.0 million shares of Empire’s common stock and the right to appoint five members of their Board of Directors. On December 29, 2005, the agreement was terminated and the joint venture received options to purchase approximately 5.2 million options of common stock of Empire at a price of $7.50 per share. The options will be exercisable until December 29, 2006.

In addition to the foregoing we also have investments in unconsolidated real estate joint ventures of (i) an approximate 5% indirect ownership interest in a joint venture that owns an investment in a New York City Class A office tower where our share of unconsolidated joint venture debt is approximately $11.8 million with an interest rate of 6.35% per annum and a remaining term of approximately 15 years, (ii) a 25% joint venture interest in the RAOC JV where our share of unconsolidated joint venture debt is approximately $52.3 million with a weighted average interest rate of 5.26% per annum and a weighted average term of 4.6 years and (iii) a 30% joint venture interest in the property located at One Court Square, Long Island City, NY where our share

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of unconsolidated joint venture debt is $94.5 million with an interest rate of 4.91% per annum and a remaining term of approximately 9.7 years.

     Leasing Activity

During the year ended December 31, 2005, the Company executed 283 leases encompassing approximately 2.2 million square feet. The following table summarizes the leasing activity by location and property type:

	Number of leases		Leased square feet		Average effective rent per square foot (1)
CBD office properties
Connecticut		36		416,034	$	25.51
New York City		40		377,639		40.98
Westchester		6		17,834		26.48
Subtotal/Weighted average		85		811,507		32.73
Suburban office properties
Long Island		98		694,711		25.32
New Jersey		29		181,702		25.11
Westchester		67		500,443		21.93
Subtotal/Weighted average		194		1,376,856		24.06
Flex properties
New Jersey		4		45,918		7.28
Subtotal/Weighted average		4		45,918		7.28
Total		283		2,234,281		26.86

(1) Base rent adjusted on a straight-line basis for free rent periods, tenant improvements and leasing commissions

     Financing Activities

We maintain our $500 million Credit Facility with JPMorgan Chase Bank, as administrative agent, Wells Fargo Bank, National Association as syndication agent and Citicorp North America, Inc. and Wachovia Bank, National Association as co- documentation agents. The Credit Facility matures in August 2008, contains options provides for a one-year extension subject to a fee of 25 basis points and, upon receiving additional lender commitments, for an increase to the maximum revolving credit amount to $750 million. In addition, borrowings under the Credit Facility accrue interest at a rate of LIBOR plus 80 basis points and the Credit Facility carries a facility fee of 20 basis points per annum. In the event of a change in the Operating Partnership’s senior unsecured credit ratings the interest rates and facility fee are subject to change. At December 31, 2005, the outstanding borrowings under the Credit Facility aggregated $419.0 million and carried a weighted average interest rate of 5.17% per annum.

The following table sets forth our applicable margin, pursuant to the Credit Facility, which indicates the additional respective percentages per annum applied to LIBOR based-borrowings determined based on the Operating Partnership’s senior unsecured credit rating:

Senior unsecured credit rating	Applicable Margin
A-/A3		0.500%
BBB+/Baa1		0.525%
BBB/Baa2		0.600%
BBB-/Baa3		0.800%
Below BBB-/Baa3 or unrated		1.100%

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We utilize the Credit Facility primarily to finance real estate investments, fund our real estate development activities and for working capital purposes. On December 29, 2005, we borrowed $150.0 million under the Credit Facility and with cash available acquired a 1.6 million square foot suburban office portfolio, consisting of 14 buildings, located in Westchester County, New York. On January 13, 2006, we repaid $254.0 million of outstanding borrowings under the Credit Facility primarily from the proceeds of the Term Loan. As a result, our availability to borrow additional funds increased to $335.0 million. At December 31, 2005, we had availability under the Credit Facility to borrow approximately an additional $81.0 million, subject to compliance with certain financial covenants.

We maintain access to unsecured debt markets through the Operating Partnership’s investment grade ratings on its senior unsecured debt. As of December 31, 2005, these ratings from the major rating organizations are as follows:

Rating Organization	Rating		Outlook
Fitch Ratings		BBB–		Stable
Moody’s Investors Service		Baa3		Stable
Standard & Poor’s		BBB–		Stable

These security ratings are not a recommendation to buy, sell or hold the Company’s securities and they are subject to revision or withdrawal at any time by the rating organization. Ratings assigned by each rating organization have their own meaning within that organization’s overall classification system. Each rating should be evaluated independently of any other rating.

We capitalized interest incurred on borrowings to fund certain development projects in the amount of $11.4 million, $8.1 million and $8.0 million for the years ended December 31, 2005, 2004 and 2003, respectively.

In connection with the acquisition of certain properties, contributing partners of such properties have provided guarantees on certain of our indebtedness. As a result, we maintain certain outstanding balances on our Credit Facility.

On May 13, 2005, we obtained a $470.0 million unsecured bridge facility (the “Bridge Facility”) from Citibank, N.A. During August 2005, we repaid $303.5 million of outstanding borrowings under the Bridge Facility with net proceeds received from the secured debt financing of the property located at One Court Square, Long Island City, NY. In addition, in September 2005, we repaid the remaining balance outstanding under the Bridge Facility of $166.5 million with proceeds received from the secured debt financing of a pool of nine of our suburban office properties. As a result of the foregoing, the Bridge Facility has been retired and is no longer available for borrowings thereunder.

On June 20, 2005, in connection with the acquisition of our joint venture partner’s 40% interest in the property located at 520 White Plains Road, Tarrytown, NY, we assumed approximately $4.1 million of secured mortgage indebtedness of the joint venture. As a result, our total secured debt related to this property was approximately $11.1 million. On September 1, 2005, the mortgage note’s scheduled maturity date, we repaid the then outstanding balance of approximately $10.9 million with proceeds received from the August 26, 2005 mortgage financings discussed below, resulting in the satisfaction of this note.

On August 3, 2005, we placed a first mortgage in the amount of $315.0 million on the property located at One Court Square, Long Island City, a sub-market of New York City. The mortgage note bears interest at a fixed rate of 4.905% per annum, requires monthly payments of interest only through September 1, 2015, the anticipated repayment date (“ARD”). In the event the mortgage is not satisfied on the ARD, all excess cash flow, as defined, shall be applied to amortize the loan and the interest rate shall be reset to 2% plus the greater of 4.905% and the then-current ten-year U.S. Treasury yield. The final maturity date of the loan is May 1, 2020. The mortgage note is secured by the property and is otherwise non-recourse except in limited circumstances regarding breaches of material representations. As additional collateral for the loan, the lender under certain circumstances may require letters of credit for their benefit, in the amount of $10.0 million each, during September 2013, March 2014 and September 2014 if Citibank, N.A., the property’s current sole tenant, exercises its second cancellation option for up to 20% of its leased space during 2014 and 2015 and the space has not been re-leased. Proceeds received from this financing, net of mortgage recording tax and other

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costs, of approximately $303.5 million, were used to repay a portion of our Bridge Facility. On November 30, 2005, we sold a 70% interest in this property to a group of institutional investors led by JPMorgan Investment Management which included their assumption of $220.5 million of the mortgage debt.

On August 26, 2005, we encumbered a pool of nine of our suburban office properties with interest only mortgages in the aggregate amount of approximately $196.1 million. Proceeds received, net of costs and required escrows, of approximately $188.3 million were used to repay borrowings under our Credit Facility, the remaining balance outstanding under our Bridge Facility and for the repayment of the secured property debt on 520 White Plains Road, Tarrytown, NY. On September 21, 2005, these properties and related underlying mortgages were sold to the RAOC JV. The mortgage notes bear interest at a fixed interest rate of 5.20% per annum and mature in September 2010. These mortgage notes are cross-collateralized by the nine properties in the pool.

On September 12, 2005 we encumbered three of our suburban office properties with interest only mortgages in the aggregate amount of approximately $51.5 million. Proceeds received, net of costs and required escrows, of approximately $50.2 million were used to repay borrowings under our Credit Facility and for general corporate purposes. The mortgage notes bear interest at a fixed interest rate of 5.20% per annum and mature in October 2010. We have contracted to sell these properties to the RAOC JV, subject to the mortgage notes, in October 2006. These mortgage notes are cross-collateralized by the three properties in the pool.

Pursuant to the terms of the mortgage note encumbering the property located at 200 Summit Lake Drive in Valhalla, NY, the note was prepayable, without penalty, subsequent to September 1, 2005. On September 30, 2005, we repaid the outstanding balance of approximately $18.1 million with proceeds received from the RAOC JV which resulted in the satisfaction of this note.

The mortgage debt on the property located at 395 North Service Road in Melville, NY was scheduled to mature on October 28, 2005. Pursuant to the terms of the note, we prepaid the mortgage debt on September 30, 2005, at which time the outstanding balance was approximately $18.6 million. We funded this prepayment with a borrowing under our Credit Facility and proceeds received from the sale of properties to the RAOC JV which resulted in the satisfaction of this note.

On October 20, 2005, in connection with our acquisition of 711 Westchester Avenue in White Plains, NY we assumed an existing first mortgage debt on the property of approximately $12.5 million. The mortgage bears interest at approximately 5.4% per annum, requires monthly payments of interest only through January 2007 and monthly payments of interest and principal based on a 30 year amortization schedule commencing in February 2007. The mortgage matures on January 1, 2015.

On December 20, 2005, in connection with the sale of our mortgaged property located at 100 Wall Street, New York, NY, we exercised our right under the mortgage note to replace collateral and assign the related mortgage debt to two of our suburban office properties; 275 Broadhollow Road, Melville, NY and 90 Merrick Avenue, Merrick, NY. In connection with the assignment, we paid a substitution of collateral fee and other costs totalling approximately $2.0 million. Such costs are being amortized to expense over the remaining term of the mortgage.

At December 31, 2005, we had 15 fixed rate mortgage notes payable with an aggregate outstanding principal amount of approximately $625.1 million. These mortgage notes are secured by properties with an aggregate cost basis at December 31, 2005 of approximately $1.2 billion and which are pledged as collateral against the mortgage notes payable. In addition, approximately $41.6 million of the $625.1 million is recourse to the Company. The mortgage notes bear interest at rates ranging from 5.20% to 8.50%, and mature between 2006 and 2015. The weighted average interest rates on the outstanding mortgage notes payable at December 31, 2005, 2004 and 2003 were approximately 7.1%, 7.3%, and 7.2%, respectively.

At December 31, 2005, our unconsolidated joint ventures had total indebtedness of approximately $751.1 million, which was comprised of $13.0 million of floating rate unsecured debt and approximately $738.1 million of fixed rate mortgage indebtedness with a weighted average interest rate of approximately 5.1% and a weighted average maturity of approximately 8.3 years. Our aggregate pro-rata share of the unconsolidated joint venture debt was approximately $158.6 million.

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On January 6, 2006, we sold two of our suburban office properties; 6800 and 6900 Jericho Turnpike, Jericho, NY to the RAOC JV, subject to their mortgage debt of approximately $20.1 million. The RAOC JV subsequently pre-paid the mortgage notes with proceeds from an unrelated financing transaction.

On January 13, 2006, we obtained our $250.0 million Term Loan from Goldman Sachs Mortgage Company. The Term Loan is for an initial term of three months and we have the option for a three month extension upon paying a one-time fee of 25 basis points on the amount then outstanding. The Term Loan has terms, including interest rates and financial covenants, substantially similar to our Credit Facility. Proceeds from the Term Loan were used to repay outstanding borrowings under our Credit Facility.

     Stock and Other Equity Offerings

During 2005, we received approximately $14.1 million of proceeds from the exercise of 571,194 stock options.

During 2005 and 2004, the Operating Partnership issued 127,510 and 33,843 OP Units, respectively, in connection with property acquisitions. In addition, during 2005, certain limited partners in the Operating Partnership exchanged approximately 1.6 million OP Units for an equal number of shares of the Company’s common stock.

During June 2005, the Operating Partnership issued $287.5 million aggregate principal amount of 4.00% exchangeable senior debentures due June 15, 2025. The debentures were issued at 98% of par and are exchangeable for shares of common stock of the Company on or after June 15, 2024 at an initial exchange rate of 24.6124 common shares per $1,000 of principal amount of debentures. The debentures are also exchangeable: (i) if the market price of our common stock over a specified period of time is more than 125% of the exchange price per share then in effect; (ii) if the trading price of the debentures over a specified period of time is less than 98% of the product of the closing price of our shares multiplied by the applicable exchange rate; (iii) during a specified period of time, for any debentures that have been called for redemption; (iv) under certain circumstances, upon the occurrence of a distribution to holders of our shares of (a) rights to purchase our common stock at a price below the market price of our shares or (b) assets, debt securities or rights to purchase our securities or securities of the Operating Partnership that have a per share value exceeding 10% of the market price of our shares; or (v) if our common stock is not listed on a national or regional securities exchange or quoted on NASDAQ for 30 consecutive trading days.

The initial exchange price of $40.63 represents a premium of approximately 25% to the closing price of the Company’s common stock on the issuance date of $32.50 per share. If exchanged in accordance with their terms, the debentures will be settled in cash up to their principal amount and any remaining exchange value will be settled, at our option, in cash, the Company’s common stock or a combination thereof. In accordance with the exchange rate terms of the debentures the Company has reserved approximately 8.8 million shares of its authorized common stock, $.01 par value, for potential future issuance upon the exchange of the debentures. Such amount is based on an exchange rate of 30.7692 common shares per $1,000 of principal amount of debentures. Although we have reserved these shares pursuant to the exchange rate terms, we believe the issuance of our shares, if any, would be significantly less than 8.8 million shares. The debentures are guaranteed by the Company. We have the option to redeem the debentures beginning June 18, 2010 for the principal amount plus accrued and unpaid interest. Holders of the debentures have the right to require us to repurchase their debentures at 100% of the principal amount thereof plus accrued and unpaid interest on June 15, 2010, June 15, 2015 and June 15, 2020 or, in the event of certain change in control transactions, prior to June 15, 2010.

The Board of Directors of the Company initially authorized the purchase of up to 5.0 million shares of the Company’s common stock. Transactions conducted on the New York Stock Exchange have been, and will continue to 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. Since the Board’s initial authorization, the Company has purchased 3,318,600 shares of its common stock for an aggregate purchase price of approximately $71.3 million. In June 2004, the Board of Directors re-set the Company’s common stock repurchase program back to 5.0 million shares. No purchases have been made since March 2003.

The Operating Partnership has issued and outstanding 1,200 preferred units of limited partnership interest with a liquidation preference value of $1,000 per unit with a stated distribution rate of 7.0%, which is subject to reduction based upon terms of their initial issuance (the “Preferred Units”). The terms of the Preferred Units provide for this reduction in distribution rate in order to address the effect of certain mortgages with above market interest rates, which were assumed by the Operating Partnership in connection with properties contributed to the Operating Partnership in 1998. As a result of the aforementioned reduction, there are currently no distributions being made on the Preferred Units.

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Corporate Strategies and Growth Opportunities

Our 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 our common stock. Our core business strategy is based on a long-term outlook considering real estate as a cyclical business. We seek to accomplish long-term stability and success by developing and maintaining an infrastructure and franchise that is modeled for success over the long-term. This approach allows us to recognize different points in the market cycle and adjust our strategy accordingly. During 2005, we experienced increased leasing activity, which resulted in increased occupancies in our properties. This was particularly true in the New York City and Long Island markets and in the Route 24 corridor market in Northern New Jersey where vacancy rates have decreased and market rents have increased. The increased leasing activity and increase in rents is a result of the economic recovery occurring in the New York tri-state region which has resulted in an increase in demand for office space with limited new supply. We are reasonably optimistic about the prospects for continued economic recovery in our markets. As a result of the recovery in our markets we have started development activities where we see market demand and limited supply warrant such activity. We have also adopted a strategy of pricing our premier space in our highest quality assets at the upper end of market rates. We may do this in instances where expiring tenants cannot meet that pricing and, therefore, will vacate that space. We may incur downtime to re-lease that space at higher rents. We still choose to maintain our conservative strategy of focusing on retaining high occupancies, controlling operating expenses, maintaining a high level of investment discipline and preserving financial flexibility. We plan to achieve these objectives by continuing our corporate strategies and capitalizing on the internal and external growth opportunities as described below.

Corporate Strategies.     Management believes that throughout its operating history it has created value in its properties through a variety of market cycles by implementing the operating strategies described below. These operating strategies include: (i) a multidisciplinary leasing approach that involves architectural design and construction personnel as well as leasing professionals, (ii) innovative marketing programs that strategically position our properties and distinguish our portfolio from the competition, increase brand equity and gain market-share. These cost-effective, high-yield programs include electronic web-casting, targeted outdoor and print media campaigns and sales promotion that enhances broker relationships and influences tenant retention, (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 our market position and efficiencies attributable to the state-of-the-art energy control systems at many of the office properties, (v) a fully integrated infrastructure of proprietary and property management accounting systems which encompasses technologically advanced systems and tools that provide meaningful information, on a real time basis, throughout the entire organization and (vi) an acquisition, disposition 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.

We also currently intend to adhere to a policy of maintaining a stabilized debt ratio over time (defined as our total debt as a percentage of the sum of our total debt and the market value of our equity) of not more than 50%. This debt ratio is intended to provide us with financial flexibility to select the optimal source of capital (whether debt or equity) with which to finance external growth. There can be no assurances that we will not adjust this policy in the future. As of December 31, 2005, our debt ratio was approximately 40.1%. This calculation is net of minority partners’ proportionate share of joint venture debt and includes our share of unconsolidated joint venture debt.

Growth Opportunities.     We intend to achieve our primary business objectives by applying our corporate strategies to the internal and external growth opportunities described below.

Internal Growth.     To the extent New York City, Long Island, Westchester, New Jersey and the Southern Connecticut office markets continue to recover with limited new supply, management believes we are well positioned to benefit from rental revenue growth through: (i) contractual annual compounding of 3-4% base rent increases on approximately 90% of existing leases from our Long Island properties, (ii) periodic contractual increases in base rent on existing leases from our Westchester properties, New Jersey properties,

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New York City properties and our 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.

Through our ownership of properties in the key CBD and suburban office markets in the Tri-State Area, we believe we have a unique competitive advantage as the trend toward the regional decentralization of the workplace increases. Subsequent to the events of September 11, 2001 as well as the impact of technological advances, which further enable decentralization, companies are strategically re-evaluating the benefits and feasibility of regional decentralization and reassessing their long-term space needs. We believe this multi-location regional decentralization will continue to take place, increasing as companies begin to have better visibility as to the future of the economy, further validating our regional strategy of maintaining a significant market share in the key CBD and suburban office markets in the Tri-State Area.

External Growth.     We seek to acquire multi-tenant Class A office buildings and other high quality, well located buildings in New York City and the surrounding Tri-State Area CBD and core suburban markets located in the Tri-State Area. Management believes that the Tri-State Area presents future opportunities to acquire or invest in properties at attractive yields. Valuations of Class A office properties in the Tri-State Area markets have risen significantly over the past 18 months. We believe this is attributable to several factors including the economic recovery the market is experiencing, the flow of capital into the real estate sector, the lack of available product and the supply constrained nature of our markets. We believe that our (i) capital structure, in particular our Credit Facility providing for a maximum borrowing amount of up to $500 million (with additional capacity of $250 million upon receiving additional lender commitments) and access to unsecured debt markets, (ii) ability to acquire a property for OP Units and thereby defer the seller’s income tax on gain, (iii) operating economies of scale, (iv) relationships with corporate owners of real estate, financial institutions and private real estate owners, (v) fully integrated operations in our five existing divisions and (vi) our substantial position and franchise in the submarkets in which we own properties will enhance our ability to identify and capitalize on acquisition opportunities. We also intend to selectively develop new Class A CBD and suburban office properties primarily on land we currently own and to continue to redevelop existing properties as these opportunities arise. We will concentrate our development activities on Class A CBD and suburban office properties within the Tri-State Area. We will also invest in mezzanine debt or preferred equity positions that are secured by assets or interests in assets located in our Tri-State Area markets. We may also utilize our development expertise to invest in mixed use development projects in our markets with local development partners. We believe that these types of investments may have higher risk/reward attributes. However, management believes that such risks can be mitigated by our experience, knowledge and operating expertise in the markets in which the assets are located.

We also believe that our New York City division provides additional leasing and operational capabilities and enhances our overall franchise value by being the only real estate operating company in the Tri-State Area with significant presence in both Manhattan and key Tri-State Area sub-markets. We actively seek alternative sources of low-cost capital to finance our growth opportunities. During 2005, we accessed the Australian Capital Markets and formed a strategic joint venture with an Australian Listed Property Trust which we manage. This vehicle was structured in a manner where we can raise additional capital through future offerings of the Limited Property Trust’s units to the Australian Market. We plan to expand our joint venture relationships with U.S. institutional partners or seek similar low-cost capital overseas to purchase assets in our markets. We believe that establishing multiple low-cost capital sources will provide us with a competitive advantage in acquiring assets as well as provide us the ability to leverage our operating infrastructure in the form of management and other fees.

In addition, when valuations for commercial real estate properties are high, we may seek to sell certain properties or interests therein to realize value and profit created. We will then seek opportunities to reinvest the capital realized from these dispositions back into assets in our core Tri-State Area markets. However, there can be no assurances that we will be able to identify such opportunities that meet our underwriting criteria. During 2005, we sold over $900 million of assets.

Regulations

Many laws and governmental regulations are applicable to our business and properties and changes in these laws and regulations, or their interpretation by agencies and the courts, occur frequently.

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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, we 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 our properties have been subjected to a Phase I or similar environmental audit (which involved general inspections without soil sampling, ground water analysis or radon testing) completed by independent environmental consultant companies. These environmental audits have not revealed any environmental liability that would have a material adverse effect on our business.

Competition

The leasing of real estate is highly competitive. There are numerous commercial properties that compete with us in attracting tenants and numerous companies that compete in selecting land for development and properties for acquisition. We compete for tenants with landlords and developers of similar properties located in our markets primarily on the basis of location, rent charged, services provided, and the design and condition of our properties. When attempting to acquire real estate, we compete with other REITs, private real estate funds, domestic and foreign financial institutions, life insurance companies, pension trusts, partnerships, individual investors and others.

Forward Looking Statements

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 risks and uncertainties. Many of the forward-looking statements can be identified by the use of words such as “believes”, “may”, “expects”, “anticipates”, “intends” or similar expressions. 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. Among those risks, trends and uncertainties are: the general economic climate, including the conditions affecting industries in which our principal tenants compete; changes in the supply of and demand for office in the New York Tri-State Area; changes in interest rate levels; changes in the Company’s credit ratings; changes in the Company’s cost and access to capital; downturns in rental rate levels in our markets and our ability to lease or re-lease space in a timely manner at current or anticipated rental rate levels; the availability of financing to us or our tenants; the financial condition of our tenants; changes in operating costs, including utility, security, real estate tax and insurance costs; repayment of debt owed to the Company by third parties; risks associated with joint

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ventures; liability for uninsured losses or environmental matters; and other risks associated with the development and acquisition of properties, including risks that development may not be completed on schedule, that the tenants will not take occupancy or pay rent, or that development or operating costs may be greater than anticipated. 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.

Item 1A. Risk Factors

Set forth below are the risks that we believe are material to investors who purchase or own our securities. The occurrence of any of the following factors or circumstances could adversely affect our cash flows, financial condition, results of operations and/or our ability to service debt and make distributions to our stockholders, any or all of which could in turn cause a decline in the market value of our securities.

• We are dependent on the New York Tri-State area market due to limited geographic diversification and our financial results may suffer as a result of a decline in economic conditions in such area

A decline in the economic conditions in the Tri-State Area and for commercial real estate could adversely affect our business, financial condition and results of operations. All of our properties are located in the Tri-State Area, although our organizational documents do not restrict us from owning properties outside this area. Each of our five markets is located in New York City and the suburbs of New York City and may be similarly affected by economic changes in this area. A significant downturn in the financial services industry and related industries would likely have a negative effect on these markets and on the performance of our properties.

The potential impact of terrorist attacks in the New York City and Tri-State Area may adversely affect the value of our properties and our ability to generate cash flow. As a result, there may be a decrease in demand for office space in metropolitan areas that are considered at risk for future terrorist attacks, and this decrease may reduce our revenues from property rentals.

• Debt servicing and refinancing, increases in interest rates and financial and other covenants could adversely affect our economic performance

Dependence upon debt financing; risk of inability to service or refinance debt.     In order to qualify as a REIT, for federal income tax purposes, we are required to distribute at least 90% of our taxable income. As a result, we are more reliant on debt or equity financings than many other non-REIT companies that are able to retain more of their income.

We are subject to the risks associated with debt financing. Our cash flow could be insufficient to meet required payments of principal and interest. We may not be able to refinance existing indebtedness, which in virtually all cases requires substantial principal payments at maturity, or the terms of such refinancing might not be as favorable as the terms of the existing indebtedness. As of December 31, 2005, the weighted average maturity of our existing indebtedness was approximately 3.8 years and our total existing indebtedness (net of minority partners’ interests’ share of our consolidated joint venture debt and including our share of unconsolidated joint venture debt) was approximately $2.0 billion. We also may not be able to refinance any indebtedness we incur in the future. Finally, we may not be able to obtain funds by selling assets or raising equity to make required payments on maturing indebtedness.

Rising interest rates could adversely affect cash flow.     We conduct all of our operations through, and serve as the sole general partner of, the Operating Partnership. Increases in interest rates could increase the Operating Partnership’s interest expense, which could adversely affect its ability to service its indebtedness or to pay dividends to our stockholders. As of December 31, 2005, approximately 21% of our total existing indebtedness was variable rate debt and our total debt was approximately $2.0 billion. Outstanding advances under the Operating Partnership’s credit facility bear interest at variable rates. In addition, we may incur indebtedness in the future that also bears interest at a variable rate.

Covenants in our debt agreements could adversely affect our financial condition and our ability to make distributions.     The Operating Partnership has an unsecured credit facility with JPMorgan Chase Bank,

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National Association, as Administrative Agent, which provides for a maximum borrowing amount of up to $500 million. The credit facility matures in August 2008, provides for a one-year extension subject to a fee of 25 basis points and, upon receiving additional lender commitments, for an increase to the maximum revolving credit amount to $750 million. The ability of the Operating Partnership to borrow under the credit facility is subject to certain covenants, including covenants relating to limitations on unsecured and secured borrowings, minimum interest and fixed charge coverage ratios, a minimum equity value and a maximum dividend payout ratio. The credit facility also contains a financial covenant limiting the amount of cash distributions that we may pay to holders of our common stock during any fiscal quarter if they exceed, when added to all distributions paid during the three immediately preceding quarters, the greater of:

• 90% of our funds from operations; and

• the amounts required in order for us to continue to qualify as a REIT.

We rely on borrowings under the Operating Partnership’s credit facility to finance acquisition and development activities and for working capital purposes. Although the Operating Partnership presently is in compliance with the covenants under the credit facility, the Operating Partnership’s ability to borrow under such facility is subject to continued compliance with the financial and other covenants contained therein. There is no assurance that the Operating Partnership will continue to be in compliance. If the Operating Partnership is unable to borrow under its credit facility, it could adversely affect our financial condition, including our ability to service our indebtedness or pay dividends to our stockholders.

The indenture under which our unsecured notes are issued also contains customary covenants, including financial covenants relating to limitations on our ability to incur secured and unsecured indebtedness and the maintenance of a certain percentage of unencumbered assets. The Operating Partnership is in compliance with the covenants under the indenture, but there can be no assurance that it will continue to be in compliance with such covenants.

In addition, the mortgage loans which are secured by certain of our properties contain customary covenants, including covenants that require us to maintain property insurance in an amount equal to the replacement cost of the properties with insurance carriers who satisfy certain ratings standards. As a result of the events of September 11, 2001, insurance companies were limiting coverage for acts of terrorism in “all-risk” policies. In November 2002, the Terrorism Risk Insurance Act of 2002 (the “TRIA”) was signed into law which, among other things, requires insurance companies to offer coverage for losses resulting from defined “acts of terrorism” through 2005. The TRIA was subsequently extended, with certain modifications, through 2007 with the enactment of the Terrorism Risk Insurance Extension Act of 2005. In the event that our coverage for losses resulting from terrorist acts is limited, there can be no assurance that the lenders under our mortgage loans would not take the position that exclusions from our coverage for losses due to terrorist acts is a breach of a covenant which, if uncured, could allow the lenders to declare an event of default and accelerate repayment of the mortgage loans. Other outstanding debt instruments contain standard cross default provisions that would be triggered in the event of an acceleration of the mortgage loans. This matter could adversely affect our financial results and our ability to finance and/or refinance our properties or to buy or sell properties. Our current property insurance coverage, which expires on June 2, 2006, provides for full replacement cost of our properties, including for acts of terrorism up to $540 million on a per occurrence basis.

The facility fee and interest rate payable under the terms of our credit facility are subject to change based upon changes in our credit ratings. Our senior unsecured debt is currently rated “BBB-” by Fitch Ratings, “BBB-” by Standard & Poor’s and “Baa3” by Moody’s Investors Service, Inc. As of December 31, 2005, based on a pricing grid of the Operating Partnership’s unsecured debt ratings, borrowings under our credit facility accrued interest at a rate of LIBOR plus 80 basis points and our credit facility carried a facility fee of 20 basis points per annum. In the event of a change in the Operating Partnership’s unsecured credit ratings, the interest rates and facility fee are subject to change. At December 31, 2005, the outstanding borrowings under our credit facility aggregated $419.0 million and carried a weighted average interest rate of 5.17%.

No limitation on debt.     Currently, we have a policy of incurring debt only if our Debt Ratio is 50% or less. As of December 31, 2005, our Debt Ratio was approximately 40.1%. For these purposes, “Debt Ratio” is defined as the total debt of the Operating Partnership as a percentage of the market value of outstanding

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shares of common stock, including the conversion of outstanding partnership units in the Operating Partnership, the liquidation preference of the preferred units of the Operating Partnership, excluding all units of general partnership interest owned by us, plus total debt (including our share of unconsolidated joint venture debt and net of minority partners’ interests’ share of consolidated joint venture debt). Under this policy, we could incur additional debt if our stock price increases, even if we may not have a corresponding increase in our ability to repay the debt. In addition, as of December 31, 2005, our debt-to-equity ratio was 1:1.5x. We calculated our debt-to-equity ratio by comparing the total debt of the Operating Partnership to the value of our outstanding common stock, common units of limited partnership interest and liquidation preference of the preferred units of the Operating Partnership (including its share of unconsolidated joint venture debt and net of minority partners’ interests’ share of consolidated joint venture debt), each based upon the market value of the common stock, and the liquidation preference of the preferred units of limited partnership interest in the Operating Partnership, excluding all units owned by us.

As described above, our credit facility and the indenture under which our unsecured notes are issued contain financial covenants which limit the ability of the Operating Partnership to incur additional indebtedness. However, our organizational documents do not contain any limitation on the amount of indebtedness we may incur. Accordingly, our Board of Directors could alter or eliminate our policy with respect to the incurrence of debt and would do so, for example, if it were necessary in order for us to continue to qualify as a REIT. If this policy were changed, we could become more highly leveraged, resulting in higher interest payments that could adversely affect our ability to pay dividends to our stockholders and could increase the risk of default on the Operating Partnership’s existing indebtedness.

• The value of our investments in loans to FrontLine Capital Group (“FrontLine”) and in joint venture investments with Reckson Strategic Venture Partners LLC (“RSVP”) may be subject to further loss

During 1997, we formed Frontline and RSVP, a real estate venture capital fund whose common equity is held indirectly by Frontline. In connection with the formation and spin-off of Frontline, the Operating Partnership established an unsecured credit facility with FrontLine (the “FrontLine Facility”) in the amount of $100 million. The Operating Partnership also approved the funding of investments of up to $110 million relating to REIT-qualified investments through RSVP-controlled joint ventures or advances made to FrontLine under an unsecured loan facility (the “RSVP Facility”) having terms similar to the FrontLine Facility (advances made under the RSVP Facility and the FrontLine Facility hereafter, the “FrontLine Loans”). As of December 31, 2005, approximately $59.8 million had been funded to RSVP-controlled joint ventures and $142.7 million through the FrontLine Loans (collectively, the “RSVP/FLCG Investments”), on which we accrued interest (net of reserves) of approximately $19.6 million. The net carrying value of our investments in the RSVP/FLCG Investments of approximately $55.2 million was reassessed with no change by management as of December 31, 2005. Such amount is included in investments in affiliate loans and joint ventures on our consolidated balance sheet.

FrontLine is in default under the FrontLine Loans and on June 12, 2002 filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. A committee of our Board of Directors, comprised solely of independent directors, considers any actions to be taken by us in connection with the RSVP/FLCG Investments. Scott H. Rechler, who serves as Chief Executive Officer, President and Chairman of our Board of Directors, serves as CEO and Chairman of the Board of Directors of FrontLine and is its sole board member. Scott H. Rechler also serves as a member of the management committee of RSVP and serves as a member of the Board of Directors of American Campus Communities, a company formerly owned by RSVP.

• Our acquisition, development and construction activities could result in losses

We intend to acquire existing office properties to the extent that suitable acquisitions can be made on advantageous terms.     Acquisitions of commercial properties entail risks, such as the risks that we may not be in a position or have the opportunity in the future to make suitable property acquisitions on advantageous terms and that our investments will fail to perform as expected. Some of the properties that we acquire may require significant additional investment and upgrades and are subject to the risk that estimates of the cost of improvements to bring such properties up to standards established for the intended market position may prove inaccurate.

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We also intend to continue the selective development and construction of office properties in accordance with our development and underwriting policies as opportunities arise. Our development and construction activities include the risks that:

• we may abandon development opportunities after expending resources to pursue development;

• construction costs of a project may exceed our original estimates;

• occupancy rates and rents at a newly completed property may not be sufficient to make the property profitable;

• financing may not be available to us on favorable terms for development of a property; and

• we may not complete construction and lease-up on schedule, resulting in increased carrying costs to complete construction, construction costs and, in some instances, penalties owed to tenants with executed leases.

Our development activities are also subject to risks relating to the inability to obtain, or delays in obtaining, all necessary zoning, land-use, building, occupancy and other required governmental permits and authorizations. If any of the above events occur, our ability to pay dividends to our stockholders and service the Operating Partnership’s indebtedness could be adversely affected. In addition, new development activities, regardless of whether or not they are ultimately successful, typically require a substantial portion of management’s time and attention.

• Adverse real estate market conditions, increases in operating expenses or capital expenditures, tenant defaults and uninsured losses could adversely affect our financial results

• Our properties’ revenues and value may be adversely affected by a number of factors, including:

• the national, state and local economic climate and real estate conditions, such as oversupply of or reduced demand for space and changes in market rental rates;

• the need to periodically renovate, repair and relet our space;

• increasing operating costs, including real estate taxes and utilities, which may not be passed through to tenants;

• defaults by our tenants or their failure to pay rent on a timely basis; and

• uninsured losses.

A significant portion of our real estate investment expenses, such as mortgage payments, real estate taxes, insurance and maintenance costs, are generally not reduced when circumstances cause a decrease in income from our properties. In addition, our real estate values and income from properties are also affected by our compliance with laws, including tax laws, interest rate levels and the availability of financing.

We may suffer losses as a result of tenant bankruptcies.     If any of our tenants files for protection from creditors under federal bankruptcy laws, such tenant generally has the right, subject to certain conditions, to reject its leases with us. In the event this occurs, we may not be able to readily lease the space or to lease it on equal or better terms.

Our reliance on a major tenant could lead to losses.     As a result of our acquisition in May 2005 of a 1.4 million square foot office tower located at One Court Square, Long Island City, New York, our lease with the seller, Citibank, N.A. and our subsequent transfer of a 70% interest in the property to a joint venture partner, rent from Citibank at this and other properties in our portfolio currently comprises approximately 4.2% of our pro-rata share of annualized base rent. We could be adversely affected if Citigroup experiences a significant downturn in its business, becomes insolvent or files for bankruptcy. Under the terms of its lease at One Court Square, Citibank has the right to cancel up to 20% of the leased space in 2011 and 2012 and to cancel up to an additional 20% of such space in 2014 and 2015. We could be adversely affected if Citibank exercises its options to terminate its leases and we are unable to lease the space at similar rents.

Because real estate investments are illiquid, we may not be able to sell properties when appropriate.     Real estate investments generally cannot be sold quickly. We may not be able to vary our portfolio promptly in response to economic or other conditions. In addition, provisions of the Internal Revenue

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Code of 1986, as amended (the “Code”), limit a REIT’s ability to sell properties in some situations when it may be economically advantageous to do so, thereby adversely affecting returns to our stockholders.

We may be unable to structure property dispositions in a tax-efficient manner.     Certain of our properties have low tax bases relative to their fair values and, accordingly, the disposition of such properties would generate significant taxable gain unless they were transferred in a tax-free exchange under Section 1031 of the Code or another tax-free or tax-deferred transaction.  For an exchange to qualify for tax-deferred treatment under Section 1031, many technical requirements must be satisfied.  In addition, a qualified replacement property must be identified within 45 days of the sale of the relinquished property and such qualified replacement property generally must be acquired within 180 days from the sale.  Given the competition for properties meeting our investment criteria, there can be no assurance that we will be able to identify and acquire qualified replacement properties within the required time frames under Section 1031, in which case we would not receive the tax benefit of such an exchange.  As of March 7, 2005, we currently have approximately $94.5 million being held by a qualified intermediary. In the event we do not find qualified replacement properties in a timely manner we would recognize approximately $32.5 million of taxable gain, which could potentially affect our REIT distribution requirements.

Competition in our markets is significant.     The competition for tenants in the office markets in the Tri-State Area is significant and includes properties owned by other REITs, local privately-held companies, institutional investors and other owners. There is also significant competition for acquisitions in our markets from the same types of competitors.

Increasing operating costs could adversely affect cash flow.     Our properties are subject to operating risks common to commercial real estate, any and all of which may adversely affect occupancy or rental rates.     Our properties are subject to increases in our operating expenses such as cleaning, electricity, heating, ventilation and air conditioning; elevator repair and maintenance; insurance and administrative costs; and other costs associated with security, landscaping, repairs and maintenance of our properties. As a result of the impact of the events of September 11, 2001, we have realized increased insurance costs, particularly relating to property and terrorism insurance, and security costs. While our tenants generally are currently obligated to pay a portion of these costs, there is no assurance that tenants will agree to pay these costs upon renewal or that new tenants will agree to pay these costs initially. If operating expenses increase, the local rental market may limit the extent to which rents may be increased to meet increased expenses without at the same time decreasing occupancy rates. While we have cost saving measures at each of our properties, if any of the above occurs, our ability to pay dividends to our stockholders and service our indebtedness could be adversely affected.

Some potential losses are not covered by insurance; losses could result from terrorist acts.     We carry comprehensive liability, fire, extended coverage and rental loss insurance on all of our properties. Five of our properties are located in New York City. As a result of the events of September 11, 2001, insurance companies were limiting coverage for acts of terrorism in “all risk” policies. In November 2002, the TRIA was signed into law, which, among other things, requires insurance companies to offer coverage for losses resulting from defined “acts of terrorism” through 2005. The TRIA was subsequently extended, with certain modifications, through 2007 with the enactment of the Terrorism Risk Insurance Extension Act of 2005. Our current property insurance coverage, which expires on June 2, 2006, provides for full replacement cost of our properties, including for acts of terrorism up to $540 million on a per occurrence basis. There can be no assurance that we will be able to replace these coverages at reasonable rates or at all.

Furthermore, losses arising from acts of war or relating to pollution are not generally insured because they are either uninsurable or not economically insurable. If an uninsured loss or a loss in excess of insured limits should occur, we could lose our capital invested in a property, as well as any future revenue from the property. We would remain obligated on any mortgage indebtedness or other obligations related to the property. Any such loss could materially and adversely affect our business and financial condition and results of operations.

• Property ownership through partnerships and joint ventures creates additional investment risks

Partnership or joint venture investments may involve risks not otherwise present for investments made solely by us, including the possibility that our partners or co-venturer might become bankrupt, that our partners or co-venturer might at any time have different interests or goals than we do, and that our partners or co-venturer may take action contrary to our instructions, requests, policies or objectives, including our policy with respect to maintaining our qualification as a REIT. Other risks of joint venture investments include impasse on decisions, such as a sale, because neither we nor our partners or co-venturer would have full control over the partnership or joint venture. There is no limitation under our organizational documents as to the amount of funds that may be invested in partnerships or joint ventures.

The following is a description of the significant joint ventures in which we are involved:

Our joint venture in 919 Third Avenue, New York, New York, includes the risks that we cannot enter into large leases or refinance or dispose of the property in our discretion.     On December 21, 2001, we formed a joint venture (the “919JV”) with the New York State Teachers’ Retirement Systems (“NYSTRS”) whereby NYSTRS acquired a 49% indirect interest in the property located at 919 Third Avenue, New York, New York for $220.5 million, which was comprised of $122.1 million of its proportionate share of secured mortgage debt and approximately $98.4 million of cash which was then distributed to us. We are responsible

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for managing the day-to-day operations and business affairs of the 919JV and have substantial rights in making decisions affecting the property such as developing a budget, leasing and marketing. We must obtain the consent of NYSTRS in order to make certain decisions, including a sale of the property, purchasing any additional property or entering into significant leases. NYSTRS has certain rights primarily intended to protect its investment.

Our joint venture in a portfolio of six office properties includes the risks that we cannot enter into large leases or refinance the properties in our discretion.     During September 2000, we formed a joint venture (the “Tri-State JV”) with Teachers Insurance and Annuity Association (“TIAA”) and contributed nine Class A suburban office properties aggregating approximately 1.5 million square feet to the Tri-State JV for a 51% majority ownership interest. TIAA contributed approximately $136 million for a 49% interest in the Tri-State JV which was then distributed to us. Since the formation of the Tri-State JV, we acquired TIAA’s 49% interest in two of the properties held by the Tri-State JV and the Tri-State JV sold one of its properties to a third party. As a result of these transactions, the Tri-State JV owns six Class A suburban office properties aggregating approximately 946,000 square feet. We are responsible for managing the day-to-day operations and business affairs of the Tri- State JV and have substantial rights in making decisions affecting the properties such as leasing, marketing and financing. The minority member has certain rights primarily intended to protect its investment.

Our investment in the Omni includes the risks that we cannot refinance or dispose of the property in our sole discretion and we could have our general partnership interest converted into a limited partnership interest. The Operating Partnership owns a 60% general partner interest in Omni Partners, L.P. (the “Omni Partnership”), the partnership that owns the Omni, a 579,000 square foot office building located in our Nassau West Corporate Center office park. Odyssey Partners, L.P. (“Odyssey”) and an affiliate of Odyssey own the remaining 40% interest. Through our partnership interest, we act as managing partner and have the sole authority to conduct the business and affairs of the Omni Partnership subject to the limitations set forth in the amended and restated agreement of limited partnership of the Omni Partnership (the “Omni Partnership Agreement”). These limitations include Odyssey’s right to negotiate under certain circumstances a refinancing of the mortgage debt encumbering the Omni and the right to approve any sale of the Omni made on or before March 13, 2007 (the “Acquisition Date”). The Operating Partnership will continue to act as the sole managing partner of the Omni Partnership unless certain conditions specified in the Omni Partnership Agreement shall occur. Upon the occurrence of any of these conditions, the Operating Partnership’s general partnership interest shall convert to a limited partnership interest and an affiliate of Odyssey shall be the sole managing partner, or, at the option of Odyssey, the Operating Partnership shall be a co-managing partner with an affiliate of Odyssey. In addition, on the Acquisition Date, the Operating Partnership will have the right to purchase Odyssey’s interest in the Omni Partnership at a price (the “Option Price”) based on 90% of its fair market value. The Option Price shall apply to the payment of all sums due under a loan made by the Operating Partnership in March 1997 to Odyssey in the amount of approximately $17 million. The Odyssey loan matures on the Acquisition Date and is secured by a pledge of Odyssey’s interest in the Omni Partnership.

Our formation of a joint venture with Reckson New York Property Trust (“Reckson LPT”) subjects us to certain risks.     On September 21, 2005, we announced the completion of the public offering in Australia of approximately A$263 million (approximately US$202 million) of units in a newly-formed Company-sponsored Australian listed property trust, Reckson LPT, which is traded on the Australian Stock Exchange, and the closing of the first of three tranches of this transaction. Reckson LPT contributed the net proceeds of the offering to Reckson Australia Operating Company, LLC, a newly-formed joint venture (the “RAOC JV”), in exchange for a 75% indirect interest therein. Simultaneously, the RAOC JV acquired from us 17 properties for a transaction price of approximately $367 million (including the assumption of approximately $196 million in mortgage debt). In return, we received a 25% interest in the RAOC JV and approximately $128 million in cash. In tranche II, which closed on January 6, 2006, we transferred an additional three properties to the RAOC JV for approximately $84.6 million (including the assignment of approximately $20.1 million in mortgage debt) and maintained our 25% interest in the RAOC JV. We have agreed to transfer to the RAOC JV an additional five properties for approximately $111.8 million in the third tranche of the transaction, which is expected to close in October 2006.

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In connection with these transactions, we arranged for approximately $320 million of debt to encumber the properties transferred to the RAOC JV. In August and September 2005, we entered into loan agreements with UBS Real Estate Investments Inc. for an aggregate of approximately $248 million, which were secured by nine of the properties transferred to the RAOC JV in September 2005, and three of the properties scheduled to be transferred to the RAOC JV during October 2006. In January 2006, the RAOC JV entered into a loan agreement with Citigroup Global Markets Realty Corp. for approximately $72 million, which was secured by two of the properties transferred to the RAOC JV in January 2006 and five of the properties transferred in the first tranche. In connection with the August 2005 loan, we have provided guarantees covering customary exceptions from the non-recourse nature of the indebtedness, as well as certain obligations relating to the potential termination of a number of leases at four of the properties. We have also guaranteed to the respective lender certain capital requirements related to certain of the properties. The loan agreement provides that we will be relieved of (i) the customary non- recourse exceptions and capital requirements upon transfer of the respective properties to the RAOC JV and the RAOC JV meeting a net worth test of at least $100 million and (ii) all but two of the lease-related obligations upon transfer of the respective properties to the RAOC JV and the RAOC JV meeting a net worth test of at least $200.00 million. The RAOC JV has agreed to indemnify us for any loss, cost or damage it may incur pursuant to our guaranty of these obligations. As of December 31, 2005, the RAOC JV met the $100 million net worth threshold and there remain approximately $18 million of aggregate guarantees outstanding.

Reckson LPT is managed by Reckson Australia Management Limited (“RAML”), an Australian licensed “Responsible Entity” which is wholly-owned by the Operating Partnership. If RAML fails to maintain its license as a “Responsible Entity” it could no longer manage Reckson LPT. RAML is managed by a six member board that includes three independent directors from Australia. Reckson Australia LPT Corporation, which is wholly-owned by Reckson LPT, serves as the managing member of the RAOC JV, and has substantial rights in making decisions affecting the RAOC JV, other than with respect to certain identified “major decisions,” including but not limited to a merger or consolidation involving the RAOC JV, a disposition of all or substantially all of its assets, or its liquidation or dissolution. Such major decisions require the prior written consent of a majority of the non-managing members. We, through RAML, will have obligations to the RAOC JV, Reckson LPT and its unitholders in connection with the management of Reckson LPT.

Certain members of our management, including Mr. Scott Rechler, our Chief Executive Officer, President and Chairman of the Board of Directors, will be involved with the management and operation of the RAOC JV and will devote time and attention to matters relating to the RAOC JV.

The completion of the third tranche of this transaction is subject to conditions typical for transactions of this nature and, as a result, there can be no assurance that the third tranche will be completed on the terms described above or at all. There also can be no assurance that the RAOC JV will perform as we anticipate.

Our joint venture in One Court Square, Long Island City, New York, includes the risks that we cannot enter into large leases or refinance or dispose of the property in our sole discretion and we could be removed as administrative member.     On November 30, 2005, we formed a joint venture (the “Court Square JV”) with a group of institutional investors (the “JV Partners”) led by JPMorgan Investment Management, whereby the JV Partners acquired a 70% interest in our 1.4 million square foot, 50-story, Class A office tower located at One Court Square, Long Island City, for approximately $329.7 million, including the assumption of approximately $220.5 million of debt. Pursuant to the terms of the operating agreement governing the Court Square JV. The Court Square JV will be managed by a two-person management committee composed of one representative from each of the Company and the JV Partners. We have been designated as the administrative member of the Court Square JV. The operating agreement of the Court Square JV requires approvals from members on certain decisions including annual budgets, sale of the property, refinancing of the property’s mortgage debt and material renovations to the property. In addition, after September 20, 2009 the members each have the right to recommend the sale of the property, subject to the terms of the property level debt, and to dissolve the Court Square JV. We may be removed as administrative member if (i) we become bankrupt, (ii) we are found to have committed fraud, willful misconduct or gross negligence in the conduct of our duties, (iii) we make an unpermitted transfer under the agreement or (iv) the Operating Partnership holds, directly or indirectly, less than a 10% interest in the Court Square JV.

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The operating agreement grants to each of the Company and the JV Partners a right of first offer to acquire the other member’s interest in the Court Square JV at any time after November 30, 2007. In addition, after September 20, 2009, either the Company or the JV Partners may recommend the sale of One Court Square (or 100% of the interest in the Court Square JV) to a third party at the price at which such member would be willing to sell the property. The non-recommending member may either approve the proposed marketing of the property or may purchase the property at an equivalent price. Also, either member may initiate a buy-sell process at any time after (i) November 30, 2007, if a dispute with respect to a “major decision” arises, or (ii) September 20, 2009. In the event the JV Partners exercise their right to recommend the sale of the property or initiate a buy-sell process, we may not be able to finance our acquisition of the property and it may be sold to a third party.

• Investments in mortgage debt could lead to losses.

We hold investments in mortgages secured by office or other types of properties. We may acquire the mortgaged properties through foreclosure proceedings or negotiated settlements. In addition to the risks associated with investments in commercial properties, investments in mortgage indebtedness present additional risks, including the risk that the fee owners of such properties may not make payments of interest and principal in a timely fashion or at all, and we may not realize our anticipated return or sustain losses relating to the investments. Moreover, to the extent that we make investments in mortgages that are secured by properties other than office properties, we are less experienced with the financing and operations of these other property types and therefore may not properly evaluate the risks involved in such investments. Although we currently have no intention to originate mortgage loans as a significant part of our business, we may make loans to a seller in connection with our purchase of real estate. The underwriting criteria we would use for these loans would be based upon the credit and value of the underlying real estate.

• Investments in mezzanine loans involve greater risks of loss than senior loans secured by properties.

We may invest in mezzanine loans relating to office or other types of properties in the Tri-State Area. Investments in mezzanine loans take the form of subordinated loans secured by second mortgages on the underlying property or loans secured by a pledge of the ownership interests in the entity that directly or indirectly owns the property. These types of investments involve a higher degree of risk than a senior mortgage loan because the investment may become unsecured as a result of foreclosure by the senior lender. In the event of a bankruptcy of the entity providing the pledge of its ownership interests as security, we may not have full recourse to the assets of the property owning entity, or the assets of the entity may not be sufficient to satisfy our mezzanine loan. If a borrower defaults on our mezzanine loan or debt senior to our loan, or in the event of a borrower bankruptcy, our mezzanine loan will be satisfied only after the senior debt is paid in full. Where debt senior to our loan exists, the presence of intercreditor arrangements may limit our ability to amend our loan documents, assign our loans, accept prepayments, exercise our remedies and control decisions made in bankruptcy proceedings relating to borrowers. As a result, we may not recover some or all of our investment, which could result in losses. In addition, mezzanine loans may have higher loan to value ratios than conventional mortgage loans, resulting in less equity in the property and increasing the risk of loss of principal. Moreover, to the extent that we make investments in mezzanine loans that relate to properties other than office properties, we are less experienced with the financing and operations of these other property types and therefore may not properly evaluate the risks involved in such investments. There is no limitation under our organizational documents as to the amount of mezzanine debt in which we may invest.

• Environmental problems are possible

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 therefor 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

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disposal or treatment facility, whether or not such facility is owned or operated by such person. Even if more than one person was responsible for the contamination, each person covered by the environmental laws may be held responsible for the clean-up costs incurred. In addition, third parties may sue the owner or operator of a site for damages and costs resulting from environmental contamination emanating from that site. Certain environmental laws also 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, we 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 our properties have been subjected to a Phase I or similar environmental audit (which involved general inspections without soil sampling, ground water analysis or radon testing) completed by independent environmental consultant companies. These Phase I, or similar environmental audits have revealed trusted environmental issues which we are currently addressing at the affected properties. These environmental audits have not revealed any environmental liability that we believe would have a material adverse effect on our business.

• Failure to qualify as a REIT would be costly

We have operated (and intend to operate) so as to qualify as a REIT under the Code beginning with our taxable year ended December 31, 1995. Although our management believes that we are organized and operated in a manner to so qualify, no assurance can be given that we will continue to qualify or remain qualified as a REIT.

If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates. Moreover, unless entitled to relief under certain statutory provisions, we also will be disqualified from treatment as a REIT for the four taxable years following the year during which qualification was lost. This treatment would significantly reduce net earnings available to service indebtedness, make investments or pay dividends to stockholders because of the additional tax liability to us for the years involved. Also, we would not then be required to pay dividends to our stockholders.

• We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our shares of common stock

At any time, the federal income tax laws or regulations governing REITs or the administrative interpretations of those laws or regulations may be amended. Any of those new laws or interpretations may take effect retroactively and could adversely affect us or our stockholders. Effective generally for taxable years 2003 through 2008, the maximum rate of tax applicable to individuals on qualified dividend income from regular C corporations is 15%. This reduces substantially the so-called “double taxation” (that is, taxation at both the corporate and stockholder levels) that has generally applied to corporations that are not taxed as REITs. Dividends from REITs generally will not qualify for the 15% dividend tax rate because, as a result of the dividends-paid deduction to which REITs are entitled, REITs generally do not pay corporate level tax on income that they distribute to stockholders. The lower rates of taxation of qualified dividend income may cause individual investors to view stocks of non-REIT corporations as more attractive relative to stocks of REITs. We cannot predict what impact these tax rates, or future changes in the laws or regulations governing REITs, may have on the value of our shares of common stock.

• Limits on changes in control may deter changes in management and third party acquisition proposals

Supermajority Vote for Removal of Directors.     In our charter, we have opted into a provision of the Maryland General Corporation Law (the “MGCL”) requiring a vote of two-thirds of the common stock to remove one or more directors.

I-24

Majority of Votes Required to Call Special Meetings of Stockholders.     Our bylaws provide that a special meeting of stockholders need only be called if requested by holders of the majority of votes eligible to be cast at such meeting.

We have adopted a stockholder rights plan which could delay, defer or prevent a change in control.     Our charter authorizes the Board of Directors to issue up to 25 million shares of preferred stock, to reclassify unissued shares of capital stock, and to establish the preferences, conversion and other rights, voting powers, restrictions, limitations and restrictions on ownership, limitations as to dividends or other distributions, qualifications, and terms and conditions of redemption for each class or series of any capital stock issued.

In October 2000, the Board of Directors adopted a Stockholder Rights Plan (the “Rights Plan”) designed to protect our stockholders from various abusive takeover tactics, including attempts to acquire control at an inadequate price, depriving stockholders of 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 of our stockholders. The Rights Plan was not adopted in response to any known effort to acquire control of us.

Under the Rights Plan, each of our stockholders received a dividend of one Right for each share of our outstanding common stock owned. The Rights are exercisable only if a person or group acquires, or announces their intent to acquire, 15% or more of our 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 our common stock. Each Right entitles the holder to purchase one one-thousandth of a share of a series of our junior participating preferred stock at an initial exercise price of $84.44.

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

Limitations on acquisition of and changes in control pursuant to Maryland law.     We have opted out of certain provisions of the MGCL referred to as the “control share acquisition statute,” which eliminates the voting rights of shares acquired in a Maryland corporation in quantities so as to constitute “control shares,” as defined under the MGCL and the “business combination statute,” which generally limits business combinations between a Maryland corporation and any 10% owners of the corporation’s stock or any affiliate thereof. However, the Board of Directors may eliminate the provision exempting acquisitions from the control share acquisition statute and/or cause the business combination statute to be applicable without, in either case, obtaining the approval of our stockholders. If the Board of Directors took such action(s), these provisions could have the effect of inhibiting a third party from making an acquisition proposal for the Company or of delaying, deferring or preventing a change in control of the Company under circumstances that otherwise could provide the holders of shares of common stock with the opportunity to realize a premium over the then-prevailing market price.

• The market value of our securities could decrease in the event we do not maintain our current dividend rate and also as a result of our performance and market perception

Effect of earnings and cash dividends.     The market value of the equity securities of a REIT may be based primarily upon the market’s perception of the REIT’s growth potential and its current and future cash dividends, and may be secondarily based upon the real estate market value of the underlying assets. During the prior two years, we have incurred significant leasing costs, in the form of tenant improvement costs, leasing commissions and free rent, as a result of market demands from tenants and high levels of leasing transactions that result from the re-tenanting of scheduled expirations or space vacated due to early terminations of leases. We are also expending costs on tenants that are renewing or extending their leases earlier than scheduled. As a result of these and/or other operating factors, our cash available for distribution from operating activities was not sufficient to pay 100% of the dividends paid on our common equity during 2004 and 2005. To meet the short-term funding requirements relating to the higher leasing costs, we have used proceeds from property sales or borrowings under our credit facility. Based on our forecasted leasing, we anticipate that we will continue to incur shortfalls during 2006. We currently intend to fund any shortfalls

I-25

with proceeds from sales of non-income producing assets or borrowings under our credit facility. We periodically review our dividend policy to determine the appropriateness of our dividend rate relative to our cash flows. We adjust our dividend rate based on such factors as leasing activity, market conditions and forecasted increases and decreases in our cash flow as well as required distributions of taxable income to maintain REIT status. There can be no assurance that we will maintain the current quarterly distribution level on our common equity.

Adverse impact of rising interest rate.     One factor which influences the price of securities is the dividend or interest rate on the securities relative to market interest rates. Rising interest rates may lead potential buyers of our equity securities to expect a higher dividend rate, which would adversely affect the market price of the securities. In addition, rising interest rates would result in increased expense, thereby adversely affecting cash flow and the ability of the Operating Partnership to service its indebtedness.

• Transactions by the Operating Partnership or the Company could adversely affect debt holders

Except with respect to a covenant limiting the incurrence of indebtedness, a covenant requiring the Operating Partnership to maintain a certain percentage of unencumbered assets and a covenant requiring any successor in a business combination with the Operating Partnership to assume all of the obligations of the Operating Partnership under the indenture pursuant to which the debt securities will be issued, the indenture does not contain any provisions that would protect holders of debt securities in the event of (i) a highly leveraged or similar transaction involving the Operating Partnership, the management of the Operating Partnership or the Company, or any affiliate of any these parties, (ii) a change in control or (iii) certain reorganizations, restructuring, mergers or similar transactions involving the Operating Partnership or the Company.

Item 1B. Unresolved Staff Comments

We have not received any comments from the Securities and Exchange Commission that remain unresolved.

Item 2. Properties

General

As of December 31, 2005 we owned 103 properties (including twenty-five office properties owned through joint ventures) in the Tri-State Area CBD and suburban markets, encompassing approximately 20.3 million rentable square feet, all of which are managed by us. The properties include 17 Class A CBD office properties encompassing approximately 7.2 million rentable square feet. The CBD office properties consist of six properties located in New York City, nine properties located in Stamford, CT and two properties located in White Plains, NY. The CBD office properties comprised 52.1% of our net operating income (property operating revenues less property operating expenses) for the three months ended December 31, 2005. The properties also include 78 Class A suburban office properties encompassing approximately 12.2 million rentable square feet, of which 59 of these properties, or 46.8% as measured by square footage, are located within our 14 office parks. We have historically emphasized the development and acquisition of suburban office properties in large-scale office parks. We believe that owning properties in planned office parks provides strategic and synergistic advantages, including the following: (i) certain tenants prefer locating in a park with other high quality companies to enhance their corporate image, (ii) parks afford tenants certain aesthetic amenities such as a common landscaping plan, standardization of signage and common dining and recreational facilities, (iii) tenants may expand (or contract) their business within a park, enabling them to centralize business functions and (iv) a park provides tenants with access to other tenants and may facilitate business relationships between tenants. The properties also include eight flex properties encompassing approximately 863,000 rentable square feet.

Set forth below is a summary of certain information relating to our properties, categorized by office and flex properties, as of December 31, 2005.

I-26

Office Properties

General

As of December 31, 2005, the Company owned or had an interest in 17 Class A CBD office properties encompassing approximately 7.2 million square feet and 78 Class A suburban office properties encompassing approximately 12.2 million square feet. As of December 31, 2005, the office properties were approximately 92.3% leased (excluding properties under development) to approximately 1,000 tenants.

The office properties are Class A office buildings and are well-located, well-maintained and professionally managed. In addition, these properties are modern with high finishes and achieve among the highest rent, occupancy and tenant retention rates within their sub-markets. The 17 Class A CBD office properties consist of six properties located in New York City, nine properties located in Stamford, CT and two properties located in White Plains, NY. 59 of the 78 suburban office properties are located within our 14 office parks. The buildings in these office parks offer a full array of amenities including health clubs, racquetball courts, restaurants, computer controlled HVAC access systems and conference centers. Management believes that the location, quality of construction and amenities as well as our reputation for providing a high level of tenant service have enabled us to attract and retain a national tenant base. The office tenants include companies representing all major industry groups including consumer products, financial services, commercial banks and legal services.

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 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, 2005 for each of the office properties.

I-27

	Percentage Ownership			Ownership Interest (Ground Lease Expiration Date) (1)			Land Area (Acres)		Number of Floors		Rentable Square Feet		Percent Leased			Annual Base Rent (2)		Annual Base Rent Per Leased Square Ft.		Number of Tenant Leases
Suburban Office Properties:
Huntington Melville Corporate Center
395 North Service Road, Melville, NY		100	%		Lease (2081	)		7.5		4		188,233		100.0	%	$	5,719,140	$	30.38		6
35 Pinelawn Road, Melville, NY		25	%		Fee			6.0		2		108,747		98.7	%		2,394,465		22.31		35
200 Broadhollow Road, Melville, NY		25	%		Fee			4.6		4		68,760		97.3	%		1,651,424		24.69		13
275 Broadhollow Road, Melville, NY		100	%		Fee			5.8		4		126,770		100.0	%		3,288,246		25.94		1
300 Broadhollow Road, Melville, NY		100	%		Fee			14.7		4		238,628		95.8	%		4,009,946		17.54		22
48 South Service Road, Melville, NY		100	%		Fee			7.3		4		128,024		99.7	%		3,355,261		26.30		12
58 South Service Road, Melville, NY		100	%		Fee			18.8		4		278,503		95.2	%		8,924,530		33.66		11
68 South Service Road, Melville, NY		100	%		Fee			14.8		4		300,198		67.5	%		1,211,335		5.98		1
1305 Old Walt Whitman Road, Melville, NY		51	%		Fee			18.1		3		164,166		100.0	%		4,654,013		28.35		3
Total Huntington Melville Corporate Center								97.6				1,602,029		92.2	%		35,208,360		23.83		104
North Shore Atrium
6800 Jericho Turnpike, Syosset, NY (6)		100	%		Fee			13.0		2		206,403		96.3	%		4,424,695		22.27		42
6900 Jericho Turnpike, Syosset, NY (6)		100	%		Fee			5.0		4		95,227		100.0	%		2,365,671		24.84		13
Total North Shore Atrium								18.0				301,630		97.5	%		6,790,366		23.10		55
Nassau West Corporate Center
50 Charles Lindbergh Boulevard, Mitchel Field, NY		100	%		Lease (2082	)		9.1		6		218,043		94.7	%		5,241,259		25.37		21
60 Charles Lindbergh Boulevard, Mitchel Field, NY		100	%		Lease (2082	)		7.8		2		219,066		100.0	%		5,581,769		25.48		1
51 Charles Lindbergh Boulevard, Mitchel Field, NY		100	%		Lease (2081	)		6.6		1		108,000		100.0	%		2,904,370		26.89		1
55 Charles Lindbergh Boulevard, Mitchel Field, NY		25	%		Lease (2081	)		10.0		2		214,581		100.0	%		3,006,783		14.01		2
Reckson Plaza, Mitchel Field, NY		100	%		Lease (2083	)		28.2		15		1,064,828		90.7	%		26,060,544		26.98		38
333 Earle Ovington Boulevard, Mitchel Field, NY		60	%		Lease (2088	)		30.6		10		580,317		95.0	%		17,534,070		31.79		31
90 Merrick Avenue, Mitchel Field, NY		100	%		Lease (2084	)		13.2		9		234,202		92.7	%		5,677,439		26.15		22
Total Nassau West Corporate Center								105.5				2,639,037		94.1	%		66,006,234		26.59		116
Stand-alone Long Island Properties
88 Duryea Road, Melville, NY		25	%		Fee			1.5		2		23,878		100.0	%		429,453		17.99		4
520 Broadhollow Road, Melville, NY		100	%		Fee			7.0		1		87,780		100.0	%		1,932,331		22.01		3
1660 Walt Whitman Road, Melville, NY		100	%		Fee			6.5		1		77,872		83.0	%		1,477,072		22.85		9
150 Motor Parkway, Hauppauge, NY		25	%		Fee			11.3		4		186,220		88.3	%		3,453,594		21.00		29
300 Motor Parkway, Hauppauge, NY		25	%		Fee			4.2		1		54,284		100.0	%		1,059,038		19.51		7
50 Marcus Drive, Melville, NY		100	%		Fee			12.9		2		163,762		100.0	%		4,198,852		25.64		1
Total Stand-alone Long Island								43.4				593,796		94.1	%		12,550,340		22.46		53
Tarrytown Corporate Center
505 White Plains Road, Tarrytown, NY		25	%		Fee			1.4		2		26,320		100.0	%		547,872		20.82		22
520 White Plains Road, Tarrytown, NY		100	%		Fee(3)			6.8		6		157,970		75.7	%		2,461,198		20.59		4
555 White Plains Road, Tarrytown, NY		25	%		Fee			4.2		5		121,730		98.2	%		2,224,234		18.60		8
560 White Plains Road, Tarrytown, NY		25	%		Fee			4.0		6		124,140		89.1	%		2,443,671		22.10		17
580 White Plains Road, Tarrytown, NY		100	%		Fee			6.1		6		169,483		65.2	%		2,111,156		19.12		15
660 White Plains Road, Tarrytown, NY		25	%		Fee			10.9		6		253,283		89.0	%		5,152,504		22.86		38
Total Tarrytown Corporate Center								33.4				852,926		83.5	%		14,940,635		20.99		104

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	Percentage Ownership			Ownership Interest (Ground Lease Expiration Date) (1)		Land Area (Acres)			Number of Floors		Rentable Square Feet		Percent Leased			Annual Base Rent (2)		Annual Base Rent Per Leased Square Ft.		Number of Tenant Leases
Reckson Executive Park
1 International Drive, Ryebrook, NY		100	%		Fee		N/A			3		90,000		100.0	%		630,000		7.00		1
2 International Drive, Ryebrook, NY		100	%		Fee		N/A			3		90,000		100.0	%		630,000		7.00		1
3 International Drive, Ryebrook, NY		100	%		Fee		N/A			3		91,193		59.8	%		1,289,689		23.64		5
4 International Drive, Ryebrook, NY		100	%		Fee		N/A			3		87,547		98.4	%		2,297,209		26.65		8
5 International Drive, Ryebrook, NY		100	%		Fee		N/A			3		90,000		56.6	%		1,195,846		23.47		2
6 International Drive, Ryebrook, NY		100	%		Fee		N/A			3		95,097		100.0	%		2,102,839		22.11		8
Total Reckson Executive Park							44.4					543,837		85.8	%		8,145,583		17.45		25
Summit at Valhalla
100 Summit Lake Drive, Valhalla, NY		100	%		Fee		11.3			4		249,297		100.0	%		5,280,791		21.18		8
200 Summit Lake Drive, Valhalla, NY		100	%		Fee		18.0			4		233,585		99.4	%		6,164,075		26.56		9
500 Summit Lake Drive, Valhalla, NY		100	%		Fee		29.1			4		227,902		100.0	%		5,842,480		25.64		1
Total Summit at Valhalla							58.4					710,784		99.8	%		17,287,346		24.37		18
Mt. Pleasant Corporate Center
115 / 117 Stevens Avenue, Mt. Pleasant, NY		100	%		Fee		5.0			3		168,667		75.5	%		2,460,547		19.33		16
Total Mt. Pleasant Corporate Center							5.0					168,667		75.5	%		2,460,547		19.33		16
Purchase Park
2500 Westchester Avenue, White Plains, NY		100	%		Fee		N/A			4		166,144		52.6	%		2,162,273		24.72		13
2700 Westchester Avenue, White Plains, NY		100	%		Fee		N/A			4		115,930		54.6	%		1,290,623		20.37		15
Total Purchase Park							24.6					282,074		53.5	%		3,452,896		22.90		28
Rockledge Center
925 Westchester Avenue, White Plains, NY		100	%		Fee		N/A			5		92,207		79.2	%		1,682,884		23.04		10
1025 Westchester Avenue, White Plains, NY		100	%		Fee		N/A			5		89,761		88.5	%		1,844,381		23.21		12
Total Rockledge Center							12.0					181,968		83.8	%		3,527,265		23.13		22
Westchester Corporate Park
105 Corporate Park Drive, White Plains, NY		100	%		Fee		10.4	(7)		3		85,845		91.5	%		1,906,038		24.26		5
106 Corporate Park Drive, White Plains, NY		100	%		Fee		20.4	(8)		4		102,599		73.6	%		1,692,746		22.43		19
108 Corporate Park Drive, White Plains, NY		100	%		Fee		NA	(8)		5		107,179		75.8	%		1,841,112		22.65		12
110 Corporate Park Drive, White Plains, NY		100	%		Fee		NA	(8)		2		38,827		81.0	%		643,833		20.48		10
3 Gannett Drive, White Plains, NY		100	%		Fee		10.6			5		160,896		78.5	%		2,890,047		22.89		5
Total Westchester Corporate Park							41.4					495,346		79.3	%		8,973,776		22.83		51
White Plains Office Park
701 Westchester Avenue, White Plains, NY		100	%		Fee		13.5			3		157,894		78.1	%		2,381,160		19.30		19
707 Westchester Avenue, White Plains, NY		100	%		Fee		21.3	(9)		5		123,822		76.6	%		2,109,311		22.25		19
709 Westchester Avenue, White Plains, NY		100	%		Fee		NA	(9)		5		121,145		69.0	%		889,233		10.64		6
711 Westchester Avenue, White Plains, NY		100	%		Fee		10.0			4		117,936		94.4	%		2,667,915		23.97		18
777 Westchester Avenue, White Plains, NY		100	%		Fee		10.0			5		121,190		82.4	%		2,768,687		27.71		9
Total White Plains Office Park							54.8					641,987		79.9	%		10,816,306		21.09		71

I-29

	Percentage Ownership			Ownership Interest (Ground Lease Expiration Date) (1)		Land Area (Acres)		Number of Floors		Rentable Square Feet		Percent Leased			Annual Base Rent (2)		Annual Base Rent Per Leased Square Ft.		Number of Tenant Leases
Stand-alone Westchester
100 / 120 White Plains Road, Tarrytown, NY		51	%		Fee		9.7		6		209,822		97.9	%		5,286,773		25.75		12
80 Grasslands Road, Elmsford, NY		25	%		Fee		4.9		3		87,114		100.0	%		1,889,883		21.69		5
Total Stand-alone Westchester							14.6				296,936		98.5	%		7,176,656		24.54		17
Executive Hill Office Park
100 Executive Drive, West Orange, NJ		25	%		Fee		10.1		3		93,665		85.6	%		1,753,626		21.87		10
200 Executive Drive, West Orange, NJ		25	%		Fee		8.2		4		105,649		94.9	%		2,134,175		21.29		9
300 Executive Drive, West Orange, NJ		100	%		Fee		8.7		4		124,777		88.9	%		1,743,463		15.72		11
10 Rooney Circle, West Orange, NJ		25	%		Fee		5.2		3		70,716		86.3	%		1,531,278		25.08		4
Total Executive Hill Office Park							32.2				394,807		89.3	%		7,162,542		20.33		34
University Square Princeton
100 Campus Drive, Princeton, NJ		100	%		Fee		N/A		1		27,888		65.9	%		216,029		11.76		2
104 Campus Drive, Princeton, NJ		100	%		Fee		N/A		1		70,239		87.0	%		1,581,216		25.86		2
115 Campus Drive, Princeton, NJ		100	%		Fee		N/A		1		33,600		100.0	%		928,669		27.64		0
Total University Square							11.0				131,727		85.9	%		2,725,914		24.10		4
Short Hills Office Park
101 John F. Kennedy Parkway, Short Hills, NJ		100	%		Fee		9.0		6		190,071		100.0	%		5,731,190		30.15		6
103 John F. Kennedy Parkway, Short Hills, NJ		100	%		Fee		6.0		4		123,000		100.0	%		4,182,000		34.00		1
51 John F. Kennedy Parkway, Short Hills, NJ		51	%		Fee		11.0		5		252,892		100.0	%		9,773,611		38.65		19
Total Short Hills Office Park							26.0				565,963		100.0	%		19,686,801		34.78		26
Giralda Farms Office Park
1 Giralda Farms, Madison, NJ		100	%		Fee		24.4		4		150,000		100.0	%		1,562,500		10.42		1
3 Giralda Farms, Madison, NJ		100	%		Fee		21		4		141,000		100.0	%		4,152,450		29.45		1
7 Giralda Farms, Madison, NJ		100	%		Fee		20		3		203,258		100.0	%		4,958,009		24.39		4
Total Giralda Farms Office Park							65.4				494,258		100.0	%		10,672,959		21.59		6
Stand-alone New Jersey Properties
99 Cherry Hill Road, Parsippany, NJ		100	%		Fee		8.8		3		91,446		78.4	%		1,398,563		19.51		8
119 Cherry Hill Road, Parsippany, NJ		100	%		Fee		9.3		3		95,179		54.0	%		936,681		18.23		8
44 Whippany Road, Morristown, NJ		100	%		Fee		20		3		215,037		100.0	%		4,891,361		22.75		5
72 Eagle Rock, East Hanover, NJ		100	%		Fee		10.4		3		144,587		55.6	%		1,692,387		21.05		3
3 University Plaza, Hackensack, NJ		100	%		Fee		10.6		6		219,796		86.5	%		3,865,856		20.34		19
1255 Broad Street, Clifton, NJ		100	%		Fee		11.1		2		193,574		62.4	%		2,414,234		20.00		1
492 River Road, Nutley, NJ		25	%		Fee		17.3		13		130,009		100.0	%		2,382,100		18.32		1
Total Stand-alone NJ Properties							87.5				1,089,628		78.9	%		17,581,182		20.46		45
Stand-alone Connecticut Properties
225 Highridge Road, Stamford, CT		25	%		Fee		14.1		3		227,966		98.6	%		6,323,600		28.12		9
Total Stand-alone CT Properties							14.1				227,966		98.6	%		6,323,600		28.12		9
Total Suburban Office Properties							789.3				12,215,366		89.6	%	$	261,489,308	$	23.90		804

I-30

	Percentage Ownership			Ownership Interest (Ground Lease Expiration Date) (1)			Land Area (Acres)		Number of Floors		Rentable Square Feet		Percent Leased			Annual Base Rent (2)		Annual Base Rent Per Leased Square Ft.		Number of Tenant Leases
CBD Office Properties:
Landmark Square
1 Landmark Square, Stamford, CT		100	%		Fee			N/A		22		280,636		83.0	%	$	5,637,478	$	24.21		47
2 Landmark Square, Stamford, CT		100	%		Fee			N/A		3		35,689		85.8	%		730,546		23.86		8
3 Landmark Square, Stamford, CT		100	%		Fee			N/A		6		128,745		84.9	%		2,556,143		23.40		14
4 Landmark Square, Stamford, CT		100	%		Fee			N/A		5		101,908		66.4	%		1,752,619		25.91		13
5 Landmark Square, Stamford, CT		100	%		Fee			N/A		3		58,000		100.0	%		249,932		4.31		3
6 Landmark Square, Stamford, CT		100	%		Fee			N/A		10		163,263		74.8	%		1,881,137		15.40		4
Total Landmark Square								7.2				768,241		80.8	%		12,807,855		20.64		89
Stand-alone Connecticut
1055 Washington Boulevard, Stamford, CT		100	%		Lease (2090	)		1.5		10		178,000		83.3	%		4,267,247		28.79		21
680 Washington Boulevard, Stamford, CT		51	%		Fee			1.3		11		132,759		100.0	%		3,699,043		27.86		7
750 Washington Boulevard, Stamford, CT		51	%		Fee			2.4		11		186,148		100.0	%		4,677,717		25.13		10
Total Stand-alone Connecticut								5.2				496,907		94.0	%		12,644,007		27.07		38
Stand-alone Westchester
360 Hamilton Avenue, White Plains, NY		100	%		Fee			1.5		12		381,626		98.2	%		10,165,611		27.14		16
140 Grand Street, White Plains, NY		100	%		Fee			2.2		9		122,050		100.0	%		2,693,436		22.07		9
Total Stand-alone Westchester								3.7				503,676		98.6	%		12,859,047		25.89		25
New York City Office Properties
120 West 45th Street, New York, NY		100	%		Fee			0.4		40		441,140		100.0	%		19,770,577		44.83		30
1 Court Square, Long Island City, NY		30	%		Fee			1.5		50		1,401,609		100.0	%		30,638,660		21.86		1
810 Seventh Avenue, New York, NY		100	%		Fee(4	)		0.6		42		690,675		97.8	%		28,000,477		41.47		36
919 Third Avenue, New York, NY		51	%		Fee(5	)		1.5		47		1,366,516		100.0	%		64,522,251		47.22		16
1185 Avenue of the Americas, New York, NY		100	%		Lease (2043	)		1.0		42		1,034,338		100.0	%		45,787,196		44.27		30
1350 Avenue of the Americas, New York, NY		100	%		Fee			0.6		35		554,643		94.9	%		19,097,782		36.28		63
Total New York City Office Properties								5.6				5,488,921		99.2	%		207,816,943		38.17		176
Total CBD Office Properties								21.7				7,257,745		96.9	%		246,127,852		35.01		328
Total Office Properties								811.0				19,473,111		92.3	%	$	507,617,160	$	28.25		1,132

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

(2) Represents Base Rent, net of electric reimbursement, of signed leases at December 31, 2005 adjusted for scheduled contractual increases during the 12 months ending December 31, 2006. Total Base Rent for these purposes reflects the effect of any lease expirations that occur during the 12-month period ending December 31, 2006. 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) 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.

(4) There are air right agreements associated with this property which expire in 2044 and 2048.

(5) There is a ground lease in place on a small portion of the land which expires in 2066.

(6) These assets were sold to Reckson Australia Operating Company Janaury 2006. As of March 2006 Reckson owns a 25% interest in this property

(7) 103 Corporate Park Drive (a development asset) and 105 Corporate Park Drive are on one lot which is 10.4 acres.

(8) The three buildings, 106/108/110 Corporate Park Drive are on one lot which is 20.4 acres.

(9) The two buildings, 707/709 Westchester Avenue are on one lot which is 21.3 acres.

I-31

Flex Properties

As of December 31, 2005, we owned eight flex properties that encompass approximately 863,000 rentable square feet. As of December 31, 2005, the flex properties were approximately 75.0% leased to 18 tenants.

Developments in Progress and Land Holdings

As of December 31, 2005, exclusive of assets classified as held for sale on our balance sheet, we had invested approximately $99.6 million in developments in progress and approximately $123.8 million relating to 10 parcels of land on which we can, based on current estimates, develop approximately 3.6 million square feet of office space. Management has made subjective assessments as to the value and recoverability of these investments based on current and proposed development plans, market comparable land values and alternative use values.

The following table sets forth our projects under development or repositioning, projects in planning and land holdings at December 31, 2005:

Project under Development or Repositioning (square footage):
68 South Service Road, Melville, NY	305,000
6 Landmark Square, Stamford, CT	161,578
7 Landmark Square, Stamford, CT	36,868
University Square, Princeton, NJ	316,000
103 Corporate Park Drive, White Plains, NY	67,207
Total Projects under Development or Repositioning	886,653
Projects in Planning (square footage):
Reckson Executive Park - Building 7, Ryebrook, NY	315,000
Giralda Farms, Madison Township, NJ	443,000
Giralda Farms, Chatham Township, NJ	125,000
600 Summit Lake Drive, Valhalla, NY	250,000
Total Projects in Planning	1,133,000
Land Holdings (acres):
Airport International Plaza - 45, Bohemia, NY	4.1
Eagle Rock III, East Hanover, NJ	15.2
East Patchogue, NY	25.2
Reckson Plaza Land, Mitchel Field, NY	8.2
Giralda Farms, Chatham Township, NJ	111.6
Valhalla, NY	39.5
Total Land Holdings	203.8

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Historical Non-Incremental Revenue-Generating Capital Expenditures, Tenant Improvement Costs and Leasing Commissions

The following table sets forth annual and per square foot non-incremental revenue-generating capital expenditures in which we paid or accrued, during the respective periods, to retain revenues attributable to existing leased space (at 100% of cost) for the years ended 2001 through 2005 for our office and industrial/flex properties, other than One Orlando Centre in Orlando, Florida which was sold on March 7, 2006:

	2001		2002		2003			2004		Average 2001-2004		2005
Suburban Markets – Office Properties
Total	$	4,606,069	$	5,283,674	$	6,791,336		$	7,034,054	$	5,928,783	$	8,402,935
Per Square Foot	$	0.45	$	0.53	$	0.67		$	0.69	$	0.59	$	0.78	(2)
NYC Office Properties
Total	$	1,584,501	$	1,939,111	$	1,922,209		$	2,515,730	$	1,990,388	$	2,017,360
Per Square Foot	$	0.45	$	0.56	$	0.55		$	0.56	$	0.53	$	0.42	(3)
Industrial/Flex Properties
Total	$	711,666	$	1,881,627	$	1,218,401	(1)	$	207,028	$	1,004,681	$	38,723
Per Square Foot	$	0.11	$	0.28	$	0.23		$	0.23	$	0.22	$	0.05

(1) Excludes non-incremental capital expenditures of $435,140 incurred during the fourth quarter 2003 for the industrial/flex properties which were sold during the period.

(2) Per square foot calculations for suburban markets — office properties exclude 68 South Service Road and the Eastridge Portfolio.

(3) Per square foot calculations for NYC office properties exclude One Court Square, a 1,401,609 square foot, triple net leased building.

I-33

The following table sets forth annual and per square foot non-incremental revenue-generating tenant improvement costs and leasing commissions (at 100% of cost) which we committed to perform, during the respective periods, to retain revenues attributable to existing leased space for the years 2001 through 2005 for our consolidated office and industrial/flex properties, other than One Orlando Centre in Orlando, Florida which was sold on March 7, 2006:

	2001		2002			2003			2004			Average 2001-2002		2005			New			Renewal
Long Island Office Properties
Tenant Improvements	$	2,722,457	$	1,917,466		$	3,774,722		$	4,856,604		$	3,317,812	$	4,768,833		$	2,987,031		$	1,781,802
Per Square Foot Improved	$	8.47	$	7.81		$	7.05		$	8.78		$	8.03	$	11.25		$	12.74		$	9.40
Leasing Commissions	$	1,444,412	$	1,026,970		$	2,623,245		$	2,345,325		$	1,859,988	$	1,546,354		$	1,057,469		$	488,885
Per Square Foot Leased	$	4.49	$	4.18		$	4.90		$	4.24		$	4.45	$	3.65		$	4.51		$	2.58
Total Per Square Foot	$	12.96	$	11.99		$	11.95		$	13.02		$	12.48	$	14.90		$	17.25		$	11.98
Westchester Office Properties
Tenant Improvements	$	2,584,728	$	6,391,589	(1)	$	3,732,370		$	6,323,134		$	4,757,955	$	5,296,662		$	3,294,755		$	2,001,907
Per Square Foot Improved	$	5.91	$	15.05		$	15.98		$	11.95		$	12.22	$	12.37		$	25.32		$	6.72
Leasing Commissions	$	1,263,012	$	1,975,850	(1)	$	917,487		$	2,671,548		$	1,706,974	$	1,923,552		$	953,883		$	969,669
Per Square Foot Leased	$	2.89	$	4.65		$	3.93		$	5.05		$	4.13	$	4.49		$	7.33		$	3.26
Total Per Square Foot	$	8.80	$	19.70		$	19.91		$	17.00		$	16.35	$	16.86		$	32.65		$	9.98
Connecticut Office Properties
Tenant Improvements	$	213,909	$	491,435		$	588,087		$	3,051,833		$	1,086,316	$	3,895,369		$	2,751,908		$	1,143,461
Per Square Foot Improved	$	1.46	$	3.81		$	8.44		$	12.71		$	6.60	$	11.86		$	27.80		$	4.98
Leasing Commissions	$	209,322	$	307,023		$	511,360		$	1,493,664		$	630,342	$	1,819,504		$	712,303		$	1,107,201
Per Square Foot Leased	$	1.43	$	2.38		$	7.34		$	6.22		$	4.34	$	5.54		$	7.20		$	4.82
Total Per Square Foot	$	2.89	$	6.19		$	15.78		$	18.93		$	10.94	$	17.40		$	35.00		$	9.80
New Jersey Office Properties
Tenant Improvements	$	1,146,385	$	2,842,521		$	4,327,295		$	1,379,362		$	2,423,891	$	2,421,779		$	2,103,408		$	318,371
Per Square Foot Improved	$	2.92	$	10.76		$	11.57		$	7.12		$	8.09	$	15.49		$	22.15		$	5.19
Leasing Commissions	$	1,602,962	$	1,037,012		$	1,892,635		$	832,658		$	1,341,317	$	1,394,470		$	1,008,362		$	386,108
Per Square Foot Leased	$	4.08	$	3.92		$	5.06		$	4.30		$	4.34	$	8.92		$	10.63		$	6.29
Total Per Square Foot	$	7.00	$	14.68		$	16.63		$	11.42		$	12.43	$	24.41		$	32.78		$	11.48
Total Suburban Markets – Office Properties
Tenant Improvements	$	6,667,479	$	11,643,011		$	12,422,474		$	15,610,933		$	11,585,974	$	16,382,643		$	11,137,102		$	5,245,541
Per Square Foot Improved	$	5.14	$	10.95		$	10.24		$	10.30		$	9.10	$	12.25		$	19.94		$	6.74
Leasing Commissions	$	4,519,708	$	4,346,855		$	5,944,728		$	7,343,194		$	5,538,621	$	6,683,880		$	3,732,017		$	2,951,863
Per Square Foot Leased	$	3.48	$	4.09		$	4.90		$	4.84		$	4.35	$	5.00		$	6.68		$	3.79
Total Per Square Foot	$	8.62	$	15.04		$	15.14		$	15.14		$	13.46	$	17.25		$	26.62		$	10.53
New York City Office Properties
Tenant Improvements	$	788,930	$	4,350,106		$	5,810,017	(2)(3)	$	9,809,822	(3)(4)	$	5,189,719	$	10,648,442	(2)	$	9,995,554	(2)	$	652,888
Per Square Foot Improved	$	15.69	$	18.39		$	32.84		$	23.21		$	22.53	$	28.20		$	33.87		$	7.91
Leasing Commissions	$	1,098,829	$	2,019,837		$	2,950,330	(2)(3)	$	3,041,141	(4)	$	2,277,534	$	4,418,706	(2)	$	3,998,549	(2)	$	420,157
Per Square Foot Leased	$	21.86	$	8.54		$	16.68		$	7.19		$	13.57	$	11.70		$	13.55		$	5.09
Total Per Square Foot	$	37.55	$	26.93		$	49.52		$	30.40		$	36.10	$	39.90		$	47.42		$	13.00
Industrial/Flex Properties
Tenant Improvements	$	1,366,488	$	1,850,812		$	1,249,200		$	310,522		$	1,194,256	$	112,781		$	99,293		$	13,488
Per Square Foot Improved	$	1.65	$	1.97		$	2.42		$	2.27		$	2.08	$	2.46		$	5.90		$	0.46
Leasing Commissions	$	354,572	$	890,688		$	574,256		$	508,198		$	581,928	$	65,740		$	19,938		$	45,802
Per Square Foot Leased	$	0.43	$	0.95		$	1.11		$	3.71		$	1.55	$	1.43		$	1.18		$	1.58
Total Per Square Foot	$	2.08	$	2.92		$	3.53		$	5.98		$	3.63	$	3.89		$	7.08		$	2.04

(1) Excludes tenant improvements and leasing commissions related to a 163,880 square foot leasing transaction with Fuji Photo Film U.S.A. Leasing commissions on this transaction amounted to $5.33 per square foot and tenant improvement allowance amounted to $40.88 per square foot.

(2) Excludes $15.5 million of tenant improvements and $2.2 million of leasing commissions related to a 121,108 square foot lease to Debevoise & Plimpton that was signed during the third quarter of 2003 with a lease commencement date in 2005.

(3) 2003 numbers exclude tenant improvements of $0.2 million for Sandler O’Neil & Partners (7,446 square feet) for expansion space with a lease commencement date in the second quarter of 2004.

I-34

(4) Excludes 86,800 square foot WestPoint Stevens early renewal. There were no tenant improvement or leasing costs associated with this transaction. Also excludes $1.4 million of tenant improvements and $1.2 million of leasing commissions related to a 74,293 square foot lease to Harper Collins Publishers with a lease commencement date in 2006. Also excludes Bank of America retail lease with $0.6 million of tenant improvements and $0.8 million of leasing commissions.

As noted, incremental revenue-generating tenant improvement costs and leasing commissions are excluded from the tables set forth above. The historical capital expenditures, tenant improvement costs and leasing commissions set forth above are not necessarily indicative of future non-incremental revenue-generating capital expenditures or non-incremental revenue-generating tenant improvement costs and leasing commissions that may be incurred to retain revenues on leased space.

The following table sets forth the components of our paid or accrued non-incremental and incremental revenue-generating capital expenditures, tenant improvements and leasing costs for the years ended December 31, 2005 and 2004 as reported on our Statements of Cash Flows — Investment Activities contained in our consolidated financial statements (in thousands):

	Year ended December 31,
	2005		2004
Capital expenditures:
Non-incremental	$	11,028	$	9,767
Incremental		10,350		4,190
Tenant improvements:
Non-incremental		40,192		21,610
Incremental		19,865		5,846
Additions to commercial real estate properties	$	81,435	$	41,413
Leasing costs:
Non-incremental	$	14,379	$	15,491
Incremental		6,165		9,241
Payment of deferred leasing costs	$	20,544	$	24,732
Acquisitions of real property and development costs	$	1,074,405	$	195,608

I-35

The following table sets forth our schedule of top 25 tenants based on base rental revenue as of December 31, 2005:

Tenant Name (1) (2) (3)		Weighted Average Term Remaining (years)		Total Square Feet		Percent of Pro-Rata Share of Annualized Base Rental Revenue
*	Citigroup/Citibank		12.4		2,015,381		4.2%
*	Debevoise & Plimpton		16.0		586,528		3.6%
	Amerada Hess Corporation		16.1		180,822		2.0%
	King & Spalding		8.2		148,675		1.7%
*	Verizon Communications Inc.		1.5		271,384		1.7%
*	American Express		7.8		129,147		1.6%
*	Schulte Roth & Zabel		14.9		279,746		1.6%
	D.E. Shaw		8.0		192,837		1.5%
	County of Nassau		15.8		219,066		1.4%
*	Fuji Photo Film USA		6.7		194,984		1.2%
*	Bank of America/Fleet Bank		4.7		209,919		1.1%
*	MCI		1.1		240,430		1.1%
	Arrow Electronics Inc.		8.0		163,762		1.0%
	Dun & Bradstreet Corp.		6.8		123,000		1.0%
	Daiichi Pharmaceuticals		11.8		141,000		1.0%
*	Schering-Plough Corporation		0.5		152,970		0.9%
*	JP Morgan Chase		5.2		100,636		0.9%
	Westpoint Stevens		1.0		86,800		0.8%
	Westdeutsche Landesbank		10.3		53,000		0.8%
	Washington Mutual		1.2		127,465		0.8%
*	HQ Global		3.4		157,892		0.8%
	North Fork Bank		13.0		126,770		0.8%
	Practicing Law Institute		8.2		77,500		0.8%
	Vytra Healthcare		2.0		105,613		0.8%
*	Banque Nationale De Paris		10.6		145,834		0.8%

(1) Ranked by pro-rata share of annualized base rental revenue adjusted for pro rata share of joint venture interests.

(2) Excludes One Orlando Centre in Orlando, Florida which was sold on March 7, 2006.

(3) Total square footage is based on currently leased space and excludes expansions or leases with future start dates.

* Part or all of space occupied by tenant is in a 51% or more owned joint venture building.

I-36

The following table sets forth our lease expiration table, as adjusted for pre-leased space and inclusive of joint venture interests, at January 1, 2006 for our total portfolio of properties, our office portfolio and our flex portfolio:

Total Portfolio
Year of Expiration	Number of Leases Expiring		Square Feet Expiring		% of Total Portfolio Sq Ft			Cumulative % of Total Portfolio Sq Ft
2006		235		1,598,979		7.8	%		7.8	%
2007		168		1,622,543		8.0	%		15.8	%
2008		180		1,404,446		6.9	%		22.7	%
2009		147		1,356,228		6.7	%		29.4	%
2010		183		2,170,611		10.6	%		40.0	%
2011 and thereafter		433		10,398,704		51.1	%		91.1	%
Total/Weighted Average		1,346		18,551,511		91.1	%
Total Portfolio Square Feet				20,336,506

Office Portfolio
Year of Expiration	Number of Leases Expiring		Square Feet Expiring		% of Total Office Sq Ft			Cumulative % of Total Portfolio Sq Ft
2006		233		1,538,920		7.9	%		7.9%
2007		165		1,570,021		8.1	%		16.0%
2008		178		1,372,203		7.0	%		23.0%
2009		146		1,311,247		6.7	%		29.7%
2010		179		1,903,915		9.8	%		39.5%
2011 and thereafter		425		10,207,558		52.4	%		91.9%
Total/Weighted Average		1,326		17,903,864		91.9	%
Total Office Portfolio Square Feet				19,473,111

Flex Portfolio
Year of Expiration	Number of Leases Expiring		Square Feet Expiring		% of Total Flex Sq Ft			Cumulative % of Total Portfolio Sq Ft
2006		2		60,059		7.0	%		7.0	%
2007		3		52,522		6.1	%		13.1	%
2008		2		32,243		3.7	%		16.8	%
2009		1		44,981		5.2	%		22.0	%
2010		4		266,696		30.9	%		52.9	%
2011 and thereafter		8		191,146		22.1	%		75.0	%
Total/Weighted Average		20		647,647		75.0	%
Total Flex Portfolio Square Feet				863,395

I-37

Mortgage Indebtedness

The following table sets forth certain information regarding our mortgage debt at December 31, 2005.

Property	Principal Amount Outstanding		Interest Rate		Maturity Date		Amortization Term (Years)
	(in thousands)
1350 Avenue of the Americas, NY, NY	$	72,108		6.52%		June, 2006		30
Landmark Square, Stamford, CT (a)		41,634		8.02%		October, 2006		25
100 Summit Lake Drive, Valhalla, NY		14,572		8.50%		April, 2007		15
333 Earle Ovington Blvd., Mitchel Field, NY (b)		50,635		7.72%		August, 2007		25
810 Seventh Avenue, NY, NY (c)		77,854		7.73%		August, 2009		25
275 Broadhollow Road, Melville, NY (c)		15,151		7.73%		August, 2009		25
90 Merrick Avenue, Merrick, NY (c)		18,586		7.73%		August, 2009		25
6900 Jericho Turnpike, Syosset, NY (d)		6,959		8.07%		July, 2010		25
6800 Jericho Turnpike, Syosset, NY (d)		13,185		8.07%		July, 2010		25
580 White Plains Road, Tarrytown, NY (e)		12,006		7.86%		September, 2010		25
520 Broadhollow Road, Melville, NY (f)		11,869		5.20%		October, 2010		Interest Only
50 Marcus Avenue, Melville, NY (f)		28,277		5.20%		October, 2010		Interest Only
1660 Walt Whitman Road, Melville, NY (f)		11,386		5.20%		October, 2010		Interest Only
919 Third Avenue, NY, NY (g)		238,316		6.87%		August, 2011		30
711 Westchester Avenue, White Plains, NY		12,525		5.36%		January, 2015		30 (h)
Total/Weighted average	$	625,063		7.06%

(a) Encompasses six Class A office properties.

(b) At December 31, 2005, we had a 60% general partnership interest in this property and our proportionate share of the aggregate principal amount of the mortgage was approximately $30.4 million.

(c) These mortgages are cross-collateralized.

(d) The properties subject to these mortgages were sold to the RAOC JV in January 2006.

(e) The property subject to this mortgage is contracted to be sold to the RAOC JV in October 2006.

(f) These mortgages are cross-collateralized and are contracted to be sold, subject to the mortgages, to the RAOC JV in October 2006.

(g) We have a 51% membership interest in this property and our proportionate share of the aggregate principal amount of the mortgage is approximately $121.5 million.

(h) This mortgage note is interest only through January 2007 and then amortizes over a 30-year period.

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Item 3. Legal Proceedings

In the fall of 2003, nine shareholder derivative actions were filed, purportedly on behalf of Reckson, against members of the Board of Directors and others, concerning the disposition of our Long Island industrial portfolio. The complaints alleged, among other things, that the process by which the directors agreed to the transaction was not sufficiently independent of the Rechler family and did not involve a “market check” or third-party auction process, and, as a result, was not for adequate consideration. Pursuant to a Stipulation of Settlement dated March 14, 2005, Reckson and the other parties to the actions agreed to a settlement requiring various changes to Reckson’s corporate governance policies, as well as certain other concessions, and Reckson’s payment of plaintiffs’ counsels’ fees of $2.15 million. In January 2006, we paid the plaintiffs’ counsels’ fees, and on February 14, 2006, the Board implemented the required changes to our corporate governance policies.

Reckson incurred approximately $1.9 million in fees and expenses associated with the defense of these actions. Although we believe that these fees and expenses, as well as the $2.15 million paid to plaintiffs’ counsel, are covered by Reckson’s insurance, subject to a $500,000 deductible, thus far, our insurance carrier has not reimbursed our fees and expenses and has asserted that it is not responsible for payment of the plaintiffs’ counsel’s fees. The Company intends to pursue its rights under the insurance policy

Except as provided above, we are not presently subject to any material litigation nor, to our knowledge, is any litigation threatened against us, 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 our liquidity, results of operations or businesses or financial condition.

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, 2005.

I-39

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Common Stock

Our common stock began trading on the New York Stock Exchange (“NYSE”) on May 25, 1995, under the symbol “RA”. On March 8, 2006, the reported closing price per share of our common stock on the NYSE was $41.86, and there were approximately 604 holders of record of our common stock.

The following table sets forth the quarterly high and low intra-day prices per share of our common stock as reported on the NYSE and the distributions paid by us for each respective quarter ended.

	High		Low		Distribution
March 31, 2004	$	28.15	$	23.70	$	0.4246
June 30, 2004	$	28.68	$	22.59	$	0.4246
September 30, 2004	$	29.77	$	27.10	$	0.4246
December 31, 2004	$	34.34	$	28.56	$	0.4246
March 31, 2005	$	33.17	$	29.65	$	0.4246
June 30, 2005	$	33.56	$	29.80	$	0.4246
September 30, 2005	$	35.25	$	32.25	$	0.4246
December 31, 2005	$	37.83	$	31.30	$	0.4246

In years prior to 2005, we reported the above table based on the quarterly high and low closing prices per share of our common stock as reported on the NYSE.

The following table sets forth the Company’s stock option plan information at December 31, 2005:

	(a)		(b)		(c)
Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Stock option plans approved by security holders		1,380,384	$	24.73		2,339,726
Stock option plan not approved by security holders (1)		27,950	$	23.28		106,838
Total		1,408,334	$	24.70		2,446,564

(1) Includes information relating to the Company’s 1996 Employee Stock Option Plan.

The 1996 Employee Stock Option Plan (the “1996 Plan”)

The 1996 Plan was adopted by the Board of Directors of the Company on November 7, 1996, and provides for the grant of awards of up to an aggregate of 200,000 shares of common stock. The 1996 Plan is administered by the Compensation Committee. Existing officers and directors of the Company are not eligible to participate in the 1996 Plan. The 1996 Plan authorizes (i) the grant of stock options that qualify as incentive stock options under Section 422 of the Code, (ii) the grant of “nonqualified” stock options, (iii) the grant of shares of common stock subject to certain restrictions on transfer and certain risks of forfeiture, and (iv) grants of unrestricted shares of common stock. The exercise price of stock options is determined by the Compensation Committee, but may not be less than 100% of the fair market value of the shares of common stock on the date of grant. In any calendar year, a person eligible for awards under the 1996 Plan may not be granted options covering more than 75,000 shares of common stock. The 1996 Plan shall terminate 10 years

II-1

after its effective date. Additional information related to the 1996 Plan is set forth in the Company’s consolidated financial statements and the notes thereto that are part of this Form 10-K.

Unregistered Sales of Equity Securities and Use of Proceeds

We did not sell any equity securities in the three months ended December 31, 2005 that were not registered under the Securities Act of 1933.

We made no repurchases of our equity securities during the three months ended December 31, 2005.

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Item 6. Selected Financial Data (in thousands except per share data and property count)

The following table sets forth our selected financial data and should be read in conjunction with our Financial Statements and notes thereto included in Item 8, “Financial Statements and Supplementary Data” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K.

In connection with this Annual Report on Form 10-K, we are restating our historical audited consolidated financial statements as a result of Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”). In compliance with SFAS No. 144, we have reported revenues and expenses from those properties as discontinued operations, net of limited partners’ minority interests, for each period presented in our Annual Report on Form 10-K. This reclassification has no effect on our reported net income (loss) or funds from operations.

	For the year ended December 31,
	2005		2004		2003		2002		2001
Operating Data:
Total revenues	$	572,053	$	512,424	$	434,866	$	420,535	$	429,632
Total expenses		516,732		440,506		387,501		350,628		332,152
Income before minority interests, preferred dividends and distributions, valuation reserves, equity in earnings of real estate joint ventures, gains on sales of real estate and discontinued operations		55,321		71,918		47,365		69,907		97,480
Minority interests		20,013		19,821		17,840		20,887		6,232
Preferred dividends and distributions		—		12,777		22,360		23,123		23,977
Redemption charges on Series A preferred stock		—		15,812		—		—		—
Valuation reserves on investments in affiliate loans and joint ventures and other investments		—		—		—		—		166,101
Equity in earnings of real estate joint ventures and service companies		1,371		603		30		1,113		2,087
Gains on sales of real estate		92,130		—		—		537		20,173
Discontinued operations (net of minority interests):
Income from discontinued operations		7,373		6,493		19,288		22,719		18,703
Gain on sales of real estate		61,459		11,776		115,771		4,267		—
Net income (loss) allocable to common shareholders		197,641		42,380		124,966		41,604		(44,243	)
Net income (loss) allocable to Class B common shareholders		—		—		17,288		12,929		(13,624	)
Per Share Data – Common Shareholders:
Basic:
Common	$	.49	$	.35	$	.10	$	.41	$	(1.50	)
Gain on sales of real estate		1.08		—		—		.01		.29
Discontinued operations		.84		.27		2.45		.42		.29
Basic net income (loss) common		2.41		.62		2.55		.84		(.92	)
Weighted average shares outstanding		82,082		68,871		49,092		49,669		48,121
Cash dividends declared	$	1.70	$	1.70	$	1.70	$	1.70	$	1.66
Diluted:
Common	$	.49	$	.35	$	.10	$	.41	$	(1.50	)
Gain on sales of real estate		1.08		—		—		.01		.29
Discontinued operations		.83		.26		2.44		.41		.29
Diluted net income (loss) common		2.40		.61		2.54		.83		(.92	)
Diluted weighted average shares outstanding		82,515		69,235		49,262		49,968		48,121
Per Share Data – Class B Common Shareholders (1):
Basic:
Class B Common	$	—	$	—	$	.30	$	.64	$	(2.18	)
Gain on sales of real estate		—		—		—		.01		.42
Discontinued operations		—		—		1.64		.63		.44
Basic net income (loss) Class B Common		—		—		1.94		1.28		(1.32	)
Weighted average shares outstanding		—		—		8,910		10,122		10,284
Cash dividends declared		—	$	—	$	2.12	$	2.59	$	2.55
Diluted:
Class B Common	$	—	$	—	$	.29	$	.81	$	(2.18	)
Gain on sales of real estate		—		—		—		—		.42
Discontinued operations		—		—		1.61		.09		.44
Diluted net income (loss) Class B Common		—		—		1.90		.90		(1.32	)
Diluted weighted average shares outstanding		—		—		8,910		10,122		10,284

(1) On November 25 2003, the Company elected to exchange all of its Class B common stock for an equal number of shares of its common stock. As a result, the Class B common stock ceased trading.

II-3

	As of or for the year ended December 31,
	2005		2004		2003		2002		2001
Balance Sheet Data (period end):
Commercial real estate properties, before accumulated depreciation (1)	$	3,476,415	$	2,759,972	$	2,258,805	$	2,187,125	$	2,112,657
Cash and cash equivalents		17,468		25,137		22,831		30,827		121,975
Total assets		3,811,206		3,167,608		2,746,995		2,907,920		2,994,218
Mortgage notes payable (1)		541,382		576,719		641,718		652,681		662,453
Unsecured credit facility		419,000		235,500		169,000		267,000		271,600
Senior unsecured notes		980,085		697,974		499,445		499,305		449,463
Market value of equity (2)		3,060,612		2,763,734		1,792,895		1,681,372		1,915,587
Total market capitalization including debt (2 and 3)		5,106,303		4,175,060		3,050,142		3,052,818		3,251,599
Other Data:
Funds from operations (basic) (4)	$	175,244	$	144,990	$	134,889	$	158,420	$	176,789
Funds from operations (diluted) (4)	$	175,244	$	145,580	$	135,982	$	181,543	$	206,390
Total square feet (at end of period) (5)		20,337		15,922		14,733		20,284		20,611
Number of properties (at end of period) (5)		103		87		89		178		182

(1) Excludes book value of real estate properties, before accumulated depreciation and mortgage notes payable related to properties classified as held for sale.

(2) Based on the sum of:

(i) the market value of the Company’s common stock and operating partnership units (assuming conversion) of 85,030,918, 84,197,940, 61,825,925, 55,522,307 and 57,469,595 at December 31, 2005, 2004, 2003, 2002 and 2001, respectively (based on a per share/unit price of $35.98, $32.81, $24.30, $21.05 and $23.36 at December 31, 2005, 2004, 2003, 2002 and 2001, respectively),

(ii) the market value of the Company’s Class B common stock of 9,915,313 and 10,283,513 shares at December 31, 2002 and 2001, respectively (based on a per share price of $22.40 and $25.51 at December 31, 2002 and 2001, respectively),

(iii) the liquidation preference value of 10,834,500, 10,834,500 and 11,192,000 shares of the Company’s preferred stock at December 31, 2003, 2002 and 2001, respectively (based on a per share value of $25.00), and

(iv) the liquidation preference value of 1,200, 1,200, 19,662, 19,662 and 30,965 of the operating partnership’s preferred units at December 31, 2005, 2004, 2003, 2002 and 2001, respectively (based on a per unit value of $1,000).

(3) Debt amount is net of minority partners’ interests’ share of consolidated joint venture debt and including our share of unconsolidated joint venture debt.

(4) Funds from Operations (“FFO”) is defined by the National Association of Real Estate Investment Trusts (“NAREIT”) as net income or loss, excluding gains or losses from sales of depreciable properties plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. We present FFO because we consider it an important supplemental measure of our operating performance and believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. As a result, FFO provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities, interest costs and other matters without the inclusion of depreciation and amortization, providing perspective that may not necessarily be apparent from net income. We compute FFO in accordance with the standards established by NAREIT. 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 our operating performance or as an alternative to cash flow as a measure of liquidity. Since all companies and analysts do not calculate FFO in a similar fashion, our calculation of FFO presented herein may not be comparable to similarly titled measures as reported by other companies. A reconciliation of FFO to net income allocable to common shareholders, the GAAP measure we believe to be the most directly comparable, is contained in Item 7 of this Form 10-K.

(5) Excludes properties under development and 800 North Magnolia Avenue, a 354,000 square foot non-core office building located in Orlando, Florida. This property was sold on March 7, 2006.

II-4

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 thereto.

Critical Accounting Policies

The consolidated financial statements of the Company include accounts of the Company and all majority-owned and controlled subsidiaries. The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the Company’s consolidated financial statements and related notes. In preparing these financial statements, management has utilized information available including its past history, industry standards and the current economic environment, among other factors, in forming its estimates and judgments of certain amounts included in the consolidated financial statements, giving due consideration to materiality. It is possible that the ultimate outcome as anticipated by management in formulating its estimates inherent in these financial statements may not materialize. However, application of the critical accounting policies below involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. In addition, other companies may utilize different estimates, which may impact comparability of the Company’s results of operations to those of companies in similar businesses.

     Revenue Recognition and Accounts Receivable

Minimum rental revenue is recognized on a straight-line basis, which averages minimum rents over the terms of the leases. The excess of rents recognized over amounts contractually due are included in deferred rents receivable on our balance sheets. Contractually due but unpaid rents are included in tenant receivables on our balance sheets. Certain lease agreements also provide for reimbursement of real estate taxes, insurance, common area maintenance costs and indexed rental increases, which are recorded on an accrual basis. Ancillary and other property related income is recognized in the period earned.

We make estimates of the collectibility of our accounts receivables related to base rents, tenant escalations and reimbursements and other revenue or income. We specifically analyze tenant receivables and historical bad debts, customer credit worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of its allowance for doubtful accounts. In addition, when tenants are in bankruptcy, we make estimates of the expected recovery of pre- petition administrative and damage claims. In some cases, the ultimate resolution of those claims can exceed a year. These estimates have a direct impact on our net income because a higher bad debt reserve results in less net income.

We incurred approximately $3.0 million, $831,000 and $1.9 million of bad debt expense for the years ended December 31, 2005, 2004 and 2003, respectively, related to tenant receivables which accordingly reduced total revenues and reported net income during the period.

We record interest income on investments in notes receivable on the accrual basis of accounting. We do 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 we consider 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.

Reckson Construction & Development LLC and Reckson Construction Group New York, Inc. use the percentage-of-completion method for recording amounts earned on their contracts. This method records amounts earned as revenue in the proportion that actual costs incurred to date bear to the estimate of total costs at contract completion.

Gain on the sale 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 and us having no substantial continuing involvement with the buyer. Additionally, in connection with the sale of real estate, if we retain certain risks in the form of guarantees, the profit recognized on that sale shall be reduced and deferred by the maximum exposure to loss, until such exposure is relieved.

II-5

We follow the guidance provided for under the Financing Accounting Standards Board (“FASB”) Statement No. 66 “Accounting for Sales of Real Estate” (“Statement No. 66”), which provides guidance on sales contracts that are accompanied by agreements which require the seller to develop the property in the future. Under Statement No. 66, profit is recognized and allocated to the sale of the land and the later development or construction work on the basis of estimated costs of each activity; the same rate of profit is attributed to each activity. As a result, profits are recognized and reflected over the improvement period on the basis of costs incurred (including land) as a percentage of total costs estimated to be incurred. We use the percentage of completion method, as future costs of development and profit are reliably estimated.

     Real Estate

Land, buildings and improvements, furniture, fixtures and equipment are recorded at cost. Tenant improvements, which are included in buildings and improvements, are also stated at cost. Expenditures for ordinary maintenance and repairs are expensed to operations as they are incurred. Renovations and/or replacements, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives.

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.

We are required to make subjective assessments as to the useful lives of our properties for purposes of determining the amount of depreciation to reflect on an annual basis with respect to those properties. These assessments have a direct impact on our net income. Should we lengthen the expected useful life of a particular asset, it would be depreciated over more years, and result in less depreciation expense and higher annual net income.

Assessment by us of certain other lease related costs must be made when we have a reason to believe that the tenant will not be able to execute under the term of the lease as originally expected.

On July 1, 2001 and January 1, 2002, we adopted FASB Statement No.141, “Business Combinations” and FASB Statement No. 142, “Goodwill and Other Intangibles”, respectively. As part of the acquisition of real estate assets, the fair value of the real estate acquired is allocated to the acquired tangible assets, consisting of land, building and building improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases, and value of tenant relationships, based in each case on their fair values.

We allocate a portion of the purchase price to tangible assets including the fair value of the building and building improvements on an as-if-vacant basis and to land determined either by real estate tax assessments, independent appraisals or other relevant data. Additionally, we assess fair value of identified intangible assets and liabilities based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information.

Estimates of future cash flows are based on a number of factors including the historical operating results, known trends, and market/economic conditions that may affect the property. If we incorrectly estimate the values at acquisition or the undiscounted cash flows, initial allocation of purchase price and future impairment charges may be different.

     Long Lived Assets

We are required to make subjective assessments as to whether there are impairments in the value of our real estate properties and other investments. An investment’s value is impaired only if management’s estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the investment are less than the carrying value of the investment. Such assessments consider factors such as cash flows, expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors. To the extent impairment has occurred it will be measured as the excess of the carrying amount of the property over the fair value of the property. These assessments have a direct impact

II-6

on our net income, as a recognition of an impairment results in an immediate negative adjustment to net income. In determining impairment, if any, we have followed FASB Statement No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets” (“Statement No. 144”). Statement No. 144 did not have an impact on net income allocable to common shareholders. Statement No. 144 only impacts the presentation of the results of operations and gains on sales of real estate assets for those properties sold during the period within the consolidated statements of income.

In accordance with the provisions of Statement No. 144, and Emerging Issues Task Force (“EITF”) 87-24, we allocated approximately $7.6 million of our unsecured corporate interest expense to discontinued operations for the year ended December 31, 2003. EITF 87-24 states that “interest on debt that is required to be repaid as a result of the disposal transaction should be allocated to discontinued operations”. Pursuant to the terms of our unsecured credit facility (the “Credit Facility”), we were required to repay the Credit Facility to the extent of the net proceeds, as defined, received from the sales of unencumbered properties. As such, we had allocated to discontinued operations the interest expense incurred on the portion of our Credit Facility, which was required to be repaid. In August 2004, we amended and extended our Credit Facility, whereby such repayment requirement was eliminated.

     Stock-Based Compensation

On December 16, 2004, the FASB issued Statement No. 123 (revised 2004), Share-Based Payment (“Statement No. 123R”), which is a revision of FASB Statement No. 123, “Accounting for Stock-Based Compensation” (“Statement No. 123”). Statement No. 123R supersedes Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and amends FASB Statement No. 95, “Statement of Cash Flows”. Generally, the approach in Statement No. 123R is similar to the approach described in Statement No. 123. However, Statement No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. On January 1, 2006, we adopted Statement No. 123R and have determined that the adoption of Statement No. 123R will have no material impact on our consolidated financial statements.

Effective January 1, 2002, we elected to follow Statement No. 123 and use the Black-Scholes option pricing model to estimate the value of stock options granted to employees and continue to use this acceptable option valuation model upon our required adoption of Statement No. 123R on January 1, 2006. Because Statement No. 123R must be applied not only to new awards but to previously granted awards that are not fully vested on the effective date, and because we adopted Statement No. 123 using the prospective transition method (which applied only to awards granted, modified or settled after the adoption date), compensation cost for previously granted awards that were not recognized under Statement No. 123 would be recognized under Statement No. 123R. However, on January 1, 2006, the date we adopted Statement No. 123R, all of the unexercised options outstanding under our stock option plans were fully vested. As a result, no additional expense will be recognized. In addition, had we adopted Statement No. 123R in prior periods, the impact of that standard would have approximated the impact of Statement No. 123 as described in the disclosure of pro forma net income and earnings per share in Note 1 to the Company’s consolidated financial statements.

In December 2002, the FASB issued Statement No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure” (“Statement No. 148”). Statement No. 148 amended Statement No. 123 to provide alternative methods of transition for an entity that voluntarily adopts the fair value recognition method of recording stock option expense. Statement No. 148 also amended the disclosure provisions of Statement 123 and Accounting Principles Board Opinion No. 28, “Interim Financial Reporting” to require disclosure in the summary of significant accounting policies of the effects of an entity’s accounting policy with respect to stock options on reported net income and earnings per share in annual and interim financial statements.

     Accumulated Other Comprehensive Income (Loss)

We report comprehensive income or loss in accordance with the provisions of FASB Statement No. 130, “Reporting Comprehensive Income”, which establishes standards for reporting comprehensive income and its

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components in the financial statements. The components of other comprehensive income (loss) (“OCI”) consist of unrealized gains and losses on derivative instruments.

     Derivative Instruments

FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“Statement No. 133”), as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities.

The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.

As required by Statement No. 133, we record all derivatives on our balance sheet at fair value. For effective hedges, depending on the nature of the hedge, changes in the fair value of the derivative will be offset against the corresponding change in fair value of the hedged asset, liability, or firm commitment through earnings or recognized in OCI until the hedged item is recognized in earnings.

For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in OCI and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. We assess the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designated hedged item or transaction. For derivatives not designated as hedges, changes in fair value are recognized in earnings.

We do not enter into derivative financial instruments for trading or speculative purposes. However, in the normal course of our business and to help us manage our debt issuances and maturities, we do use derivative financial instruments in the form of cash flow hedges to protect ourselves against potentially rising interest rates.

     Variable Interest Entities

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”), which explains how to identify variable interest entities (“VIEs”) and how to assess whether to consolidate such entities. VIEs are primarily entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. All VIEs with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes. The initial determination of whether an entity qualifies as a VIE shall be made as of the date at which a primary beneficiary becomes involved with the entity and reconsidered as of the date of a triggering event, as defined. The provisions of this interpretation are immediately effective for VIEs formed after January 31, 2003. In December 2003 the FASB issued FIN 46R, deferring the effective date until the period ending March 31, 2004 for interests held by public companies in VIEs created before February 1, 2003, which were non-special purpose entities. The Company adopted FIN 46R during the period ended March 31, 2004 and has determined that its consolidated and unconsolidated subsidiaries do not represent VIEs pursuant to such interpretation. We will continue to monitor any changes in circumstances relating to certain of its consolidated and unconsolidated joint ventures which could result in a change in our consolidation policy.

     Finite Life Joint Venture Agreements

In May 2003, the FASB issued Statement No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (“Statement No. 150”). Statement No. 150 establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity. Statement No. 150 is effective for all financial

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instruments created or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. We adopted Statement No. 150 on July 1, 2003, which had no effect on our financial statements. Statement No. 150 also requires the disclosure of the estimated settlement values of non-controlling interests in joint ventures that have finite lives.

Two of our consolidated joint ventures are subject to finite life joint venture agreements. In accordance with Statement No. 150, we have estimated the settlement value of these non-controlling interests at December 31, 2005 and 2004 to be approximately $153.2 million and $145.1 million, respectively. The carrying value of these non-controlling interests, which is included in minority partners’ interests in consolidated partnerships on our consolidated balance sheets, was approximately $109.2 million and $110.9 million at December 31, 2005 and 2004, respectively.

     Current pronouncements

In June 2005, the FASB ratified the consensus in EITF Issue No. 04-5, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (“Issue 04-5”), which provides guidance in determining whether a general partner controls a limited partnership. Issue 04-5 states that the general partner in a limited partnership is presumed to control that limited partnership. The presumption may be overcome if the limited partners have either (1) the substantive ability to dissolve the limited partnership or otherwise remove the general partner without cause or (2) substantive participating rights, which provide the limited partners with the ability to effectively participate in significant decisions that would be expected to be made in the ordinary course of the limited partnership’s business and thereby preclude the general partner from exercising unilateral control over the partnership. The adoption of Issue 04-5 by us for new or modified limited partnership arrangements is effective June 30, 2005 and for existing limited partnership arrangements effective January 1, 2006. We do not expect that we will be required to consolidate our current unconsolidated joint venture investments nor do we expect Issue 04-5 to have a material effect on our consolidated financial statements.

In May 2005, the FASB issued Statement No. 154, “Accounting Changes and Error Corrections” (“Statement No. 154”). Statement No. 154, which replaces APB Opinion No. 20, “Accounting Changes” and FASB Statement No. 3, “Reporting Accounting Changes in Interim Financial Statements”, changes the requirements for the accounting for and reporting of a change in accounting principle. The statement requires retrospective application of changes in accounting principle to prior periods’ financial statements unless it is impracticable to determine the period-specific effects or the cumulative effect of the change. Statement No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of Statement No. 154 is not expected to have a material impact on our consolidated financial position, results of operations or cash flows.

In March 2005, FASB issued Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations” (“FIN 47”), which became effective December 31, 2005. Under FIN 47, a conditional asset retirement obligation (“CARO”) must be recorded if the liability can be reasonably estimated. A CARO is an obligation that is settled at the time an asset is retired or disposed of an for which the timing and/or method of settlement are conditional on future events. The Company owns certain properties that currently have asbestos which under certain conditions must be remediated. As a result of adopting FIN 47, we will increase the value of our recorded tangible assets at the time we recognize the associated conditional retirement obligation.

As a result, we have recorded approximately $2.0 million which represents the fair value of the CARO related to asbestos removal in tenant spaces. In addition, for certain limited areas of our properties, management is unable to reasonably determine the fair value of potential remediation costs as there is an indeterminate settlement date for the asset retirement obligation because the range of time over which way we may choose to remediate this condition may not be estimated with any level of precision which would lend itself to a meaningful estimate.

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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/R&D buildings, and also owned 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”) engaged in the ownership, operation, acquisition, leasing, financing, management and development of commercial real estate properties, principally office and to a lesser extent flex properties and also owns land for future development. The Company’s growth strategy is focused on the commercial real estate markets in and around the New York City tri-state area (the “Tri-State Area”). All of the Company’s interests in its real properties, land held for development and investments in notes receivable are held directly or indirectly by, and all of its operations are conducted through, Reckson Operating Partnership, L.P. (the “Operating Partnership”).

In connection with the IPO, we were granted ten-year options to acquire ten properties (the “Option Properties”) which were either owned by certain Rechler family members who were also executive officers of the Company, or in which the Rechler family members owned a non-controlling minority interest, at prices based upon an agreed upon formula. During November, 2003, in connection with the sale of all but three of our Long Island industrial building portfolio to members of the Rechler family, four of the five remaining options (the “Remaining Option Properties”) were terminated, along with management contracts relating to three of the properties.

As part of the Company’s REIT structure, it is provided management, leasing and construction related services through taxable REIT subsidiaries as defined by the Internal Revenue Code of 1986, as amended (the “Code”). These services are currently provided by Reckson Management Group, Inc. (“RMG”), RANY Management Group, Inc., Reckson Construction and Development LLC (“RCD”), and Reckson Construction Group New York, Inc. (collectively, the “Service Companies”). During the years ended December 31, 2005 and 2004, RCD billed approximately $31,000 and $859,000, respectively, of market rate services and RMG billed approximately $285,000 and $280,000, respectively, of market rate management fees to the Remaining Option Properties.

RMG leases approximately 26,000 square feet of office space at the Remaining Option Property located at 225 Broadhollow Road, Melville, New York for its corporate offices at an annual base rent of approximately $809,000. During 2005, RMG exercised a termination option for its corporate offices allowing us to terminate the lease on November 30, 2006 without penalty. RMG also leases 10,722 square feet of warehouse space used for equipment, materials and inventory storage at a property owned by certain members of the Rechler family at an annual base rent of approximately $79,000. In addition, commencing April 1, 2004, RCD has been leasing approximately 17,000 square feet of space at 225 Broadhollow Road, Melville, New York, which is scheduled to terminate on September 30, 2006. Base rent of approximately $495,000 and $360,000 was paid by RCD during the years ended December 31, 2005 and 2004, respectively. Commencing in April 2005, RCD sub-let the entire 17,000 square feet to a third party for approximately $35,000 per month through RCD’s September 2006 lease termination date.

On March 28, 2005, an entity (“REP”) owned by members of the Rechler family (excluding Scott Rechler, but including his father, Roger, and brother, Gregg) exercised a Right of First Refusal (which was granted in connection with the 2003 sale of the industrial portfolio by us) to acquire a vacant parcel of land for a purchase price of $2.0 million. We have agreed to provide REP with the option to defer the closing on the purchase until September 2006, for a non-refundable deposit of $400,000 and a fee of $10,666 per month for each month that the closing is deferred. In connection therewith, REP agreed to settle a dispute concerning an easement on a separate parcel of land owned by us adjacent to one of the properties transferred to REP in November 2003.

A company affiliated with an independent director of the Company leases 15,566 square feet in a property owned by us at an annual base rent of approximately $430,000.

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During November 2005 we purchased 11 pieces of art which have historically been on display in certain of our buildings for approximately $170,000 from an entity owned by certain members of the Rechler family. The purchase prices were reviewed by an independent art dealer and approved by the independent directors.

As of December 31, 2005 we owned and operated 103 properties (inclusive of twenty-five office properties owned through joint ventures) in the Tri-State Area Central Business District (“CBD”) and suburban markets, encompassing approximately 20.3 million rentable square feet, all of which are managed by us. The properties include 17 Class A CBD office properties encompassing approximately 7.2 million rentable square feet. The CBD office properties consist of six properties located in New York City, nine properties located in Stamford, CT and two properties located in White Plains, NY. The CBD office properties comprised 52.1% of our net operating income (property operating revenues less property operating expenses) for the three months ended December 31, 2005. These properties also include 78 Class A suburban office properties encompassing approximately 12.2 million rentable square feet, of which 59 of these properties, or 46.8% as measured by square footage, are located within our 14 office parks. We have historically emphasized the development and acquisition of suburban office properties in large-scale office parks. We believe that owning properties in planned office parks provides strategic and synergistic advantages, including the following: (i) certain tenants prefer locating in a park with other high quality companies to enhance their corporate image, (ii) parks afford tenants certain aesthetic amenities such as a common landscaping plan, standardization of signage and common dining and recreational facilities, (iii) tenants may expand (or contract) their business within a park, enabling them to centralize business functions and (iv) a park provides tenants with access to other tenants and may facilitate business relationships between tenants. Additionally, the properties include eight flex properties encompassing approximately 863,000 rentable square feet.

Through our ownership of properties in the key CBD and suburban office markets in the Tri-State Area, we believe we have a unique competitive advantage as the trend toward the regional decentralization of the workplace increases. Subsequent to the events of September 11, 2001, as well as the impact of technological advances, which further enable decentralization, companies are strategically re-evaluating the benefits and feasibility of regional decentralization and reassessing their long- term space needs. We believe this multi-location regional decentralization will continue to take place, increasing as companies begin to have better visibility as to the future of the economy, further validating our regional strategy of maintaining a significant market share in the key CBD and suburban office markets in the Tri-State Area.

At December 31, 2005, we also owned a 354,000 square foot office building located in Orlando, Florida. This non-core real estate holding was acquired in May 1999 in connection with our initial New York City portfolio acquisition. This property was cross-collateralized under a $99.7 million mortgage note payable along with one of our New York City office buildings. On November 1, 2004, we exercised its right to prepay this note in its entirety, without penalty. This property was sold on March 7, 2006 for aggregate consideration of approximately $70.0 million.

We also own certain land parcels throughout our markets in the Tri-State Area which we hold for current and future development (the “Development Parcels”). During July 2004, we commenced the ground-up development on one of the Development Parcels of a 300,000 square foot Class A office building located within our existing three building executive office park in Melville, NY with a total anticipated investment of approximately $64.0 million. This development was recently completed and is approximately 67% leased. During July 2005, we commenced the ground-up development on one of the Development Parcels of a 37,000 square foot Class A retail property located within our existing six building Landmark Square office park in Stamford, Connecticut with a total anticipated investment of approximately $10.1 million. In August 2005, we recommenced the ground-up development of one of the Development Parcels of a 316,000 square foot Class A office building located within our existing three building office park located in Princeton, NJ with an anticipated incremental investment of approximately $47.0 million. There can be no assurances that the actual cost of these ground-up development projects will not exceed their anticipated amounts. Further, one of the Development Parcels, aggregating approximately 4.1 acres, is classified as held for sale on our balance sheets and is expected to close during September 2006 for aggregate consideration of $2.0 million. In addition, as previously discussed, in May 2005, we entered into a contract to sell approximately 60 acres of vacant land in Chatham Township, NJ, subject to a change in zoning and other conditions. There can be no assurances that such conditions will be met or that the transaction will be consummated. Excluding the foregoing, at

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December 31, 2005 our inventory of Development Parcels aggregated approximately 309 acres of land in 10 separate parcels of which we can, based on current estimates, develop approximately 3.6 million square feet of office space and which we had invested approximately $123.8 million.

Management has made subjective assessments as to the value and recoverability of our investments in the Development Parcels based on current and proposed development plans, market comparable land values and alternative use values. We are currently evaluating alternative land uses for certain of the remaining Development Parcels to realize their highest economic value. These alternatives may include rezoning certain Development Parcels from commercial to residential for potential disposition.

Our core business strategy is based on a long-term outlook considering real estate as a cyclical business. We seek to accomplish long-term stability and success by developing and maintaining an infrastructure and franchise that is modeled for success over the long-term. This approach allows us to recognize different points in the market cycle and adjust our strategy accordingly. We are reasonably optimistic about the prospects for continued economic recovery in our markets. We still choose to maintain our conservative operating strategy of focusing on retaining high occupancies, controlling operating expenses, maintaining a high level of investment discipline and preserving financial flexibility.

Our market capitalization at December 31, 2005 was approximately $5.1 billion. Our market capitalization is based on the sum of (i) the market value of the Company’s common stock and units of limited partnership interest (“OP Units”) (assuming conversion) of $35.98 per share/unit (based on the closing price of the Company’s common stock on December 31, 2005), (ii) the liquidation preference value of the Operating Partnership’s preferred units of $1,000 per unit and (iii) approximately $2.0 billion (including our share of consolidated and unconsolidated joint venture debt and net of minority partners’ interests’ share of consolidated joint venture debt) of debt outstanding at December 31, 2005. As a result, our total debt to total market capitalization ratio at December 31, 2005 equaled approximately 40.1%.

Results of Operations

The following table is a comparison of the results of operations for the year ended December 31, 2005 to the year ended December 31, 2004:

	Year ended December 31,
					Change
	2005		2004		Dollars		Percent
Property Operating Revenues:
Base rents	$	468,034	$	422,012	$	46,022		10.9%
Tenant escalations and reimbursements		78,114		71,369		6,745		9.5%
Total property operating revenues	$	546,148	$	493,381	$	52,767		10.7%
Property Operating Expenses:
Operating expenses	$	131,289	$	118,278	$	13,011		11.0%
Real estate taxes		87,752		80,855		6,897		8.5%
Total property operating expenses	$	219,041	$	199,133	$	19,908		10.0%
Other Income	$	118,035	$	19,043	$	98,992		519.8%
Other Expenses:
Interest:
Expense	$	110,891	$	95,920	$	14,971		15.6%
Amortization of deferred financing costs		4,166		3,721		445		12.0%
Marketing, general and administrative		32,438		29,967		2,471		8.2%
Long term incentive compensation expense		23,534		—		23,534		—%
Total other expenses	$	171,029	$	129,608	$	41,421		32.0%

Our property operating revenues, which include base rents and tenant escalations and reimbursements (“Property Operating Revenues”), increased by $52.8 million or 10.7% for the year ended December 31, 2005 as compared to the 2004 period. Property Operating Revenues increased by $49.1 million attributable to

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properties acquired during 2005 and $24.3 million from built in rent increases and straight line rental revenue increases in our same store properties. These increases were offset by a $14.6 million revenue decrease from properties sold during 2005 and $6.0 million decrease in termination fees.

The 2004 increase in property operating expenses, real estate taxes and ground rents (“Property Expenses”) increased by $19.9 million or 10.0% for the year ended December 31, 2005 as compared to the 2004 period. The increase is due to a $14.7 million increase in real estate taxes and operating expenses related to our same store properties. Properties acquired during 2005 increased property expenses by $10.4 million. These increases were offset by a $5.2 million decrease for properties sold during 2005. The increase in real estate taxes is attributable to the increases levied by certain municipalities, particularly in New York City and Westchester County, New York. The increase in utilities was the effect of rising fuel prices throughout the United States as a result of Hurricane Katrina.

Gross operating margins (defined as Property Operating Revenues less Property expenses, taken as a percentage of Property Operating Revenues) for 2005 and 2004 were 59.9% and 59.6%, respectively

Other income, consisting of gains on sales of real estate, interest income on notes receivable, investment income and other increased by $99.0 million for the year ended December 31, 2005 as compared to the 2004 period. This increase is primarily attributable to gains on sales of real estate recognized in the 2005 period of $92.1 million from the sales of 17 of our suburban office properties to a newly formed joint venture, Reckson Australia Operating Company LLC (the “RAOC JV”) ($86.7 million) and the sale of a 70% interest in One Court Square to the Court Square JV ($5.4 million). Interest income on notes receivable increased by $7.0 million for the year ended December 31, 2005 as compared to the 2004 period due to a weighted average increase in our Note Receivable Investments of $62.7 million from the 2004 period. These increases were off-set by a net decrease in investment and other income of approximately $100,000. This net decrease is comprised of the following: $4.6 million in transactional, property and asset management fees earned during the 2005 period related to the RAOC JV, an increase of $4.0 million earned through our Service Companies, an increase of $2.3 million related to tenant- related services and other income, a decrease of $5.0 million to the gain recognized and related tenant work on a land sale and build-to-suit transaction earned in 2004 with no such gain recognized in the 2005 period, a $1.2 million decrease related to real estate tax and other non-tenant related recoveries, a decrease in income tax refunds of $1.0 million recorded in the 2004 period through a Service Company and a decrease of $3.8 million received in the 2004 period in consideration for the assignment of certain mortgage indebtedness.

Interest expense incurred increased by $15.0 million or 15.6% for the year ended December 31, 2005 as compared to the 2004 period. This increase is attributable to an increase of $10.3 million attributable to a net increase of $50.0 million in the Operating Partnership’s senior unsecured notes and its issuance of $287.5 million of senior unsecured debentures during the 2005 period. Interest expense increased by $5.1 million incurred under an unsecured bridge facility, which was funded in May 2005 for the acquisition of One Court Square (the “Bridge Facility”), $1.6 million incurred from our financing of twelve properties during the 2005 period related to the RAOC JV, approximately $300,000 incurred from the assumption of mortgage debt on two of our acquisitions during the 2005 period and $9.1 million incurred under our unsecured credit facility. The increase in interest expense incurred under our unsecured credit facility is a result of an increase in the weighted average balance outstanding and an increase in the weighted average interest rate from 3.6% to 4.6%. The weighted average balance outstanding under our unsecured credit facility was $314.0 million for the year ended December 31, 2005 as compared to $143.9 million for the year ended December 31, 2004. During the 2005 period we also incurred $5.1 million of interest expense related to the permanent financing of One Court Square prior to the sale of a 70% interest in the property on November 30, 2005. These aggregate increases of $31.5 million were off-set by decreases in interest expense of approximately $1.1 million incurred under our same store mortgage portfolio, by decreases in interest expense of $12.3 million resulting from the pay-off of four mortgage notes during 2004 and 2005 and an increase of $3.4 million in capitalized interest expense due to increase in development activities.

Amortization of deferred financing costs increased by approximately $445,000 from 2004 to 2005 primary as a result of costs attributable to the permanent financing of One Court Square prior to the sale of a 70% interest in the property on November 30, 2005 of approximately $369,000. To a lesser extent the increase was

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attributable to the issuance of the Operating Partnership’s senior unsecured debentures during 2005 and from the financing of certain properties during the 2005 period related to the RAOC JV.

Marketing, general and administrative expenses before a $23.5 million charge related to our long term incentive compensation plan increased by $2.5 million for the year ended December 31, 2005 as compared to the 2004 period. This overall net increase is attributable to increased costs of maintaining offices and infrastructure in each of our five divisional markets, higher compensation costs including amortization expense related to restricted stock awards to executive and non-executive officers, increases in charitable contributions to organizations that operate within our market places, increased costs related to our directors and officers insurance premiums and higher accounting fees related to maintaining compliance with the requirements of the Sarbanes-Oxley Act of 2002. Marketing, general and administrative costs represented 5.7% of total revenues from continuing operations (excluding gains on sales of depreciable real estate assets) in the 2005 period as compared to 5.8% in the 2004 period. For further discussion on the aforementioned $23.5 million charge please see “other matters” of this Item 7.

Discontinued operations net of minority interests increased by $50.6 million for the year ended December 31, 2005 as compared to the 2004 period. This increase is attributable to an increase in the gains on sales of $49.7 million related to properties sold during the 2005 period as compared to the 2004 period and approximately $900,000 of income from discontinued operations for those properties classified as held for sale.

The following table is a comparison of the results of operations for the year ended December 31, 2004 to the year ended December 31, 2003:

	Year ended December 31,
					Change
	2004		2003		Dollars			Percent
Property Operating Revenues:
Base rents	$	422,012	$	353,654	$	68,358			19.3%
Tenant escalations and reimbursements		71,369		57,003		14,366			25.2%
Total property operating revenues	$	493,381	$	410,657	$	82,724			20.1%
Property Operating Expenses:
Operating expenses	$	118,278	$	98,837	$	19,441			19.7%
Real estate taxes		80,855		66,094		14,761			22.3%
Total property operating expenses	$	199,133	$	164,931	$	34,202			20.7%
Other Income	$	19,043	$	24,209	$	(5,166	)		(21.3)%
Other Expenses:
Interest:
Expense	$	95,920	$	78,580	$	17,340			22.1%
Amortization of deferred financing costs		3,721		3,239		482			14.9%
Marketing, general and administrative		29,967		31,442		(1,475	)		(4.7)%
Total other expenses	$	129,608	$	113,261	$	16,347			14.4%

Property Operating Revenues increased by $82.7 million from 2003 to 2004. Property Operating Revenues increased by $64.5 million attributable to newly acquired properties during 2004, $11.8 million resulting from an increase in weighted average occupancies and an increase of straight-line rental revenues in our same store properties. In addition, Property Operating Revenues increased by $6.4 million in termination fees and $2.6 million resulting in the recovery of bad debts previously written off. These increases were offset by a $2.6 million decrease in escalations and reimbursements related to our same store properties. This was a result of the modest increase of escalatable operating expenses and new base years for renewing tenants.

The 2004 increase in Property Expenses of $34.2 million is due to a $4.2 million increase in real estate taxes and operating expenses related to our same store properties. Newly acquired properties in 2004 increased Property Expenses by $30.0 million. Included in the increased operating expenses are increases in

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utilities, security and ground rent. These increases were mitigated by lower costs related to insurance and repairs and maintenance. The increase in real estate taxes is attributable to the significant increases levied by certain municipalities, particularly in New York City and Westchester County, New York, which have experienced severe fiscal budget issues. Increases in utility costs relate to rate increases per energy unit and increases in security relate to the heightened terror alerts in New York City.

Gross operating margins for 2004 and 2003 were 59.6% and 59.8%, respectively.

Other income decreased by $5.2 million. This decrease is primarily attributable to a gain recognized on a land sale and build-to-suit construction contract of approximately $18.8 million from the 2003 period as compared to a $5.0 million gain recognized in the 2004 period. This decrease was off-set by an increase in property tax and utility refunds of approximately $1.9 million, sales proceeds during 2004 related to certain mortgage assignments on two of our New York City properties totaling approximately $3.8 million, income tax refunds related to a Service Company of $1.1 million and an increase in Service Company income of approximately $1.9 million.

Interest expense incurred increased by $17.3 million or 22.1% for the year ended December 31, 2004 as compared to the 2003 period. This increase is attributable to $4.8 million of additional interest expense from a net increase during 2004 of $200 million in the Operating Partnership’s senior unsecured notes, an increase of $8.0 million of interest expense incurred on the mortgage debt on 1185 Avenue of the Americas which was acquired in January 2004 and $8.9 million of corporate interest expense which was allocated to discontinued operations during the 2003 period with no such allocation in the 2004 period. This allocation resulted in an increase in interest expense from continuing operations in the 2004 period. These aggregate increases of approximately $21.7 million were mitigated by a decrease in mortgage interest expense of $800,000 resulting from the satisfaction of a mortgage note payable during 2004, a decrease in mortgage interest expense of $800,000 under our same store mortgage portfolio and a decrease of $2.8 million incurred under the Credit Facility as a result of a decrease in the weighted average balance outstanding. The weighted average balance outstanding under the Credit Facility was $143.9 million for the 2004 period and $308.1 million for the 2003 period.

Marketing, general and administrative expenses decreased by $1.5 million for the year ended December 31, 2004 as compared to the 2003 period. This decrease is primarily attributable to the efficiencies we achieved as a result of the November 2003 restructuring and the related termination of certain employees and settlement of the employment contracts of certain former executive officers of the Company. These cost savings were impacted by our initiative to comply with the provisions of section 404 of the Sarbanes-Oxley Act of 2002 in the amount of approximately $700,000 with no such costs applicable to the comparative period of 2003. These costs included additional directors and independent accounting and legal fees. Marketing, general and administrative expenses as a percentage of total property operating revenues were 5.8% in 2004 and 7.2% in 2003.

Liquidity and Capital Resources

Historically, rental revenue has been the principal source of funds to pay operating expenses, debt service and non-incremental capital expenditures, excluding incremental capital expenditures. We expect to meet our short-term liquidity requirements generally through our net cash provided by operating activities along with our $500 million unsecured credit facility (the “Credit Facility”) described below. The Credit Facility contains several financial covenants with which we must be in compliance in order to borrow funds thereunder. During the prior two years, we have incurred significant leasing costs in the form of tenant improvement costs, leasing commissions and free rent. The trend is a result of market demands from tenants and high levels of leasing transactions to re-tenant scheduled expirations or space vacated due to early terminations of leases. We are also expending costs on tenants that are renewing or extending their leases earlier than scheduled. For the years ended December 31, 2005 and 2004, we paid or accrued approximately $67.7 million and $52.2 million, respectively, for tenanting costs including tenant improvement costs and leasing commissions. As a result of these and/or other operating factors, our cash available for distribution from operating activities was not sufficient to cover 100% of the dividends paid on our common equity. However, we are beginning to experience a moderation in the cost of re-tenanting our properties, primarily in terms of free rent concessions

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and costs to renew existing tenants. We are not yet experiencing significant reductions in the cost of re-leasing vacant or vacated space. Recently, we have experienced an economic recovery in our markets, including an accelerated recovery in our New York City and Long Island markets. This is resulting in rental rate increases which is positively impacting our cash flow. To meet the short-term funding requirements relating to the higher leasing costs, we have used proceeds from property sales or borrowings under our Credit Facility. Based on our forecasted leasing, we anticipate that we will continue to incur shortfalls during 2006. We currently intend to fund any shortfalls with proceeds from sales of non-income producing assets or borrowings under our Credit Facility. We periodically review our dividend policy to determine the appropriateness of our dividend rate relative to our cash flows. We adjust our distribution rate based on such factors as leasing activity, market conditions and forecasted increases and decreases in our cash flow as well as required distributions of taxable income to maintain REIT status. There can be no assurance that we will maintain the current quarterly distribution level on our common equity.

We expect to meet most of our financing requirements through long-term unsecured borrowings and the issuance of debt and equity securities of the Company. In certain situations, primarily in joint venture transactions, we use secured debt in connection with the acquisition of properties. During the year ended December 31, 2004, the Company issued approximately $436.2 million of common stock and the Operating Partnership issued $300 million of senior unsecured debt securities. In addition, during June 2005, the Operating Partnership issued $287.5 million of exchangeable senior debentures. There can be no assurance that there will be adequate demand for the Company’s equity at the time or at the price in which the Company desires to raise capital through the sale of additional equity. Similarly, there can be no assurance that the Operating Partnership will be able to access the unsecured debt markets at the time when the Operating Partnership desires to sell its unsecured notes. In addition, when valuations for commercial real estate properties are high, we will seek to sell non-core operating properties or certain land inventory to realize value and profit created. We will then seek opportunities to reinvest the capital realized from these dispositions back into value-added assets in our core Tri-State Area markets. However, there can be no assurances that we will be able to identify such opportunities that meet our underwriting criteria. Additionally, we have been actively seeking joint venture relationships to access new sources of equity capital. In September 2005 we completed a series of transactions whereby we sponsored the IPO of Reckson LPT, a newly-formed Australian listed property trust which is traded on the Australian Stock Exchange. Proceeds received from the IPO were used to form a joint venture with us, the RAOC JV, and purchase 17 of our properties. In addition, we have sold or are under contract to sell an additional eight of our properties to the RAOC JV during 2006. It is our intention to purchase additional assets, within our markets, with Reckson LPT through the RAOC JV. Joint Ventures often involve relinquishing sole decision making authority relating to material events such as sale and financing. Loss of control of these decisions may adversely affect our financial flexibility. There can be no assurances that we will be able to successfully execute this strategy.

We expect to refinance existing mortgage indebtedness, senior unsecured notes or indebtedness under our Credit Facility at maturity or retire such debt through the issuance of additional unsecured debt securities or additional equity securities. We anticipate that the current balance of cash and cash equivalents and cash flows from operating activities, together with cash available from borrowings, equity offerings and proceeds from sales of land and non-income producing assets, will be adequate to meet our capital and liquidity requirements in both the short and long-term. Our senior unsecured debt is currently investment grade rated “BBB-” by Fitch Ratings, “BBB-” by Standard & Poor’s and “Baa3” by Moody’s Investors Service. The rating agencies review the ratings assigned to an issuer such as us on an ongoing basis. Negative changes in our ratings may result in increases in our borrowing costs, including borrowings under our Credit Facility.

Our markets are currently in the recovery stage in the economic cycle. As a result of current economic conditions, we have experienced higher renewal rates and a lower number of lease terminations. Our results reflect improving vacancy rates in our markets and our asking rents in our markets have stabilized and in some instances have begun to trend higher. Landlords are still required to grant concessions such as free rent and tenant improvements but generally at a more moderate rate than had been experienced in the prior year, particularly on renewal space. Our markets continue to experience higher real estate taxes and utility rates. The recent volatility in the energy markets have had a substantial impact on cost of utilities in the northeast where we own our properties. In certain of our markets, the increase in real estate taxes and utility costs will

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be included as part of expenses subject to escalation above a “base year” and billed to tenants consistent with the terms of their underlying leases. We are also experiencing a similar increase in cost of building materials to fit out tenant space, maintain our buildings and in new development costs. We believe that trends are moving positively from a landlord’s perspective particularly in terms of increased demand and limited new supply and that the above average tenant costs relating to leasing are moderating. This trend is supported by increased occupancy and reduced vacancy rates in most of our markets, the general economic recovery in the market resulting in job growth, and the scarcity of available land in which to develop a new supply of office space.

We carry comprehensive liability, fire, extended coverage and rental loss insurance on all of our properties. Six of our properties are located in New York City. As a result of the events of September 11, 2001, insurance companies were limiting coverage for acts of terrorism in “all risk” policies. In November 2002, the Terrorism Risk Insurance Act (“TRIA”) of 2002 was signed into law, which, among other things, requires insurance companies to offer coverage for losses resulting from defined “acts of terrorism” through 2005. The TRIA was subsequently extended, with certain modifications, through 2007 with the enactment of the Terrorism Insurance Extension Act of 2005. Our current property insurance coverage, which expires on June 2, 2006, provides for full replacement cost of our properties, including for acts of terrorism up to $540.0 million on a per occurrence basis. There can be no assurances that we will be able to replace these coverages at commercially reasonably rates or at all.

The potential impact of terrorist attacks in the New York City and Tri-State Area may adversely affect the value of our properties and our ability to generate cash flow. As a result, there may be a decrease in demand for office space in metropolitan areas that are considered at risk for future terrorist attacks, and this decrease may reduce our revenues from property rentals.

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. We expect to use our cash flow from operating activities for distributions to stockholders and for payment of recurring, non-incremental revenue-generating expenditures. We intend to invest amounts accumulated for distribution in short-term investments.

     Summary of Cash Flows

Net cash provided by operating activities totaled $199.6 million in 2005, $172.3 million in 2004 and $160.7 million in 2003. Cash provided by operating activities during 2005 is primarily attributable to increased occupancies and leasing in our portfolio and an increase of approximately 1.5 million rentable square feet during 2005 resulting from property acquisitions and the lease up of two development properties. Cash provided by operating activities during 2004 is primarily attributable to increased occupancies and leasing in our portfolio and an increase of approximately 1.2 million rentable square feet during 2004 resulting from property acquisitions and the lease up of a development property.

Net cash used in investing activities totaled $1.0 billion in 2005 and $226.9 million in 2004. Net cash provided by investing activities totaled $109.5 million in 2003. Cash flows used in investing activities during 2005 related primarily to our acquisition of 20 office properties and a parcel of land aggregating approximately $1.0 billion, ongoing development and improvements to our existing portfolio of properties including related leasing costs of approximately $152.3 million and additional investments in notes receivable of approximately $124.2 million. These uses of cash were offset by proceeds received from the sale of 22 of our office properties or interests therein and one parcel of land aggregating approximately $247.0 million as well as proceeds received from the repayment of notes receivable of approximately $36.4 million. Cash flows used in investing activities during 2004 related primarily to our acquisition of five office properties (including one property from its joint venture partner, TIAA) aggregating approximately $160.7 million, ongoing development and improvements to our existing portfolio of properties including related leasing costs of approximately $101.1 million and additional net investments in notes receivable of approximately $31.6 million. These uses of cash were offset by proceeds received from the sale of five commercial properties, certain non-core land holdings and a retail property aggregating approximately $67.3 million. Cash provided by investing activities in 2003 is primarily attributable to proceeds from the sale of the Long Island

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industrial building portfolio, which was offset by the purchase of assets and investments in developments and commercial real estate properties.

Net cash provided by financing activities totaled $816.9 million in 2005 and $56.9 million in 2004. Net cash used in financing activities totaled $278.2 million in 2003. Cash provided by financing activities in 2005 is primarily attributable to the net issuance of senior unsecured notes in the amount of approximately $281.8 million, the issuance of common stock (including the exercising of stock options) of approximately $14.1 million, proceeds received from secured borrowings of approximately $562.6 million and net advances made under the Credit Facility of $183.5 million. These sources of cash provided by financing activities were offset by the repayment of three outstanding mortgage notes payable, along with principal repayments on our mortgage notes payables in the amount of approximately $59.6 million and dividends and distributions paid to the Company’s equity holders in the amount of $158.7 million. Cash provided by financing activities in 2004 is primarily attributable to the net issuance of senior unsecured notes in the amount of approximately $200 million, the issuance of common stock (including the exercising of stock options) of approximately $500 million and net advances made under the Credit Facility of $66.5 million. These sources of cash provided by financing activities were offset by the repayment of three outstanding mortgage notes payable in the amount of $362.2 million, the repurchases of Series A preferred stock of $178.7 million and dividends and distributions paid to the Company’s equity holders in the amount of $169.7 million. Cash used in financing activities for 2003 primarily resulted from secured debt amortization payments and the repayment of outstanding borrowings on the Credit Facility from proceeds from the sale of the Long Island industrial building portfolio.

     Investing Activities

During January 2005, we acquired, in two separate transactions, two Class A office properties located at One and Seven Giralda Farms in Madison, New Jersey for total consideration of approximately $78 million. One Giralda Farms encompasses approximately 150,000 rentable square feet and Seven Giralda Farms encompasses approximately 203,000 rentable square feet. We made these acquisitions through advances under our Credit Facility.

In May 2005, we acquired a 1.4 million square foot, 50-story, Class A office tower located at One Court Square, Long Island City, NY, for approximately $471.0 million, inclusive of transfer taxes and transactional costs. One Court Square is 100% leased to the seller, Citibank N.A., under a 15-year net lease. The lease contains partial cancellation options effective during 2011 and 2012 for up to 20% of the leased space and in 2014 and 2015 for up to an additional 20% of the originally leased space, subject to notice and the payment of early termination penalties. On November 30, 2005, we sold a 70% joint venture interest in One Court Square (the “Court Square JV”) to certain institutional funds advised by JPMorgan Investment Management (the “JPM Investor”) for approximately $329.7 million, including the assumption of $220.5 million of the property’s mortgage debt. The operating agreement of the Court Square JV requires approvals from members on certain decisions including annual budgets, sale of the property, refinancing of the property’s mortgage debt and material renovations to the property. In addition, after September 20, 2009, the members each have the right to recommend the sale of the property, subject to the terms of the property level debt, and to dissolve the Court Square JV. We have evaluated the impact of FIN 46R on our accounting for the Court Square JV and have concluded that the Court Square JV is not a VIE. We account for the Court Square JV under the equity method of accounting. We have also evaluated, under Issue 04-05, that the JPM Investor has substantive participating rights in the ordinary course of the Court Square JV’s business In accordance with the equity method of accounting, our proportionate share of the Court Square JV income was approximately $45,000 for the period November 30 through December 31, 2005.

On May 26, 2005, we entered into a contract to sell approximately 60 acres of vacant land located in Chatham Township, NJ for up to approximately $30.0 million, which is based upon a final approved site plan. The closing is anticipated to occur upon receiving final re-zoning approvals and other customary due diligence and approvals. The sale is contingent upon due diligence, environmental assessment, re-zoning and other customary approvals. There can be no assurances that any of the aforementioned contingences will be achieved and the sale ultimately completed.

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On June 8, 2005, we sold a three-acre vacant land parcel located on Long Island for approximately $1.4 million which resulted in a net gain of approximately $175,000, net of limited partner’s minority interest.

On June 20, 2005, we acquired our joint venture partner’s 40% interest in a 172,000 square foot office property located at 520 White Plains Road, Tarrytown, NY for approximately $8.1 million which consisted of the issuance of 127,510 OP Units valued at $31.37 per OP Unit and the assumption of approximately $4.1 million of secured mortgage indebtedness of the joint venture.

On July 14, 2005, we acquired two adjacent Class A suburban office buildings aggregating approximately 228,000 square feet located at 225 High Ridge Road in Stamford, CT for approximately $76.3 million. This acquisition was made through a borrowing under our Credit Facility. On August 26, 2005 this property was encumbered, along with eight other properties, with an interest only mortgage in the amount of approximately $55.3 million and on September 21, 2005 was sold to the RAOC JV for approximately $76.5 million which included the assignment of the property’s mortgage debt.

On August 18, 2005, we entered into (i) an underwriting agreement relating to the public offering in Australia of approximately A$263.0 million (approximately US$202.0 million) of units (“LPT Units”) in a newly-formed Reckson-sponsored Australian listed property trust, Reckson New York Property Trust (“Reckson LPT”), a newly-formed listed property trust which is traded on the Australian Stock Exchange and (ii) contribution and sale agreements pursuant to which, among other things, we agreed to transfer 25 of our properties for an aggregate purchase price of approximately $563.0 million and containing an aggregate of 3.4 million square feet, in three separate tranches, to the RAOC JV in exchange for a 25% interest in the RAOC JV and approximately $502.0 million in cash (inclusive of proceeds from mortgage debt to be assumed by the RAOC JV). On September 21, 2005, Reckson LPT completed its public offering and the closing of the first of three tranches (“Tranche I”) of this transaction.

In connection with the Tranche I closing, the RAOC JV acquired from us 17 of our suburban office properties containing approximately 2.0 million square feet for approximately $367.0 million (including the assumption of approximately $196.1 million in mortgage debt which had been incurred by us in August 2005). In return, we received a 25% interest in the RAOC JV and approximately $128.1 million in cash resulting in an aggregate gain of approximately $103.6 million. As discussed below relating to certain guarantees we have made, approximately $18 million of the aggregate gain has been deferred to future periods pursuant to Statement No. 66 to coincide with the release of the guarantees. As a result, gains on sales of real estate, related to Tranche I reported in the current period is approximately $82.7 million, net of limited partners’ minority interest. Approximately $22.0 million of the cash received was used to repay certain of our secured mortgage indebtedness on September 30, 2005 and approximately $105.7 million of the cash received was used to establish an escrow account with a qualified intermediary for a future exchange of real property pursuant to Section 1031 of the Code (a “Section 1031 Exchange”). A Section 1031 Exchange allows for the deferral of taxes related to the gain attributable to the sale of property if a qualified replacement property is identified within 45 days and such qualified replacement property is acquired within 180 days from the initial sale. As described below, on October 7, 2005 we acquired a qualified replacement property for purposes of this Section 1031 Exchange and thereby deferred a portion of the tax gain from the Tranche I sale.

In connection with the foregoing, on September 21, 2005, Reckson Australia Holdings LLC (“Reckson Holdings”), a wholly-owned subsidiary of the Operating Partnership, and Reckson Australia LPT Corporation (“LPT REIT”), a U.S. real estate investment trust which is wholly-owned by Reckson LPT, entered into the Amended and Restated Limited Liability Company Agreement governing the RAOC JV (the “Operating Agreement”). Pursuant to the Operating Agreement, LPT REIT holds a 75% interest in, and acts as the managing member for, the RAOC JV, and Reckson Holdings holds a 25% non-managing member interest therein. The Operating Agreement provides that, if at any time additional capital contributions are made to the RAOC JV, Reckson Holdings will have a right to make additional capital contributions up to an amount necessary to maintain its 25% interest therein on the same terms and conditions as such other capital contributions.

As the managing member of the RAOC JV, LPT REIT has the sole responsibility for managing its business and affairs on a day-to-day basis, other than with respect to certain identified “major decisions,” including but not limited to a merger or consolidation involving the RAOC JV, a disposition of all or substantially all of its

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assets, or the liquidation or dissolution of the RAOC JV. Such major decisions require the prior written consent of a majority of the non-managing members. As a result of the foregoing, we are accounting for our 25% non-managing member interest in the RAOC JV under the equity method of accounting.

On January 6, 2006, Reckson LPT completed the second Tranche of this transaction (“Tranche II”) whereby the RAOC JV acquired three of our suburban office properties; 6800 and 6900 Jericho Turnpike, Jericho, NY and 710 Bridgeport Avenue, Shelton, CT, aggregating approximately 761,000 square feet for approximately $84.6 million, including the assignment of approximately $20.1 million of mortgage debt. Approximately $25.1 million of sales proceeds was used to establish an escrow account for the purpose of a future Section 1031 Exchange. The balance of the cash proceeds was used to fund our development activities and for general corporate purposes.

The Tranche III closing (“Tranche III”), consisting of five of our properties valued at approximately $111.8 million, is scheduled to close in October 2006 and will include the assumption of approximately $51.5 million of existing mortgage debt. The Tranche III closing is subject to customary closing conditions.

Our Service Companies provide asset management, property management, leasing, construction and other services to the RAOC JV and affiliates of ours are entitled to transaction fees and ongoing fees for providing services to the RAOC JV. As of December 31, 2005, we earned and received approximately $3.6 million in transaction related fees and approximately $966,000 of ongoing fees from the RAOC JV. Such amount is included in investment income and other on our consolidated statements of income. In addition, we also formed Reckson Australia Management Limited (“RAML”), a wholly owned subsidiary, that will manage Reckson LPT and serve as its “Responsible Entity”. The Responsible Entity will be managed by a six member board that includes three independent directors domiciled in Australia. To address and mitigate any potential conflicts of interest with Reckson LPT or its affiliates the Company has adopted the following policies: (i) all transactions between the Company and Reckson LPT or its affiliates shall require the approval of a majority of the independent directors of both the Company and Reckson LPT, (ii) executive officers and directors of the Company are prohibited from owning equity in the Reckson LPT, and (iii) the adoption of an express policy which mandates that property services and leasing decisions shall be made without regard to the Company’s percentage ownership of any property.

Under the Operating Agreement, Reckson Holdings will have the right, beginning September 21, 2007, to require LPT REIT to redeem all or a portion of Reckson Holdings’ membership interest in the RAOC JV for cash or, at LPT REIT’s option, shares of LPT REIT’s common stock (which may be exchanged for LPT Units) on a one-for-one basis. Reckson Holdings also has the right to cause the liquidation of the RAOC JV in the event that RAML is replaced as Reckson LPT’s Responsible Entity. In addition, the Operating Agreement contains a right of first refusal granting Reckson Holdings the right to acquire any asset of the RAOC JV, at fair market value, in the event of an attempted sale of such asset or the exercise of Reckson Holdings’ right to liquidate the RAOC JV.

In connection with the Tranche I closing, on September 21, 2005 the Company, RAOC JV and LPT REIT entered into an Option Agreement (the “Option Agreement”) pursuant to which we granted RAOC JV options to acquire ten additional properties from the Operating Partnership over a two year period, beginning January 1, 2006. The properties contain an aggregate of approximately 1.2 million square feet and will be priced based on the fair market value at the time of each transfer to RAOC JV. The Option Agreement contains a right of first refusal granting RAOC JV the right to acquire any option property from Reckson in the event we receive, and are amenable to, an offer from a third party to purchase such option property. The Option Agreement will terminate under certain circumstances, including if (i) RAOC JV sends notice of its intent to exercise its option but fails to close as obligated, (ii) RAOC JV is in default under the Option Agreement, the contribution agreement or the sale agreement or (iii) RAML or an affiliate of ours is no longer the Responsible Entity of Reckson LPT.

In connection with the mortgage indebtedness securing nine of the Tranche I properties, which were transferred to the RAOC JV on September 21, 2005, and three of the Tranche III properties scheduled to be transferred to the RAOC JV during October 2006, we have guaranteed to the lender certain customary non-recourse carve-outs, as well as certain obligations relating to the potential termination of a number of

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leases at four of these properties. We have also guaranteed to the lender certain capital requirements related to these properties. We will be relieved of the customary non- recourse carve-outs and capital requirements upon transfer of the respective properties to the RAOC JV and the RAOC JV meeting a net worth test of at least $100.0 million. We will be relieved of all but two of the lease related obligations upon transfer of the respective properties to the RAOC JV and the RAOC JV meeting a net worth test of at least $200.0 million. The RAOC JV has agreed to indemnify us for any loss, cost or damage it may incur pursuant to our guaranty of these obligations. As of December 31, 2005, the RAOC JV met the $100.0 million net worth threshold and there remain approximately $18 million of aggregate guarantees outstanding.

In accordance with FASB Statement No. 144, the assets and liabilities of the properties transferred and to be transferred, excluding the option properties, to the RAOC JV are classified as held for sale on our consolidated balance sheets, for all periods presented.

During September 2005, we entered into a letter of intent with an entity owned by the owner of the New York Islanders professional hockey team to enter into a 50/50 joint venture to potentially develop over five million square feet of office, residential, retail and hotel space in the Mitchel Field, Long Island sub-market in and around Nassau County’s Veterans Memorial Coliseum where we are currently the largest owner of office properties. In February 2006, we were selected as one of the two finalists to continue to negotiate with the County of Nassau prior to the County’s final selection. If selected by the County, the development will remain subject to numerous governmental approvals, compliance, zoning and other customary approvals. In addition, if selected we would serve as the master developer of the development. There can be no assurances that we will enter into the aforementioned joint venture, that the joint venture will be selected as the developer or that all required approvals, zoning and compliance can be obtained.

On September 22, 2005, we sold two suburban office properties, aggregating approximately 69,000 square feet, located at 310 and 333 East Shore Road in Great Neck, Long Island for aggregate consideration of approximately $17.3 million. As a result, we recorded an aggregate gain, net of limited partners’ minority interest, of approximately $13.6 million. For federal income tax purposes we recognized a tax gain of approximately $12.6 million. Such tax gain did not affect our REIT distribution requirements. Pursuant to FASB Statement No. 144, the operating results of these properties are classified within discontinued operations, for all periods presented, on our consolidated statements of income.

On October 7, 2005, we acquired a 1.1 million square foot Class A office complex located in Uniondale, NY, commonly referred to as “EAB Plaza”, for approximately $240 million and changed the name of the complex to Reckson Plaza. The property is encumbered by a long-term ground lease which has a remaining term in excess of 75 years, including renewal options. The acquisition of Reckson Plaza was financed, in part, (i) from sales proceeds being held by a qualified intermediary pursuant to a Section 1031 Exchange as the property was an identified, qualified replacement property, (ii) a borrowing under our Credit Facility, (iii) the satisfaction of our $27.6 million junior participating mezzanine loan which was secured by a pledge of an indirect interest of an entity which owned the ground leasehold estate and (iv) cash on hand. In connection with this acquisition we also acquired an adjoining 8.2 acre development site for approximately $19.0 million which was financed through a borrowing under our Credit Facility.

On October 20, 2005, we acquired a 118,000 square foot suburban office property situated on ten acres of land located at 711 Westchester Avenue in White Plains, NY for approximately $24.8 million. This acquisition was financed through the assumption of approximately $12.5 million of existing debt on the property and a borrowing under our Credit Facility.

On December 20, 2005, we sold our property located at 48 Harbor Park Drive, Port Washington, NY for approximately $6.4 million and recorded a gain on sales of real estate of approximately $2.7 million, net of limited partners’ minority interest. Pursuant to FASB Statement No. 144, this property has been reflected as held for sale on our balance sheets and its operating results are classified within discontinued operations, for all periods presented, on our consolidated statements of income.

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On December 20, 2005, we sold our property located at 100 Wall Street, New York, NY for approximately $134.0 million and recorded a gain on sales of real estate of approximately $45.0 million, net of limited partners’ minority interest. The property was secured by a first mortgage and cross collateralized with another one of our New York City properties. In order to effectuate the sale and not incur prepayment penalties which would be due under a prepayment of the mortgage, we provided the lender with replacement collateral and assigned this mortgage debt to the replacement collateral properties. In connection with the assignment, we paid a substitution of collateral fee and other costs aggregating approximately $2.0 million. In addition, we provided the purchaser with a mezzanine loan in the amount of $30.0 million which bears interest at 15.0% per annum, requires payments of interest only and has a term of two years. Cash proceeds of approximately $100.9 million were used, in part, to acquire a 14 building suburban office portfolio as discussed below. We have evaluated the purchaser’s financial commitment as being sufficient to provide substance to this sale and us having no substantial continuing involvement with the purchaser pursuant to Statement No. 66 and as such have recognized the aforementioned gain in its entirety. In addition, pursuant to FASB Statement No. 144, this property has been reflected as held for sale on our balance sheets and its operating results are classified within discontinued operations, for all periods presented, on our consolidated statements of net income.

On December 29, 2005, we acquired a 1.6 million square foot suburban office portfolio, consisting of 14 buildings, concentrated within five business parks, located in Westchester County, for approximately $255.0 million. We made this acquisition through a borrowing under a $250 million term loan from Goldman Sachs Mortgage Company (the “Term Loan”) and cash sales proceeds from the sale of our property located at 100 Wall Street, New York, NY.

     Notes Receivable Investment Activity

On March 16, 2005, a wholly owned subsidiary of the Operating Partnership advanced under separate mezzanine loan agreements, each of which bears interest at 9% per annum, (i) approximately $8.0 million which matures in April 2010 and is secured, in part, by indirect ownership interests in ten suburban office properties located in adjacent office parks in Long Island, NY and (ii) approximately $20.4 million which matures in April 2012 and is secured, in part, by indirect ownership interests in twenty-two suburban office properties located in adjacent office parks in Long Island, NY. Each mezzanine loan is additionally secured by other guaranties, pledges and assurances and is pre-payable without penalty after 18 months from the initial funding. We made these investments through a borrowing under our Credit Facility.

In May 2005, we acquired a 65% interest in an $85 million, 15-year loan secured by an indirect interest in a 550,000 square foot condominium in a Class A office tower located at 1166 Avenue of the Americas, New York, NY for approximately $55.3 million. The loan accrues interest compounded at 9.0% and pays interest at an annual rate of 6.0% through March 2010, 8.5% thereafter through March 2015 and 11.0% thereafter through maturity in 2020. The loan is pre-payable only under certain circumstances and, in any case, not before 2009. Upon a capital event related to the indirect interest in the property which secures the loan, we are entitled to participate in 30% of the net proceeds derived from such capital event. This investment replaced our $34.0 million mezzanine loan, including accrued and unpaid interest, to one of the partners owning such condominium interest. We also acquired an approximately 5% indirect ownership interest in the property for a purchase price of approximately $6.2 million. The property is currently 100% leased. The balance of these investments was funded through a borrowing under our Credit Facility and cash on hand.

On September 30, 2005, we advanced $20.0 million to entities that are each controlled by Cappelli Enterprises under a junior mezzanine loan. This mezzanine loan bore interest at 15.0% per annum, was secured by a subordinate pledge of an indirect ownership interest in a 550,000 square foot office condominium in a Class A office tower located at 1166 Avenue of the Americas, New York, NY and had a scheduled maturity date of March 31, 2006. As described above, during May 2005, we made a $55.3 million participating loan investment secured by interests in this property (including the interests securing this new mezzanine loan). We also advanced a $10.0 million bridge loan to Louis Cappelli, an affiliate, under a promissory note (the “Promissory Note”) in anticipation of closing a longer-term structured finance transaction. The Promissory Note bore interest at 4.86% per annum, matured on November 30, 2005, was secured by a security interest in a reserve account owned by the borrower and was pre-payable in whole or in part without penalty. These investments were funded through a borrowing under our Credit Facility. On November 30,

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2005, the Promissory Note was repaid, we advanced an additional $5.0 million under the mezzanine loan and adjusted its interest rate to 17.5% per annum and extended its maturity date to November 30, 2009. The refinanced junior mezzanine loan is secured by interests in the 1166 Avenue of the Americas condominium and guaranteed by Mr. Cappelli.

On October 7, 2005, a wholly owned subsidiary of the Operating Partnership advanced under a second mortgage loan agreement $10.0 million to an entity which owns a 60,000 square foot office property located on Madison Avenue in New York City which is currently slated for residential conversion. The borrower is an affiliate of the seller of EAB Plaza which we acquired on October 7, 2005. This mortgage loan bears interest at 20.0% per annum, requires monthly payments of interest only, matures on October 7, 2007 and is secured by the underlying property. The mortgage loan is not pre-payable until the earlier of January 10, 2007 or the sale of the underlying property and upon notice. In addition to this mortgage loan, RCD entered into a development agreement with the owner of the property to perform certain predevelopment, development and/or other services with respect to the property. In exchange for its services, RCD will receive a development fee of $2.0 million which is payable in equal monthly installments over a two-year period. Interest due under the mortgage note during its term and the entire development fee are currently being held in a segregated account under our control.

At December 31, 2005, we had invested approximately $93.4 million in mezzanine loans and approximately $55.3 million in a participating loan investment. In general these investments are secured by a pledge of either a direct or indirect ownership interest in the underlying real estate or leasehold, other guaranties, pledges and assurances.

The following table sets forth the terms of the mezzanine loans at December 31, 2005 (in thousands):

Property	Amount		Interest Rate		Funding		Maturity
Long Island office portfolio	$	8,031		9.00%		Mar., 2005		Apr., 2010	(a)
Long Island office portfolio		20,356		9.00%		Mar., 2005		Apr., 2012	(a)
72 Madison Avenue, NY, NY		10,000		20.00%		Oct., 2005		Oct., 2007
1166 Avenue of the Americas, NY, NY (b)		25,000		17.50%		Nov., 2005		Nov., 2009
100 Wall Street, NY, NY		30,000		15.00%		Dec., 2005		Dec., 2007
	$	93,387

(a) Prepayable without penalty after 18 months from initial funding.

(b) Junior mezzanine loan secured by interests in a 550,000 square foot condominium interest.

At December 31, 2005, we also held a $17.0 million note receivable, which bore interest at 12% per annum and was secured by a minority partnership interest in Omni Partners, L.P., owner of the Omni, a 579,000 square foot Class A office property located in Uniondale, NY (the “Omni Note”).

As of December 31, 2005, we held one other note receivable, which aggregated $1.0 million and carried an interest rate of 10.50% per annum (the “Other Note”) and collectively with the Omni Note, our mezzanine loans and preferred loan investments (the “Note Receivable Investments”). The Other Note matures on January 31, 2010 and is secured in part by a minority partner’s preferred unit interest in the Operating Partnership.

As of December 31, 2005, management has made subjective assessments as to the underlying security value on the Note Receivable Investments. These assessments indicate an excess of market value over the carrying value and, based on these assessments, we believe there is no impairment to their carrying value.

     Financing and Equity Activities

During 2005, the Company paid cash dividends on its common stock of approximately $1.70 per share.

During 2005, we received approximately $14.1 million of proceeds from the exercise of 571,194 stock options.

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During 2005 and 2004, the Operating Partnership issued 127,510 and 33,843 OP Units, respectively, in connection with property acquisitions. In addition, during 2005, certain limited partners in the Operating Partnership exchanged approximately 1.6 million OP Units for an equal number of shares of the Company’s common stock.

During June 2005, the Operating Partnership issued $287.5 million aggregate principal amount of 4.00% exchangeable senior debentures due June 15, 2025. The debentures were issued at 98% of par and are exchangeable for shares of common stock of the Company on or after June 15, 2024 at an initial exchange rate of 24.6124 common shares per $1,000 of principal amount of debentures. The debentures are also exchangeable: (i) if the market price of our common stock over a specified period of time is more than 125% of the exchange price per share then in effect; (ii) if the trading price of the debentures over a specified period of time is less than 98% of the product of the closing price of our shares multiplied by the applicable exchange rate; (iii) during a specified period of time, for any debentures that have been called for redemption; (iv) under certain circumstances, upon the occurrence of a distribution to holders of our shares of (a) rights to purchase our common stock at a price below the market price of our shares or (b) assets, debt securities or rights to purchase our securities or securities of the Operating Partnership that have a per share value exceeding 10% of the market price of our shares; or (v) if our common stock is not listed on a national or regional securities exchange or quoted on NASDAQ for 30 consecutive trading days.

The initial exchange price of $40.63 represents a premium of approximately 25% to the closing price of the Company’s common stock on the issuance date of $32.50 per share. If exchanged in accordance with their terms, the debentures will be settled in cash up to their principal amount and any remaining exchange value will be settled, at our option, in cash, the Company’s common stock or a combination thereof. In accordance with the exchange rate terms of the debentures the Company has reserved approximately 8.8 million shares of its authorized common stock, $.01 par value, for potential future issuance upon the exchange of the debentures. Such amount is based on an exchange rate of 30.7692 common shares per $1,000 of principal amount of debentures. Although we have reserved these shares pursuant to the exchange rate terms, we believe the issuance of our shares, if any, would be significantly less than 8.8 million shares. The debentures are guaranteed by the Company. We have the option to redeem the debentures beginning June 18, 2010 for the principal amount plus accrued and unpaid interest. Holders of the debentures have the right to require us to repurchase their debentures at 100% of the principal amount thereof plus accrued and unpaid interest on June 15, 2010, June 15, 2015 and June 15, 2020 or, in the event of certain change in control transactions, prior to June 15, 2010.

The Board of Directors of the Company initially authorized the purchase of up to 5.0 million shares of the Company’s common stock. Transactions conducted on the New York Stock Exchange have been, and will continue to 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. Since the Board’s initial authorization, the Company has purchased 3,318,600 shares of its common stock for an aggregate purchase price of approximately $71.3 million. In June 2004, the Board of Directors re-set the Company’s common stock repurchase program back to 5.0 million shares. No purchases have been made since March 2003.

The Operating Partnership has issued and outstanding 1,200 preferred units of limited partnership interest with a liquidation preference value of $1,000 per unit with a stated distribution rate of 7.0%, which is subject to reduction based upon terms of their initial issuance (the “Preferred Units”). The terms of the Preferred Units provide for this reduction in distribution rate in order to address the effect of certain mortgages with above market interest rates, which were assumed by the Operating Partnership in connection with properties contributed to the Operating Partnership in 1998. As a result of the aforementioned reduction, there are currently no distributions being made on the Preferred Units.

On May 13, 2005, we obtained a $470.0 million unsecured bridge facility (the “Bridge Facility”) from Citibank, N.A. During August 2005, we repaid $303.5 million of outstanding borrowings under the Bridge Facility with net proceeds received from the secured debt financing of the property located at One Court Square, Long Island City, NY. In addition, in September 2005, we repaid the remaining balance outstanding under the Bridge Facility of $166.5 million with proceeds received from the secured debt financing of a pool of nine of our suburban office properties. As a result of the foregoing, the Bridge Facility has been retired and is no longer available for borrowings thereunder.

On June 20, 2005, in connection with the acquisition of our joint venture partner’s 40% interest in the property located at 520 White Plains Road, Tarrytown, NY, we assumed approximately $4.1 million of secured mortgage indebtedness of the joint venture. As a result, our total secured debt related to this property was approximately $11.1 million. On September 1, 2005, the mortgage note’s scheduled maturity date, we repaid the then outstanding balance of approximately $10.9 million with proceeds received from the August 26, 2005 mortgage financings discussed below, resulting in the satisfaction of this note.

On August 3, 2005, we placed a first mortgage in the amount of $315.0 million on the property located at One Court Square, Long Island City, a sub-market of New York City. The mortgage note bears interest at a

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fixed rate of 4.905% per annum, requires monthly payments of interest only through September 1, 2015, the anticipated repayment date (“ARD”). In the event the mortgage is not satisfied on the ARD, all excess cash flow, as defined, shall be applied to amortize the loan and the interest rate shall be reset to 2% plus the greater of 4.905% and the then-current ten-year U.S. Treasury yield. The final maturity date of the loan is May 1, 2020. The mortgage note is secured by the property and is otherwise non-recourse except in limited circumstances regarding breaches of material representations. As additional collateral for the loan, the lender under certain circumstances may require letters of credit for their benefit, in the amount of $10.0 million each, during September 2013, March 2014 and September 2014 if Citibank, N.A., the property’s current sole tenant, exercises its second cancellation option for up to 20% of its leased space during 2014 and 2015 and the space has not been re-leased. Proceeds received from this financing, net of mortgage recording tax and other costs, of approximately $303.5 million, were used to repay a portion of the Bridge Facility. On November 30, 2005, we sold a 70% interest in this property to a group of institutional investors led by JPMorgan Investment Management which included their assumption of $220.5 million of the mortgage debt.

On August 26, 2005, we encumbered a pool of nine of our suburban office properties with interest only mortgages in the aggregate amount of approximately $196.1 million. Proceeds received, net of costs and required escrows, of approximately $188.3 million were used to repay borrowings under our Credit Facility, the remaining balance outstanding under our Bridge Facility and for the repayment of the secured property debt on 520 White Plains Road, Tarrytown, NY. On September 21, 2005, these properties and related underlying mortgages were sold to the RAOC JV. The mortgage notes bear interest at a fixed interest rate of 5.20% per annum and mature in September 2010. These mortgage notes are cross-collateralized by the nine properties in the pool.

On September 12, 2005, we encumbered three of our suburban office properties with interest only mortgages in the aggregate amount of approximately $51.5 million. Proceeds received, net of costs and required escrows, of approximately $50.2 million were used to repay borrowings under our Credit Facility and for general corporate purposes. The mortgage notes bear interest at a fixed interest rate of 5.20% per annum and mature in October 2010. We have contracted to sell these properties to the RAOC JV, subject to the mortgage notes, in October 2006. These mortgage notes are cross-collateralized by the three properties in the pool.

Pursuant to the terms of the mortgage note encumbering the property located at 200 Summit Lake Drive in Valhalla, NY, the note was prepayable, without penalty, subsequent to September 1, 2005. On September 30, 2005, we repaid the outstanding balance of approximately $18.1 million with proceeds received from the RAOC JV which resulted in the satisfaction of this note.

The mortgage debt on the property located at 395 North Service Road in Melville, NY was scheduled to mature on October 28, 2005. Pursuant to the terms of the note, we prepaid the mortgage debt on September 30, 2005, at which time the outstanding balance was approximately $18.6 million. We funded this prepayment with a borrowing under our Credit Facility and proceeds received from the sale of properties to the RAOC JV which resulted in the satisfaction of this note.

On October 20, 2005, in connection with our acquisition of 711 Westchester Avenue in White Plains, NY we assumed an existing first mortgage debt on the property of approximately $12.5 million. The mortgage bears interest at approximately 5.4% per annum, requires monthly payments of interest only through January 2007 and monthly payments of interest and principal based on a 30 year amortization schedule commencing in February 2007. The mortgage matures on January 1, 2015.

On December 20, 2005, in connection with the sale of our mortgaged property located at 100 Wall Street, New York, NY, we exercised our right under the mortgage note to replace collateral and assign the related mortgage debt to two of our suburban office properties; 275 Broadhollow Road, Melville, NY and 90 Merrick Avenue, Merrick, NY. In connection with the assignment, we paid a substitution of collateral fee and other costs totalling approximately $2.0 million. Such costs are being amortized to expense over the remaining term of the mortgage.

At December 31, 2005, we had 15 fixed rate mortgage notes payable with an aggregate outstanding principal amount of approximately $625.1 million. These mortgage notes are secured by properties with an

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aggregate cost basis at December 31, 2005 of approximately $1.2 billion and which are pledged as collateral against the mortgage notes payable. In addition, approximately $41.6 million of the $625.1 million is recourse to the Company. The mortgage notes bear interest at rates ranging from 5.20% to 8.50%, and mature between 2006 and 2015. The weighted average interest rates on the outstanding mortgage notes payable at December 31, 2005, 2004 and 2003 were approximately 7.1%, 7.3%, and 7.2%, respectively.

At December 31, 2005, our unconsolidated joint ventures had total indebtedness of approximately $751.1 million, which was comprised of $13.0 million of floating rate unsecured debt and approximately $738.1 million of fixed rate mortgage indebtedness with a weighted average interest rate of approximately 5.1% and a weighted average maturity of approximately 8.3 years. Our aggregate pro-rata share of the unconsolidated joint venture debt was approximately $158.6 million.

On January 6, 2006, we sold two of our suburban office properties; 6800 and 6900 Jericho Turnpike, Jericho, NY to the RAOC JV, subject to their mortgage debt of approximately $20.1 million. The RAOC JV subsequently pre-paid the mortgage notes with proceeds from an unrelated financing transaction.

We currently maintain our $500 million Credit Facility with JPMorgan Chase Bank, as administrative agent, Wells Fargo Bank, National Association as syndication agent and Citicorp North America, Inc. and Wachovia Bank, National Association as co-documentation agents. The Credit Facility matures in August 2008, provides for a one-year extension subject to a fee of 25 basis points and, upon receiving additional lender commitments, for an increase to the maximum revolving credit amount to $750 million. In addition, borrowings under the Credit Facility accrue interest at a rate of LIBOR plus 80 basis points and the Credit Facility carries a facility fee of 20 basis points per annum. In the event of a change in the Operating Partnership’s senior unsecured credit ratings the interest rates and facility fee are subject to change. At December 31, 2005, the outstanding borrowings under the Credit Facility aggregated $419.0 million and carried a weighted average interest rate of 5.17% per annum. A description of certain of the covenants contained in our Credit Facility is set forth in Item 1A, Risk Factors.

We utilize the Credit Facility primarily to finance real estate investments, fund our real estate development activities and for working capital purposes. On December 29, 2005, we borrowed $150.0 million under the Credit Facility and with cash available acquired a 1.6 million square foot suburban office portfolio, consisting of 14 buildings, located in Westchester County, New York. On January 13, 2006, we repaid $254.0 million of outstanding borrowings under the Credit Facility primarily from the proceeds of the Term Loan. As a result, our availability to borrow additional funds increased to $335.0 million. At December 31, 2005, we had availability under the Credit Facility to borrow approximately an additional $81.0 million, subject to compliance with certain financial covenants.

We capitalized interest incurred on borrowings to fund certain development projects in the amount of $11.4 million, $8.1 million and $8.0 million for the years ended December 31, 2005, 2004 and 2003, respectively.

In connection with the acquisition of certain properties, contributing partners of such properties have provided guarantees on certain of our indebtedness. As a result, we maintain certain outstanding balances on our Credit Facility.

On January 13, 2006, we obtained our $250.0 million Term Loan from Goldman Sachs Mortgage Company. The Term Loan is for an initial term of three months and we have the option for a three month extension upon paying a one-time fee of 25 basis points on the amount then outstanding. The Term Loan has terms, including interest rates and financial covenants, substantially similar to our Credit Facility. Proceeds from the Term Loan were used to repay outstanding borrowings under our Credit Facility.

     Capitalization

Our indebtedness at December 31, 2005 totaled approximately $2.0 billion (including our share of consolidated and unconsolidated joint venture debt and net of minority partners’ interests’ share of consolidated joint venture debt) and was comprised of $422.3 million outstanding under the Credit Facility, approximately $980.1 million of senior unsecured notes and approximately $643.4 million of mortgage indebtedness with a weighted average interest rate of approximately 6.6% and a weighted average maturity of

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approximately 3.8 years. Based on our total market capitalization of approximately $5.1 billion at December 31, 2005 (calculated based on the sum of (i) the market value of the Company’s common stock and OP Units, assuming conversion, (ii) the liquidation preference value of the Operating Partnership’s preferred units and (iii) the $2.0 billion of debt), our debt represented approximately 40.1% of our total market capitalization.

On October 16, 2000, our 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.

     Contractual Obligations and Commercial Commitments

The following table sets forth our significant consolidated debt obligations by scheduled principal cash flow payments and maturity date and our commercial commitments by scheduled maturity at December 31, 2005 (in thousands):

	Maturity Date
	2006		2007		2008		2009		2010		Thereafter		Total
Mortgage notes payable (1)	$	11,439	$	8,994	$	7,887	$	7,335	$	4,963	$	3,236	$	43,854
Mortgage notes payable (2)		112,030		60,535		—		100,254		79,955		228,435		581,209
Senior unsecured notes		—		200,000		—		200,000		287,500		300,000		987,500
Credit facility		—		—		419,000		—		—		—		419,000
Land lease obligations (3)		12,285		12,302		12,329		12,475		12,398		330,973		392,762
Air rights lease obligations		362		362		362		362		362		3,257		5,067
Capital leases		410		410		410		410		410		1,887		3,937
Operating leases		1,319		194		196		14		—		—		1,723
	$	137,845	$	282,797	$	440,184	$	320,850	$	385,588	$	867,788	$	2,435,052

(1) Scheduled principal amortization payments.

(2) Principal payments due at maturity.

(3) We lease, pursuant to noncancellable operating leases, the land on which ten of our buildings were constructed. The leases, certain of which contain renewal options at our direction, expire between 2043 and 2090. 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 indices at specified intervals. Minimum ground rent is recognized on a straight-line basis over the terms of the leases and includes lease renewals if reasonably assured that we will exercise that option.

Certain of the mortgage notes payable are guaranteed by certain limited partners in the Operating Partnership and/or the Company. In addition, consistent with customary practices in non-recourse lending, certain non-recourse mortgages may be recourse to the Company under certain limited circumstances including environmental issues and breaches of material representations.

At December 31, 2005, approximately $41.6 million, or 6.7%, of our mortgage debt was recourse to the Company.

The following table sets forth our significant consolidated interest expense obligations on our fixed rate debt by scheduled cash flow payments at December 31, 2005, excluding interest expense obligations related to those properties classified as held for sale on our consolidated balance sheet (in thousands):

	Year ended December 31,
	2006		2007		2008		2009		2010		Thereafter		Total
Mortgage notes payable	$	36,114	$	28,422	$	24,782	$	21,633	$	16,105	$	10,041	$	137,097
Senior unsecured notes		45,838		40,612		32,038		19,767		16,537		32,267		187,059
Exchangeable debentures (a)		11,500		11,500		11,500		11,500		11,500		166,271		223,771
	$	93,452	$	80,534	$	68,320	$	52,900	$	44,142	$	208,579	$	547,927

(a) Callable after June 17, 2010 at par.

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Interest expense from those properties classified as held for sale on our consolidated balance sheet at December 31, 2005 over the next five years and thereafter aggregated approximately $24.0 million.

Interest expense incurred under our variable rate Credit Facility amounted to approximately $14.3 million for the year ended December 31, 2005 and was based on a weighted average balance and interest rate of $314.0 million and 4.6%, respectively. In addition, interest expense incurred under our variable rate Bridge Facility amounted to approximately $5.0 million for the year ended December 31, 2005 and was based on a weighted average balance and interest rate of $118.7 million and 4.2%, respectively. The Bridge Facility was repaid and retired during 2005.

Our rental revenues are our principal source of funds along with our net cash provided by operating activities to meet these and future interest obligations.

We had undrawn letters of credit outstanding of approximately $100,000 and $1.2 million at December 31, 2005 and 2004, respectively.

During the quarterly period ended June 30, 2005 we entered into anticipatory interest rate hedge instruments totaling $250.0 million to protect ourselves against potentially rising interest rates. These instruments were settled prior to their maturity in exchange for a mortgage rate lock agreement in connection with a 15-year permanent financing on the property located at One Court Square, Long Island City, NY which closed on August 3, 2005. Costs related to the terminated instruments of approximately $1.4 million were incorporated into the final fixed mortgage rate of 4.905% per annum. The other comprehensive loss is being amortized as a yield adjustment of the fixed rate mortgage.

We also entered into an additional $200.0 million of anticipatory interest rate hedge instruments during the quarterly period ended June 30, 2005, which were scheduled to coincide with our August 26, 2005 and September 12, 2005 financings on twelve of our office properties. These hedge instruments were settled on August 1, 2005 realizing proceeds of approximately $1.1 million. The proceeds received from settlement of the instruments were used to buy-down the fixed mortgage rates to 5.20% per annum. The gain resulting from this settlement has been recorded to OCI and is being amortized as a yield adjustment of the fixed-rate mortgage. Nine of these properties were sold to the RAOC JV, subject to their mortgage notes, on September 21, 2005 at which time we reclassified the proportionate share of the gain from OCI to earnings. The remaining three office properties are under contract to be sold to the RAOC JV, subject to the mortgage notes, in October 2006, at which time we will reclassify the proportionate share of the gain from OCI to earnings.

     Corporate Governance

In February 2006 the Company amended its Bylaws to implement certain corporate governance policies, including (i) a requirement that at least two-thirds of the members of the Board of Directors consist of independent directors and (ii) the establishment of an Affiliate Transaction Committee, which consists of all of the independent directors.

The corporate governance policies implemented by the amendments to the Bylaws supplement the Company’s previously-enacted corporate governance enhancements, which include: (i) the de-staggering of the Board of Directors so that shareholders can vote on the entire slate of directors each year; (ii) the establishment of an independent lead director position; (iii) the mandatory rotation of at least one independent director every three years; (iv) a requirement that independent directors own a minimum equity stake in the Company of $100,000 of common stock; (v) a requirement that a substantial portion of directors’ compensation be in the Company’s equity, which equity must be held during each director’s tenure on the Board; (vi) opting out of the Maryland Business Combination Statute; and (vii) modifying the Company’s “five or fewer” limitation on the ownership of its common stock so that such limitation may only be used to protect the Company’s REIT status and not for anti-takeover purposes.

     Other Matters

Nine of our office properties, which were acquired by the issuance of OP Units, are subject to agreements limiting our ability to transfer them prior to agreed upon dates without the consent of the limited partner who

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transferred the respective property to us. In the event we transfer any of these properties prior to the expiration of these limitations, we may be required to make a payment relating to taxes incurred by the limited partner. These limitations expire between 2011 and 2015.

Two of our properties that are held in joint ventures contain certain limitations on transfer. These limitations include requiring the consent of the joint venture partner to transfer a property prior to various specified dates, rights of first offer, and buy/sell provisions.

In connection with the establishment of Reckson LPT the Company, RAOC JV and LPT REIT entered into an Option Agreement (the “Option Agreement”) pursuant to which we granted RAOC JV options to acquire ten additional properties from the Operating Partnership over a two year period, beginning January 1, 2006. The properties contain an aggregate of approximately 1.2 million square feet and will be priced based on the fair market value at the time of each transfer to RAOC JV. The Option Agreement contains a right of first refusal granting RAOC JV the right to acquire any option property in the event we receive, and are amenable to, an offer from a third party to purchase such option property. The Option Agreement will terminate under certain circumstances, including if (i) RAOC JV sends notice of its intent to exercise its option but fails to close as obligated, (ii) RAOC JV is in default under the Option Agreement, the contribution agreement or the sale agreement or (iii) RAML or an affiliate of ours is no longer the Responsible Entity of Reckson LPT.

In July 2002, as a result of certain provisions of the Sarbanes-Oxley Act of 2002, we discontinued the use of stock loans in our Long Term Incentive Programs (“LTIP”). In connection with LTIP grants made prior to the enactment of the Sarbanes- Oxley Act of 2002, we currently have stock loans outstanding to certain executive officers which were used to purchase 385,000 shares of our common stock. The stock loans were priced at the market prices of our common stock at the time of issuance, bear interest at the mid-term Applicable Federal Rate and are secured by the shares purchased. Such stock loans (including accrued interest) are scheduled to vest and be ratably forgiven each year on the anniversary of the grant date based upon initial vesting periods ranging from seven to ten years. Such forgiveness is based on continued service and in part on the Company attaining certain annual performance measures. These stock loans had an initial aggregate weighted average vesting period of approximately nine years. As of December 31, 2005, there remains 180,714 shares of common stock subject to the original stock loans which are anticipated to vest between 2006 and 2011. Approximately $2.3 million, $2.1 million and $3.1 million of compensation expense was recorded for each of the years ended December 31, 2005, 2004 and 2003, respectively, related to these loans. Such amounts have been included in marketing, general and administrative expenses on our consolidated statements of income.

The outstanding stock loan balances due from executive officers aggregated approximately $3.8 million and $4.7 million at December 31, 2005 and December 31, 2004, respectively, and have been included as a reduction of additional paid in capital on our consolidated balance sheets. Other outstanding loans to executive and senior officers at December 31, 2005 and December 31, 2004 amounted to approximately $2.5 million and $2.7 million, respectively, and are included in investments in affiliate loans and joint ventures on our consolidated balance sheets and are primarily related to tax payment advances on stock compensation awards and life insurance contracts made to certain executive and non-executive officers.

In November 2002 and March 2003, an award of rights was granted to certain executive officers of the Company (the “2002 Rights” and “2003 Rights”, respectively, and collectively, the “Rights”). Each Right represents the right to receive, upon vesting, one share of common stock if shares are then available for grant under one of the Company’s stock option plans or, if shares are not so available, an amount of cash equivalent to the value of such stock on the vesting date. The 2002 Rights vest in four equal annual installments beginning on November 14, 2003 (and shall be fully vested on November 14, 2006). The 2003 Rights were earned on March 13, 2005 and vest in three equal annual installments beginning on March 13, 2005 (and shall be fully vested on March 13, 2007). Dividends on the shares will be held by the Company until such shares become vested, and will be distributed thereafter to the applicable officer. The 2002 Rights also entitle the holder thereof to cash payments in respect of taxes payable by the holder resulting from the 2002 Rights. The 2002 Rights aggregate 62,835 shares of the Company’s common stock and the 2003 Rights aggregate 26,040 shares of common stock. As of December 31, 2005, there remains 15,709 shares of common stock reserved related to the 2002 Rights and 17,360 shares of common stock reserved related to

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the 2003 Rights. Approximately $465,000, $403,000 and $855,000 of compensation expense was recorded for each of the years ended December 31, 2005, 2004 and 2003, respectively, related to the Rights. Such amounts have been included in marketing, general and administrative expenses on our consolidated statements of income.

In March 2003, the Company established a new LTIP for its executive and senior officers (the “2003 LTIP”). The four-year plan has a core award, which provides for annual stock based compensation based upon continued service and in part based on the Company attaining certain annual performance measures. The plan also has a special outperformance component in the form of a bonus pool equal to 10% of the total return in excess of a 9% cumulative and compounded annual total return on the Company’s common equity for the period through the four-year anniversary after the date of grant (the “Special Outperformance Pool”). The aggregate amount payable to such officers from the Special Outperformance Pool is capped at an amount calculated based upon a total cumulative and compounded annual return on the common equity of 15%. An officer’s special outperformance award represents an allocation of the Special Outperformance Pool and will become vested on the fourth anniversary of the date of grant, provided that the officer remains in continuous employment with the Company or any of its affiliates until such date, and the Company has achieved on a cumulative and compounded basis, during the four fiscal years completed on the applicable anniversary date, a total return to holders of the common equity that (i) is at or above the 60th percentile of the total return to stockholders achieved by members of the peer group during the same period and (ii) equals at least 9% per annum. Special outperformance awards will be paid in cash; however, the Compensation Committee, in its sole discretion, may elect to pay such an award in shares of common stock, valued at the date of vesting, if shares are available at such time under any of the Company’s existing stock option plans. The LTIP provides that no dividends or dividend equivalent payments will accrue with respect to the special outperformance awards. On March 13, 2003, the Company made available 827,776 shares of its common stock under its existing stock option plans in connection with the core award of the 2003 LTIP for certain of its executive and senior officers. During May 2003, the special outperformance awards of the 2003 LTIP were amended to increase the per share base price above which the four year cumulative return is measured from $18.00 to $22.40.

The Board of Directors approved an amendment to the 2003 LTIP to revise the peer group used to measure relative performance. The amendment eliminated the mixed office and industrial companies and added certain other “pure office” companies in order to revise the peer group to office sector companies. The Board has also approved the revision of the performance measurement dates for future vesting under the core component of the 2003 LTIP from the anniversary of the date of grant to December 31 of each year. This was done in order to have the performance measurement coincide with the performance period that the Company believes many investors use to judge the performance of the Company.

On December 27, 2004, the Operating Partnership entered into definitive agreements with certain executive and senior officers of the Company to revise their incentive awards under the 2003 LTIP. The revised agreements provide for (i) the rescission of the unvested portion of their core awards and (ii) an award in exchange for the rescinded core awards of an equal number of units of a new class of limited partnership interests (“LTIP Units”) of the Operating Partnership.

Each executive and senior officer participating in the 2003 LTIP was offered the option to retain all or a portion of his core awards or to rescind them in exchange for new awards of LTIP Units. On December 27, 2004, certain executive and senior officers accepted such offer and thereby amended their Amended and Restated Long-Term Incentive Award Agreement to cancel, in the aggregate, 362,500 shares of restricted stock of the Company representing all or a portion of their unvested core award, and received an equal number of LTIP Units.

The revised awards under the 2003 LTIP were designed to provide the potential for executives to retain a greater equity interest in the Company by eliminating the need for executives to sell a portion of the core awards immediately upon vesting in order to satisfy personal income taxes which are due upon vesting under the original core awards.

With respect to the 2003 LTIP, the Company met its annual performance measure with respect to the 2005, 2004 and 2003 annual measurement periods, respectively. As a result, the Company issued to the

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participants of the 2003 LTIP 86,111, 102,779 and 206,944 shares of its common stock, respectively, related to the core component of the 2003 LTIP.

The terms of each award of LTIP Units are substantially similar to those of the core awards under the 2003 LTIP. The vesting, performance hurdles and timing for vesting remain unchanged. However, an LTIP Unit represents an equity interest in the Operating Partnership, rather than the Company. At issuance, the LTIP Unit has no value but may over time accrete to a value equal to (but never greater than) the value of one share of common stock of the Company (a “REIT Share”). Initially, LTIP Units will not have full parity with OP Units with respect to liquidating distributions. Upon the occurrence of certain “triggering events,” the Operating Partnership will revalue its assets for the purpose of the capital accounts of its partners and any increase in valuation of the Operating Partnership’s assets from the date of the issuance of the LTIP Units through the “triggering event” will be allocated to the capital accounts of holders of LTIP Units until their capital accounts are equivalent to the capital accounts of holders of OP Units. If such equivalence is reached, LTIP Units would achieve full parity with OP Units for all purposes, and therefore accrete to an economic value equivalent to REIT Shares on a one-for-one basis. After two years from the date of grant, if such parity is reached, vested LTIP Units may be redeemed for cash in an amount equal to the then fair market value of an equal number of REIT Shares or converted into an equal number of OP Units, as determined by the Company’s Compensation Committee. However, there are circumstances under which such economic equivalence would not be reached. Until and unless such economic equivalence is reached, the value that the officers will realize for vested LTIP Units will be less than the value of an equal number of REIT Shares. In addition, unlike core awards under the 2003 LTIP (wherein dividends that accumulate are paid upon vesting), LTIP Units will receive the same quarterly distributions as OP Units on a current basis, thus providing full dividend equivalence with REIT Shares. At the scheduled March 2005 vesting date, the specified performance hurdles were met, and officers that received LTIP Units received a one-time cash payment that represented payment of the full vested amount of the accrued unpaid dividends under the core award of the 2003 LTIP through December 27, 2004, the issuance date of the LTIP Units. In addition, the officers, in the aggregate, vested in 104,167 LTIP Units. At the scheduled March 2006 vesting date, the specified performance hurdles were met and officers that received LTIP Units, in the aggregate, vested in 120,833 LTIP Units. In order to more closely replicate the terms of the core awards being rescinded, the Company also entered into agreements with three executive officers, which provide that in the event of a change of control the executive shall receive the equivalent value of one REIT Share for each LTIP Unit.

In March 2005, following the recommendation of the Compensation Committee, eight senior and executive officers of the Company were awarded, in the aggregate, 272,100 LTIP Units to continue to incentivize them for the long-term (the “2005 LTIP Unit Grants”). Each such LTIP Unit awarded is deemed equivalent to an award of one share of common stock reserved under one of the Company’s stock option plans, reducing availability for other equity awards on a one-for-one basis. The terms of the 2005 LTIP Unit Grants are generally consistent with the terms of the 2003 LTIP, including with respect to the impact upon vesting in the event of a change of control.

As a result of the foregoing, there remains 69,443 shares of common stock reserved for future issuance under the core award of the 2003 LTIP and 409,600 shares of common stock reserved for issuance with respect to the issuance of LTIP Units. With respect to the core award of the 2003 LTIP, the Company recorded approximately $1.2 million, $2.8 million and $2.6 million of compensation expense for each of the years ended December 31, 2005, 2004 and 2003, respectively. In addition, with respect to the LTIP Units and the 2005 LTIP Unit Grants, the Company recorded compensation expense of approximately $2.9 million for the year ended December 31, 2005. Such amounts have been included in marketing, general and administrative expenses on our consolidated statements of income. Based on the terms of the 2003 LTIP, potential outcomes of the Special Outperformance Pool are estimated to range from $0, assuming the requisite four year cumulative performance measures are not met, to a maximum of approximately $34.0 million, assuming relative peer group performance measures are met and a 15% cumulative and compounded return on common equity. During the three months ended December 31, 2005, we recorded approximately $23.5 million of compensation expense with respect to the Special Outperformance Pool. This amount is calculated on the closing stock price of our common stock on December 31, 2005 and is based on management’s determination of the probability of the requisite performance measures being met. The accrual represents

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approximately 70% of the total estimated Special Outperformance Pool reflecting the service period through December 31, 2005.

Compensation expense with respect to the core component of the 2003 LTIP, which relates to the Company attaining certain annual performance measures, is recognized in accordance with paragraph 26 of Statement No. 123 as a “target stock price” plan. Under this type of plan, compensation expense is recognized for the target stock price awards whether or not the targeted stock price condition is achieved as long as the underlying service conditions are achieved. Accordingly, we obtained an independent third party valuation of the 2003 LTIP awards and recognize compensation expense on a straight-line basis through the vesting period for awards to employees who remain in service over the requisite period regardless of whether the target stock price has been reached.

Compensation expense with respect to the core component of the 2003 LTIP, which relates to the continued service of the grantee, is recognized in accordance with Statement No. 123 in which compensation expense is recognized on a straight- line basis through the vesting period based on the fair market value of the stock on the date of grant.

As a result of the election of certain executive and senior officers to exchange all or a portion of their 2003 LTIP into an equal number of LTIP Units we again obtained an independent third party valuation of the newly granted LTIP Units and determined that the fair value of the LTIP Units was not greater than the exchanged 2003 LTIP awards on the date of the exchange. As such, compensation expense to be recognized, on a straight-lined basis, over the vesting period of the LTIP Units equals the amount of unamortized compensation expense cost for the 2003 LTIP awards as of the exchange date.

We adopted Statement No. 123R on January 1, 2006 and have determined that the adoption of Statement No. 123R will have no material impact on our consolidated financial statements.

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, we 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 our properties have been subjected to a Phase I or similar environmental audit (which involved general inspections without soil sampling, ground water analysis or radon testing) completed by independent environmental consultant companies. These environmental audits have not revealed any environmental liability that would have a material adverse effect on our business.

Off Balance Sheet Arrangements

During 1997, the Company formed FrontLine Capital Group (“FrontLine”) and Reckson Strategic Venture Partners, LLC (“RSVP”), a real estate venture capital fund whose common equity is held indirectly by FrontLine. In connection with the formation and subsequent spin-off of FrontLine, the Operating Partnership established an unsecured credit facility with FrontLine (the “FrontLine Facility”) in the amount of $100.0 million.

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The Operating Partnership also approved the funding of investments of up to $110.0 million relating to REIT-qualified investments through RSVP-controlled joint ventures or advances made to FrontLine under an additional unsecured loan facility (the “RSVP Facility”) having terms similar to the FrontLine Facility (advances made under the RSVP Facility and the FrontLine Facility hereafter, the “FrontLine Loans”). To date, approximately $59.8 million has been funded to RSVP-controlled joint ventures and $142.7 million through the FrontLine Loans (collectively, the “RSVP/FLCG Investments”) on which we accrued interest (net of reserves) of approximately $19.6 million.

A committee of the Board of Directors, comprised solely of independent directors, considers any actions to be taken by the Company in connection with the RSVP/FLCG Investments and during 2001, based on our assessment of value and recoverability of the RSVP/FLCG Investments and considering the findings and recommendations of the committee and its financial advisor, we recorded a $163.0 million valuation reserve charge, inclusive of anticipated costs against the carrying cost of the RSVP/FLCG Investments. In addition, we have discontinued the accrual of interest income with respect to the FrontLine Loans and have also reserved against our share of GAAP equity in earnings, if any, from the RSVP-controlled joint ventures funded until such income is realized through cash distributions.

FrontLine is in default under the FrontLine Loans and on June 12, 2002, filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code.

In September 2003, RSVP completed the restructuring of its capital structure and management arrangements whereby a management company formed by its former managing directors, whose contracts as managing directors were terminated, has been retained to manage RSVP pursuant to a management agreement. The management agreement, which has a term of three years and is subject to early termination in the event of the disposition of all of the assets of RSVP, provides for an annual base management fee and disposition fees equal to 2% of the net proceeds received by RSVP on asset sales (the “Fees”). The Fees are subject to a maximum over the term of the agreement of $7.5 million. In addition, the former managing directors of RSVP retained a one-third residual interest in RSVP’s assets which is subordinated to the distribution of an aggregate amount of $75.0 million to RSVP and/or us in respect of RSVP-controlled joint ventures.

In connection with RSVP’s capital restructuring, RSVP and certain of its affiliates obtained a $60.0 million secured loan (the “RSVP Secured Loan”). On November 3, 2005, the outstanding balance of the RSVP Secured Loan was repaid primarily with proceeds received from the sale of certain assisted living related assets.

The net carrying value of our investments in the RSVP/FLCG Investments of approximately $55.2 million was reassessed with no change by management as of December 31, 2005. Such amount is included in investments in affiliate loans and joint ventures on our consolidated balance sheet.

Scott H. Rechler, who serves as our Chief Executive Officer, President and Chairman of the Board, serves as CEO and Chairman of the Board of Directors of FrontLine and is its sole board member. Scott H. Rechler also serves as a member of the management committee of RSVP and serves as a member of the Board of Directors of American Campus Communities, a company formally owned by RSVP.

In November 2004, a joint venture in which RSVP owns approximately 47% executed a binding agreement to contribute its Catskills, NY resort properties (excluding residentially zoned land) to Empire Resorts Inc. (NASDAQ: NYNY) (“Empire”) for consideration of 18.0 million shares of Empire’s common stock and the right to appoint five members of their Board of Directors. On December 29, 2005, the agreement was terminated and the joint venture received options to purchase approximately 5.2 million options of common stock of Empire at a price of $7.50 per share. The options will be exercisable until December 29, 2006.

In addition to the foregoing, our off-balance sheet arrangements are our approximate 5% indirect ownership interest in a joint venture that owns an investment in a New York City Class A office tower where our share of unconsolidated joint venture debt is approximately $11.8 million with an interest rate of 6.35% per annum and a remaining term of approximately 15 years, our 25% joint venture interest in the RAOC JV where our share of unconsolidated joint venture debt is approximately $52.3 million with a weighted average interest rate of 5.26% per annum and a weighted average term of 4.6 years and our 30% joint venture interest in the

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property located at One Court Square, Long Island City, NY where our share of unconsolidated joint venture debt is $94.5 million with an interest rate of 4.91% per annum and a remaining term of approximately 9.7 years.

Inflation

The office leases generally provide for fixed base rent increases or indexed escalations. In addition, the office leases provide for separate escalations of real estate taxes, operating expenses and electric costs over a base amount. The flex 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. We believe that inflationary increases in expenses will be mitigated by contractual rent increases and expense escalations described above. As a result of the impact of the events of September 11, 2001, we have realized increased insurance costs, particularly relating to property and terrorism insurance, and security costs. We have included these costs as part of our escalatable expenses and have billed them to our tenants consistent with the terms of the underlying leases and believe they are collectible. To the extent our properties contain vacant space, we will bear such inflationary increases in expenses.

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

Funds From Operations

Funds from Operations (“FFO”) is defined by the National Association of Real Estate Investment Trusts (“NAREIT”) as net income or loss, excluding gains or losses from sales of depreciable properties plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. We present FFO because we consider it an important supplemental measure of our operating performance and believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. As a result, FFO provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities, interest costs and other matters without the inclusion of depreciation and amortization, providing perspective that may not necessarily be apparent from net income.

We compute FFO in accordance with the standards established by NAREIT. 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 our operating performance or as an alternative to cash flow as a measure of liquidity. Since all companies and analysts do not calculate FFO in a similar fashion, our calculation of FFO presented herein may not be comparable to similarly titled measures as reported by other companies. FFO for the years ended December 31, 2004 and 2003 includes gains from the sales of land and a build-to-suit transaction in the amount of $6.1 million and $18.8 million, respectively.

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

	2005		2004		2003
Income before minority interests, preferred dividends and distributions, equity in earnings of real estate joint ventures, and discontinued operations	$	147,451	$	71,918	$	47,365
Add:
Equity in earnings of real estate joint ventures		1,371		603		30
Discontinued operations (net of minority interests)		68,832		18,269		135,059
Less:
Minority partners’ interests in consolidated partnerships		15,749		18,507		16,857
Limited partners’ minority interest in the Operating Partnership		4,264		1,314		983
Redemption charges on Series A preferred stock		—		15,812		—
Preferred dividends and distributions		—		12,777		22,360
Net income allocable to common shareholders		197,641		42,380		142,254
Adjustments for basic Funds From Operations
Add:
Limited partners’ minority interest in the Operating Partnership		5,451		2,303		14,110
Real estate depreciation and amortization		121,649		107,945		101,435
Minority partners’ interests in consolidated partnerships		27,763		30,427		30,477
Less:
Gain on sales of depreciable real estate		154,216		11,322		126,789
Amounts distributable to minority partners in consolidated partnerships		23,044		26,743		26,598
Basic Funds From Operations		175,244		144,990		134,889
Add:
Dividends and distributions on dilutive shares and units		—		590		1,093
Diluted Funds From Operations	$	175,244	$	145,580	$	135,982
Weighted Average Shares/OP Units outstanding (1)		84,566		72,430		64,884
Diluted Weighted Average Shares/OP Units outstanding (1)		85,040		73,163		65,716

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

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

The primary market risk facing us is interest rate risk on our long-term debt and notes receivable. We do not enter into derivative financial instruments for trading or speculative purposes. However, in the normal course of our business and to help us manage our debt issuances and maturities, we do use derivative financial instruments in the form of cash flow hedges to protect ourselves against potentially rising interest rates. We are not subject to foreign currency risk.

The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.

As required by Statement No. 133, we record all derivatives on our balance sheet at fair value. For effective hedges, depending on the nature of the hedge, changes in the fair value of the derivative will be offset against the corresponding change in fair value of the hedged asset, liability, or firm commitment through earnings or recognized in OCI on our balance sheet until the hedged item is recognized in earnings.

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For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in OCI and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. We assess the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designated hedged item or transaction. For derivatives not designated as hedges, changes in fair value are recognized in earnings.

The fair market value (“FMV”) of our long term debt and Note Receivable Investments is estimated based on discounting future cash flows at interest rates that we believe reflects the risks associated with long term debt and notes receivable of similar risk and duration.

The following table sets forth our long-term debt obligations by scheduled principal cash flow payments and maturity date, weighted average interest rates and estimated FMV at December 31, 2005 (dollars in thousands):

	For the Year Ended December 31,
	2006			2007			2008			2009			2010			Thereafter			Total (1)			FMV
Long term debt:
Fixed rate	$	123,469		$	269,529		$	7,887		$	307,589		$	372,418		$	531,671		$	1,612,563		$	1,677,396
Weighted average interest rate		7.11	%		7.14	%		7.28	%		7.71	%		4.51	%		6.07	%		6.29	%
Variable rate	$	—		$	—		$	419,000		$	—		$	—		$	—		$	419,000		$	419,000
Weighted average interest rate		—	%		—	%		5.17	%		—	%		—	%		—	%		5.17	%

(1) Includes aggregate unamortized issuance discounts of approximately $7.4 million on the senior unsecured notes which are due at maturity.

In addition, we have assessed the market risk of our variable rate debt, which is based upon LIBOR, and believe that a one percent increase in the LIBOR rate would have an approximate $4.2 million annual increase in interest expense based on $419.0 million of variable rate debt outstanding at December 31, 2005.

The following table sets forth our Notes Receivable Investments by scheduled maturity date, weighted average interest rates and estimated FMV at December 31, 2005 (dollars in thousands):

	For the Year Ended December 31,
	2006			2007			2008			2009			2010			Thereafter			Total (1)			FMV
Notes receivable:
Fixed rate	$	16,990		$	40,000		$	—		$	25,000		$	8,031		$	97,760	(2)	$	187,781		$	187,781	(2)
Weighted average interest rate		12.00	%		16.25	%		—	%		17.50	%		9.00	%		9.02	%		10.87	%
Variable rate	$	—		$	—		$	—		$	500		$	—		$	—		$	500		$	500
Weighted average interest rate		—	%		—	%		—	%		4.35	%		—	%		—	%		4.35	%

(1) Excludes interest receivables and unamortized acquisition costs aggregating approximately $7.5 million.

(2) Our investment balance, with respect to a participating loan investment, includes approximately $21.2 million of accretive interest which is due at maturity. The FMV calculation considers only accretive interest recorded through December 31, 2005.

In addition, we have assessed the market risk of our variable rate note receivable, which is based on LIBOR, and believe that a one percent increase in the LIBOR rate would have a $5,000 annual increase in interest income based on a $500,000 variable rate note receivable outstanding at December 31, 2005.

Item 8. Financial Statements and Supplementary Data

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

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures.     We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our filings under the Securities Exchange Act of 1934 is reported within the time periods specified in the SEC’s rules and forms. In this regard, we have formed a Disclosure Committee currently comprised of all of our executive officers as well as certain other members of senior management with knowledge of information that may be considered in the SEC reporting process. The Committee has responsibility for the development and assessment of the financial and non-financial information to be included in the reports filed by us with the SEC and supports our Chief Executive Officer and Chief Financial Officer in connection with their certifications contained in our SEC reports. The Committee meets regularly and reports to the Audit Committee on a quarterly or more frequent basis. Our Chief Executive Officer and Chief Financial Officer have evaluated, with the participation of our senior management, our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based upon the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that such disclosure controls and procedures are effective.

Managements Report on Internal Control Over Financial Reporting.     Management’s Report on Internal Control Over Financial Reporting and the attestation report of Ernst & Young LLP, our independent registered public accounting firm, on management’s assessment of our internal control over financial reporting are included in Part IV, item 15(a) of the Form 10-K, and are incorporated herein by reference.

Changes in Internal Control Over Financial Reporting.     There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other information

On January 13, 2006, the Operating Partnership obtained a $250.0 million term loan (the “Term Loan”) from Goldman Sachs Mortgage Company. The Term Loan is for an initial term of three months and we have the option for a three month extension upon paying a one-time fee of 25 basis points on the amount then outstanding. The Term Loan has terms, including interest rates and financial covenants, substantially similar to our Credit Facility. Proceeds from the Term Loan were used to repay outstanding borrowings under our Credit Facility which were used primarily to acquire a 1.6 million square foot suburban office portfolio, consisting of 14 buildings, located in Westchester County, NY on December 29, 2005. An affiliate of the lender has performed investment banking and advisory services for us from time to time for which it has received customary fees and expenses.

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PART III

Item 10.     Directors and Executive Officers of the Registrant

The information contained in the section captioned “Proposal I: Election of Directors” and “Section 16 Beneficial Ownership Reporting Compliance” of our definitive proxy statement for the 2006 annual meeting of stockholders is incorporated herein by reference.

Item 11.     Executive Compensation

The information contained in the section captioned “Executive Compensation” of our definitive proxy statement for the 2006 annual meeting of stockholders is incorporated herein by reference, provided, however, that the report on Executive Compensation set forth therein shall not be incorporated by reference herein, in any of our prior or future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent we specifically incorporate such report by reference therein and shall not be otherwise deemed filed under either of such Acts.

Item 12.     Security Ownership of Certain Beneficial Owners and Management And Related Stockholder Matters

The information contained in the section captioned “Principal and Management Stockholders” of our definitive proxy statement for the 2006 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 our definitive proxy statement for the 2006 annual meeting of stockholders is incorporated herein by reference.

Item 14.     Principal Accountant Fees and Services

The information contained in the section captioned “Proposal II: Ratification of Selection of Independent Auditors” of our definitive proxy statement for the 2006 annual meeting of stockholders is incorporated herein by reference.

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PART IV

Item 15.     Exhibits and Financial Statement Schedules

(a)(1 and 2) Financial Statement 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.
Management’s Report on Internal Control Over Financial Reporting		F-1
Reports of Independent Registered Public Accounting Firm		F-2 - F-3
Consolidated Balance Sheets as of December 31, 2005 and December 31, 2004		F-4
Consolidated Statements of Income for the years ended December 31, 2005, 2004, and 2003		F-5 - F-6
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2005, 2004, and 2003.		F-7
Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004, and 2003		F-8
Notes to Consolidated Financial Statements		F-9 - F-50
Schedule III - Real Estate and Accumulated Depreciation		F-51

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

(3) Exhibits: The following exhibits are filed as part of, or incorporated by reference into, this Form 10-K.

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File No.	Exhibit	Filing Date	Filed Herewith
3.1	Amended and Restated Articles of Incorporation of the Registrant	S-11	333-1280	3.3	2/12/96
3.2	Amended and Restated By Laws of the Registrant	8-K		3.1	2/21/06
3.3	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	8-K		3.1	3/1/99
3.4	Articles Supplementary of the Registrant Establishing and Fixing the Rights and Preferences of a Class of Shares of Common Stock filed with the Maryland State Department of Assessments and Taxation on May 24, 1999	10-K		3.4	3/17/00
3.5	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	8-K		3.1	6/7/99
3.6	Articles of Amendment of the Registrant filed with the Maryland State Department of Assessments and Taxation on January 4, 2000	10-K		3.6	3/17/00
3.7	Articles Supplementary of the Registrant filed with the Maryland State Department of Assessments and Taxation on January 11, 2000	10-K		3.7	3/17/00
3.8	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 November 2, 2000	8-K		4	10/17/00
3.9	Articles of Amendment of the Registrant filed with the Maryland State Department of Assessments and Taxation on June 2, 2004	10-Q		3.1	8/9/04
3.10	Articles of Amendment of the Registrant filed with the Maryland State Department of Assessments and Taxation on June 2, 2004	10-Q		3.1	8/9/04
3.11	Articles of Amendment of the Registrant filed with the Maryland State Department of Assessments and Taxation on September 16, 2004	8-K		3	9/20/04
3.12	Articles of Amendment of the Registrant filed with the Maryland State Department of Assessments and Taxation on May 26, 2005	10-Q		3.1	8/9/05
4.1	Specimen Share Certificate of Common Stock	S-11	33-84324	4.1	5/4/95
4.2	Form of 7.75% Notes due 2009 of Reckson Operating Partnership, L.P. (the “Operating Partnership”)	8-K		4.2	3/26/99
4.3	Indenture, dated March 26, 1999, among the Operating Partnership, the Registrant, and The Bank of New York, as trustee	8-K		4.3	3/26/99

IV-1

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File No.	Exhibit	Filing Date	Filed Herewith
4.4	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	8-K		4	10/17/00
4.5	Form of 6.00% Notes due 2007 of the Operating Partnership	8-K		4.1	6/18/02
4.6	Note Purchase Agreement for the Senior Unsecured Notes due 2007	10-K		10.23	3/26/98
4.7	Form of 5.15% Notes due 2011 of the Operating Partnership	8-K		4.1	1/21/04
4.8	Form of 5.875% Notes due 2014 of the Operating Partnership	8-K		4.1	8/12/04
4.9	4.00% Exchangeable Senior Debentures due 2025 of the Operating Partnership	8-K		4.1	6/27/05
10.1	Amended and Restated Agreement of Limited Partnership of the Operating Partnership	S-11	333-1280	10.1	2/12/96
10.2	Supplement to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership Establishing Series A Preferred Units of Limited Partnership Interest	8-K		10.1	3/1/99
10.3	Supplement to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership Establishing Series B Preferred Units of Limited Partnership Interest	8-K		10.2	3/1/99
10.4	Supplement to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership Establishing Series C Preferred Units of Limited Partnership Interest	8-K		10.3	3/1/99
10.5	Supplement to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership Establishing Series D Preferred Units of Limited Partnership Interest	8-K		10.4	3/1/99
10.6	Supplement to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership Establishing Series B Common Units of Limited Partnership Interest	10-K		10.6	3/17/00
10.7	Supplement to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership Establishing Series E Preferred Partnership Units of Limited Partnership Interest	10-K		10.7	3/17/00
10.8	Supplement to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership Establishing Series F Junior Participating Preferred Partnership Units	10-K		10.8	3/21/01
10.9	Supplement to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership Establishing Series C Common Units of Limited Partnership Interest	10-Q		10.4	8/13/03
10.10	Supplement to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership Establishing LTIP Units of Limited Partnership Interest	8-K		10.4	12/29/04
10.11	Supplement to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership Establishing 2005 LTIP Units of Limited Partnership Interest					X
10.12	Third Amended and Restated Agreement of Limited Partnership of Omni Partners, L.P.	10-K		10.2	3/26/98
10.13	Amendment and Restatement of Employment and Noncompetition Agreement, dated as of August 15, 2000, between the Registrant and Scott Rechler	8-K		10.13	10/17/00
10.14	Amendment and Restatement of Employment and Noncompetition Agreement, dated as of August 15, 2000, between the Registrant and Michael Maturo	8-K		10.9	10/17/00
10.15	Amendment and Restatement of Employment and Noncompetition Agreement, dated as of August 15, 2000, between the Registrant and Jason Barnett	8-K		10.17	10/17/00
10.16	Employment and Noncompetition Agreement, dated as of July 16, 2001, between the Registrant and F.D. Rich	10-K		10.14	3/9/04
10.17	Employment and Noncompetition Agreement, dated as of November 20, 2002, among the Registrant, Metropolitan Partners LLC and Philip Waterman III	10-K		10.15	3/9/04
10.18	Agreement for Extension of Employment and Noncompetition Agreement, dated as of September 27, 2005, by and between the Registrant and Scott Rechler(1)	8-K		10.3	9/27/05
10.19	Agreement for Extension of Employment and Noncompetition Agreement, dated as of December 6, 2005, by and between the Registrant and Scott Rechler(2)	8-K		10.2	12/6/05
10.20	Agreement for Extension of Employment and Noncompetition Agreement, dated as of February 14 , 2006, by and between the Registrant and Scott Rechler(3)	8-K		10.1	2/21/06

IV-2

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File No.	Exhibit	Filing Date	Filed Herewith
10.21	Purchase Option Agreement relating to 225 Broadhollow Road	S-11	333-1280	10.14	2/12/96
10.22	Amended and Restated 1995 Stock Option Plan	10-Q		10.1	8/13/03
10.23	1996 Employee Stock Option Plan	8-K		10.2	11/25/96
10.24	Ground Leases for certain of the properties	S-11	33-84324	10.17	2/3/95
10.25	Amended and Restated 1997 Stock Option Plan	10-Q		10.2	8/13/03
10.26	1998 Stock Option Plan	10-K		10.20	3/26/98
10.27	Amended and Restated 2002 Stock Option Plan	10-Q		10.3	8/13/03
10.28	2005 Stock Option Plan	10-Q		10.1	8/9/05
10.29	Amendment and Restatement of Severance Agreement, dated as of August 15, 2000, between the Registrant and Scott Rechler	8-K		10.14	10/17/00
10.30	Amendment and Restatement of Severance Agreement, dated as of August 15, 2000, between the Registrant and Michael Maturo	8-K		10.10	10/17/00
10.31	Amendment and Restatement of Severance Agreement, dated as of August 15, 2000, between the Registrant and Jason Barnett	8-K		10.18	10/17/00
10.32	Loan Agreement, dated as of June 1, 2001, between 1350 LLC, as Borrower, and Secore Financial Corporation, as Lender	10-Q		10.1	8/14/01
10.33	Loan Agreement, dated as of July 18, 2001, between Metropolitan 919 3rd Avenue, LLC, as Borrower, and Secore Financial Corporation, as Lender	10-Q		10.2	8/14/01
10.34	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	8-K		10.3	10/17/00
10.35	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-K		10.51	3/21/01
10.36	Consolidated, Amended and Restated Secured Promissory Note relating to Metropolitan 810 7th Ave., LLC and 100 Wall Company LLC	10-K		10.52	3/21/01
10.37	Amended and Restated Operating Agreement of 919 JV LLC	8-K		10.1	1/8/02
10.38	Indemnification Agreement, dated as of May 23, 2002, between the Registrant and Scott H. Rechler(4)	10-K		10.33	3/14/05
10.39	Award Agreement, dated as of November 14, 2002, between the Registrant and Scott H. Rechler(5)	10-K		10.49	3/24/03
10.40	Award Agreement, dated as of March 13, 2003, between the Registrant and Scott H. Rechler(6)	10-K		10.50	3/24/03
10.41	Amendment Agreement, dated as of September 10, 2003, by and between the Registrant, the Operating Partnership and Scott Rechler	8-K		10.7	9/18/03
10.42	Third Amended and Restated Credit Agreement, dated August 6, 2004, between the Operating Partnership, as Borrower, and the Institutions from time to time party thereto	10-Q		10.1	8/9/04
10.43	Amended and Restated Long-Term Incentive Award Agreement, dated as of May 28, 2003, between Registrant and Scott H. Rechler(7)	10-K		10.49	3/14/05
10.44	Form of First Amendment to Amended and Restated Long-Term Incentive Award Agreement	8K		10.1	12/29/04
10.45	Form of Long-Term Incentive Plan OP Unit Award Agreement	8K		10.2	12/29/04
10.46	Form of Change-in-Control Bonus Agreement	8K		10.3	12/29/04
10.47	Long-Term Incentive Plan OP Unit Award Agreement, dated as of March 11, 2005, between the Registrant and Scott H. Rechler(8)					X
10.48	Long-Term Incentive Plan OP Unit Award Agreement, dated as of March 11, 2005, between the Registrant and Salvatore Campofranco(9)					X
10.49	Change-in-Control Agreement, dated as of March 11, 2005, between the Registrant and Scott H. Rechler(10)					X
10.50	Purchase and Sale Agreement, dated as of May 4, 2005, by and between Citibank, N.A. and Reckson Court Square, LLC	10-Q		10.1	5/9/05
10.51	Term Loan Agreement, dated as of May 12, 2005, among the Operating Partnership, the institution from time to time party thereto as lenders, Citicorp North America, Inc., as administrative agent, and Citigroup Global Markets Inc., as lead arranger and sole bookrunner	8-K		10.3	5/18/05
10.52	Amendment No. 1 to Third Amended and Restated Credit Agreement, dated as of May 12, 2005, by and among the Operating Partnership, the Lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent	8-K		10.4	5/18/05
10.53	Amendment No. 2 to Third Amended and Restated Credit Agreement, dated as of June 20, 2005, among the Operating Partnership, the Lenders party thereto and JPMorgan Chase Bank, N.A.	8-K		10.1	6/27/05
10.54	Amendment No. 1 to Term Loan Agreement, dated as of June 20, 2005, among the Operating Partnership, the Lenders party thereto and Citicorp. North America, Inc., as administrative agent	8-K		10.2	6/27/05

IV-3

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File No.	Exhibit	Filing Date	Filed Herewith
10.55	Contract of Sale, dated as of July 8, 2005, between Galaxy LI Associates LLC, as seller, and Reckson EAB LLC, as buyer	10-Q		10.2	8/9/05
10.56	Note, dated as of August 3, 2005, by Reckson Court Square, LLC (Borrower), in favor of German American Capital Corporation (Lender)	10-Q		10.3	8/9/05
10.57	Loan and Security Agreement, dated as of August 3, 2005, between Reckson Court Square, LLC and German American Capital Corporation	10-Q		10.4	8/9/05
10.58	Sale Agreement, dated as of August 12, 2005, by and among the Operating Partnership and certain of its subsidiaries, Reckson Australia Operating Company LLC and Reckson Australia LPT Corporation	8-K		10.3	8/18/05
10.59	Contribution Agreement, dated as of August 12, 2005, by and among the Operating Partnership, and certain of its subsidiaries, Reckson Australia Operating Company LLC and Reckson Australia LPT Corporation	8-K		10.2	8/18/05
10.60	Loan Agreement, dated as of August 26, 2005, among UBS Real Estate Investments Inc. and RA 492 River Road LLC, RA 100 Executive Drive LLC, RA 200 Executive Drive LLC, RA 35 Pinelawn Road LLC, RA 80 Grasslands Road LLC, RA 100 Grasslands Road LLC, RA 150 Motor Parkway LLC, RA 660 White Plains Road LLC and RA 225 High Ridge LLC (the “UBS Borrowers”)	8-K		10.1	9/1/05
10.61	Promissory Note, dated as of August 26, 2005, among UBS Real Estate Investments Inc and the UBS Borrowers	8-K		10.2	9/1/05
10.62	Guaranty of Recourse Obligations (Pool A), dated as of August 26, 2005, between the Operating Partnership and UBS Real Estate Investments Inc.	8-K		10.3	9/1/05
10.63	Amended and Restated Limited Liability Company Agreement, dated as of September 21, 2005, by and between Reckson Australia Holdings LLC and Reckson Australia LPT Corporation	8-K		10.1	9/27/05
10.64	Option Agreement, dated as of September 21, 2005, by and between the Operating Partnership, Reckson Australia Operating Company LLC and Reckson Australia LPT Corporation	8-K		10.2	9/27/05
10.65	Amended and Restated Operating Agreement of One Court Square Holdings LLC, dated as of November 30, 2005, by and between One Court Square Member LLC and One Court Square Investor, LLC	8-K		10.1	12/6/05
10.66	Term Loan, dated as of January 13, 2006, among the Operating Partnership, the Institutions From Time to Time Party Thereto as Lenders, Goldman Sachs Management Company, as Administrative Agent, and Goldman Sachs Management Company, as Lead Arranger and Sole Bookrunner					X
12.1	Statement of Ratios of Earnings to Fixed Charges					X
14.1	Reckson Associates Realty Corp. Code of Ethics and Business Conduct	10-K		14.1	3/9/04
21.1	Statement of Subsidiaries					X
23.1	Consent of Independent Registered Public Accounting Firm					X
24.1	Power of Attorney (included in Part IV of the Form 10-K)
31.1	Certification of Scott H. Rechler, Chief Executive Officer and President of the Registrant, pursuant to Rule 13a-14(a) or Rule 15(d)-14(a)					X
31.2	Certification of Michael Maturo, Executive Vice President, Treasurer and Chief Financial Officer of the Registrant, pursuant to Rule 13a- 14(a) or Rule 15(d)-14(a)					X
32.1	Certification of Scott H. Rechler, Chief Executive Officer and President of the Registrant, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code					X
32.2	Certification of Michael Maturo, Executive Vice President, Treasurer and Chief Financial Officer of the Registrant, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code					X

(1) Each of Michael Maturo and Jason Barnett has entered into an Agreement for Extension of Employment and Noncompetition Agreement, dated as of September 27, 2005, with the Registrant. These agreements are identical in all material respects to the Agreement for Extension of Employment and Noncompetition Agreement for Scott Rechler incorporated by reference herein.

(2) Each of Michael Maturo and Jason Barnett has entered into an Agreement for Extension of Employment and Noncompetition Agreement, dated as of December 6, 2005, with the Registrant. These agreements are identical in all material respects to the Agreement for Extension of Employment and Noncompetition Agreement for Scott Rechler incorporated by reference herein.

(3) Each of Michael Maturo and Jason Barnett has entered into an Agreement for Extension of Employment and Noncompetition Agreement, dated as of February 14, 2006, with the Registrant. These agreements are identical in all material respects to the Agreement for Extension of Employment and Noncompetition Agreement for Scott Rechler incorporated by reference herein.

(4) Each of Michael Maturo, Jason M. Barnett and Lewis S. Ranieri has entered into an Indemnification Agreement with the Registrant, dated as of May 23, 2002. Each of Ronald H. Menaker and Peter Quick has entered into an Indemnification Agreement with the Registrant dated as of May 1, 2002. Each of Douglas Crocker and Stanley Steinberg has entered into an Indemnification Agreement with the Registrant dated as of February 5, 2004. Elizabeth McCaul has entered into an Indemnification Agreement with the Registrant dated as of February 25, 2004 and John Ruffle has entered into an Indemnification Agreement with the Registrant dated as of

IV-4

March 30, 2004. These Agreements are identical in all material respects to the Indemnification Agreement for Scott H. Rechler incorporated by reference herein.

(5) Michael Maturo has been awarded certain rights to shares of common stock of the Registrant, pursuant to an Award Agreement dated November 14, 2002. This Agreement is identical in all material respects to the Agreement for Scott H. Rechler incorporated by reference herein, except that Michael Maturo received rights to 27,588 shares.

(6) Each of Michael Maturo and Jason M. Barnett has been awarded certain rights to shares of common stock of the Registrant pursuant to Award Agreements dated March 13, 2003. These Agreements are identical in all material respects to the Agreement for Scott H. Rechler incorporated by reference herein.

(7) Each of Michael Maturo and Jason Barnett has entered into an Amended and Restated Long-Term Incentive Award Agreement, dated as of May 28, 2003, with the Registrant. These Agreements are identical in all material respects to the Amended and Restated Long-Term Incentive Award Agreement for Scott H. Rechler incorporated by reference herein.

(8) Each of Michael Maturo and Jason Barnett has entered into a Long-Term Incentive Plan OP Unit Award Agreement, dated as of March 11, 2005, with the Registrant. These agreements are identical in all material respects to the Long-Term Incentive Plan OP Unit Award Agreement for Scott H. Rechler filed herewith.

(9) Each of F. D. Rich III and Philip Waterman III has entered into a Long-Term Incentive Plan OP Unit Award Agreement, dated as of March 11, 2005, with the Registrant. These agreements are identical in all material respects to the Long-Term Incentive Plan OP Unit Award Agreement for Salvatore Campofranco filed herewith.

(10) Each of Michael Maturo and Jason Barnett has entered into a Change-in-Control Agreement, dated as of March 11, 2005, with the Registrant. These agreements are identical in all material respects to the Change-in-Control Agreement for Scott H. Rechler filed herewith.

IV-5

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 7, 2006.

RECKSON ASSOCIATES REALTY CORP.
	By:	/s/ Scott H. Rechler
		Scott H. Rechler, Chairman of the Board, Chief Executive Officer, President and Director

KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and directors of Reckson Associates Realty Corp., hereby severally constitute and appoint Scott H. Rechler and Michael Maturo, and each of them singly, our true and lawful attorneys-in-fact 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 7, 2006.

Signature	Title
/s/ Scott H. Rechler Scott H. Rechler	Chairman of the Board, Chief Executive Officer, President and Director
/s/ Michael Maturo Michael Maturo	Executive Vice President, Treasurer and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
/s/ Peter Quick Peter Quick	Lead Independent Director
/s/ Ronald H. Menaker Ronald H. Menaker	Director
/s/ Lewis S. Ranieri Lewis S. Ranieri	Director
/s/ Douglas Crocker II Douglas Crocker II	Director
/s/ John F. Ruffle John F. Ruffle	Director
/s/ Stanley Steinberg Stanley Steinberg	Director
/s/ Elizabeth McCaul Elizabeth McCaul	Director

IV-6

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Reckson Associates Realty Corp. is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control — Integrated Framework, management concluded that our internal control over financial reporting was effective as of December 31, 2005. Management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2005 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included herein.

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of
Reckson Associates Realty Corp.

We have audited the accompanying consolidated balance sheets of Reckson Associates Realty Corp. as of December 31, 2005 and 2004, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2005. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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, 2005 and 2004, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Reckson Associates Realty Corp.’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 7, 2006 expressed an unqualified opinion thereon.

Ernst & Young LLP

New York, New York
March 7, 2006

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of
Reckson Associates Realty Corp.

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that Reckson Associates Realty Corp. maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Reckson Associates Realty Corp.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Reckson Associates Realty Corp. maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Reckson Associates Realty Corp. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 2005 consolidated financial statements of Reckson Associates Realty Corp. and our report dated March 7, 2006 expressed an unqualified opinion thereon.

Ernst & Young LLP

New York, New York
March 7, 2006

F-3

RECKSON ASSOCIATES REALTY CORP.
Consolidated Balance Sheets
(in thousands, except share amounts)

	December 31,
	2005			2004
Assets
Commercial real estate properties, at cost: (Notes 2, 3, 5 and 6)
Land	$	430,064		$	353,408
Buildings and improvements		2,823,020			2,273,419
Developments in progress:
Land		123,761			90,976
Development costs		99,570			42,169
Furniture, fixtures and equipment		12,738			11,609
		3,489,153			2,771,581
Less accumulated depreciation		(532,152	)		(434,112	)
Investments in real estate, net of accumulated depreciation		2,957,001			2,337,469
Properties and related assets held for sale, net of accumulated depreciation (Note 6)		194,297			405,353
Investments in real estate joint ventures (Note 6)		61,526			6,657
Investments in notes receivable (Note 6)		174,612			85,855
Cash and cash equivalents		17,468			25,137
Tenant receivables		20,196			9,427
Investments in affiliate loans and joint ventures (Note 8)		59,324			60,951
Deferred rents receivable		138,990			108,791
Prepaid expenses and other assets		109,197			59,125
Contract and land deposits and pre-acquisition costs		184			121
Deferred leasing and loan costs, net of accumulated amortization of $45,332 and $53,021, respectively		78,411			68,722
Total Assets	$	3,811,206		$	3,167,608
Liabilities
Mortgage notes payable (Note 2)	$	541,382		$	576,719
Mortgage notes payable and other liabilities associated with properties held for sale (Note 6)		84,572			35,638
Unsecured credit facility (Note 3)		419,000			235,500
Senior unsecured notes (Note 4)		980,085			697,974
Accrued expenses and other liabilities		120,994			72,059
Deferred revenues and tenant security deposits (Note 6)		75,903			47,535
Dividends and distributions payable		36,398			35,924
Total Liabilities		2,258,334			1,701,349
Minority partners’ interests in consolidated partnerships		217,705			211,178
Preferred unit interest in the operating partnership		1,200			1,200
Limited partners’ minority interest in the operating partnership		33,498			53,231
		252,403			265,609
Commitments and contingencies (Notes 10 and 13)		—			—
Stockholders’ Equity (Note 7)
Preferred Stock, $.01 par value, 25,000,000 shares authorized		—			—
Common Stock, $.01 par value, 200,000,000 shares authorized 82,995,931 and 80,618,339 shares issued and outstanding, respectively		830			806
Accumulated other comprehensive income		1,819			1,789
Treasury Stock, 3,318,600 shares		(68,492	)		(68,492	)
Retained earnings		56,868			—
Additional paid in capital		1,309,444			1,266,547
Total Stockholders’ Equity		1,300,469			1,200,650
Total Liabilities and Stockholders’ Equity	$	3,811,206		$	3,167,608

(see accompanying notes to financial statements)

F-4

RECKSON ASSOCIATES REALTY CORP.
Consolidated Statements of Income
(in thousands, except share amounts)

	For the year ended December 31,
		2005			2004			2003
Property operating revenues (Note 10):
Base Rents	$	468,034		$	422,012		$	353,654
Tenant escalations and reimbursements		78,114			71,369			57,003
Total property operating revenues		546,148			493,381			410,657
Operating expenses:
Property operating expenses		219,041			199,133			164,931
Marketing, general and administrative		32,438			29,967			31,442
Depreciation and amortization		126,662			111,765			97,729
Total operating expenses		378,141			340,865			294,102
Operating income		168,007			152,516			116,555
Non-operating income and expenses:
Gains on sales of real estate		92,130			—			—
Interest income on notes receivable (including $2,308 $1,816 and $3,865, respectively from related parties)		14,118			7,129			6,568
Investment and other income		11,787			11,914			17,641
Interest:
Expense		(110,891	)		(95,920	)		(78,580	)
Amortization of deferred financing costs		(4,166	)		(3,721	)		(3,239	)
Long term incentive compensation expense (Note 7)		(23,534	)		—			—
Restructuring charges — net (Note 8)		—			—			(11,580	)
Total non-operating income and expenses		(20,556	)		(80,598	)		(69,190	)
Income before minority interests, preferred dividends and distributions, equity in earnings of real estate joint ventures and discontinued operations		147,451			71,918			47,365
Minority partners’ interests in consolidated partnerships		(15,749	)		(18,507	)		(16,857	)
Limited partners’ minority interest in the operating partnership		(4,264	)		(1,314	)		(983	)
Distributions to preferred unit holders		—			(541	)		(1,093	)
Equity in earnings of real estate joint ventures		1,371			603			30
Income before discontinued operations and dividends to preferred shareholders		128,809			52,159			28,462
Discontinued operations (net of minority interests):
Income from discontinued operations		7,373			6,493			19,288
Gains on sales of real estate		61,459			11,776			115,771
Net Income		197,641			70,428			163,521
Dividends to preferred shareholders		—			(12,236	)		(21,267	)
Redemption charges on Series A preferred stock		—			(15,812	)		—
Net income allocable to common shareholders	$	197,641		$	42,380		$	142,254
Net income allocable to:
Common shareholders	$	197,641		$	42,380		$	124,966
Class B common shareholders		—			—			17,288
Total	$	197,641		$	42,380		$	142,254

(see accompanying notes to financial statements)

F-5

RECKSON ASSOCIATES REALTY CORP.
Consolidated Statements of Income — Continued
(in thousands, except share amounts)

	For the year ended December 31,
		2005		2004		2003
Basic net income per weighted average common share:
Common	$	.49	$	.35	$	.10
Gains on sales of real estate		1.08		—		—
Discontinued operations		.84		.27		2.45
Basic net income per common share	$	2.41	$	.62	$	2.55
Class B common	$	—	$	—	$	.30
Gains on sales of real estate		—		—		—
Discontinued operations		—		—		1.64
Basic net income per Class B common share	$	—	$	—	$	1.94
Basic weighted average common shares outstanding:
Common		82,082,000		68,871,000		49,092,000
Class B common		—		—		8,910,000
Diluted net income per weighted average common
Common	$	2.40	$	.61	$	2.54
Class B common	$	—	$	—	$	1.90
Diluted weighted average common shares outstanding:
Common		82,515,000		69,235,000		49,262,000
Class B common		—		—		8,910,000

(see accompanying notes to financial statements)

F-6

RECKSON ASSOCIATES REALTY CORP.
Consolidated Statements of Stockholders’ Equity
(in thousands)

	Preferred Stock			Common Stock		Treasury Stock			Additional Paid in Capital			Accumulated Other Comprehensive Income			Retained Earnings			Total Stockholders’ Equity			Comprehensive Income			Limited Partners’ Minority Interest
Balance at January 1, 2003	$	108		$	581	$	(63,954	)	$	1,005,494		$	—		$	—		$	942,229		$	—		$	71,420
Issuance of OP Units		—			—		—			—			—			—			—			—			11,180
Redemption of OP Units		—			—		—			(42,805	)		—			—			(42,805	)		—			(40,189	)
Proceeds from exercised stock options and long-term compensation issues		—			2		—			5,964			—			—			5,966			—			—
Repurchases of common stock		—			—		(4,538	)		—			—			—			(4,538	)		—			—
Net income allocable to common Shareholders		—			—		—			—			—			142,254			142,254		$	142,254			14,110
Dividends and distributions paid and payable		—			—		—			—			—			(106,497	)		(106,497	)		—			(12,003	)
Balance at December 31, 2003		108			583		(68,492	)		968,653			—			35,757			936,609		$	142,254			44,518
Issuance of OP Units		—			—		—			—			—			—			—			—			16,521
Redemption of OP Units		—			5		—			14,657			—			—			14,662			—			(14,820	)
Proceeds from exercised stock
options and long-term compensation issues		—			31		—			66,737			—			—			66,768			—			2,199
Issuance of common stock		—			150		—			419,383			—			—			419,533			—			13,823
Repurchase, exchange and redemption of preferred stock		(108	)		37		—			(157,026	)		—			—			(157,097	)		—			(5,175	)
Net income allocable to common Shareholders		—			—		—			—			—			42,380			42,380		$	42,380			2,303
Net unrealized gains on derivative instruments		—			—		—			—			1,789			—			1,789			1,789			—
Dividends and distributions paid and payable		—			—		—			(45,857	)		—			(78,137	)		(123,994	)		—			(6,138	)
Balance at December 31, 2004		—			806		(68,492	)		1,266,547			1,789			—			1,200,650		$	44,169			53,231
Issuance of OP Units		—			—		—			—			—			—			—			—			5,408
Redemption of OP Units		—			16		—			25,170			—			—			25,186			—			(27,121	)
Proceeds from exercised stock options and long-term compensation issues		—			8		—			17,727			—			—			17,735			—			—
Net income allocable to common Shareholders		—			—		—			—			—			197,641			197,641		$	197,641			6,926
Net unrealized gains on derivative instruments		—			—		—			—			(186	)		—			(186	)		(186	)		—
Reckson’s share of joint venture net unrealized gains on derivative instruments		—			—		—			—			216			—			216			216			—
Dividends and distributions paid and payable		—			—		—			—			—			(140,773	)		(140,773	)		—			(4,946	)
Balance at December 31, 2005	$	—		$	830	$	(68,492	)	$	1,309,444		$	1,819		$	56,868		$	1,300,469		$	197,671		$	33,498

(see accompanying notes to financial statements)

F-7

RECKSON ASSOCIATES REALTY CORP.
Consolidated Statements of Cash Flows
(in thousands)

	For the year ended December 31,
	2005			2004			2003
Cash Flows From Operating Activities:
Net Income	$	197,641		$	70,428		$	163,521
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including discontinued operations)		137,480			121,285			116,633
Minority partners’ interests in consolidated partnerships		15,749			21,040			17,972
Limited partners’ minority interest in the operating partnership		6,926			2,303			14,110
Gain on sales of real estate		(155,640	)		(14,787	)		(126,789	)
Undistributed earnings from real estate joint ventures		(1,330	)		(603	)		(30	)
Changes in operating assets and liabilities:
Deferred rents receivable		(31,474	)		(20,984	)		(6,444	)
Prepaid expenses and other assets		(4,515	)		(12,779	)		(5,263	)
Tenant and affiliate receivables		(10,738	)		2,192			1,919
Accrued expenses and other liabilities		39,508			1,557			(15,064	)
Tenant security deposits		6,007			2,617			124
Net cash provided by operating activities		199,614			172,269			160,689
Cash Flows From Investment Activities:
Purchases of commercial real estate properties		(1,003,528	)		(160,695	)		(40,500	)
Increase in contract and land deposits and pre-acquisition costs		(90	)		—			(20,000	)
Additions to notes receivable		(124,162	)		(49,500	)		(15,000	)
Repayments of notes receivable		36,444			17,908			—
Additions to developments in progress		(70,877	)		(34,913	)		(24,391	)
Additions to commercial real estate properties		(81,435	)		(41,413	)		(43,341	)
Payment of deferred leasing costs		(20,544	)		(24,732	)		(16,086	)
Investments in real estate joint venture		(6,216	)		—			—
Distributions from (contributions to) investments in a real estate joint venture		—			(150	)		243
Additions to furniture, fixtures and equipment		(881	)		(636	)		(196	)
Proceeds from redemption of preferred securities					—			—
Proceeds from sales of real estate		247,033			67,259			268,757
Net cash (used in) provided by investing activities		(1,024,256	)		(226,872	)		109,486
Cash Flows From Financing Activities:
Proceeds from secured borrowings		562,601			—			—
Principal payments on secured borrowings		(59,571	)		(362,117	)		(12,300	)
Proceeds from issuance of senior unsecured notes, net of issuance costs		281,750			298,529			—
Repayment of senior unsecured notes		—			(100,000	)		—
Payment of loan and equity issuance costs		(7,633	)		(5,249	)		(156	)
Distribution from affiliate joint venture		—			10,603			—
Proceeds from unsecured credit facility		682,000			627,998			132,000
Principal payments on unsecured credit facility		(498,500	)		(561,498	)		(230,000	)
Proceeds from unsecured bridge facility		470,000			—			—
Principal payments on unsecured bridge facility		(470,000	)		—			—
Repurchases of common stock		—			—			(4,538	)
Repurchases and redemption of Series A preferred stock		—			(178,738	)		—
Proceeds from issuance of common stock, net of issuance costs,     and exercise of stock options		14,102			497,090			1,028
Contributions by minority partners in consolidated partnerships		924			—			—
Distributions to minority partners in consolidated partnerships		(11,671	)		(34,281	)		(22,189	)
Distributions to limited partners in the operating partnership		(7,265	)		(5,329	)		(12,353	)
Distributions to preferred unit holders		—			(723	)		(1,093	)
Dividends to common shareholders		(139,764	)		(113,601	)		(107,303	)
Dividends to preferred shareholders		—			(15,775	)		(21,267	)
Net cash provided by (used in) financing activities		816,973			56,909			(278,171	)
Net increase (decrease) in cash and cash equivalents		(7,669	)		2,306			(7,996	)
Cash and cash equivalents at beginning of period		25,137			22,831			30,827
Cash and cash equivalents at end of period	$	17,468		$	25,137		$	22,831
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest, including interest capitalized	$	121,648		$	102,259		$	97,644

(see accompanying notes to financial statements)

F-8

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

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, acquisition, leasing, financing and development of commercial real estate properties, principally office and to a lesser extent flex properties and also owns land for future development located in the New York City 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. The remaining 27% interest in the Operating Partnership was owned primarily by continuing investors who contributed properties or interests in properties to the Operating Partnership in exchange for common units of limited partnership interest in the Operating Partnership (“OP Units”). Since the IPO the Company has completed numerous equity transactions, contributing net proceeds received to the Operating Partnership and thereby increasing its general partnership interest. The Company’s ownership percentage in the Operating Partnership was approximately 96.8% and 95.7% at December 31, 2005 and 2004, respectively. All properties acquired by the Company are held by or through the Operating Partnership.

Basis of Presentation and Summary of Significant Accounting Policies

The accompanying consolidated financial statements include the consolidated financial position of the Company, the Operating Partnership and the Service Companies (as defined below) at December 31, 2005 and 2004 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2005. The Operating Partnership’s investments in majority owned and controlled real estate joint ventures are reflected in the accompanying financial statements on a consolidated basis with a reduction for the minority partners’ interests. The Operating Partnership’s investments in real estate joint ventures, where it owns less than a controlling interest, are reflected in the accompanying financial statements on the equity method of accounting. The Service Companies, which provide management, development and construction services to the Company and the Operating Partnership and to third parties, include Reckson Management Group, Inc., RANY Management Group, Inc., Reckson Construction & Development LLC and Reckson Construction Group New York, Inc. (collectively, the “Service Companies”). All significant intercom any balances and transactions have been eliminated in the consolidated financial statements.

Minority partners’ interests in consolidated partnerships represent a 49% non-affiliated interest in RT Tri-State LLC, owner of a six property suburban office portfolio located within the Tri-State Area, a 40% non-affiliated interest in Omni Partners, L.P., owner of a 579,000 square foot suburban office property and a 49% non-affiliated interest in Metropolitan 919 Third Avenue, LLC, owner of the property located at 919 Third Avenue, New York, NY. Limited partners’ minority interest in the Operating Partnership was approximately 3.2% and 4.3% at December 31, 2005 and 2004, respectively.

At December 31, 2005, the Operating Partnership’s investments in unconsolidated real estate joint ventures consisted of a 30% interest in the 1.4 million square foot Class A office tower located at One Court Square, Long Island City, NY (the “Court Square JV”), a 25% interest in a 17 suburban office property portfolio, located within the Tri-State Area, containing approximately 2.0 million square feet (the “RAOC JV”)

F-9

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

1. Description of Business and Significant Accounting Policies — (Continued)

and an approximate 5% indirect ownership interest in a 550,000 square foot office condominium in a Class A office tower located in New York City.

     Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes thereto. Actual results could differ from those estimates.

     Real Estate

Land, buildings and improvements, furniture, fixtures and equipment are recorded at cost. Tenant improvements, which are included in buildings and improvements, are also stated at cost. Expenditures for ordinary maintenance and repairs are expensed to operations as they are incurred. Renovations and/or replacements, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives.

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. Depreciation expense, net of discontinued operations, for each of the three years ended December 31, 2005 amounted to approximately $92.5 million, $79.9 million and $58.5 million, respectively.

We are required to make subjective assessments as to the useful lives of our properties for purposes of determining the amount of depreciation to reflect on an annual basis with respect to those properties. These assessments have a direct impact on our net income. Should we lengthen the expected useful life of a particular asset, it would be depreciated over more years, and result in less depreciation expense and higher annual net income.

Assessment by us of certain other lease related costs must be made when we have a reason to believe that the tenant will not be able to execute under the term of the lease as originally expected.

On July 1, 2001 and January 1, 2002, we adopted Financial Accounting Standards Board (“FASB”) Statement No.141, “Business Combinations” and FASB Statement No. 142, “Goodwill and Other Intangibles”, respectively. As part of the acquisition of real estate assets, the fair value of the real estate acquired is allocated to the acquired tangible assets, consisting of land, building and building improvements, and identified intangible assets and liabilities, consisting of the value of above- market and below-market leases, other value of in-place leases, and value of tenant relationships, based in each case on their fair values.

We allocate a portion of a property’s purchase price to tangible assets including the fair value of the building and building improvements on an as-if-vacant basis and to land determined either by real estate tax assessments, independent appraisals or other relevant data. Additionally, we assess fair value of identified intangible assets and liabilities based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information.

Estimates of future cash flows are based on a number of factors including the historical operating results, known trends, and market/economic conditions that may affect the property. If we incorrectly estimate the values at acquisition or the undiscounted cash flows, initial allocation of purchase price and future impairment charges may be different.

F-10

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

1. Description of Business and Significant Accounting Policies — (Continued)

     Long Lived Assets

We are required to make subjective assessments as to whether there are impairments in the value of our real estate properties and other investments. An investment’s value is impaired only if management’s estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the investment are less than the carrying value of the investment. Such assessments consider factors such as cash flows, expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors. To the extent impairment has occurred it will be measured as the excess of the carrying amount of the property over the fair value of the property. These assessments have a direct impact on our net income, as a recognition of an impairment results in an immediate negative adjustment to net income. In determining impairment, if any, we have followed FASB Statement No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets” (“Statement No. 144”). Statement No. 144 did not have an impact on net income allocable to common shareholders. Statement No. 144 only impacts the presentation of the results of operations and gains on sales of real estate assets for those properties sold during the period within the consolidated statements of income.

In accordance with the provisions of Statement No. 144, and Emerging Issues Task Force (“EITF”) 87-24, we allocated approximately $7.6 million of our unsecured corporate interest expense to discontinued operations for the year ended December 31, 2003. EITF 87-24 states that “interest on debt that is required to be repaid as a result of the disposal transaction should be allocated to discontinued operations”. Pursuant to the terms of our unsecured credit facility (the “Credit Facility”), we were required to repay the Credit Facility to the extent of the net proceeds, as defined, received from the sales of unencumbered properties. As such, we had allocated to discontinued operations the interest expense incurred on the portion of our Credit Facility, which was required to be repaid. In August 2004, we amended and extended our Credit Facility, whereby such repayment requirement was eliminated.

     Cash Equivalents

We consider highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Tenants’ lease security deposits aggregating approximately $5.5 million and $4.5 million at December 31, 2005 and 2004, 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 in obtaining financing are capitalized and amortized over the term of the related loan.

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

     Income Taxes

Commencing with its taxable year ended December 31, 1995, the Company elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least 90% of its adjusted taxable income to its stockholders. It is management’s current intention to adhere to these requirements and maintain the Company’s REIT status. As a REIT, the Company generally will not be subject to corporate level income tax on taxable income it distributes currently to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to income taxes at regular

F-11

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

1. Description of Business and Significant Accounting Policies — (Continued)

corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for the subsequent four taxable years. Even if the Company qualifies as a REIT, the Company may be subject to certain state and local taxes, including tax on its income and property, and to federal income and excise taxes on its undistributed taxable income. In addition, taxable income from non-REIT activities managed through the Company’s taxable REIT subsidiaries are subject to federal, state and local income taxes. (See Note 14 for the Company’s reconciliation of GAAP net income to taxable income, its reconciliation of cash distributions to the dividends paid deduction and its characterization of taxable distributions).

     Revenue Recognition & Accounts Receivable

Minimum rental revenue is recognized on a straight-line basis, which averages minimum rents over the terms of the leases. 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 also provide for reimbursement of real estate taxes, insurance, common area maintenance costs and indexed rental increases, which are recorded on an accrual basis. Ancillary and other property related income is recognized in the period earned.

We make estimates of the collectibility of our accounts receivables related to base rents, tenant escalations and reimbursements and other revenue or income. We specifically analyze tenant receivables and historical bad debts, customer credit worthiness, current economic trends and changes in tenant payment terms when evaluating the adequacy of our allowance for doubtful accounts. In addition, when tenants are in bankruptcy, we make estimates of the expected recovery of pre-petition administrative and damage claims. In some cases, the ultimate resolution of those claims can exceed a year. These estimates have a direct impact on our net income because a higher bad debt reserve results in lower annual net income.

We incurred approximately $3.0 million, $831,000 and $1.9 million of bad debt expense for the years ended December 31, 2005, 2004 and 2003, respectively, related to tenant receivables which accordingly reduced total revenues and reported net income during the period.

We record interest income on our investments in notes receivable on the accrual basis of accounting. We do 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 we consider 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.

Reckson Construction & Development LLC and Reckson Construction Group New York, Inc. use the percentage-of-completion method for recording amounts earned on their contracts. This method records amounts earned as revenue in the proportion that actual costs incurred to date bear to the estimate of total costs at contract completion.

Gain on the sale of real estate is recorded when title is conveyed to the buyer, subject to the buyer’s financial commitment being sufficient to provide economic substance to the sale and us having no substantial continuing involvement with the buyer. Additionally, in connection with a sale of real estate, if we retain certain risks in the form of guarantees, the profit recognized on that sale shall be reduced and deferred by the maximum exposure to loss, until such exposure is relieved.

We follow the guidance provided for under FASB Statement No. 66 “Accounting for Sales of Real Estate” (“Statement No. 66”), which provides guidance on sales contracts that are accompanied by agreements which require the seller to develop the property in the future. Under Statement No. 66, profit is recognized and allocated to the sale of the land and the later development or construction work on the basis of estimated costs of each activity; the same rate of profit is attributed to each activity. As a result, profits are recognized

F-12

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

1. Description of Business and Significant Accounting Policies — (Continued)

and reflected over the improvement period on the basis of costs incurred (including land) as a percentage of total costs estimated to be incurred. We use the percentage of completion method, as future costs of development and profit are reliably estimated.

     Earnings Per Share

We follow the guidance provided for under FASB Statement No. 128, “Earnings per Share” (“Statement No. 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 are very similar to the previously reported fully diluted earnings per share. The conversion of OP Units into common stock would not have a significant effect on per share amounts as the OP Units share proportionately with the common stock in the results of the Operating Partnership’s operations.

     Stock Options

In December 2002, the FASB issued Statement No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure” (“Statement No. 148”). Statement No. 148 amended FASB Statement No. 123, “Accounting for Stock-Based Compensation” (“Statement No. 123”), to provide alternative methods of transition for an entity that voluntarily adopts the fair value recognition method of recording stock option expense. Statement No. 148 also amended the disclosure provisions of Statement No. 123 and Accounting Principles Board Opinion No. 28, “Interim Financial Reporting” to require disclosure in the summary of significant accounting policies of the effects of an entity’s accounting policy with respect to stock options on reported net income and earnings per share in annual and interim financial statements.

The following table sets forth the Company’s pro forma information for its common shareholders for the years ended December 31 (in thousands except earnings per share data):

	2005		2004			2003
Net income allocable to common shareholders as reported	$	197,641	$	42,380		$	124,966
Add: Stock option expense included above		—		5			5
Less: Stock option expense determined under fair value recognition method for all awards		—		(290	)		(253	)
Pro forma net income allocable to common shareholders	$	197,641	$	42,095		$	124,718
Net income per share as reported:
Basic	$	2.41	$	.62		$	2.55
Diluted	$	2.40	$	.61		$	2.54
Pro forma net income per share:
Basic	$	2.41	$	.61		$	2.54
Diluted	$	2.40	$	.61		$	2.53

The fair value for those options was estimated at the date of grant using a Black-Scholes option-pricing model with the following weighted-average assumptions for the three years ended December 31:

	2005 (a)		2004			2003
Risk free interest rate		n/a		3.0	%		3.0	%
Dividend yield		n/a		6.92	%		7.36	%
Volatility factor of the expected market price of the Company’s common stock		n/a		.197			.193
Weighted average expected option life (in years)		n/a		5			5

F-13

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

1. Description of Business and Significant Accounting Policies — (Continued)

(a) No options were granted or vested during the year ended December 31, 2005. As a result, no weighted average assumptions or calculations were required.

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

On December 16, 2004, the FASB issued Statement No. 123 (revised 2004), “Share-Based Payment” (“Statement No. 123R”), which is a revision of Statement No. 123. Statement No. 123R supersedes Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, and amends FASB Statement No. 95, “Statement of Cash Flows.” Generally, the approach in Statement No. 123R is similar to the approach described in Statement No. 123. However, Statement No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. We adopted Statement No. 123R on January 1, 2006.

Effective January 1, 2002, we elected to follow Statement No. 123 and use the Black-Scholes option pricing model to estimate the value of stock options granted to employees and continue to use this acceptable option valuation model upon our required adoption of Statement No. 123R on January 1, 2006. Because Statement No. 123R must be applied not only to new awards but to previously granted awards that are not fully vested on the effective date, and because we adopted Statement No. 123 using the prospective transition method (which applied only to awards granted, modified or settled after the adoption date), compensation cost for previously granted awards that were not recognized under Statement No. 123 would be recognized under Statement No. 123R. However, on January 1, 2006, the date we adopted Statement No. 123R, all of the unexercised options outstanding under our stock option plans were fully vested. As a result, no additional expense will be recognized. In addition, had we adopted Statement No. 123R in prior periods, the impact of that standard would have approximated the impact of Statement No. 123 as described above.

     Accumulated Other Comprehensive Income (Loss)

We report comprehensive income or loss in accordance with the provisions of FASB Statement No. 130, “Reporting Comprehensive Income”, which establishes standards for reporting comprehensive income and its components in the financial statements. The components of other comprehensive income (loss) (“OCI”) consist of unrealized gains and losses on derivative instruments. OCI is presented in the accompanying consolidated statements of stockholders’ equity.

     Derivative Instruments

FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“Statement No. 133”), as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities.

The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.

As required by Statement No. 133, we record all derivatives on our balance sheet at fair value. For effective hedges, depending on the nature of the hedge, changes in the fair value of the derivative will be offset against the corresponding change in fair value of the hedged asset, liability, or firm commitment through earnings or recognized in OCI until the hedged item is recognized in earnings.

F-14

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

1. Description of Business and Significant Accounting Policies — (Continued)

For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in OCI and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. We assess the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designated hedged item or transaction. For derivatives not designated as hedges, changes in fair value are recognized in earnings.

We do not enter into derivative financial instruments for trading or speculative purposes. However, in the normal course of our business and to help us manage our debt issuances and maturities, we do use derivative financial instruments in the form of cash flow hedges to protect ourselves against potentially rising interest rates.

     Variable Interest Entities

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”), which explains how to identify variable interest entities (“VIEs”) and how to assess whether to consolidate such entities. VIEs are primarily entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. All VIEs with which we are involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes. The initial determination of whether an entity qualifies as a VIE shall be made as of the date at which a primary beneficiary becomes involved with the entity and reconsidered as of the date of a triggering event, as defined. The provisions of this interpretation are immediately effective for VIEs formed after January 31, 2003. In December 2003 the FASB issued FIN 46R, deferring the effective date until the period ended March 31, 2004 for interests held by public companies in VIEs created before February 1, 2003, which were non-special purpose entities. We adopted FIN 46R during the period ended March 31, 2004 and have determined that our unconsolidated subsidiaries do not represent VIEs pursuant to such interpretation. We will continue to monitor any changes in circumstances relating to certain of our consolidated and unconsolidated joint ventures which could result in a change in our consolidation policy.

     Finite Life Joint Venture Agreements

In May 2003, the FASB issued Statement No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (“Statement No. 150”). Statement No. 150 establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity. Statement No. 150 is effective for all financial instruments created or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. We adopted Statement No. 150 on July 1, 2003, which had no effect on our financial statements. Statement No. 150 also requires the disclosure of the estimated settlement values of non-controlling interests in joint ventures that have finite lives.

Two of our consolidated joint ventures are subject to finite life joint venture agreements. In accordance with Statement No. 150, we have estimated the settlement value of these non-controlling interests at December 31, 2005 and 2004 to be approximately $153.2 and $145.1 million, respectively. The carrying value of these non-controlling interests, which is included in minority partners’ interests in consolidated partnerships on our consolidated balance sheets, was approximately $109.2 million and $110.9 million at December 31, 2005 and 2004, respectively.

F-15

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

1. Description of Business and Significant Accounting Policies — (Continued)

     Current pronouncements

In June 2005, the FASB ratified the consensus in EITF Issue No. 04-5, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (“Issue 04-5”), which provides guidance in determining whether a general partner controls a limited partnership. Issue 04-5 states that the general partner in a limited partnership is presumed to control that limited partnership. The presumption may be overcome if the limited partners have either (1) the substantive ability to dissolve the limited partnership or otherwise remove the general partner without cause or (2) substantive participating rights, which provide the limited partners with the ability to effectively participate in significant decisions that would be expected to be made in the ordinary course of the limited partnership’s business and thereby preclude the general partner from exercising unilateral control over the partnership. The adoption of Issue 04-5 by us for new or modified limited partnership arrangements is effective June 30, 2005 and for existing limited partnership arrangements effective January 1, 2006. We do not expect that we will be required to consolidate our current unconsolidated joint venture investments nor do we expect Issue 04-5 to have a material effect on our consolidated financial statements.

In May 2005, the FASB issued Statement No. 154, “Accounting Changes and Error Corrections” (“Statement No. 154”). Statement No. 154, which replaces APB Opinion No. 20, “Accounting Changes” and FASB Statement No. 3, “Reporting Accounting Changes in Interim Financial Statements”, changes the requirements for the accounting for and reporting of a change in accounting principle. The statement requires retrospective application of changes in accounting principle to prior periods’ financial statements unless it is impracticable to determine the period-specific effects or the cumulative effect of the change. Statement No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of Statement No. 154 is not expected to have a material impact on our consolidated financial position, results of operations or cash flows.

In March 2005, FASB issued Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations” (“FIN 47”), which became effective December 31, 2005. Under FIN 47, a conditional asset retirement obligation (“CARO”) must be recorded if the liability can be reasonably estimated. A CARO is an obligation that is settled at the time an asset is retired or disposed of and for which the timing and/or method of settlement are conditional on future events. The Company owns certain properties that currently have asbestos which under certain conditions must be remediated. As a result of adopting FIN 47, we will increase the value of our recorded tangible assets at the time we recognize the associated conditional retirement obligation.

As a result, we have recorded approximately $2.0 million which represents the fair value of the CARO related to asbestos removal in tenant spaces. In addition, for certain limited areas of our properties, management is unable to reasonably determine the fair value of potential remediation costs as there is an indeterminate settlement date for the asset retirement obligation because the range of time over which way we may choose to remediate this condition may not be estimated with any level of precision which would lend itself to a meaningful estimate.

     Reclassifications

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

2. Mortgage Notes Payable

On August 3, 2005, we placed a first mortgage in the amount of $315.0 million on the property located at One Court Square, Long Island City, a sub-market of New York City. The mortgage note bears interest at a fixed rate of 4.905% per annum, requires monthly payments of interest only through September 1, 2015, the

F-16

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

2. Mortgage Notes Payable — (Continued)

anticipated repayment date (“ARD”). In the event the mortgage is not satisfied on the ARD, all excess cash flow, as defined, shall be applied to amortize the loan and the interest rate shall be reset to 2% plus the greater of 4.905% and the then-current ten-year U.S. Treasury yield. The final maturity date of the loan is May 1, 2020. The mortgage note is secured by the property and is otherwise non-recourse except in limited circumstances regarding breaches of material representations. As additional collateral for the loan, the lender under certain circumstances may require letters of credit for their benefit, in the amount of $10.0 million each, during September 2013, March 2014 and September 2014 if Citibank, N.A., the property’s current sole tenant, exercises its second cancellation option for up to 20% of its leased space during 2014 and 2015 and the space has not been re-leased. Proceeds received from this financing, net of mortgage recording tax and other costs, of approximately $303.5 million, were used to repay a portion of our unsecured bridge facility as discussed in Note 3. On November 30, 2005, we sold a 70% interest in this property to a group of institutional investors led by JPMorgan Investment Management which included their assumption of $220.5 million of the mortgage debt.

On August 26, 2005, we encumbered a pool of nine of our suburban office properties with interest only mortgages in the aggregate amount of approximately $196.1 million. Proceeds received, net of costs and required escrows, of approximately $188.3 million were used to repay borrowings under our Credit Facility, the remaining balance outstanding under our unsecured bridge facility and for the repayment of the secured property debt on 520 White Plains Road, Tarrytown, NY. On September 21, 2005, these properties and related underlying mortgages were sold to the RAOC JV (see Note 6). The mortgage notes bear interest at a fixed interest rate of 5.20% per annum and mature in September 2010. These mortgage notes are cross-collateralized by the nine properties in the pool.

On June 20, 2005, in connection with the acquisition of our joint venture partner’s 40% interest in the property located at 520 White Plains Road, Tarrytown, NY, we assumed approximately $4.1 million of secured mortgage indebtedness of the joint venture. As a result, our total secured debt related to this property was approximately $11.1 million. On September 1, 2005, the mortgage note’s scheduled maturity date, we repaid the then outstanding balance of approximately $10.9 million with proceeds received from the aforementioned August 26, 2005 mortgage financings, resulting in the satisfaction of this note.

On September 12, 2005 we encumbered three of our suburban office properties with interest only mortgages in the aggregate amount of approximately $51.5 million. Proceeds received, net of costs and required escrows, of approximately $50.2 million were used to repay borrowings under our Credit Facility and for general corporate purposes. The mortgage notes bear interest at a fixed interest rate of 5.20% per annum and mature in October 2010. We have contracted to sell these properties to the RAOC JV, subject to the mortgage notes, in October 2006. These mortgage notes are cross-collateralized by the three properties in the pool.

Pursuant to the terms of the mortgage note encumbering the property located at 200 Summit Lake Drive in Valhalla, NY, the note was prepayable, without penalty, subsequent to September 1, 2005. On September 30, 2005, we repaid the outstanding balance of approximately $18.1 million with proceeds received from the RAOC JV which resulted in the satisfaction of this note.

The mortgage debt on the property located at 395 North Service Road in Melville, NY was scheduled to mature on October 28, 2005. Pursuant to the terms of the note, we prepaid the mortgage debt on September 30, 2005, at which time the outstanding balance was approximately $18.6 million. We funded this prepayment with a borrowing under our Credit Facility and proceeds received from the sale of properties to the RAOC JV which resulted in the satisfaction of this note.

On October 20, 2005, in connection with our acquisition of 711 Westchester Avenue in White Plains, NY we assumed an existing first mortgage debt on the property of approximately $12.5 million. The mortgage

F-17

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

2. Mortgage Notes Payable — (Continued)

bears interest at approximately 5.4% per annum, requires monthly payments of interest only through January 2007 and monthly payments of interest and principal based on a 30 year amortization schedule commencing in February 2007. The mortgage matures on January 1, 2015.

At December 31, 2005, we had 15 fixed rate mortgage notes payable with an aggregate outstanding principal amount of approximately $625.1 million. These mortgage notes are secured by properties with an aggregate cost basis at December 31, 2005 of approximately $1.2 billion and which are pledged as collateral against the mortgage notes payable. In addition, approximately $41.6 million of the $625.1 million is recourse to the Company. The mortgage notes bear interest at rates ranging from 5.20% to 8.50%, and mature between 2006 and 2015. The weighted average interest rates on the outstanding mortgage notes payable at December 31, 2005, 2004 and 2003 were approximately 7.1%, 7.3%, and 7.2%, respectively.

Certain of the mortgage notes payable are guaranteed by certain limited partners in the Operating Partnership and/or the Company. In addition, consistent with customary practices in non-recourse lending, certain non-recourse mortgages may be recourse to the Company under certain limited circumstances including environmental issues and breaches of material representations.

The following table sets forth our mortgage notes payable at December 31, 2005, by scheduled maturity date (dollars in thousands):

Property	Principal Amount Outstanding		Interest Rate			Maturity Date		Amortization Term (Years)
	(in thousands)
1350 Avenue of the Americas, NY, NY	$	72,108		6.52	%		June, 2006		30
Landmark Square, Stamford, CT (a)		41,634		8.02	%		October, 2006		25
100 Summit Lake Drive, Valhalla, NY		14,572		8.50	%		April, 2007		15
333 Earle Ovington Blvd., Mitchel Field, NY (b)		50,635		7.72	%		August, 2007		25
810 Seventh Avenue, NY, NY (c)		77,854		7.73	%		August, 2009		25
275 Broadhollow Road, Melville, NY (c)		15,151		7.73	%		August, 2009		25
90 Merrick Avenue, Merrick, NY (c)		18,586		7.73	%		August, 2009		25
6900 Jericho Turnpike, Syosset, NY (d)		6,959		8.07	%		July, 2010		25
6800 Jericho Turnpike, Syosset, NY (d)		13,185		8.07	%		July, 2010		25
580 White Plains Road, Tarrytown, NY (e)		12,006		7.86	%		September, 2010		25
520 Broadhollow Road, Melville, NY (f)		11,869		5.20	%		October, 2010		Interest Only
50 Marcus Avenue, Melville, NY (f)		28,277		5.20	%		October, 2010		Interest Only
1660 Walt Whitman Road, Melville, NY (f)		11,386		5.20	%		October, 2010		Interest Only
919 Third Avenue, NY, NY (g)		238,316		6.87	%		August, 2011		30
711 Westchester Avenue, White Plains, NY		12,525		5.36	%		January, 2015		30	(h)
Total/Weighted average	$	625,063		7.06	%

(a) Encompasses six Class A office properties.

(b) At December 31, 2005, we had a 60% general partnership interest in this property and our proportionate share of the aggregate principal amount of the mortgage was approximately $30.4 million.

(c) These mortgages are cross-collateralized.

(d) The properties subject to these mortgages were sold to the RAOC JV in January 2006.

(e) The property subject to this mortgage is contracted to be sold to the RAOC JV in October 2006.

(f) These mortgages are cross-collateralized by properties that are contracted to be sold, subject to the mortgages, to the RAOC JV in October 2006.

(g) We have a 51% membership interest in this property and our proportionate share of the aggregate principal amount of the mortgage is approximately $121.5 million.

(h) This mortgage note is interest only through January 2007 and then amortizes over a 30-year period.

F-18

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

2. Mortgage Notes Payable — (Continued)

Scheduled principal repayments to be made during the next five years and thereafter, for mortgage notes payable outstanding at December 31, 2005, are as follows (in thousands):

	Principal Amortization		Due at Maturity		Total
2006	$	11,439	$	112,030	$	123,469
2007		8,994		60,535		69,529
2008		7,887		—		7,887
2009		7,335		100,254		107,589
2010		4,963		79,955		84,918
Thereafter		3,236		228,435		231,671
	$	43,854	$	581,209	$	625,063

At December 31, 2005, our unconsolidated joint ventures had total indebtedness of approximately $751.1 million, which was comprised of $13.0 million of floating rate unsecured debt and approximately $738.1 million of fixed rate mortgage indebtedness with a weighted average interest rate of approximately 5.1% and a weighted average maturity of approximately 8.3 years. Our aggregate pro-rata share of the unconsolidated joint venture debt was approximately $158.6 million.

On December 20, 2005, in connection with the sale of our mortgaged property located at 100 Wall Street, New York, NY, we exercised our right under the mortgage note to replace collateral and assign the related mortgage debt to two of our suburban office properties; 275 Broadhollow Road, Melville, NY and 90 Merrick Avenue, Merrick, NY. In connection with the assignment, we paid a substitution of collateral fee and other costs totalling approximately $2.0 million. Such costs are being amortized to expense over the remaining term of the mortgage.

On January 6, 2006, we sold two of our suburban office properties; 6800 and 6900 Jericho Turnpike, Jericho, NY to the RAOC JV, subject to their mortgage debt of approximately $20.1 million. The RAOC JV subsequently pre-paid the mortgage notes with proceeds from an unrelated financing transaction.

During the quarterly period ended June 30, 2005 we entered into anticipatory interest rate hedge instruments totaling $250.0 million to protect ourselves against potentially rising interest rates. These instruments were settled prior to their maturity in exchange for a mortgage rate lock agreement in connection with a 15-year permanent financing on the property located at One Court Square, Long Island City, NY which closed on August 3, 2005. Costs related to the terminated instruments of approximately $1.4 million were incorporated into the final fixed mortgage rate of 4.905% per annum. The other comprehensive loss is being amortized as a yield adjustment of the fixed rate mortgage.

We also entered into an additional $200.0 million of anticipatory interest rate hedge instruments during the quarterly period ended June 30, 2005, which were scheduled to coincide with our August 26, 2005 and September 12, 2005 financings on twelve of our office properties. These hedge instruments were settled on August 1, 2005 realizing proceeds of approximately $1.1 million. The proceeds received from settlement of the instruments were used to buy-down the fixed mortgage rates to 5.20% per annum. The gain resulting from this settlement has been recorded to accumulated other comprehensive income (“OCI”) and is being amortized as a yield adjustment of the fixed-rate mortgage. Nine of these properties were sold to the RAOC JV, subject to their mortgage notes, on September 21, 2005 at which time we reclassified the proportionate share of the gain from OCI to earnings. The remaining three office properties are under contract to be sold to the RAOC JV, subject to the mortgage notes, in October 2006, at which time we will reclassify the proportionate share of the gain from OCI to earnings.

F-19

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

3. Unsecured Credit Facility, Bridge Facility and Term Loan

On May 13, 2005, we obtained a $470.0 million unsecured bridge facility (the “Bridge Facility”) from Citibank, N.A. During August 2005, we repaid $303.5 million of outstanding borrowings under the Bridge Facility with net proceeds received from the secured debt financing of the property located at One Court Square, Long Island City, NY. In addition, in September 2005, we repaid the remaining balance outstanding under the Bridge Facility of $166.5 million with proceeds received from the secured debt financing of a pool of nine of our suburban office properties which were subsequently sold to the RAOC JV, subject to the mortgages. As a result of the foregoing, the Bridge Facility has been retired and is no longer available for borrowings thereunder.

We currently maintain our $500 million Credit Facility with JPMorgan Chase Bank, as administrative agent, Wells Fargo Bank, National Association as syndication agent and Citicorp, North America, Inc. and Wachovia Bank, National Association as co-documentation agents. The Credit Facility matures in August 2008, provides for a one-year extension subject to a fee of 25 basis points and, upon receiving additional lender commitments, for an increase to the maximum revolving credit amount to $750 million. In addition, borrowings under the Credit Facility accrue interest at a rate of LIBOR plus 80 basis points and the Credit Facility carries a facility fee of 20 basis points per annum. In the event of a change in the Operating Partnership’s senior unsecured credit ratings the interest rates and facility fee are subject to change. At December 31, 2005, the outstanding borrowings under the Credit Facility aggregated $419.0 million and carried a weighted average interest rate of 5.17% per annum.

We utilize the Credit Facility primarily to finance real estate investments, fund our real estate development activities and for working capital purposes. On December 29, 2005, we borrowed $150.0 million under the Credit Facility and with cash available acquired a 1.6 million square foot suburban office portfolio, consisting of 14 buildings, located in Westchester County, New York.

On January 13, 2006, we repaid $254.0 million of outstanding borrowings under the Credit Facility primarily from the proceeds from a $250.0 million term loan as discussed below. As a result, our availability to borrow additional funds increased to $335.0 million. At December 31, 2005, we had availability under the Credit Facility to borrow approximately an additional $81.0 million, subject to compliance with certain financial covenants.

We capitalized interest incurred on borrowings to fund certain development projects in the amount of $11.4 million, $8.1 million and $8.0 million for the years ended December 31, 2005, 2004 and 2003, respectively.

In connection with the acquisition of certain properties, contributing partners of such properties have provided guarantees on certain of our indebtedness. As a result, we maintain certain outstanding balances on our Credit Facility.

On January 13, 2006, we obtained a $250.0 million term loan (the “Term Loan”) from Goldman Sachs Mortgage Company. The Term Loan is for an initial term of three months and we have the option for a three month extension upon paying a one-time fee of 25 basis points on the amount then outstanding. The Term Loan has terms, including interest rates and financial covenants, substantially similar to our Credit Facility. Proceeds from the Term Loan were used to repay outstanding borrowings under our Credit Facility.

4. Senior Unsecured Notes

During June 2005, the Operating Partnership issued $287.5 million aggregate principal amount of 4.00% exchangeable senior debentures due June 15, 2025. Interest on the debentures will be payable semi-annually on June 15 and December 15, commencing December 15, 2005. The debentures are callable after June 17, 2010 at 100% of par. In addition, the debentures can be put to us, at the option of the holder at par, on June 15, 2010, 2015 and 2020. The net proceeds from the offering, after the underwriter’s discounts and

F-20

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

4. Senior Unsecured Notes — (Continued)

expenses, were approximately $281.6 million and were used for the repayment of amounts outstanding under our Credit Facility. (See Note 7, Stockholders’ Equity, regarding the terms of the debentures’ exchange into our common stock).

As of December 31, 2005, the Operating Partnership had outstanding approximately $980.1 million (net of unamortized 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 by scheduled maturity date (dollars in thousands):

Issuance	Face Amount		Coupon Rate			Term (in Years)		Maturity
June 17, 2002	$	50,000		6.00	%		5		June 15, 2007
August 27, 1997		150,000		7.20	%		10		August 28, 2007
March 26, 1999		200,000		7.75	%		10		March 15, 2009
January 22, 2004		150,000		5.15	%		7		January 15, 2011
August 13, 2004		150,000		5.875	%		10		August 15, 2014
June 27, 2005		287,500		4.00	%		20		June 15, 2025
	$	987,500

Interest on the Senior Unsecured Notes is payable semiannually with principal and unpaid interest due on the scheduled maturity dates. In addition, certain of the Senior Unsecured Notes were issued at discounts aggregating approximately $8.3 million. Such discounts are being amortized to interest expense over the term of the Senior Unsecured Notes to which they relate. Through December 31, 2005, approximately $900,000 of the aggregate discounts have been amortized.

5. Land Leases, Air Rights and Operating Leases

We lease, pursuant to noncancellable operating leases, the land on which ten of our buildings were constructed. The leases, certain of which contain renewal options at our direction, expire between 2043 and 2090. 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 and includes lease renewals if reasonably assured that we will exercise our option. Excess of amounts recognized over amounts contractually due are reflected as a deferred ground rent liability and included in accrued expenses and other liabilities on the accompanying balance sheets.

On September 21, 2005, our property located at 55 Charles Lindbergh Boulevard located on Long Island, New York which was subject to a land lease, was sold to the RAOC JV subject to the land lease.

Amounts recognized as deferred ground rent liabilities aggregated approximately $12.2 million and $7.5 million at December 31, 2005 and 2004, respectively.

In addition, our property located at 810 7th Avenue, New York, NY is subject to certain air rights lease agreements. These lease agreements have terms expiring in 2044 and 2048, including renewal options.

Reckson Management Group, Inc. is subject to operating leases for certain of its management offices and warehouse storage space. These operating leases expire, pursuant to their terms, during 2008 and 2009. During 2005, we exercised a termination option on one of the management office space leases allowing us to terminate the affected lease on November 30, 2006 without penalty.

F-21

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

5. Land Leases, Air Rights and Operating Leases — (Continued)

As of December 31, 2005, we leased certain building equipment at two of our suburban office properties which are classified as capital leases. This equipment has a cost basis and cumulative amortization of approximately $2.9 million and $129,000, respectively, at December 31, 2005.

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

Year ended December 31,	Land Leases		Air Rights		Operating Leases		Capital Leases
2006	$	12,285	$	362	$	1,319	$	410
2007		12,302		362		194		410
2008		12,329		362		196		410
2009		12,475		362		14		410
2010		12,398		362		—		410
Thereafter		330,973		3,257		—		1,887
	$	392,762	$	5,067	$	1,723		3,937
Less amounts representing interest								(1,121	)
Present value of net minimum lease payments							$	2,816

Amounts contractually due and expensed under our land leases, air rights and operating leases for each of the three years ended December 31, 2005, 2004 and 2003 amounted to $6.1 million, $5.4 million and $4.8 million, respectively.

6. Commercial Real Estate Investments

During January 2005, we acquired, in two separate transactions, two Class A office properties located at One and Seven Giralda Farms in Madison, New Jersey for total consideration of approximately $78.0 million. One Giralda Farms encompasses approximately 150,000 rentable square feet and Seven Giralda Farms encompasses approximately 203,000 rentable square feet. We made these acquisitions through borrowings under our Credit Facility.

In May 2005, we acquired a 1.4 million square foot, 50-story, Class A office tower located at One Court Square, Long Island City, NY, for approximately $471.0 million, inclusive of transfer taxes and transactional costs. One Court Square is 100% leased to the seller, Citibank N.A., under a 15-year net lease. The lease contains partial cancellation options effective during 2011 and 2012 for up to 20% of the leased space and in 2014 and 2015 for up to an additional 20% of the originally leased space, subject to notice and the payment of early termination penalties. On November 30, 2005, we sold a 70% joint venture interest in One Court Square to certain institutional funds advised by JPMorgan Investment Management (the “JPM Investor”) for approximately $329.7 million, including the assumption of $220.5 million of the property’s mortgage debt. The operating agreement of the Court Square JV requires approvals from members on certain decisions including annual budgets, sale of the property, refinancing of the property’s mortgage debt and material renovations to the property. In addition, after September 20, 2009 the members each have the right to recommend the sale of the property, subject to the terms of the mortgage debt, and to dissolve the Court Square JV. We have evaluated the impact of FIN 46R on our accounting for the Court Square JV and have concluded that the Court Square JV is not a VIE. We account for the Court Square JV under the equity method of accounting. We have also evaluated, under Issue 04-05, that the JPM Investor has substantive participating rights in the ordinary course of the Court Square JV’s business In accordance with the equity method of accounting, our

F-22

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

6. Commercial Real Estate Investments — (Continued)

proportionate share of the Court Square JV income was approximately $45,000 for the period November 30 through December 31, 2005.

In May 2005, we completed mandatory arbitration proceedings relating to the re-setting of the rent under the ground lease pursuant to which we own an approximately 1.1 million square foot Class A office tower located at 1185 Avenue of the Americas, New York, NY. The rent was re-set, and is not subject to further increase, for the remaining 37 years of the ground lease (inclusive of a 20-year extension at our option) to approximately $6.9 million per annum. Such re-set is retroactive to June 2004.

On May 26, 2005, we entered into a contract to sell approximately 60 acres of vacant land located in Chatham Township, NJ for up to approximately $30.0 million, which is based upon a final approved site plan. The closing is anticipated to occur upon receiving final re-zoning approvals and other customary due diligence and approvals. The sale is contingent upon due diligence, environmental assessment, re-zoning and other customary approvals. There can be no assurances that any of the aforementioned contingences will be achieved and the sale ultimately completed.

On June 8, 2005, we sold a three-acre vacant land parcel located on Long Island for approximately $1.4 million which resulted in a net gain of approximately $175,000, net of limited partner’s minority interest. Such gain is reflected as a component of discontinued operations on our consolidated statements of income.

On June 20, 2005, we acquired our joint venture partner’s 40% interest in a 172,000 square foot office property located at 520 White Plains Road, Tarrytown, NY for approximately $8.1 million which consisted of the issuance of 127,510 OP Units valued at $31.37 per OP Unit and the assumption of approximately $4.1 million of secured mortgage indebtedness of the joint venture. Prior to us acquiring this interest, we accounted for the joint venture under the equity method of accounting. In accordance with the equity method of accounting, our proportionate share of the joint venture’s income was approximately $176,000 for the period January 1, 2005 through June 19, 2005 and $603,000 and $30,000 for the years ended December 31, 2004 and 2003, respectively.

On July 14, 2005, we acquired two adjacent Class A suburban office buildings aggregating approximately 228,000 square feet located at 225 High Ridge Road in Stamford, CT for approximately $76.3 million. This acquisition was made through a borrowing under our Credit Facility. On August 26, 2005 this property was encumbered, along with eight other properties, with an interest only mortgage in the amount of approximately $55.3 million and on September 21, 2005 was sold to the RAOC JV discussed below for approximately $76.5 million which included the assignment of the property’s mortgage debt.

On August 18, 2005, we entered into (i) an underwriting agreement relating to the public offering in Australia of approximately A$263.0 million (approximately US$202.0 million) of units (“LPT Units”) in a newly-formed Reckson-sponsored Australian listed property trust, Reckson New York Property Trust (“Reckson LPT”), a newly-formed listed property trust which is traded on the Australian Stock Exchange and (ii) contribution and sale agreements pursuant to which, among other things, we agreed to transfer 25 of our properties for an aggregate purchase price of approximately $563.0 million and containing an aggregate of 3.4 million square feet, in three separate tranches, to the RAOC JV in exchange for a 25% interest in the RAOC JV and approximately $502.0 million in cash (inclusive of proceeds from mortgage debt to be assumed by the RAOC JV). On September 21, 2005, Reckson LPT completed its public offering and the closing of the first of three tranches (“Tranche I”) of this transaction.

In connection with the Tranche I closing, the RAOC JV acquired from us 17 of our suburban office properties containing approximately 2.0 million square feet for approximately $367.0 million (including the assumption of approximately $196.1 million in mortgage debt which had been incurred by us in August 2005 — see Note 2). In return, we received a 25% interest in the RAOC JV and approximately $128.1 million in cash resulting in an aggregate gain of approximately $103.6 million. As discussed below relating to certain

F-23

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

6. Commercial Real Estate Investments — (Continued)

guarantees we have made, approximately $18 million of the aggregate gain has been deferred to future periods pursuant to Statement No. 66 to coincide with the release of the guarantees. As a result, gains on sales of real estate, related to Tranche I reported in the current period is approximately $82.7 million, net of limited partners’ minority interest. Approximately $22.0 million of the cash received was used to repay certain of our secured mortgage indebtedness on September 30, 2005 and approximately $105.7 million of the cash received was used to establish an escrow account with a qualified intermediary for a future exchange of real property pursuant to Section 1031 of the Code (a “Section 1031 Exchange”). A Section 1031 Exchange allows for the deferral of taxes related to the gain attributable to the sale of property if a qualified replacement property is identified within 45 days and such qualified replacement property is acquired within 180 days from the initial sale. As described below, on October 7, 2005 we acquired a qualified replacement property for purposes of this Section 1031 Exchange and thereby deferred a portion of the tax gain from the Tranche I sale.

In connection with the foregoing, on September 21, 2005, Reckson Australia Holdings LLC (“Reckson Holdings”), a wholly-owned subsidiary of the Operating Partnership, and Reckson Australia LPT Corporation (“LPT REIT”), a U.S. real estate investment trust which is wholly-owned by Reckson LPT, entered into the Amended and Restated Limited Liability Company Agreement governing the RAOC JV (the “Operating Agreement”). Pursuant to the Operating Agreement, LPT REIT holds a 75% interest in, and acts as the managing member for, the RAOC JV, and Reckson Holdings holds a 25% non-managing member interest therein. The Operating Agreement provides that, if at any time additional capital contributions are made to the RAOC JV, Reckson Holdings will have a right to make additional capital contributions up to an amount necessary to maintain its 25% interest therein on the same terms and conditions as such other capital contributions.

As the managing member of the RAOC JV, LPT REIT has the sole responsibility for managing its business and affairs on a day-to-day basis, other than with respect to certain identified “major decisions,” including but not limited to a merger or consolidation involving the RAOC JV, a disposition of all or substantially all of its assets, or the liquidation or dissolution of the RAOC JV. Such major decisions require the prior written consent of a majority of the non-managing members. As a result of the foregoing, we are accounting for our 25% non-managing member interest in the RAOC JV under the equity method of accounting. In accordance with the equity method of accounting, our proportionate share of the RAOC JV’s income was approximately $863,000 for the period September 21, 2005 through December 31, 2005.

On January 6, 2006, Reckson LPT completed the second Tranche of this transaction (“Tranche II”) whereby the RAOC JV acquired three of our suburban office properties; 6800 and 6900 Jericho Turnpike, Jericho, NY and 710 Bridgeport Avenue, Shelton, CT, aggregating approximately 761,000 square feet for approximately $84.6 million, including the assignment of approximately $20.1 million of mortgage debt. Approximately $25.1 million of sales proceeds was used to establish an escrow account for the purpose of a future Section 1031 Exchange. The balance of the cash proceeds was used to fund our development activities and for general corporate purposes.

The Tranche III closing (“Tranche III”), consisting of five of our properties valued at approximately $111.8 million, is scheduled to close in October 2006 and will include the assumption of approximately $51.5 million of existing mortgage debt. The Tranche III closing is subject to customary closing conditions.

Our Service Companies provide asset management, property management, leasing, construction and other services to the RAOC JV and affiliates of ours are entitled to transaction fees and ongoing fees for providing services to the RAOC JV. As of December 31, 2005, we earned and received approximately $3.6 million in transaction related fees and approximately $966,000 of ongoing fees from the RAOC JV. Such amount is included in investment income and other on our consolidated statements of income. In addition, we also formed Reckson Australia Management Limited (“RAML”), a wholly owned subsidiary, that will manage

F-24

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

6. Commercial Real Estate Investments — (Continued)

Reckson LPT and serve as its “Responsible Entity”. The Responsible Entity will be managed by a six member board that includes three independent directors domiciled in Australia. To address and mitigate any potential conflicts of interest with Reckson LPT or its affiliates the Company has adopted the following policies: (i) all transactions between the Company and Reckson LPT or its affiliates shall require the approval of a majority of the independent directors of both the Company and Reckson LPT, (ii) executive officers and directors of the Company are prohibited from owning equity in the Reckson LPT, and (iii) the adoption of an express policy which mandates that property services and leasing decisions shall be made without regard to the Company’s percentage ownership of any property.

Under the Operating Agreement, Reckson Holdings will have the right, beginning September 21, 2007, to require LPT REIT to redeem all or a portion of Reckson Holdings’ membership interest in the RAOC JV for cash or, at LPT REIT’s option, shares of LPT REIT’s common stock (which may be exchanged for LPT Units) on a one-for-one basis. Reckson Holdings also has the right to cause the liquidation of the RAOC JV in the event that RAML is replaced as Reckson LPT’s Responsible Entity. In addition, the Operating Agreement contains a right of first refusal granting Reckson Holdings the right to acquire any asset of the RAOC JV, at fair market value, in the event of an attempted sale of such asset or the exercise of Reckson Holdings’ right to liquidate the RAOC JV.

In connection with the Tranche I closing, on September 21, 2005 the Company, RAOC JV and LPT REIT entered into an Option Agreement (the “Option Agreement”) pursuant to which we granted RAOC JV options to acquire ten additional properties from the Operating Partnership over a two year period, beginning January 1, 2006. The properties contain an aggregate of approximately 1.2 million square feet and will be priced based on the fair market value at the time of each transfer to RAOC JV. The Option Agreement contains a right of first refusal granting RAOC JV the right to acquire any option property from Reckson in the event we receive, and are amenable to, an offer from a third party to purchase such option property. The Option Agreement will terminate under certain circumstances, including if (i) RAOC JV sends notice of its intent to exercise its option but fails to close as obligated, (ii) RAOC JV is in default under the Option Agreement, the contribution agreement or the sale agreement or (iii) RAML or an affiliate of ours is no longer the Responsible Entity of Reckson LPT.

In connection with the mortgage indebtedness securing nine of the Tranche I properties, which were transferred to the RAOC JV on September 21, 2005, and three of the Tranche III properties scheduled to be transferred to the RAOC JV during October 2006, we have guaranteed to the lender certain customary non-recourse carve-outs, as well as certain obligations relating to the potential termination of a number of leases at four of these properties. We have also guaranteed to the lender certain capital requirements related to these properties. We will be relieved of the customary non-recourse carve-outs and capital requirements upon transfer of the respective properties to the RAOC JV and the RAOC JV meeting a net worth test of at least $100.0 million. We will be relieved of all but two of the lease related obligations upon transfer of the respective properties to the RAOC JV and the RAOC JV meeting a net worth test of at least $200.0 million. The RAOC JV has agreed to indemnify us for any loss, cost or damage it may incur pursuant to our guaranty of these obligations. As of December 31, 2005, the RAOC JV met the $100.0 million net worth threshold and there remain approximately $18 million of aggregate guarantees outstanding.

In accordance with FASB Statement No. 144, the assets and liabilities of the properties transferred and to be transferred, excluding the option properties, to the RAOC JV are classified as held for sale on our consolidated balance sheets, for all periods presented.

During September 2005, we entered into a letter of intent with an entity owned by the owner of the New York Islanders professional hockey team to enter into a 50/50 joint venture to potentially develop over five million square feet of office, residential, retail and hotel space in the Mitchel Field, Long Island sub-market in and around Nassau County’s Veterans Memorial Coliseum where we are currently the largest owner of

F-25

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

6. Commercial Real Estate Investments — (Continued)

office properties. In February 2006, we were selected as one of the two finalists to continue to negotiate with the County of Nassau prior to the County’s final selection. If selected by the County, the development will remain subject to numerous governmental approvals, compliance, zoning and other customary approvals. In addition, if selected we would serve as the master developer of the development. There can be no assurances that we will enter into the aforementioned joint venture, that the joint venture will be selected as the developer or that all required approvals, zoning and compliance can be obtained.

On September 22, 2005, we sold two suburban office properties, aggregating approximately 69,000 square feet, located at 310 and 333 East Shore Road in Great Neck, Long Island for aggregate consideration of approximately $17.3 million. As a result, we recorded an aggregate gain, net of limited partners’ minority interest, of approximately $13.6 million. For federal income tax purposes we recognized a tax gain of approximately $12.6 million. Such tax gain did not affect our REIT distribution requirements. Pursuant to FASB Statement No. 144, these properties have been reflected as held for sale on our balance sheets and their operating results are classified within discontinued operations, for all periods presented, on our consolidated statements of income.

On October 7, 2005, we acquired a 1.1 million square foot Class A office complex located in Uniondale, NY, commonly referred to as “EAB Plaza”, for approximately $240 million and changed the name of the complex to Reckson Plaza. The property is encumbered by a long-term ground lease which has a remaining term in excess of 75 years, including renewal options. The acquisition of Reckson Plaza was financed, in part, (i) from sales proceeds being held by a qualified intermediary pursuant to a Section 1031 Exchange as the property was an identified, qualified replacement property, (ii) a borrowing under our Credit Facility, (iii) the satisfaction of our $27.6 million junior participating mezzanine loan which was secured by a pledge of an indirect interest of an entity which owned the ground leasehold estate and (iv) cash on hand. In connection with this acquisition we also acquired an adjoining 8.2 acre development site for approximately $19.0 million which was financed through a borrowing under our Credit Facility.

On October 20, 2005, we acquired a 118,000 square foot suburban office property situated on ten acres of land located at 711 Westchester Avenue in White Plains, NY for approximately $24.8 million. This acquisition was financed through the assumption of approximately $12.5 million of existing debt on the property and a borrowing under our Credit Facility.

On December 20, 2005, we sold our property located at 48 Harbor Park Drive, Port Washington, NY for approximately $6.4 million and recorded a gain on sales of real estate of approximately $2.7 million, net of limited partners’ minority interest. Pursuant to FASB Statement No. 144, this property has been reflected as held for sale on our balance sheets and its operating results are classified within discontinued operations, for all periods presented, on our consolidated statements of income.

On December 20, 2005, we sold our property located at 100 Wall Street, New York, NY for approximately $134.0 million and recorded a gain on sales of real estate of approximately $45.0 million, net of limited partners’ minority interest. The property was secured by a first mortgage and cross collateralized with another one of our New York City properties. In order to effectuate the sale and not incur prepayment penalties which would be due under a prepayment of the mortgage, we provided the lender with replacement collateral and assigned this mortgage debt to the replacement collateral properties. In connection with the assignment, we paid a substitution of collateral fee and other costs aggregating approximately $2.0 million. In addition, we provided the purchaser with a mezzanine loan in the amount of $30.0 million which bears interest at 15.0% per annum, requires payments of interest only and has a term of two years. Cash proceeds of approximately $100.9 million were used, in part, to acquire a 14 building suburban office portfolio as discussed below. We

F-26

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

6. Commercial Real Estate Investments — (Continued)

have evaluated the purchaser’s financial commitment as being sufficient to provide substance to this sale and us having no substantial continuing involvement with the purchaser pursuant to Statement No. 66 and as such have recognized the aforementioned gain in its entirety. In addition, pursuant to FASB Statement No. 144, this property has been reflected as held for sale on our balance sheets and its operating results are classified within discontinued operations, for all periods presented, on our consolidated statements of net income.

On December 29, 2005, we acquired a 1.6 million square foot suburban office portfolio, consisting of 14 buildings, concentrated within five business parks, located in Westchester County, for approximately $255.0 million. We made this acquisition through a borrowing under our Term Loan and cash sales proceeds from the sale of our property located at 100 Wall Street, New York, NY.

As of December 31, 2005, we owned and operated 103 office properties (inclusive of twenty-five office properties owned through joint ventures) comprising approximately 20.3 million square feet and eight flex properties comprising approximately 863,000 square feet located in the Tri-State Area.

We also own certain land parcels throughout our markets in the Tri-State Area which we hold for current and future development (the “Development Parcels”). We recently completed the ground-up development on one of the Development Parcels of a 300,000 square foot Class A office building which commenced in July 2004 and is located within our existing three building executive office park in Melville, NY with a total investment of approximately $64.0 million. During July 2005, we commenced the ground-up development on one of the Development Parcels of a 37,000 square foot Class A retail property located within our existing six building Landmark Square office park in Stamford, Connecticut. In August 2005, we recommenced the ground-up development of one of the Development Parcels of a 316,000 square foot Class A office building located within our existing three building office park located in Princeton, NJ. Further, one of the Development Parcels, aggregating approximately 4.1 acres, is classified as held for sale on our balance sheets and is expected to close during September 2006 for aggregate consideration of $2.0 million. In addition, as previously discussed, in May 2005, we entered into a contract to sell approximately 60 acres of vacant land in Chatham Township, NJ, subject to a change in zoning and other conditions. There can be no assurances that such conditions will be met or that the transaction will be consummated. Excluding the foregoing, at December 31, 2005 our inventory of Development Parcels aggregated approximately 309 acres of land in 10 separate parcels which we had invested approximately $123.8 million.

Management has made subjective assessments as to the value and recoverability of our investments in the Development Parcels based on current and proposed development plans, market comparable land values and alternative use values. We are currently evaluating alternative land uses for certain of the remaining Development Parcels to realize their highest economic value. These alternatives may include rezoning certain Development Parcels from commercial to residential for potential disposition.

At December 31, 2005, we also owned a 354,000 square foot office building in Orlando, Florida. This non-core real estate holding was acquired in May 1999 in connection with our initial New York City portfolio acquisition. This property was sold on March 7, 2006 for aggregate consideration of approximately $70.0 million. Net proceeds were used to establish an escrow account with a qualified intermediary for a future Section 1031 Exchange.

Discontinued Operations

At December 31, 2005, we had identified ten of our operating properties and one parcel of land as held for sale in accordance with Statement No. 144. We have classified the assets and liabilities for these properties and parcel of land at December 31, 2005, for all periods presented, on our consolidated balance sheets as held for sale. In addition, where we will not have a continuing interest in their operations, we have

F-27

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

6. Commercial Real Estate Investments — (Continued)

classified their results of operations and gains from their sales, for all periods presented, as discontinued operations on our consolidated statements of income.

In addition, during 2005 we sold 21 of our operating properties and one parcel of land. We have classified the assets and liabilities for these properties and parcel of land at December 31, 2004 on our consolidated balance sheet as held for sale. In addition, where we will not have a continuing interest in their operations, we have classified their results of operations, for all periods presented, and gains from their sales, as discontinued operations on our consolidated statements of income.

The following table sets forth those assets and liabilities classified on our balances sheets as held for sale (in thousands):

	December 31, 2005				December 31, 2004
	Assets		Liabilities		Assets		Liabilities
Properties held for sale at December 31, 2005:
Eight operating properties to be sold to the RAOC JV	$	101,740	$	84,326	$	102,752	$	33,236
One operating property located in Westchester County, New York (a)		31,977		190		—		—
One Orlando Centre located in Orlando, Florida		59,457		56		59,328		29
Land parcel located in Long Island, New York		1,123		—		1,027		—
Properties sold during 2005:
Seventeen properties sold to the RAOC JV		—		—		146,890		1,398
310/333 East Shore Road, Great Neck, New York		—		—		3,188		24
48 Harbor Park Drive, Port Washington, New York		—		—		3,569		—
100 Wall Street, New York, New York		—		—		87,616		951
Land parcel located in Long Island, New York		—		—		983		—
Totals	$	194,297	$	84,572	$	405,353	$	35,638

The following table sets forth the income from discontinued operations and the related net gains on sales of real estate for those properties sold during the years ended December 31, 2005, 2004 and 2003 (in thousands and net of minority and limited partners interests):

F-28

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

6. Commercial Real Estate Investments — (Continued)

	Year ended December 31,
	2005		2004			2003
Income (loss) from discontinued operations:
310/333 East Shore Road, Great Neck, New York	$	336	$	537		$	561
48 Harbor Park Drive, Port Washington, New York		349		316			289
100 Wall Street, New York, New York		5,960		5,730			3,538
One Orlando Centre located in Orlando, Florida		710		(742	)		(568	)
One operating property located in Westchester County, New York (a)		18		—			—
Properties sold during 2004 and 2003		—		652			15,468
Total income from discontinued operations		7,373		6,493			19,288
Gains on sales of real estate:
One parcel of land located in Long Island, New York		175		—			—
310/333 East Shore Road, Great Neck, New York		13,615		—			—
48 Harbor Park Drive, Port Washington, New York		2,678		—			—
100 Wall Street, New York, New York		44,991		—			—
Properties sold during 2004 and 2003		—		11,776			115,771
Total gains on sales of real estate — discontinued operations		61,459		11,776			115,771
Total discontinued operations	$	68,832	$	18,269		$	135,059

(a) Property was acquired during 2005.

Note Receivable Investments

On March 16, 2005, a wholly owned subsidiary of the Operating Partnership advanced under separate mezzanine loan agreements, each of which bears interest at 9% per annum, (i) approximately $8.0 million which matures in April 2010 and is secured, in part, by indirect ownership interests in ten suburban office properties located in adjacent office parks in Long Island, NY and (ii) approximately $20.4 million which matures in April 2012 and is secured, in part, by indirect ownership interests in twenty-two suburban office properties located in adjacent office parks in Long Island, NY. Each mezzanine loan is additionally secured by other guaranties, pledges and assurances and is pre-payable without penalty after 18 months from the initial funding. We made these investments through a borrowing under our Credit Facility.

In May 2005, we acquired a 65% interest in an $85 million, 15-year loan secured by an indirect interest in a 550,000 square foot condominium in a Class A office tower located at 1166 Avenue of the Americas, New York, NY for approximately $55.3 million. The loan accrues interest compounded at 9.0% and pays interest at an annual rate of 6.0% through March 2010, 8.5% thereafter through March 2015 and 11.0% thereafter through maturity in 2020. The loan is pre-payable only under certain circumstances and, in any case, not before 2009. Upon a capital event related to the indirect interest in the property which secures the loan, we are entitled to participate in 30% of the net proceeds derived from such capital event. This investment replaced our $34.0 million mezzanine loan, including accrued and unpaid interest, to one of the partners owning such condominium interest. We also acquired an approximately 5% indirect ownership interest in the property for a purchase price of approximately $6.2 million. The balance of these investments was funded through a borrowing under our Credit Facility and cash on hand.

On September 30, 2005, we advanced $20.0 million to entities that are each controlled by Cappelli Enterprises under a junior mezzanine loan. This mezzanine loan bore interest at 15.0% per annum, was

F-29

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

6. Commercial Real Estate Investments — (Continued)

secured by a subordinate pledge of an indirect ownership interest in a 550,000 square foot office condominium in a Class A office tower located at 1166 Avenue of the Americas, New York, NY and had a scheduled maturity date of March 31, 2006. As described above, during May 2005, we made a $55.3 million participating loan investment secured by interests in this property (including the interests securing this new mezzanine loan). We also advanced a $10.0 million bridge loan to Louis Cappelli, an affiliate, under a promissory note (the “Promissory Note”) in anticipation of closing a longer-term structured finance transaction. The Promissory Note bore interest at 4.86% per annum, matured on November 30, 2005, was secured by a security interest in a reserve account owned by the borrower and was pre-payable in whole or in part without penalty. These investments were funded through a borrowing under our Credit Facility. On November 30, 2005, the Promissory Note was repaid, we advanced an additional $5.0 million under the mezzanine loan and adjusted its interest rate to 17.5% per annum and extended its maturity date to November 30, 2009. The refinanced junior mezzanine loan is secured by interests in the 1166 Avenue of the Americas condominium and guaranteed by Mr. Cappelli.

On October 7, 2005, a wholly owned subsidiary of the Operating Partnership advanced under a second mortgage loan agreement $10.0 million to an entity which owns a 60,000 square foot office property located on Madison Avenue in New York City which is currently slated for residential conversion. The borrower is an affiliate of the seller of EAB Plaza which we acquired on October 7, 2005. This mortgage loan bears interest at 20.0% per annum, requires monthly payments of interest only, matures on October 7, 2007 and is secured by the underlying property. The mortgage loan is not pre-payable until the earlier of January 10, 2007 or the sale of the underlying property and upon notice. In addition to this mortgage loan, Reckson Construction and Development, LLC (“RCD”) entered into a development agreement with the owner of the property to perform certain predevelopment, development and/or other services with respect to the property. In exchange for its services, RCD will receive a development fee of $2.0 million which is payable in equal monthly installments over a two-year period. Interest due under the mortgage note during its term and the entire development fee are currently being held in a segregated account under our control.

At December 31, 2005, we had invested approximately $93.4 million in mezzanine loans and approximately $55.3 million in a participating loan investment. In general these investments are secured by a pledge of either a direct or indirect ownership interest in the underlying real estate or leasehold, other guaranties, pledges and assurances.

The following table sets forth the terms of the mezzanine loans at December 31, 2005 (in thousands):

Property	Amount		Interest Rate			Funding		Maturity
Long Island office portfolio	$	8,031		9.00	%		Mar., 2005		Apr., 2010(a)
Long Island office portfolio		20,356		9.00	%		Mar., 2005		Apr., 2012(a)
72 Madison Avenue, NY, NY		10,000		20.00	%		Oct., 2005		Oct., 2007
1166 Avenue of the Americas, NY, NY (b)		25,000		17.50	%		Nov., 2005		Nov., 2009
100 Wall Street, NY, NY		30,000		15.00	%		Dec., 2005		Dec., 2007
	$	93,387

(a) Prepayable without penalty after 18 months from initial funding.

(b) Junior mezzanine loan secured by interests in a 550,000 square foot condominium interest.

At December 31, 2005, we also held a $17.0 million note receivable, which bore interest at 12% per annum and was secured by a minority partnership interest in Omni Partners, L.P., owner of the Omni, a 579,000 square foot Class A office property located in Uniondale, NY (the “Omni Note”).

F-30

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005

6. Commercial Real Estate Investments — (Continued)

As of December 31, 2005, we held one other note receivable, which aggregated $1.0 million and carried an interest rate of 10.50% per annum (the “Other Note”) and collectively with the Omni Note, our mezzanine loans and preferred loan investments (the “Note Receivable Investments”). The Other Note matures on January 31, 2010 and is secured in part by a minority partner’s preferred unit interest in the Operating Partnership.

The following table sets forth the changes in our Note Receivable Investments for each of the periods in the three years ended December 31, 2005 (in thousands):

	2005		2004		2003
Balance at the beginning of period	$	85,855	$	54,986	$	54,547
Additions during the period:
New investments		148,637		31,500		15,000
Interest receivables and related investment costs		4,212		1,777		439
Deductions during the period:
Collections/satisfaction of principal		64,092		2,408		15,000
Balance at end of period	$	174,612	$	85,855	$	54,986

As of December 31, 2005, management has made subjective assessments as to the underlying security value on the Note Receivable Investments. These assessments indicate an excess of market value over the carrying value and, based on these assessments, we believe there is no impairment to their carrying value.

7. Stockholders’ Equity

A Class A OP Unit and a share of common stock have similar economic characteristics as they effectively share equally in the net income or loss and distributions of the Operating Partnership. As of December 31, 2005, the Operating Partnership had issued and outstanding 1,569,142 Class A OP Units and 465,845 Class C OP Units. The Class A OP Units and the Company’s common stock currently receive a quarterly distribution of $0.4246 per unit/share. The Class C OP Units were issued in August 2003 in connection with the contribution of real property to the Operating Partnership and currently receive a quarterly distribution of $0.4664 per unit. Subject to certain holding periods, OP Units may either be redeemed for cash or, at the election of the Company, exchanged for shares of common stock on a one-for-one basis.

During 2005 and 2004, the Operating Partnership issued 127,510 and 33,843 OP Units, respectively, in connection with property acquisitions. In addition, during 2005, certain limited partners in the Operating Partnership exchanged approximately 1.6 million OP Units for an equal number of shares of the Company’s common stock.

During June 2005, the Operating Partnership issued $287.5 million aggregate principal amount of 4.00% exchangeable senior debentures due June 15, 2025. The debentures were issued at 98% of par and are exchangeable for shares of common stock of the Company on or after June 15, 2024 at an initial exchange rate of 24.6124 common shares per $1,000 of principal amount of debentures. The debentures are also exchangeable: (i) if the market price of our common stock over a specified period of time is more than 125% of the exchange price per share then in effect; (ii) if the trading price of the debentures over a specified period of time is less than 98% of the product of the closing price of our shares multiplied by the applicable exchange rate; (iii) during a specified period of time, for any debentures that have been called for redemption; (iv) under certain circumstances, upon the occurrence of a distribution to holders of our shares of (a) rights to purchase our common stock at a price below the market price of our shares or (b) assets, debt securities or rights to purchase our securities or securities of the Operating Partnership that have a per share value exceeding 10% of the market price of our shares; or (v) if our common stock is not listed on a national or regional securities exchange or quoted on NASDAQ for 30 consecutive trading days.

The initial exchange price of $40.63 represents a premium of approximately 25% to the closing price of the Company’s common stock on the issuance date of $32.50 per share. If exchanged in accordance with their terms, the debentures will be settled in cash up to their principal amount and any remaining exchange value will be settled, at our option, in cash, the Company’s common stock or a combination thereof. In accordance with the exchange rate terms of the debentures the Company has reserved approximately 8.8 million shares of its authorized common stock, $.01 par value, for potential future issuance upon the exchange of the debentures. Such amount is based on an exchange rate of 30.7692 common shares per $1,000 of principal amount of debentures. Although we have reserved these shares pursuant to the exchange

F-31

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2005

7. Stockholders’ Equity — (Continued)

rate terms, we believe the issuance of our shares, if any, would be significantly less than 8.8 million shares. The debentures are guaranteed by the Company. We have the option to redeem the debentures beginning June 18, 2010 for the principal amount plus accrued and unpaid interest. Holders of the debentures have the right to require us to repurchase their debentures at 100% of the principal amount thereof plus accrued and unpaid interest on June 15, 2010, June 15, 2015 and June 15, 2020 or, in the event of certain change in control transactions, prior to June 15, 2010.

The limited partners’ minority interest in the Operating Partnership (“Limited Partner Equity”), which is reflected on the accompanying balance sheets, is reported at an amount equal to the limited partners’ ownership percentage of the net equity of the Operating Partnership at the end of reporting period. The Limited Partner Equity is adjusted at the end of the period to reflect the ownership percentages at that time. The Limited Partner Equity was approximately 3.2% and 4.3% at December 31, 2005 and 2004, respectively.

The following table sets forth the Company’s annual dividend rates and dividends paid on each class of its common and preferred stock for each of the years ended December 31:

	2005		2004		2003
Common stock:
Dividend rate	$	1.698	$	1.698	$	1.698
Dividends paid (in thousands)	$	139,764	$	111,857	$	81,638
Class B common stock (a):
Dividend rate	$	—	$	—	$	2.588
Dividends paid (in thousands)	$	—	$	1,744	$	25,665
Series A preferred stock (b):
Dividend rate	$	—	$	1.906	$	1.906
Dividends paid (in thousands)	$	—	$	14,988	$	16,842
Series B preferred stock (c):
Dividend rate	$	—	$	—	$	2.213
Dividends paid (in thousands)	$	—	$	787	$	4,425

(a) On November 25, 2003, the Company elected to exchange all of its then outstanding Class B common stock for an equal number of shares of its common stock. Final cash dividends on the Class B common stock were paid during January 2004, which relate to the period from November 1, 2003 through November 25, 2003.

(b) During 2004, the Company purchased or redeemed 6,947,567 shares of its Series A preferred stock for approximately $181.0 million, including accumulated and unpaid dividends. In addition, 1,886,933 shares of Series A preferred stock were exchanged for common stock of the Company at the election of the Series A preferred stockholders. As a result of these transactions, there was no Series A preferred stock outstanding at December 31, 2004. The dividend rate of $1.906 represents the annualized per share dividend rate without regard to the aforementioned transactions. In addition, the dividends paid of approximately $15.0 million during 2004 excludes cash redemption charges of approximately $5.2 million.

F-32

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2005

7. Stockholders’ Equity — (Continued)

(c) In January 2004, the Company exercised its option to redeem 2.0 million shares, or 100%, of its then outstanding Series B preferred stock for approximately 1,958,000 shares of its common stock. Final cash dividends on the Series B preferred stock were paid during January 2004, which related to the period from November 1, 2003 through January 4, 2004.

The Board of Directors of the Company initially authorized the purchase of up to 5.0 million shares of the Company’s common stock. Transactions conducted on the New York Stock Exchange have been, and will continue to 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. Since the Board’s initial authorization, the Company has purchased 3,318,600 shares of its common stock for an aggregate purchase price of approximately $71.3 million. In June 2004, the Board of Directors re-set the Company’s common stock repurchase program back to 5.0 million shares. No purchases have been made since March 2003.

The Operating Partnership has issued and outstanding 1,200 preferred units of limited partnership interest with a liquidation preference value of $1,000 per unit and a stated distribution rate of 7.0%, which is subject to reduction based upon the terms of their initial issuance (the “Preferred Units”). The terms of the Preferred Units provide for this reduction in distribution rate in order to address the effect of certain mortgages with above market interest rates which were assumed by the Operating Partnership in connection with properties contributed to the Operating Partnership in 1998. As a result of the aforementioned reduction, there are currently no distributions being made on the Preferred Units.

In October 2000, the Company instituted 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. Under the Rights Plan, each shareholder receives one Right to acquire one one-thousandth of a share of a series of junior participating preferred stock at an initial purchase price of $84.44 for each share of the Company’s outstanding common stock owned. The Rights will be exercisable only if a person or group acquires, or announces an intention to acquire, 15% or more of the Company’s common stock, or announces a tender offer, which would result in beneficial ownership by a person or group of 15% or more of the common stock. If any person acquires 15% or more of the outstanding shares of common stock or if the Company is acquired in a merger after such an acquisition, all Rights holders except the acquiring person will be entitled to purchase the Company’s common stock at a discounted price. The Rights will expire at the close of business on October 13, 2010, unless earlier redeemed by the Company.

In July 2002, as a result of certain provisions of the Sarbanes-Oxley Act of 2002, we discontinued the use of stock loans in our Long Term Incentive Programs (“LTIP”). In connection with LTIP grants made prior to the enactment of the Sarbanes- Oxley Act of 2002, we currently have stock loans outstanding to certain executive officers which were used to purchase 385,000 shares of our common stock. The stock loans were priced at the market prices of our common stock at the time of issuance, bear interest at the mid-term Applicable Federal Rate and are secured by the shares purchased. Such stock loans (including accrued interest) are scheduled to vest and be ratably forgiven each year on the anniversary of the grant date based upon initial vesting periods ranging from seven to ten years. Such forgiveness is based on continued service and in part on the Company attaining certain annual performance measures. These stock loans had an initial aggregate weighted average vesting period of approximately nine years. As of December 31, 2005, there remains 180,714 shares of common stock subject to the original stock loans which are anticipated to vest between 2006 and 2011. Approximately $2.3 million, $2.1 million and $3.1 million of compensation expense was recorded for each of the years ended December 31, 2005, 2004 and 2003, respectively, related to these loans. Such amounts have been included in marketing, general and administrative expenses on the accompanying consolidated statements of income.

The outstanding stock loan balances due from executive officers aggregated approximately $3.8 million and $4.7 million at December 31, 2005 and December 31, 2004, respectively, and have been included as a

F-33

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2005

7. Stockholders’ Equity — (Continued)

reduction of additional paid in capital on the accompanying consolidated balance sheets. Other outstanding loans to executive and senior officers at December 31, 2005 and December 31, 2004 amounted to approximately $2.5 million and $2.7 million, respectively, and are included in investments in affiliate loans and joint ventures on the accompanying consolidated balance sheets and are primarily related to tax payment advances on stock compensation awards and life insurance contracts made to certain executive and non-executive officers.

In November 2002 and March 2003, an award of rights was granted to certain executive officers of the Company (the “2002 Rights” and “2003 Rights”, respectively, and collectively, the “Rights”). Each Right represents the right to receive, upon vesting, one share of common stock if shares are then available for grant under one of the Company’s stock option plans or, if shares are not so available, an amount of cash equivalent to the value of such stock on the vesting date. The 2002 Rights vest in four equal annual installments beginning on November 14, 2003 (and shall be fully vested on November 14, 2006). The 2003 Rights were earned on March 13, 2005 and vest in three equal annual installments beginning on March 13, 2005 (and shall be fully vested on March 13, 2007). Dividends on the shares will be held by the Company until such shares become vested, and will be distributed thereafter to the applicable officer. The 2002 Rights also entitle the holder thereof to cash payments in respect of taxes payable by the holder resulting from the 2002 Rights. The 2002 Rights aggregate 62,835 shares of the Company’s common stock and the 2003 Rights aggregate 26,040 shares of common stock. As of December 31, 2005, there remains 15,709 shares of common stock reserved related to the 2002 Rights and 17,360 shares of common stock reserved related to the 2003 Rights. Approximately $465,000, $403,000 and $855,000 of compensation expense was recorded for each of the years ended December 31, 2005, 2004 and 2003, respectively, related to the Rights. Such amounts have been included in marketing, general and administrative expenses on the accompanying consolidated statements of income.

In March 2003, the Company established a new LTIP for its executive and senior officers (the “2003 LTIP”). The four-year plan has a core award, which provides for annual stock based compensation based upon continued service and in part based on the Company attaining certain annual performance measures. The plan also has a special outperformance component in the form of a bonus pool equal to 10% of the total return in excess of a 9% cumulative and compounded annual total return on the Company’s common equity for the period through the four-year anniversary after the date of grant (the “Special Outperformance Pool”). The aggregate amount payable to such officers from the Special Outperformance Pool is capped at an amount calculated based upon a total cumulative and compounded annual return on the common equity of 15%. An officer’s special outperformance award represents an allocation of the Special Outperformance Pool and will become vested on the fourth anniversary of the date of grant, provided that the officer remains in continuous employment with the Company or any of its affiliates until such date, and the Company has achieved on a cumulative and compounded basis, during the four fiscal years completed on the applicable anniversary date, a total return to holders of the common equity that (i) is at or above the 60th percentile of the total return to stockholders achieved by members of the peer group during the same period and (ii) equals at least 9% per annum. Special outperformance awards will be paid in cash; however, the Compensation Committee, in its sole discretion, may elect to pay such an award in shares of common stock, valued at the date of vesting, if shares are available at such time under any of the Company’s existing stock option plans. The LTIP provides that no dividends or dividend equivalent payments will accrue with respect to the special outperformance awards. On March 13, 2003, the Company made available 827,776 shares of its common stock under its existing stock option plans in connection with the core award of the 2003 LTIP for certain of its executive and senior officers. During May 2003, the special outperformance awards of the 2003 LTIP were amended to increase the per share base price above which the four year cumulative return is measured from $18.00 to $22.40.

F-34

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2005

7. Stockholders’ Equity — (Continued)

The Board of Directors approved an amendment to the 2003 LTIP to revise the peer group used to measure relative performance. The amendment eliminated the mixed office and industrial companies and added certain other “pure office” companies in order to revise the peer group to office sector companies. The Board has also approved the revision of the performance measurement dates for future vesting under the core component of the 2003 LTIP from the anniversary of the date of grant to December 31 of each year. This was done in order to have the performance measurement coincide with the performance period that the Company believes many investors use to judge the performance of the Company.

On December 27, 2004, the Operating Partnership entered into definitive agreements with certain executive and senior officers of the Company to revise their incentive awards under the 2003 LTIP. The revised agreements provide for (i) the rescission of the unvested portion of their core awards and (ii) an award in exchange for the rescinded core awards of an equal number of units of a new class of limited partnership interests (“LTIP Units”) of the Operating Partnership.

Each executive and senior officer participating in the 2003 LTIP was offered the option to retain all or a portion of his core awards or to rescind them in exchange for new awards of LTIP Units. On December 27, 2004, certain executive and senior officers accepted such offer and thereby amended their Amended and Restated Long-Term Incentive Award Agreement to cancel, in the aggregate, 362,500 shares of restricted stock of the Company representing all or a portion of their unvested core award, and received an equal number of LTIP Units.

The revised awards under the 2003 LTIP were designed to provide the potential for executives to retain a greater equity interest in the Company by eliminating the need for executives to sell a portion of the core awards immediately upon vesting in order to satisfy personal income taxes which are due upon vesting under the original core awards.

With respect to the 2003 LTIP, the Company met its annual performance measure with respect to the 2005, 2004 and 2003 annual measurement periods, respectively. As a result, the Company issued to the participants of the 2003 LTIP 86,111, 102,779 and 206,944 shares of its common stock, respectively, related to the core component of the 2003 LTIP.

The terms of each award of LTIP Units are substantially similar to those of the core awards under the 2003 LTIP. The vesting, performance hurdles and timing for vesting remain unchanged. However, an LTIP Unit represents an equity interest in the Operating Partnership, rather than the Company. At issuance, the LTIP Unit has no value but may over time accrete to a value equal to (but never greater than) the value of one share of common stock of the Company (a “REIT Share”). Initially, LTIP Units will not have full parity with OP Units with respect to liquidating distributions. Upon the occurrence of certain “triggering events,” the Operating Partnership will revalue its assets for the purpose of the capital accounts of its partners and any increase in valuation of the Operating Partnership’s assets from the date of the issuance of the LTIP Units through the “triggering event” will be allocated to the capital accounts of holders of LTIP Units until their capital accounts are equivalent to the capital accounts of holders of OP Units. If such equivalence is reached, LTIP Units would achieve full parity with OP Units for all purposes, and therefore accrete to an economic value equivalent to REIT Shares on a one-for-one basis. After two years from the date of grant, if such parity is reached, vested LTIP Units may be redeemed for cash in an amount equal to the then fair market value of an equal number of REIT Shares or converted into an equal number of OP Units, as determined by the Company’s Compensation Committee. However, there are circumstances under which such economic equivalence would not be reached. Until and unless such economic equivalence is reached, the value that the officers will realize for vested LTIP Units will be less than the value of an equal number of REIT Shares. In addition, unlike core awards under the 2003 LTIP (wherein dividends that accumulate are paid upon vesting), LTIP Units will receive the same quarterly distributions as OP Units on a current basis, thus providing full dividend equivalence with REIT Shares. At the scheduled March 2005 vesting date, the specified performance hurdles were met, and officers

F-35

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2005

7. Stockholders’ Equity — (Continued)

that received LTIP Units received a one-time cash payment that represented payment of the full vested amount of the accrued unpaid dividends under the core award of the 2003 LTIP through December 27, 2004, the issuance date of the LTIP Units. In addition, the officers, in the aggregate, vested in 104,167 LTIP Units. At the scheduled March 2006 vesting date, the specified performance hurdles were met and officers that received LTIP Units, in the aggregate, vested in 120,833 LTIP Units. In order to more closely replicate the terms of the core awards being rescinded, the Company also entered into agreements with three executive officers, which provide that in the event of a change of control the executive shall receive the equivalent value of one REIT Share for each LTIP Unit.

In March 2005, following the recommendation of the Compensation Committee, eight senior and executive officers of the Company were awarded, in the aggregate, 272,100 LTIP Units to continue to incentivize them for the long-term (the “2005 LTIP Unit Grants”). Each such LTIP Unit awarded is deemed equivalent to an award of one share of common stock reserved under one of the Company’s stock option plans, reducing availability for other equity awards on a one-for-one basis. The terms of the 2005 LTIP Unit Grants are generally consistent with the terms of the 2003 LTIP, including with respect to the impact upon vesting in the event of a change of control.

As a result of the foregoing, there remains 69,443 shares of common stock reserved for future issuance under the core award of the 2003 LTIP and 409,600 shares of common stock reserved for issuance with respect to the issuance of LTIP Units. With respect to the core award of the 2003 LTIP, the Company recorded approximately $1.2 million, $2.8 million and $2.6 million of compensation expense for each of the years ended December 31, 2005, 2004 and 2003, respectively. In addition, with respect to the LTIP Units and the 2005 LTIP Unit Grants, the Company recorded compensation expense of approximately $2.9 million for the year ended December 31, 2005. Such amount has been included in marketing, general and administrative expenses on the accompanying consolidated statements of income. Based on the terms of the 2003 LTIP, potential outcomes of the Special Outperformance Pool are estimated to range from $0, assuming the requisite four year cumulative performance measures are not met, to a maximum of approximately $35.0 million, assuming relative peer group performance measures are met and a 15% cumulative and compounded return on common equity. During the three months ended December 31, 2005, we recorded approximately $23.5 million of compensation expense with respect to the Special Outperformance Pool. This amount is calculated on the closing stock price of our common stock on December 31, 2005 and is based on management’s determination of the probability of requisite performance measures being met. The accrual represents approximately 70% of the total estimated Special Outperformance Pool reflecting the service period through December 31, 2005.

Compensation expense with respect to the core component of the 2003 LTIP, which relates to the Company attaining certain annual performance measures, is recognized in accordance with paragraph 26 of Statement No. 123 as a “target stock price” plan. Under this type of plan, compensation expense is recognized for the target stock price awards whether or not the targeted stock price condition is achieved as long as the underlying service conditions are achieved. Accordingly, we obtained an independent third party valuation of the 2003 LTIP awards and recognize compensation expense on a straight-line basis through the vesting period for awards to employees who remain in service over the requisite period regardless of whether the target stock price has been reached.

Compensation expense with respect to the core component of the 2003 LTIP, which relates to the continued service of the grantee, is recognized in accordance with Statement No. 123 in which compensation expense is recognized on a straight- line basis through the vesting period based on the fair market value of the stock on the date of grant.

As a result of the election of certain executive and senior officers to exchange all or a portion of their 2003 LTIP into an equal number of LTIP Units we again obtained an independent third party valuation of the

F-36

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2005

7. Stockholders’ Equity — (Continued)

newly granted LTIP Units and determined that the fair value of the LTIP Units was not greater than the exchanged 2003 LTIP awards on the date of the exchange. As such, compensation expense to be recognized, on a straight-lined basis, over the vesting period of the LTIP Units equals the amount of unamortized compensation expense cost for the 2003 LTIP awards as of the exchange date.

On January 1, 2006, we adopted Statement No. 123R and have determined that the adoption of Statement No. 123R will have no material impact on our consolidated financial statements.

The following table sets forth our reconciliation of numerators and denominators of the basic and diluted net income per weighted average common share and the computation of basic and diluted net income per weighted average share for the Company’s common stock as required by Statement No. 128 for the years ended December 31 (in thousands except for earnings per share data):

	2005		2004			2003
Numerator:
Income before discontinued operations, dividends to preferred shareholders and income allocated to Class B shareholders	$	128,809	$	52,159		$	28,462
Discontinued operations (net of share applicable to limited partners and Class B common shareholders)		68,832		18,269			120,436
Dividends to preferred shareholders		—		(12,236	)		(21,267	)
Redemption charges on Series A preferred stock		—		(15,812	)		—
(Income) allocated to Class B common shareholders		—		—			(2,665	)
Numerator for basic and diluted net income per share Share	$	197,641	$	42,380		$	124,966
Denominator:
Denominator for basic net income per share-weighted average common shares		82,082		68,871			49,092
Effect of dilutive securities: Common stock equivalents		433		364			170
Denominator for diluted net income per common share-adjusted weighted average shares and assumed conversions		82,515		69,235			49,262
Basic net income per common share:
Basic net income	$	.49	$	.35		$	.10
Gain on sales of real estate		1.08		—			—
Discontinued operations		.84		.27			2.45
Basic net income per common share	$	2.41	$	.62		$	2.55
Diluted net income per common share:
Diluted net income	$	.49	$	.35		$	.10
Gain on sales of real estate		1.08		—			—
Discontinued operations		.83		.26			2.44
Diluted net income per common share	$	2.40	$	.61		$	2.54

F-37

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2005

7. Stockholders’ Equity — (Continued)

In calculating diluted net income per weighted average common share, the Company takes into consideration any security that may be potentially dilutive with respect to its common stock. Securities considered to be potentially dilutive include, to the extent outstanding, stock option grants, Class B common stock, Series A preferred stock and Series B preferred stock. OP Units have a distribution rate equivalent to a share of common stock and are convertible into common stock on a one for one basis. As such, OP Units are not dilutive with respect to the common stock.

The following table sets forth our reconciliation of numerators and denominators of the basic and diluted net income per weighted average common share and the computation of basic and diluted net income per weighted average share for the Company’s Class B common stock as required by Statement No. 128 for the year ended December 31, 2003 (in thousands except for earnings per share data):

	2003
Numerator:
Income before discontinued operations, dividends to preferred shareholders and income allocated to common shareholders	$	28,462
Discontinued operations (net of share applicable to limited partners and common shareholders)		14,623
Dividends to preferred shareholders		(21,267	)
(Income) allocated to common shareholders		(4,530	)
Numerator for basic and diluted net income per share	$	17,288
Denominator:
Denominator for basic net income per share—weighted average Class B common shares		8,910
Effect of dilutive securities:
Common stock equivalents		170
Denominator for diluted net income per Class B common share—adjusted weighted average shares and assumed conversions		9,080
Basic net income per Class B common share:
Basic net income	$	.30
Gain on sales of real estate		—
Discontinued operations		1.64
Basic net income per Class B common share	$	1.94
Diluted net income per Class B common share:
Diluted net income	$	.29
Gain on sales of real estate		—
Discontinued operations		1.61
Diluted net income per Class B common share	$	1.90

Our 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 into our common stock.

F-38

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2005

7. Stockholders’ Equity — (Continued)

     Employee Stock Option Plans and Related Disclosures

We have six outstanding stock option plans (the “Plans”) which are utilized for the purpose of attracting and retaining executive officers, directors and other key employees.

The following table sets forth the authorized shares of common stock which have been reserved for issuance under the Plans, the options granted under the Plans and their corresponding exercise price range per share as of December 31, 2005:

	Common shares reserved		Options		Exercise price range(1)				Outstanding and unexercised
			granted (1) (2)		from		to
Amended and Restated 1995 Stock Option Plan		1,500,000		1,545,038	$	12.04	$	25.56		104,584
1996 Employee Stock Option Plan		400,000		269,600	$	19.67	$	26.13		27,950
Amended and Restated 1997 Stock Option Plan		3,000,000		2,525,965	$	22.67	$	27.04		819,450
1998 Stock Option Plan		3,000,000		2,286,501	$	17.75	$	25.67		456,350
Amended and Restated 2002 Stock Option Plan		1,500,000		—		—		—		—
2005 Stock Option Plan		2,000,000		—		—		—		—
Total		11,400,000		6,627,104						1,408,334

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

(2) Inclusive of options subsequently forfeited by grantees which were re-granted by the Company and exclusive of share grants.

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 in the aggregate 22,250 shares of common stock pursuant to the Amended and Restated 1995 Stock Option Plan at exercise prices ranging from $21.31 to $25.56 per share and options to purchase in the aggregate 24,250 shares of common stock pursuant to the Amended and Restated 1997 Stock Option Plan at exercise prices ranging from $24.70 to $25.23 per share. The options granted to the independent directors were exercisable on the date of the grant and remain unexercised.

In addition, the Company has issued 4,000 shares and reserved 16,686 shares of its common stock under its Amended and Restated 2002 Stock Option Plan for issuance to the independent directors of the Company as part of their compensation for their current and prior terms. Such common stock may not be sold until such time as the director is no longer a member of our Board.

Former independent directors of our Board were previously granted options to purchase, in the aggregate, 156,250 shares of common stock pursuant to the Amended and Restated 1995 Stock Option Plan and options to purchase, in the aggregate, 18,750 shares of common stock pursuant to the Amended and Restated 1997 Stock Option Plan. Certain of these former independent directors exercised 83,000 options during 2004, resulting in proceeds to the Company of approximately $1.5 million. During 2005, no options were exercised by the former independent directors of the Company.

F-39

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2005

7. Stockholders’ Equity — (Continued)

During 2005 and 2004, we received approximately $14.1 million and $62.2 million from the exercise of 571,194 stock options and 2,706,378 stock options, respectively.

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 our Plans 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 may not necessarily provide a reliable single measure of the fair value of its employee stock options.

The following table summarizes our stock option activity and related information:

	Options			Weighted- average exercise price
Outstanding—January 1, 2003		4,913,570		$	24.17
Granted		—			—
Exercised		(58,809	)	$	17.57
Forfeited		(90,917	)	$	24.65
Outstanding—December 31, 2003		4,763,844		$	24.26
Granted		13,229		$	24.42
Exercised		(2,783,128	)	$	22.90
Forfeited		(3,417	)	$	24.26
Outstanding—December 31, 2004		1,990,528		$	24.69
Granted		—		$	—
Exercised		(571,194	)	$	24.69
Forfeited		(11,000	)	$	23.77
Outstanding—December 31, 2005		1,408,334		$	24.70

The following table sets forth the weighted average fair value of options granted for the years ended December 31, and the weighted average per share exercise price and vested options exercisable at December 31:

	2005		2004		2003
Weighted average fair value of options granted	$	—	$	1.37	$	—
Weighted average per share exercise price	$	24.80	$	24.91	$	23.82
Vested options exercisable		1,408,334		1,990,528		4,715,511

Exercise prices for options outstanding, under all Plans, as of December 31, 2005 ranged from $15.48 per share to $27.04 per share. The weighted average remaining contractual life of those options is approximately 2.68 years.

8. Related Party Transactions

In connection with our IPO, we were granted ten-year options to acquire ten properties (the “Option Properties”) which were either owned by certain Rechler family members who were also executive officers of the Company, or in which the Rechler family members owned a non-controlling minority interest, at prices based upon an agreed upon formula. During November 2003, in connection with the sale of all but three of our

F-40

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2005

8. Related Party Transactions — (Continued)

95 property, 5.9 million square foot, Long Island industrial building portfolio to members of the Rechler family, four of the five remaining options (the “Remaining Option Properties”) were terminated along with management contracts relating to three of the properties. In addition, as a result of the sale of the aforementioned properties to members of the Rechler family we recorded a gain, net of limited partner’s minority interest, of approximately $115 million. Approximately $204 million of cash sales proceeds received were used to repay borrowings under our Credit Facility. In connection with this closing and the settlement of the employment contracts of the departing Rechler family members, we incurred net restructuring charges of approximately $11.6 million.

As part of the Company’s REIT structure it is provided management, leasing and construction related services through taxable REIT subsidiaries as defined by the Code. These services are currently provided by the Service Companies. During the years ended December 31, 2005 and 2004, RCD billed approximately $31,000 and $859,000, respectively, of market rate services and Reckson Management Group, Inc. (“RMG”) billed approximately $285,000 and $280,000, respectively, of market rate management fees to the Remaining Option Properties.

RMG leases approximately 26,000 square feet of office space at the Remaining Option Property located at 225 Broadhollow Road, Melville, NY for its corporate offices at an annual base rent of approximately $809,000. During 2005, RMG exercised a termination option for its corporate offices allowing us to terminate the lease on November 30, 2006 without penalty. RMG also leases 10,722 square feet of warehouse space used for equipment, materials and inventory storage at a property owned by certain members of the Rechler family at an annual base rent of approximately $79,000. In addition, commencing April 1, 2004, RCD has been leasing approximately 17,000 square feet of space at 225 Broadhollow Road, Melville, NY, which is scheduled to terminate on September 30, 2006. Base rent of approximately $495,000 and $360,000 was paid by RCD during the years ended December 31, 2005 and 2004, respectively. Commencing in April 2005, RCD sub-let the entire 17,000 square feet to a third party for approximately $35,000 per month through RCD’s September 2006 lease termination date.

On March 28, 2005, an entity (“REP”) owned by members of the Rechler family (excluding Scott Rechler, but including his father, Roger, and brother, Gregg) exercised a Right of First Refusal (which was granted in connection with the 2003 sale of the industrial portfolio by us) to acquire a vacant parcel of land for a purchase price of $2.0 million. We have agreed to provide REP with the option to defer the closing on the purchase until September 2006, for a non-refundable deposit of $400,000 and a fee of $10,666 per month for each month that the closing is deferred. In connection therewith, REP agreed to settle a dispute concerning an easement on a separate parcel of land owned by us adjacent to one of the properties transferred to REP in November 2003.

A company affiliated with an independent director of the Company leases 15,566 square feet in a property owned by us at an annual base rent of approximately $430,000.

During November 2005 we purchased 11 pieces of art which have historically been on display in certain of our buildings for approximately $170,000 from an entity owned by certain members of the Rechler family. The purchase prices were reviewed by an independent art dealer and approved by the independent directors.

During 1997, the Company formed FrontLine Capital Group (“FrontLine”) and Reckson Strategic Venture Partners, LLC (“RSVP”), a real estate venture capital fund whose common equity is held indirectly by FrontLine. In connection with the formation and subsequent spin-off of FrontLine, the Operating Partnership established an unsecured credit facility with FrontLine (the “FrontLine Facility”) in the amount of $100.0 million. The Operating Partnership also approved the funding of investments of up to $110.0 million relating to REIT-qualified investments through RSVP-controlled joint ventures or advances made to FrontLine under an additional unsecured loan facility (the “RSVP Facility”) having terms similar to the FrontLine Facility (advances

F-41

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2005

8. Related Party Transactions — (Continued)

made under the RSVP Facility and the FrontLine Facility hereafter, the “FrontLine Loans”). To date, approximately $59.8 million has been funded to RSVP-controlled joint ventures and $142.7 million through the FrontLine Loans (collectively, the “RSVP/FLCG Investments”) on which we accrued interest (net of reserves) of approximately $19.6 million.

A committee of the Board of Directors, comprised solely of independent directors, considers any actions to be taken by the Company in connection with the RSVP/FLCG Investments and during 2001, based on our assessment of value and recoverability of the RSVP/FLCG Investments and considering the findings and recommendations of the committee and its financial advisor, we recorded a $163.0 million valuation reserve charge, inclusive of anticipated costs against the carrying cost of the RSVP/FLCG Investments. In addition, we have discontinued the accrual of interest income with respect to the FrontLine Loans and have also reserved against our share of GAAP equity in earnings, if any, from the RSVP-controlled joint ventures funded until such income is realized through cash distributions.

FrontLine is in default under the FrontLine Loans and on June 12, 2002, filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code.

In September 2003, RSVP completed the restructuring of its capital structure and management arrangements whereby a management company formed by its former managing directors, whose contracts as managing directors were terminated, has been retained to manage RSVP pursuant to a management agreement. The management agreement, which has a term of three years and is subject to early termination in the event of the disposition of all of the assets of RSVP, provides for an annual base management fee and disposition fees equal to 2% of the net proceeds received by RSVP on asset sales (the “Fees”). The Fees are subject to a maximum over the term of the agreement of $7.5 million. In addition, the former managing directors of RSVP retained a one-third residual interest in RSVP’s assets which is subordinated to the distribution of an aggregate amount of $75.0 million to RSVP and/or us in respect of RSVP-controlled joint ventures.

In connection with RSVP’s capital restructuring, RSVP and certain of its affiliates obtained a $60.0 million secured loan (the “RSVP Secured Loan”). On November 3, 2005, the outstanding balance of the RSVP Secured Loan was repaid primarily with proceeds received from the sale of certain assisted living related assets.

The net carrying value of our investments in the RSVP/FLCG Investments of approximately $55.2 million was reassessed with no change by management as of December 31, 2005. Such amount is included in investments in affiliate loans and joint ventures on our consolidated balance sheet.

Scott H. Rechler, who serves as our Chief Executive Officer, President and Chairman of the Board, serves as CEO and Chairman of the Board of Directors of FrontLine and is its sole board member. Scott H. Rechler also serves as a member of the management committee of RSVP and serves as a member of the Board of Directors of American Campus Communities, a company formally owned by RSVP.

In November 2004, a joint venture in which RSVP owns approximately 47% executed a binding agreement to contribute its Catskills, NY resort properties (excluding residentially zoned land) to Empire Resorts Inc. (NASDAQ: NYNY) (“Empire”) for consideration of 18.0 million shares of Empire’s common stock and the right to appoint five members of their Board of Directors. On December 29, 2005, the agreement was terminated and the joint venture received options to purchase approximately 5.2 million options of common stock of Empire at a price of $7.50 per share. The options will be exercisable until December 29, 2006.

F-42

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2005

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, 2005 as required by FASB Statement No. 107.

Cash and cash equivalents, tenant receivables, deferred rents receivable, prepaid expenses and other assets, accrued expenses and other liabilities, deferred revenues and tenant security deposits and variable rate debts are carried at amounts which reasonably approximate their fair values.

The fair value of our long-term debt and Notes Receivable Investments is estimated based on discounting future cash flows at interest rates that management believes reflects the risks associated with long-term debt and notes receivable of similar risk and duration. At December 31, 2005, the estimated aggregate fair value of our Notes Receivable Investments approximated their carrying value and the aggregate fair value of our long term debt exceeded its carrying value by approximately $72.2 million.

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

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

Contractual future minimum rents, excluding those future minimum rents from properties classified as held for sale, to be received over the next five years and thereafter from leases in effect at December 31, 2005 are as follows (in thousands):

2006	$	425,551
2007		406,981
2008		379,703
2009		358,186
2010		321,211
Thereafter		1,852,637
	$	3,744,269

Future minimum rents from those properties classified as held for sale at December 31, 2005 over the next five years and thereafter aggregated approximately $51.0 million.

11. Segment Disclosure

We own all of the interests in our real estate properties directly or indirectly through the Operating Partnership. Our portfolio consists of Class A office properties located within the New York City metropolitan area and Class A suburban office and flex properties located and operated within the Tri-State Area (the “Core Portfolio”). We have formed an Operating Committee that reports directly to the President and Chief Financial Officer who have been identified as the Chief Operating Decision Makers due to their final authority over resource allocation, decisions and performance assessment.

We do not consider (i) interest incurred on our Credit Facility, Bridge Facility and Senior Unsecured Notes, (ii) the operating performance of those properties reflected as discontinued operations on our consolidated statements of income, (iii) the operating results of the Service Companies and (iv) restructuring charges as part

F-43

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2005

11. Segment Disclosure — (Continued)

of our Core Portfolio’s property operating performance for purposes of our component disclosure set forth below.

The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. In addition, historical amounts have been adjusted to give effect to our discontinued operations in accordance with Statement No. 144.

The following tables set forth the components of our revenues and expenses and other related disclosures, as required by FASB Statement No. 131, “Disclosures About Segments of an Enterprise and Related Information”, for the years ended December 31 (in thousands):

	2005
	Core Portfolio			Other			Consolidated Totals
Property operating revenues:
Base rents, tenant escalations and reimbursements	$	546,148		$	—		$	546,148
Expenses:
Property operating expenses		219,041			—			219,041
Marketing, general and administrative		17,511			14,927			32,438
Depreciation and amortization		125,213			1,449			126,662
Total operating expenses		361,765			16,376			378,141
Operating income (loss)		184,383			(16,376	)		168,007
Non-Operating Income and Expenses
Gains on sales of real estate		92,130			—			92,130
Interest, investment and other income		4,645			21,260			25,905
Interest:
Expense		(39,464	)		(71,427	)		(110,891	)
Amortization of deferred financing costs		(1,426	)		(2,740	)		(4,166	)
Long term incentive compensation expense		—			(23,534	)		(23,534	)
Total non-operating income and expenses		55,885			(76,441	)		(20,556	)
Income (loss) before minority interests, equity in earnings of real estate joint ventures and discontinued operations	$	240,268		$	(92,817	)	$	147,451
Total assets	$	3,268,531		$	542,675		$	3,811,206

F-44

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2005

11. Segment Disclosure — (Continued)

	2004
	Core Portfolio			Other			Consolidated Totals
Property operating revenues:
Base rents, tenant escalations and reimbursements	$	493,381		$	—		$	493,381
Expenses:
Property operating expenses		199,133			—			199,133
Marketing, general and administrative		16,469			13,498			29,967
Depreciation and amortization		110,210			1,555			111,765
Total operating expenses		325,812			15,053			340,865
Operating income (loss)		167,569			(15,053	)		152,516
Non-Operating Income and Expenses
Interest, investment and other income		9,459			9,584			19,043
Interest:
Expense		(56,978	)		(38,942	)		(95,920	)
Amortization of deferred financing costs		(1,021	)		(2,700	)		(3,721	)
Total non-operating income and expenses		(48,540	)		(32,058	)		(80,598	)
Income (loss) before minority interests, preferred dividends and distributions, equity in earnings of a real estate joint venture and discontinued operations	$	119,029		$	(47,111	)	$	71,918
Total assets	$	2,524,825		$	642,783		$	3,167,608

	2003
	Core Portfolio			Other			Consolidated Totals
Property operating revenues:
Base rents, tenant escalations and reimbursements	$	410,657		$	—		$	410,657
Expenses:
Property operating expenses		164,931			—			164,931
Marketing, general and administrative		15,124			16,318			31,442
Depreciation and amortization		93,741			3,988			97,729
Total operating expenses		273,796			20,306			294,102
Operating income (loss)		136,861			(20,306	)		116,555
Non-Operating Income and Expenses
Interest, investment and other income		2,974			21,235			24,209
Interest:
Expense		(49,796	)		(28,784	)		(78,580	)
Amortization of deferred financing costs		(1,077	)		(2,162	)		(3,239	)
Restructuring charges—net		—			(11,580	)		(11,580	)
Total non-operating income and expenses		(47,899	)		(21,291	)		(69,190	)
Income (loss) before minority interests, preferred dividends and distributions, equity in earnings of real estate joint ventures and discontinued operations	$	88,962		$	(41,597	)	$	47,365
Total assets	$	2,037,097		$	709,898		$	2,746,995

F-45

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2005

12. Non-Cash Investing and Financing Activities

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

On January 1, 2005 and March 14, 2005, certain limited partners in the Operating Partnership exchanged 263,340 OP Units and 513,259 OP Units, respectively, for an equal number of shares of the Company’s common stock which were valued at approximately $24.8 million, in the aggregate.

In May 2005, we acquired an approximate $55.3 million interest in a 15-year loan secured by an indirect interest in a 550,000 square foot condominium in a Class A office tower located at 1166 Avenue of the Americas, New York, NY. This investment replaced our $34.0 million mezzanine loan, including accrued and unpaid interest, to one of the partners owning such condominium interest.

During June 2005, a limited partner exchanged 841,992 OP Units for an equal number of shares of the Company’s common stock, which were priced at $31.60 per share.

On June 20, 2005, as part of the consideration to acquire our joint venture partner’s 40% interest in the property located at 520 White Plains Road, Tarrytown, NY, we issued 127,510 OP Units valued at $31.37 per OP Unit and assumed approximately $4.1 million of secured mortgage indebtedness of the joint venture.

On September 21, 2005, in connection with the Tranche I closing of the RAOC JV, we received non-cash consideration, in the form of (i) LPT Units valued at approximately $42.7 million and (ii) the assignment of approximately $196.1 million of secured mortgage debt.

On September 30, 2005, in connection with a $20.0 million junior mezzanine loan investment, we withheld from the funding approximately $1.6 million to establish an interest reserve which remains under our control.

On November 30, 2005, in connection with the sale of a 70% joint venture interest in One Court Square we received non-cash consideration of $220.5 million related to our joint venture partner’s assumption of 70% of the property’s mortgage debt.

On December 20, 2005, in connection with our sale of 100 Wall Street, we provided the purchaser with mezzanine financing in the amount of $30.0 million.

13. Commitments and Contingencies

The Company has extended the terms of its amended and restated employment and noncompetition agreements with three executive officers, which were scheduled to expire on August 15, 2005, in all respects through April 30, 2006. The Company has also entered into an employment agreement with one additional officer prior to his appointment as an executive officer. This agreement expires in December 2006.

We had undrawn letters of credit outstanding against our Credit Facility of approximately $100,000 and $1.2 million at December 31, 2005 and 2004, respectively.

In connection with the mortgage indebtedness securing nine of the Tranche I properties, which were transferred to the RAOC JV on September 21, 2005, and three of the Tranche III properties scheduled to be transferred to the RAOC JV during October 2006, we have guaranteed to the lender certain customary non-recourse carve-outs, as well as certain obligations relating to the potential termination of a number of leases at four of these properties. We have also guaranteed to the lender certain capital requirements related to these properties. We will be relieved of the customary non-recourse carve-outs and capital requirements upon transfer of the respective properties to the RAOC JV and the RAOC JV meeting a net worth test of at least $100.0 million. We will be relieved of all but two of the lease related obligations upon transfer of the respective properties to the RAOC JV and the RAOC JV meeting a net worth test of at least $200.0 million. The RAOC JV has agreed to indemnify us for any loss, cost or damage it may incur pursuant to our guaranty of these obligations. As of December 31, 2005, the RAOC JV met the $100.0 million net worth threshold and there remain approximately $18 million of aggregate guarantees outstanding.

F-46

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2005

14. Income Taxes

The following table sets forth our reconciliation of GAAP net income to taxable income for the years ended December 31 (in thousands and unaudited):

	2005 (estimated)			2004			2003
GAAP net income	$	197,641		$	70,428		$	163,521
Minority interests and distributions to preferred unit holders		22,675			23,884			33,176
		220,316			94,312			196,697
Add: GAAP depreciation and amortization		124,400			122,638			109,239
Less: Tax depreciation and amortization		(73,058	)		(76,715	)		(69,839	)
GAAP/tax difference on gains/losses from capital transactions		(100,351	)		13,364			(112,973	)
Straight-line rental income adjustment		(28,465	)		(16,457	)		(16,610	)
FAS 141 lease adjustment		(6,891	)		(7,340	)		—
LTIP accruals		27,483			—			—
Other GAAP/tax differences, net		4,190			3,688			(8,753	)
Taxable income before minority interests		167,624			133,490			97,761
Minority interests		(26,693	)		(31,558	)		(27,431	)
Taxable income to REIT	$	140,931		$	101,932		$	70,330

The following table sets forth our reconciliation of cash distributions to the dividends paid deduction for the years ended December 31 (in thousands):

	2005 (estimated)			2004			2003
Total cash distributions	$	139,103		$	128,881		$	129,675
Less: Cash distributions on restricted shares		(329	)		478			(1,105	)
Return of capital		—			(27,427	)		(56,687	)
Cash dividends paid		138,774			101,932			71,883
Less: dividends designated to prior year		—			—			—
Add: dividends designated from following year		2,157			—			—
Dividends paid deduction	$	140,931		$	101,932		$	71,883

The following tables set forth the characterization of our taxable distributions per share on our common stock and Class B common stock for the years ended December 31:

Common stock	2005 (estimated)				2004				2003
Ordinary income	$	1.081	63.7	%	$	.911	53.7	%	$	.640	37.7	%
Qualified Dividends		—	—			.041	2.4	%		—	—
Return of capital		—	—			.413	24.3	%		.897	52.8	%
Long-term rate capital gains		.416	24.5	%		.149	8.8	%		.105	6.2	%
Unrecaptured Section 1250 gain		.201	11.8	%		.184	10.8	%		.056	3.3	%
Totals	$	1.698	100.0	%	$	1.698	100.0	%	$	1.698	100.0	%

Class B common stock	2005 (estimated)			2004				2003
Ordinary income		—	—	$	.094	53.7	%	$	.976	37.7	%
Qualified Dividends		—	—		.004	2.4	%		—	—
Return of capital		—	—		.043	24.3	%		1.367	52.8	%
Long-term rate capital gains		—	—		.016	8.8	%		.160	6.2	%
Unrecaptured Section 1250 gain		—	—		.019	10.8	%		.085	3.3	%
Totals		—	—	$	0.176	100.0	%	$	2.588	100.0	%

F-47

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2005

15. Quarterly Financial Data (Unaudited)

The following summary represents our results of operations for each fiscal quarter during 2005 and 2004 (in thousands, except share amounts):

	2005
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Total property operating revenues as previously reported	$	135,884		$	141,802		$	145,293		$	136,840
Property operating revenues from discontinued operations (a)		(5,696	)		(6,431	)		(1,544	)		—
Total property operating revenues (b)	$	130,188		$	135,371		$	143,749		$	136,840
Income before minority interests, equity in earnings of real estate joint ventures and discontinued operations	$	19,606		$	20,154		$	105,270		$	2,421
Minority interests		(4,471	)		(4,474	)		(7,038	)		(4,030	)
Equity in earnings of real estate joint ventures		151			83			248			889
Discontinued operations (net of minority interests)		2,070			2,003			15,075			49,684
Net income allocable to common shareholders	$	17,356		$	17,766		$	113,555		$	48,964
Basic net income per weighted average common share:
Income (loss) from continuing operations	$	.18		$	.20		$	.17		$	(.09	)
Gains on sales of real estate		—			—			1.03			.08
Discontinued operations		.03			.02			.18			.60
Basic net income per weighted average common share	$	.21		$	.22		$	1.38		$	.59
Basic weighted average common shares outstanding		81,100,109			81,882,157			82,544,645			82,776,703
Diluted net income per weighted average common share	$	.21		$	.22		$	1.37		$	.59
Diluted weighted average common shares outstanding		81,520,971			82,290,396			83,026,184			83,198,073

(a) Excludes revenues from discontinued operations which were previously excluded from total revenues as previously reported.

(b) Amounts have been adjusted to give effect to our discontinued operations in accordance with Statement No. 144.

F-48

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2005

15. Quarterly Financial Data (Unaudited) — (Continued)

	2004
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Total property operating revenues as previously reported	$	129,305		$	127,243		$	130,777		$	132,666
Property operating revenues from discontinued operations (a)		(6,981	)		(6,953	)		(6,697	)		(5,979	)
Total property operating revenues (b)	$	122,324		$	120,290		$	124,080		$	126,687
Income before preferred dividends and distributions, minority interests, equity in earnings of a real estate joint venture and discontinued operations	$	20,163		$	16,918		$	19,815		$	15,022
Preferred dividends and distributions		(4,533	)		(4,399	)		(3,478	)		(367	)
Redemption charges on Series A preferred stock		—			—			(6,717	)		(9,095	)
Minority interests		(6,710	)		(4,849	)		(4,408	)		(3,854	)
Equity in earnings of a real estate joint venture		114			294			112			83
Discontinued operations (net of minority interests)		6,930			5,079			3,516			2,744
Net income allocable to common shareholders	$	15,964		$	13,043		$	8,840		$	4,533
Basic net income per weighted average common share:
Income from continuing operations	$	.15		$	.11		$	.08		$	.02
Discontinued operations		.11			.08			.05			.04
Basic net income per weighted average common share	$	.26		$	.19		$	.13		$	.06
Basic weighted average common shares outstanding		61,363,097			66,892,096			70,236,721			76,887,346
Diluted net income per weighted average common share	$	.26		$	.19		$	.13		$	.06
Diluted weighted average common shares outstanding		61,718,028			67,326,754			70,510,301			77,281,163

(a) Excludes revenues from discontinued operations which were previously excluded from total revenues as previously reported.

(b) Amounts have been adjusted to give effect to our discontinued operations in accordance with Statement No. 144.

F-49

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DECEMBER 31, 2005

16. Pro Forma Results (Unaudited)

The following table presents our unaudited pro forma results for the year ended December 31, 2005 as if the property acquisitions and dispositions made during 2005 had occurred on January 1, 2005. Unaudited pro forma financial information is presented for informational purposes only and may not be indicative of what our actual results of operations would have been had the events occurred on January 1, 2005, nor does it purport to represent the results of operations for future periods (in thousands except per share data):

Total revenues	$	603,019
Income before minority interests, equity in earnings of real estate joint ventures and discontinued operations	$	168,965
Net income available to common shareholders	$	216,353
Basic net income per common share	$	2.64

F-50

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, 2005 are as follows:

	2005			2004			2003
Real estate balance at beginning of period	$	3,195,064		$	2,689,812		$	2,604,542
Improvements/revaluations		216,443			91,903			73,495
Disposals, including write-off of fully depreciated building improvements		(798,361	)		(2,641	)		(19,862	)
Properties held for sale		(171,352	)		(35	)		—
Acquisitions		1,034,621			416,025			31,637
Balance at end of period	$	3,476,415		$	3,195,064		$	2,689,812

The changes in accumulated depreciation exclusive of amounts relating to equipment, autos, furniture and fixtures, for each of the periods in the three years ended December 31, 2005 are as follows:

	2005			2004			2003
Balance at beginning of period	$	551,018		$	449,043		$	364,390
Depreciation for period		120,756			103,745			91,028
Disposals, including write-off of fully depreciated building improvements		(93,862	)		(1,330	)		(6,375	)
Accumulated depreciation on assets held for sale		(54,918	)		(440	)		—
Balance at end of period	$	522,994		$	551,018		$	449,043

S-1

RECKSON ASSOCIATES REALTY CORP.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2005
(IN THOUSANDS)

Column A	Column B		Column C				Column D					Column E						Column F		Column G		Column H		Column I
			Initial Cost				Cost Capitalized, Subsequent to Acquisition					Gross Amount At Which Carried At Close of Period
Description	Encum- brance		Land		Buildings and Improve- ments		Land			Buildings and Improve- ments		Land		Buildings and Improv- ements		Total		Accumu- lated Depre- ciation		Date of Constru- ction		Date Acquired		Life On Which Depreciation is Computed
50 Charles Lindbergh Boulevard Mitchel Field, New York		—		—		12,089		—			8,701		—		20,790		20,790		13,943		1984		1984		10 - 30 Years
48 South Service Road Melville, New York		—		1,652		10,245		—			8,172		1,652		18,417		20,069		10,881		1986		1986		10 - 30 Years
395 North Service Road Melville, New York		18,893		—		15,551		—			8,193		—		23,744		23,744		15,470		1988		1988		10 - 30 Years
333 Earle Ovington Bou- levard Mitchel Field, New York		51,795		—		67,221		—			26,618		—		93,839		93,839		41,134		1990		1995		10 - 30 Years
40 Cragwood Road South Plainfield, New Jersey		—		725		7,131		—			6,584		725		13,715		14,440		10,093		1970		1983		10 - 30 Years
60 Charles Lindbergh Boulevard Mitchel Field, New York		—		—		20,800		—			10,805		—		31,605		31,605		7,687		1989		1996		10 - 30 Years
1 - 6 Landmark Square Stamford, Connecticut		42,879		11,603		64,466		(1,633	)		24,427		9,970		88,893		98,863		26,428		1973-1984		1996		10 - 30 Years
72 Eagle Rock Avenue East Hanover, New Jersey		—		803		7,563		—			5,457		803		13,020		13,823		5,183		1986		1997		10 - 30 Years
3 University Plaza Hackensack, New Jersey		—		7,894		11,846		—			3,375		7,894		15,221		23,115		5,178		1985		1997		10 - 30 Years
Reckson Executive Park Ryebrook, New York		—		18,343		55,028		—			10,538		18,343		65,566		83,909		17,392		1983-1986		1997		10 - 30 Years
100 Forge Way Rockaway, New Jersey		—		315		902		—			168		315		1,070		1,385		309		1986		1998		10 - 30 Years
200 Forge Way Rockaway, New Jersey		—		1,128		3,227		—			594		1,128		3,821		4,949		1,152		1989		1998		10 - 30 Years
300 Forge Way Rockaway, New Jersey		—		376		1,075		—			470		376		1,545		1,921		516		1989		1998		10 - 30 Years
400 Forge Way Rockaway, New Jersey		—		1,142		3,267		—			321		1,142		3,588		4,730		936		1989		1998		10 - 30 Years
51 Charles Linderbergh Boulevard Mitchel Field, New York		—		—		12,185		—			310		—		12,495		12,495		3,558		1981		1998		10 - 30 Years
100 Summit Lake Drive Valhalla, New York		16,211		3,007		41,351		—			6,375		3,007		47,726		50,733		13,417		1988		1998		10 - 30 Years
115/117 Stevens Avenue Valhalla, New York		—		1,094		22,490		—			2,576		1,094		25,066		26,160		6,709		1984		1998		10 - 30 Years
200 Summit Lake Drive Valhalla, New York		18,460		4,343		37,305		—			11,850		4,343		49,155		53,498		13,799		1990		1998		10 - 30 Years
140 Grand Street White Plains, New York		—		1,932		18,744		—			1,060		1,932		19,804		21,736		4,958		1991		1998		10 - 30 Years
500 Summit Lake Drive Valhalla, New York		—		7,052		37,309		—			8,021		7,052		45,330		52,382		14,833		1986		1998		10 - 30 Years

S-2

RECKSON ASSOCIATES REALTY CORP.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2005
(IN THOUSANDS)

Column A	Column B		Column C				Column D				Column E						Column F		Column G		Column H		Column I
			Initial Cost				Cost Capitalized, Subsequent to Acquisition				Gross Amount At Which Carried At Close of Period
Description	Encum- brance		Land		Buildings and Improve- ments		Land		Buildings and Improve- ments		Land		Buildings and Improve- ments		Total		Accumu- lated Depre- ciation		Date of Construc- tion		Date Acquired		Life On Which Depreciation is Computed
120 West 45th Street New York, New York		—		28,757		162,809		7,676		10,582		36,433		173,391		209,824		38,044		1998		1999		10 - 30 Years
1255 Broad Street Clifton, New Jersey		—		1,329		15,869		—		3,785		1,329		19,654		20,983		5,072		1999		1999		10 - 30 Years
810 7th Avenue New York, New York		79,651		26,984		152,767		117		23,343		27,101		176,110		203,211		38,122		1970		1999		10 - 30 Years
1350 Avenue of the Americas New York, New York		73,009		19,222		109,168		—		23,282		19,222		132,450		151,672		26,720		1966		2000		10 - 30 Years
919 Third Avenue New York, New York		241,305		101,644		205,736		12,795		104,084		114,439		309,820		424,259		49,921		1970		2000		10 - 30 Years
360 Hamilton Avenue White Plains, New York		—		2,838		34,606		—		24,453		2,838		59,059		61,897		14,318		2000		2000		10 - 30 Years
275 Broadhollow Road Melville, New York		—		3,850		12,958		972		9,841		4,822		22,799		27,621		3,454		1970		1997		10 - 30 Years
90 Merrick Avenue East Meadow, New York		—		—		23,804		—		8,866		—		32,670		32,670		6,635		1985		1997		10 - 30 Years
120 White Plains Road Tarrytown, New York		—		3,852		24,861		—		4,933		3,852		29,794		33,646		6,538		1984		1997		10 - 30 Years
100 White Plains Road Tarrytown, New York		—		79		472		—		79		79		551		630		95		1984		1997		10 - 30 Years
51 JFK Parkway Short Hills, New Jersey		—		10,053		62,504		—		1,899		10,053		64,403		74,456		14,433		1988		1998		10 - 30 Years
680 Washington Boule- vard Stamford, Connecticut		—		4,561		23,698		1,137		649		5,698		24,347		30,045		5,497		1989		1998		10 - 30 Years
750 Washington Boule- vard Stamford, Connecticut		—		7,527		31,940		—		293		7,527		32,233		39,760		7,009		1989		1998		10 - 30 Years
1305 Walt Whitman Road Melville, New York		—		3,934		24,040		—		853		3,934		24,893		28,827		6,208		1999		1999		10 - 30 Years
58 South Service Road Melville, New York		—		1,061		—		6,888		46,209		7,949		46,209		54,158		7,779		2001		1998		10 - 30 Years
103 JFK Parkway Short Hills, New Jersey		—		3,098		18,011		217		11,383		3,315		29,394		32,709		6,743		2002		1997		10 - 30 Years
1055 Washington Bou- levard Stamford, Connecticut		—		—		31,637		—		1,738		—		33,375		33,375		2,629		1987		2003		10 - 30 Years
3 Giralda Farms Madison, New Jersey		—		5,675		17,028		—		5,945		5,675		22,973		28,648		252		1990		2004		10-30 Years
44 Whippany Road Chattam, New Jersey		—		7,500		22,006		—		764		7,500		22,770		30,270		975		1985		2004		10-30 Years
1185 Avenue of the Americas New York, New York		—		—		322,180		—		31,969		—		354,149		354,149		22,866		1969		2004		10-30 Years
300 Broadhollow Road Melville, New York		—		10,250		31,386		—		2,944		10,250		34,330		44,580		1,396		1989		2004		10-30 Years

S-3

RECKSON ASSOCIATES REALTY CORP.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2005
(IN THOUSANDS)

Column A	Column B		Column C				Column D				Column E						Column F		Column G		Column H		Column I
			Initial Cost				Cost Capitalized, Subsequent to Acquisition				Gross Amount At Which Carried At Close of Period
Description	Encum- brance		Land		Buildings and Improve- ments		Land		Buildings and Improve- ments		Land		Buildings and Improve- ments		Total		Accumu- lated Depreciation		Date of Construc- tion		Date Acquired		Life On Which Depreciation is Computed
32 Windsor Place Islip, New York		—		32		321		—		50		32		371		403		367		1971		1971		10-30 Years
101 JFK Expressway Short Hills, New Jersey		—		4,647		25,878		274		17,605		4,921		43,483		48,404		9,735		1981		1997		10-30 Years
7 Giralda Farms Madison, New Jersey		—		16,110		34,314		—		—		16,110		34,314		50,424		1,053		1997		2005		10-30 Years
Reckson Plaza Mitchel Field, New York		—		—		223,500		—		378		—		223,878		223,878		1,862		1984		2005		10-30 Years
711 Westchester Avenue White Plains, New York		—		5,650		18,202		—		—		5,650		18,202		23,852		108		1978		2005		10-30 Years
701 Westchester Avenue White Plains, New York		—		6,316		20,193		—		—		6,316		20,193		26,509		—		1981		2005		10-30 Years
707 Westchester Avenue White Plains, New York		—		5,356		15,722		—		—		5,356		15,722		21,078		—		1978		2005		10-30 Years
709 Westchester Avenue White Plains, New York		—		4,870		13,992		—		—		4,870		13,992		18,862		—		1979		2005		10-30 Years
777 Westchester Avenue White Plains, New York		—		4,864		15,606		—		—		4,864		15,606		20,470		—		1971		2005		10-30 Years
1025 Westchester Avenue White Plains, New York		—		3,709		10,664		—		—		3,709		10,664		14,373		—		1977		2005		10-30 Years
925 Westchester Avenue White Plains, New York		—		3,704		11,101		—		—		3,704		11,101		14,805		—		1977		2005		10-30 Years
2500 Westchester Avenue White Plains, New York		—		6,626		18,838		—		—		6,626		18,838		25,464		—		1984		2005		10-30 Years
2700 Westchester Avenue White Plains, New York		—		4,654		13,082		—		—		4,654		13,082		17,736		—		1984		2005		10-30 Years
105 Corporate Park Drive White Plains, New York		—		3,434		10,927		—		—		3,434		10,927		14,361		—		1985		2005		10-30 Years
106 Corporate Park Drive White Plains, New York		—		4,108		12,423		—		—		4,108		12,423		16,531		—		1974		2005		10-30 Years
108 Corporate Park Drive White Plains, New York		—		4,287		13,159		—		—		4,287		13,159		17,446		—		1973		2005		10-30 Years
110 Corporate Park Drive White Plains, New York		—		1,553		4,347		—		—		1,553		4,347		5,900		—		1977		2005		10-30 Years
1 Giralda Farms Madison, New Jersey		—		6,062		18,188		—		449		6,062		18,637		24,699		563		1982		2005		10-30 Years
100 Campus Drive Princeton, New Jersey		—		670		1,813		—		675		670		2,488		3,158		926		1987		1997		10-30 Years
104 Campus Drive Princeton, New Jersey		—		1,819		4,917		—		1,221		1,819		6,138		7,957		1,626		1987		1997		10-30 Years
115 Campus Drive Princeton, New Jersey		—		798		2,158		—		362		798		2,520		3,318		687		1987		1997		10-30 Years

S-4

RECKSON ASSOCIATES REALTY CORP.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2005
(IN THOUSANDS)

Column A	Column B		Column C				Column D				Column E						Column F		Column G		Column H		Column I
			Initial Cost				Cost Capitalized, Subsequent to Acquisition				Gross Amount At Which Carried At Close of Period
Description	Encum- brance		Land		Buildings and Improve- ments		Land		Buildings and Improve- ments		Land		Buildings and Improve- ments		Total		Accumu- lated Depre- ciation		Date of Construc- tion		Date Acquired		Life On Which Depreciation is Computed
99 Cherry Hill Road Parsippany, New Jersey		—		2,360		7,508		5		2,380		2,365		9,888		12,253		2,660		1982		1998		10-30 Years
119 Cherry Hill Road Parsippany, New Jersey		—		2,512		7,622		6		1,886		2,518		9,508		12,026		2,619		1982		1998		10-30 Years
520 White Plains Tarrytown, New York		—		3,462		19,617		387		5,188		3,849		24,805		28,654		7,877		1981		1996		10-30 Years
Land held for de- velopment		—		123,761		—		—		—		123,761		—		123,761		—		N/A		Various		N/A
Developments in progress		—		—		99,570		—		—		—		99,570		99,570		—
Other property		—		—				—		28,947		—		28,947		28,947		14,629
Total	$	542,203	$	524,987	$	2,400,937	$	28,841	$	521,650	$	553,828	$	2,922,587	$	3,476,415	$	522,994

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 Includes costs incurred to acquire the lessor’s rights to an air rights lease agreement.

The aggregate cost for Federal Income Tax purposes was approximately $3,237 million at December 31, 2005.

S-5

EX-10.11

                                                                 Exhibit 10.11



                     SUPPLEMENT TO THE AMENDED AND RESTATED
                        AGREEMENT OF LIMITED PARTNERSHIP
                                       OF
                       RECKSON OPERATING PARTNERSHIP, L.P.
                          ESTABLISHING 2005 LTIP UNITS
                                       OF
                          LIMITED PARTNERSHIP INTEREST

         In accordance with Sections 4.2 and 14.1.B (2), (3) and (4) of the
Amended and Restated Agreement of Limited Partnership, dated as of June 2, 1995,
as amended on December 6, 1995, April 13, 1998, April 20, 1998, June 30, 1998,
May 24, 1999, June 2, 1999, October 13, 2000, August 7, 2003 and December 27,
2004 (the "Partnership Agreement"), the Partnership Agreement is hereby
supplemented (the "Supplement") to establish a class of units of limited
partnership interest of Reckson Operating Partnership, L.P. (the "Partnership"),
which shall be designated "2005 LTIP Units," having the rights, powers,
privileges and restrictions, qualifications and limitations as set forth below
and which shall be issued to the parties and in the amounts set forth on
SCHEDULE A hereto. Capitalized terms used and not otherwise defined herein shall
have the meanings set forth in the Partnership Agreement, including the
Supplement thereto, dated December 27, 2004, establishing LTIP Units of limited
partnership interest.

         WHEREAS, the Partnership desires to provide for equity incentives to
certain employees of the Company who provide services for the benefit of the
Partnership ("Grantees").

         WHEREAS, pursuant to Section 4.2 of the Partnership Agreement, the
Partnership is issuing 2005 LTIP Units to the Grantees with the rights, powers,
privileges and restrictions, qualifications and limitations as set forth below.

         WHEREAS, pursuant to Section 4.2 and Sections 14.1.B (2), (3) and (4),
the General Partner is amending the Partnership Agreement to facilitate the
issuance of the 2005 LTIP Units.

         NOW THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1. Issuance of 2005 LTIP Units

         (a) Pursuant to Section 4.2 of the Partnership Agreement, the
Partnership hereby issues 272,100 Partnership Interests (the "2005 LTIP Units")
to the Grantees and in the amounts set forth on SCHEDULE A hereto. The 2005 LTIP
Units shall have the rights, powers, privileges, restrictions, qualifications
and limitations (including, but not limited to, limitations on transfer) of
Limited Partners under the Partnership Agreement, as supplemented and amended by
the rights, powers, privileges, restrictions, qualifications and limitations
specified in EXHIBIT I hereto.



         (b) The admission of the Grantees as Additional Limited Partners of the
Partnership shall become effective as of the date of this Supplement, which
shall also be the date upon which the names of the Grantees are recorded on the
books and records of the Partnership, and Exhibit A to the Partnership Agreement
is amended to reflect such admission.

SECTION 2. Amendments to Partnership Agreement.

                  Pursuant to Section 14.1.B(3) of the Partnership Agreement,
the General Partner, as general partner of the Partnership and as
attorney-in-fact for its Limited Partners, hereby amends the Partnership
Agreement as follows:

                  (a) Article 1 of the Partnership Agreement is hereby amended
by inserting the following definitions in alphabetical order:


                        "2005 LTIP Units" means the units of the class of
                        limited partnership interest initially issued on March
                        11, 2005, having the rights, powers, privileges,
                        restrictions, qualifications and limitations set forth
                        in the Supplement to the Partnership Agreement dated as
                        of such date.

                  (b) Section 6.1E of the Partnership Agreement is hereby
amended by replacing the text thereof with the following:

                        E. Notwithstanding the provisions of Section 6.1.A
                        above, but subject to the prior allocation of income and
                        gain under clauses A(i), (ii) and (iii) above and to the
                        terms of any Partnership Unit Designation in respect of
                        any class of Partnership Interests ranking senior to the
                        LTIP Units and the 2005 LTIP Units with respect to
                        return of capital or any preferential or priority
                        return, any Liquidating Capital Gains shall first be
                        allocated to the holders of LTIP Units and next to
                        holders of 2005 LTIP Units until the Economic Capital
                        Account Balances of such holders, to the extent
                        attributable to their ownership of LTIP Units or 2005
                        LTIP Units, as applicable, are equal to (i) the Common
                        Unit Economic Balance, multiplied by (ii) the number of
                        their LTIP Units or 2005 LTIP Units, as applicable;
                        provided that no such Liquidating Capital Gains will be
                        allocated with respect to any particular LTIP Unit or
                        2005 LTIP Unit, as applicable, unless and to the extent
                        that the Common Unit Economic Balance exceeds the Common
                        Unit Economic Balance in existence at the time such LTIP
                        Unit or 2005 LTIP Unit, as applicable, was issued. For
                        this purpose, "Liquidating Capital Gains" means net
                        capital gains realized in connection with the actual or
                        hypothetical sale of all or substantially all of the
                        assets of the Partnership, including but not limited to
                        net capital gain realized in connection with an
                        adjustment to the Carrying Value of Partnership assets
                        under Section 704(b) of the Code. The "Economic Capital
                        Account Balances" of the holders of LTIP Units or 2005
                        LTIP Units, as applicable, will be equal to their
                        Capital Account balances, plus the amount of their
                        shares of any Partner Minimum Gain or Partnership
                        Minimum Gain, in either case to the extent attributable
                        to their


                                       2



                        ownership of LTIP Units or 2005 LTIP Units, as
                        applicable. Similarly, the "Common Unit Economic
                        Balance" shall mean (i) the Capital Account Balance of
                        the Company, plus the amount of the Company's share of
                        any Partner Minimum Gain or Partnership Minimum Gain, in
                        either case to the extent attributable to the Company's
                        ownership of Common Units and computed on a hypothetical
                        basis after taking into account all allocations through
                        the date on which any allocation is made under this
                        Section 6.1.E, divided by (ii) the number of the
                        Company's Common Units. Any such allocations shall be
                        made first among the LTIP Unitholders and next among the
                        2005 LTIP Unitholders in proportion to the amounts
                        required to be allocated to each under this Section
                        6.1.E. The parties agree that the intent of this Section
                        6.1.E is to make the Capital Account Balance associated
                        with each LTIP Unit and 2005 LTIP Unit economically
                        equivalent to the Capital Account Balance associated
                        with the Company's Common Units (on a per-Unit basis),
                        but only if the Capital Account Balance associated with
                        the Company's Common Units has increased on a per-Unit
                        basis since the issuance of the relevant LTIP Unit or
                        2005 LTIP Unit, as applicable.

                  (c) Section 8.6A is hereby amended by replacing the text of
the final sentence thereof with the following:

                        Notwithstanding the foregoing, the Redemption Right
                        shall not be exercisable with respect to any Common Unit
                        issued upon conversion of an LTIP Unit or a 2005 LTIP
                        Unit, as applicable, until on or after the date that is
                        two years after the date on which the LTIP Unit or 2005
                        LTIP Unit, as applicable, was issued, provided however,
                        that the foregoing restriction shall not apply if the
                        Redemption Right is exercised by an LTIP Unitholder or a
                        2005 LTIP Unitholder, as applicable, in connection with
                        a transaction that falls within the definition of a
                        "change-in-control" under the agreement or agreements to
                        which the LTIP Units or the 2005 LTIP Units, as
                        applicable, were issued to him or her.

                  (d) The term "transfer" as used in Article 11 of the
Partnership Agreement shall not include any conversion of 2005 LTIP Units into
Common Units.

SECTION 3.        Continuation of Partnership Agreement

                  The Partnership Agreement and this Supplement shall be read
together and shall have the same force and effect as if the provisions of the
Partnership Agreement and this Supplement (including EXHIBIT I hereto) were
contained in one document. Any provisions of the Partnership Agreement not
amended by this Supplement shall remain in full force and effect as provided in
the Partnership Agreement immediately prior to the date hereof.



                                       3



         IN WITNESS WHEREOF, the parties hereto have executed this Supplement to
the Partnership Agreement as of the 11th day of March, 2005.

                             GENERAL PARTNER:

                             RECKSON ASSOCIATES REALTY CORP.


                             By: /s/ Jason Barnett
                                ----------------------------------------
                                Name: Jason Barnett
                                Title: Executive Vice President and
                                       General Counsel

                             EXISTING LIMITED PARTNERS:

                             By: Reckson Associates Realty Corp.,
                                   as Attorney-in-Fact for the Limited
                                   Partners

                             By: /s/ Jason Barnett
                                ----------------------------------------
                                 Name: Jason Barnett
                                 Title: Executive Vice President and
                                        General Counsel

                             GRANTEES:

                             *Individual Counterpart Signature Pages Attached.



                                       4



                       RECKSON OPERATING PARTNERSHIP, L.P.

                         Limited Partner Signature Page

         The undersigned, desiring to become one of the within named Limited
Partners of Reckson Operating Partnership, L.P. (the "Partnership") hereby
becomes a party to the Amended and Restated Agreement of Limited Partnership,
dated as of June 2, 1995 and amended through the date hereof, of the
Partnership, by and among Reckson Associates Realty Corp. and such Limited
Partners. The undersigned agrees that this signature page may be attached to any
counterpart of said Amended and Restated Agreement of Limited Partnership.


Date:                                ------------------------------------------
                                     Name of Limited Partner (please print)


                                     ------------------------------------------
                                     Signature


                                     ------------------------------------------
                                     Address



                                       5



                                    EXHIBIT I

                       RECKSON OPERATING PARTNERSHIP, L.P.

                 DESIGNATION OF THE RIGHTS, POWERS, PRIVILEGES,
                  RESTRICTIONS, QUALIFICATIONS AND LIMITATIONS
                             OF THE 2005 LTIP UNITS

         The following are the terms of the 2005 LTIP Units established pursuant
to this Supplement:

         1. Number. The maximum number of authorized LTIP Units shall be
272,100.

         2. Vesting.

                  (a) Vesting, Generally. LTIP Units may, in the sole discretion
of the General Partner, be issued subject to vesting, forfeiture and additional
restrictions on transfer pursuant to the terms of an award vesting or other
similar agreement (a "Vesting Agreement"). The terms of any Vesting Agreement
may be modified by the General Partner from time to time in its sole discretion,
subject to any restrictions on amendment imposed by the relevant Vesting
Agreement or by the terms of any plan pursuant to which the 2005 LTIP Units are
issued, if applicable. 2005 LTIP Units that have vested under the terms of a
Vesting Agreement are referred to as "Vested 2005 LTIP Units"; all other LTIP
Units shall be treated as "Unvested 2005 LTIP Units." Subject to the terms of
any Vesting Agreement, a holder of 2005 LTIP Units shall be entitled to transfer
his or her 2005 LTIP Units to the same extent, and subject to the same
restrictions as holders of Common Units are entitled to transfer their Common
Units pursuant to Article 11 of the Agreement.

                  (b) Forfeiture or Transfer of Unvested 2005 LTIP Units. Unless
otherwise specified in the Vesting Agreement, upon the occurrence of any event
specified in a Vesting Agreement as resulting in either the right of the
Partnership or the Company to repurchase 2005 LTIP Units at a specified purchase
price or some other forfeiture of any 2005 LTIP Units, then if the Partnership
or the Company exercises such right to repurchase or upon the occurrence of the
circumstances resulting in such forfeiture, then the relevant 2005 LTIP Units
shall immediately, and without any further action, be treated as transferred to
the Company, if applicable, or cancelled and no longer outstanding for any
purpose. Unless otherwise specified in the Vesting Agreement, no consideration
or other payment shall be due with respect to any 2005 LTIP Units that have been
forfeited, other than any distributions declared with respect to a Distribution
Payment Record Date (as defined below) prior to the effective date of the
forfeiture. In connection with any repurchase or forfeiture of 2005 LTIP Units,
the balance of the portion of the Capital Account of the holder that is
attributable to all of his or her 2005 LTIP Units shall be reduced by the
amount, if any, by which it exceeds the target balance contemplated by Section
6.1.E of the Partnership Agreement, calculated with respect to the Holder's
remaining 2005 LTIP Units, if any.


                                    Exh. I-1


                  (c) Legend. Any certificate evidencing a 2005 LTIP Unit shall
bear an appropriate legend indicating that additional terms, conditions and
restrictions on transfer, including without limitation any Vesting Agreement,
apply to the 2005 LTIP Unit.

3. Distributions.

                  (a) 2005 LTIP Distribution Amount. Commencing from the date on
which any 2005 LTIP Units are first issued (each, a "2005 LTIP Issue Date"), for
any quarterly period holders of such 2005 LTIP Units shall be entitled to
receive, if, when and as authorized by the General Partner out of funds legally
available for the payment of distributions, cash distributions in an amount per
unit equal to the distribution payable on the Common Units for the corresponding
quarterly period (the "2005 LTIP Distribution Amount"). Distributions on the
2005 LTIP Units, if authorized, shall be payable quarterly in arrears on such
dates as may be authorized by the General Partner (any such date, a
"Distribution Payment Date"). In addition, 2005 LTIP Units shall be entitled to
receive, if, when and as authorized by the General Partner out of funds or other
property legally available for the payment of distributions, any special,
extraordinary or other distributions payable on the Common Units which may be
made from time to time in an amount per unit equal to the amount of any special,
extraordinary or other distributions payable on the Common Units. Distributions
will be payable to the holder of the 2005 LTIP Units with respect to the 2005
LTIP Units held at the close of business on the applicable record date, which
shall be such date designated by the General Partner for the payment of
distributions that is not more than 30 nor less than 10 days prior to such
Distribution Payment Date (each, a "Distribution Payment Record Date"). With
regard to any distribution to the 2005 LTIP Units, the Distribution Payment Date
shall be the same date as the date fixed for the payment of distributions to
holders of Common Units and the Distribution Payment Record Date shall be the
same date set for the record date for holders of Common Units. In the event that
distributions to holders of Common Units for any period are paid on other than a
quarterly basis, for example, on a monthly basis, then distributions to holders
of the 2005 LTIP Units shall also be paid on that alternate basis.

                  (b) Prohibited Distributions. No distributions on the 2005
LTIP Units shall be authorized by the General Partner or be paid or set apart
for payment by the Partnership at such time as the terms and provisions of any
agreement of the Partnership, including any agreement relating to its
indebtedness, prohibits such authorization, payment or setting apart for payment
or provides that such authorization, payment or setting apart for payment would
constitute a breach thereof or a default thereunder, or if such authorization or
payment shall be restricted or prohibited by law.

                  (c) Noncumulative Distributions. Distributions on the 2005
LTIP Units will be noncumulative. If the General Partner does not authorize a
distribution on the 2005 LTIP Units payable on any Distribution Payment Date
while any 2005 LTIP Unit is outstanding, then the holder of the 2005 LTIP Units
will have no right to receive a distribution for that Distribution Payment Date,
and the Partnership will have no obligation to pay a distribution for that
Distribution Payment Date with respect to the 2005 LTIP Units.


                                    Exh. I-2


                  (d) Parity with Common Units. No distributions, whether in
cash, securities or property, will be authorized or paid or set apart for
payment to holders of Common Units for any period unless for each 2005 LTIP Unit
outstanding, a distribution equal to the 2005 LTIP Distribution Amount with
respect to such period has been or contemporaneously is authorized and paid or
authorized and a sum sufficient for the payment thereof is set apart for such
payment to the holders of the 2005 LTIP Units for the then current distribution
period.

                  (e) Definition of Set Apart for Payment. As used in this
Section 3, "set apart for payment" shall be deemed to include, without any
further action, the following: the recording by the Partnership in its
accounting ledgers of any accounting or bookkeeping entry which indicates,
pursuant to an authorization of a distribution by the General Partner, the
allocation of funds to be so paid on any series or class of units of the
Partnership.

         4. Adjustments.

The Partnership shall maintain at all times a one-to-one correspondence between
2005 LTIP Units and Common Units for conversion, distribution and other
purposes, including without limitation complying with the following procedures.
If an Adjustment Event (as defined below) occurs, then the General Partner shall
make a corresponding adjustment to the 2005 LTIP Units to maintain a one-for-one
conversion and economic equivalence ratio between Common Units and 2005 LTIP
Units. The following shall be "Adjustment Events": (A) the Partnership makes a
distribution on all outstanding Common Units in Partnership Units, (B) the
Partnership subdivides the outstanding Common Units into a greater number of
units or combines the outstanding Common Units into a smaller number of units,
or (C) the Partnership issues any Partnership Units in exchange for its
outstanding Common Units by way of a reclassification or recapitalization of its
Common Units. If more than one Adjustment Event occurs, the adjustment to the
2005 LTIP Units need be made only once using a single formula that takes into
account each and every Adjustment Event as if all Adjustment Events occurred
simultaneously. For the avoidance of doubt, the following shall not be
Adjustment Events: (x) the issuance of Partnership Units in a financing,
reorganization, acquisition or other similar business transaction, (y) the
issuance of Partnership Units pursuant to any employee benefit or compensation
plan or distribution reinvestment plan, or (z) the issuance of any Partnership
Units to the Company in respect of a capital contribution to the Partnership of
proceeds from the sale of securities by the Company. If the Partnership takes an
action affecting the Common Units other than actions specifically described
above as "Adjustment Events" and in the opinion of the General Partner such
action would require an adjustment to the 2005 LTIP Units to maintain the
one-to-one correspondence described above, the General Partner shall have the
right to make such adjustment to the 2005 LTIP Units, to the extent permitted by
law and by the terms of any plan pursuant to which the 2005 LTIP Units have been
issued, in such manner and at such time as the General Partner, in its sole
discretion, may determine to be appropriate under the circumstances. If an
adjustment is made to the 2005 LTIP Units as herein provided the Partnership
shall promptly file in the books and records of the Partnership an officer's
certificate setting forth such adjustment and a brief statement of the facts
requiring such adjustment, which certificate shall be conclusive evidence of the
correctness of such adjustment absent manifest error. Promptly after filing of
such certificate, the Partnership shall mail a notice to each holder of 2005
LTIP Units setting forth the adjustment to his or her 2005 LTIP Units and the
effective date of such adjustment.


                                    Exh. I-3


         5. Ranking.

         The 2005 LTIP Units shall rank on parity with the Common Units in all
respects.

         6. No Liquidation Preference.

         The 2005 LTIP Units shall have no liquidation preference.

         7. Right to Convert 2005 LTIP Units into Common Units.

                  (a) Conversion Right. On or after the date that is two (2)
years after the 2005 LTIP Issuance Date a holder of 2005 LTIP Units shall have
the right (the "Conversion Right"), at his or her option, at any time to convert
all or a portion of his or her Vested 2005 LTIP Units into Common Units;
provided, however, that a holder may not exercise the Conversion Right for fewer
than one thousand (1,000) Vested 2005 LTIP Units or, if such holder holds fewer
than one thousand Vested 2005 LTIP Units, all of the holder's Vested 2005 LTIP
Units. Holders of 2005 LTIP Units shall not have the right to convert Unvested
2005 LTIP Units into Common Units until they become Vested 2005 LTIP Units. The
General Partner shall have the right at any time to cause a conversion of Vested
2005 LTIP Units into Common Units. In all cases, the conversion of any 2005 LTIP
Units into Common Units shall be subject to the conditions and procedures set
forth in this Section 7.

                  (b) Number of Units Convertible. A holder of Vested 2005 LTIP
Units may convert such Units into an equal number of fully paid and
non-assessable Common Units, giving effect to all adjustments (if any) made
pursuant to Section 4. Notwithstanding the foregoing, in no event may a holder
of Vested 2005 LTIP Units convert a number of Vested 2005 LTIP Units that
exceeds (x) the Economic Capital Account Balance of such holder, to the extent
attributable to its ownership of 2005 LTIP Units, divided by (y) the Common Unit
Economic Balance, in each case as determined as of the effective date of
conversion (the "Capital Account Limitation").

                  (c) Notice. In order to exercise his or her Conversion Right,
a holder of 2005 LTIP Units shall deliver a notice (a "Conversion Notice") in
the form attached as EXHIBIT A to this Supplement (with a copy to the General
Partner) not less than 10 nor more than 60 days prior to a date (the "Conversion
Date") specified in such Conversion Notice; provided, however, that if the
General Partner has not given to the 2005 LTIP Unitholders notice of a proposed
or upcoming Transaction (as defined below) at least



                                    Exh. I-4


thirty (30) days prior to the effective date of such Transaction, then holders
of 2005 LTIP Units shall have the right to deliver a Conversion Notice until the
earlier of (x) the tenth (10th) day after such notice from the General Partner
of a Transaction or (y) the third business day immediately preceding the
effective date of such Transaction. A Conversion Notice shall be provided in the
manner provided in Section 15.1 of the Partnership Agreement. Each Holder of
2005 LTIP Units covenants and agrees with the Partnership that all Vested 2005
LTIP Units to be converted pursuant to this Section 7 shall be free and clear of
all liens. Notwithstanding anything herein to the contrary, a Holder of 2005
LTIP Units may deliver a Redemption Notice pursuant to Section 8.6 of the
Partnership Agreement relating to those Common Units that will be issued to such
holder upon conversion of such 2005 LTIP Units into Common Units in advance of
the Conversion Date; provided, however, that the redemption of such Common Units
by the Partnership shall in no event take place until the Conversion Date. For
clarity, it is noted that the objective of this paragraph is to put a holder of
2005 LTIP Units in a position where, if he or she so wishes, the Common Units
into which his or her Vested 2005 LTIP Units will be converted can be redeemed
by the Partnership simultaneously with such conversion, with the further
consequence that, if the Company elects to assume the Partnership's redemption
obligation with respect to such Common Units under Section 8.6 of the
Partnership Agreement by delivering to such holder REIT Shares rather than cash,
then such holder can have such REIT Shares issued to him or her simultaneously
with the conversion of his or her Vested 2005 LTIP Units into Common Units. The
General Partner shall cooperate with a holder of 2005 LTIP Units to coordinate
the timing of the different events described in the foregoing sentence.

                  (d) Forced Conversion. The Partnership, at any time at the
election of the General Partner, may cause any number of Vested 2005 LTIP Units
held by a holder of 2005 LTIP Units to be converted (a "Forced Conversion") into
an equal number of Common Units, giving effect to all adjustments (if any) made
pursuant to Section 4; provided, that the Partnership may not cause Forced
Conversion of any 2005 LTIP Units that would not at the time be eligible for
conversion at the option of such 2005 LTIP Unitholder pursuant to paragraph (b)
above. In order to exercise its right of Forced Conversion, the Partnership
shall deliver a notice (a "Forced Conversion Notice") in the form attached as
EXHIBIT B to this Supplement to the applicable Holder not less than 10 nor more
than 60 days prior to the Conversion Date specified in such Forced Conversion
Notice. A Forced Conversion Notice shall be provided in the manner provided in
Section 15.1 of the Partnership Agreement.

                  (e) Conversion Procedures. A conversion of Vested 2005 LTIP
Units for which the Holder has given a Conversion Notice or the Partnership has
given a Forced Conversion Notice shall occur automatically after the close of
business on the applicable Conversion Date without any action on the part of
such holder of 2005 LTIP Units, as of which time such holder of 2005 LTIP Units
shall be credited on the books and records of the Partnership with the issuance
as of the opening of business on the next day of the number of Common Units
issuable upon such conversion. After the conversion of 2005 LTIP Units as
aforesaid, the Partnership shall deliver to such holder of 2005 LTIP Units, upon
his or her written request, a certificate of the General Partner certifying the
number of Common Units and remaining 2005 LTIP Units, if any, held by such
Person immediately after such conversion.


                                    Exh. I-5


                  (f) Treatment of Capital Account. For purposes of making
future allocations under Section 6.1.E of the Agreement and applying the Capital
Account Limitation, the portion of the Economic Capital Account Balance of the
applicable holder of 2005 LTIP Units that is treated as attributable to his or
her 2005 LTIP Units shall be reduced, as of the date of conversion, by the
product of the number of 2005 LTIP Units converted and the Common Unit Economic
Balance.

                  (g) Mandatory Conversion in Connection with a Transaction. If
the Partnership or the General Partner shall be a party to any transaction
(including without limitation a merger, consolidation, unit exchange, self
tender offer for all or substantially all Common Units or other business
combination or reorganization, or sale of all or substantially all of the
Partnership's assets, but excluding any transaction which constitutes an
Adjustment Event), in each case as a result of which Common Units shall be
exchanged for or converted into the right, or the holders of such Units shall
otherwise be entitled, to receive cash, securities or other property or any
combination thereof (each of the foregoing being referred to herein as a
"Transaction"), then the General Partner shall, immediately prior to the
Transaction, exercise its right to cause a Forced Conversion with respect to the
maximum number of 2005 LTIP Units then eligible for conversion, taking into
account any allocations that occur in connection with the Transaction or that
would occur in connection with the Transaction if the assets of the Partnership
were sold at the Transaction price or, if applicable, at a value determined by
the General Partner in good faith using the value attributed to the Partnership
Units in the context of the Transaction (in which case the Conversion Date shall
be the effective date of the Transaction).

         In anticipation of such Forced Conversion and the consummation of the
Transaction, the Partnership shall use commercially reasonable efforts to cause
each holder of 2005 LTIP Units to be afforded the right to receive in connection
with such Transaction in consideration for the Common Units into which his or
her 2005 LTIP Units will be converted the same kind and amount of cash,
securities and other property (or any combination thereof) receivable upon the
consummation of such Transaction by a holder of the same number of Common Units,
assuming such holder of Common Units is not a Person with which the Partnership
consolidated or into which the Partnership merged or which merged into the
Partnership or to which such sale or transfer was made, as the case may be (a
"Constituent Person"), or an affiliate of a Constituent Person. In the event
that holders of Common Units have the opportunity to elect the form or type of
consideration to be received upon consummation of the Transaction, prior to such
Transaction the General Partner shall give prompt written notice to each holder
of 2005 LTIP Units of such election, and shall use commercially reasonable
efforts to afford such holders the right to elect, by written notice to the
General Partner, the form or type of consideration to be received upon
conversion of each 2005 LTIP Unit held by such holder into Common Units in
connection with such Transaction. If a holder of 2005 LTIP Units fails to make
such an election, such Holder (and any of its transferees) shall receive upon
conversion of each 2005 LTIP Unit held by him or her (or by any of his or her
transferees) the same kind and amount of consideration that a holder of a Common
Unit would receive if such Common Unit Holder failed to make such an election.


                                    Exh. I-6


         Subject to the rights of the Partnership and the General Partner under
any Vesting Agreement and the terms of any plan under which 2005 LTIP Units are
issued, the Partnership shall use commercially reasonable effort to cause the
terms of any Transaction to be consistent with the provisions of this Section 7
and to enter into an agreement with the successor or purchasing entity, as the
case may be, for the benefit of any holders of 2005 LTIP Units whose 2005 LTIP
Units will not be converted into Common Units in connection with the Transaction
that will (i) contain provisions enabling the holders of 2005 LTIP Units that
remain outstanding after such Transaction to convert their 2005 LTIP Units into
securities as comparable as reasonably possible under the circumstances to the
Common Units and (ii) preserve as far as reasonably possible under the
circumstances the distribution, special allocation, conversion, and other rights
set forth in the Partnership Agreement for the benefit of the holders of 2005
LTIP Units.

         8. Redemption at the Option of the Partnership.

         2005 LTIP Units will not be redeemable at the option of the
Partnership; provided, however, that the foregoing shall not prohibit the
Partnership from repurchasing 2005 LTIP Units from the holder thereof if and to
the extent such holder agrees to sell such 2005 LTIP Units.

         9. Intentionally Omitted.

         10. Voting Rights.

                  (a) Voting with Common Units. Holders of 2005 LTIP Units shall
have the right to vote on all matters submitted to a vote of the holders of
Common Units; holders of 2005 LTIP Units and Common Units shall vote together as
a single class, together with any other class or series of units of limited
partnership interest in the Partnership upon which like voting rights have been
conferred. In any matter in which the 2005 LTIP Units are entitled to vote,
including an action by written consent, each 2005 LTIP Unit shall be entitled to
one vote.

                  (b) Special Approval Rights. In addition to, and not in
limitation of, the provisions of Section 10(a) above (and notwithstanding
anything appearing to be contrary in the Partnership Agreement), the Company
and/or the Partnership shall not, without the affirmative consent of the holders
of sixty-six and two-thirds percent (66 2/3%) of the then outstanding 2005 LTIP
Units, given in person or by proxy, either in writing or at a meeting, take any
action that would materially and adversely alter, change, modify or amend the
rights, powers or privileges of the 2005 LTIP Units; but subject in any event to
the following provisions: (i) no consent of the holders of 2005 LTIP Units will
be required if and to the extent that any such alteration, change, modification
or amendment would similarly alter, change, modify or amend the rights, powers
or



                                    Exh. I-7


privileges of the Common Units; (ii) with respect to the occurrence of any
merger, consolidation or other business combination or reorganization, so long
as the 2005 LTIP Units remain outstanding with the terms thereof materially
unchanged or, if the Partnership is not the surviving entity in such
transaction, are exchanged for a security of the surviving entity with terms
that are materially the same with respect to rights to allocations,
distributions, redemption, conversion and voting as the 2005 LTIP Units and
without any income, gain or loss expected to be recognized by the holder upon
the exchange for federal income tax purposes (and with the terms of the Common
Units or such other securities into which the 2005 LTIP Units (or the substitute
security therefor) are convertible materially the same with respect to rights to
allocations, distributions, redemption, conversion and voting), the occurrence
of any such event shall not be deemed to materially and adversely alter, change,
modify or amend the rights, powers or privileges of the 2005 LTIP Units; (iii)
any creation or issuance of any Common Units or of any class of series of common
or preferred units of the Partnership (whether ranking junior to, on a parity
with or senior to the 2005 LTIP Units with respect to payment of distributions,
redemption rights and the distribution of assets upon liquidation, dissolution
or winding up), which either (x) does not require the consent of the holders of
Common Units or (y) does require such consent and is authorized by a vote of the
holders of Common Units; and 2005 LTIP Units voting together as a single class,
together with any other class or series of units of limited partnership interest
in the Partnership upon which like voting rights have been conferred, shall not
be deemed to materially and adversely alter, change, modify or amend the rights,
powers or privileges of the 2005 LTIP Units; and (iv) any waiver by the
Partnership of restrictions or limitations applicable to any outstanding 2005
LTIP Units with respect to any holder or holders thereof shall not be deemed to
materially and adversely alter, change, modify or amend the rights, powers or
privileges of the 2005 LTIP Units with respect to other holders. The foregoing
voting provisions will not apply if, as of or prior to the time when the action
with respect to which such vote would otherwise be required will be taken or be
effective, all outstanding 2005 LTIP Units shall have been converted and/or
redeemed, or provision is made for such redemption and/or conversion to occur as
of or prior to such time.



                                    Exh. I-8


                                   Schedule A
                                   ----------


  Name and Address                                 Number of 2005 LTIP Units
  ----------------                                 -------------------------
Scott H. Rechler                                             200,000
c/o Reckson Associates Realty Corp.
225 Broadhollow Road
Melville, New York 11747

Michael Maturo                                               25,000
c/o Reckson Associates Realty Corp.
225 Broadhollow Road
Melville, New York 11747

Jason M. Barnett                                              6,500
c/o Reckson Associates Realty Corp.
225 Broadhollow Road
Melville, New York 11747

Salvatore Campofranco                                        15,000
c/o Reckson Associates Realty Corp.
225 Broadhollow Road
Melville, New York 11747

F.D. Rich                                                     6,500
c/o Reckson Associates Realty Corp.
225 Broadhollow Road
Melville, New York 11747

Philip Waterman                                               2,600
c/o Reckson Associates Realty Corp.
225 Broadhollow Road
Melville, New York 11747

Todd Rechler                                                 10,000
c/o Reckson Associates Realty Corp.
225 Broadhollow Road
Melville, New York 11747

Richard Conniff                                               6,500
c/o Reckson Associates Realty Corp.
225 Broadhollow Road
Melville, New York 11747



                                     Sch. A




                                    Exhibit A

                    NOTICE OF ELECTION BY PARTNER TO CONVERT
                        2005 LTIP UNITS INTO COMMON UNITS

         The undersigned holder of 2005 LTIP Units hereby irrevocably elects to
convert the number of Vested 2005 LTIP Units in Reckson Operating Partnership,
L.P. (the "Partnership") set forth below into Common Units in accordance with
the terms of the Amended and Restated Agreement of Limited Partnership of the
Partnership, as amended. The undersigned hereby represents, warrants, and
certifies that the undersigned: (a) has title to such 2005 LTIP Units, free and
clear of the rights or interests of any other person or entity other than the
Partnership; (b) has the full right, power, and authority to cause the
conversion of such 2005 LTIP Units as provided herein; and (c) has obtained the
consent or approval of all persons or entities, if any, having the right to
consent or approve such conversion.


Name of Holder: _______________________________________________________________
                  (Please Print: Exact Name as Registered with Partnership)

Number of 2005 LTIP Units to be Converted: _______________

Date of this Notice: _____________________________________


         ______________________________________________________________________
         (Signature of Holder: Sign Exact Name as Registered with Partnership)

         ______________________________________________________________________
         (Street Address)

         ______________________________________________________________________
         (City)                             (State)                  (Zip Code)

         Signature Guaranteed by:______________________________________________




                                     Exh. A



                                    Exhibit B

              NOTICE OF ELECTION BY PARTNERSHIP TO FORCE CONVERSION
                      OF 2005 LTIP UNITS INTO COMMON UNITS


         Reckson Operating Partnership, L.P. (the "Partnership") hereby
irrevocably elects to cause the number of 2005 LTIP Units held by the holder of
2005 LTIP Units set forth below to be converted into Common Units in accordance
with the terms of the Amended and Restated Agreement of Limited Partnership of
the Partnership.


Name of Holder: _______________________________________________________________
                  (Please Print: Exact Name as Registered with Partnership)

Number of 2005 LTIP Units to be Converted: _______________

Date of this Notice: _____________________________________




                                     Exh. B

EX-10.47

                                                                 Exhibit 10.47

                         RECKSON ASSOCIATES REALTY CORP.
                            LONG-TERM INCENTIVE PLAN
                             OP UNIT AWARD AGREEMENT


Name of Grantee:  Scott Rechler ("Grantee")
No. of LTIP OP Units:  200,000
Date of Grant:  March 11, 2005


                                    RECITALS

         A. The Grantee is an executive officer of Reckson Associates Realty
Corp. (the "Company") or one of its Affiliates.

         B. The Grantee was selected by the Compensation Committee of the Board
of Directors of the Company (the "Committee") to receive an award of Long-Term
Incentive Plan OP Units ("LTIP OP Units") in Reckson Operating Partnership, L.P.
(the "Partnership") in the number specified above and having the rights
specified herein and in the Supplement to the Amended and Restated Agreement of
Limited Partnership of the Partnership (the "Partnership Agreement")
Establishing 2005 LTIP Units of Limited Partnership Interest (the "Partnership
Agreement Supplement").

         NOW, THEREFORE, the Company hereby grants to the Grantee, effective as
of the Date of Grant specified above, the number of LTIP OP Units listed above
subject to the terms and conditions of this Agreement.

         1. Restrictions and Conditions:

                  (a) The records of the Partnership evidencing the LTIP OP
Units granted herein shall bear an appropriate legend, as determined by the
Partnership in its sole discretion, to the effect that such LTIP OP Units are
subject to restrictions as set forth herein, in the Partnership Agreement
Supplement and in the Partnership Agreement.

                  (b) None of the LTIP OP Units awarded to the Grantee hereunder
shall be sold, assigned, transferred, pledged, hypothecated, given away or in
any other manner disposed of, encumbered, whether voluntarily or by operation of
law, or redeemed in accordance with the Partnership Agreement or the Partnership
Agreement Supplement (a) prior to vesting, (b) for a period of two (2) years
beginning on the Date of Grant specified above other than in connection with a
Change-in-Control, or (c) unless such transfer is in compliance with all
applicable securities laws (including, without limitation, the Securities Act),
and such disposition is in accordance with the applicable terms and conditions
of the Partnership Agreement and the Partnership Agreement Supplement. In
connection with any transfer of LTIP OP Units, the Company may require the
transferor to provide at the Grantee's own expense an opinion of counsel to the
transferor, satisfactory to the Company, that such transfer is in compliance
with all foreign, federal and state securities laws (including, without
limitation, the Securities Act). Any attempted disposition of LTIP OP Units not
in accordance with the terms and conditions of this Section 1(b) shall be null
and void, and the Partnership shall not reflect on its records any change in
record ownership of any LTIP OP Units as a result of any such disposition, shall
otherwise refuse to recognize any such disposition and shall not in any way give
effect to any such disposition of any LTIP OP Units.




                  (c) Except as otherwise provided in Section 2 hereof or
elsewhere herein, if the Grantee's employment with the Company or its Affiliates
is voluntarily or involuntarily terminated for any reason prior to vesting of
the LTIP OP Units granted herein, the Grantee shall forfeit all LTIP OP Units
that are not vested as of the date of such termination of employment.

         2. Vesting of the LTIP OP Units: The LTIP OP Units generally will
become vested as follows:

                  (a) 50.0% of the LTIP OP Units will become cumulatively vested
on December 31, 2006 and December 31, 2007 (each, an "Annual Vesting Date"); in
each case provided that the Grantee remains in continuous employment with the
Company or any of its Affiliates until such date; and provided, further, that
any LTIP OP Units which otherwise would become vested on such Annual Vesting
Date will not become so vested unless the Company has achieved, during the
calendar year completed on December 31, 2005, (i) a total return to shareholders
(including all Common Stock dividends and stock appreciation) based on the
respective Initial Base Price that either (x) is at or above the 50th percentile
of the total return to shareholders achieved by members of the Peer Group during
the same period, or (y) subject to the provisions of Section 2(e), equals a
total return of at least 9% per annum or (ii) a per share increase in annual
Funds from Operations of 5% or more. If the vesting performance requirement is
not satisfied for the calendar year ending December 31, 2005, the LTIP OP Units
will not be forfeited and will become vested on December 31, 2006, or if the
performance requirement is not satisfied at such date the LTIP OP Units will not
be forfeited and will become vested on December 31, 2007, if on either of such
dates the vesting performance requirement is satisfied on a cumulative and
compounded basis as measured for an extended performance period beginning with
the annual period for which the vesting performance requirement was not
satisfied through the relevant date. For purposes of this Section, (i) the
performance of the Company relative to the performance of members of the Peer
Group will be determined using the VWAP for the last ten trading days of the
Company's Common Stock and the common stock of the members of the Peer Group at
the applicable calendar year end, and (ii) the per annum percentage performance
of the Company will be determined using the VWAP for the last ten trading days
for the period ending at the applicable calendar year end. If the vesting
performance requirement is not satisfied at December 31, 2007, subject to
Section 2(d), the LTIP OP Units will be forfeited.

                  (b) Notwithstanding the foregoing, if a Change-in-Control
occurs prior to December 31, 2007 and the Grantee remains in continuous
employment with the Company or any of its Affiliates until such occurrence, all
non-vested LTIP OP Units will thereupon become fully vested provided that, if a
Change-in-Control shall occur and (i) (a) the Company continues in existence as
a public company or (b) another company is the successor to the Company in a
transaction whereby holders of Common Stock receive common stock of the
successor company (or a combination of common stock and cash) and such successor
company expressly assumes the obligations of the Company as the general partner
of the Partnership, and (ii) (a) the Partnership continues in existence as the
operating partnership of the Company (in the event described in clause (i)(a)
above) or (b) another limited partnership, limited liability company or similar
entity is the successor to the Partnership in a transaction whereby holders of
OPU and LTIP OP Units receive equity interests in such successor entity having
substantially identical rights, voting powers, restrictions, limitations as to
distributions, qualifications and terms and conditions of redemption as the OPU
and LTIP OP Units, respectively, and expressly assumes the obligations under
this Agreement, and (iii) the Grantee continues employment with the Company or
such successor company or their Affiliates, as the case may be, then no vesting
shall occur under this Section 2(b) as a result of such Change-in-Control, but
this Agreement and the awards hereunder shall continue in effect on the terms
hereof, subject to the adjustment of the Initial Base Price as may be
appropriate pursuant to Section 4 hereof.


                                       2


                  (c) Notwithstanding the foregoing, if the Grantee's employment
with the Company and all Affiliates is terminated prior to December 31, 2007 by
reason of the Grantee's death or Disability, by the Grantee for Good Reason or
in the event a Force Out occurs subsequent to a Change-in-Control, or by the
Company or any Affiliate for any reason other than Cause or transfer to another
Affiliate, all non-vested LTIP OP Units will thereupon become fully vested. If
the Grantee's employment with the Company and all Affiliates is terminated prior
to December 31, 2007 for any other reason, any LTIP OP Units that have not yet
become vested will thereupon be forfeited.

                  (d) Notwithstanding the foregoing, if the Grantee remains in
continuous employment with the Company or any of its Affiliates until an
applicable Annual Vesting Date but the vesting performance requirement is not
satisfied at such date (or any extended performance period as contemplated in
Section 2(b) above), and if the Committee determines that it nevertheless would
be consistent with the spirit and intent of this Agreement to vest some or all
of the LTIP OP Units that otherwise would have become vested on that Annual
Vesting Date, then the Committee, in its sole and absolute discretion, may elect
to vest some or all of such LTIP OP Units.

                  (e) Notwithstanding the foregoing, in the event that (i) the
LTIP OP Units would become vested as a result of the Company achieving a total
return of at least 9% per annum in accordance with the terms of Section 2(a),
(ii) the appreciation in the share price of the Common Stock alone has not
resulted in the Company achieving such a 9% per annum total return (i.e.,
without taking into account any dividends paid to holders of Common Stock), and
(iii) the Company's Dividend Payout Ratio with regard to its Cash Available for
Distribution exceeds 100% for any relevant annual period or periods, the
Committee may, in its sole discretion, review whether it is appropriate for the
LTIP OP Units to vest for such period or periods, and may determine that the
LTIP OP Units shall not vest, in whole or in part, based upon such facts as it
deems appropriate including, but not limited to, the effect on the Dividend
Payout Ratio of rent concessions, tenant improvements, capital expenditures by
the Company and similar matters that represent uses of operating cash flow for
the purpose of generating incremental cash flow or other returns for the
Company.


                                       3


         3. Distributions. Distributions on the LTIP OP Units shall be paid
currently to the Grantee in accordance with the terms of the Partnership
Agreement.

         4. Adjustment. The Committee will make or provide for such adjustments
in the number of LTIP OP Units and the vesting performance requirements
applicable to LTIP OP Units, as the Committee may in good faith determine to be
equitably required in order to prevent any dilution or expansion of the rights
of the Grantee that otherwise would result from (i) any stock dividend, stock
split, combination of shares, recapitalization or similar change in the capital
structure of the Company or similar events with respect to the partnership
interests in the Partnership or (ii) any merger, consolidation, spin-off,
spin-out, split-off, split-up, reorganization, partial or complete liquidation
or other distribution of assets, issuance of warrants or other rights to
purchase securities or any other transaction or event having an effect similar
to any of the foregoing.

         5. Compliance With Law. The Partnership and the Grantee will make
reasonable efforts to comply with all applicable securities laws. In addition,
notwithstanding any provision of this Agreement to the contrary, no LTIP OP
Units will become vested or be paid at a time that such vesting or payment would
result in a violation of any such law.

         6. Investment Representation; Registration.

                  (a) The Grantee hereby makes the covenants, representations
and warranties set forth on EXHIBIT B attached hereto. All of such covenants,
warranties and representations shall survive the execution and delivery of this
Agreement by the Grantee. The Grantee shall immediately notify the Partnership
upon discovering that any of the representations or warranties set forth on
EXHIBIT B were false when made or have, as a result of changes in circumstances,
become false.

                  (b) The Partnership may make a notation in its records and/or
affix a legend to the certificates (if any) representing the LTIP OP Units
issued pursuant to this Agreement to the effect that such units have not been
registered under the Securities Act and may only be sold or transferred upon
registration or pursuant to an exemption therefrom.

                  (c) The Partnership will have no obligation to register under
the Securities Act any LTIP OP Units.

         7. Severability. In the event that one or more of the provisions of
this Agreement may be invalidated for any reason by a court, any provision so
invalidated will be deemed to be separable from the other provisions hereof, and
the remaining provisions hereof will continue to be valid and fully enforceable.

         8. Governing Law. This Agreement is made under, and will be construed
in accordance with, the laws of the State of New York, without giving effect to
the principles of conflicts of laws of such State.

         9. Transferability. This Agreement is personal to the Grantee, is
non-assignable and is not transferable in any manner, by operation of law or
otherwise, other than by will or the laws of descent and distribution.



                                       4


         10. Amendment. The Grantee acknowledges that this Agreement may be
amended or canceled by the Partnership for the purpose of satisfying changes in
law or for any other lawful purpose, provided that no such action shall
adversely affect the Grantee's rights under this Agreement without the Grantee's
written consent.

         11. No Obligation to Continue Employment. Neither the Company nor any
Affiliate is obligated by or as a result of this Agreement to continue the
Grantee in employment and this Agreement shall not interfere in any way with the
right of the Company or any Affiliate to terminate the employment of the Grantee
at any time.

         12. Notices. Notices hereunder shall be mailed or delivered to the
Partnership at its principal place of business and shall be mailed or delivered
to the Grantee at the address on file with the Partnership or, in either case,
at such other address as one party may subsequently furnish to the other party
in writing.

         13. Withholding and Taxes. No later than the date as of which an amount
first becomes includible in the gross income of the Grantee for income tax
purposes or subject to Federal Insurance Contributions Act withholding with
respect to any award under this Agreement, such Grantee will pay to the Company
or, if appropriate, any of its Affiliates, or make arrangements satisfactory to
the Company regarding the payment of, any United States federal, state or local
or foreign taxes of any kind required by law to be withheld with respect to such
amount. The obligations of the Company under this Agreement will be conditional
on such payment or arrangements, and the Company and its Affiliates shall, to
the extent permitted by law, have the right to deduct any such taxes from any
payment otherwise due to the Grantee.

         14. Successors and Assigns. This Agreement shall be binding upon the
Partnership's successors and assigns, whether or not this Agreement is expressly
assumed.

         15. Certain Definitions.

                  (a) "Affiliate" means any person or entity that, at the time
of reference, is controlled by, controlling of or under common control with the
Company.

                  (b) "Cash Available for Distribution" means the Company's cash
available for distribution to holders of the Company's Common Stock on an "as
committed" basis as announced by the Company for the relevant period.

                  (c) "Cause" means a finding by the Company's Board of
Directors that the Grantee has (i) acted with gross negligence or willful
misconduct in connection with the performance of his material duties to the
Company or any Affiliate; (ii) defaulted in the performance of his material
duties to the Company or any Affiliate and has not corrected such action within
15 days of receipt of written notice thereof; (iii) willfully acted against the
best interests of the Company or any Affiliate, which act has had a material and
adverse impact on the financial affairs of the Company or such Affiliate; or
(iv) been convicted of a felony or committed a material act of common law fraud
against the Company, any Affiliate or any of their employees and such act or
conviction has had, or the Company's Board of Directors reasonably determines
will have, a material adverse effect on the interests of the Company or such
Affiliate; provided, however, that a finding of Cause will not become effective
unless and until the Board of Directors provides the Grantee notice that it is
considering making such finding and a reasonable opportunity to be heard by the
Board of Directors.


                                       5


                  (d) A "Change-in-Control" will be deemed to have occurred if
following the Date of Grant:

                           (i) any Person, together with all "affiliates" and
                  "associates" (as such terms are defined in Rule 12b-2 under
                  the Securities Exchange Act of 1934 (the "Exchange Act")) of
                  such Person, shall become the "beneficial owner" (as such term
                  is defined in Rule 13d-3 under the Exchange Act), directly or
                  indirectly, of securities of the Company representing 30% or
                  more of (A) the combined voting power of the Company's then
                  outstanding securities having the right to vote in an election
                  of the Company's Board of Directors ("Voting Securities"), (B)
                  the combined voting power of the Company's then outstanding
                  Voting Securities and any securities convertible into Voting
                  Securities, or (C) the then outstanding shares of all classes
                  of stock of the Company; or

                           (ii) individuals who, as of the effective date of
                  this Agreement, constitute the Company's Board of Directors
                  (the "Incumbent Directors") cease for any reason, including,
                  without limitation, as a result of a tender offer, proxy
                  contest, merger or similar transaction, to constitute at least
                  a majority of the Company's Board of Directors, provided that
                  any person becoming a director of the Company subsequent to
                  the effective date of this Agreement whose election or
                  nomination for election was approved by a vote of at least a
                  majority of the Incumbent Directors (other than an election or
                  nomination of an individual whose initial assumption of office
                  is in connection with an actual or threatened election contest
                  relating to the election of the directors of the Company, as
                  such terms are used in Rule 14a-11 of Regulation 14A under the
                  Exchange Act) shall, for purposes of this Agreement, be
                  considered an Incumbent Director; or

                           (iii) consummation of (1) any consolidation or merger
                  of the Company or any subsidiary where the stockholders of the
                  Company, immediately prior to the consolidation or merger,
                  would not, immediately after the consolidation or merger,
                  beneficially own (as such term is defined in Rule 13d-3 under
                  the Exchange Act), directly or indirectly, but based solely on
                  their prior ownership of shares of the Company, shares
                  representing in the aggregate more than 60% of the voting
                  shares of the corporation issuing cash or securities in the
                  consolidation or merger (or of its ultimate parent
                  corporation, if any), or (2) any sale, lease, exchange or
                  other transfer (in one transaction or a series of transactions
                  contemplated or arranged by any party as a single plan) of all
                  or substantially all of the assets of the Company; or

                           (iv) stockholder approval of any plan or proposal for
                  the liquidation or dissolution of the Company.



                                       6



                           Notwithstanding the foregoing, a "Change-in-Control"
                  shall not be deemed to have occurred for purposes of the
                  foregoing clause (i) (A) solely as the result of an
                  acquisition of securities by the Company which, by reducing
                  the number of shares of stock or other Voting Securities
                  outstanding, increases (x) the proportionate number of shares
                  of stock of the Company beneficially owned by any Person to
                  30% or more of the shares of stock then outstanding or (y) the
                  proportionate voting power represented by the Voting
                  Securities beneficially owned by any Person to 30% or more of
                  the combined voting power of all then outstanding Voting
                  Securities; provided, however, that if any Person referred to
                  in clause (x) or (y) of this sentence shall thereafter become
                  the beneficial owner of any additional stock of the Company or
                  other Voting Securities (other than pursuant to a share split,
                  stock dividend, or similar transaction), then a
                  "Change-in-Control" shall be deemed to have occurred for
                  purposes of the foregoing clause (i), and (B) solely as a
                  result of the direct or indirect acquisition of beneficial
                  ownership of Voting Securities by any executive officers of
                  the Company on the date hereof and/or the Company, any of its
                  subsidiaries, or any trustee, fiduciary or other person or
                  entity holding securities under any employee benefit plan of
                  the Company or any of its subsidiaries if the Grantee is one
                  of the executive officers participating in such acquisition.

                  (e) "Common Stock" means the shares of common stock, par value
$0.01 per share, of the Company.

                  (f) "Disability" means that the Grantee has been unable to
efficiently perform his duties to the Company and all Affiliates because of any
physical or mental injury or illness until the earlier of such time when (i) the
period of injury or illness (whether or not the same injury or illness) exceeds
180 consecutive days or (ii) the Grantee becomes eligible to receive benefits
under a comprehensive disability insurance policy maintained or sponsored by the
Company.

                  (g) "Dividend Payout Ratio" means the quotient, expressed as a
percentage, derived by dividing the aggregate dividends paid on shares of the
Company's Common Stock during a relevant period by the Cash Available for
Distribution for such period.

                  (h) "Employment Agreement" means the Amendment and Restatement
of Employment and Noncompetition Agreement, dated as of August 15, 2000, between
the Grantee and the Company as may be amended or restated from time to time, or
any agreement entered into by the Company and the Grantee after the date hereof
with respect to the Grantee's employment by the Company.

                  (i) "Force Out" means

                           (i) a change in duties, responsibilities, status or
                  positions with the Company or successor company, which, in the
                  Grantee's reasonable judgment, does not represent a promotion
                  from or maintaining of the Grantee's duties, responsibilities,
                  status or positions as in effect immediately prior to the
                  Change-in-Control, or any removal of the Grantee from or any
                  failure to reappoint or reelect the Grantee to such positions,
                  except in connection with the termination of the Grantee's
                  employment for Cause, Disability, retirement or death;


                                       7


                           (ii) a reduction by the Company or such successor
                  company in the Grantee's base salary as in effect immediately
                  prior to the Change-in-Control;

                           (iii) the failure by the Company or such successor
                  company to provide and credit the Grantee with the number of
                  paid vacation days to which the Grantee is then entitled in
                  accordance with the Company or such successor company's normal
                  vacation policies as in effect immediately prior to the
                  Change-in-Control;

                           (iv) the Company or such successor company requiring
                  the Grantee to be based in an office located beyond a
                  reasonable commuting distance from the Grantee's residence
                  immediately prior to the Change-in-Control, except for
                  required travel relating to the Company or such successor
                  company's business to an extent substantially consistent with
                  the business travel obligations which the Grantee undertook on
                  behalf of the Company or such successor company prior to the
                  Change-in-Control;

                           (v) the failure by the Company or such successor
                  company to obtain from any successor to the Company or such
                  successor company an agreement to be bound by this Agreement
                  and the Employment Agreement;

                           (vi) any refusal by the Company or such successor
                  company to continue to allow the Grantee to attend to matters
                  or engage in activities not directly related to the business
                  of the Company or such successor company which, prior to the
                  Change in-Control, the Grantee was permitted by the Company or
                  such successor company's Boards of Directors to attend to or
                  engage in; or

                           (vii) the failure by the Company or such successor
                  company to continue in effect any of the benefit plans,
                  programs or arrangements in which the Grantee is participating
                  at the time of the Change-in-Control of the Company or such
                  successor company (unless the Grantee is permitted to
                  participate in any substitute benefit plan, program or
                  arrangement with substantially the same terms and to the same
                  extent and with the same rights as the Grantee had with
                  respect to the benefit plan, program or arrangement that is
                  discontinued) other than as a result of the normal expiration
                  of any such benefit plan, program or arrangement in accordance
                  with its terms as in effect at the time of the
                  Change-in-Control, or the taking of any action, or the failure
                  to act, by the Company or such successor company which would
                  adversely affect the Grantee's continued participation in any
                  of such benefit plans, programs or arrangements on at least as
                  favorable a basis to the Grantee as is the case on the date of
                  the Change-in-Control or which would materially reduce the
                  Grantee's benefits in the future under any of such benefit
                  plans, programs or arrangements or deprive the Grantee of any
                  material benefits enjoyed by the Grantee at the time of the
                  Change-in-Control.

                  (j) "Funds from Operations" means the Company's funds from
operations as defined by the National Association of Real Estate Investment
Trusts and as may be adjusted by the Company.


                                       8


                  (k) "Good Reason" means the occurrence of any of the following
events or conditions, which event or condition is not corrected by the Company
within 30 days of written notice from the Grantee: (i) any failure of the Board
of Directors of the Company to elect the Grantee to offices with the same or
substantially the same duties and responsibilities as in effect on the Date of
Grant, (ii) any material failure by the Company or any Affiliate to timely pay
or provide to the Grantee any compensation or benefits required to be paid or
provided under the terms of any employment or similar agreement in effect during
the term of this Agreement between the Grantee and the Company or such
Affiliate, (iii) any material breach by the Company or any Affiliate of any
other provision of any employment or similar agreement in effect during the term
of this Agreement between the Grantee and the Company or such Affiliate, and
(iv) any failure by the Company or any Affiliate to timely offer to renew (and
to hold such offer to renew open for acceptance for a reasonable period of time)
on substantially identical terms until at least the fourth anniversary of the
Date of Grant any employment agreement in effect on the Date of Grant between
the Grantee and the Company or such Affiliate.

                  (l) "Initial Base Price" means $32.81 per share of the Common
Stock of the Company.

                  (m) An "OPU" means a Class A common operating partnership unit
of the Partnership.

                  (n) "Peer Group" means the business entities set forth on
Exhibit A to this Agreement, and any successors to the businesses or assets of
such entities as determined by the Committee in its sole and absolute
discretion. If an entity listed on such Exhibit ceases to exist during the term
of this Agreement and the Committee determines that there is no successor to the
business or assets of such entity, then such entity will cease to be treated as
a member of the Peer Group to the extent and for the periods determined by the
Committee in its sole and absolute discretion.

                  (o) "Person" has the meaning used in Sections 13(d) and 14(d)
of the Exchange Act.

                  (p) "Securities Act" means the Securities Act of 1933.

                  (q) "VWAP" means the volume weighted average closing price per
share of a security on the primary exchange or other quotation system on which
the security is traded.

                            [signature page follows]



                                       9


         IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the 11th day of March, 2005.


                                RECKSON ASSOCIATES REALTY CORP.


                                By: /s/ Jason Barnett
                                    -------------------------------------------
                                    Name:  Jason Barnett
                                    Title: Executive Vice President and General
                                           Counsel


                                RECKSON OPERATING PARTNERSHIP, L.P.


                                By: /s/ Jason Barnett
                                    -------------------------------------------
                                    Name:  Jason Barnett
                                    Title: Executive Vice President and General
                                           Counsel


                                    /s/ Scott Rechler
                                    -------------------------------------------
                                    Scott Rechler





                                       10



                        Exhibit A - Peer Group Companies
                        --------------------------------

                         American Financial Realty Trust
                            Arden Realty Group, Inc.
                             Boston Properties, Inc.
                             Brandywine Realty Trust
                         CarrAmerica Realty Corporation
                       Crescent Real Estate Equities, Inc.
                         Equity Office Properties Trust
                          Mack-Cali Realty Corporation
                             Maguire Properties Inc.
                            Prentiss Properties Trust
                           SL Green Realty Corporation
                             Trizec Properties Inc.
                              Vornado Realty Trust






                                                                      EXHIBIT B


               GRANTEE'S COVENANTS, REPRESENTATIONS AND WARRANTIES

         The Grantee hereby represents, warrants and covenants as follows:

         (a) The Grantee is an individual with income (without including any
income of the Grantee's spouse) in excess of $200,000, or joint income with the
Grantee's spouse, in excess of $300,000, in each of the two most recent years,
and the Grantee reasonably expects to reach the same income level in the current
year.

         (b) The Grantee has received and had an opportunity to review the
following documents (the "Background Documents"):

                  (i)      The Company's latest Annual Report to Stockholders;

                  (ii)     The Company's Proxy Statement for its most recent
                           Annual Meeting of Stockholders;

                  (iii)    The Company's Report on Form 10-K for the fiscal year
                           most recently ended;

                  (iv)     The Company's Form 10-Q for the most recently ended
                           quarter if one has been filed by the Company with the
                           Securities and Exchange Commission since the filing
                           of the report described in clause (iii) above;

                  (v)      Each of the Company's Current Report(s) on Form 8-K,
                           if any, filed since the end of the fiscal year most
                           recently ended;

                  (vi)     The Partnership Agreement; and

                  (vii)    The Company's Amended and Restated Certificate of
                           Incorporation.

         The Grantee also acknowledges that any delivery of the Background
Documents and other information relating to the Company and the Partnership
prior to the determination by the Partnership of the suitability of the Grantee
as an LTIP OP Unitholder shall not constitute an offer of LTIP OP Units until
such determination of suitability shall be made.

         (c) The Grantee hereby represents and warrants that

                  (i)      The Grantee either (i) is an "accredited investor" as
                           defined in Rule 501(a) under the Securities Act of
                           1933, as amended (the "Securities Act"), or (ii) by
                           reason of his or her business and financial
                           experience, together with the business and financial
                           experience of those persons, if any, retained by the
                           Grantee to represent or advise him or her with
                           respect to the grant to him or her of LTIP OP Units,
                           has such knowledge, sophistication and experience in
                           financial and business matters and in making
                           investment decisions of this type that he or she (A)
                           is capable of evaluating the merits and risks of an
                           investment in the Partnership and of making an
                           informed investment decision, (B) is capable of
                           protecting his or her own interest or has engaged
                           representatives or advisors to assist him or her in
                           protecting his or her interests, and (C) is capable
                           of bearing the economic risk of such investment.


                                      B-1


                  (ii)     The Grantee understands that (A) the award of LTIP OP
                           Units involves risks different from, and in certain
                           circumstances substantially greater than those
                           involved in an award of a comparable number of shares
                           of restricted common stock of the Company; (B) the
                           Grantee is responsible for consulting his or her own
                           tax advisors with respect to the application of the
                           U.S. federal income tax laws, and the tax laws of any
                           state, local or other taxing jurisdiction to which
                           the Grantee is or by reason of the award of LTIP OP
                           Units may become subject, to his or her particular
                           situation; (C) the Grantee has not received or relied
                           upon business or tax advice from the Company, the
                           Partnership or any of their respective employees,
                           agents, consultants or advisors; (D) the Grantee
                           provides services to the Partnership on a regular
                           basis and in such capacity has access to such
                           information, and has such experience of and
                           involvement in the business and operations of the
                           Partnership, as the Grantee believes to be necessary
                           and appropriate to make an informed decision to
                           accept this Award of LTIP OP Units; and (E) an
                           investment in the Partnership involves substantial
                           risks. The Grantee has been given the opportunity to
                           make a thorough investigation of matters relevant to
                           the LTIP OP Units and has been furnished with, and
                           has reviewed and understands, materials relating to
                           the Partnership and its activities (including, but
                           not limited to, the Background Documents). The
                           Grantee has been afforded the opportunity to obtain
                           any additional information (including any exhibits to
                           the Background Documents) deemed necessary by the
                           Grantee to verify the accuracy of information
                           conveyed to the Grantee. The Grantee confirms that
                           all documents, records, and books pertaining to his
                           or her receipt of LTIP OP Units which were requested
                           by the Grantee have been made available or delivered
                           to the Grantee. The Grantee has had an opportunity to
                           ask questions of and receive answers from the
                           Partnership and the Company, or from a person or
                           persons acting on their behalf, concerning the terms
                           and conditions of the LTIP OP Units. THE GRANTEE HAS
                           RELIED UPON, AND IS MAKING ITS DECISION SOLELY UPON,
                           THE BACKGROUND DOCUMENTS AND OTHER WRITTEN
                           INFORMATION PROVIDED TO THE GRANTEE BY THE
                           PARTNERSHIP OR THE COMPANY. The Grantee did not
                           receive any tax, legal or financial advice from the
                           Partnership or the Company and, to the extent it
                           deemed necessary, has consulted with its own advisors
                           in connection with its evaluation of the Background
                           Documents and this Agreement and the Grantee's
                           receipt of LTIP OP Units.

                  (iii)    The LTIP OP Units to be issued will be acquired for
                           the account of the Grantee for investment only and
                           not with a current view to, or with any intention of,
                           a distribution or resale thereof, in whole or in
                           part, or the grant of any participation therein,
                           without prejudice, however, to the Grantee's right
                           (subject to the terms of the LTIP OP Units and this
                           Agreement) at all times to sell or otherwise dispose
                           of all or any part of his or her LTIP OP Units in
                           compliance with the Securities Act, and applicable
                           state securities laws, and subject, nevertheless, to
                           the disposition of his or her assets being at all
                           times within his or her control.


                                      B-2


                  (iv)     The Grantee acknowledges that (A) the LTIP OP Units
                           to be issued have not been registered under the
                           Securities Act or state securities laws by reason of
                           a specific exemption or exemptions from registration
                           under the Securities Act and applicable state
                           securities laws and, if such LTIP OP Units are
                           represented by certificates, such certificates will
                           bear a legend to such effect, (B) the reliance by the
                           Partnership on such exemptions is predicated in part
                           on the accuracy and completeness of the
                           representations and warranties of the Grantee
                           contained herein, (C) such LTIP OP Units, therefore,
                           cannot be resold unless registered under the
                           Securities Act and applicable state securities laws,
                           or unless an exemption from registration is
                           available, (D) there is no public market for such
                           LTIP OP Units and (E) the Partnership has no
                           obligation or intention to register such LTIP OP
                           Units under the Securities Act or any state
                           securities laws or to take any action that would make
                           available any exemption from the registration
                           requirements of such laws. The Grantee hereby
                           acknowledges that because of the restrictions on
                           transfer or assignment of such LTIP OP Units acquired
                           hereby that are set forth in the Partnership
                           Agreement or this Agreement, the Grantee may have to
                           bear the economic risk of his or her ownership of the
                           LTIP OP Units acquired hereby for an indefinite
                           period of time.

                  (v)      The Grantee has determined that the LTIP OP Units are
                           a suitable investment for the Grantee.

                  (vi)     No representations or warranties have been made to
                           the Grantee by the Partnership or the Company, or any
                           officer, director, shareholder, agent, or affiliate
                           of any of them, and the Grantee has received no
                           information relating to an investment in the
                           Partnership or the LTIP OP Units except the
                           information specified in Paragraph (b) above.

         (d) So long as the Grantee holds any LTIP OP Units, the Grantee shall
disclose to the Partnership in writing such information as may be reasonably
requested with respect to ownership of LTIP OP Units as the Partnership may deem
reasonably necessary to ascertain and to establish compliance with provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), applicable to the
Partnership or to comply with requirements of any other appropriate taxing
authority.

         (e) The address set forth on the signature page of this Agreement is
the address of the Grantee's principal residence, and the Grantee has no present
intention of becoming a resident of any country, state or jurisdiction other
than the country and state in which such residence is sited.


                                      B-3


         (f) The representations of the Grantee as set forth above are true and
complete to the best of the information and belief of the Grantee, and the
Partnership shall be notified promptly of any changes in the foregoing
representations.




                                      B-4

EX-10.48

                                                                 Exhibit 10.48

                         RECKSON ASSOCIATES REALTY CORP.
                            LONG-TERM INCENTIVE PLAN
                             OP UNIT AWARD AGREEMENT


Name of Grantee:  Salvatore Campofranco ("Grantee")
No. of LTIP OP Units:  15,000
Date of Grant:  March 11, 2005


                                    RECITALS

         A. The Grantee is an officer of Reckson Associates Realty Corp. (the
"Company") or one of its Affiliates.

         B. The Grantee was selected by the Compensation Committee of the Board
of Directors of the Company (the "Committee") to receive an award of Long-Term
Incentive Plan OP Units ("LTIP OP Units") in Reckson Operating Partnership, L.P.
(the "Partnership") in the number specified above and having the rights
specified herein and in the Supplement to the Amended and Restated Agreement of
Limited Partnership of the Partnership (the "Partnership Agreement")
Establishing 2005 LTIP Units of Limited Partnership Interest (the "Partnership
Agreement Supplement").

         NOW, THEREFORE, the Company hereby grants to the Grantee, effective as
of the Date of Grant specified above, the number of LTIP OP Units listed above
subject to the terms and conditions of this Agreement.

         1. Restrictions and Conditions:

                  (a) The records of the Partnership evidencing the LTIP OP
Units granted herein shall bear an appropriate legend, as determined by the
Partnership in its sole discretion, to the effect that such LTIP OP Units are
subject to restrictions as set forth herein, in the Partnership Agreement
Supplement and in the Partnership Agreement.

                  (b) None of the LTIP OP Units awarded to the Grantee hereunder
shall be sold, assigned, transferred, pledged, hypothecated, given away or in
any other manner disposed of, encumbered, whether voluntarily or by operation of
law, or redeemed in accordance with the Partnership Agreement or the Partnership
Agreement Supplement (a) prior to vesting, (b) for a period of two (2) years
beginning on the Date of Grant specified above other than in connection with a
Change-in-Control, or (c) unless such transfer is in compliance with all
applicable securities laws (including, without limitation, the Securities Act),
and such disposition is in accordance with the applicable terms and conditions
of the Partnership Agreement and the Partnership Agreement Supplement. In
connection with any transfer of LTIP OP Units, the Company may require the
transferor to provide at the Grantee's own expense an opinion of counsel to the
transferor, satisfactory to the Company, that such transfer is in compliance
with all foreign, federal and state securities laws (including, without
limitation, the Securities Act). Any attempted disposition of LTIP OP Units not
in accordance with the terms and conditions of this Section 1(b) shall be null
and void, and the Partnership shall not reflect on its records any change in
record ownership of any LTIP OP Units as a result of any such disposition, shall
otherwise refuse to recognize any such disposition and shall not in any way give
effect to any such disposition of any LTIP OP Units.




                  (c) Except as otherwise provided in Section 2 hereof or
elsewhere herein, if the Grantee's employment with the Company or its Affiliates
is voluntarily or involuntarily terminated for any reason prior to vesting of
the LTIP OP Units granted herein, the Grantee shall forfeit all LTIP OP Units
that are not vested as of the date of such termination of employment.

         2. Vesting of the LTIP OP Units: The LTIP OP Units generally will
become vested as follows:

                  (a) 50.0% of the LTIP OP Units will become cumulatively vested
on December 31, 2006 and December 31, 2007 (each, an "Annual Vesting Date"); in
each case provided that the Grantee remains in continuous employment with the
Company or any of its Affiliates until such date; and provided, further, that
any LTIP OP Units which otherwise would become vested on such Annual Vesting
Date will not become so vested unless the Company has achieved, during the
calendar year completed on December 31, 2005, (i) a total return to shareholders
(including all Common Stock dividends and stock appreciation) based on the
respective Initial Base Price that either (x) is at or above the 50th percentile
of the total return to shareholders achieved by members of the Peer Group during
the same period, or (y) subject to the provisions of Section 2(e), equals a
total return of at least 9% per annum or (ii) a per share increase in annual
Funds from Operations of 5% or more. If the vesting performance requirement is
not satisfied for the calendar year ending December 31, 2005, the LTIP OP Units
will not be forfeited and will become vested on December 31, 2006, or if the
performance requirement is not satisfied at such date the LTIP OP Units will not
be forfeited and will become vested on December 31, 2007, if on either of such
dates the vesting performance requirement is satisfied on a cumulative and
compounded basis as measured for an extended performance period beginning with
the annual period for which the vesting performance requirement was not
satisfied through the relevant date. For purposes of this Section, (i) the
performance of the Company relative to the performance of members of the Peer
Group will be determined using the VWAP for the last ten trading days of the
Company's Common Stock and the common stock of the members of the Peer Group at
the applicable calendar year end, and (ii) the per annum percentage performance
of the Company will be determined using the VWAP for the last ten trading days
for the period ending at the applicable calendar year end. If the vesting
performance requirement is not satisfied at December 31, 2007, subject to
Section 2(d), the LTIP OP Units will be forfeited.

                  (b) Notwithstanding the foregoing, if a Change-in-Control
occurs prior to December 31, 2007 and the Grantee remains in continuous
employment with the Company or any of its Affiliates until such occurrence, the
portion of the LTIP OP Units that otherwise would have become vested upon the
next following vesting date will become vested at the time of the
Change-in-Control, provided however, such LTIP OP Units shall vest only if the
performance requirements set forth in Section 2(a)(i) above have been satisfied
in accordance with their terms.


                                       2



Notwithstanding the foregoing, if a Change-in-Control shall occur and (i) (a)
the Company continues in existence as a public company or (b) another company is
the successor to the Company in a transaction whereby holders of Common Stock
receive common stock of the successor company (or a combination of common stock
and cash) and such successor company expressly assumes the obligations of the
Company as the general partner of the Partnership, and (ii) (a) the Partnership
continues in existence as the operating partnership of the Company (in the event
described in clause (i)(a) above) or (b) another limited partnership, limited
liability company or similar entity is the successor to the Partnership in a
transaction whereby holders of OPU and LTIP OP Units receive equity interests in
such successor entity having substantially identical rights, voting powers,
restrictions, limitations as to distributions, qualifications and terms and
conditions of redemption as the OPU and LTIP OP Units, respectively, and
expressly assumes the obligations under this Agreement, and (iii) the Grantee is
offered continued employment by the Company or such successor company or their
Affiliates, as the case may be, then no vesting shall occur under this Section
2(b) as a result of such Change-in-Control, but this Agreement and the awards
hereunder shall continue in effect on the terms hereof, subject to the
adjustment of the Initial Base Price as may be appropriate pursuant to Section 4
hereof.

                  (c) Notwithstanding the foregoing, if the Grantee's employment
with the Company and all Affiliates is terminated prior to December 31, 2007 by
reason of the Grantee's death or Disability, by the Grantee prior to the date
which is one year from a Change-in-Control by reason of a Force Out or by the
Company or any Affiliate for any reason other than Cause or transfer to another
Affiliate, all non-vested LTIP OP Units will thereupon become fully vested. If
the Grantee's employment with the Company and all Affiliates is terminated prior
to December 31, 2007 for any other reason, any LTIP OP Units that have not yet
become vested will thereupon be forfeited.

                  (d) Notwithstanding the foregoing, if the Grantee remains in
continuous employment with the Company or any of its Affiliates until an
applicable Annual Vesting Date but the vesting performance requirement is not
satisfied at such date (or any extended performance period as contemplated in
Section 2(b) above), and if the Committee determines that it nevertheless would
be consistent with the spirit and intent of this Agreement to vest some or all
of the LTIP OP Units that otherwise would have become vested on that Annual
Vesting Date, then the Committee, in its sole and absolute discretion, may elect
to vest some or all of such LTIP OP Units.

                  (e) Notwithstanding the foregoing, in the event that (i) the
LTIP OP Units would become vested as a result of the Company achieving a total
return of at least 9% per annum in accordance with the terms of Section 2(a),
(ii) the appreciation in the share price of the Common Stock alone has not
resulted in the Company achieving such a 9% per annum total return (i.e.,
without taking into account any dividends paid to holders of Common Stock), and
(iii) the Company's Dividend Payout Ratio with regard to its Cash Available for
Distribution exceeds 100% for any relevant annual period or periods, the
Committee may, in its sole discretion, review whether it is appropriate for the
LTIP OP Units to vest for such period or periods, and may determine that the
LTIP OP Units shall not vest, in whole or in part, based upon such facts as it
deems appropriate including, but not limited to, the effect on the Dividend
Payout Ratio of rent concessions, tenant improvements, capital expenditures by
the Company and similar matters that represent uses of operating cash flow for
the purpose of generating incremental cash flow or other returns for the
Company.


                                       3


         3. Distributions. Distributions on the LTIP OP Units shall be paid
currently to the Grantee in accordance with the terms of the Partnership
Agreement.

         4. Adjustment. The Committee will make or provide for such adjustments
in the number of LTIP OP Units and the vesting performance requirements
applicable to LTIP OP Units, as the Committee may in good faith determine to be
equitably required in order to prevent any dilution or expansion of the rights
of the Grantee that otherwise would result from (i) any stock dividend, stock
split, combination of shares, recapitalization or similar change in the capital
structure of the Company or similar events with respect to the partnership
interests in the Partnership or (ii) any merger, consolidation, spin-off,
spin-out, split-off, split-up, reorganization, partial or complete liquidation
or other distribution of assets, issuance of warrants or other rights to
purchase securities or any other transaction or event having an effect similar
to any of the foregoing.

         5. Compliance With Law. The Partnership and the Grantee will make
reasonable efforts to comply with all applicable securities laws. In addition,
notwithstanding any provision of this Agreement to the contrary, no LTIP OP
Units will become vested or be paid at a time that such vesting or payment would
result in a violation of any such law.

         6. Investment Representation; Registration.

                  (a) The Grantee hereby makes the covenants, representations
and warranties set forth on EXHIBIT B attached hereto. All of such covenants,
warranties and representations shall survive the execution and delivery of this
Agreement by the Grantee. The Grantee shall immediately notify the Partnership
upon discovering that any of the representations or warranties set forth on
EXHIBIT B were false when made or have, as a result of changes in circumstances,
become false.

                  (b) The Partnership may make a notation in its records and/or
affix a legend to the certificates (if any) representing the LTIP OP Units
issued pursuant to this Agreement to the effect that such units have not been
registered under the Securities Act and may only be sold or transferred upon
registration or pursuant to an exemption therefrom.

                  (c) The Partnership will have no obligation to register under
the Securities Act any LTIP OP Units.

         7. Severability. In the event that one or more of the provisions of
this Agreement may be invalidated for any reason by a court, any provision so
invalidated will be deemed to be separable from the other provisions hereof, and
the remaining provisions hereof will continue to be valid and fully enforceable.

         8. Governing Law. This Agreement is made under, and will be construed
in accordance with, the laws of the State of New York, without giving effect to
the principles of conflicts of laws of such State.


                                       4


         9. Transferability. This Agreement is personal to the Grantee, is
non-assignable and is not transferable in any manner, by operation of law or
otherwise, other than by will or the laws of descent and distribution.

         10. Amendment. The Grantee acknowledges that this Agreement may be
amended or canceled by the Partnership for the purpose of satisfying changes in
law or for any other lawful purpose, provided that no such action shall
adversely affect the Grantee's rights under this Agreement without the Grantee's
written consent.

         11. No Obligation to Continue Employment. Neither the Company nor any
Affiliate is obligated by or as a result of this Agreement to continue the
Grantee in employment and this Agreement shall not interfere in any way with the
right of the Company or any Affiliate to terminate the employment of the Grantee
at any time.

         12. Notices. Notices hereunder shall be mailed or delivered to the
Partnership at its principal place of business and shall be mailed or delivered
to the Grantee at the address on file with the Partnership or, in either case,
at such other address as one party may subsequently furnish to the other party
in writing.

         13. Withholding and Taxes. No later than the date as of which an amount
first becomes includible in the gross income of the Grantee for income tax
purposes or subject to Federal Insurance Contributions Act withholding with
respect to any award under this Agreement, such Grantee will pay to the Company
or, if appropriate, any of its Affiliates, or make arrangements satisfactory to
the Company regarding the payment of, any United States federal, state or local
or foreign taxes of any kind required by law to be withheld with respect to such
amount. The obligations of the Company under this Agreement will be conditional
on such payment or arrangements, and the Company and its Affiliates shall, to
the extent permitted by law, have the right to deduct any such taxes from any
payment otherwise due to the Grantee.

         14. Successors and Assigns. This Agreement shall be binding upon the
Partnership's successors and assigns, whether or not this Agreement is expressly
assumed.

         15. Certain Definitions.

                  (a) "Affiliate" means any person or entity that, at the time
of reference, is controlled by, controlling of or under common control with the
Company.

                  (b) "Cash Available for Distribution" means the Company's cash
available for distribution to holders of the Company's Common Stock on an "as
committed" basis as announced by the Company for the relevant period.

                  (c) "Cause" means a finding by the Company's Board of
Directors that the Grantee has (i) acted with gross negligence or intentional
misconduct in connection with the performance of his duties to the Company or
any Affiliate; (ii) defaulted in the performance of his duties to the Company or
any Affiliate and has not corrected such action within 15 days of receipt of
written notice thereof; (iii) acted against the best interests of the Company or
any Affiliate, which act has had an adverse impact on the financial affairs of
the Company or such Affiliate; or (iv) been convicted of a felony or committed a
material act of common law fraud against the Company, any Affiliate or any of
their employees and such act or conviction has had, or the Company's Board of
Directors reasonably determines will have, an adverse effect on the interests of
the Company or such Affiliate; provided, however, that a finding of Cause will
not become effective unless and until the Board of Directors provides the
Grantee notice that it is considering making such finding and a reasonable
opportunity to be heard by the Board of Directors.


                                       5


                  (d) A "Change-in-Control" will be deemed to have occurred if
following the Date of Grant:

                           (i) any Person, together with all "affiliates" and
                  "associates" (as such terms are defined in Rule 12b-2 under
                  the Securities Exchange Act of 1934 (the "Exchange Act")) of
                  such Person, shall become the "beneficial owner" (as such term
                  is defined in Rule 13d-3 under the Exchange Act), directly or
                  indirectly, of securities of the Company representing 30% or
                  more of (A) the combined voting power of the Company's then
                  outstanding securities having the right to vote in an election
                  of the Company's Board of Directors ("Voting Securities"), (B)
                  the combined voting power of the Company's then outstanding
                  Voting Securities and any securities convertible into Voting
                  Securities, or (C) the then outstanding shares of all classes
                  of stock of the Company; or

                           (ii) individuals who, as of the effective date of
                  this Agreement, constitute the Company's Board of Directors
                  (the "Incumbent Directors") cease for any reason, including,
                  without limitation, as a result of a tender offer, proxy
                  contest, merger or similar transaction, to constitute at least
                  a majority of the Company's Board of Directors, provided that
                  any person becoming a director of the Company subsequent to
                  the effective date of this Agreement whose election or
                  nomination for election was approved by a vote of at least a
                  majority of the Incumbent Directors (other than an election or
                  nomination of an individual whose initial assumption of office
                  is in connection with an actual or threatened election contest
                  relating to the election of the directors of the Company, as
                  such terms are used in Rule 14a-11 of Regulation 14A under the
                  Exchange Act) shall, for purposes of this Agreement, be
                  considered an Incumbent Director; or

                           (iii) consummation of (1) any consolidation or merger
                  of the Company or any subsidiary where the stockholders of the
                  Company, immediately prior to the consolidation or merger,
                  would not, immediately after the consolidation or merger,
                  beneficially own (as such term is defined in Rule 13d-3 under
                  the Exchange Act), directly or indirectly, but based solely on
                  their prior ownership of shares of the Company, shares
                  representing in the aggregate more than 60% of the voting
                  shares of the corporation issuing cash or securities in the
                  consolidation or merger (or of its ultimate parent
                  corporation, if any), or (2) any sale, lease, exchange or
                  other transfer (in one transaction or a series of transactions
                  contemplated or arranged by any party as a single plan) of all
                  or substantially all of the assets of the Company; or


                                       6


                           (iv) stockholder approval of any plan or proposal for
                  the liquidation or dissolution of the Company.

                           Notwithstanding the foregoing, a "Change-in-Control"
                  shall not be deemed to have occurred for purposes of the
                  foregoing clause (i) (A) solely as the result of an
                  acquisition of securities by the Company which, by reducing
                  the number of shares of stock or other Voting Securities
                  outstanding, increases (x) the proportionate number of shares
                  of stock of the Company beneficially owned by any Person to
                  30% or more of the shares of stock then outstanding or (y) the
                  proportionate voting power represented by the Voting
                  Securities beneficially owned by any Person to 30% or more of
                  the combined voting power of all then outstanding Voting
                  Securities; provided, however, that if any Person referred to
                  in clause (x) or (y) of this sentence shall thereafter become
                  the beneficial owner of any additional stock of the Company or
                  other Voting Securities (other than pursuant to a share split,
                  stock dividend, or similar transaction), then a
                  "Change-in-Control" shall be deemed to have occurred for
                  purposes of the foregoing clause (i), and (B) solely as a
                  result of the direct or indirect acquisition of beneficial
                  ownership of Voting Securities by any executive officers of
                  the Company on the date hereof and/or the Company, any of its
                  subsidiaries, or any trustee, fiduciary or other person or
                  entity holding securities under any employee benefit plan of
                  the Company or any of its subsidiaries if the Grantee is one
                  of the executive officers participating in such acquisition.

                  (e) "Common Stock" means the shares of common stock, par value
$0.01 per share, of the Company.

                  (f) "Disability" means that the Grantee has been unable to
efficiently perform his duties to the Company and all Affiliates because of any
physical or mental injury or illness until the earlier of such time when (i) the
period of injury or illness (whether or not the same injury or illness) exceeds
180 consecutive days or (ii) the Grantee becomes eligible to receive benefits
under a comprehensive disability insurance policy maintained or sponsored by the
Company.

                  (g) "Dividend Payout Ratio" means the quotient, expressed as a
percentage, derived by dividing the aggregate dividends paid on shares of the
Company's Common Stock during a relevant period by the Cash Available for
Distribution for such period.

                  (h) "Force Out" means

                           (i) a change in duties, responsibilities, status or
                  positions with the Company or successor company, which, in the
                  Grantee's reasonable judgment, does not represent a promotion
                  from or maintaining of the Grantee's duties, responsibilities,
                  status or positions as in effect immediately prior to the
                  Change-in-Control, or any removal of the Grantee from or any
                  failure to reappoint or reelect the Grantee to such positions,
                  except in connection with the termination of the Grantee's
                  employment for Cause, Disability, retirement or death;


                                       7


                           (ii) a reduction by the Company or such successor
                  company in the Grantee's base salary as in effect immediately
                  prior to the Change-in-Control;

                           (iii) the failure by the Company or such successor
                  company to provide and credit the Grantee with the number of
                  paid vacation days to which the Grantee is then entitled in
                  accordance with the Company or such successor company's normal
                  vacation policies as in effect immediately prior to the
                  Change-in-Control;

                           (iv) the Company or such successor company requiring
                  the Grantee to be based in an office located beyond a
                  reasonable commuting distance from the Grantee's residence
                  immediately prior to the Change-in-Control, except for
                  required travel relating to the Company or such successor
                  company's business to an extent substantially consistent with
                  the business travel obligations which the Grantee undertook on
                  behalf of the Company or such successor company prior to the
                  Change-in-Control;

                           (v) the failure by the Company or such successor
                  company to obtain from any successor to the Company or such
                  successor company an agreement to be bound by this Agreement;
                  or

                           (vi) the failure by the Company or such successor
                  company to continue in effect any of the benefit plans,
                  programs or arrangements in which the Grantee is participating
                  at the time of the Change-in-Control of the Company or such
                  successor company (unless the Grantee is permitted to
                  participate in any substitute benefit plan, program or
                  arrangement with substantially the same terms and to the same
                  extent and with the same rights as the Grantee had with
                  respect to the benefit plan, program or arrangement that is
                  discontinued) other than as a result of the normal expiration
                  of any such benefit plan, program or arrangement in accordance
                  with its terms as in effect at the time of the
                  Change-in-Control, or the taking of any action, or the failure
                  to act, by the Company or such successor company which would
                  adversely affect the Grantee's continued participation in any
                  of such benefit plans, programs or arrangements on at least as
                  favorable a basis to the Grantee as is the case on the date of
                  the Change-in-Control or which would materially reduce the
                  Grantee's benefits in the future under any of such benefit
                  plans, programs or arrangements or deprive the Grantee of any
                  material benefits enjoyed by the Grantee at the time of the
                  Change-in-Control.

                  (i) "Funds from Operations" means the Company's funds from
operations as defined by the National Association of Real Estate Investment
Trusts and as may be adjusted by the Company.

                  (j) "Initial Base Price" means $32.81 per share of the Common
Stock of the Company.

                  (k) An "OPU" means a Class A common operating partnership unit
of the Partnership.


                                       8


                  (l) "Peer Group" means the business entities set forth on
Exhibit A to this Agreement, and any successors to the businesses or assets of
such entities as determined by the Committee in its sole and absolute
discretion. If an entity listed on such Exhibit ceases to exist during the term
of this Agreement and the Committee determines that there is no successor to the
business or assets of such entity, then such entity will cease to be treated as
a member of the Peer Group to the extent and for the periods determined by the
Committee in its sole and absolute discretion.

                  (m) "Person" has the meaning used in Sections 13(d) and 14(d)
of the Exchange Act.

                  (n) "Securities Act" means the Securities Act of 1933.

                  (o) "VWAP" means the volume weighted average closing price per
share of a security on the primary exchange or other quotation system on which
the security is traded.

                            [signature page follows]



                                       9


         IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the 11th day of March, 2005.


                              RECKSON ASSOCIATES REALTY CORP.




                              By: /s/ Jason Barnett
                                  ---------------------------------------------
                                  Name:  Jason Barnett
                                  Title: Executive Vice President and General
                                         Counsel



                              RECKSON OPERATING PARTNERSHIP, L.P.


                              By: /s/ Jason Barnett
                                  ---------------------------------------------
                                  Name:  Jason Barnett
                                  Title: Executive Vice President and General
                                         Counsel



                                  /s/ Salvatore Campofranco
                                  ---------------------------------------------
                                  Salvatore Campofranco




                                       10



                        Exhibit A - Peer Group Companies
                        --------------------------------

                         American Financial Realty Trust
                            Arden Realty Group, Inc.
                             Boston Properties, Inc.
                             Brandywine Realty Trust
                         CarrAmerica Realty Corporation
                       Crescent Real Estate Equities, Inc.
                         Equity Office Properties Trust
                          Mack-Cali Realty Corporation
                             Maguire Properties Inc.
                            Prentiss Properties Trust
                           SL Green Realty Corporation
                             Trizec Properties Inc.
                              Vornado Realty Trust






                                                                      EXHIBIT B


               GRANTEE'S COVENANTS, REPRESENTATIONS AND WARRANTIES

         The Grantee hereby represents, warrants and covenants as follows:

         (a) The Grantee is an individual with income (without including any
income of the Grantee's spouse) in excess of $200,000, or joint income with the
Grantee's spouse, in excess of $300,000, in each of the two most recent years,
and the Grantee reasonably expects to reach the same income level in the current
year.

         (b) The Grantee has received and had an opportunity to review the
following documents (the "Background Documents"):

                  (i)      The Company's latest Annual Report to Stockholders;

                  (ii)     The Company's Proxy Statement for its most recent
                           Annual Meeting of Stockholders;

                  (iii)    The Company's Report on Form 10-K for the fiscal year
                           most recently ended;

                  (iv)     The Company's Form 10-Q for the most recently ended
                           quarter if one has been filed by the Company with the
                           Securities and Exchange Commission since the filing
                           of the report described in clause (iii) above;

                  (v)      Each of the Company's Current Report(s) on Form 8-K,
                           if any, filed since the end of the fiscal year most
                           recently ended;

                  (vi)     The Partnership Agreement; and

                  (vii)    The Company's Amended and Restated Certificate of
                           Incorporation.

         The Grantee also acknowledges that any delivery of the Background
Documents and other information relating to the Company and the Partnership
prior to the determination by the Partnership of the suitability of the Grantee
as an LTIP OP Unitholder shall not constitute an offer of LTIP OP Units until
such determination of suitability shall be made.

         (c) The Grantee hereby represents and warrants that

                  (i)      The Grantee either (i) is an "accredited investor" as
                           defined in Rule 501(a) under the Securities Act of
                           1933, as amended (the "Securities Act"), or (ii) by
                           reason of his or her business and financial
                           experience, together with the business and financial
                           experience of those persons, if any, retained by the
                           Grantee to represent or advise him or her with
                           respect to the grant to him or her of LTIP OP Units,
                           has such knowledge, sophistication and experience in
                           financial and business matters and in making
                           investment decisions of this type that he or she (A)
                           is capable of evaluating the merits and risks of an
                           investment in the Partnership and of making an
                           informed investment decision, (B) is capable of
                           protecting his or her own interest or has engaged
                           representatives or advisors to assist him or her in
                           protecting his or her interests, and (C) is capable
                           of bearing the economic risk of such investment.


                                      B-1





                  (ii)     The Grantee understands that (A) the award of LTIP OP
                           Units involves risks different from, and in certain
                           circumstances substantially greater than those
                           involved in an award of a comparable number of shares
                           of restricted common stock of the Company; (B) the
                           Grantee is responsible for consulting his or her own
                           tax advisors with respect to the application of the
                           U.S. federal income tax laws, and the tax laws of any
                           state, local or other taxing jurisdiction to which
                           the Grantee is or by reason of the award of LTIP OP
                           Units may become subject, to his or her particular
                           situation; (C) the Grantee has not received or relied
                           upon business or tax advice from the Company, the
                           Partnership or any of their respective employees,
                           agents, consultants or advisors; (D) the Grantee
                           provides services to the Partnership on a regular
                           basis and in such capacity has access to such
                           information, and has such experience of and
                           involvement in the business and operations of the
                           Partnership, as the Grantee believes to be necessary
                           and appropriate to make an informed decision to
                           accept this Award of LTIP OP Units; and (E) an
                           investment in the Partnership involves substantial
                           risks. The Grantee has been given the opportunity to
                           make a thorough investigation of matters relevant to
                           the LTIP OP Units and has been furnished with, and
                           has reviewed and understands, materials relating to
                           the Partnership and its activities (including, but
                           not limited to, the Background Documents). The
                           Grantee has been afforded the opportunity to obtain
                           any additional information (including any exhibits to
                           the Background Documents) deemed necessary by the
                           Grantee to verify the accuracy of information
                           conveyed to the Grantee. The Grantee confirms that
                           all documents, records, and books pertaining to his
                           or her receipt of LTIP OP Units which were requested
                           by the Grantee have been made available or delivered
                           to the Grantee. The Grantee has had an opportunity to
                           ask questions of and receive answers from the
                           Partnership and the Company, or from a person or
                           persons acting on their behalf, concerning the terms
                           and conditions of the LTIP OP Units. THE GRANTEE HAS
                           RELIED UPON, AND IS MAKING ITS DECISION SOLELY UPON,
                           THE BACKGROUND DOCUMENTS AND OTHER WRITTEN
                           INFORMATION PROVIDED TO THE GRANTEE BY THE
                           PARTNERSHIP OR THE COMPANY. The Grantee did not
                           receive any tax, legal or financial advice from the
                           Partnership or the Company and, to the extent it
                           deemed necessary, has consulted with its own advisors
                           in connection with its evaluation of the Background
                           Documents and this Agreement and the Grantee's
                           receipt of LTIP OP Units.

                  (iii)    The LTIP OP Units to be issued will be acquired for
                           the account of the Grantee for investment only and
                           not with a current view to, or with any intention of,
                           a distribution or resale thereof, in whole or in
                           part, or the grant of any participation therein,
                           without prejudice, however, to the Grantee's right
                           (subject to the terms of the LTIP OP Units and this
                           Agreement) at all times to sell or otherwise dispose
                           of all or any part of his or her LTIP OP Units in
                           compliance with the Securities Act, and applicable
                           state securities laws, and subject, nevertheless, to
                           the disposition of his or her assets being at all
                           times within his or her control.


                                      B-2


                  (iv)     The Grantee acknowledges that (A) the LTIP OP Units
                           to be issued have not been registered under the
                           Securities Act or state securities laws by reason of
                           a specific exemption or exemptions from registration
                           under the Securities Act and applicable state
                           securities laws and, if such LTIP OP Units are
                           represented by certificates, such certificates will
                           bear a legend to such effect, (B) the reliance by the
                           Partnership on such exemptions is predicated in part
                           on the accuracy and completeness of the
                           representations and warranties of the Grantee
                           contained herein, (C) such LTIP OP Units, therefore,
                           cannot be resold unless registered under the
                           Securities Act and applicable state securities laws,
                           or unless an exemption from registration is
                           available, (D) there is no public market for such
                           LTIP OP Units and (E) the Partnership has no
                           obligation or intention to register such LTIP OP
                           Units under the Securities Act or any state
                           securities laws or to take any action that would make
                           available any exemption from the registration
                           requirements of such laws. The Grantee hereby
                           acknowledges that because of the restrictions on
                           transfer or assignment of such LTIP OP Units acquired
                           hereby that are set forth in the Partnership
                           Agreement or this Agreement, the Grantee may have to
                           bear the economic risk of his or her ownership of the
                           LTIP OP Units acquired hereby for an indefinite
                           period of time.

                  (v)      The Grantee has determined that the LTIP OP Units are
                           a suitable investment for the Grantee.

                  (vi)     No representations or warranties have been made to
                           the Grantee by the Partnership or the Company, or any
                           officer, director, shareholder, agent, or affiliate
                           of any of them, and the Grantee has received no
                           information relating to an investment in the
                           Partnership or the LTIP OP Units except the
                           information specified in Paragraph (b) above.

         (d) So long as the Grantee holds any LTIP OP Units, the Grantee shall
disclose to the Partnership in writing such information as may be reasonably
requested with respect to ownership of LTIP OP Units as the Partnership may deem
reasonably necessary to ascertain and to establish compliance with provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), applicable to the
Partnership or to comply with requirements of any other appropriate taxing
authority.

         (e) The address set forth on the signature page of this Agreement is
the address of the Grantee's principal residence, and the Grantee has no present
intention of becoming a resident of any country, state or jurisdiction other
than the country and state in which such residence is sited.


                                      B-3


         (f) The representations of the Grantee as set forth above are true and
complete to the best of the information and belief of the Grantee, and the
Partnership shall be notified promptly of any changes in the foregoing
representations.


                                      B-4

EX-10.49

                                                                  Exhibit 10.49


                         RECKSON ASSOCIATES REALTY CORP.
                        CHANGE-IN-CONTROL BONUS AGREEMENT

         WHEREAS, Scott H. Rechler (the "Executive") is an executive officer or
key employee of Reckson Associates Realty Corp. (the "Company") or one of its
Affiliates;

         WHEREAS, the Executive has received an award of LTIP OP Units (the
"LTIP OP Units") pursuant to the Long-Term Incentive Plan OP Unit Award
Agreement, dated as of March 11, 2005 between Executive, the Company and Reckson
Operating Partnership, L.P. (the "LTIP Award Agreement"); and

         WHEREAS, the Company desires to provide the Executive with an
additional incentive in the event that a Change-in-Control occurs prior to the
Termination Date (as defined herein) and prior to the complete book-up of the
LTIP OP Units, under the circumstances described herein, which would adversely
affect the Executive by denying him the intended benefit of the LTIP OP Units
awarded.

         NOW, THEREFORE, the Company and the Executive hereby agree as follows:

         1. Change-in-Control Bonus:

         (a) In the event the LTIP OP Units held by the Executive are redeemed
or otherwise cashed-out in connection with the occurrence of a
Change-in-Control, the Executive shall be entitled to receive from the Company a
cash bonus determined as follow:

                  A = (B minus C), multiplied by D, where:

                  A equals the amount of the cash bonus to be paid to the
                  Executive by the Company;

                  B equals the per OPU consideration received by a holder of an
                  OPU in connection with the Change-in-Control;

                  C equals the per vested LTIP OP Unit consideration received by
                  the Executive in connection with the Change-in-Control (but in
                  no event shall C be greater than B); and

                  D equals the number of vested LTIP OP Units held by the
                  Executive (including LTIP OP Units that become vested as a
                  result of the Change-in-Control in accordance with the LTIP
                  Award Agreement) that are redeemed or otherwise cashed-out in
                  connection with the Change-in-Control.

For example, if Executive holds 100 LTIP OP Units, all 100 LTIP OP Units are
vested or become vested in connection with the Change-in-Control, such LTIP OP
Units are cashed-out in connection with a Change-in-Control for $5 per LTIP OP
Unit as a result of a less-than-complete book-up thereof, and the OPU are
cashed-out for $7 per OPU, then Executive will be entitled to receive a cash
bonus of $200 hereunder ($7 minus $5, multiplied by 100).

         (b) Said amount shall be payable in a lump sum no later than 31 days
following the date or dates the vested LTIP OP Units held by the Executive are
redeemed or otherwise cashed-out in connection with the Change-in-Control.





         (c) Amounts payable pursuant to this Agreement are intended to
supplement the Executive's change-in-control and other compensation under the
circumstances described herein.

         2. Term. This Agreement shall terminate upon the earlier of (a) the
date on which the Executive no longer holds LTIP OP Units, other than as a
result of the redemption or other cash-out of such LTIP OP Units in connection
with the occurrence of a Change-in-Control, or (b) the payment of all amounts
owed hereunder to the Executive, or (c) the sixth anniversary of the date of
this Agreement (the "Termination Date").

         3. Governing Law. This Agreement is made under, and will be construed
in accordance with, the laws of the State of New York, without giving effect to
the principle of conflict of laws of such State.

         4. Transferability. This Agreement is personal to the Executive, is
non-assignable and is not transferable in any manner, by operation of law or
otherwise, other than by will or the laws of descent and distribution.

         5. Amendment. The Executive acknowledges that this Agreement may be
amended or canceled by the Company for the purpose of satisfying changes in law
or for any other lawful purpose, provided that no such action shall adversely
affect the Executive's rights under this Agreement without the Executive's
written consent.

         6. No Obligation to Continue Employment. Neither the Company nor any
Affiliate is obligated by or as a result of this Agreement to continue the
Executive in employment and this Agreement shall not interfere in any way with
the right of the Company or any Affiliate to terminate the employment of the
Executive at any time.

         7. Withholding and Taxes. No later than the date as of which an amount
first becomes includible in the gross income of the Executive for income tax
purposes or subject to Federal Insurance Contributions Act withholding with
respect to any award under this Agreement, such Executive will pay to the
Company or, if appropriate, any of its Affiliates, or make arrangements
satisfactory to the Company's Board of Directors regarding the payment of, any
United States federal, state or local or foreign taxes of any kind required by
law to be withheld with respect to such amount. The obligations of the Company
under this Agreement will be conditional on such payment or arrangements, and
the Company and its Affiliates shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment otherwise due to the Executive.

         8. Successors and Assigns. This Agreement shall be binding upon the
Company's successors and assigns, whether or not this Agreement is expressly
assumed.

         9. Definitions. Capitalized terms used but not otherwise defined herein
shall have the respective meanings ascribed to such terms in the LTIP Award
Agreement.

                            [signature page follows]



                                       2



         IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the date first above written.

                              RECKSON ASSOCIATES REALTY CORP.




                              By: /s/ Jason Barnett
                                  --------------------------------------
                                  Name:  Jason Barnett
                                  Title: Executive Vice President and General
                                         Counsel




                                  /s/ Scott Rechler
                                  --------------------------------------
                                  Name: Scott Rechler


                                       3

EX-10.66

                                                                   Exhibit 10.66

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



                               TERM LOAN AGREEMENT

                          DATED AS OF JANUARY 13, 2006

                                      AMONG

                       RECKSON OPERATING PARTNERSHIP, L.P.

                       THE INSTITUTIONS FROM TIME TO TIME
                             PARTY HERETO AS LENDERS

                                       AND

                         GOLDMAN SACHS MORTGAGE COMPANY,
                             AS ADMINISTRATIVE AGENT

                                       AND

                         GOLDMAN SACHS MORTGAGE COMPANY,
                      AS LEAD ARRANGER AND SOLE BOOKRUNNER



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


ARTICLE I.            DEFINITIONS..............................................1

         1.1.     Certain Defined Terms........................................1

         1.2.     Computation of Time Periods.................................26

         1.3.     Accounting Terms............................................26

         1.4.     Other Terms.................................................26

         1.5.     Rules of Interpretation.....................................27

ARTICLE II.           AMOUNTS AND TERMS OF LOANS..............................27

         2.1.     Loans.......................................................27

         2.2.     Use of Proceeds of Loans....................................28

         2.3.     Term Loan Maturity Date.....................................28

         2.4.     Authorized Agents...........................................29

ARTICLE III.          INTENTIONALLY OMITTED...................................30

ARTICLE IV.           PAYMENTS AND PREPAYMENTS................................30

         4.1.     Prepayments.................................................30

         4.2.     Payments....................................................31

         4.3.     Promise to Repay; Evidence of Indebtedness..................33

ARTICLE V.            INTEREST AND FEES.......................................34

         5.1.     Interest on the Loans and other Obligations.................34

         5.2.     Special Provisions Governing Eurodollar Rate Loans..........36

ARTICLE VI.           CONDITIONS TO LOANS.....................................39

         6.1.     Conditions Precedent to the Loans...........................39

ARTICLE VII.          REPRESENTATIONS AND WARRANTIES..........................40

         7.1.     Representations and Warranties of the Borrower..............40

ARTICLE VIII.         REPORTING COVENANTS.....................................48

         8.1.     Borrower Accounting Practices...............................48

         8.2.     Financial Reports...........................................48

         8.3.     Events of Default...........................................51

         8.4.     Lawsuits....................................................51

         8.5.     Insurance...................................................52

         8.6.     ERISA Notices...............................................52

         8.7.     Environmental Notices.......................................53

         8.8.     Labor Matters...............................................54


         8.9.     Notices of Asset Sales and/or Acquisitions..................54

         8.10.    Notices of Joint Ventures...................................55

         8.11.    Tenant Notifications........................................55

         8.12.    Other Reports...............................................55

         8.13.    Other Information...........................................55

ARTICLE IX.           AFFIRMATIVE COVENANTS...................................55

         9.1.     Existence. Etc..............................................56

         9.2.     Powers; Conduct of Business.................................56

         9.3.     Compliance with Laws. Etc...................................56

         9.4.     Payment of Taxes and Claims.................................56

         9.5.     Insurance...................................................56

         9.6.     Inspection of Property, Books and Records Discussions.......57

         9.7.     ERISA Compliance............................................57

         9.8.     Maintenance of Property.....................................57

         9.9.     Company Status..............................................57

         9.10.    Ownership of Projects, Joint Ventures and Property..........57

         9.11.    [Intentionally Omitted.]....................................57

         9.12.    Additional Guarantors; Solvency of Guarantors...............57

         9.13.    Further Assurances..........................................58

         9.14.    Distributions in the Ordinary Course........................58

ARTICLE X.            NEGATIVE COVENANTS......................................58

         10.1.    Intentionally Omitted.......................................58

         10.2.    Liens.......................................................59

         10.3.    Intentionally Omitted.......................................59

         10.4.    Conduct of Business.........................................59

         10.5.    Transactions with Partners and Affiliates...................59

         10.6.    Restriction on Fundamental Changes..........................59

         10.7.    Margin Regulations; Securities Laws.........................60

         10.8.    ERISA.......................................................60

         10.9.    Organizational Documents....................................60

         10.10.   Fiscal Year.................................................61

         10.11.   Financial Covenants.........................................61

                                      -ii-


         10.12.   Negative Covenants with respect to the Company..............62

ARTICLE XI.           EVENTS OF DEFAULT; RIGHTS AND REMEDIES..................63

         11.1.    Events of Default...........................................63

         11.2.    Rights and Remedies.........................................66

ARTICLE XII.          THE AGENTS..............................................67

         12.1.    Appointment.................................................67

         12.2.    Nature of Duties............................................67

         12.3.    Right to Request Instructions...............................68

         12.4.    Reliance....................................................68

         12.5.    Indemnification.............................................68

         12.6.    Agents Individually.........................................68

         12.7.    Successor Agents............................................69

         12.8.    Relations Among the Lenders.................................69

         12.9.    Standard of Care............................................69

ARTICLE XIII.         YIELD PROTECTION........................................69

         13.1.    Taxes.......................................................69

         13.2.    Increased Capital...........................................72

         13.3.    Changes; Legal Restrictions.................................72

         13.4.    Replacement of Certain Lenders..............................73

         13.5.    Mitigation..................................................73

ARTICLE XIV.          MISCELLANEOUS...........................................73

         14.1.    Assignments and Participations..............................73

         14.2.    Expenses....................................................75

         14.3.    Indemnity...................................................76

         14.4.    Change in Accounting Principles.............................76

         14.5.    Intentionally Omitted.......................................77

         14.6.    Ratable Sharing.............................................77

         14.7.    Amendments and Waivers......................................77

         14.8.    Notices.....................................................79

         14.9.    Survival of Warranties and Agreements.......................79

         14.10.   Failure or Indulgence Not Waiver; Remedies Cumulative.......79

         14.11.   Payments Set Aside..........................................80

                                     -iii-


         14.12.   Severability................................................80

         14.13.   Headings....................................................80

         14.14.   Governing Law...............................................80

         14.15.   Limitation of Liability.....................................80

         14.16.   Successors and Assigns......................................80

         14.17.   Certain Consents and Waivers of the Borrower................80

         14.18.   Counterparts; Effectiveness; Inconsistencies................82

         14.19.   Limitation on Agreements....................................82

         14.20.   Disclaimers.................................................82

         14.21.   Entire Agreement............................................82

         14.22.   Confidentiality.............................................82

         14.23.   Intentionally Omitted.......................................83

         14.24.   USA Patriot Act.............................................83

                                      -iv-


LIST OF EXHIBITS AND SCHEDULES

Exhibit A             Form of Assignment and Acceptance
Exhibit B             Form of Note
Exhibit C             Form of Notice of Borrowing
Exhibit D             Form of Notice of Conversion /Continuation
Exhibit E             List of Closing Documents
Exhibit F             Form of Compliance Certificate to Accompany Reports
Exhibit G             Sample of Calculations of Financial Covenants
Exhibit H             Form of Guaranty


Schedule EEP               Eligible Encumbered Properties
Schedule EG                Eligible Ground Lease
Schedule LC                Lenders' Commitments and Notice Addresses
Schedule 1.1.1             Existing Permitted Liens
Schedule 1.1.2             Permitted Securities Options
Schedule 7.1-A             Organizational Documents
Schedule 7.1-C             Corporate Structure; Outstanding Capital Stock and
                             Partnership Interests; Partnership Agreement
Schedule 7.1-H             Indebtedness for Borrowed Money; Contingent
                             Obligations
Schedule 7.1-I             Pending Actions
Schedule 7.1-P             Environmental Matters
Schedule 7.1-Q             ERISA Matters
Schedule 7.1-R             Securities Activities
Schedule 7.1-T             Insurance Policies

                                      -v-


                               TERM LOAN AGREEMENT

         This Term Loan Agreement, dated as of January 13, 2006 (as amended,
supplemented or modified from time to time, the "AGREEMENT"), is entered into
among RECKSON OPERATING PARTNERSHIP, L.P., a Delaware limited partnership
("RECKSON"), the institutions from time to time a party hereto as Lenders,
whether by execution of this Agreement or an Assignment and Acceptance, GOLDMAN
SACHS MORTGAGE COMPANY, as Administrative Agent, and GOLDMAN SACHS MORTGAGE
COMPANY, as Lead Arranger and Sole Bookrunner.

                                    RECITALS

         WHEREAS, Reckson desires that the Administrative Agent and the Lenders
party hereto provide a term loan facility in an aggregate amount of
$250,000,000; and

         WHEREAS, the Administrative Agent and the other Lenders party hereto
have agreed to make the requested term loan facility available to Reckson in
accordance with the terms and provisions contained herein.

         NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:





                                   ARTICLE I.
                                   DEFINITIONS

         1.1. CERTAIN DEFINED TERMS. The following terms used in this Agreement
shall have the following meanings, applicable both to the singular and the
plural forms of the terms defined:

         "ACQUISITION" means that certain purchase by Reckson Cross Westchester
LLC and other Subsidiaries of the Borrower of certain properties in Westchester
County, New York pursuant to that certain Real Estate Purchase and Sale
Agreement, effective as of December 7, 2005, between Eastridge Properties I
Corporation, Eastridge Properties II Corporation, Eastridge Properties III
Corporation, Eastridge Properties V Corporation, collectively, as Seller, and
Reckson Cross Westchester LLC, as Buyer.

         "ACQUISITION PROPERTIES" means the Real Property acquired by the
Borrower pursuant to the Acquisition.

         "ADJUSTED UNENCUMBERED NOI" means, for the prior calendar quarter, the
sum of (i) NOI from the Consolidated Businesses attributable to Unencumbered
Projects and Unencumbered New York City Assets which are wholly-owned or
ground-leased by a Consolidated Business; plus (ii) the Borrower's pro rata
share of NOI from Joint Ventures attributable to Unencumbered Projects and
Unencumbered New York City Assets in which the Borrower's beneficial economic
interest in such Joint Ventures is 51% or greater, provided the sale or
financing of any Property owned or ground-leased by such Joint Venture is
substantially controlled by the Borrower, subject to customary provisions set
forth in the organizational documents of such Joint Venture with respect to
financings, sales or rights of first refusal granted to other members of such
Joint Venture; plus (iii) the Borrower's pro rata share of NOI from Joint
Ventures attributable to Unencumbered Projects and Unencumbered New York City
Assets in which the Borrower's beneficial economic interest is less than 51%,
provided that a majority of the beneficial economic interests in such Joint
Ventures that is not owned by the Consolidated Businesses is owned or controlled
by Qualified Joint Venture Partners; plus (iv) the Borrower's pro rata share of
Net Income attributable to other Unencumbered assets including Performing Notes
(exclusive of Investment Funds, land and development, and service company
income); plus (v) NOI from Eligible Encumbered Properties; less (vi) the
quotient of Capital Expenditure Coverage Reserve Amounts for such period
relating to such Unencumbered assets and Eligible Encumbered Properties, divided
by four (4);



provided, clause (ii) above shall not exceed twenty percent (20%) of Adjusted
Unencumbered NOI; clause (iii) above shall not exceed ten percent (10%) of
Adjusted Unencumbered NOI; and clause (iv) above shall not exceed fifteen
percent (15%) of Adjusted Unencumbered NOI.

         "ADMINISTRATIVE AGENT" means GSMC, in its capacity as administrative
agent for the Lenders.

         "AFFILIATE", as applied to any Person, means any other Person that
directly or indirectly controls, is controlled by, or is under common control
with, that Person. For purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to vote ten percent (10%) or more of the equity
Securities having voting power for the election of directors of such Person or
otherwise to direct or cause the direction of the management and policies of
that Person, whether through the ownership of voting equity Securities or by
contract or otherwise.

         "AGENTS" means, together, GSMC in its capacity as Administrative Agent,
the Arranger, and each successor agent appointed pursuant to the terms of
Article XII of this Agreement.

         "AGREEMENT" has the meaning set forth in the preamble hereto.

         "APPLICABLE LENDING OFFICE" means, with respect to a particular Lender,
(i) its Eurodollar Lending Office in respect of provisions relating to
Eurodollar Rate Loans, and (ii) its Domestic Lending Office in respect of
provisions relating to Base Rate Loans.

         "APPLICABLE MARGIN" means, with respect to each Loan, the respective
percentages per annum determined based on the range into which the Borrower's
Credit Rating then falls, in accordance with the following table. Any change in
the Borrower's Credit Rating causing it to move to a different range on the
table shall to the extent set forth below effect an immediate change in the
Applicable Margin. The Borrower shall notify the Administrative Agent in writing
promptly after becoming aware of any change in any of its Credit Ratings. The
Borrower shall maintain Credit Ratings from at least two (2) Rating Agencies,
one of which must be Moody's or S&P so long as such Persons are in the business
of providing debt ratings for the REIT industry; provided that if the Borrower
fails to maintain at least two Credit Ratings, the Applicable Margin shall be
based upon an S&P rating of less than BBB- in the table below. In the event that
the Borrower receives two (2) Credit Ratings that are not equivalent, the
Applicable Margin shall be determined by the lower of such two (2) Credit
Ratings, at least one of which shall be an Investment Grade Rating. In the event
the Borrower receives more than two (2) Credit Ratings and such Credit Ratings
are not equivalent, the Applicable Margin shall be determined by the lower of
the two highest ratings; provided that each of said two (2) highest ratings
shall be Investment Grade Ratings and at least one of which shall be an
Investment Grade Rating from S&P or Moody's.

                                      -2-




                       Range of                                                   Applicable
                    the Borrower's                    Applicable                  Margin for
                     Credit Rating                  Margin for Euro               Base Rate
                     (S&P/Moody's                    Dollar Loans                   Loans
                   or other Ratings)                 (% per annum)              (% per annum)
                   -----------------                 -------------              -------------
                                                                                
           A-/A3 or their equivalent or                   0.50                        0
           higher
           BBB+/Baa1 or their equivalent                  0.525                       0
           BBB/Baa2 or their equivalent                   0.60                        0
           BBB-/Baa3 or their equivalent                  0.80                        0
           Below BBB-/Baa3 or their                       1.10                        0
           equivalent or unrated


The Administrative Agent shall notify the Lenders in writing promptly after it
obtains knowledge of any change in the Borrower's Credit Rating which shall
effect a change in the Applicable Margin.

         "ARRANGER" means GSMC, appointed pursuant to the terms of Article XII
of this Agreement.

         "ASSET SALE" shall have the meaning assigned to such term in the
definition of "Net Cash Proceeds".

         "ASSIGNMENT AND ACCEPTANCE" means an Assignment and Acceptance in
substantially the form of Exhibit A attached hereto and made a part hereof (with
blanks appropriately completed) delivered to the Administrative Agent in
connection with an assignment of a Lender's interest under this Agreement in
accordance with the provisions of Section 14.1.

         "AUTHORIZED FINANCIAL OFFICER" means a chief executive officer,
president, chief financial officer, treasurer or other qualified senior officer
acceptable to the Administrative Agent.

         "BASE RATE" means, for any period, a fluctuating interest rate per
annum as shall be in effect from time to time, which rate per annum shall at all
times be equal to the higher of:

                  (i) the rate of interest announced publicly by Citibank, N.A.
         in New York, New York from time to time, as Citibank, N.A.'s prime
         rate; and

                  (ii) the sum of (A) one-half of one percent (0.50%) per annum
         plus (B) the Federal Funds Rate in effect from time to time during such
         period.

                                      -3-


Any change in the Base Rate shall result in a corresponding change on the same
day in the rate of interest accruing from and after such day on the unpaid
balance of any Base Rate Loan.

         "BASE RATE LOAN" means (i) a Loan which bears interest at a rate
determined by reference to the Base Rate and the Applicable Margin as provided
in Section 5.1(a), or (ii) an overdue amount which was a Base Rate Loan
immediately before it became due.

         "BENEFIT PLAN" means an employee benefit plan defined in Section 3(3)
of ERISA in respect of which the Borrower or any ERISA Affiliate (i) is, or
within the immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA or (ii) has assumed or is otherwise subject to any
liability.

         "BORROWER" means Reckson.

         "BORROWER PARTNERSHIP AGREEMENT" means the Reckson Partnership
Agreement as such agreement may be amended, restated, modified or supplemented
from time to time with the consent of the Agents or as permitted under Section
10.9.

         "BORROWING" means a borrowing consisting of Loans of the same type
made, continued or converted on the same day.

         "BUDGETED CONSTRUCTION COST" means, with respect to Property on which
vertical construction of Improvements (including redevelopments consisting of or
described as vacant buildings, but excluding TI Work and excluding work prior to
erection of the structure of the building) has commenced and is proceeding to
completion in the ordinary course but has not yet been completed (as such
completion shall be evidenced by a temporary or permanent certificate of
occupancy permitting use of such Property by the general public), the aggregate
full-budgeted costs of construction of such Improvements (including land
acquisition costs and other soft costs and TI Work relating to such Property, in
accordance with GAAP); provided that Budgeted Construction Cost shall exclude
build-to-suit Projects that are seventy-five percent (75%) pre-leased or
Projects which are less than seventy-five percent (75%) pre-leased but have a
pro-forma yield of ten percent (10%) or more, based upon executed leases and the
cost of acquisition plus the estimated cost to complete the same, which
estimated cost to complete shall be determined in a manner reasonably acceptable
to the Administrative Agent.

         "BUSINESS DAY" means a day, in the applicable local time, which is not
a Saturday or Sunday or a legal holiday and on which banks are not required or
permitted by law or other governmental action to close (i) in New York, New York
and (ii) in the case of Eurodollar Rate Loans, in London, England.

         "CAPITAL EXPENDITURE VALUATION RESERVE AMOUNTS" means the sum of (a) an
amount per annum equal to $0.40 multiplied by the number of square feet for
office properties (other than New York City Assets) owned or ground leased,
directly or indirectly, by any of the Consolidated Businesses or Joint Ventures;
(b) an amount per annum equal to $0.15 multiplied by the number of square feet
for industrial properties owned or ground leased, directly or indirectly, by any
of the Consolidated Businesses or Joint Ventures; and (c) an amount per annum
equal to $0.50 multiplied by the number of square feet for New York City Assets;
provided that all properties that are subject to a Triple Net Lease shall be
excluded from the foregoing calculation of the Capital Expenditure Valuation
Reserve Amounts.

                                      -4-


         "CAPITAL EXPENDITURE COVERAGE RESERVE AMOUNTS" means the sum of (a) an
amount per annum equal to $1.25 multiplied by the number of square feet for
office properties (other than New York City Assets) owned or ground leased,
directly or indirectly, by any of the Consolidated Businesses or Joint Ventures;
(b) an amount per annum equal to $0.40 multiplied by the number of square feet
for industrial properties owned or ground leased, directly or indirectly, by any
of the Consolidated Businesses or Joint Ventures; and (c) an amount per annum
equal to $1.75 multiplied by the number of square feet for New York City Assets
provided that all properties that are subject to a Triple Net Lease shall be
excluded from the foregoing calculation of the Capital Expenditure Coverage
Reserve Amounts.

         "CAPITAL LEASE" means any lease of any property (whether real, personal
or mixed) by a Person as lessee which, in conformity with GAAP, is accounted for
as a capital lease on the balance sheet of that Person.

         "CAPITAL MARKETS TRANSACTION" means the issuance by the Company, the
Borrower or any of their respective Subsidiaries after the Closing Date of (a)
of debt securities (excluding mortgage financings or borrowings under the
Existing Revolving Credit Agreement or this Agreement) or (b) common or
preferred equity or equity equivalent securities, including partnership
interests, limited liability company interests and convertible securities
(however designated, and whether voting or non-voting, but excluding equity not
issued for the purpose of raising cash (including, but not limited to, equity
issued upon exercise of options or upon awards to company executives or
trustees, equity issued under any dividend reinvestment plan and equity
securities issued in private placements to a limited number of institutional
investors in connection with joint venture transactions)) issued in the public
or private capital markets pursuant to an underwriting or placement agreement
(or similar agreement performing the same function as an underwriting or
placement agreement).

         "CAPITAL STOCK" means, with respect to any Person, any capital stock of
such Person, regardless of class or designation, and all warrants, options,
purchase rights, conversion or exchange rights, voting rights, calls or claims
of any character with respect thereto.

         "CASH AND CASH EQUIVALENTS" means unrestricted (i) cash, (ii)
marketable direct obligations issued or unconditionally guaranteed by the United
States government and backed by the full faith and credit of the United States
government; and (iii) domestic and Eurodollar certificates of deposit and time
deposits, bankers' acceptances and floating rate certificates of deposit issued
by any commercial bank organized under the laws of the United States, any state
thereof, the District of Columbia, any foreign bank, or its branches or agencies
(fully protected against currency fluctuations), which, at the time of
acquisition, are rated A-1 (or better) by S&P or P-1 (or better) by Moody's
provided that the maturities of such Cash and Cash Equivalents shall not exceed
one year.

         "CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. ss.ss. 9601 et seq., any amendments
thereto, any successor statutes, and any regulations or guidelines promulgated
thereunder.

         "CLAIM" means any claim or demand, by any Person, of whatsoever kind or
nature for any alleged Liabilities and Costs, whether based in contract, tort,
implied or express warranty, strict liability, criminal or civil statute,
Permit, ordinance or regulation, common law or otherwise.

                                      -5-


         "CLOSING DATE" means January 13, 2006.

         "COMBINED EQUITY VALUE" means Total Value, less Total Outstanding
Indebtedness.

         "COMMISSION" means the Securities and Exchange Commission and any
Person succeeding to the functions thereof.

         "COMPANY" means Reckson Associates Realty Corp., a Maryland
corporation.

         "COMPLIANCE CERTIFICATE" has the meaning set forth in Section 8.2(b).

         "CONSOLIDATED" means consolidated, in accordance with GAAP, but
excluding the effects of consolidation under Interpretation No. 46 of the
Financial Accounting Standards Board.

         "CONSOLIDATED BUSINESSES" means the Company, the Borrower, Reckson FS
Limited Partnership, Metropolitan, MOP and their wholly-owned Subsidiaries.

         "CONSTRUCTION ASSET COST" means, with respect to Property on which
vertical construction of Improvements (including redevelopments consisting of or
described as vacant buildings, but excluding TI Work and excluding work prior to
erection of the structure of the building) has commenced and is proceeding to
completion in the ordinary course but has not yet been completed (as such
completion shall be evidenced by a temporary or permanent certificate of
occupancy permitting use of such Property by the general public), the aggregate
sums incurred and paid on the construction of such Improvements (including land
acquisition costs and other soft costs and TI Work relating to such Property, in
accordance with GAAP). Any such Property shall continue to be valued (for
financial covenant compliance purposes) at its Construction Asset Cost until the
end of four (4) consecutive quarters following such completion (as such
completion shall be evidenced by a temporary or permanent certificate of
occupancy permitting use of such Property by the general public).

         "CONTAMINANT" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, radioactive materials, asbestos containing materials (in any
form or condition), polychlorinated biphenyls (PCBs), or any constituent of any
such substance or waste, and includes, but is not limited to, these terms as
defined in federal, state or local laws or regulations.

         "CONTINGENT OBLIGATION" as to any Person means, without duplication,
(i) any contingent obligation of such Person required to be shown on such
Person's balance sheet in accordance with GAAP, and (ii) any obligation required
to be disclosed in the footnotes to such Person's financial statements in
accordance with GAAP, which obligation guarantees partially or in whole any
non-recourse Indebtedness, lease, dividend or other obligation, exclusive of
contractual indemnities (including, without limitation, any Non-Recourse
Carve-Outs, any indemnity or price-adjustment provision relating to the purchase
or sale of securities or other assets) and guarantees of non-monetary
obligations (other than guarantees of completion) which have not yet been called
on or quantified, of such Person or of any other Person. Notwithstanding the
foregoing, any litigation required to be disclosed in the footnotes to such
Person's financial statements in accordance with GAAP shall not be included as a
"Contingent Obligation" unless the same shall have been reserved for in
accordance with GAAP. The amount of any Contingent Obligation described in
clause (ii) shall be deemed to be (a) with respect to a guaranty of interest or
interest and principal, or operating income guaranty, the sum of all payments
required to be made thereunder (which in the case of an operating income
guaranty shall be deemed to be equal to the debt service for the note secured
thereby), calculated at the interest rate applicable to such Indebtedness,
through (i) in the case of an interest or interest and principal guaranty, the
stated date of maturity of the obligation (and commencing on the date interest
could first be payable thereunder), or (ii) in the case of an operating income
guaranty, the date through which such guaranty will remain in effect, and (b)
with respect to all guarantees not covered by the preceding clause (a) an amount
equal to the stated or determinable amount of the primary obligation in respect
of which such guaranty is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as recorded on the balance sheet and on the
footnotes to the most recent financial statements of the Borrower required to be
delivered pursuant hereto; provided that in no event shall the amount of
Contingent Obligations with respect to any guaranties relating to a loan exceed
the principal amount of such loan. Notwithstanding anything contained herein to
the contrary, guarantees of completion shall not be deemed to be Contingent
Obligations unless and until a claim for payment has been made thereunder, at
which time any such guaranty of completion shall be deemed to be a Contingent
Obligation in an amount equal to any such claim. Subject to the preceding
sentence, (i) in the case of a joint and several guaranty given by such Person
and another Person (but only to the extent such guaranty is recourse, directly
or indirectly to the Borrower), the amount of the guaranty shall be deemed to be
100% thereof unless and only to the extent that (X) such other Person has
delivered Cash or Cash Equivalents to secure all or any part of such Person's
guaranteed obligations or (Y) such other Person holds an Investment Grade Rating
from either Moody's or S&P, and (ii) in the case of a guaranty (whether or not
joint and several) of an obligation otherwise constituting Debt of such Person,
the amount of such guaranty shall be deemed to be only that amount in excess of
the amount of the obligation constituting Indebtedness of such Person.
Notwithstanding anything contained herein to the contrary, "Contingent
Obligations" shall not be deemed to include guarantees of loan commitments or of
construction loans to the extent the same have not been drawn.

                                      -6-


         "CONTRACTUAL OBLIGATION", as applied to any Person, means any provision
of any Securities issued by that Person or any indenture, mortgage, deed of
trust, security agreement, pledge agreement, guaranty, contract, undertaking,
agreement or instrument to which that Person is a party or by which it or any of
its properties is bound, or to which it or any of its properties is subject.

         "CREDIT RATING" means the ratings assigned by not less than two of the
Rating Agencies (at least one of which shall be S&P or Moody's) to the
Borrower's senior long-term unsecured indebtedness. The decision on which two,
or in certain cases three, Rating Agencies to use shall be made by the Borrower
so long as one of such Rating Agencies shall be Moody's or S&P.

         "CUSTOMARY PERMITTED LIENS" means

                  (i) Liens (other than Environmental Liens and Liens in favor
         of the PBGC) with respect to the payment of taxes, assessments or
         governmental charges or levies in all cases which are not yet due or
         which are being contested in good faith by appropriate proceedings in
         accordance with Section 9.4, and with respect to which adequate
         reserves or other appropriate provisions are being maintained in
         accordance with GAAP;

                  (ii) statutory and common law Liens of landlords against any
         Property of the Borrower or any of its Subsidiaries;

                                      -7-


                  (iii) Liens against any Property of the Borrower or any of its
         Subsidiaries in favor of suppliers, mechanics, carriers, materialmen,
         warehousemen or workmen and other Liens against any Property of the
         Borrower or any of its Subsidiaries imposed by law created in the
         ordinary course of business for amounts which could not reasonably be
         expected to result in a Material Adverse Effect;

                  (iv) Liens (other than any Lien in favor of the PBGC) incurred
         or deposits made in the ordinary course of business in connection with
         worker's compensation, unemployment insurance or other types of social
         security benefits or to secure the performance of bids, tenders, sales,
         contracts (other than for the repayment of borrowed money), surety,
         appeal and performance bonds; provided that (A) all such Liens do not
         in the aggregate materially detract from the value of the Borrower's or
         such Subsidiary's assets or Property or materially impair the use
         thereof in the operation of their respective businesses, and (B) all
         Liens of attachment or judgment and Liens securing bonds to stay
         judgments or in connection with appeals which do not secure at any time
         an aggregate amount of recourse Indebtedness exceeding $10,000,000;

                  (v) Liens against any Property of the Borrower or any
         Subsidiary of the Borrower arising with respect to zoning restrictions,
         easements, licenses, reservations, covenants, rights-of-way, utility
         easements, building restrictions and other similar charges or
         encumbrances on the use of Real Property which do not materially
         interfere with the ordinary conduct of the business of the Borrower or
         any of its Subsidiaries;

                  (vi) leases or subleases granted to other Persons not
         materially interfering with the conduct of the business of the Borrower
         and its Subsidiaries taken as a whole;

                  (vii) Liens placed upon equipment or machinery used in the
         ordinary course of business of the Borrower or any of its Subsidiaries
         at the time of acquisition thereof by the Borrower or any such
         Subsidiary or within 180 days thereafter to secure Indebtedness
         incurred to pay all or a portion of the purchase price thereof,
         provided that the Lien encumbering the equipment or machinery so
         acquired does not encumber any other asset of the Borrower or such
         Subsidiary;

                  (viii) customary restrictions imposed by licensors of software
         or trademarks on users thereof;

                  (ix) interests of licensees and sublicensees in any trademarks
         or other intellectual property license or sublicense by the Borrower or
         any of its Subsidiaries; and

                  (x) Environmental Liens less than $5,000,000, which are being
         contested in good faith by appropriate proceedings.

         "DESIGNATED LENDER" has the meaning set forth in Section 13.4.

         "DOL" means the United States Department of Labor and any Person
succeeding to the functions thereof.

         "DOLLARS" AND "$" mean the lawful money of the United States.

                                      -8-


         "DOMESTIC LENDING OFFICE" means, with respect to any Lender, such
Lender's office, located in the United States, specified as the "Domestic
Lending Office" under its name on SCHEDULE LC hereto or as set forth in the
Assignment and Acceptance by which it became a Lender or such other United
States office of such Lender as it may from time to time specify by written
notice to the Borrower and the Administrative Agent.

         "ELIGIBLE ASSIGNEE" means (i) a Lender or a Lender Affiliate; (ii) a
commercial bank having total assets in excess of $1,000,000,000; (iii) the
central bank of any country which is a member of the organization for Economic
Cooperation and Development having total assets in excess of $10,000,000,000; or
(iv) a finance company or other financial institution reasonably acceptable to
the Administrative Agent, which is regularly engaged in making, purchasing or
investing in loans and having total assets in excess of $1,000,000,000 or is
otherwise reasonably acceptable to the Administrative Agent.

         "ELIGIBLE CASH 1031 PROCEEDS" means the cash proceeds held by a
"qualified intermediary" from the sale of Real Property, which proceeds are
intended to be used by such qualified intermediary to acquire one or more
"replacement properties" that are of "like-kind" to such Real Property in an
exchange that qualifies as a tax-free exchange under Section 1031 of the
Internal Revenue Code, and no portion of which proceeds the Borrower, the
Company or any Affiliate has the right to receive, pledge, borrow or otherwise
obtain the benefits of until such time as provided under the applicable
"exchange agreement" (as such terms in quotations are defined in Treasury
Regulations Section 1.1031(k)-1(g)(4) (the "REGULATIONS")) or until such
exchange is terminated. Upon the cash proceeds no longer being held by such
qualified intermediary pursuant to the Regulations or otherwise no longer
qualifying under the Regulations for like-kind exchange treatment, such proceeds
shall cease being Eligible Cash 1031 Proceeds.

         "ELIGIBLE ENCUMBERED PROPERTIES" means the Projects and New York City
Assets listed on SCHEDULE EEP, so long as (a) such Projects and New York City
Assets are owned and ground leased by the Borrower or a Guarantor and would
otherwise satisfy the requirements of an Unencumbered Project or an Unencumbered
New York City Asset, except that such Project or New York City Asset is subject
to a lien which is not a Customary Permitted Lien, (b) the Indebtedness secured
by the Lien on such Project or New York City Asset that exists on the Closing
Date is not (x) amended or modified in any manner that would increase the
principal amount or postpone the maturity date thereof or (y) refinanced or
replaced with new Indebtedness having a principal amount greater than or a
maturity date later than the Indebtedness being refinanced or replaced, (c) the
Indebtedness secured by the Lien on such Project or New York City Asset has not
been accelerated, unless such acceleration is rescinded and (d) no default or
event of default under any mortgage or other loan document relating to the
Indebtedness secured by the Lien on such Project or New York City Asset has
occurred and is continuing, which default or event of default then subjects such
Indebtedness to acceleration or then permits such Indebtedness to be accelerated
under any such mortgage or other loan document, unless such default or event of
default is cured or waived.

         "ELIGIBLE GROUND LEASE" means a ground lease that (a) has a minimum
remaining term of twenty-five (25) years, including tenant controlled options,
as of any date of determination, (b) has customary notice rights, default cure
rights, new lease rights in the event of bankruptcy of the tenant and other
customary provisions for the benefit of a leasehold mortgagee or has equivalent
protection for a leasehold permanent mortgagee by a subordination to such
leasehold permanent mortgagee of the landlord's fee interest, and (c) is
otherwise acceptable for non-recourse leasehold mortgage financing under
customary lending requirements. The Eligible Ground Leases as of the date of
this Agreement are listed on SCHEDULE EG.

                                      -9-


         "ELIGIBLE NET CASH PROCEEDS" means (a) until such time as the aggregate
Net Cash Proceeds from all Asset Sales after the Closing Date equals or exceeds
$100,000,000, all Net Cash Proceeds from any Asset Sale that results in
$50,000,000 or more of Net Cash Proceeds and (b) thereafter (and excluding, for
the avoidance of doubt, the first $100,000,000 of Net Cash Proceeds from Asset
Sales that result in less than $50,000,000 of Net Cash Proceeds), all Net Cash
Proceeds from any Asset Sale, but only with respect to Asset Sales that result
in less than $50,000,000 of Net Cash Proceeds, to the extent that the aggregate
Net Cash Proceeds from such Asset Sales exceed $2,500,000.

         "ENVIRONMENTAL, HEALTH OR SAFETY REQUIREMENTS OF LAW" means all
Requirements of Law derived from or relating to any federal, state or local law,
ordinance, rule, regulation, Permit, license or other binding determination of
any Governmental Authority relating to, imposing liability or standards
concerning, or otherwise addressing the environment, health and/or safety,
including, but not limited to the Clean Air Act, the Clean Water Act, CERCLA,
RCRA, any so-called "Superfund" or "Superlien" law, the Toxic Substances Control
Act and OSHA, and public health codes, each as from time to time in effect.

         "ENVIRONMENTAL LIEN" means a Lien in favor of any Governmental
Authority for any (i) liabilities under any Environmental, Health or Safety
Requirement of Law, or (ii) damages arising from, or costs incurred by such
Governmental Authority in response to, a Release or threatened Release of a
Contaminant into the environment.

         "ENVIRONMENTAL PROPERTY TRANSFER ACT" means any applicable Requirement
of Law that conditions, restricts, prohibits or requires any notification or
disclosure triggered by the transfer, sale, lease or closure of any Property or
deed or title for any Property for environmental reasons, including, but not
limited to, any so-called "Environmental Cleanup Responsibility Act" or
"Responsible Property Transfer Act".

         "EQUIPMENT" means equipment used in connection with the maintenance of
Projects and Properties.

         "ERISA" means the Employee Retirement Income Security Act of 1974, 29
U.S.C. ss.ss. 1000 et seq., any amendments thereto, any successor statutes, and
any regulations or guidelines promulgated thereunder.

         "ERISA AFFILIATE" means (i) any corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414 (b) of
the Internal Revenue Code) as the Borrower; (ii) a partnership or other trade or
business (whether or not incorporated) which is under common control (within the
meaning of Section 414 (c) of the Internal Revenue Code) with the Borrower; and
(iii) a member of the same affiliated service group (within the meaning of
Section 414 (m) of the Internal Revenue Code) as the Borrower, any corporation
described in clause (i) above or any partnership or trade or business described
in clause (ii) above.

         "ERISA TERMINATION EVENT" means (i) a Reportable Event with respect to
any Benefit Plan or Multiemployer Plan; (ii) the withdrawal of the Borrower or
any ERISA Affiliate from a Benefit Plan during a plan year in which the Borrower
or such ERISA Affiliate was a "substantial employer" as defined in Section
4001(a)(2) of ERISA or the cessation of operations which results in the
termination of employment of 20% of Benefit Plan participants who are employees
of the Borrower or any ERISA Affiliate; (iii) the imposition of an obligation on
the Borrower or any ERISA Affiliate under Section 4041 of ERISA to provide
affected parties written notice of intent to terminate a Benefit Plan in a
distress termination described in Section 4041(c) of ERISA; (iv) the institution
by the PBGC of proceedings to terminate a Benefit Plan; (v) any event or
condition which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Benefit Plan;
or (vi) the partial or complete withdrawal of the Borrower or any ERISA
Affiliate from a Multiemployer Plan.

                                      -10-


         "EURODOLLAR AFFILIATE" means, with respect to each Lender, the
Affiliate of such Lender (if any) set forth below such Lender's name under the
heading "Eurodollar Affiliate" on SCHEDULE LC hereto or as set forth in the
Assignment and Acceptance by which it became a Lender or such Lender Affiliate
as it may from time to time specify by written notice to the Borrower and the
Administrative Agent.

         "EURODOLLAR INTEREST PERIOD" has the meaning set forth in Section
5.2(b).

         "EURODOLLAR INTEREST RATE DETERMINATION DATE" has the meaning set forth
in Section 5.2(c).

         "EURODOLLAR LENDING OFFICE" means, with respect to any Lender, such
Lender's office (if any) specified as the "Eurodollar Lending Office" under its
name on SCHEDULE LC hereto or as set forth in the Assignment and Acceptance by
which it became a Lender or such other office or offices of such Lender as it
may from time to time specify by written notice to the Borrower and the
Administrative Agent.

         "EURODOLLAR RATE" means, for any Eurodollar Interest Period with
respect to any Eurodollar Rate Loan, an interest rate per annum equal to the
rate per annum obtained by multiplying (a) a rate per annum equal to the rate
for Dollar deposits with maturities comparable to such Eurodollar Interest
Period which appears on Telerate Page 3750 as of 11:00 a.m., London time, two
(2) Business Days prior to the commencement of such Eurodollar Interest Period,
provided, however, that if such rate does not appear on Telerate Page 3750, the
"Eurodollar Rate" applicable to a particular Eurodollar Interest Period shall
mean a rate per annum equal to the rate at which Dollar deposits in an amount
approximately equal to the principal balance (or the portion thereof which will
bear interest at a rate determined by reference to the Eurodollar Rate during
the Eurodollar Interest Period to which such Eurodollar Rate is applicable in
accordance with the provisions hereof), and with maturities comparable to the
last day of the Eurodollar Interest Period with respect to which such Eurodollar
Rate is applicable, are offered in immediately available funds in the London
Interbank Market to the London office of Citibank, N.A. by leading banks in the
Eurodollar market at 11:00 a.m., London time, two (2) Business Days prior to the
commencement of the Eurodollar Interest Period to which such Eurodollar Rate is
applicable, by (b) a fraction (expressed as a decimal) the numerator of which
shall be the number one and the denominator of which shall be the number one
minus the Eurodollar Reserve Percentage for each day during such Eurodollar
Interest Period.

         "EURODOLLAR RATE LOAN" means (i) a Loan which bears interest at a rate
determined by reference to the Eurodollar Rate and the Applicable Margin for
Eurodollar Rate Loans, as provided in Section 5.1(a) or (ii) an overdue amount
which was a Eurodollar Rate Loan immediately before it became due.

                                      -11-


         "EURODOLLAR RESERVE PERCENTAGE" means, for any day, that percentage
which is in effect on such day, as prescribed by the Federal Reserve Board for
determining the maximum reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve requirement) for a member bank
of the Federal Reserve System in New York, New York with deposits exceeding five
billion Dollars in respect of "Eurocurrency Liabilities" (or in respect of any
other category of liabilities which includes deposits by reference to which the
interest rate on Eurodollar Rate Loans is determined or any category of
extensions of credit or other assets which includes loans by a non United States
office of any bank to United States residents).

         "EVENT OF DEFAULT" means any of the occurrences set forth in Section
11.1 after the expiration of any applicable grace period and the giving of any
applicable notice, in each case as expressly provided in Section 11.1.

         "EXISTING PERMITTED LIENS" means each of the Liens set forth on
SCHEDULE 1.1.1.

         "EXISTING REVOLVING CREDIT AGREEMENT" means that certain Third Amended
and Restated Credit Agreement, dated as of August 6, 2004, among the Borrower,
the institutions from time to time a party thereto as Lenders, and JPMorgan
Chase Bank, as Administrative Agent, as amended by that certain Amendment No. 1
dated as of May 11, 2005 and that certain Amendment No. 2 dated as of June 20,
2005.

         "FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day in New York, New York, for the next preceding
Business Day) in New York, New York by the Federal Reserve Bank of New York, or
if such rate is not so published for any day which is a Business Day in New
York, New York, the average of the quotations for such day on such transactions
by the Reference Bank, as determined by the Administrative Agent.

         "FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System or any Governmental Authority succeeding to its functions.

          "FFO" means "funds from operations" as defined in accordance with
resolutions adopted by the Board of Governors of the National Association of
Real Estate Investment Trusts as in effect from time to time; provided that FFO
shall (i) be based on net income after payment of distributions to holders of
preferred partnership units in the Borrower and distributions necessary to pay
holders of preferred stock of the Company and (ii) at all times exclude (a)
charges for impairment losses from property sales and (b) non-recurring charges.

         "FINANCIAL STATEMENTS" means (i) quarterly and annual consolidated
statements of income and retained earnings, statements of cash flow, and balance
sheets, prepared in accordance with GAAP, consistently applied, and (ii) such
other financial statements of the Borrower, the Company and the other
Consolidated Businesses or Joint Ventures that the Company shall routinely and
regularly prepare and that the Arranger or the Requisite Lenders may from time
to time reasonably request.

         "FISCAL YEAR" means the fiscal year of the Company and the Borrower for
accounting and tax purposes, which shall be the 12-month period ending on
December 31 of each calendar year.

                                      -12-


         "FITCH" means Fitch Ratings, a division of Fitch, Inc. or any successor
thereto.

         "FIXED CHARGES" means, with respect to any fiscal period, the sum of
(a) Total Interest Expense, (b) the aggregate of all scheduled principal
payments on Total Outstanding Indebtedness according to GAAP made or required to
be made during such fiscal period for the Consolidated Businesses and Joint
Ventures (but excluding balloon payments of principal due upon the stated
maturity of an Indebtedness), provided that only the Consolidated Businesses'
pro rata share of the Joint Ventures' scheduled principal payments are to be
included, and (c) the aggregate of all dividends or distributions payable
(whether paid or accrued) on all preferred stock and other preferred securities
or preferential arrangements of the Consolidated Businesses, including, without
limitation, preferred distributions payable to holders of preferred OP Units. As
used herein, "OP Units" means limited partnership interests in Reckson.

         "FUNDING DATE" means the date on or after the Closing Date on which all
of the conditions described in Section 6.1 have been satisfied (or waived) in a
manner satisfactory to the Administrative Agent and the Lenders and on which the
Term Loan under this Agreement is made by the Lenders to the Borrower.

         "GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the American Institute of Certified Public
Accountants' Accounting Principles Board and Financial Accounting Standards
Board or in such other statements by such other entity as may be in general use
by significant segments of the accounting profession as in effect on the Closing
Date (unless otherwise specified herein as in effect on another date or dates).

         "GENERAL PARTNER" means the Company and any successor general
partner(s) of the Borrower.

         "GOVERNMENTAL APPROVAL" means all right, title and interest in any
existing or future certificates, licenses, permits, variances, authorizations
and approvals issued by any Governmental Authority having jurisdiction with
respect to any Project.

         "GOVERNMENTAL AUTHORITY" means any nation or government, any federal,
state, local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.

         "GSMC" means Goldman Sachs Mortgage Company.

         "GUARANTIES" means, collectively, the Unconditional Guaranties of
Payment, made by each of the Company, Reckson FS Limited Partnership and the
other Guarantors for the benefit of the Lenders, in substantially the form of
Exhibit H hereto.

         "GUARANTORS" means, collectively, the Company, Reckson FS Limited
Partnership, 360 Hamilton Plaza LLC, Metropolitan, MOP, 275 Broadhollow LLC,
1055 Washington Boulevard LLC, Reckson 1 Giralda LLC, Reckson 7 Giralda Owner
LLC, Reckson 300 Broadhollow LLC, Reckson 1185 Avenue of the Americas LLC,
Magnolia Associates, Ltd., Reckson Plaza LLC, Reckson Cross Westchester LLC,
Reckson Cross Westchester II LLC, Reckson Cross Westchester III LLC, Reckson
Cross Westchester IV LLC, Reckson Cross Westchester V LLC, and any other
Affiliate of the Borrower executing a Guaranty. Any Guarantor that is the owner
or ground lessee of an Unencumbered Project or Unencumbered New York City Asset
shall be a wholly-owned Subsidiary of the Borrower.

                                      -13-


         "IMPROVEMENTS" means all buildings, fixtures, structures, parking
areas, landscaping and all other improvements whether existing now or hereafter
constructed, together with all machinery and mechanical, electrical, HVAC and
plumbing systems presently located thereon and used in the operation thereof,
excluding (a) any such items owned by utility service providers, (b) any such
items owned by tenants or other third-parties unaffiliated with the Borrower and
(c) any items of personal property.

         "INDEBTEDNESS", as applied to any Person, means, at any time, without
duplication, (a) all indebtedness, obligations or other liabilities of such
Person (whether consolidated or representing the proportionate interest in any
other Person) (i) for borrowed money (including construction loans) or evidenced
by debt securities, debentures, acceptances, notes or other similar instruments,
and any accrued interest and fees relating thereto, (ii) under profit payment
agreements or in respect of obligations to redeem, repurchase or exchange any
Securities of such Person or to pay dividends in respect of any preferred stock
(but only to the extent that such Person shall be contractually obligated to pay
the same), (iii) with respect to letters of credit, bankers' acceptances or
similar facilities issued for such Person's account or for which such Person
otherwise has reimbursement obligations, other than any undrawn letter of credit
to the extent that such letter of credit supports any Contractual Obligation
with a term of less than ninety (90) days, (iv) to pay the deferred purchase
price of property or services, except accounts payable and accrued expenses
arising in the ordinary course of business, (v) in respect of Capital Leases or
so-called synthetic leases, (vi) which are Contingent Obligations or (vii) under
indemnities but only at such time as a claim shall have been made thereunder;
(b) all indebtedness, obligations or other liabilities of such Person or others
secured by a Lien on any property of such Person, whether or not such
indebtedness, obligations or liabilities are assumed by such Person, all as of
such time, but in a case of obligations of others not assumed by such Person an
amount not in excess of the value of such property; (c) all indebtedness,
obligations or other liabilities of such Person in respect of interest rate
contracts, derivatives contracts and foreign exchange contracts, net of
liabilities owed to such Person by the counterparties thereon; (d) all preferred
stock and preferred equity interests subject (upon the occurrence of any
contingency or otherwise) to mandatory redemption in cash by the holder of such
preferred stock or equity interest; (e) all preferred stock and preferred equity
interests in any Consolidated Business (other than the Company and the Borrower)
which has not provided a Guaranty of the Obligations; and (f) all Contractual
Obligations with respect to any of the foregoing.

         "INDEMNIFIED MATTERS" has the meaning set forth in Section 14.3.

         "INDEMNITEES" has the meaning set forth in Section 14.3.

         "INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter, any successor
statute and any regulations or guidelines promulgated thereunder.

         "INVESTMENT" means, with respect to any Person, (i) any purchase or
other acquisition by that Person of Securities, or of a beneficial interest in
Securities, issued by any other Person, (ii) any purchase by that Person of all
or substantially all of the assets of a business conducted by another Person,
(iii) any loan, advance (other than deposits with financial institutions
available for withdrawal on demand, prepaid expenses, accounts receivable,
advances to employees and similar items made or incurred in the ordinary course
of business) or capital contribution by that Person to any other Person,
including all Indebtedness to such Person arising from a sale of property by
such Person other than in the ordinary course of its business, and (iv) any
purchase or other acquisition by that Person of Real Property, whether directly
or indirectly. The amount of any Investment shall be the original cost of such
Investment (together with all capital improvement costs thereafter paid or
incurred with respect to such Investment in accordance with GAAP), without any
adjustments for increases or decreases in value or write-ups, write-downs or
write-offs with respect to such Investment.

                                      -14-


         "INVESTMENT FUNDS" means (i) Reckson Strategic Venture Partners LLC,
and (ii) a Person in which FrontLine Capital Group or a Subsidiary thereof is a
general partner or a managing member, in the case of a partnership or limited
liability company, and which, in the case of a corporation, has the right to
elect a majority of the board of directors.

         "INVESTMENT GRADE RATING" means a rating for a Person's senior
long-term unsecured debt of BBB- or better from S&P, and a rating of Baa3 or
better from Moody's or a rating equivalent to the foregoing from Fitch or
another Rating Agency.

          "IRS" means the Internal Revenue Service and any Person succeeding to
the functions thereof.

         "JOINT VENTURES" means any interests in partnerships, joint ventures,
limited liability companies, trusts, associations and corporations held or owned
directly or indirectly by the Borrower and/or the Company which are not
wholly-owned by the Borrower and/or the Company (other than Investment Funds or
any affiliated or unaffiliated operating company that the Borrower includes
under clause (vii) of the definition of Total Value, subject to the limitation
of $100,000,000 investments (valued at the lower of cost or market in accordance
with GAAP)).

         "JOINT VENTURE UNENCUMBERED VALUE" means the portion of Total
Unencumbered Value from Joint Ventures attributable to Unencumbered Projects and
Unencumbered New York City Assets.

         "KNOWLEDGE" with reference to the Company, the Borrower or any
Subsidiary of any of them, means the actual knowledge of such Person after
reasonable inquiry (which reasonable inquiry shall include, without limitation,
interviewing and questioning such other Persons as the Company, the Borrower or
such Subsidiary, as applicable, deems reasonably necessary).

         "LAND/DEVELOPMENT UNENCUMBERED VALUE" means the portion of Total
Unencumbered Value which is attributable to Unencumbered assets consisting of
land and Projects under development.

         "LEASE" means a lease, license, concession agreement or other agreement
providing for the use or occupancy of any portion of any Project, including all
amendments, supplements, modifications and assignments thereof and all side
letters or side agreements relating thereto.

         "LENDER" means each financial institution a signatory hereto as a
Lender as of the Closing Date and, at any other given time, each financial
institution which is a party hereto as Lender, whether as a signatory hereto or
pursuant to an Assignment and Acceptance.

         "LENDER AFFILIATE" means with respect to any Lender an Affiliate of
such Lender.

         "LETTER AGREEMENT" means the letter agreement dated as of the date
hereof among the Borrower, the Administrative Agent and the Arranger.

                                      -15-


         "LIABILITIES AND COSTS" means all liabilities, obligations,
responsibilities, losses, damages, personal injury, death, punitive damages,
economic damages, consequential damages, treble damages, intentional, willful or
wanton injury, damage or threat to the environment, natural resources or public
health or welfare, costs and expenses (including, without limitation, attorney,
expert and consulting fees and costs of investigation, feasibility or Remedial
Action studies), fines, penalties and monetary sanctions, interest, direct or
indirect, known or unknown, absolute or contingent, past, present or future.

         "LIEN" means any mortgage, deed of trust, pledge, hypothecation,
assignment, conditional sale agreement, deposit arrangement, security interest,
encumbrance, lien (statutory or other and including, without limitation, any
Environmental Lien), preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever in respect of any
property of a Person, whether granted voluntarily or imposed by law, and
includes the interest of a lessor under a Capital Lease or under any financing
lease having substantially the same economic effect as any of the foregoing.

         "LIMITED PARTNERS" means those Persons who from time to time are
limited partners of the Borrower; and "LIMITED PARTNER" means each of the
Limited Partners, individually.

         "LOAN" means a Term Loan made by a Lender pursuant to Section 2.1;
provided, that if any such loan or loans (or portions thereof) are combined or
subdivided pursuant to a Notice of Conversion/Continuation, the term "Loan"
shall refer to the combined principal amount resulting from such combination or
to each of the separate principal amounts resulting from such subdivision, as
the case may be.

         "LOAN ACCOUNT" has the meaning set forth in Section 4.3(b).

         "LOAN DOCUMENTS" means this Agreement, the Notes and the Guaranties.

         "MANAGEMENT COMPANY" means, collectively (i) Reckson Management Group,
Inc., a Delaware corporation, RANY Management Group, Inc. and their respective
wholly-owned or controlled Subsidiaries and (ii) such other property management
companies controlled (directly or indirectly) by the Company or the Borrower and
which property management companies manage properties owned by the Company, the
Borrower and its Subsidiaries and for which the Borrower has previously provided
the Administrative Agent with: (1) notice of such property management company,
(2) evidence reasonably satisfactory to the Administrative Agent that such
property management company is controlled (directly or indirectly) by the
Company or the Borrower, and (3) evidence reasonably satisfactory to the
Administrative Agent that such property management company manages properties
owned, in whole or in part by the Company or the Borrower or its Subsidiaries.

         "MARGIN STOCK" means "margin stock" or "margin security" as such terms
are defined in Regulation U and Regulation X.

         "MATERIAL ADVERSE EFFECT" means a material adverse effect upon (i) the
financial condition or assets of the Company, the Borrower and their
Subsidiaries taken as a whole, (ii) the ability of the Borrower to perform its
material obligations under the Loan Documents, (iii) the ability of the
Guarantors to perform their material obligations under the Guaranties, or (iv)
the ability of the Lenders or the Administrative Agent to enforce any of the
Loan Documents.

                                      -16-


         "METROPOLITAN" means Metropolitan Partners, LLC, a Delaware limited
liability company, in which the Borrower currently owns 100% of the common
equity interests.

         "MOODY'S" means Moody's Investors Service, Inc.

         "MOP" means Metropolitan  Operating  Partnership,  L.P., a Delaware
limited partnership,  and a Subsidiary of Metropolitan.

         "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA which is, or within the immediately preceding six (6) years
was, contributed to by either the Borrower or any ERISA Affiliate or in respect
of which the Borrower or any ERISA Affiliate has assumed any liability.

         "NET CASH PROCEEDS" means all cash (whether proceeds, dividends, or
distributions) when and as received in connection with the sale, financing or
refinancing of any Real Property or other Real Property asset (including
interests in Joint Ventures and Subsidiaries that own Real Property) or multiple
Real Properties or Real Property assets in a single transaction (an "ASSET
SALE"), less reasonable costs and expenses, repayment of secured indebtedness
with respect to the applicable asset, repayment of loans under the Existing
Revolving Credit Agreement required by Section 8.9 of the Existing Revolving
Credit Agreement, and net of an amount equal to taxable capital gains and real
estate transfer taxes payable in connection with any asset sale.

         "NET INCOME" means, with respect to any Person, the net income of such
Person determined in accordance with GAAP.

         "NET OFFERING PROCEEDS" means all cash or other assets received by the
Company or the Borrower or their respective Subsidiaries as a result of a
Capital Markets Transaction, less customary costs, expenses and discounts of
issuance paid by the Company, the Borrower or such Subsidiary, as the case may
be.

         "NEW YORK CITY ASSET" means (i) Real Property which is Class A office
property located in the borough of Manhattan, New York, New York or (ii) Real
Property which is Class A office property located in any other borough of New
York, New York and is substantially similar to Class A office properties located
in the borough of Manhattan, New York, New York, and in each case which is owned
or ground-leased by one of the Consolidated Businesses or Joint Ventures

         "NOI" means (x) net operating income determined in accordance with
GAAP, before gains or losses from extraordinary items relating to any Real
Property, plus (y) (i) any interest expense relating to such Real Property, (ii)
depreciation and amortization relating to such Real Property, and (iii) Property
Level G&A to the extent included in the calculation of net operating income,
less (z) (i) free rent and accrued rent with respect to tenants that are more
than 90 days in arrears in the payment of rent, and further adjusted to omit the
straight line treatment of rent, so as to account for rent on an accrual basis,
(ii) any interest income relating to such Real Property, and (iii) the greater
of Property Level G&A to the extent included in the calculation of net operating
income and an amount equal to 2% of gross revenues with respect to such Real
Property.

         "NON PRO RATA LOAN" has the meaning set forth in Section 4.2(b)(iv).

         "NON-RECOURSE CARVE-OUTS" means exceptions to non-recourse obligations,
such as fraud, misappropriation, waste, environmental liabilities, improper
transfer and breach of restrictions on further financing and breach of single
purpose entity covenants, which are usual and customary in secured transactions
involving institutional lenders or securitized financings and recourse to single
purpose entities that are Consolidated Businesses which have no material assets
other than the Real Property or Properties which are the subject of the Secured
Indebtedness.

                                      -17-


         "NOTE" has the meaning set forth in Section 4.3(a).

         "NOTICE OF BORROWING" means a notice substantially in the form of
Exhibit C attached hereto and made a part hereof.

         "NOTICE OF CONVERSION/CONTINUATION" means a notice substantially in the
form of EXHIBIT D attached hereto and made a part hereof with respect to a
proposed conversion or continuation of a Loan pursuant to Section 5.1(c).

         "OBLIGATIONS" means all Loans, advances, debts, liabilities and
monetary obligations owing by the Borrower to the Administrative Agent, any
Lender, or any Person entitled to indemnification pursuant to Section 14.3 of
this Agreement, of any kind or nature, arising under this Agreement, the Notes
or any other Loan Document. The term includes, without limitation, all interest,
charges, reasonable expenses, fees, reasonable attorneys' fees and disbursements
and any other sum chargeable to the Borrower under this Agreement or any other
Loan Document.

         "OFFICER'S CERTIFICATE" means, as to a corporation, a certificate
executed on behalf of such corporation by the chairman of its board of directors
(if an officer of such corporation) or its chief executive officer, president,
any of its vice-presidents, its chief financial officer, or its treasurer and,
as to a partnership, a certificate executed on behalf of such partnership by the
chairman of the board of directors (if an officer of such corporation) or chief
executive officer, president, any vice-president, or treasurer of the general
partner of such partnership.

         "OPERATING LEASE" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) by that Person as lessee which is not
a Capital Lease.

         "ORGANIZATIONAL DOCUMENTS" means, with respect to any corporation,
limited liability company, or partnership (i) the articles/certificate of
incorporation (or the equivalent organizational documents) of such corporation
or limited liability company, (ii) the partnership agreement executed by the
partners in such partnership, (iii) the by-laws (or the equivalent governing
documents) of such corporation, limited liability company or partnership, and
(iv) any document setting forth the designation, amount and/or relative rights,
limitations and preferences of any class or series of such corporation's Capital
Stock or such limited liability company's or partnership's equity or ownership
interests.

         "OSHA" means the Occupational Safety and Health Act of 1970, 29 U.S.C.
ss.ss. 651 et seq., any amendments thereto, any successor statutes and any
regulations or guidelines promulgated thereunder.

         "OTHER MANAGEMENT COMPANY" means property management companies
controlled (directly or indirectly) by the Company or the Borrower which may
manage properties owned by third parties.

         "PBGC" means the Pension Benefit Guaranty Corporation and any Person
succeeding to the functions thereof.

                                      -18-


         "PERFORMING NOTES" means mortgage notes, notes receivable and other
investments in Real Property (other than investments in or loans to, directly or
indirectly, an Investment Fund, or joint venture arrangements with an Investment
Fund, or an affiliated or unaffiliated operating company in which such
Investment Fund or joint venture arrangements with an Investment Fund owns an
equity interest), valued at the lower of cost or market in accordance with GAAP
and which are not more than 30 days past due or otherwise in default; provided,
that, in the case of mortgage notes, notes receivable and other investments in
Real Property that generate cash and non-cash payments, such mortgage notes,
notes receivable and other investments in Real Property shall be treated as
Performing Notes whose value is determined solely by reference to the cash
payments and references to the income generated by the Performing Notes shall
include only the cash payments which have current payments payable in cash.

         "PERMITS" means any permit, consent, approval, authorization license,
variance, or permission required from any Person, including any Governmental
Approvals.

         "PERMITTED SECURITIES OPTIONS" means the subscriptions, options,
warrants, rights, convertible Securities and other agreements or commitments
relating to the issuance of the Borrower's Securities or the Company's Capital
Stock identified as such on SCHEDULE 1.1.2.

         "PERSON" means any natural person, corporation, limited liability
company, limited partnership, general partnership, joint stock company, joint
venture, association, company, trust, bank, trust company, land trust, business
trust or other organization, whether or not a legal entity, and any Governmental
Authority.

         "PLAN" means a Benefit Plan or a Multiemployer Plan.

         "POTENTIAL EVENT OF DEFAULT" means an event which, with the giving of
notice or the lapse of time, or both, would constitute an Event of Default.

         "PRE-APPROVED LENDER" means any Person and its Affiliates that are not
(or not reasonably likely to become), in the reasonable judgment of the Lender
making the assignment, direct, material competitors with Borrower and its
Affiliates in the development, operation or management of real estate in the
areas in which the Borrowers and its Affiliates operate.

         "PREPAYMENT DATE" has the meaning set forth in Section 4.1(c).

         "PROJECT" means any office or industrial properties owned or
ground-leased, directly or indirectly, by any of the Consolidated Businesses or
Joint Ventures.

         "PROPERTY" means any Real Property or personal property, plant,
building, facility, structure, equipment, general intangible, receivable, or
other asset owned or leased by any Consolidated Business or any Joint Venture.
The definition of "Property" shall specifically exclude items of Real Property
or personal property owned or leased by members of the Rechler family.

         "PROPERTY LEVEL G&A" means general and administrative expenses
allocated to the Properties.

         "PRO RATA SHARE" means, with respect to any Lender, (a) prior to the
making of the Term Loan or the expiration of the Term Loan Commitments, the
percentage set forth on SCHEDULE LC and (b) after the Funding Date, the
percentage obtained by dividing (i) the aggregate amount of such Lender's Loans
(as may be adjusted from time to time in accordance with the provisions of this
Agreement or any Assignment and Acceptance to which such Lender is a party), by
(ii) the aggregate amount of all of the Lenders' Loans.

                                      -19-


         "QUALIFIED JOINT VENTURE PARTNERS" means (a) pension funds, insurance
companies, banks, investment banks or similar institutional entities, each with
significant experience in making investments in commercial real estate and (b)
commercial real estate companies of similar quality and experience.

         "QUARTERLY COMPLIANCE CERTIFICATES" has the meaning set forth in
Section 8.2(a)(iii).

         "RATING AGENCY" means Moody's, S&P, Fitch or another
nationally-recognized rating agency reasonably satisfactory to the
Administrative Agent.

         "RCRA" means the Resource Conservation and Recovery Act of 1976, 42
U.S.C. ss.ss. 6901 et seq., any amendments thereto, any successor statutes, and
any regulations or guidelines promulgated thereunder.

         "REAL PROPERTY" means all of the Borrower's and the Consolidated
Businesses' present and future right, title and interest (including, without
limitation, any leasehold estate) in (i) any plots, pieces or parcels of land,
(ii) any Improvements of every nature whatsoever (the rights and interests
described in clauses (i) and (ii) above being the "PREMISES"), (iii) all
easements, rights of way, gores of land or any lands occupied by streets, ways,
alleys, passages, sewer rights, water courses, water rights and powers, and
public places adjoining such land, and any other interests in property
constituting appurtenances to the Premises, or which hereafter shall in any way
belong, relate or be appurtenant thereto, and (iv) all other rights and
privileges thereunto belonging or appertaining and all extensions, additions,
improvements, betterments, renewals, substitutions and replacements to or of any
of the rights and interests described in clause (iii) above.

         "RECKSON" means Reckson Operating Partnership, L.P., a Delaware limited
partnership.

         "REFERENCE BANK" means Citibank, N.A.

         "REGISTER" has the meaning set forth in Section 14.1(c).

         "REGULATION A" means Regulation A of the Federal Reserve Board as in
effect from time to time.

         "REGULATION T" means Regulation T of the Federal Reserve Board as in
effect from time to time.

         "REGULATION U" means Regulation U of the Federal Reserve Board as in
effect from time to time.

         "REGULATION X" means Regulation X of the Federal Reserve Board as in
effect from time to time.

         "REIT" means a domestic trust or corporation that qualifies as a real
estate investment trust under the provisions of Sections 856, et seq., of the
Internal Revenue Code.

                                      -20-


         "RELEASE" means any release, spill, emission, leaking, pumping,
pouring, dumping, injection, deposit, disposal, abandonment, or discarding of
barrels, containers or other receptacles, discharge, emptying, escape,
dispersal, leaching or migration into the indoor or outdoor environment or into
or out of any Property, including the movement of Contaminants through or in the
air, soil, surface water, groundwater or Property.

         "REMEDIAL ACTION" means actions required to (i) clean up, remove, treat
or in any other way address Contaminants in the indoor or outdoor environment;
(ii) prevent the Release or threat of Release or minimize the further Release of
Contaminants; or (iii) investigate and determine if a remedial response is
needed and to design such a response and post-remedial investigation,
monitoring, operation and maintenance and care.

         "REPORTABLE EVENT" means any of the events described in Section 4043(c)
of ERISA and the regulations promulgated thereunder as in effect from time to
time but not including any such event as to which the thirty (30) day notice
requirement has been waived by applicable PBGC regulations.

         "REQUIREMENTS OF LAW" means, as to any Person, the charter and by-laws
or other organizational or governing documents of such Person, and any law, rule
or regulation, or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is subject
including, without limitation, the Securities Act, the Securities Exchange Act,
Regulations T, U and X, ERISA, the Fair Labor Standards Act, the Worker
Adjustment and Retraining Notification Act, Americans with Disabilities Act of
1990, and any certificate of occupancy, zoning ordinance, building,
environmental or land use requirement or Permit and Environmental, Health or
Safety Requirement of Law.

         "REQUISITE LENDERS" means Lenders whose Pro Rata Shares, in the
aggregate, are equal to or greater than sixty-six and two-thirds percent
(66.67%); provided, however, that, in the event any of the Lenders shall have
failed to fund its Pro Rata Share of the Loans which such Lenders are obligated
to fund under the terms of this Agreement and any such failure has not been
cured as provided in Section 4.2(b)(iv)(B), then for so long as such failure
continues, "Requisite Lenders" means Lenders (excluding all Lenders whose
failure to fund their respective Pro Rata Shares of such Loans have not been so
cured) whose Pro Rata Shares represent sixty-six and two-thirds percent (66.67%)
or more of the aggregate Pro Rata Shares of such Lenders.

         "RESTRICTED PAYMENT" has the meaning set forth in Section 10.11(h).

         "S&P" means Standard & Poor's Ratings Services, a division of The
McGraw Hill Companies, Inc.

         "SECURED INDEBTEDNESS" means any Indebtedness secured by a Lien.

         "SECURITIES" means any stock, shares, voting trust certificates,
partnership interests, bonds, debentures, notes or other evidences of
indebtedness, secured or unsecured, convertible, subordinated or otherwise, or
in general any instruments commonly known as "securities", including, without
limitation, any "security" as such term is defined in Section 8-102 of the
Uniform Commercial Code, or any certificates of interest, shares, or
participations in temporary or interim certificates for the purchase or
acquisition of, or any right to subscribe to, purchase or acquire any of the
foregoing, but shall not include the Notes or any other evidence of the
obligations.

                                      -21-


         "SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time, and any successor statute.

         "SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute.

         "SERVICING EBITDA" means, with respect to the Management Company or any
other service company owned by the Borrower or the Company, as of the first day
of each fiscal quarter for the immediately preceding fiscal quarter, an amount,
determined in accordance with GAAP, equal to (i) total earnings relating to such
companies' operations adjusted to exclude amounts that are more than 90 days
delinquent, less (ii) total operating expenses relating to such operations,
including corporate marketing, general and administrative expenses.

         "SOLVENT", when used with respect to any Person, means that at the time
of determination:

                  (i) the fair saleable value of its assets is in excess of the
         total amount of its liabilities (including, without limitation,
         contingent liabilities); and

                  (ii) the present fair saleable value of its assets is greater
         than its probable liability on its existing debts as such debts become
         absolute and matured; and

                  (iii) it is then able and expects to be able to pay its debts
         (including, without limitation, contingent debts and other commitments)
         as they mature; and

                  (iv) it has capital sufficient to carry on its business as
         conducted and as proposed to be conducted.

         "SUBSIDIARY" of a Person means any corporation, limited liability
company, general or limited partnership, or other entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned or controlled by such Person, one or more of
the other subsidiaries of such Person or any combination thereof.

         "TAXES" has the meaning set forth in Section 13.1(a).

         "TELERATE PAGE 3750" means the display known as "Telerate Page 3750"
(or such other page as may replace Telerate Page 3750 as the display of such
service (other than Telerate Service) as may be nominated by the British
Bankers' Association as the information vendor for the purpose of displaying
British Bankers' Association interest settlement rates for U.S. Dollar
deposits).

         "TENANT ALLOWANCE" means a cash allowance paid to a tenant by the
landlord pursuant to a Lease.

         "TERM LOAN" is defined in Section 2.1(a) hereof.

                                      -22-


         "TERM LOAN COMMITMENT" means, with respect to any Lender, the
obligation of such Lender to make Loans pursuant to the terms and conditions of
this Agreement, and which shall not exceed the principal amount set forth
opposite such Lender's name on SCHEDULE LC hereto or in the Assignment and
Acceptance by which it became a Lender, as modified from time to time pursuant
to the terms of this Agreement or to give effect to any applicable Assignment
and Acceptance, and "TERM LOAN COMMITMENTS" means the aggregate principal amount
of the Term Loan Commitments of all the Lenders, the maximum amount of which
shall be $250,000,000.

         "TERM LOAN MATURITY DATE" means April 13, 2006, subject to extension to
July 13, 2006 as provided in Section 2.3(b); provided, that if such date shall
fall on a day that is not a Business Day, then the Term Loan Maturity Date shall
be the preceding Business Day.

         "TERM LOAN OBLIGATIONS" means, at any particular time, the outstanding
principal amount of the Loans at such time.

         "TI WORK" means any construction or other "build out" of tenant
leasehold improvement to the space demised to the applicable tenant under a
Lease (excluding such tenant's furniture, fixtures and equipment) performed
pursuant to the terms of such Lease, whether or not such tenant improvement work
is performed by or on behalf of the landlord or as part of a Tenant Allowance.

         "TOTAL ADJUSTED EBITDA" means, for any quarterly period, (i) net income
determined in accordance with GAAP, plus (ii) Total Interest Expense,
depreciation and amortization deducted in the calculation of such net income,
plus (iii) taxes on income deducted in the calculation of such net income, less
(iv) the gains (and plus the losses) from extraordinary items, asset sales,
write-ups, debt forgiveness, asset impairments, mark to market adjustments for
marketable securities or fair market valuation adjustments for derivatives
included in the calculation of such net income, less (v) the Capital Expenditure
Coverage Reserve Amounts divided by four.

         "TOTAL INTEREST EXPENSE" means the sum of (i) interest expense of the
Consolidated Businesses paid during such period and (ii) interest expense of the
Consolidated Businesses accrued and/or capitalized for such period and (iii) the
pro-rata portion of the interest expense of Joint Ventures allocable to the
Borrower and paid during such period and (iv) the pro-rata portion of the
interest expense of Joint Ventures allocable to the Borrower accrued and/or
capitalized for such period, in each case including participating interest
expense but excluding extraordinary interest expense, and net of amortization of
deferred costs associated with new financings or refinancings of existing
Indebtedness.

         "TOTAL OUTSTANDING INDEBTEDNESS" means, for any period, the sum of (i)
the amount of Indebtedness of the Consolidated Businesses set forth on the then
most recent quarterly financial statements of the Borrower, prepared in
accordance with GAAP, plus any additional Indebtedness incurred by the
Consolidated Businesses since the time of such statements, less any Indebtedness
repaid by the Consolidated Businesses since the time of such statements, and
(ii) the outstanding amount of Joint Venture Indebtedness set forth on the then
most recent quarterly financial statements of the Borrower or the applicable
Joint Venture, prepared in accordance with GAAP, plus any additional Joint
Venture Indebtedness incurred by the Joint Ventures since the time of such
statements, less any Indebtedness repaid by the Joint Ventures since the time of
such statements; provided that all of the foregoing shall only include the
Consolidated Businesses' pro rata share of the outstanding and additional
Indebtedness, as the case may be, with respect to any Joint Venture, and (iii)
the Contingent Obligations of the Consolidated Businesses and the pro-rata
portion of Contingent Obligations of the Joint Ventures allocable to the
Consolidated Businesses.

                                      -23-


         "TOTAL RECOURSE SECURED OUTSTANDING INDEBTEDNESS" means Total Secured
Outstanding Indebtedness under the terms of which any of the Consolidated
Businesses guarantees or is directly obligated for any portion of such
Indebtedness or interest payments thereon (other than Non-Recourse Carve-Outs),
including, without limitation, the pro rata share of such recourse Indebtedness
of Joint Ventures allocable to any of the Consolidated Businesses.

         "TOTAL SECURED OUTSTANDING INDEBTEDNESS" means the sum of (i) that
portion of Total Outstanding Indebtedness that is secured by a Lien, including,
without duplication, the pro rata share of such Indebtedness that is Joint
Venture Indebtedness allocable to any of the Consolidated Businesses, plus (ii)
that portion of Total Outstanding Indebtedness attributable to Consolidated
Subsidiaries of the Borrower (or the Joint Ventures) which is recourse to the
Borrower or any of the Consolidated Subsidiaries (other than Non-Recourse
Carve-Outs), regardless of whether it is secured by a Lien (it being understood
that this definition shall not include the Loans hereunder).

         "TOTAL UNENCUMBERED VALUE" means the portion of Total Value
attributable to (x) Unencumbered assets (including, without limitation, the
Unencumbered New York City Assets and the other Unencumbered Projects, but
excluding Investment Funds and service company income) owned or ground-leased
under an Eligible Ground Lease by the Consolidated Businesses and the Joint
Ventures and (y) the Eligible Encumbered Properties, subject to the limitations
set forth in the next paragraph and the following conditions and limitations:
(i) only the amount of unrestricted Cash and Cash Equivalents in excess of
$40,000,000 shall be included; (ii) Joint Venture Unencumbered Value for Joint
Ventures in which the Borrower's beneficial economic interest is fifty-one
percent (51%) or greater shall be included, provided the sale or financing of
any Property owned or ground-leased by such Joint Venture is substantially
controlled by the Borrower, subject to customary provisions set forth in the
organizational documents of such Joint Venture with respect to financings, sales
or rights of first refusal granted to other members of such Joint Venture; (iii)
Joint Venture Unencumbered Value for Joint Ventures in which the Borrower's
beneficial economic interest is less than fifty-one percent (51%) shall be
included, provided that a majority of the beneficial economic interests in such
Joint Ventures that are not owned by the Consolidated Businesses is owned or
controlled by Qualified Joint Venture Partners; (iv) the portion of Total
Unencumbered Value attributable to Performing Notes shall be included; (v)
Land/Development Unencumbered Value shall be included; and (vi) the portion of
Total Unencumbered Value attributable to Unencumbered office and industrial
Projects owned or ground-leased under an Eligible Ground Lease by the
Consolidated Businesses for less than four (4) fiscal quarters and which have
received a certificate of occupancy shall be included.

         Clause (ii) above shall not exceed twenty percent (20%) of Total
Unencumbered Value. Clause (iii) shall not exceed ten percent (10%) of Total
Unencumbered Value. Clause (iv) above shall not exceed fifteen percent (15%) of
Total Unencumbered Value. Clause (v) above shall not exceed ten percent (10%) of
Total Unencumbered Value. The sum of clauses (iii), (iv) and (v) above shall not
exceed twenty percent (20%) of Total Unencumbered Value.

         "TOTAL UNSECURED OUTSTANDING INDEBTEDNESS" means the sum of (a) that
portion of Total Outstanding Indebtedness that is not secured by a Lien plus (b)
that portion of Total Outstanding Indebtedness that is secured by a Lien on an
Eligible Encumbered Property. Without limiting the foregoing, Total Unsecured
Outstanding Indebtedness shall include, without double counting, (i) all amounts
outstanding under this Agreement, (ii) all Indebtedness of the Consolidated
Businesses, including the Consolidated Businesses' pro rata share of
Indebtedness of Joint Ventures, which is not secured by a Lien, (iii) all
outstanding undrawn letters of credit of the Consolidated Businesses (and the
pro rata share of such letters of credit allocable to any of the Consolidated
Businesses) less those outstanding undrawn letters of credit for the benefit of
any tenant, prospective tenant or lender at any Real Property to secure the
Consolidated Businesses' leasing obligations relating to tenant improvement work
or third party leasing commissions which have previously been paid, as evidenced
by a schedule provided by the Borrower to the Administrative Agent upon the
request of the Administrative Agent.

                                      -24-


         "TOTAL VALUE" means (a) the sum of (i) Valuation NOI divided by (A)
seven and one-half percent (7.50%) for all New York City Assets, (B) eight and
three-quarter percent (8.75%) for all other office Real Property, and (C) nine
percent (9.00%) for industrial Real Property; (ii) the Investment in office and
industrial Projects owned or ground-leased by the Consolidated Businesses for
less than four fiscal quarters; (iii) unrestricted Cash and Cash Equivalents;
(iv) land cost (at book value) and Construction Asset Cost, which credit will be
limited to fifteen percent (15%) of Total Value (exclusive of build-to-suit
Projects that are seventy-five percent (75%) pre-leased or Projects which are
less than seventy-five percent (75%) pre-leased but have a pro-forma yield of
ten percent (10%) or more, based upon executed leases and the cost of
acquisition plus the estimated cost to complete the same, which estimated cost
to complete shall be determined in a manner reasonably acceptable to the
Administrative Agent and the Syndication Agent); (v) NOI from all other Real
Property not otherwise set forth in this definition, divided by twelve percent
(12%); (vi) Servicing EBITDA of the Management Company or other such service
companies for the immediately preceding four (4) consecutive quarters, divided
by twenty percent (20%); (vii) any investment in or loan to (based on the actual
cash investment in or loan to), directly or indirectly, an affiliated or
unaffiliated operating company and investments in or loans to Investment Funds
either directly or indirectly or joint venture arrangements with Investment
Funds, which credit will be limited to $100,000,000 (valued at the lower of cost
or market in accordance with GAAP), other than (x) investments in, loans to, or
joint venture arrangements with Joint Ventures and (y) Performing Notes; (viii)
Performing Notes, which credit will be limited in the aggregate to fifteen
percent (15%) of Total Value; and (ix) Eligible Cash 1031 Proceeds;

         less (b) the quotient of the Capital Expenditure Valuation Reserve
Amounts for such period, divided by (A) seven and one-half percent (7.50%) for
all New York City Assets, (B) eight and three-quarter percent (8.75%) for all
other office Property, and (C) nine percent (9.00%) for industrial Property;

         provided, the sum of items (a) (iv), (vii) and (viii) above shall not
exceed twenty-five percent (25%) of Total Value.

         "UNENCUMBERED" means, with respect to any asset (other than a Project
or a New York City Asset) as of any date of determination, that such asset, the
equity interests in such asset and the revenues generated by such asset are not
subject to any Liens (excluding Customary Permitted Liens) or preferred equity
interests.

         "UNENCUMBERED NEW YORK CITY ASSET" means any Unencumbered Project that
is a New York City Asset.

         "UNENCUMBERED PROJECT" means any Project located in the United States
that on any date of determination: (a) is owned or ground-leased under an
Eligible Ground Lease, (b) is not subject (nor are any equity interests therein
subject) to any Liens (excluding Customary Permitted Liens) or preferred equity
interests, (c) has been improved with Improvements which (except for any
portions of the Project being restored or renovated) (1) have been issued a
certificate of occupancy (where available) or is otherwise lawfully occupied for
its intended use, and (2) are fully operational, including in each case, an
Unencumbered Project that is being renovated or restored and such renovation is
proceeding to completion without undue delay from Permit denial, construction
delays or otherwise, (d) has not been the subject of an event or occurrence that
has had a Material Adverse Effect, and (e) if owned or ground leased by a
wholly-owned Subsidiary of the Borrower, such Subsidiary has executed and
delivered a Guaranty.

                                      -25-


         "UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code as enacted
in the State of New York, as it may be amended from time to time.

         "UNSECURED INTEREST EXPENSE" means the interest expense paid, accrued
or capitalized on the Total Unsecured Outstanding Indebtedness for the
applicable period.

         "VALUATION NOI" means, with respect to any office or industrial Project
or any office or industrial Joint Venture (exclusive of projects under
development) which has been owned or ground-leased by the Borrower for not less
than four consecutive quarters, as of the first day of each fiscal quarter, an
amount equal to the NOI relating to such Project or the Borrower's pro rata
share of such Joint Venture for the immediately preceding consecutive four
fiscal quarters.

         "WHOLLY-OWNED" means, with respect to the ownership of any asset by any
Person, that such Person owns 100% of the voting and economic interests in such
asset; provided that, with the written approval of the Administrative Agent,
such Person may be deemed to wholly-own an asset if it owns less than 100% of
the voting and economic interests in such asset so long as such Person owns 100%
of the interests generally having the right to vote with respect to such asset
and at least 90% of the economic interests in such asset.

         1.2. COMPUTATION OF TIME PERIODS. In this Agreement, in the computation
of periods of time from a specified date to a later specified date, the word
"FROM" means "from and including" and the words "TO" and "UNTIL" each mean "to
but excluding". Periods of days referred to in this Agreement shall be counted
in calendar days unless Business Days are expressly prescribed. Any period
determined hereunder by reference to a month or months or year or years shall
end on the day in the relevant calendar month in the relevant year, if
applicable, immediately preceding the date numerically corresponding to the
first day of such period, provided that if such period commences on the last day
of a calendar month (or on a day for which there is no numerically corresponding
day in the calendar month during which such period is to end), such period
shall, unless otherwise expressly required by the other provisions of this
Agreement, end on the last day of the calendar month.

         1.3. ACCOUNTING TERMS. Subject to Section 14.4, for purposes of this
Agreement, all accounting terms not otherwise defined herein shall have the
meanings assigned to them in conformity with GAAP.

         1.4. OTHER TERMS. All other terms contained in this Agreement shall,
unless the context indicates otherwise, have the meanings assigned to such terms
by the Uniform Commercial Code to the extent the same are defined therein.

                                      -26-


         1.5. RULES OF INTERPRETATION. (a) A reference to any document or
agreement shall include such document or agreement as amended, modified or
supplemented from time to time in accordance with its terms and the terms of
this Agreement.

              (a) The singular includes the plural and the plural includes the
singular.

              (b) A reference to any law includes any amendment or modification
to such law.

              (c) A reference to any Person includes its permitted successors
and permitted assigns.

              (d) The words "include", "includes" and "including" are not
limiting.

              (e) Reference to a particular "Section" refers to that section of
this Agreement unless otherwise indicated, and reference to a particular
"Exhibit" or "Schedule" refers to that exhibit or schedule to this Agreement
unless otherwise indicated.

                                  ARTICLE II.
                           AMOUNTS AND TERMS OF LOANS

         2.1. LOANS.

              (a) Commitment to Lend. Subject to the terms and conditions set
forth in this Agreement, each Lender hereby severally and not jointly agrees to
make a term loan, in Dollars (the "TERM LOAN") to the Borrower on the Funding
Date, in an amount equal to such Lender's Pro Rata Share of the principal amount
of $250,000,000. The aggregate amount of the Term Loan to be made hereunder
shall not exceed Two Hundred Fifty Million Dollars ($250,000,000). The Term Loan
shall be made by the Lenders simultaneously and proportionately to their then
respective Pro Rata Shares, it being understood that no Lender shall be
responsible for any failure by any other Lender to perform its obligation to
make a Term Loan hereunder nor shall the Term Loan Commitment of any Lender be
increased or decreased as a result of any such failure. The Term Loan
Commitments, with respect to the making of the Term Loan (and not with respect
to the obligations of the Lenders to convert or continue any Loans), shall
expire on January 20, 2006.

              (b) Notice of Borrowing. The Borrower shall provide to the
Administrative Agent a Notice of Borrowing, signed by it (x) no later than 12:00
noon (New York time) on the Business Day immediately preceding the proposed
Funding Date, in the case of a Borrowing of Base Rate Loans and (y) no later
than 11:00 a.m. (New York time) at least three (3) Business Days in advance of
the proposed Funding Date, in the case of a Borrowing of Eurodollar Rate Loans.
The Notice of Borrowing shall specify (i) the proposed Funding Date (which shall
be a Business Day), (ii) the amount of the proposed Borrowing, (iii) whether the
proposed Borrowing will be of Base Rate Loans or Eurodollar Rate Loans, (iv) in
the case of Eurodollar Rate Loans, the requested Eurodollar Interest Period, (v)
instructions for the disbursement of the proceeds of the proposed Borrowing,
(vi) an Officer's Certificate of the Borrower with respect to compliance with
(including calculation thereof) Sections 10.11(a) and 10.11(e), and (vii) that
no Potential Event of Default or Event of Default shall have occurred and be
continuing or would result therefrom. Any Notice of Borrowing given pursuant to
this Section 2.1(b) shall be irrevocable.

                                      -27-


              (c) Making of Term Loans. (i) Each Lender shall deposit an amount
equal to its Pro Rata Share of the Term Loan with the Administrative Agent at
its office in New York, New York, in immediately available funds, not later than
12:00 noon (New York time) on the Funding Date. Subject to the fulfillment of
the conditions precedent set forth in Section 6.1, the Administrative Agent
shall make the proceeds of such amounts received by it available to the Borrower
at the Administrative Agent's office in New York, New York on the Funding Date
(or on the date received if later than such Funding Date) and shall disburse
such proceeds in accordance with the Borrower's disbursement instructions as set
forth in the Notice of Borrowing. The failure of any Lender to deposit the
amount described above with the Administrative Agent on the Funding Date shall
not relieve any other Lender of its obligations hereunder to make its Term Loan
on the Funding Date. In the event the conditions precedent set forth in Section
6.1 are not fulfilled as of the Funding Date, the Administrative Agent shall
promptly return, by wire transfer of immediately available funds, the amount
deposited by each Lender to such Lender.

              (ii) The Administrative Agent may assume that each Lender has
funded its Term Loan and is depositing the proceeds thereof with the
Administrative Agent on the Funding Date, and the Administrative Agent in its
sole discretion may, but shall not be obligated to, disburse a corresponding
amount to the Borrower on the Funding Date. If the Term Loan proceeds
corresponding to that amount are advanced to the Borrower by the Administrative
Agent but are not in fact deposited with the Administrative Agent by such Lender
on or prior to the Funding Date, such Lender agrees to pay, and in addition the
Borrower, agrees to repay, to the Administrative Agent forthwith on demand such
corresponding amount, together with interest thereon, for each day from the date
such amount is disbursed to or for the benefit of the Borrower until the date
such amount is paid or repaid to the Administrative Agent, at the average
Federal Funds Rate for such period. If such Lender shall pay to the
Administrative Agent the corresponding amount, the amount so paid shall
constitute such Lender's Term Loan as of the Funding Date, and if both such
Lender and the Borrower shall pay and repay such corresponding amount, the
Administrative Agent shall promptly pay to the Borrower such corresponding
amount. This Section 2.1(c)(ii) does not relieve any Lender of its obligation to
make its Term Loan on the Funding Date.

         2.2. USE OF PROCEEDS OF LOANS. The proceeds of the Loans issued for the
account of the Borrower hereunder shall be used for the purposes of general
working capital needs of the Borrower and other general corporate purposes,
including acquisitions.

         2.3. TERM LOAN MATURITY DATE. (a) The Borrower promises to pay the Term
Loan Obligations and all other Obligations in full on the Term Loan Maturity
Date.

              (b) So long as (x) no Potential Event of Default or Event of
Default has occurred and is continuing and (y) the representations and
warranties of the Borrower set forth in this Agreement are true and correct in
all material respects on and as of such election date (or, if such
representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date), the Borrower may elect at least
fifteen (15) days prior to the Term Loan Maturity Date, to extend the Term Loan
Maturity Date for three (3) months as provided in this Section 2.3(b) by
providing written notice of such election to the Administrative Agent (which
shall promptly notify each of the Lenders). Such notice shall include a
confirmation in writing from the Borrower of its agreement to comply with the
covenant set forth in Section 2.3(c) and a certification as to the matters set
forth in clauses (x) and (y) in the preceding sentence. If on the initial Term
Loan Maturity Date (i) no Potential Event of Default under Section 11.1(a)(ii)
or Section 11.1(f) or Event of Default has occurred and is continuing, (ii) the
Borrower pays to the Administrative Agent, for the pro rata benefit of the
Lenders based on their Pro Rata Shares, an extension fee equal to 0.25% of the
then outstanding principal amount of the Loans, and (iii) the Borrower has given
written notice to the Administrative Agent of such election to extend the Term
Loan Maturity Date within the time frame set forth in this Section 2.3(b), the
Term Loan Maturity Date shall be extended to June __, 2006 (the period from the
initial Term Loan Maturity Date until the Term Loan Maturity Date as so extended
being referred to herein as the "Extension Period").

                                      -28-


              (c) The exercise of the Borrower's extension option pursuant to
Section 2.3(b) shall constitute and be deemed an agreement by the Borrower to
deliver to the Administrative Agent, on or prior to the Term Loan Maturity Date
(unless the Obligations are repaid in full prior to such date), mortgages on the
Acquisition Properties and related title insurance and legal opinions, in each
case reasonably satisfactory to the Administrative Agent. To facilitate such
delivery, the Administrative Agent shall perform its legal due diligence,
including title, environmental, survey and zoning review, and the Borrower and
the Administrative Agent shall negotiate the forms of the mortgages, title
insurance and legal opinions, promptly after the commencement of the Extension
Period. The Borrower shall cooperate diligently with the Administrative Agent in
delivering the due diligence materials requested by the Administrative Agent and
negotiating the mortgages, title insurance and legal opinions, and the Borrower
shall pay all reasonable expenses of the Administrative Agent associated
therewith, including title search, environmental, survey and zoning report
costs, reasonable legal fees and, if mortgages are recorded, all applicable
mortgage recording taxes and title insurance premiums. The Borrower shall
execute, notarize and deliver such mortgages to the Administrative Agent on or
before the Term Loan Maturity Date (as extended), but the Administrative Agent
shall not record same unless the Obligations are not repaid in full on or prior
to the Term Loan Maturity Date (as extended).

         2.4. AUTHORIZED AGENTS. On the Closing Date and from time to time
thereafter, the Borrower shall deliver to the Administrative Agent an Officer's
Certificate setting forth the names of the employees and agents authorized to
request the Term Loan and to request a conversion/continuation of any Loan and
containing a specimen signature of each such employee or agent. The employees
and agents so authorized shall also be authorized to act for the Borrower in
respect of all other matters relating to the Loan Documents. The Administrative
Agent, the Arranger, and the Lenders shall be entitled to rely conclusively on
such employee's or agent's authority to request the Term Loan or such
conversion/continuation until the Administrative Agent and the Arranger receive
written notice to the contrary. Neither the Administrative Agent nor the
Arranger shall have any duty to verify the authenticity of the signature
appearing on the Notice of Borrowing or any Notice of Conversion/Continuation or
any other document, and, with respect to an oral request for such
conversion/continuation, the Administrative Agent and the Arranger shall have no
duty to verify the identity of any person representing himself or herself as one
of the employees or agents authorized to make such request or otherwise to act
on behalf of the Borrower. None of the Administrative Agent, the Arranger or the
Lenders shall incur any liability to the Borrower or any other Person in acting
upon any telephonic or facsimile notice referred to above which the
Administrative Agent or the Arranger believe to have been given by a person duly
authorized to act on behalf of the Borrower and the Borrower hereby indemnifies
and holds harmless the Administrative Agent, the Arranger and each Lender from
any loss or expense the Administrative Agent, the Arranger or the Lenders might
incur in acting in good faith as provided in this Section 2.4; provided,
however, that Borrower shall not indemnify the applicable party for acts
resulting from its own gross negligence or willful misconduct.

                                      -29-


                                  ARTICLE III.
                              INTENTIONALLY OMITTED



                                  ARTICLE IV.
                            PAYMENTS AND PREPAYMENTS

         4.1. PREPAYMENTS.

              (a) Voluntary Prepayments. The Borrower may, at any time and from
time to time, prepay the Loans, in part or in their entirety, subject to the
following limitations. The Borrower shall give at least three (3) Business Days
prior written notice to the Administrative Agent (which the Administrative Agent
shall promptly transmit to each Lender) of any prepayment in the entirety to be
made prior to the occurrence of an Event of Default, which notice of prepayment
shall specify the date (which shall be a Business Day) of prepayment. When
notice of prepayment is delivered as provided herein, the outstanding principal
amount of the Loans on the prepayment date specified in such notice shall become
due and payable on such prepayment date. Each voluntary partial prepayment of
the Loans shall be in a minimum amount of $1,000,000 and in integral multiples
of $500,000 in excess of that amount (or such lesser amount in the event the
unpaid principal amount of any Loan is less than such minimum prepayment
amount). Eurodollar Rate Loans may be prepaid in part or in their entirety only
upon payment of the amounts described in Section 5.2(f). Any amounts repaid
pursuant to this Agreement may not be reborrowed.

              (b) No Penalty. The prepayments and payments in respect of
reductions and terminations described in clause (a) of this Section 4.1 may be
made without premium or penalty (except as provided in Section 5.2(f)).

              (c) Mandatory Prepayment.

                  (i) If at any time from and after the Closing Date: (i) the
         Company or the Borrower merges or consolidates with another Person and
         the Company or Borrower, as the case may be, is not the surviving
         entity and does not control the management of such surviving entity, or
         (ii) the Company, the Borrower, any of its Affiliates or Consolidated
         Subsidiaries or the Management Company ceases to provide property
         management and leasing services to at least 80% of the total number of
         Projects in which the Borrower has a direct ownership interest (the
         date any such event shall occur being the "PREPAYMENT DATE"), the
         Borrower shall prepay the Loans in their entirety as if the Prepayment
         Date were the Term Loan Maturity Date. The Borrower shall immediately
         make such prepayment together with interest accrued to the date of the
         prepayment on the principal amount prepaid.

                  (ii) If the Borrower, the Company or any Subsidiary receives
         any Net Offering Proceeds or any Eligible Net Cash Proceeds, the
         Borrower shall apply 100% of such Net Offering Proceeds and Eligible
         Net Cash Proceeds to the prepayment of the Loans on the date such Net
         Offering Proceeds or Eligible Net Cash Proceeds are received until such
         time as the outstanding principal amount of the Loans on such date is
         less than 60% of the excess, if any, of (a) the aggregate purchase
         price of the Acquisition Properties which are Unencumbered over (b) the
         aggregate book value of the Acquisition Properties that have been sold,
         transferred or otherwise disposed of by the Borrower and its
         Subsidiaries since the Closing Date.

                                      -30-


In connection with the prepayment of any Loan prior to the maturity thereof, the
Borrower shall also pay accrued interest to the date of such prepayment on the
amount prepaid and any applicable expenses pursuant to Section 5.2(f). Each such
prepayment shall be applied to prepay ratably the Loans of the Lenders in
accordance with Section 4.2(b). Any such repayment shall be applied first to
Base Rate Loans and second to Eurodollar Rate Loans. Amounts prepaid pursuant to
this Section 4.1(c) may not be reborrowed. Such prepayment shall not affect any
rights and remedies that the Agents and Lenders may otherwise have hereunder.

         4.2. PAYMENTS.

              (a) Manner and Time of Payment. All payments of principal of and
interest on the Loans and other Obligations (including, without limitation, fees
and expenses) which are payable to the Administrative Agent, the Arranger or any
Lender shall be made without condition or reservation of right, in immediately
available funds, delivered to the Administrative Agent not later than 12:00 noon
(New York time) on the date and at the place due, to such account of the
Administrative Agent (or Arranger) as it may designate, for the account of the
Administrative Agent, the Arranger, or such Lender, as the case may be; and
funds received by the Administrative Agent (or Arranger) not later than 12:00
noon (New York time) on any given Business Day shall be credited against payment
to be made that day and funds received by the Administrative Agent (or Arranger)
after that time shall be deemed to have been paid on the next succeeding
Business Day. Payments actually received by the Administrative Agent for the
account of the Lenders, or any of them, shall be paid to them by the
Administrative Agent promptly after receipt thereof.

              (b) Apportionment of Payments. (i) Subject to the provisions of
Section 4.2(b)(iv), all payments of principal and interest in respect of
outstanding Loans, all payments of fees and all other payments in respect of any
other Obligations, shall be allocated among such of the Lenders as are entitled
thereto, in proportion to their respective Pro Rata Shares or otherwise as
provided herein. Subject to the provisions of Section 4.2(b)(ii), all such
payments and any other amounts received by the Administrative Agent from or for
the benefit of the Borrower shall be applied in the following order:

                            (A) to pay principal of and interest on any portion
              of the Loans which the Administrative Agent may have advanced on
              behalf of any Lender other than GSMC for which the Administrative
              Agent has not then been reimbursed by such Lender or the Borrower;

                            (B) to pay all other Obligations then due and
              payable, and

                            (C) as the Borrower so designates.

Unless otherwise designated by the Borrower, all principal payments in respect
of its Loans shall be applied first, to repay its outstanding Base Rate Loans,
and then to repay its outstanding Eurodollar Rate Loans with those Eurodollar
Rate Loans which have earlier expiring Eurodollar Interest Periods being repaid
prior to those which have later expiring Eurodollar Interest Periods.

                                      -31-


                  (ii) After the occurrence of an Event of Default and while the
         same is continuing which results in an acceleration of the Obligations
         in accordance with Section 11.2, the Administrative Agent shall apply
         all payments in respect of any Obligations in the following order:

                            (A) first, to pay principal of and interest on any
              portion of the Loans which the Administrative Agent may have
              advanced on behalf of any Lender other than GSMC for which the
              Administrative Agent has not then been reimbursed by such Lender
              or the Borrower;

                            (B) second, to pay Obligations in respect of any
              fees, expense reimbursements or indemnities then due to the
              Administrative Agent;

                            (C) third, to pay Obligations in respect of any
              fees, expense reimbursements or indemnities then due to the
              Lenders;

                            (D) fourth, to pay interest due in respect of Loans;

                            (E) fifth, to the ratable payment or prepayment of
              principal outstanding on Loans; and

                            (F) sixth, to the ratable payment of all other
              Obligations.

The order of priority set forth in this Section 4.2(b)(ii) and the related
provisions of this Agreement are set forth solely to determine the rights and
priorities of the Administrative Agent and the Lenders as among themselves. The
order of priority set forth in clauses (A) and (B) of this Section 4.2(b)(ii)
may be changed only with the prior written consent of the Administrative Agent.

                  (iii) Subject to Section 4.2(b)(iv), the Administrative Agent
         shall promptly distribute to the Arranger and each Lender at its
         primary address set forth on SCHEDULE LC hereto or as set forth in the
         Assignment and Acceptance by which it became a Lender, or at such other
         address as a Lender may request in writing, such funds as such Person
         may be entitled to receive, subject to the provisions of Article XII;
         provided that the Administrative Agent shall under no circumstances be
         bound to inquire into or determine the validity, scope or priority of
         any interest or entitlement of any Lender and may suspend all payments
         or seek appropriate relief (including, without limitation, instructions
         from the Requisite Lenders or an action in the nature of interpleader)
         in the event of any doubt or dispute as to any apportionment or
         distribution contemplated hereby.

                  (iv) In the event that any Lender fails to fund its Pro Rata
         Share of the Term Loan which such Lender is obligated to fund under the
         terms of this Agreement (the funded portion of the Term Loan being
         hereinafter referred to as a "NON PRO RATA LOAN"), until the earlier of
         such Lender's cure of such failure and the termination of the Term Loan
         Commitments, the proceeds of all amounts thereafter repaid to the
         Administrative Agent by the Borrower and otherwise required to be
         applied to such Lender's share of all other Obligations pursuant to the
         terms of this Agreement shall be advanced to the Borrower by the
         Administrative Agent on behalf of such Lender to cure, in full or in
         part, such failure by such Lender, but shall nevertheless be deemed to
         have been paid to such Lender in satisfaction of such other
         Obligations. Notwithstanding anything in this Agreement to the
         contrary:

                                      -32-


                            (A) the foregoing provisions of this Section
              4.2(b)(iv) shall apply only with respect to the proceeds of
              payments of Obligations and shall not affect the conversion or
              continuation of Loans pursuant to Section 5.1(c);

                            (B) a Lender shall be deemed to have cured its
              failure to fund its Pro Rata Share of the Term Loan at such time
              as an amount equal to such Lender's original Pro Rata Share of the
              requested principal portion of the Term Loan is fully funded to
              the Borrower, whether made by such Lender itself or by operation
              of the terms of this Section 4.2(b)(iv), and whether or not the
              Non Pro Rata Loan with respect thereto has been repaid, converted
              or continued; and

                            (C) regardless of whether or not an Event of Default
              has occurred or is continuing, and notwithstanding the
              instructions of the Borrower as to its desired application, all
              repayments of principal which, in accordance with the other terms
              of this Section 4.2, would be applied to its outstanding Base Rate
              Loans shall be applied first, ratably to its Base Rate Loans
              constituting Non Pro Rata Loans and second, ratably to its Base
              Rate Loans other than those constituting Non Pro Rata Loans.

              (c) Payments on Non-Business Days. Whenever any payment to be made
by the Borrower hereunder or under the Notes is stated to be due on a day which
is not a Business Day, the payment shall instead be due on the next succeeding
Business Day (or, as set forth in Section 5.2(b)(iii), the next preceding
Business Day).

         4.3. PROMISE TO REPAY; EVIDENCE OF INDEBTEDNESS.

              (a) Promise to Repay. The Borrower hereby agrees to pay when due,
without setoff or counterclaim, the principal amount of the Term Loan which is
made to it, and further agrees to pay all unpaid interest accrued thereon, in
accordance with the terms of this Agreement and the Notes. The Borrower shall
execute and deliver to each Lender on or prior to the Closing Date, a promissory
note, in the form of EXHIBIT B attached hereto with blanks appropriately
completed, evidencing the Term Loans and thereafter shall execute and deliver
such other promissory notes as are necessary to evidence the Term Loans made to
it owing to the Lenders after giving effect to any assignment thereof pursuant
to Section 14.1, all in the form of EXHIBIT B attached hereto with blanks
appropriately completed (all such promissory notes and all amendments thereto,
replacements thereof and substitutions therefor being collectively referred to
as the "NOTES"; and "NOTE" means any one of the Notes).

              (b) Loan Account. Each Lender shall maintain in accordance with
its usual practice an account or accounts (a "LOAN ACCOUNT") evidencing the
Indebtedness of the Borrower to such Lender from time to time, including the
amount of principal and interest payable and paid to such Lender from time to
time hereunder and under the Notes.

              (c) Control Account. The Register maintained by the Administrative
Agent pursuant to Section 14.1(c) shall include a control account, and a
subsidiary account for each Lender, in which accounts (taken together) shall be
recorded (i) the date and amount of the Loans made hereunder, any conversion or
continuation of the Loans, including the type of Loan and any Eurodollar
Interest Period applicable thereto, (ii) the effective date and amount of each
Assignment and Acceptance delivered to and accepted by it and the parties
thereto, (iii) the amount of any principal or interest due and payable or to
become due and payable from the Borrower to each Lender hereunder or under the
Notes and (iv) the amount of any sum received by the Administrative Agent from
the Borrower hereunder and each Lender's share thereof.

                                      -33-


              (d) Entries Binding. The entries made in the Register and each
Loan Account shall be conclusive and binding for all purposes, absent manifest
error.

              (e) No Recourse. Notwithstanding anything contained in this
Agreement, any Note, or the Guaranties to the contrary, it is expressly
understood and agreed that nothing herein or therein shall be construed as
creating any liability on any Limited Partner, or any partner, officer,
shareholder or director of any Limited Partner or any officer, trustee, member,
director, or employee of the Borrower or any Guarantor, to pay any of the
Obligations other than liability arising under applicable law from or in
connection with (i) its own fraud or (ii) the misappropriation or misapplication
by it of proceeds of the Loans; but nothing contained in this Section 4.3(e)
shall be construed to prevent the exercise of any remedy allowed to the
Administrative Agent, the Arranger or the Lenders by law or by the terms of this
Agreement or the other Loan Documents which does not relate to or result in such
an obligation by any Limited Partner or such other Persons to pay money.

                                   ARTICLE V.
                                INTEREST AND FEES

         5.1. INTEREST ON THE LOANS AND OTHER OBLIGATIONS.

              (a) Rate of Interest. All Loans and the outstanding principal
balance of all other Obligations shall bear interest on the unpaid principal
amount thereof from the Funding Date and such other Obligations are due and
payable until paid in full, except as otherwise provided in Section 5.1(d), as
follows:

                            (i) If a Base Rate Loan or such other Obligation, at
              a rate per annum equal to the sum of (A) the Base Rate, as in
              effect from time to time as interest accrues, plus (B) the then
              Applicable Margin for Base Rate Loans; and

                            (ii) If a Eurodollar Rate Loan, at a rate per annum
              equal to the sum of (A) the Eurodollar Rate determined for the
              applicable Eurodollar Interest Period, plus (B) the then
              Applicable Margin for Eurodollar Loans.

The applicable basis for determining the rate of interest on the Loans shall be
selected by the Borrower at the time the Notice of Borrowing or a Notice of
Conversion/Continuation is delivered by the Borrower to the Administrative
Agent; provided, however, the Borrower may not select the Eurodollar Rate as the
applicable basis for determining the rate of interest on such a Loan if at the
time of such selection an Event of Default has occurred and is continuing or if
Eurodollar Rate Loans are not available pursuant to Section 5.2(d) or (e). If on
any day any Loan is outstanding with respect to which notice has not been timely
delivered to the Administrative Agent in accordance with the terms of this
Agreement specifying the basis for determining the rate of interest on that day,
then for that day interest on that Loan shall be determined by reference to the
Base Rate.

                                      -34-


              (b) Interest Payments. (i) Interest accrued on each Loan, whether
a Base Rate Loan or a Eurodollar Loan shall be calculated on the last day of
each calendar month and shall be payable in arrears (A) on the first day of each
calendar month, commencing on the first such day following the Funding Date, (B)
upon the payment or prepayment thereof in full or in part, and (C) if not
theretofore paid in full, at maturity (whether by acceleration or otherwise) of
the Loan.

              (ii) Interest accrued on the principal balance of all other
Obligations shall be calculated on the last day of each calendar month and shall
be payable in arrears (A) on the first (1st) Business Day of each calendar
month, commencing on the first such day following the incurrence of such
Obligation, (B) upon repayment thereof in full or in part, and (C) if not
theretofore paid in full, at the time such other Obligation becomes due and
payable (whether by acceleration or otherwise).

              (c) Conversion or Continuation. (i) The Borrower shall have the
option (A) to convert at any time all or any part of outstanding Base Rate Loans
to Eurodollar Rate Loans; (B) to convert all or any part of outstanding
Eurodollar Rate Loans having Eurodollar Interest Periods which expire on the
same date to Base Rate Loans on such expiration date; or (C) to continue all or
any part of outstanding Eurodollar Rate Loans having Eurodollar Interest Periods
which expire on the same date as Eurodollar Rate Loans, and the succeeding
Eurodollar Interest Period of such continued Loans shall commence on such
expiration date; provided, however, no such outstanding Loan may be continued
as, or be converted into, a Eurodollar Rate Loan (i) if the continuation of, or
the conversion into, would violate any of the provisions of Section 5.2 or (ii)
if an Event of Default has occurred and is continuing. Any conversion into or
continuation of Eurodollar Rate Loans under this Section 5.1(c) shall be in a
minimum amount of $3,000,000 and in integral multiples of $500,000 in excess of
that amount, except in the case of a conversion into or a continuation of the
entire Borrowing of Non Pro Rata Loans.

              (ii) To convert or continue a Loan under Section 5.1(c)(i), the
Borrower shall deliver a Notice of Conversion/Continuation to the Administrative
Agent no later than 11:00 a.m. (New York time) at least three (3) Business Days
in advance of the proposed conversion/continuation date. A Notice of
Conversion/Continuation shall specify (A) the proposed conversion/continuation
date (which shall be a Business Day), (B) the principal amount of the Loan to be
converted/continued, (C) whether such Loan shall be converted and/or continued,
and (D) in the case of a conversion to, or continuation of, a Eurodollar Rate
Loan, the requested Eurodollar Interest Period. Promptly after receipt of a
Notice of Conversion/Continuation under this Section 5.1(c)(ii), the
Administrative Agent shall notify each Lender by facsimile transmission, or
other similar written form of transmission, of the proposed
conversion/continuation. Any Notice of Conversion/Continuation for conversion
to, or continuation of, a Loan (or telephonic notice in lieu thereof) given
pursuant to this Section 5.1(c)(ii) shall be irrevocable, and the Borrower shall
be bound to convert or continue in accordance therewith. In the event no Notice
of Conversion/Continuation is delivered as and when specified in this Section
5.1(c)(ii) with respect to outstanding Eurodollar Rate Loans, upon the
expiration of the Eurodollar Interest Period applicable thereto, such Loans
shall automatically be converted to a Base Rate Loan.

              (d) Default Interest. Notwithstanding the rates of interest
specified in Section 5.1(a) or elsewhere in this Agreement, effective
immediately upon the occurrence of an Event of Default, and for as long
thereafter as such Event of Default shall be continuing, the principal balance
of the Loans and other Obligations shall bear interest at a rate equal to (A) in
the case of any Eurodollar Rate Loans outstanding as of the date of occurrence
of any Event of Default, the sum of (x) the applicable Eurodollar Rate, plus (y)
six percent (6.0%) per annum, and (B) in the case of any Base Rate Loan
(including any Eurodollar Loan that is converted to a Base Rate Loan at
maturity) the sum of (x) the Base Rate, as in effect from time to time as
interest accrues, plus (y) five percent (5.0%) per annum.

                                      -35-


              (e) Computation of Interest. Interest on all obligations shall be
computed on the basis of the actual number of days elapsed in the period during
which interest accrues and a year of 360 days. In computing interest on any
Loan, the Funding Date or the first day of a Eurodollar Interest Period, as the
case may be, shall be included and the date of payment or the expiration date of
a Eurodollar Interest Period, as the case may be, shall be excluded.

              (f) Eurodollar Rate Information. Upon the request of the Borrower,
the Administrative Agent shall promptly provide to the Borrower such information
with respect to the applicable Eurodollar Rate as may be so requested.

         5.2. SPECIAL PROVISIONS GOVERNING EURODOLLAR RATE LOANS.

              (a) Amount of Eurodollar Rate Loans. Each Eurodollar Rate Loan
shall be in a minimum principal amount of $3,000,000 and in integral multiples
of $500,000 in excess of that amount.

              (b) Determination of Eurodollar Interest Period. By giving notice
as set forth in Section 5.1(c), the Borrower shall have the option, subject to
the other provisions of this Section 5.2, to select an interest period (each, a
"EURODOLLAR INTEREST PERIOD") to apply to the Loans described in such notice,
subject to the following provisions:

                  (i) The Borrower may only select a Eurodollar Interest Period
         of one, two, or three months in duration;

                  (ii) In the case of immediately successive Eurodollar Interest
         Periods, each successive Eurodollar Interest Period shall commence on
         the day on which the next preceding Eurodollar Interest Period expires;

                  (iii) If any Eurodollar Interest Period would otherwise expire
         on a day which is not a Business Day, such Eurodollar Interest Period
         shall be extended to expire on the next succeeding Business Day if the
         next succeeding Business Day occurs in the same calendar month, and if
         there will be no succeeding Business Day in such calendar month, such
         Eurodollar Interest Period shall expire on the immediately preceding
         Business Day;

                  (iv) The Borrower may not select a Eurodollar Interest Period
         as to any Loan if such Eurodollar Interest Period terminates later than
         the Term Loan Maturity Date;

                  (v) The Borrower may not select a Eurodollar Interest Period
         with respect to any portion of principal of a Loan which extends beyond
         a date on which the Borrower is required to make a scheduled payment of
         such portion of principal of which the Borrower is aware on the date of
         such request, in the case of a payment pursuant to Section 4.1(c)
         hereof; and

                                      -36-


                  (vi) There shall be no more than five (5) Eurodollar Interest
         Periods in effect at any time with respect to Eurodollar Rate Loans.

         (c) Determination of Eurodollar Interest Rate. As soon as practicable
on the second Business Day prior to the first day of each Eurodollar Interest
Period (the "EURODOLLAR INTEREST RATE DETERMINATION DATE"), the Administrative
Agent shall determine (pursuant to the procedures set forth in the definition of
"Eurodollar Rate") the interest rate which shall apply to the Eurodollar Rate
Loans for which an interest rate is then being determined for the applicable
Eurodollar Interest Period and shall promptly give notice thereof (in writing or
by telephone or by facsimile confirmed in writing) to the Borrower and to each
Lender. The Administrative Agent's determination shall be presumed to be
correct, absent manifest error, and shall be binding upon the Borrower.

         (d) Interest Rate Unascertainable, Inadequate or Unfair. In the event
that at least one (1) Business Day before any Eurodollar Interest Rate
Determination Date:

                  (i) the Administrative Agent is advised by the Reference Bank
         that deposits in Dollars (in the applicable amounts) are not being
         offered by the Reference Bank in the London interbank market for such
         Eurodollar Interest Period;

                  (ii) the Administrative Agent determines that adequate and
         fair means do not exist for ascertaining the applicable interest rates
         by reference to which the Eurodollar Rate then being determined is to
         be fixed; or

                  (iii) the Requisite Lenders advise the Administrative Agent
         that the Eurodollar Rate for Eurodollar Rate Loans to be continued or
         converted will not adequately reflect the cost to such Requisite
         Lenders of obtaining funds in Dollars in the London interbank market in
         an amount substantially equal to such Lenders' Eurodollar Rate Loans in
         Dollars and for a period equal to such Eurodollar Interest Period;

then the Administrative Agent shall forthwith give notice thereof to the
Borrower and the Lenders, whereupon (until the Administrative Agent notifies the
Borrower that the circumstances giving rise to such suspension no longer exist)
the right of the Borrower to elect to have Loans bear interest based upon the
Eurodollar Rate shall be suspended and each outstanding Eurodollar Rate Loan
shall be converted into a Base Rate Loan on the last day of the then current
Eurodollar Interest Period therefor, notwithstanding any prior election by the
Borrower to the contrary.

         (e) Illegality. (i) If at any time any Lender determines (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties) that the making or continuation of any Eurodollar Rate Loan
has become unlawful or impermissible by compliance by that Lender with any law,
governmental rule, regulation or order of any Governmental Authority (whether or
not having the force of law and whether or not failure to comply therewith would
be unlawful or would result in costs or penalties), then, and in any such event,
such Lender may give notice of that determination, in writing, to the Borrower
and the Administrative Agent, and the Administrative Agent shall promptly
transmit the notice to each other Lender.

                  (ii) When notice is given by a Lender under Section 5.2(e)(i),
         (A) the Borrower's right to request from such Lender and such Lender's
         obligation, if any, to make Eurodollar Rate Loans to the Borrower shall
         be immediately suspended, and (B) if the affected Eurodollar Rate Loan
         or Loans are then outstanding, the Borrower shall immediately, or if
         permitted by applicable law, no later than the date permitted thereby,
         upon at least one (1) Business Day's prior written notice to the
         Administrative Agent and the affected Lender, convert each such Loan
         into a Base Rate Loan.

                                      -37-


                  (iii) If at any time after a Lender gives notice under Section
         5.2(e)(i) such Lender determines that it may lawfully make Eurodollar
         Rate Loans, such Lender shall promptly give notice of that
         determination, in writing, to the Borrower and the Administrative
         Agent, and the Administrative Agent shall promptly transmit the notice
         to each other Lender. The Borrower's right to request, and such
         Lender's obligation, if any, to make Eurodollar Rate Loans to the
         Borrower shall thereupon be restored.

         (f) Compensation. In addition to all amounts required to be paid by the
Borrower pursuant to Section 5.1 and Article XIII, the Borrower shall compensate
each Lender, upon demand, for all losses, expenses and liabilities (including,
without limitation, any loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund or
maintain such Lender's Eurodollar Rate Loans or to the Borrower, but excluding
any loss of Applicable Margin on the relevant Loans) which that Lender may
sustain (i) if for any reason a conversion into or continuation of Eurodollar
Rate Loans does not occur on a date specified therefor in a Notice of
Conversion/Continuation given by the Borrower or in a telephonic request by it
for conversion/continuation or a successive Eurodollar Interest Period does not
commence after notice therefor is given pursuant to Section 5.1(c), other than
pursuant to Sections 5.2(d) or (e), or (ii) if for any reason any Eurodollar
Rate Loan is prepaid (other than pursuant to Section 5.2(d) or (e)) or converted
on a date which is not the last day of the applicable Eurodollar Interest Period
or (iii) as a consequence of any failure by the Borrower to repay a Eurodollar
Rate Loan when required by the terms of this Agreement. The Lender making demand
for such compensation shall deliver to the Borrower concurrently with such
demand a written statement in reasonable detail as to such losses, expenses and
liabilities, and this statement shall be conclusive as to the amount of
compensation due to that Lender, absent manifest error.

         (g) Booking of Eurodollar Rate Loans. Any Lender may make, carry or
transfer Eurodollar Rate Loans at, to, or for the account of, its Eurodollar
Lending Office or Eurodollar Affiliate or its other offices or Affiliates. No
Lender shall be entitled, however, to receive any greater amount under Sections
4.2 or 5.2(f) or Article XIII as a result of the transfer of any such Eurodollar
Rate Loan to any office (other than such Eurodollar Lending Office) or any
Affiliate (other than such Eurodollar Affiliate) than such Lender would have
been entitled to receive immediately prior thereto, unless (i) the transfer
occurred at a time when circumstances giving rise to the claim for such greater
amount did not exist and (ii) such claim would have arisen even if such transfer
had not occurred.

         (h) Affiliates Not Obligated. No Eurodollar Affiliate or other
Affiliate of any Lender shall be deemed a party to this Agreement or shall have
any liability or obligation under this Agreement.

         (i) Adjusted Eurodollar Rate. Any failure by any Lender to take into
account the Eurodollar Reserve Percentage when calculating interest due on
Eurodollar Rate Loans shall not constitute, whether by course of dealing or
otherwise, a waiver by such Lender of its right to collect such amount for any
future period.

                                      -38-


         (j) Application of Mandatory Prepayments. The principal amount of any
mandatory prepayment pursuant to Section 4.1(c) hereof, shall be applied, first,
to the outstanding Base Rate Loans and then, to the outstanding Eurodollar Rate
Loans. Unless the Borrower otherwise pays breakage costs in accordance with
Section 5.2(f), the Administrative Agent shall hold such principal amounts
allocated for prepayment of Eurodollar Rate Loans until the end of the
applicable Eurodollar Interest Periods) and, during the interim period, shall
invest said sums in Cash Equivalents. Interest earned thereon shall be forwarded
to the Borrower upon the payment of the Eurodollar Rate Loans at the end of said
Eurodollar Interest Period. Interest shall continue to accrue on the principal
amount of such Eurodollar Rate Loans until so paid.



                                  ARTICLE VI.
                               CONDITIONS TO LOANS

         6.1. CONDITIONS PRECEDENT TO THE LOANS. The obligation of each Lender
on the Funding Date to make the Term Loan requested to be made by it shall be
subject to the satisfaction of all of the following conditions precedent:

              (a) Documents. The Administrative Agent shall have received on or
before the Funding Date all of the following:

                  (i) this Agreement, the Notes, and, to the extent not
         otherwise specifically referenced in this Section 6.1(a), all other
         Loan Documents and agreements, documents and instruments described in
         the List of Closing Documents attached hereto as EXHIBIT E and made a
         part hereof, each duly executed, and in form and substance satisfactory
         to the Agents; without limiting the foregoing, the Borrower hereby
         directs its counsel, Fried Frank Harris Shriver & Jacobson LLP to
         prepare and deliver to the Agents, the Lenders, and Bingham McCutchen
         LLP the legal opinions referred to in such List of Closing Documents;
         and

                  (ii) such additional documentation as the Agents may
         reasonably request.

         (b) No Legal Impediments. No law, regulation, order, judgment or decree
of any Governmental Authority shall, and the Administrative Agent shall not have
received any notice that litigation is pending or threatened which is likely to
(i) enjoin, prohibit or restrain the making of the Term Loan on the Funding Date
or (ii) impose or result in the imposition of a Material Adverse Effect.

         (c) No Change in Condition. No change in the business, assets,
management, operations, financial condition or prospects of the Borrower or any
of its Properties shall have occurred since September 30, 2005 which change, in
the judgment of the Administrative Agent, will have a Material Adverse Effect.

         (d) Interim Liabilities and Equity. Except as disclosed to the Arranger
and the Lenders, or as permitted under the Existing Revolving Credit Agreement
(including as set forth on Schedule 6.1(d) thereto), since September 30, 2005,
neither the Borrower nor the Company shall have (i) entered into any (as
determined in good faith by the Administrative Agent) commitment or transaction,
including, without limitation, transactions for borrowings and capital
expenditures, which are not in the ordinary course of the Borrower's business,
(ii) declared or paid any dividends or other distributions other than in the
ordinary course of business, (iii) established compensation or employee benefit
plans, or (iv) redeemed or issued any equity Securities.

                                      -39-


         (e) No Loss of Material Agreements and Licenses. Since September 30,
2005, no agreement or license relating to the business, operations or employee
relations of the Borrower or any of its Real Properties shall have been
terminated, modified, revoked, breached or declared to be in default, the
termination, modification, revocation, breach or default under which, in the
reasonable judgment of the Administrative Agent, would result in a Material
Adverse Effect.

         (f) No Market Changes. Since the Closing Date no material adverse
change shall have occurred in the conditions in the capital markets.

         (g) No Default. No Event of Default or Potential Event of Default shall
have occurred and be continuing or would result from the making of the Loans.

         (h) Representations and Warranties. As of the Funding Date, both before
and after giving effect to the Loans, all of the representations and warranties
of the Borrower contained in Sections 7.1, 9.12(b) and 9.14 and all of the
representations of the Borrower and the Guarantors in any other Loan Document
(other than representations and warranties which expressly speak as of a
different date) shall be true and correct in all material respects.

         (i) Fees and Expenses Paid. There shall have been paid to the
Administrative Agent, for the accounts of the Agents and the Lenders, as
applicable, all fees due and payable on or before the Funding Date and all
expenses due and payable on or before the Funding Date, including, without
limitation, reasonable attorneys' fees and expenses, and other costs and
expenses incurred in connection with the Loan Documents.

         (j) No Legal Impediments. No law, regulation, order, judgment or decree
of any Governmental Authority shall, and the Administrative Agent shall not have
received from such Lender notice that, in the reasonable judgment of such
Lender, litigation is pending or threatened which is likely to, enjoin, prohibit
or restrain such Lender's making of the Loan.

         (k) Acquisition. The Administrative Agent shall receive evidence
satisfactory to it of the closing of the Acquisition substantially concurrently
with the funding of the Term Loan on the Closing Date.

                                  ARTICLE VII.
                         REPRESENTATIONS AND WARRANTIES

         7.1. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. In order to induce
the Lenders to enter into this Agreement and to make the Loans and the other
financial accommodations to the Borrower described herein, the Borrower hereby
represents and warrants to each Lender that the following statements are true,
correct and complete:

              (a) Organization; Powers. (i) The Borrower (A) is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware, (B) is duly qualified to do business and is in good
standing under the laws of each jurisdiction in which failure to be so qualified
and in good standing will have a Material Adverse Effect, (C) has all requisite
power and authority to own, operate and encumber its Property and to conduct its
business as presently conducted and as proposed to be conducted in connection
with and following the consummation of the transactions contemplated by this
Agreement, and (D) is a partnership for federal income tax purposes.

                                      -40-


                  (ii) The Company (A) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland, (B) is
duly authorized and qualified to do business and is in good standing under the
laws of each jurisdiction in which failure to be so qualified and in good
standing will have a Material Adverse Effect, and (C) has all requisite
corporate power and authority to own, operate and encumber its Property and to
conduct its business as presently conducted.

                  (iii) True, correct and complete copies of the Organizational
Documents of the Borrower and the Company identified on SCHEDULE 7.1-A have been
delivered to Administrative Agent, each of which is in full force and effect,
has not been modified or amended except to the extent set forth or indicated
therein or as otherwise permitted hereby and, to the best of the Borrower's
knowledge, there are no defaults under such Organizational Documents and no
events which, with the passage of time or giving of notice or both, would
constitute a default under such Organizational Documents. Borrower shall update
SCHEDULE 7.1-A from time to time in order to keep said Schedule true and
correct.

                  (iv) Neither the Borrower nor the Company is a "foreign
person" within the meaning of Section 1445 of the Internal Revenue Code.

              (b) Authority. (i) The Company has the requisite power and
authority to execute and deliver this Agreement on behalf of the Borrower and
each of the other Loan Documents which are required to be executed on behalf of
the Borrower as required by this Agreement. The Company is the Person who has
executed this Agreement and such other Loan Documents on behalf of the Borrower
and is the sole general partner of the Borrower.

                  (ii) The execution, delivery and performance of each of the
Loan Documents which must be executed in connection with this Agreement by the
Borrower and to which the Borrower is a party and the consummation of the
transactions contemplated thereby are within the Borrower's partnership powers,
have been duly authorized by all necessary partnership action (and, in the case
of the Company acting on behalf of the Borrower in connection therewith, all
necessary corporate action of the Company) and such authorization has not been
rescinded. No other partnership or corporate action or proceedings on the part
of the Borrower or the Company is necessary to consummate such transactions.

                  (iii) Each of the Loan Documents to which the Borrower is a
party has been duly executed and delivered on behalf of the Borrower and
constitutes the Borrower's legal, valid and binding obligation, enforceable
against the Borrower in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally or by general principles of equity
regardless of whether enforcement is considered in a proceeding at law or in
equity. Each of the Loan Documents to which Borrower is a party is in full force
and effect and all the terms, provisions, agreements and conditions set forth
therein and required to be performed or complied with by the Company, the
Borrower and the Borrower's Subsidiaries on or before the Funding Date have been
performed or complied with, and no Potential Event of Default or Event of
Default exists.

                                      -41-


              (c) Subsidiaries; Ownership of Capital Stock and Partnership
Interests. (i) SCHEDULE 7.1-C (A) contains a diagram indicating the corporate
structure of the Company, the Borrower and any other Person in which the Company
or the Borrower holds a direct or indirect partnership, joint venture or other
equity interest indicating the nature of such interest with respect to each
Person included in such diagram; and (B) accurately sets forth (1) the correct
legal name of such Person, the jurisdiction of its incorporation or organization
and the jurisdictions in which it is qualified to transact business as a foreign
corporation, or otherwise, and (2) the authorized, issued and outstanding shares
or interests of each class of equity Securities of the Company, the Borrower and
the Subsidiaries of the Borrower, and (3) the ownership interest of the
Borrower, the Company and the Subsidiaries of the Borrower in all Joint
Ventures. None of such issued and outstanding Securities is subject to any
vesting, redemption, or repurchase agreement, and there are no warrants or
options (other than Permitted Securities options) outstanding with respect to
such Securities, except as noted on SCHEDULE 7.1-C. The outstanding Capital
Stock of the Company is duly authorized, validly issued, fully paid and
nonassessable and the outstanding Securities of the Borrower and its
Subsidiaries are duly authorized and validly issued. Attached hereto as part of
SCHEDULE 7.1-C is a true, accurate and complete copy of the Borrower Partnership
Agreement as in effect on the Closing Date and the Borrower Partnership
Agreement has not been amended, supplemented, replaced, restated or otherwise
modified in any respect since the Closing Date, except as otherwise permitted
hereby. Borrower shall update SCHEDULE 7.1-C as of the first day of each fiscal
quarter, and shall deliver the same together with the Quarterly Compliance
Certificates, to the extent required, in order to keep said Schedule true and
correct.

                  (ii) Except where failure would not have a Material Adverse
Effect, each of the Subsidiaries of the Borrower: (A) is a corporation, limited
liability company or partnership, as indicated on SCHEDULE 7.1-C, duly organized
or formed, validly existing and, if applicable, in good standing under the laws
of the jurisdiction of its organization, (B) is duly qualified to do business
and, if applicable, is in good standing under the laws of each jurisdiction in
which failure to be so qualified and in good standing would have a Material
Adverse Effect, and (C) has all requisite power and authority to own, operate
and encumber its Property and to conduct its business as presently conducted and
as proposed to be conducted hereafter.

                  (iii) As to each Guarantor, a provision similar, as applicable
to (a), (b) and (c) above shall be included in each such Subsidiary's Guaranty,
and the Borrower shall be deemed to make for itself and on behalf of such
Subsidiary a representation as to such provisions.

              (d) No Conflict. The execution, delivery and performance of each
of the Loan Documents to which the Borrower, the Company or any Guarantor is a
party, and the consummation of the transactions expressly contemplated thereby
respectively, do not and will not (i) conflict with the Organizational Documents
of the Borrower, the Company or any Guarantor, (ii) conflict with, result in a
breach of or constitute (with or without notice or lapse of time or both) a
default under any Requirement of Law or material Contractual Obligation of the
Borrower, the Company or any Guarantor, or require termination of any such
material Contractual Obligation which would subject the Administrative Agent or
any of the other Lenders to any liability, (iii) result in or require the
creation or imposition of any Lien whatsoever upon any of the Property or assets
of the Borrower, the Company or any Guarantor, or (iv) require any approval of
shareholders of the Company (other than such approvals that have been obtained
and are in full force and effect).

                                      -42-


              (e) Governmental Consents. The execution, delivery and performance
of each of the Loan Documents to which the Borrower, the Company or any
Guarantor is a party and the consummation of the transactions expressly
contemplated thereby do not and will not require any registration with, consent
or approval of, or notice to, or other action to, with or by any Governmental
Authority, except filings, consents or notices which have been made, obtained or
given.

              (f) Governmental Regulation. None of the Borrower, the Company or
the Guarantors is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, the Interstate Commerce Act, or the
Investment Company Act of 1940, or any other federal or state statute or
regulation which limits its ability to incur indebtedness as contemplated by
this Agreement.

              (g) Financial Position. Complete and accurate copies of the
following financial statements and materials have been delivered to the
Administrative Agent: annual unaudited financial statements of the Borrower,
annual audited financial statements of the Company for the fiscal year ended
December 31, 2004 and unaudited financial statements of the Company for the
fiscal quarter ended September 30, 2005. All annual financial statements of the
Borrower shall be accompanied by an Officer's Certificate of the Borrower, and
shall be certified by the Chief Financial Officer of the Borrower as fairly
presenting in all material respects the financial position of the Borrower. All
financial statements included in such materials were prepared in all material
respects in conformity with GAAP, except as otherwise noted therein, and fairly
present in all material respects the respective consolidated financial positions
as of the date referred to therein, and the consolidated results of operations
and cash flows for each of the periods covered thereby of the Borrower and the
Company. Neither the Borrower nor the Company has any Contingent Obligation,
contingent liability or liability for any taxes, long-term leases or commitments
not reflected in its financial statements delivered to the Administrative Agent
on or prior to the Closing Date or otherwise disclosed to the Administrative
Agent and the Lenders in writing on or prior to the Closing Date, which will
have a Material Adverse Effect.

              (h) Indebtedness. SCHEDULE 7.1-H sets forth, as of September 30,
2005, all Indebtedness for borrowed money of each of the Borrower, the Company
and their respective Subsidiaries and, except as set forth on SCHEDULE 7.1-H,
there are no defaults in the payment of principal of or interest on any such
Indebtedness and no payments thereunder have been deferred or extended beyond
their stated maturity and there has been no material change in the type or
amount of such Indebtedness (except for the repayment of certain Indebtedness)
since September 30, 2005.

              (i) Litigation; Adverse Effects. Except as set forth in SCHEDULE
7.1-I, as of the Closing Date, there is no action, suit, proceeding,
investigation or arbitration before or by any Governmental Authority or private
arbitrator pending or, to the knowledge of the Borrower, threatened against the
Company, the Borrower or any of their respective Subsidiaries, or any Property
of any of them (i) challenging the validity or the enforceability of any of the
Loan Documents, (ii) which is reasonably likely to result in any Material
Adverse Effect, or (iii) under the Racketeering Influenced and Corrupt
Organizations Act or any similar federal or state statute where such Person is a
defendant in a criminal indictment that provides for the forfeiture of assets to
any Governmental Authority as a potential criminal penalty. There is no material
loss contingency within the meaning of GAAP which has not been reflected in the
consolidated financial statements of the Company and the Borrower. None of the
Company, the Borrower or any Subsidiary of the Borrower is (A) in violation of
any applicable Requirements of Law which violation will have or is reasonably
likely to have a Material Adverse Effect, or (B) in default with respect to any
final judgment, writ, injunction, restraining order or order of any nature,
decree, rule or regulation of any court or Governmental Authority which will
have a Material Adverse Effect.

                                      -43-


              (j) No Material Adverse Effect. Since September 30, 2005, there
has occurred no event which has had a Material Adverse Effect.

              (k) Intentionally Omitted.

              (l) Payment of Taxes. All material tax returns, reports and
similar statements or filings of the Company, the Borrower and their respective
Subsidiaries required to be filed have been timely filed (or extensions to file
have been obtained), and, except for Customary Permitted Liens, all material
taxes, assessments, fees and other charges of Governmental Authorities thereupon
and upon or relating to their respective Properties, assets, receipts, sales,
use, payroll, employment, income, licenses and franchises which are shown in
such returns or reports to be due and payable have been paid, except to the
extent (i) such taxes, assessments, fees and other charges of Governmental
Authorities are being contested in good faith by an appropriate proceeding
diligently pursued as permitted by the terms of Section 9.4 and (ii) such taxes,
assessments, fees and other charges of Governmental Authorities pertain to
Property of the Borrower or any of its Subsidiaries and the non-payment of the
amounts thereof would not, individually or in the aggregate, result in a
Material Adverse Effect. All other material taxes (including, without
limitation, real estate taxes), assessments, fees and other governmental charges
upon or relating to the respective Properties of the Borrower and its
Subsidiaries which are due and payable have been paid, except for Customary
Permitted Liens and except to the extent described in clauses (i) and (ii)
hereinabove. The Borrower has no knowledge of any proposed tax assessment
against the Borrower, any of its Subsidiaries, or any of the Projects that will
have or is reasonably likely to have a Material Adverse Effect.

              (m) Performance. To the knowledge of the Borrower, neither the
Company, the Borrower nor any of their Subsidiaries has received any written
notice or citation, nor has actual knowledge, that (i) it is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any Contractual Obligation applicable to it, or (ii) any
condition exists which, with the giving of notice or the lapse of time or both,
would constitute a default with respect to any such Contractual Obligation; in
each case, except where such default or defaults, if any, will not have a
Material Adverse Effect.

              (n) Disclosure. The representations and warranties of the Borrower
and the Guarantors contained in the Loan Documents, and all certificates and
other documents delivered to the Administrative Agent or any Lender pursuant to
the terms thereof, do not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they were
made, taken as a whole, not misleading. Notwithstanding the foregoing, the
Lenders acknowledge that the Borrower shall not have liability under this clause
(n) with respect to its projections of future events or for any financial
projections.

              (o) Requirements of Law. Each of the Borrower and each of its
Subsidiaries is in compliance with all Requirements of Law applicable to it and
its respective businesses and Properties, in each case where the failure to so
comply individually or in the aggregate will have a Material Adverse Effect.

                                      -44-


              (p) Environmental Matters.

                  (i) Except as disclosed on SCHEDULE 7.1-P (the Borrower shall
update SCHEDULE 7.1-P as of the first day of each fiscal quarter, and deliver
the same together with the Quarterly Compliance Certificates, to the extent
required, in order to keep said Schedule true and correct):

                           (A) the operations of the Borrower, each of its
                  Subsidiaries, and their respective Properties comply with all
                  applicable Environmental, Health or Safety Requirements of
                  Law, except to the extent any failure to do so would not have
                  a Material Adverse Effect;

                           (B) the Borrower and each of its Subsidiaries have
                  obtained all material environmental, health and safety Permits
                  necessary for their respective operations, and all such
                  Permits are in good standing and the holder of each such
                  Permit is currently in compliance with all terms and
                  conditions of such Permits, except to the extent any failure
                  to do so would not have a Material Adverse Effect;

                           (C) to the knowledge of the Borrower, none of the
                  Borrower, its Subsidiaries or any of their respective present
                  or past Properties or operations are subject to or are the
                  subject of any investigation of any Governmental Authority,
                  judicial or administrative proceeding, order, judgment or
                  decree, negotiations, agreement or settlement respecting (I)
                  any Remedial Action, (II) any Claims or Liabilities and Costs
                  arising from the Release or threatened Release of a
                  Contaminant into the environment, or (III) any violation of or
                  liability under any Environmental, Health or Safety
                  Requirement of Law, except to the extent none of the foregoing
                  would have a Material Adverse Effect;

                           (D) none of Borrower or any of its Subsidiaries has
                  filed any notice under any applicable Requirement of Law (I)
                  reporting a Release of a Contaminant; (II) indicating past or
                  present treatment, storage or disposal of a hazardous waste,
                  as that term is defined under 40 C.F.R. Part 261 or any state
                  equivalent; or (III) reporting a violation of any applicable
                  Environmental, Health or Safety Requirement of Law with
                  respect to any of the foregoing, the substance of which would
                  have a Material Adverse Effect;

                           (E) none of the Borrower's or any of its
                  Subsidiaries' present or past Property is listed or, to the
                  knowledge of the Borrower, proposed for listing on the
                  National Priorities List ("NPL") pursuant to CERCLA or on the
                  Comprehensive Environmental Response Compensation Liability
                  Information System List ("CERCLIS") or any similar state list
                  of sites requiring Remedial Action;

                           (F) to the knowledge of the Borrower, none of the
                  Borrower or any of its Subsidiaries has sent or directly
                  arranged for the transport of any waste to any site listed or
                  proposed for listing on the NPL, CERCLIS or any similar state
                  list;

                                      -45-


                           (G) to the best of the Borrower's knowledge, there is
                  not now, and to the Borrower's knowledge there has never been,
                  on or in any Project (I) any treatment, recycling, storage
                  away from the site of generation or disposal of any hazardous
                  waste, as that term is defined under 40 C.F.R. Part 261 or any
                  state equivalent, (II) any solid waste management facility,
                  (III) any underground storage tanks the presence or use of
                  which is in violation of applicable Environmental, Health or
                  Safety Requirements of Law, (IV) any asbestos-containing
                  material which, in its present state, such Person has any
                  reason to believe could subject such Person or its Property to
                  Liabilities and Costs arising out of or relating to
                  environmental, health or safety matters that would result in a
                  Material Adverse Effect; or (V) any polychlorinated biphenyls
                  (PCB) used in hydraulic oils, electrical transformers or other
                  Equipment, which, in any such case, would subject the Borrower
                  or its Subsidiaries or their respective Properties to
                  Liabilities and Costs arising out of or relating to
                  environmental, health or safety matters that would result in a
                  Material Adverse Effect;

                           (H) to the knowledge of the Borrower, none of the
                  Borrower or any of its Subsidiaries has received any notice or
                  Claim to the effect that any of such Persons is or may be
                  liable to any Person as a result of the Release or threatened
                  Release of a Contaminant into the environment which would
                  result in a Material Adverse Effect;

                           (I) none of the Borrower or any of its Subsidiaries
                  has any contingent liability in connection with any Release or
                  threatened Release of any Contaminants into the environment
                  which will result in a Material Adverse Effect;

                           (J) no Environmental Lien has attached to any
                  Property of the Borrower or any of its Subsidiaries (other
                  than those otherwise permitted hereunder) or which do not
                  constitute an Event of Default; and

                           (K) no Property of the Borrower or any of its
                  Subsidiaries is subject to any Environmental Property Transfer
                  Act, or to the extent such acts are applicable to any such
                  Property, the Borrower and/or such Subsidiary whose Property
                  is subject thereto has complied in all material respects with
                  the requirements of such acts.

              (q) ERISA. As of the date hereof, neither the Borrower nor any
ERISA Affiliate maintains or contributes to any Benefit Plan or Multiemployer
Plan other than those listed on SCHEDULE 7.1-Q hereto. Each Plan which is
intended to be qualified under Section 401(a) of the Internal Revenue Code as
currently in effect has been determined by the IRS to be so qualified, and each
trust related to any such Plan has been determined to be exempt from federal
income tax under Section 501(a) of the Internal Revenue Code as currently in
effect. Except as disclosed in SCHEDULE 7.1-Q, neither the Borrower nor any of
its Subsidiaries maintains or contributes to any employee welfare benefit plan
within the meaning of Section 3(1) of ERISA that provides benefits to employees
after termination of employment other than as required by Section 601 of ERISA.
The Borrower and each of its Subsidiaries is in compliance in all material
respects with the responsibilities, obligations and duties imposed on it by
ERISA, the Internal Revenue Code and regulations promulgated thereunder with
respect to all Plans. No Benefit Plan has incurred any accumulated funding
deficiency (as defined in Sections 302(a)(2) of ERISA and 412 (a) of the
Internal Revenue Code) whether or not waived. Neither the Borrower nor any ERISA
Affiliate nor any fiduciary of any Plan which is not a Multiemployer Plan (i)
has engaged in a nonexempt prohibited transaction described in Sections 406 of
ERISA or 4975 of the Internal Revenue Code or (ii) has taken or failed to take
any action which would constitute or result in an ERISA Termination Event.
Neither the Borrower nor any ERISA Affiliate is subject to any liability under
Sections 4063, 4064, or 4204 of ERISA which would have a Material Adverse
Effect. Neither the Borrower nor any ERISA Affiliate is subject to any liability
under Sections 4069 or 4212 (c) of ERISA or has incurred any liability to the
PBGC which remains outstanding other than the payment of premiums, and there are
no premium payments which have become due which are unpaid. Schedule B to the
most recent annual report filed with the IRS with respect to each Benefit Plan
has been furnished to the Administrative Agent and is complete and accurate in
all material respects. Since the date of each such Schedule B, there has been no
material adverse change in the funding status or financial condition of the
Benefit Plan relating to such Schedule B. Neither the Borrower nor any ERISA
Affiliate has (i) failed to make a required contribution or payment to a
Multiemployer Plan or (ii) made a complete or partial withdrawal under Sections
4203 or 4205 of ERISA from a Multiemployer Plan which would have a Material
Adverse Effect. Neither the Borrower, nor any ERISA Affiliate has failed to make
a required installment or any other required payment under Section 412 of the
Internal Revenue Code on or before the due date for such installment or other
payment. Neither the Borrower nor any ERISA Affiliate is required to provide
security to a Benefit Plan under Section 401(a)(29) of the Internal Revenue Code
due to a Benefit Plan amendment that results in an increase in current liability
for the plan year. Except as disclosed on SCHEDULE 7.1-Q, which shall be updated
by Borrower as of the first day of each fiscal quarter, to the extent required,
neither the Borrower nor any of its Subsidiaries has, by reason of the
transactions contemplated hereby, any obligation to make any payment to any
employee pursuant to any Plan or existing contract or arrangement.

                                      -46-


              (r) Securities Activities. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying Margin
Stock except as described on SCHEDULE 7.L-R.

              (s) Solvency. After giving effect to the Term Loans to be made on
the Funding Date, the Acquisition, and the disbursement of the proceeds of such
Term Loan pursuant to the Borrower's instructions, each of the Borrower and each
Guarantor is Solvent.

              (t) Insurance. SCHEDULE 7.1-T accurately sets forth as of the
Closing Date all insurance policies and programs currently in effect with
respect to the respective Property and assets and business of the Borrower and
its Subsidiaries, specifying for each such policy and program, (i) the amount
thereof, (ii) the risks insured against thereby, (iii) the name of the insurer
and each insured party thereunder, (iv) the policy or other identification
number thereof, and (v) the expiration date thereof. The Borrower has delivered
to the Administrative Agent certificates of insurance or other satisfactory
evidence of all insurance policies set forth on SCHEDULE 7.1-T. Such insurance
policies and programs or their replacements obtained in compliance with Section
9.5 are currently in full force and effect, in compliance with the requirements
of Section 9.5 hereof and provide coverage against such casualties and
contingencies as are commercially reasonable and in accordance with the
customary and general practices of businesses having similar operations and real
estate portfolios in similar geographic areas and are in amounts, containing
such terms, in such forms and for such periods as are reasonable and prudent for
such businesses. Borrower shall update SCHEDULE 7.1-T, to the extent required,
in order to keep said Schedule true and correct.

                                      -47-


              (u) REIT Status. The Company qualifies as a REIT under the
Internal Revenue Code.

              (v) Ownership of Projects, Joint Ventures and Property. Ownership
of all wholly owned Projects, Joint Ventures and other Property of the
Consolidated Businesses is held by the Borrower and its Subsidiaries and is not
held directly by the Company.

              (w) Title to Properties. The Borrower, the Guarantors and their
respective Subsidiaries that own Real Property each has good title to all of its
respective Real Property purported to be owned by it, including, without
limitation, that:

                  (a) Either (i) the Borrower or (ii) a Guarantor is the owner
of or the holder of a fee or ground leasehold interest (under an Eligible Ground
Lease) in the Unencumbered Projects and Unencumbered New York City Assets which
are wholly-owned or ground-leased by the Borrower and the Consolidated
Businesses, free from any Lien, except for Customary Permitted Liens, or
preferred equity interest.

                  (b) The Company, the Borrower and their Consolidated
Subsidiaries will, as of the Closing Date, own all of the assets as reflected in
the financial statements of the Borrower and the Company described in Section
7.1(g) or acquired since the date of such financial statements (except property
and assets sold or otherwise disposed of in the ordinary course of business
since that date).

                                 ARTICLE VIII.
                               REPORTING COVENANTS

         The Borrower covenants and agrees that so long as any Term Loan
Commitments are outstanding and thereafter until payment in full of all of the
Obligations (other than indemnities pursuant to Section 14.3 not yet due),
unless the Requisite Lenders shall otherwise give prior written consent thereto:

         8.1. BORROWER ACCOUNTING PRACTICES. The Borrower shall maintain, and
cause each of its consolidated Subsidiaries to maintain, a system of accounting
established and administered in accordance with sound business practices to
permit preparation of consolidated financial statements in conformity with GAAP.

         8.2. FINANCIAL REPORTS. The Borrower shall deliver or cause to be
delivered to the Administrative Agent (with copies for each of the Lenders):

              (a) Quarterly Reports.

              (i) Borrower Quarterly Financial Reports. As soon as practicable,
         and in any event within forty-five (45) days after the end of each
         fiscal quarter in each Fiscal Year (other than the last fiscal quarter
         in each Fiscal Year), a consolidated balance sheet of the Borrower and
         the related consolidated statements of income and cash flow of the
         Borrower (to be prepared and delivered quarterly in conjunction with
         the other reports delivered hereunder at the end of each fiscal
         quarter) for each such fiscal quarter, and, in comparative form, the
         corresponding figures for the corresponding dates and periods of the
         previous Fiscal Year, certified by an Authorized Financial Officer of
         the Borrower as fairly presenting in all material respects the
         consolidated financial position of the Borrower as of the dates
         indicated and the consolidated results of its operations and cash flow
         for the months indicated in accordance with GAAP, subject to normal
         adjustments.

                                      -48-


              (ii) Company Quarterly Financial Reports. As soon as practicable,
         and in any event within forty-five (45) days after the end of each
         fiscal quarter in each Fiscal Year (other than the last fiscal quarter
         in each Fiscal Year), the Financial Statements of the Company and its
         consolidated Subsidiaries on Form 10-Q as at the end of such period and
         a report setting forth in comparative form the corresponding figures
         for the corresponding dates and period of the previous Fiscal Year,
         certified by an Authorized Financial Officer of the Company as fairly
         presenting in all material respects the consolidated financial position
         of the Company and its consolidated Subsidiaries as at the date
         indicated and the consolidated results of their operations and cash
         flow for the period indicated in accordance with GAAP, subject to
         normal adjustments.

              (iii) Quarterly Compliance Certificates. Together with each
         delivery of any quarterly report pursuant to paragraph (a)(i) of this
         Section 8.2, Officer's Certificates of the Borrower and the Company in
         the form of EXHIBIT F hereto (the "QUARTERLY COMPLIANCE CERTIFICATES"),
         signed by the Borrower's and the Company's respective Authorized
         Financial Officers representing and certifying (1) that the Authorized
         Financial Officer signatory thereto has reviewed the terms of the Loan
         Documents, and has made, or caused to be made under his/her
         supervision, a review in reasonable detail of the consolidated
         financial condition of the Company and its Consolidated Subsidiaries,
         for the fiscal quarter covered by such reports, that such review has
         not disclosed the existence during or at the end of such fiscal
         quarter, and that such officer does not have knowledge of the existence
         as at the date of such Officer's Certificate, of an Event of Default or
         Potential Event of Default or mandatory prepayment event, or, if any
         such condition or event existed or exists, the nature and period of
         existence thereof and what action the Company and/or the Borrower or
         any of their Subsidiaries has taken, is taking and proposes to take
         with respect thereto; (2) the calculations in the form of EXHIBIT G
         hereto for the period then ended which demonstrate whether there has
         been compliance with the covenants and financial ratios set forth in
         Sections 9.9, 9.11, 10.2, 10.6, 10.7, 10.11, and 10.12 hereof and, when
         applicable, that no Event of Default described in Section 11.1 exists,
         (3) a schedule of the Borrower's outstanding Indebtedness, including
         the amount, maturity, interest rate and amortization requirements, as
         well as such other information regarding such Indebtedness as may be
         reasonably requested by the Administrative Agent, (4) a schedule of
         Total Adjusted EBITDA, and (5) a schedule of Adjusted Unencumbered NOI.

              (b) Annual Reports.

              (i) Borrower Financial Statements. As soon as practicable, and in
         any event within ninety (90) days after the end of each Fiscal Year,
         the Financial Statements of the Borrower and its Subsidiaries as at the
         end of such Fiscal Year, accompanied by an Officer's Certificate of the
         Borrower, signed by the Chief Financial Officer of the Borrower, that
         such Financial Statements fairly present in all material respects the
         consolidated financial position of the Borrower and its Subsidiaries as
         of the dates indicated and the results of their operations and cash
         flow for the periods indicated in conformity with GAAP consistently
         applied, and which Officer's Certificate shall explain any
         inconsistencies between the Financial Statements of the Borrower and
         the Financial Statements of the Company.

                                      -49-


              (ii) Company Financial Statements. As soon as practicable, and in
         any event within ninety (90) days after the end of each Fiscal Year,
         (i) the Financial Statements of the Company and its consolidated
         Subsidiaries on Form 10-K as at the end of such Fiscal Year and a
         report setting forth in comparative form the corresponding figures from
         the consolidated Financial Statements of the Company and its
         Subsidiaries as of the end of and for the prior Fiscal Year; (ii) a
         report with respect thereto of Ernst & Young LLP or other independent
         certified public accountants acceptable to the Administrative Agent (it
         being understood that any "Big Four" certified public accountants are
         acceptable to the Administrative Agent), which report shall be
         unqualified and shall state that such financial statements fairly
         present the consolidated financial position of the Company and its
         consolidated Subsidiaries as at the dates indicated and the results of
         their operations and cash flow for the periods indicated in conformity
         with GAAP (except for changes with which Ernst & Young LLP or any such
         other independent certified public accountants, if applicable, shall
         concur and which shall have been disclosed in the notes to the
         financial statements) (which report shall be subject to the
         confidentiality limitations set forth herein); and (iii) in the event
         that the report referred to in clause (ii) above is qualified, a copy
         of the management letter or any similar report delivered to the Company
         or to any officer or employee thereof by such independent certified
         public accountants in connection with such financial statements. The
         Administrative Agent and each Lender (through the Administrative Agent)
         may, with the consent of the Company (which consent shall not be
         unreasonably withheld), communicate directly with such accountants,
         with any such communication to occur together with a representative of
         the Company, at the expense of the Administrative Agent (or the Lender
         requesting such communication), upon reasonable notice and at
         reasonable times during normal business hours.

              (iii) Annual Compliance Certificates. Together with each delivery
         of any annual report pursuant to clauses (i) and (ii) of this Section
         8.2(b), Officer's Certificates of the Borrower and the Company in the
         form of EXHIBIT F hereto (the "ANNUAL COMPLIANCE CERTIFICATES" and,
         collectively with the Quarterly Compliance Certificates, the
         "COMPLIANCE CERTIFICATES"), signed by the Borrower's and the Company's
         respective Authorized Financial Officers, representing and certifying
         (1) that the officer signatory thereto has reviewed the terms of the
         Loan Documents, and has made, or caused to be made under his/her
         supervision, a review in reasonable detail of the consolidated
         financial condition of the Company and its consolidated Subsidiaries,
         for the accounting period covered by such reports, that such review has
         not disclosed the existence at the end of such accounting period, and
         that such officer does not have knowledge of the existence as at the
         date of such Officer's Certificate, of an Event of Default or Potential
         Event of Default or mandatory prepayment event, or, if any such
         condition or event existed or exists, the nature and period of
         existence thereof and what action the Company and/or the Borrower or
         any of their Subsidiaries has taken, is taking and proposes to take
         with respect thereto; (2) the calculations in the form of EXHIBIT G
         hereto for the period then ended which demonstrate whether there has
         been compliance with the covenants and financial ratios set forth in
         Sections 9.9, 9.11, 10.2, 10.6, 10.7, 10.11, and 10.12 hereof and, when
         applicable, that no Event of Default described in Section 11.1 exists,
         (3) a schedule of the Borrower's outstanding Indebtedness including the
         amount, maturity, interest rate and amortization requirements, as well
         as such other information regarding such Indebtedness as may be
         reasonably requested by the Administrative Agent, (4) a schedule of
         Total Adjusted EBITDA and (5) a schedule of Adjusted Unencumbered NOI.

                                      -50-


              (iv) Tenant Bankruptcy Reports. As soon as practicable, and in any
         event within ninety (90) days after the end of each Fiscal Year, a
         written report, in form reasonably satisfactory to the Administrative
         Agent, of all bankruptcy proceedings filed by or against any tenant of
         any of the Projects, which tenant occupies three and one half percent
         (3.5%) or more of the gross leasable area in the Projects in the
         aggregate. The Borrower shall deliver to the Administrative Agent and
         the Lenders, immediately upon the Borrower's learning thereof, of any
         bankruptcy proceedings filed by or against, or the cessation of
         business or operations of, any tenant of any of the Projects which
         tenant occupies three and one half percent (3.5%) or more of the gross
         leasable area in the Projects in the aggregate.

              (v) Update of Schedule 7.1-C. As soon as practicable, and in any
         event within ninety (90) days after the end of each Fiscal Year, the
         Borrower shall deliver an update of Schedule 7.1-C.

         8.3. EVENTS OF DEFAULT. Promptly upon the Borrower obtaining knowledge
(a) of any condition or event which constitutes an Event of Default or Potential
Event of Default; (b) that any Person has given any notice to the Borrower or
any Subsidiary of the Borrower or taken any other action with respect to a
claimed default or event or condition of the type referred to in Section
11.1(e); or (c) of any condition or event which has a Material Adverse Effect,
the Borrower shall deliver to the Administrative Agent (with copies for each of
the Lenders) an Officer's Certificate specifying (i) the nature and period of
existence of any such claimed default, Event of Default, Potential Event of
Default, condition or event, (ii) the notice given or action taken by such
Person in connection therewith, and (iii) what action the Borrower has taken, is
taking and proposes to take with respect thereto.

         8.4. LAWSUITS. (i) Promptly upon the Borrower's obtaining knowledge of
the institution of, or written threat of, any action, suit, proceeding,
governmental investigation or arbitration against or affecting the Borrower or
any of its Subsidiaries not previously disclosed pursuant to Section 7.1(i),
which action, suit, proceeding, governmental investigation or arbitration
exposes, or in the case of multiple actions, suits, proceedings, governmental
investigations or arbitrations arising out of the same general allegations or
circumstances which expose, in the Borrower's reasonable judgment, the Borrower
or any of its Subsidiaries to liability in an amount aggregating $1,000,000 or
more and is not covered by the Borrower's or such Subsidiary's insurance, the
Borrower shall give written notice thereof to the Administrative Agent (with
copies for each of the Lenders) and provide such other information as may be
reasonably available to enable each Lender and the Administrative Agent and its
counsel to evaluate such matters; (ii) as soon as practicable and in any event
within forty-five (45) days after the end of each fiscal quarter of the
Borrower, the Borrower shall provide a written quarterly report to the
Administrative Agent and the Lenders covering the institution of, or written
threat of, any action, suit, proceeding, governmental investigation or
arbitration in an amount equal to or in excess of $50,000,000 (to the extent not
previously reported) against or affecting the Borrower or any of its
Subsidiaries or any Property of the Borrower or any of its Subsidiaries not
previously disclosed by the Borrower to the Administrative Agent and the
Lenders, and shall provide such other information at such time as may be
reasonably available to enable each Lender and the Administrative Agent and its
counsel to evaluate such matters; and (iii) in addition to the requirements set
forth in clauses (i) and (ii) of this Section 8.4, the Borrower upon request of
the Administrative Agent or the Requisite Lenders shall promptly give written
notice of the status of any action, suit, proceeding, governmental investigation
or arbitration covered by a report delivered pursuant to clause (i) or (ii)
above and provide such other information as may be reasonably requested and
available to it to enable each Lender and the Administrative Agent and its
counsel to evaluate such matters. Notwithstanding the foregoing, the Borrower
shall not be required to disclose any information which is subject to the
attorney-client privilege.

                                      -51-


         8.5. INSURANCE. As soon as practicable and in any event by January 31st
of each calendar year, the Borrower shall deliver to the Administrative Agent
(with copies for each of the Lenders) (i) a report in form and substance
reasonably satisfactory to the Administrative Agent, outlining all insurance
coverage maintained as of the date of such report by the Borrower and its
Subsidiaries and the duration of such coverage and (ii) an Officer's Certificate
signed by an Authorized Financial Officer of the Borrower certifying that all
premiums with respect to such coverage have been paid when due.

         8.6. ERISA NOTICES. The Borrower shall deliver or cause to be delivered
to the Administrative Agent (with copies for each of the Lenders), at the
Borrower's expense, the following information and notices as soon as reasonably
possible, and in any event:

              (a) within fifteen (15) Business Days after the Borrower or any
ERISA Affiliate knows or has reason to know that an ERISA Termination Event has
occurred, a written statement of an Authorized Financial Officer of the Borrower
describing such ERISA Termination Event and the action, if any, which the
Borrower or any ERISA Affiliate has taken, is taking or proposes to take with
respect thereto, and when known, any action taken or threatened by the IRS, DOL
or PBGC with respect thereto;

              (b) within fifteen (15) Business Days after the Borrower knows or
has reason to know that a non-exempt prohibited transaction (as defined in
Sections 406 of ERISA and Section 4975 of the Internal Revenue Code) has
occurred with respect to the Borrower, any ERISA Affiliate or any Plan, a
statement of an Authorized Financial Officer of the Borrower describing such
transaction with respect to the Borrower, any ERISA Affiliate or any Plan and
the action which the Borrower or any ERISA Affiliate has taken, is taking or
proposes to take with respect thereto;

              (c) within fifteen (15) Business Days after the filing of the same
with the DOL, IRS or PBGC, copies of each annual report (Form 5500 series),
including Schedule B thereto, filed with respect to each Benefit Plan;

              (d) within fifteen (15) Business Days after receipt by the
Borrower or any ERISA Affiliate of each actuarial report for any Benefit Plan or
Multiemployer Plan and each annual report for any Multiemployer Plan, copies of
each such report;

              (e) within fifteen (15) Business Days after the filing of the same
with the IRS, a copy of each funding waiver request filed with respect to any
Benefit Plan and all written communications received by the Borrower or any
ERISA Affiliate with respect to such request;

              (f) within fifteen (15) Business Days after the occurrence of any
material increase in the benefits of any existing Benefit Plan or Multiemployer
Plan or the establishment of any new Benefit Plan or the commencement of
contributions to any Benefit Plan or Multiemployer Plan to which the Borrower or
any ERISA Affiliate to which the Borrower or any ERISA Affiliate was not
previously contributing, notification of such increase, establishment or
commencement;

                                      -52-


              (g) within fifteen (15) Business Days after the Borrower or any
ERISA Affiliate receives notice of the PBGC's intention to terminate a Benefit
Plan or to have a trustee appointed to administer a Benefit Plan, copies of each
such notice;

              (h) within fifteen (15) Business Days after the Borrower or any of
its Subsidiaries receives notice of any unfavorable determination letter from
the IRS regarding the qualification of a Plan under Section 401(a) of the
Internal Revenue Code, copies of each such letter to the extent any of the
foregoing would have a Material Adverse Effect;

              (i) within fifteen (15) Business Days after the Borrower or any
ERISA Affiliate receives notice from a Multiemployer Plan regarding the
imposition of withdrawal liability, copies of each such notice;

              (j) within fifteen (15) Business Days after the Borrower or any
ERISA Affiliate fails to make a required installment or any other required
payment under Section 412 of the Internal Revenue Code on or before the due date
for such installment or payment which failure has not been cured, a notification
of such failure; and

              (k) within fifteen (15) Business Days after the Borrower or any
ERISA Affiliate knows or has reason to know (i) a Multiemployer Plan has been
terminated, (ii) the administrator or plan sponsor of a Multiemployer Plan
intends to terminate a Multiemployer Plan, or (iii) the PBGC has instituted or
has given written notice that it will institute proceedings under Section 4042
of ERISA to terminate a Multiemployer Plan, notification of such termination,
intention to terminate, or institution of proceedings. For purposes of this
Section 8.6, the Borrower and any ERISA Affiliate shall be deemed to know all
facts known by the "Administrator" of any Plan of which the Borrower or any
ERISA Affiliate is the plan sponsor.

         8.7. ENVIRONMENTAL NOTICES. The Borrower shall notify the
Administrative Agent (with copies for each of the Lenders) in writing, promptly
upon any officer of the Borrower responsible for the environmental matters at
any Property of the Borrower learning thereof, of any of the following (together
with any material documents and correspondence received or sent in connection
therewith):

              (a) notice or claim to the effect that the Borrower or any of its
Subsidiaries is or may be liable to any Person as a result of the Release or
threatened Release of any Contaminant into the environment, if such liability
would result in a Material Adverse Effect;

              (b) notice that the Borrower or any of its Subsidiaries is subject
to investigation by any Governmental Authority evaluating whether any Remedial
Action is needed to respond to the Release or threatened Release of any
Contaminant into the environment which would have a Material Adverse Effect;

              (c) notice that any Property of the Borrower or any of its
Subsidiaries is subject to an Environmental Lien if the claim to which such
Environmental Lien relates would result in a Material Adverse Effect;

                                      -53-


              (d) notice of violation by the Borrower or any of its Subsidiaries
of any Environmental, Health or Safety Requirement of Law which violation would
have a Material Adverse Effect;

              (e) commencement or written threat of any judicial or
administrative proceeding alleging a violation by the Borrower or any of its
Subsidiaries of any Environmental, Health or Safety Requirement of Law, which
would result in a Material Adverse Effect; or

              (f) any proposed acquisition of stock, assets, real estate, or
leasing of Property by the Borrower or any of its Subsidiaries that would
subject the Borrower or any of its Subsidiaries to environmental, health or
safety Liabilities and Costs which would result in a Material Adverse Effect.

         8.8. LABOR MATTERS. The Borrower shall notify the Administrative Agent
(with copies for each of the Lenders) in writing, promptly upon the Borrower's
learning thereof, of any labor dispute to which the Borrower or any of its
Subsidiaries is reasonably expected to become a party (including, without
limitation, any strikes, lockouts or other disputes relating to any Property of
such Persons and other facilities) which would result in a Material Adverse
Effect.

         8.9. NOTICES OF ASSET SALES AND/OR ACQUISITIONS. The Borrower shall
deliver to the Administrative Agent and the Lenders written notice of each of
the following events affecting the Company, the Borrower or their respective
Subsidiaries not less than five (5) Business Days prior to the occurrence
thereof: (a) (i) an Asset Sale or (ii) the sale of assets other than Real
Property, in a single transaction or series of related transactions after the
date hereof and within the two preceding calendar quarter periods, for
consideration in excess of $50,000,000, (b) an acquisition of assets, in a
single transaction or series of related transactions within the two preceding
calendar quarter period, for consideration in excess of $50,000,000, (c) the
grant of a Lien with respect to (i) an Unencumbered Project or Unencumbered New
York City Asset or (ii) assets (other than Real Property), in a single
transaction or series of related transactions within the two preceding calendar
quarter periods, for consideration in excess of $50,000,000, and (d) a release
from an escrow account of the proceeds of a qualified, deferred exchange under
ss.1031 of the Internal Revenue Code. In addition, simultaneously with delivery
of any such notice, the Borrower shall deliver to the Administrative Agent a
certificate of an Authorized Officer certifying that Borrower is in compliance
with this Agreement and the other Loan Documents both on a historical basis and
on a pro forma basis, exclusive of the property sold, transferred and/or
encumbered and inclusive of the property to be acquired or the indebtedness to
be incurred.

To the extent such proposed transaction would result in a failure to comply with
the covenants set forth herein or in the Existing Revolving Credit Agreement,
the Borrower shall (i) apply the proceeds of such transaction (together with
such additional amounts as may be required), to prepay the Obligations and the
Obligations under the Existing Revolving Credit Agreement in an aggregate
amount, as determined by the Administrative Agent, equal to that which would be
required to reduce the Obligations and the Obligations under the Existing
Revolving Credit Agreement so that Borrower will be in compliance with the
covenants set forth herein and in the Existing Revolving Credit Agreement upon
the consummation of the contemplated transaction (with such application to the
Obligations and the Obligations under the Existing Revolving Credit Agreement
being made at the determination of the Borrower), to the extent such proceeds
are not applied pursuant to clauses (ii) or (iii); (ii) to the extent
applicable, segregate the net proceeds of such transaction in an escrow account
with the Administrative Agent or with a financial institution reasonably
acceptable to the Administrative Agent (including the Administrative Agent under
the Existing Revolving Credit Agreement) and apply such net proceeds solely to a
qualified, deferred exchange under ss.1031 of the Internal Revenue Code that
results in compliance with the covenants set forth herein and in the Existing
Revolving Credit Agreement upon the consummation of the contemplated
transaction, or with the prior written approval of the Requisite Lenders to
another use, to the extent such proceeds are not applied pursuant to clauses (i)
or (iii); or (iii) to the extent applicable, complete an exchange of such assets
for other real property of equivalent value under ss.1031 of the Internal
Revenue Code that results in compliance with the covenants set forth herein and
in the Existing Revolving Credit Agreement upon the consummation of the
contemplated transaction, to the extent such proceeds are not applied pursuant
to clauses (i) or (ii). The Borrower shall also apply the Eligible Net Cash
Proceeds of any Asset Sale as required by Section 4.1(c)(ii) hereof.

                                      -54-


         8.10. NOTICES OF JOINT VENTURES. The Borrower shall deliver to the
Administrative Agent and the Lenders written notice of each of the following not
less than two (2) Business Days prior to the occurrence thereof: (a) the
acquisition of an interest in a Joint Venture in excess of $5,000,000, (b) the
investment of an amount in excess of $5,000,000 in a Joint Venture of which the
Administrative Agent and the Lenders have not previously received notice, and
(c) the sale of an interest in a Subsidiary that results in the same becoming a
Joint Venture. Simultaneously with the delivery of the Compliance Certificates,
the Borrower shall deliver to the Administrative Agent and the Lenders written
notice of the formation of any other Joint Venture.

         8.11. TENANT NOTIFICATIONS. The Borrower shall promptly notify the
Administrative Agent upon obtaining knowledge of the bankruptcy or cessation of
operations of any tenant to which greater than three and one half percent (3.5%)
of the Borrower's share of annual base rent (as reported in the Borrower's most
recent quarterly financial statements) is attributable to such tenant.

         8.12. OTHER REPORTS. The Borrower shall deliver or cause to be
delivered to the Administrative Agent (with copies for each of the Lenders)
copies of all financial statements and reports, if any, sent or made available
generally by the Company and/or the Borrower to its respective Securities
holders, including, without limitation, supplemental quarterly forms, or (to the
extent not otherwise provided hereunder), all press releases made available
generally by the Company and/or the Borrower or any of its Subsidiaries to the
public concerning material adverse developments in the business of the Company,
the Borrower or any such Subsidiary and all material notifications received by
the Company, the Borrower or their Subsidiaries pursuant to the Securities
Exchange Act and the rules promulgated thereunder.

         8.13. OTHER INFORMATION. Promptly upon receiving a request therefor
from the Administrative Agent or the Arranger, the Borrower shall prepare and
deliver to the Administrative Agent (with copies for each of the Lenders) such
other information with respect to the Company, the Borrower, or any of their
Subsidiaries, as from time to time may be reasonably requested by the
Administrative Agent or the Arranger, including without limitation, rent rolls,
title reports, environmental site assessments, and tax returns.

                                  ARTICLE IX.
                              AFFIRMATIVE COVENANTS

         Borrower covenants and agrees that so long as any Term Loan Commitments
are outstanding and thereafter until payment in full of all of the Obligations
(other than indemnities pursuant to Section 14.3 not yet due), unless the
Requisite Lenders shall otherwise give prior written consent:

                                      -55-


         9.1. EXISTENCE. ETC. The Borrower shall, and shall cause each of its
Subsidiaries and the Company to, at all times maintain its corporate existence
or existence as a limited partnership, limited liability company or joint
venture, as applicable, and preserve and keep, or cause to be preserved and
kept, in full force and effect its rights and franchises material to its
businesses, except where the loss or termination of such rights and franchises
will not have a Material Adverse Effect.

         9.2. POWERS; CONDUCT OF BUSINESS. The Borrower shall remain qualified,
and shall cause each of its Subsidiaries and the Company to qualify and remain
qualified, to do business and maintain its good standing in each jurisdiction in
which the nature of its business and the ownership of its Property requires it
to be so qualified and in good standing if the failure to do so will have a
Material Adverse Effect.

         9.3. COMPLIANCE WITH LAWS. ETC. The Borrower shall, and shall cause
each of its Subsidiaries and the Company to, (a) comply with all Requirements of
Law and all restrictive covenants affecting such Person or the business,
Property or operations of such Person, and (b) obtain and maintain as needed all
Permits necessary for its operations (including, without limitation, the
operation of the Projects) and maintain such Permits in good standing, except
where noncompliance with either clause (a) or (b) above will not have a Material
Adverse Effect.

         9.4. PAYMENT OF TAXES AND CLAIMS. (a) The Borrower shall pay, and cause
each of its Subsidiaries and the Company to pay, (i) all material taxes,
assessments and other governmental charges imposed upon it or on any of its
Property or assets or in respect of any of its franchises, licenses, receipts,
sales, use, payroll, employment, business, income or Property before any penalty
or interest accrues thereon, and (ii) all material Claims (including, without
limitation, claims for labor, services, materials and supplies) for sums which
have become due and payable and which by law have or may become a Lien (other
than a Lien permitted by Section 10.2 or a Customary Permitted Lien for property
taxes and assessments not yet due upon any of the Borrower's, the Company's or
any of the Borrower's Subsidiaries' Property, prior to the time when any penalty
or fine shall be incurred with respect thereto; provided, however, that no such
taxes, assessments, fees and governmental charges referred to in clause (i)
above or Claims referred to in clause (ii) above need be paid if being contested
in good faith by appropriate proceedings diligently instituted and conducted and
if such reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor.

         9.5. INSURANCE. The Borrower shall maintain for itself and its
Subsidiaries, or shall cause each of its Subsidiaries or tenants to maintain, in
full force and effect the insurance policies and programs listed on SCHEDULE
7.1-T or substantially similar policies and programs or other policies and
programs as are reasonably acceptable to the Administrative Agent. All such
policies and programs shall be maintained (a) with insurers having an Alfred M.
Best Company, Inc. rating of "A" or better (or if approved by the Administrative
Agent, a rating of "A-") and a financial size category of not less than VIII or
(b) in the case of (i) insurance maintained by tenants, pursuant to insurance
programs, including self-insurance, supported by creditworthy entities which do
not satisfy clause (a) above or (ii) a program by which a tenant (or any
guarantor of tenant) undertakes obligations that are substantially the same as
would be covered by the insurance referred to in this Section, by a tenant (or
any guarantor) that is a creditworthy entity, in each case consistent with
normal industry practice and reasonably acceptable to the Administrative Agent;
provided that a tenant (or any guarantor) that is, or has senior unsecured long
term debt that is, rated at least "A" (or its equivalent) by any Rating Agency
shall be deemed to have acceptable creditworthiness by the Administrative Agent.

                                      -56-


         9.6. INSPECTION OF PROPERTY, BOOKS AND RECORDS DISCUSSIONS. The
Borrower shall permit, and cause each of its Subsidiaries and the Company to
permit, any authorized representative(s) designated by the Administrative Agent,
the Arranger or any Lender (coordinated through the Administrative Agent) to
visit and inspect any of the Projects, to examine, audit, and check their
respective financial and accounting records, books, journals, orders, receipts
and any correspondence and other data relating to their respective businesses or
the transactions contemplated hereby (including, without limitation, in
connection with environmental compliance, hazard or liability), and to discuss
their affairs, finances and accounts with their officers and independent
certified public accountants, upon reasonable notice and at such reasonable
times during normal business hours, as often as may be reasonably requested.
Each such visitation and inspection shall be at such visitor's expense. The
Borrower shall keep and maintain, and cause its Subsidiaries to keep and
maintain, in all material respects proper books of record and account in which
entries are made in conformity with GAAP.

         9.7. ERISA COMPLIANCE. The Borrower shall, and shall cause each of its
Subsidiaries and ERISA Affiliates to, establish, maintain and operate all
Benefit Plans to comply in all material respects with the provisions of ERISA,
the Internal Revenue Code, all other applicable laws, and the regulations and
interpretations thereunder and the respective requirements of the governing
documents for such Plans.

         9.8. MAINTENANCE OF PROPERTY. The Borrower shall, and shall cause each
of its Subsidiaries to, maintain in all material respects all of their
respective owned and leased Property in good, safe and insurable condition and
repair (ordinary wear and tear excepted), and not permit, commit or suffer any
waste or abandonment of any such Property and from time to time shall make or
cause to be made all material repairs, renewals and replacements thereof,
including, without limitation, any capital improvements which may be required to
maintain the same; provided, however, that such Property may be altered or
renovated in the ordinary course of business of the Borrower or such applicable
Subsidiary. Without any limitation on the foregoing, the Borrower shall maintain
each Project that is an office or industrial Project as an office or industrial
Project.

         9.9. COMPANY STATUS. The Borrower shall cause the Company to, and the
Company shall, at all times (1) remain a publicly traded company listed on the
New York Stock Exchange; (2) maintain its status as a REIT under the Internal
Revenue Code, and (3) retain direct or indirect management and control of the
Borrower.

         9.10. OWNERSHIP OF PROJECTS, JOINT VENTURES AND PROPERTY. The ownership
of substantially all wholly owned Projects, Joint Ventures and other Property of
the Consolidated Businesses shall be held by the Borrower and its Subsidiaries
and shall not be held directly by the Company.

         9.11. [INTENTIONALLY OMITTED.]

         9.12. ADDITIONAL GUARANTORS; SOLVENCY OF GUARANTORS.

                                      -57-


              (a) If, after the Closing Date, a Subsidiary of the Borrower that
is not a Guarantor acquires any Real Property that then or thereafter qualifies
under the definition of Unencumbered Project or Unencumbered New York City Asset
or any other Unencumbered asset and such Property or asset is directly or
indirectly wholly-owned or ground leased by the Borrower, the Borrower shall
cause such Person (which Person must be or become a wholly-owned Subsidiary of
the Borrower) to execute and deliver a Guaranty to the Administrative Agent and
the Lenders in substantially the form of EXHIBIT H hereto. Such Guaranty shall
evidence consideration and equivalent value.

              (b) The Borrower, the Company, and each other Guarantor are
Solvent. The Borrower and the Company each acknowledge that, subject to the
indefeasible payment and performance in full of the Obligations, the rights of
contribution among each of them and the other Guarantors are in accordance with
applicable laws and in accordance with each such Person's benefits under the
Loans and this Agreement. The Borrower further acknowledges that, subject to the
indefeasible payment and performance in full of the Obligations, the rights of
subrogation of the Guarantors as against the Borrower and the Company are in
accordance with applicable laws.

              (c) Other than during the continuance of a Potential Event of
Default or Event of Default, at the request of the Borrower following the
delivery of the certificate of an Authorized Officer in accordance with Section
8.9 hereof, the Guaranty of any Guarantor shall be released by the
Administrative Agent if and when all of the Real Property owned or ground-leased
by such Guarantor shall cease (not thereby creating a Potential Event of Default
or Event of Default) to be an Unencumbered Project or Unencumbered New York City
Asset which is wholly-owned by a Consolidated Business, provided the foregoing
shall never permit the release of the Company.

         9.13. FURTHER ASSURANCES. The Borrower will, and will cause each
Guarantor to, cooperate with, and to cause each of its Subsidiaries to cooperate
with, the Administrative Agent and the Lenders and execute such further
instruments and documents as the Lenders or the Administrative Agent shall
reasonably request to carry out to their reasonable satisfaction the
transactions contemplated by this Agreement and the other Loan Documents.

         9.14. DISTRIBUTIONS IN THE ORDINARY COURSE. In the ordinary course of
business the Borrower causes all of its Subsidiaries to make net transfers of
cash and cash equivalents upstream to the Borrower and the Company, and shall
continue to follow such ordinary course of business. The Borrower shall not make
net transfers of cash and cash equivalents downstream to its Subsidiaries except
in the ordinary course of business consistent with past practice.

                                   ARTICLE X.
                               NEGATIVE COVENANTS

         Borrower covenants and agrees that it shall comply with the following
covenants so long as any Term Loan Commitments are outstanding and thereafter
until payment in full of all of the Obligations (other than indemnities pursuant
to Section 14.3 not yet due), unless the Requisite Lenders shall otherwise give
prior written consent:

         10.1. INTENTIONALLY OMITTED.

                                      -58-


         10.2. LIENS. Neither the Borrower nor any of its Subsidiaries shall
directly or indirectly create, incur, assume or permit to exist any Lien (i)
that is not permitted under the Existing Revolving Credit Agreement or (ii) if
the Existing Revolving Credit Agreement is no longer in effect, on or with
respect to any Property, except:

              (a) Liens with respect to Capital Leases of Equipment entered into
in the ordinary course of business of the Borrower or its Subsidiaries pursuant
to which the aggregate Indebtedness under such Capital Leases does not exceed
$1,000,000 for any Project;

              (b) Existing Permitted Liens;

              (c) Liens securing permitted Secured Indebtedness; provided that
the incurrence of such Liens shall be subject to compliance with Section 4.1(c)
and Section 8.9 hereof; and

              (d) Customary Permitted Liens.

         10.3. INTENTIONALLY OMITTED.

         10.4. CONDUCT OF BUSINESS. Neither the Borrower nor any of its
Subsidiaries shall engage in any business, enterprise or activity other than (a)
the businesses of acquiring, developing, re-developing, financing, leasing and
managing predominantly office and industrial Projects and portfolios of like
Projects, (b) any business or activities which are substantially similar,
related or incidental thereto, (c) investments in and loans to Investment Funds,
FrontLine Capital Group, Subsidiaries, Affiliates and Joint Ventures and
unaffiliated entities (to the extent permitted hereunder) and (d) other
activities referred to in Section 2.2 hereof.

         10.5. TRANSACTIONS WITH PARTNERS AND AFFILIATES. Neither the Borrower
nor any of its Subsidiaries shall directly or indirectly enter into or permit to
exist any transaction (including, without limitation, the purchase, sale, lease
or exchange of any property or the rendering of any service) with any holder or
holders of more than five percent (5%) of any class of equity Securities of the
Borrower, or with any Affiliate of the Borrower which is not its Subsidiary or
the Company, unless such transaction is determined by the Board of Directors of
the Company to be no less favorable to the Borrower or any of its Subsidiaries,
as applicable, than those that might be obtained in an arm's length transaction
at the time from Persons who are not such a holder or Affiliate (other than
transactions referred to in Section 2.2). Nothing contained in this Section 10.5
shall prohibit (a) increases in compensation and benefits for officers and
employees of the Company, the Borrower or any of its Subsidiaries; (b) payment
of officers', managers', trustees', directors', partners' and other similar
indemnities; (c) performance of any obligations arising under the Loan
Documents; or (d) loans to Persons in connection with such Person's contribution
of Real Property to the Consolidated Businesses or Joint Ventures.

         10.6. RESTRICTION ON FUNDAMENTAL CHANGES. The Borrower shall not, and
shall not permit any of the Guarantors to, enter into any merger, consolidation
or amalgamation, or liquidate, wind-up or dissolve (or suffer any liquidation or
dissolution), or convey, lease, sell, transfer or otherwise dispose of, in one
transaction or series of transactions, all or substantially all of the
Borrower's or such Guarantor's business or Property, whether now or hereafter
acquired, except in connection with issuance, transfer, conversion or repurchase
of limited partnership interests in the Borrower. Notwithstanding the foregoing,
(a) the Borrower or a Guarantor shall be permitted to merge, consolidate or
amalgamate with another Person so long as the Borrower or such Guarantor, as the
case may be, is the surviving Person following such merger, consolidation or
amalgamation, (b) a Guarantor (other than the Company) shall be permitted to
merge, consolidate or amalgamate with or into the Borrower or another Guarantor,
and (c) so long as no Potential Event of Default or Event of Default has
occurred and is continuing and following the delivery by the Borrower to the
Administrative Agent of a certificate of an Authorized Officer certifying that
Borrower is in compliance with this Agreement and the other Loan Documents on a
pro forma basis, exclusive of the properties owned by a Guarantor, such
Guarantor (other than the Company) shall be permitted to merge, consolidate or
amalgamate with or into another Person.

                                      -59-


         10.7. MARGIN REGULATIONS; SECURITIES LAWS. Neither the Borrower nor any
of its Subsidiaries shall use all or any portion of the proceeds of any credit
extended under this Agreement to purchase or carry Margin Stock.

         10.8. ERISA. The Borrower shall not and shall not permit any of its
Subsidiaries or ERISA Affiliates to:

              (a) engage in any prohibited transaction described in Sections 406
of ERISA or 4975 of the Internal Revenue Code for which a statutory or class
exemption is not available or a private exemption has not been previously
obtained from the DOL, except to the extent engaging in such transaction would
not have a Material Adverse Effect;

              (b) permit to exist any accumulated funding deficiency (as defined
in Sections 302 of ERISA and 412 of the Internal Revenue Code), with respect to
any Benefit Plan, whether or not waived;

              (c) fail to pay timely required contributions or annual
installments due with respect to any waived funding deficiency to any Benefit
Plan;

              (d) terminate any Benefit Plan which would result in any liability
of Borrower or any ERISA Affiliate under Title IV of ERISA;

              (e) fail to make any contribution or payment to any Multiemployer
Plan which Borrower or any ERISA Affiliate may be required to make under any
agreement relating to such Multiemployer Plan, or any law pertaining thereto,
except to the extent such failure would not have a Material Adverse Effect;

              (f) fail to pay any required installment or any other payment
required under Section 412 of the Internal Revenue Code on or before the due
date for such installment or other payment; or

              (g) amend a Benefit Plan resulting in an increase in current
liability for the plan year such that the Borrower or any ERISA Affiliate is
required to provide security to such Plan under Section 401(a)(29) of the
Internal Revenue Code.

         10.9. ORGANIZATIONAL DOCUMENTS. Neither the Company nor the Borrower
shall, and the Borrower shall not permit any Guarantor to, amend, modify or
otherwise change any of the terms or provisions in any of their respective
Organizational Documents as in effect on the Closing Date, except amendments to
effect (a) a change of name of the Borrower or such Guarantor, provided that the
Borrower shall have provided the Administrative Agent with thirty (30) days
prior written notice of any such name change, or (b) changes that would not
affect such Organizational Documents in any material manner not otherwise
prohibited under this Agreement.

                                      -60-


         10.10. FISCAL YEAR. Neither the Company, the Borrower nor any of their
Subsidiaries shall change its Fiscal Year for accounting or tax purposes from a
period consisting of the 12-month period ending on December 31 of each calendar
year.

         10.11. FINANCIAL COVENANTS.

              (a) Indebtedness. Neither the Borrower nor any of its Subsidiaries
shall directly or indirectly create, incur, assume or otherwise become or remain
directly or indirectly liable with respect to ("INCUR") any Indebtedness,
except:

                  (i) Total Outstanding Indebtedness which would not exceed
         sixty percent (60%) of Total Value as of the date of incurrence;
         provided that if the Borrower or its Subsidiaries shall have Incurred
         any Indebtedness in connection with the acquisition of any material
         Real Property during the previous 120 days, the Borrower or its
         Subsidiaries may Incur Indebtedness (the "INCURRENCE") that would cause
         Total Outstanding Indebtedness to exceed sixty percent (60%) of Total
         Value so long as (x) Total Outstanding Indebtedness does not exceed
         sixty-five percent (65%) of Total Value and (y) Total Outstanding
         Indebtedness is reduced to sixty percent (60%) or less of Total Value
         within 240 days after the date of the Incurrence (with such reduction
         to be certified in writing to the Administrative Agent by the
         Borrower);

                  (ii) Total Secured Outstanding Indebtedness which would not
         exceed forty percent (40%) of Total Value as of the date of incurrence,
         or

                  (iii) Total Recourse Secured Outstanding Indebtedness which
         would not exceed ten percent (10%) of Total Value as of the date of
         incurrence..

              (b) Minimum Combined Equity Value. The Combined Equity Value shall
at no time be less than $1,250,000,000, plus an amount equal to seventy percent
(70%) of all Net Offering Proceeds received by the Company after June 20, 2005.

              (c) Intentionally Omitted.

              (d) Minimum Unsecured Interest Coverage Ratio. As of the first day
of each calendar quarter for the immediately preceding calendar quarter, the
ratio of (i) Adjusted Unencumbered NOI to (ii) Unsecured Interest Expense shall
not be less than 2.0 to 1.0.

              (e) Limitation on Total Unsecured Outstanding Indebtedness. As of
the first day of each calendar quarter for the immediately preceding calendar
quarter, the ratio of (i) Total Unsecured Outstanding Indebtedness to (ii) Total
Unencumbered Value (including Eligible Cash 1031 Proceeds, to the extent not
already included) shall not exceed 0.60 to 1.0.

                                      -61-


              (f) Minimum Total Interest Coverage Ratio. As of the first day of
each calendar quarter for the immediately preceding calendar quarter, the ratio
of (i) Total Adjusted EBITDA to (ii) Total Interest Expense shall not be less
than 2.0 to 1.0.

              (g) Minimum Fixed Charge Coverage Ratio. As of the first day of
each calendar quarter for the immediately preceding calendar quarter, the ratio
of (i) Total Adjusted EBITDA to (ii) Fixed Charges shall not be less than 1.60
to 1.0.

              (h) Maximum Dividend Payout Ratio. The Borrower shall not make any
Restricted Payment during any of its fiscal quarters, which, when added to all
Restricted Payments made during the three immediately preceding fiscal quarters,
exceeds the greater of (i) 90% of FFO of the Borrower, and (ii) the amounts
required to maintain the Company's status as a REIT under the Internal Revenue
Code, and, provided an Event of Default shall not have occurred and be
continuing, to avoid federal income and excise tax liability. For purposes of
this provision, "RESTRICTED PAYMENT" means any cash dividend or other cash
distribution on any interest in the Borrower's common operating partnership
units or on any of the Borrower's common partnership interests or other common
equity interests (except dividends or distributions payable solely in interests
in operating partnership units, partnership interests, or other equity interests
or in rights to subscribe for or purchase interests in its operating partnership
units, partnership interests, or other equity interests and except dividends or
distributions which are necessary to pay dividends or distributions on preferred
stock or other preferred equity interests of the Company).

              (i) Development Activities. As of the first day of each calendar
quarter for the immediately preceding calendar quarter, the ratio of (i)
Budgeted Construction Cost to (ii) Total Value shall not exceed 0.20 to 1.0.

              (j) Negative Pledge. From and after the date hereof, neither the
Borrower nor the Company will, and will not permit any of their respective
Subsidiaries, to enter into any agreement containing any provision prohibiting
the creation or assumption of any Lien upon its properties, revenues or assets
(other than with respect to (i) prohibitions on subordinate liens or
prohibitions on pledges of direct or indirect ownership interests (other than
pledges of direct ownership interests in the Borrower or any Subsidiary that
owns an Unencumbered Project or Unencumbered New York City Asset) set forth in a
mortgage on a particular property, (ii) customary restrictions contained in the
Organizational Documents of a Joint Venture, or (iii) restrictions contained in
the Organizational Documents of the Borrower on the ability of its general
partner and limited partner to pledge and transfer partnership interests in the
Borrower), whether now owned or hereafter acquired, or restricting the ability
of the Borrower to amend or modify this Agreement or any other Loan Document.

         10.12. NEGATIVE COVENANTS WITH RESPECT TO THE COMPANY.

              (a) From and after the date hereof, the Company will not acquire
any assets of any nature whatsoever other than additional units in the Borrower,
Cash or Cash Equivalents in the ordinary course of business or in connection
with the payment of dividends.

              (b) From and after the date hereof, the Company will not incur any
Indebtedness or any other obligations or liabilities except (i) as imposed by
operation of law on the Company in its capacity as the general partner of the
Borrower, (ii) Indebtedness, the net proceeds of which are contributed to the
Borrower simultaneously with the incurrence thereof by the Company, (iii)
guarantees of Indebtedness which are recourse to the Borrower, (iv) in
connection with the payment of a declared dividend and (v) otherwise as imposed
by law.

                                      -62-


              (c) From and after the date hereof, the Company will not retain
any Net Offering Proceeds, and the same will be contributed by the Company to
the Borrower simultaneously with receipt thereof by the Company.

              (d) The Company shall not enter into any merger or consolidation,
or liquidate, wind-up or dissolve (or suffer any liquidation or dissolution), or
convey, lease, sell, transfer or otherwise dispose of, in one transaction or
series of transactions, any of its business or assets, including its interests
in the Borrower. Notwithstanding the foregoing, the Company shall be permitted
to merge with another Person so long as the Company is the surviving Person
following such merger.

                                  ARTICLE XI.
                     EVENTS OF DEFAULT; RIGHTS AND REMEDIES

         11.1. EVENTS OF DEFAULT. Each of the following occurrences shall
constitute an Event of Default under this Agreement:

              (a) Failure to Make Payments When Due. The Borrower shall fail to
pay (i) when due any principal payment on the Obligations which is due on the
Term Loan Maturity Date or pursuant to the terms of Section 2.1(a), Section 2.4,
Section 4.1(a), or Section 4.1(c) or (ii) when due, any interest payment on the
obligations, provided, however, that the Borrower shall be entitled to a five
(5) day grace period with respect to any interest payment but not more than one
time in any twelve (12) month period during the term hereof, or (iii) when due,
any principal payment on the Obligations not referenced in clauses (i) or (ii)
hereinabove or (iv) when due, any fees due pursuant to the terms of Section 5.3
and such default shall continue for five (5) days.

              (b) Breach of Certain Covenants. The Borrower shall fail duly and
punctually to perform or observe any agreement, covenant or obligation binding
on such Person under Sections 2.3(c), 9.1, 9.4, 9.5, 9.10, or Article X.

              (c) Breach of Representation or Warranty. Any representation or
warranty made or deemed made by the Borrower or any of the parties to the
Guaranties to the Administrative Agent, the Arranger or any Lender herein or by
the Borrower or any of the parties to the Guaranties or any of their
Subsidiaries in any of the other Loan Documents or in any statement or
certificate at any time given by any such Person pursuant to any of the Loan
Documents shall be false or misleading in any material respect on the date as of
which made or deemed made or given.

              (d) Other Defaults. The Borrower shall default in the performance
of or compliance with any terms contained in this Agreement (other than as
identified in paragraphs (a), (b) or (c) of this Section 11.1), or any default
or event of default shall occur under any of the other Loan Documents, and such
default or event of default shall continue for thirty (30) days after receipt of
written notice from the Administrative Agent thereof.

              (e) Acceleration of Other Indebtedness. Any breach, default or
event of default shall occur and be continuing, or any other condition shall
exist under any instrument, agreement or indenture pertaining to any recourse
Indebtedness (other than the Obligations) of the Company, the Borrower or their
Subsidiaries aggregating more than $10,000,000, and the effect thereof is to
cause an acceleration, mandatory redemption or other required repurchase of such
Indebtedness, or permit the holder(s) of such Indebtedness to accelerate the
maturity of any such Indebtedness or require a redemption or other repurchase of
such Indebtedness; or any such Indebtedness shall be otherwise declared to be
due and payable (by acceleration or otherwise) or required to be prepaid,
redeemed or otherwise repurchased by the Borrower or any of its Subsidiaries
(other than by a regularly scheduled required prepayment) prior to the stated
maturity thereof; or any such Indebtedness shall not be repaid at maturity
(after taking into account grace and cure periods).

                                      -63-


              (f) Involuntary Bankruptcy; Appointment of Receiver, Etc.

                  (i) An involuntary case shall be commenced against the
         Company, the Borrower or any of its Subsidiaries to which $25,000,000
         or more of the Combined Equity Value is attributable, and the petition
         shall not be dismissed, stayed, bonded or discharged within sixty (60)
         days after commencement of the case; or a court having jurisdiction in
         the premises shall enter a decree or order for relief in respect of the
         Company, the Borrower or any such Subsidiaries of the Borrower in an
         involuntary case, under any applicable bankruptcy, insolvency or other
         similar law now or hereafter in effect; or any other similar relief
         shall be granted under any applicable federal, state, local or foreign
         law; or the respective board of directors of the Company, or General
         Partner or Limited Partners of the Borrower or the board of directors
         or partners of any such Subsidiaries of the Borrower (or any committee
         thereof) adopts any resolution or otherwise authorizes any action to
         approve any of the foregoing.

                  (ii) A decree or order of a court having jurisdiction in the
         premises for the appointment of a receiver, liquidator, sequestrator,
         trustee, custodian or other officer having similar powers over the
         Company, the Borrower or any of their Subsidiaries to which $25,000,000
         or more of the Combined Equity Value is attributable, or over all or a
         substantial part of the Property of the Company, the Borrower or any of
         such Subsidiaries, shall be entered; or an interim receiver, trustee or
         other custodian of the Company, the Borrower or any of such
         Subsidiaries or of all or a substantial part of the Property of the
         Company, the Borrower or any of such Subsidiaries shall be appointed or
         a warrant of attachment, execution or similar process against any
         substantial part of the Property of any of the Company, the Borrower,
         or any of such Subsidiaries shall be issued and any such event shall
         not be stayed, dismissed, bonded or discharged within sixty (60) days
         after entry, appointment or issuance; or the respective board of
         directors of any of the Company or General Partners or Limited Partners
         of the Borrower or the board of directors or partners of any of
         Borrower's Subsidiaries (or any committee thereof) adopts any
         resolution or otherwise authorizes any action to approve any of the
         foregoing.

              (g) Voluntary Bankruptcy; Appointment of Receiver. Etc. The
Company, the Borrower or any of their Subsidiaries to which $25,000,000 or more
of the Combined Equity Value is attributable, shall commence a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or shall consent to the entry of an order for relief in an
involuntary case, or to the conversion of an involuntary case to a voluntary
case, under any such law, or shall consent to the appointment of or taking
possession by a receiver, trustee or other custodian for all or a substantial
part of its Property; or the Company, the Borrower or any of such Subsidiaries
shall make any assignment for the benefit of creditors or shall be unable or
fail, or admit in writing its inability, to pay its debts as such debts become
due.

                                      -64-


              (h) Judgments and Unpermitted Liens.

                  (i) Any money judgment (other than a money judgment covered by
         insurance as to which the insurance company has acknowledged coverage),
         writ or warrant of attachment, or similar process against the Borrower
         or any of its Subsidiaries or any of their respective assets involving
         in any case an amount in excess of $5,000,000 (other than with respect
         to Claims arising out of non-recourse Indebtedness) is entered and
         shall remain undischarged, unvacated, unbonded or unstayed for a period
         of sixty (60) days or in any event later than five (5) days prior to
         the date of any proposed sale thereunder.

                  (ii) A federal, state, local or foreign tax Lien is filed
         against the Borrower which is not discharged of record, bonded over or
         otherwise secured to the satisfaction of the Administrative Agent
         within sixty (60) days after the filing thereof or the date upon which
         the Administrative Agent receives actual knowledge of the filing
         thereof for an amount which, either separately or when aggregated with
         the amount of any judgments described in clause (i) above, equals or
         exceeds $5,000,000.

                  (iii) An Environmental Lien is filed against any Project with
         respect to Claims in an amount which, either separately or when
         aggregated with the amount of all other such Environmental Liens,
         equals or exceeds $5,000,000.

              (i) Dissolution. Any order, judgment or decree shall be entered
against the Borrower or any Guarantor decreeing its involuntary dissolution or
split up; or the Borrower or any Guarantor shall otherwise dissolve or cease to
exist except as specifically permitted by this Agreement.

              (j) Loan Documents. At any time, for any reason, any Loan Document
ceases to be in full force and effect or the Borrower or any Guarantor seeks to
repudiate its obligations thereunder.

              (k) ERISA Termination Event. Any ERISA Termination Event occurs
which the Administrative Agent believes could subject any of the Borrower or any
ERISA Affiliate to liability in excess of $500,000.

              (l) Waiver Application. The plan administrator of any Benefit Plan
applies under Section 412 (d) of the Internal Revenue Code for a waiver of the
minimum funding standards of Section 412 (a) of the Internal Revenue Code and
the Administrative Agent believes that the substantial business hardship upon
which the application for the waiver is based could subject either the Borrower
or any ERISA Affiliate to liability in excess of $500,000.

              (m) Material Adverse Effect. An event shall occur which has a
Material Adverse Effect.

              (n) Certain Defaults Pertaining to the Company. The Company shall
fail to comply with Section 9.9, or any representation or warranty contained in
Section 7.1(a)(ii), (b), (d), (l), or (o) shall be false or misleading in any
material respect on the date as of which made.

                                      -65-


              (o) Merger or Liquidation of the Company, the Borrower. The
Company shall merge or liquidate with or into any other Person and, as a result
thereof and after giving effect thereto, (i) the Company is not the surviving
Person or (ii) such merger or liquidation would effect an acquisition of or
Investment in any Person which is prohibited or results in a Potential Event of
Default or an Event of Default under the terms of this Agreement. The Borrower
shall merge or liquidate with or into any other Person and, as a result thereof
and after giving effect thereto, (i) the Borrower is not the surviving Person or
(ii) such merger or liquidation would effect an acquisition of or Investment in
any Person which is prohibited or results in a Potential Event of Default or an
Event of Default under the terms of this Agreement.

              (p) Existing Revolving Credit Agreement. An "Event of Default"
shall occur under the Existing Revolving Credit Agreement.

An Event of Default shall be deemed "continuing" until cured or waived in
writing in accordance with Section 14.7.

         11.2. RIGHTS AND REMEDIES.

              (a) Acceleration and Termination. Upon the occurrence of any Event
of Default described in Sections 11.1(f) or 11.1(g), the Term Loan Commitments
shall automatically and immediately terminate and the unpaid principal amount
of, and any and all accrued interest on, the Obligations and all accrued fees
and other Obligations shall automatically become immediately due and payable,
without presentment, demand, or protest or other requirements of any kind
(including, without limitation, valuation and appraisement, diligence,
presentment, notice of intent to demand or accelerate and of acceleration), all
of which are hereby expressly waived by the Borrower, and, upon the occurrence
and during the continuance of any other Event of Default, the Administrative
Agent shall at the request, or may with the consent, of the Lenders whose Pro
Rata Shares, in the aggregate, are greater than fifty-one percent (51%), by
written notice to the Borrower, (i) declare that the Term Loan Commitments are
terminated, whereupon the Term Loan Commitments and the obligation of each
Lender to convert or continue any Loan hereunder shall immediately terminate,
and/or (ii) declare the unpaid principal amount of and any and all accrued and
unpaid interest on the Obligations and all other Obligations to be, and the same
shall thereupon be, immediately due and payable, without presentment, demand, or
protest or other requirements of any kind (including, without limitation,
valuation and appraisement, diligence, presentment, notice of intent to demand
or accelerate and of acceleration), all of which are hereby expressly waived by
the Borrower.

              (b) Rescission. If within ninety (90) days after termination of
the Term Loan Commitments and/or acceleration of the maturity of the Loans, the
Borrower shall pay all arrears of interest and all payments on account of
principal of the Loans which shall have become due otherwise than by
acceleration (with interest on principal and, to the extent permitted by law, on
overdue interest, at the rates specified in this Agreement) and all Events of
Default and Potential Events of Default (other than nonpayment of principal of
and accrued interest on the Loans due and payable solely by virtue of
acceleration) shall be remedied or waived pursuant to Section 14.7, then upon
the written consent of the Requisite Lenders and written notice to the Borrower,
the termination of the Term Loan Commitments and/or the acceleration and their
consequences may be rescinded and annulled; but such action shall not affect any
subsequent Event of Default or Potential Event of Default or impair any right or
remedy consequent thereon. The provisions of the preceding sentence are intended
merely to bind the Lenders to a decision which may be made at the election of
the Requisite Lenders; they are not intended to benefit the Borrower and do not
give the Borrower the right to require the Lenders to rescind or annul any
acceleration hereunder, even if the conditions set forth herein are met.

                                      -66-


              (c) Enforcement. The Borrower acknowledges that in the event the
Borrower, the Guarantors or any of their Subsidiaries fails to perform, observe
or discharge any of their respective obligations or liabilities under this
Agreement or any other Loan Document, any remedy of law may prove to be
inadequate relief to the Administrative Agent, the Arranger and the Lenders;
therefore, the Borrower agrees that the Administrative Agent, the Arranger and
the Lenders shall be entitled to temporary and permanent injunctive relief in
any such case without the necessity of proving actual damages.

                                  ARTICLE XII.
                                   THE AGENTS

         12.1. APPOINTMENT. (a) Each Lender hereby designates and appoints GSMC
as the Administrative Agent, and the Arranger as the arrangers of such Lender
under this Agreement, and each Lender hereby irrevocably authorizes the
Administrative Agent, and the Arranger to take such actions on its behalf under
the provisions of this Agreement and the other Loan Documents and to exercise
such powers in each case only as are set forth herein or therein together with
such other powers as are reasonably incidental thereto. The Administrative Agent
and the Arranger each agrees to act as such on the express conditions contained
in this Article XII.

              (b) The provisions of this Article XII are solely for the benefit
of the Administrative Agent, the Arranger and the Lenders, and neither the
Borrower, the Company nor any Subsidiary of the Borrower shall have any rights
to rely on or enforce any of the provisions hereof (other than as expressly set
forth in Section 12.7). In performing its respective functions and duties under
this Agreement, the Administrative Agent and the Arranger shall act solely as
agents of the Lenders and do not assume and shall not be deemed to have assumed
any obligation or relationship of agency, trustee or fiduciary with or for the
Company, the Borrower or any Subsidiary of the Borrower. The Administrative
Agent and the Arranger may perform any of their respective duties hereunder, or
under the other Loan Documents, by or through their respective agents or
employees.

         12.2. NATURE OF DUTIES. The Administrative Agent and the Arranger shall
not have any duties or responsibilities except those expressly set forth in this
Agreement or in the other Loan Documents. The duties of the Administrative Agent
and the Arranger shall be mechanical and administrative in nature. Neither the
Administrative Agent nor the Arranger shall have by reason of this Agreement a
fiduciary relationship in respect of any Lender. Nothing in this Agreement or
any of the other Loan Documents, expressed or implied, is intended to or shall
be construed to impose upon the Administrative Agent or the Arranger any
obligations in respect of this Agreement or any of the other Loan Documents
except as expressly set forth herein or therein. The Administrative Agent and
the Arranger each hereby agrees that its duties shall include providing copies
of documents received by such Agent from the Borrower which are reasonably
requested by any Lender, furnishing copies of documents to each Lender, upon
request, of documents sent by such Agent to the Borrower and promptly notifying
each Lender upon its obtaining actual knowledge of the occurrence of any Event
of Default hereunder. In addition, the Administrative Agent shall deliver to
each Lender, promptly after receipt thereof, copies of those documents and
reports received by it pursuant to Sections 8.2, 8.3, 8.4, 8.7 and 8.12.

                                      -67-


         12.3. RIGHT TO REQUEST INSTRUCTIONS. The Administrative Agent and the
Arranger may at any time request instructions from the Lenders with respect to
any actions or approvals which by the terms of any of the Loan Documents such
Agent is permitted or required to take or to grant, and such Agent shall be
absolutely entitled to refrain from taking any action or to withhold any
approval and shall not be under any liability whatsoever to any Person for
refraining from any action or withholding any approval under any of the Loan
Documents until it shall have received such instructions from those Lenders from
whom such Agent is required to obtain such instructions for the pertinent matter
in accordance with the Loan Documents. Without limiting the generality of the
foregoing, such Agent shall take any action, or refrain from taking any action,
which is permitted by the terms of the Loan Documents upon receipt of
instructions from those Lenders from whom such Agent is required to obtain such
instructions for the pertinent matter in accordance with the Loan Documents,
provided, that no Lender shall have any right of action whatsoever against the
Administrative Agent or the Arranger as a result of such Agent acting or
refraining from acting under the Loan Documents in accordance with the
instructions of the Requisite Lenders or, where required by the express terms of
this Agreement, a greater proportion of the Lenders.

         12.4. RELIANCE. The Administrative Agent and the Arranger shall each be
entitled to rely upon any written notices, statements, certificates, orders or
other documents believed by it in good faith to be genuine and correct and to
have been signed, sent or made by the proper Person, and with respect to all
matters pertaining to this Agreement or any of the other Loan Documents and its
duties hereunder or thereunder, upon advice of legal counsel (including counsel
for the Borrower), independent public accountants and other experts selected by
it.

         12.5. INDEMNIFICATION. To the extent that the Administrative Agent or
the Arranger is not reimbursed and indemnified by the Borrower, the Lenders will
reimburse and indemnify such Agent for and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, and
reasonable costs, expenses or disbursements of any kind or nature whatsoever
which may be imposed on, incurred by, or asserted against it in any way relating
to or arising out of the Loan Documents or any action taken or omitted by such
Agent under the Loan Documents, in proportion to each Lender's Pro Rata Share.
Notwithstanding anything to the contrary contained herein, neither the
Administrative Agent nor the Arranger shall be indemnified to the extent such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs and expenses result from such Person's gross negligence, willful
misconduct or breach of this Article XII. Such Agent agrees to refund to the
Lenders any of the foregoing amounts paid to it by the Lenders which amounts are
subsequently recovered by such Agent from the Borrower or any other Person on
behalf of the Borrower. The obligations of the Lenders under this Section 12.5
shall survive the payment in full of the Loans and all other Obligations and the
termination of this Agreement.

         12.6. AGENTS INDIVIDUALLY. With respect to their respective Pro Rata
Share of the Term Loan Commitments hereunder, if any, and the Loans made by
them, if any, the Persons serving as the Administrative Agent and the Arranger
shall have and may exercise the same rights and powers hereunder and are subject
to the same obligations and liabilities as and to the extent set forth herein
for any Lender. The terms "LENDERS" or "REQUISITE LENDERS" or any similar terms
shall, unless the context clearly otherwise indicates or such Lender has
assigned its interest hereunder, include GSMC in its individual capacity as a
Lender or as one of the Requisite Lenders. GSMC and each of its Affiliates may
accept deposits from, lend money to, and generally engage in any kind of
banking, trust or other business with the Borrower or any of its Subsidiaries as
if GSMC were not acting as an Agent or Arranger pursuant hereto.

                                      -68-


         12.7. SUCCESSOR AGENTS.

              (a) Resignation. Any Agent may resign from the performance of all
its functions and duties hereunder at any time by giving at least thirty (30)
Business Days' prior written notice to the Borrower and the Lenders, unless
applicable law requires a shorter notice period or that there be no notice
period, in which instance such applicable law shall control. Such resignation
shall take effect upon the acceptance by a successor Agent of appointment
pursuant to this Section 12.7.

              (b) Appointment by Requisite Lenders. Upon any such resignation
becoming effective, the Requisite Lenders shall have the right to appoint a
successor Administrative Agent selected from among the Lenders with the prior
written consent of the Borrower (so long as no Event of Default then exists),
which consent shall not be unreasonably withheld.

              (c) Appointment by Retiring Agent. If a successor Administrative
Agent shall not have been appointed within the thirty (30) Business Day or
shorter period provided in paragraph (a) of this Section 12.7, the retiring
Agent shall then appoint a successor Agent who shall serve as Administrative
Agent until such time, if any, as the Requisite Lenders appoint a successor
Agent as provided above with the prior written consent of the Borrower (so long
as no Event of Default then exists) which shall not be unreasonably withheld,
provided, however, that such successor Administrative Agent shall have total
assets of not less than $10,000,000,000.

              (d) Rights of the Successor and Retiring Agents. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Agent, such successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Article XII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was the Agent under this Agreement.

         12.8. RELATIONS AMONG THE LENDERS. Each Lender agrees that it will not
take any legal action, or institute any actions or proceedings, against the
Borrower or any other obligor hereunder with respect to any of the Obligations,
without the prior written consent of the Lenders. Without limiting the
generality of the foregoing, no Lender may accelerate or otherwise enforce its
portion of the obligations, or unilaterally terminate its Term Loan Commitment
except in accordance with Section 11.2(a).

         12.9. STANDARD OF CARE. The Administrative Agent and the Arranger shall
administer the Loans in the same manner that such Agent administers loans made
for its own account.

                                 ARTICLE XIII.
                                YIELD PROTECTION

         13.1. TAXES.

              (a) Payment of Taxes. Any and all payments by the Borrower
hereunder or under the Notes or other documents evidencing any Obligations of
such Person shall be made, in accordance with Section 4.2, free and clear of and
without reduction for any and all present or future taxes, levies, imposts,
deductions, charges, withholdings, and all stamp or documentary taxes, excise
taxes, ad valorem taxes and other taxes which arise from the execution, delivery
or registration, or from payment or performance under, or otherwise with respect
to, any of the Loan Documents or the Term Loan Obligations and all other
liabilities with respect thereto excluding, in the case of each Lender, taxes
imposed on or measured by net income or overall gross receipts and capital and
franchise taxes imposed on it by (i) the United States, (ii) the Governmental
Authority of the jurisdiction in which such Lender's Applicable Lending Office
is located or any political subdivision thereof or (iii) the Governmental
Authority in which such Person is organized, managed and controlled or any
political subdivision thereof (all such non-excluded taxes, levies, imposts,
deductions, charges and withholdings being hereinafter referred to as "TAXES").
Except as otherwise provided herein, if the Borrower shall be required by law to
withhold or deduct any Taxes from or in respect of any sum payable hereunder or
under any such Note or document to any Lender, (x) the sum payable to such
Lender shall be increased as may be necessary so that after making all required
withholding or deductions (including withholding or deductions applicable to
additional sums payable under this Section 13.1) such Lender receives an amount
equal to the sum it would have received had no such withholding or deductions
been made, (y) the Borrower shall make such withholding or deductions, and (z)
the Borrower shall pay the full amount withheld or deducted to the relevant
taxation authority or other authority in accordance with applicable law.

                                      -69-


              (b) Indemnification. Except as otherwise provided herein, the
Borrower will indemnify each Lender against, and reimburse each Lender within
ten (10) Business Days after written demand for, the full amount of all Taxes
(including, without limitation, any Taxes imposed by any Governmental Authority
on amounts payable under this Section 13.1 and any additional income or
franchise taxes resulting therefrom) incurred or paid by such Lender and any
liability (including penalties, interest, and out-of-pocket expenses paid to
third parties) arising therefrom or with respect thereto, whether or not such
Taxes were lawfully payable, to the extent not paid by the Borrower pursuant to
this Section 13.1. A certificate as to any additional amount payable to any
Person under this Section 13.1 submitted by it to the Borrower shall, absent
manifest error, be final, conclusive and binding upon all parties hereto. Each
Lender agrees, within a reasonable time after receiving a written request from
the Borrower, to provide the Borrower and the Administrative Agent with such
certificates and other documents as are reasonably required, and take such other
actions as are reasonably necessary to claim such exemptions as such Lender may
be entitled to claim in respect of all or a portion of any Taxes which are
otherwise required to be paid or deducted or withheld pursuant to this Section
13.1 in respect of any payments under this Agreement or under the other Loan
Documents. If any Lender receives any refund with respect to any Taxes, such
Lender shall promptly remit such refund to the Borrower.

              (c) Receipts. Within thirty (30) days after the date of any
payment of Taxes by the Borrower, the Borrower will furnish to the
Administrative Agent, at its address referred to in Section 14.8, the original
or a certified copy of a receipt evidencing payment thereof.

              (d) Foreign Bank Certifications. (i) Each Lender that is not
created or organized under the laws of the United States or a political
subdivision thereof shall deliver to each of the Borrower and the Administrative
Agent on the Closing Date or the date on which such Lender becomes a Lender
pursuant to Section 14.1 hereof a true and accurate certificate executed in
duplicate by a duly authorized officer of such Lender to the effect that such
Lender is eligible to receive payments hereunder and under the Notes without
deduction or withholding of United States federal income tax (I) under the
provisions of an applicable tax treaty concluded by the United States (in which
case the certificate shall be accompanied by two duly completed copies of IRS
Form W-8BEN (or any successor or substitute form or forms)) or (II) under
Sections 1441(c)(1) and 1442(a) of the Internal Revenue Code (in which case the
certificate shall be accompanied by two duly completed copies of IRS Form W-8ECI
(or any successor or substitute form or forms)).

                                      -70-


                  (ii) Each Lender referred to in Section 13.1(d)(i) further
agrees to deliver to each of the Borrower and the Administrative Agent from time
to time, a true and accurate certificate executed in duplicate by a duly
authorized officer of such Lender before or promptly upon the occurrence of any
event requiring a change in the most recent certificate previously delivered by
it to the Borrower and the Administrative Agent pursuant to this Section
13.1(d). Each certificate required to be delivered pursuant to this Section
13.1(d)(ii) shall certify as to one of the following:

                           (A) that such Lender can continue to receive payments
                  hereunder and under the Notes without deduction or withholding
                  of United States federal income tax;

                           (B) that such Lender cannot continue to receive
                  payments hereunder and under the Notes without deduction or
                  withholding of United States federal income tax as specified
                  therein but does not require additional payments pursuant to
                  Section 13.1(a) because it is entitled to recover the full
                  amount of any such deduction or withholding from a source
                  other than the Borrower; or

                           (C) that such Lender is no longer capable of
                  receiving payments hereunder and under the Notes without
                  deduction or withholding of United States federal income tax
                  as specified therein and that it is not capable of recovering
                  the full amount of the same from a source other than the
                  Borrower.

Each such Lender agrees to deliver to each of the Borrower and the
Administrative Agent further duly completed copies of the above-mentioned IRS
forms on or before the earlier of (x) the date that any such form expires or
becomes obsolete or otherwise is required to be resubmitted as a condition to
obtaining an exemption from withholding from United States federal income tax
and (y) fifteen (15) days after the occurrence of any event requiring a change
in the most recent form previously delivered by such Lender to the Borrower and
Administrative Agent, unless any change in treaty, law, regulation, or official
interpretation thereof which would render such form inapplicable or which would
prevent such Lender from duly completing and delivering such form has occurred
prior to the date on which any such delivery would otherwise be required and
such Lender promptly advises the Borrower that it is not capable of receiving
payments hereunder and under the Notes without any deduction or withholding of
United States federal income tax.

                  (iii) Notwithstanding anything to the contrary contained in
this Section 13.1, the Borrower will not be required to make any additional
payment to or for the account of any Lender under Section 13.1(a) or (b) by
reason of (x) a breach by such Lender of any certification or representation set
forth in any form furnished to the Borrower under this Section 13.1(d), or (y)
such Lender's failure or inability to furnish, if required to do so, under this
Section 13.1(d) an original or renewal of a Form W-8ECI or Form W-8BEN (or
successor form), as applicable, unless such failure or inability results from a
change (after the date such Lender became a Lender party hereto) in any
applicable law or regulation or in the interpretation thereof by any regulatory
authority (including without limitation any change in any applicable tax
treaty).

                                      -71-


         13.2. INCREASED CAPITAL. If after the date hereof any Lender determines
that (i) the adoption or implementation of or any change in or in the
interpretation or administration of any law or regulation or any guideline or
request from any central bank or other Governmental Authority or
quasi-governmental authority exercising jurisdiction, power or control over any
Lender or banks or financial institutions generally (whether or not having the
force of law), compliance with which affects the amount of capital required or
expected to be maintained by such Lender or any corporation controlling such
Lender and (ii) the amount of such capital is increased by or based upon the
making or maintenance by any Lender of its Loans, any Lender's participation in
or obligation to participate in the Loans or other advances made hereunder or
the existence of any Lender's obligation to make Loans then, in any such case,
within ten (10) Business Days after written demand by such Lender (with a copy
of such demand to the Administrative Agent), the Borrower shall immediately pay
to the Administrative Agent for the account of such Lender, from time to time as
specified by such Lender, additional amounts sufficient to compensate such
Lender or such corporation therefor. Such demand shall be accompanied by a
statement as to the amount of such compensation and include a brief summary of
the basis for such demand. Such statement shall be conclusive and binding for
all purposes, absent manifest error.

         13.3. CHANGES; LEGAL RESTRICTIONS. If after the date hereof any Lender
determines that the adoption or implementation of or any change in or in the
interpretation or administration of any law or regulation or any guideline or
request from any central bank or other Governmental Authority or
quasi-governmental authority exercising jurisdiction, power or control over any
Lender, or over banks or financial institutions generally (whether or not having
the force of law), compliance with which:

              (a) subjects a Lender (or its Applicable Lending Office or
Eurodollar Affiliate) to charges (other than taxes) of any kind which such
Lender reasonably determines to be applicable to the Term Loan Commitments of
the Lenders to make Eurodollar Rate Loans or change the basis of taxation of
payments to that Lender of principal, fees, interest, or any other amount
payable hereunder with respect to Eurodollar Rate Loans (other than taxes
covered by Section 13.1(a) hereof and taxes excluded in Section 13.1(a) hereof);
or

              (b) imposes, modifies, or holds applicable, in the determination
of a Lender, any reserve, special deposit, compulsory loan, FDIC insurance or
similar requirement against assets held by, or deposits or other liabilities in
or for the account of, advances or loans by, commitments made, or other credit
extended by, or any other acquisition of funds by, a Lender or any Applicable
Lending Office or Eurodollar Affiliate of that Lender in respect of Eurodollar
Loans;

and the result of any of the foregoing is to increase the cost to that Lender of
making, renewing or maintaining the Loans or its Term Loan Commitment; then, in
any such case, within ten (10) Business Days after written demand by such Lender
(with a copy of such demand to the Administrative Agent), the Borrower shall
immediately pay to the Administrative Agent for the account of such Lender, from
time to time as specified by such Lender, such amount or amounts as may be
necessary to compensate such Lender or its Eurodollar Affiliate for any such
additional cost incurred or reduced amount received. Such demand shall be
accompanied by a statement as to the amount of such compensation and include a
brief summary of the basis for such demand. Such statement shall be conclusive
and binding for all purposes, absent manifest error.

                                      -72-


         13.4. REPLACEMENT OF CERTAIN LENDERS. In the event a Lender (a
"DESIGNATED LENDER") shall have (i) requested additional compensation from the
Borrower under Section 13.1 or under Section 13.2 or under Section 13.3, (ii)
failed to make its Pro Rata Share of the Term Loan or (iii) failed to make any
Loan at the Eurodollar Rate, the Borrower may, at its sole election, make
written demand on such Designated Lender (with a copy to the Administrative
Agent) for the Designated Lender to assign, and such Designated Lender shall
assign pursuant to one or more duly executed Assignment and Acceptances to one
or more Eligible Assignees which the Borrower or the Administrative Agent shall
have identified for such purpose, all of such Designated Lender's right and
obligations under this Agreement, the Notes and the other Loan Documents
(including, without limitation, its Term Loan Commitment, all Loans owing to it
and all other Obligations owing to it) in accordance with Section 14.1. All
out-of-pocket expenses incurred by the Administrative Agent in connection with
the foregoing shall be for the sole account of the Borrower and shall constitute
Obligations hereunder. In no event shall Borrower's election under the
provisions of this Section 13.4 affect its obligation to pay the additional
compensation required under either Section 13.1, Section 13.2 or Section 13.3.

         13.5. MITIGATION. Each Lender shall notify the Borrower of any event
occurring after the date of this Agreement entitling such Lender to compensation
under Sections 13.1, 13.2 or 13.3 as promptly as practicable, but in any event,
within 45 days, after such Lender obtains actual knowledge thereof; provided
that (i) if any Lender fails to give such notice within 45 days after it obtains
actual knowledge of such an event, such Lender shall, with respect to
compensation payable pursuant to Sections 13.1, 13.2 or 13.3 in respect of any
costs resulting from such event, only be entitled to payment under Sections
13.1, 13.2 or 13.3 for costs incurred from and after the date 45 days prior to
the date that such Lender does give such notice and (ii) each Lender will
designate a different Applicable Lending Office for the Loans of such Lender
affected by such event if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the reasonable judgment of
such Lender, be disadvantageous to such Lender.

                                  ARTICLE XIV.
                                  MISCELLANEOUS

         14.1. ASSIGNMENTS AND PARTICIPATIONS.

              (a) Assignments. No assignments or participations of any Lender's
rights or obligations under this Agreement shall be made except in accordance
with this Section 14.1. Each Lender may assign to one or more Eligible Assignees
all or a portion of its rights and obligations under this Agreement (including
all of its rights and obligations with respect to the Loans) in accordance with
the provisions of this Section 14.1.

              (b) Limitations on Assignments. Each assignment shall be subject
to the following conditions: (i) each assignment shall be of a constant, and not
a varying, ratable percentage of all of the assigning Lender's rights and
obligations under this Agreement and, in the case of a partial assignment to an
assignee which is not a Lender or a Lender Affiliate, shall be in a minimum
principal amount of $5,000,000 (and the assignor shall maintain a minimum amount
of $5,000,000 for its own account unless the assignor shall assign or
participate its entire interest), (ii) each such assignment shall be to an
Eligible Assignee, (iii) (A) so long as no Event of Default has occurred and is
continuing, each assignment shall be subject to the approval of the
Administrative Agent (which approval shall not be unreasonably withheld);
provided that, no such consent of the Administrative Agent shall be required for
an assignment by any Lender to any of its Lender Affiliates, so long as such
Lender Affiliate is an Eligible Assignee, and (B) so long as no Event of Default
has occurred and is continuing, each assignment to an assignee which is not a
Lender, a Lender Affiliate or a Pre-Approved Lender shall be subject to the
approval of the Borrower (which approval shall not be unreasonably withheld and
shall be deemed to have been given if the Borrower fails to object to such
proposed assignment within five (5) Business Days of its receipt of a request
for approval), and (iv) the parties to each such assignment shall execute and
deliver to the Administrative Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance. Upon such execution, delivery,
acceptance and recording in the Register, from and after the effective date
specified in each Assignment and Acceptance and agreed to by the Administrative
Agent, (A) the assignee thereunder shall, in addition to any rights and
obligations hereunder held by it immediately prior to such effective date, if
any, have the rights and obligations hereunder that have been assigned to it
pursuant to such Assignment and Acceptance and shall, to the fullest extent
permitted by law, have the same rights and benefits hereunder as if it were an
original Lender hereunder, (B) the assigning Lender shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights (except as otherwise provided
in Section 14.9) and be released from its obligations under this Agreement (and,
in the case of an Assignment and Acceptance covering all or the remaining
portion of such assigning Lender's rights and obligations under this Agreement,
the assigning Lender shall cease to be a party hereto, except as otherwise
provided in Section 14.9) and (C) the Borrower shall execute and deliver to the
assignee thereunder a Note evidencing its obligations to such assignee with
respect to the Loans.

                                      -73-


              (c) The Register. The Administrative Agent shall maintain at its
address referred to in Section 14.8 a copy of each Assignment and Acceptance
delivered to and accepted by it and a register (the "REGISTER") for the
recordation of the names and addresses of the Lenders, the Term Loan Commitment
of, and the principal amount of the Loans owing to, each Lender from time to
time and whether such Lender is an original Lender or the assignee of another
Lender pursuant to an Assignment and Acceptance. The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Administrative Agent and the other Lenders and each other party to
a Loan Document may treat each Person whose name is recorded in the Register as
a Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice.

              (d) Fee. Upon its receipt of an Assignment and Acceptance executed
by the assigning Lender and an Assignee and a processing and recordation fee of
$3,500 (payable by the assignee to the Administrative Agent), the Administrative
Agent shall, if such Assignment and Acceptance has been completed and is in
compliance with this Agreement and in substantially the form of EXHIBIT A
hereto, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Borrower.

              (e) Participations. Each Lender may sell participations to one or
more other financial institutions or other Persons in or to all or a portion of
its rights and obligations under and in respect of any and all facilities under
this Agreement (including, without limitation, all or a portion of its Term Loan
Commitment hereunder and the Loans owing to it); provided, however, that (i)
such Lender's obligations under this Agreement (including, without limitation,
its Term Loan Commitment hereunder) shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties hereto for the performance
of such obligations, (iii) the Borrower, the Administrative Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement, (iv)
each participation (other than a participation to an Affiliate) shall be in a
minimum amount of $5,000,000, and (v) such participant's rights to agree or to
restrict such Lender's ability to agree to the modification, waiver or release
of any of the terms of the Loan Documents, to consent to any action or failure
to act by any party to any of the Loan Documents or any of their respective
Affiliates, or to exercise or refrain from exercising any powers or rights which
any Lender may have under or in respect of the Loan Documents, shall be limited
to the right to consent to any (A) increase in the Term Loan Commitment of the
Lender from whom such participant purchased a participation, (B) reduction of
the principal of, or rate or amount of interest on the Loans subject to such
participation (other than by the payment or prepayment thereof), (C)
postponement of any date fixed for any payment of principal of, or interest on,
the Loans) subject to such participation and (D) release of any guarantor of the
Obligations.

                                      -74-


              (f) Information Regarding the Borrower. Any Lender may, subject to
the provisions of Section 14.22, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
14.1, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower or its Subsidiaries
furnished to such Lender by the Administrative Agent or by or on behalf of the
Borrower.

              (g) Payment to Participants. Anything in this Agreement to the
contrary notwithstanding, in the case of any participation, all amounts payable
by the Borrower under the Loan Documents shall be calculated and made in the
manner and to the parties required hereby as if no such participation had been
sold.

              (h) Lenders' Creation of Security Interests. Notwithstanding any
other provision set forth in this Agreement, any Lender may at any time create a
security interest in all or any portion of its rights under this Agreement
(including, without limitation, Obligations owing to it and any Note held by it)
in favor of any Person.

         14.2. EXPENSES.

              (a) Generally. The Borrower agrees promptly upon demand to pay, or
reimburse the Administrative Agent for the reasonable fees, expenses and
disbursements of counsel to the Administrative Agent (but not of other legal
counsel) and for all other reasonable out-of-pocket costs and expenses incurred
by the Administrative Agent or the Arranger in connection with (i) the
preparation, negotiation, and execution of the Loan Documents; (ii) the
preparation, negotiation, execution, syndication and interpretation of this
Agreement (including, without limitation, the satisfaction or attempted
satisfaction of any of the conditions set forth in Article VI), the Loan
Documents, and the making of the Loans and other extensions of credit hereunder;
(iii) any amendments, consents, waivers, assignments, restatements, or
supplements to any of the Loan Documents and the preparation, negotiation, and
execution of the same; and (iv) any other amendments, modifications, agreements,
assignments, restatements or supplements to any of the Loan Documents requested
by Borrower and the preparation, negotiation, and execution of the same.

              (b) After Default. The Borrower further agrees to pay or reimburse
the Administrative Agent, the Arranger and each of the Lenders upon demand for
all reasonable out-of-pocket costs and expenses, including, without limitation,
reasonable attorneys' fees (including allocated costs of internal counsel and
costs of settlement) incurred by the such entity after the occurrence and during
the continuance of an Event of Default (i) in enforcing any Loan Document or
Obligation, the collection of any Obligation or exercising or enforcing any
other right or remedy available by reason of such Event of Default; or (ii) in
connection with any refinancing or restructuring of the credit arrangements
provided under this Agreement in the nature of a "work-out" or in any insolvency
or bankruptcy proceeding; (iii) in commencing, defending or intervening in any
litigation or in filing a petition, complaint, answer, motion or other pleadings
in any legal proceeding relating to the Obligations, a Project, or any of the
Consolidated Businesses and related to or arising out of the transactions
contemplated hereby or by any of the other Loan Documents; and (iv) in taking
any other action in or with respect to any suit or proceeding (bankruptcy or
otherwise) described in clauses (i) through (iii) above.

                                      -75-


         14.3. INDEMNITY. The Borrower further agrees (a) to defend, protect,
indemnify, and hold harmless the Administrative Agent, the Arranger and each and
all of the Lenders and each of their respective officers, directors, employees,
attorneys and agents (collectively, the "INDEMNITEES") from and against any and
all liabilities, obligations, losses (other than loss of profits), damages,
penalties, actions, judgments, suits, claims, reasonable costs, reasonable
expenses and reasonable disbursements (excluding any taxes and including,
without limitation, the reasonable fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceeding, whether or not such Indemnitees shall be designated a party
thereto), imposed on, incurred by, or asserted against such Indemnitees in any
manner relating to or arising out of (i) this Agreement or the other Loan
Documents, the making of the Loans, the use or intended use of the proceeds of
the Loans hereunder, or any of the other transactions contemplated by the Loan
Documents, or (ii) any Liabilities and Costs relating to violation of any
Environmental, Health or Safety Requirements of Law, the past, present or future
operations of the Borrower, any of its Subsidiaries or any of their respective
predecessors in interest, or, the past, present or future environmental, health
or safety condition of any respective Property of the Borrower or any of its
Subsidiaries, the presence of asbestos-containing materials at any respective
Property of the Borrower or any of its Subsidiaries, or the Release or
threatened Release of any Contaminant into the environment (collectively, the
"INDEMNIFIED MATTERS"); provided, however, the Borrower shall have no obligation
to an Indemnitee hereunder with respect to Indemnified Matters caused by or
resulting from the willful misconduct or gross negligence of such Indemnitee, as
determined by a court of competent jurisdiction in a non-appealable final
judgment; and provided further that payment of the costs of preparation of the
Loan Documents shall be governed by Section 14.2(a) hereof; and (b) not to
assert any claim against any of the Indemnitees, on any theory of liability, for
consequential or punitive damages arising out of, or in any way in connection
with, the Term Loan Commitments, the Obligations, or the other matters governed
by this Agreement and the other Loan Documents. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it is violative of any law or public
policy, the Borrower shall contribute the maximum portion which it is permitted
to pay and satisfy under applicable law, to the payment and satisfaction of all
Indemnified Matters incurred by the Indemnitees.

         14.4. CHANGE IN ACCOUNTING PRINCIPLES. If any change in the accounting
principles used in the preparation of the most recent financial statements
referred to in Sections 8.1 or 8.2 are hereafter required or permitted by the
rules, regulations, pronouncements and opinions of the Financial Accounting
Standards Board or the American Institute of Certified Public Accountants (or
successors thereto or agencies with similar functions) and are adopted by the
Company or the Borrower as applicable, with the agreement of its independent
certified public accountants and such changes result in a change in the method
of calculation of any of the covenants, standards or terms found in Article X,
the parties hereto agree to enter into negotiations in order to amend such
provisions so as to equitably reflect such changes with the desired result that
the criteria for evaluating compliance with such covenants, standards and terms
by the Borrower shall be the same after such changes as if such changes had not
been made; provided, however, no change in GAAP that would affect the method of
calculation of any of the covenants, standards or terms shall be given effect in
such calculations until such provisions are amended, in a manner satisfactory to
the Administrative Agent and the Borrower, to so reflect such change in
accounting principles.

                                      -76-


         14.5. INTENTIONALLY OMITTED.

         14.6. RATABLE SHARING. The Lenders agree among themselves that (i) with
respect to all amounts received by them which are applicable to the payment of
the Obligations (excluding the costs, fees and other payments described in
Sections 5.2(f), and 5.3, Article XIII and Section 14.1) equitable adjustment
will be made so that, in effect, all such amounts will be shared among them
ratably in accordance with their Pro Rata Shares, whether received by voluntary
payment, by the exercise of the right of setoff or banker's lien, by
counterclaim or cross-action or by the enforcement of any or all of the
Obligations (excluding the costs, fees and other payments described in Sections
5.2(f), and 5.3, Article XIII and Section 14.1), (ii) if any of them shall by
voluntary payment or by the exercise of any right of counterclaim, setoff,
banker's lien or otherwise, receive payment of a proportion of the aggregate
amount of the Obligations held by it, which is greater than the amount which
such Lender is entitled to receive hereunder, the Lender receiving such excess
payment shall purchase, without recourse or warranty, an undivided interest and
participation (which it shall be deemed to have done simultaneously upon the
receipt of such payment) in such Obligations owed to the others so that all such
recoveries with respect to such obligations shall be applied ratably in
accordance with their Pro Rata Shares; provided, however, that if all or part of
such excess payment received by the purchasing party is thereafter recovered
from it, those purchases shall be rescinded and the purchase prices paid for
such participations shall be returned to such party to the extent necessary to
adjust for such recovery, but without interest except to the extent the
purchasing party is required to pay interest in connection with such recovery.
The Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 14.6 may, to the fullest extent permitted by
law, exercise all its rights of payment with respect to such participation as
fully as if such Lender were the direct creditor of the Borrower in the amount
of such participation.

         14.7. AMENDMENTS AND WAIVERS.

              (a) General Provisions. Unless otherwise provided for or required
in this Agreement, no amendment or modification of any provision of this
Agreement or any of the other Loan Documents shall be effective without the
written agreement of the Requisite Lenders (which the Requisite Lenders shall
have the right to grant or withhold in their sole discretion) and the Borrower;
provided, however, that the Borrower's agreement shall not be required for any
amendment or modification of Sections 12.1 through 12.8 (other than Section
12.7). In the event that the Administrative Agent shall request the agreement of
the Lenders to any amendment, modification or waiver, if any Lender shall fail
to respond to any such request within fifteen (15) days after receipt of such
request, such Lender's approval thereto shall be deemed to have been given;
provided, however, that such request shall state, in capital letters that
"FAILURE TO RESPOND TO THIS REQUEST WITHIN FIFTEEN (15) DAYS AFTER RECEIPT,
SHALL BE DEEMED CONSENT TO THE ENCLOSED REQUEST". No termination or waiver of
any provision of this Agreement or any of the other Loan Documents, or consent
to any departure by the Borrower therefrom, shall be effective without the
written or deemed concurrence of the Requisite Lenders, which the Requisite
Lenders shall have the right to grant or withhold in their sole discretion. All
amendments, waivers and consents not specifically reserved to the Administrative
Agent, the Arranger or the Lenders in Section 14.7(b), 14.7(c), and in other
provisions of this Agreement shall require only the approval of the Requisite
Lenders. Any waiver or consent shall be effective only in the specific instance
and for the specific purpose for which it was given. No notice to or demand on
the Borrower in any case shall entitle the Borrower to any other or further
notice or demand in similar or other circumstances.

                                      -77-


              (b) Amendments, Consents and Waivers by Affected Lenders. Any
amendment, modification, termination, waiver or consent with respect to any of
the following provisions of this Agreement shall be effective only by a written
agreement, signed by each Lender affected thereby as described below:

                  (i) waiver of any of the conditions specified in Sections 6.1
         (except with respect to a condition based upon another provision of
         this Agreement, the waiver of which requires only the concurrence of
         the Requisite Lenders),

                  (ii) change the amount of such Lender's Term Loan Commitment
         (other than pursuant to an assignment permitted under Section 14.1),

                  (iii) reduction of the principal of, or the rate or amount of
         interest on, the Loans, or any fees or other amounts payable to such
         Lender (other than by the payment or prepayment thereof), and

                  (iv) postponement or extension of any date (other than the
         Term Loan Maturity Date postponement or extension of which is governed
         by Section 14.7(c)(i)) fixed for any payment of principal of, or
         interest on, the Loans or any fees or other amounts payable to such
         Lender (except with respect to any modifications of the application
         provisions relating to prepayments of Loans and other Obligations which
         are governed by Section 4.2(b)).

              (c) Amendments, Consents and Waivers by All Lenders. Any
amendment, modification, termination, waiver or consent with respect to any of
the following provisions of this Agreement shall be effective only by a written
agreement, signed by each Lender:

                  (i) postponement of the Term Loan Maturity Date;

                  (ii) change in the definition of Requisite Lenders or in the
         aggregate Pro Rata Share of the Lenders which shall be required for the
         Lenders or any of them to take action hereunder or under the other Loan
         Documents,

                  (iii) amendment of Section 14.6 or this Section 14.7,

                  (iv) assignment of any right or interest in or under this
         Agreement or any of the other Loan Documents by the Borrower,

                  (v) waiver of any Event of Default under Section 11.1(a),
         Section 11.1(f) or Section 11.1(g), and

                  (vi) amendment or release of the Guaranties, except in
         connection with the permitted sale of an Unencumbered Project or
         Unencumbered New York City Asset by a Guarantor.

                                      -78-


              (d) Administrative Agent Authority. Subject to the second
succeeding sentence of this subsection (d), the Administrative Agent may, but
shall have no obligation to, with the written concurrence of any Lender, execute
amendments, modifications, waivers or consents on behalf of that Lender.
Notwithstanding anything to the contrary contained in this Section 14.7, no
amendment, modification, waiver or consent shall affect the rights or duties of
the Administrative Agent under this Agreement and the other Loan Documents,
unless made in writing and signed by the Administrative Agent in addition to the
Lenders required above to take such action. Notwithstanding anything herein to
the contrary, in the event that the Borrower shall have requested, in writing,
that any Lender agree to an amendment, modification, waiver or consent with
respect to any particular provision or provisions of this Agreement or the other
Loan Documents, and such Lender shall have failed to state, in writing, that it
either agrees or disagrees (in full or in part) with all such requests (in the
case of its statement of agreement, subject to satisfactory documentation and
such other conditions it may specify) within fifteen (15) days after such
request, then such Lender hereby irrevocably authorizes the Administrative Agent
to agree or disagree, in full or in part, and in the Administrative Agent's sole
discretion, to such requests on behalf of such Lender as such Lender's
attorney-in-fact and to execute and deliver any writing approved by the
Administrative Agent which evidences such agreement as such Lender's duly
authorized agent for such purposes; provided, however, that such request shall
state, in capital letters that "FAILURE TO RESPOND TO THIS REQUEST WITHIN
FIFTEEN (15) DAYS AFTER RECEIPT, SHALL BE DEEMED AUTHORIZATION TO THE
ADMINISTRATIVE AGENT WITH RESPECT TO THE ENCLOSED REQUEST".

         14.8. NOTICES. Unless otherwise specifically provided herein, any
notice or other communication herein required or permitted to be given shall be
in writing and may be personally served, sent by facsimile transmission or by
courier service or United States certified mail and shall be deemed to have been
given when delivered in person or by courier service, upon receipt of a
facsimile transmission, or four (4) Business Days after deposit in the United
States mail with postage prepaid and properly addressed. Notices to the
Administrative Agent pursuant to Articles II, IV or XII shall not be effective
until received by the Administrative Agent. For the purposes hereof, the
addresses of the parties hereto (until notice of a change thereof is delivered
as provided in this Section 14.8) shall be (i) for the Borrower, as set forth on
its signature page to this Agreement, and (ii) for the Lenders, as set forth on
SCHEDULE LC hereto or on the applicable Assignment and Acceptance by which such
party became a Lender hereunder, or, as to each party, at such other address as
may be designated by such party in a written notice to all of the other parties
to this Agreement.

         14.9. SURVIVAL OF WARRANTIES AND AGREEMENTS. All representations and
warranties made herein and all obligations of the Borrower in respect of taxes,
indemnification and expense reimbursement shall survive the execution and
delivery of this Agreement and the other Loan Documents, the making and
repayment of the Loans and, in the case of any Lender that may assign any
interest in its Term Loan Commitment, or Loans hereunder, shall survive the
making of such assignment, notwithstanding that such assigning Lender may cease
to be a "Lender" hereunder, and, except for the representations and warranties,
the termination of this Agreement other than any of the foregoing set forth in
Section 13.1 or Section 13.2 or Section 13.3 or Section 5.2(f), which shall
survive for thirty (30) days after termination of this Agreement.

         14.10. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of the Administrative Agent or any Lender in the
exercise of any power, right or privilege under any of the Loan Documents shall
impair such power, right or privilege or be construed to be a waiver of any
default or acquiescence therein, nor shall any single or partial exercise of any
such power, right or privilege preclude any other or further exercise thereof or
of any other right, power or privilege. All rights and remedies existing under
the Loan Documents are cumulative to and not exclusive of any rights or remedies
otherwise available.

                                      -79-


         14.11. PAYMENTS SET ASIDE. To the extent that the Borrower makes a
payment or payments to the Administrative Agent, the Arranger or any Lender or
any such Person exercises its rights of setoff, and such payment or payments or
the proceeds of such enforcement or setoff or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, receiver or any other party, then to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied,
and all right and remedies therefor, shall be revived and continued in full
force and effect as if such payment had not been made or such enforcement or
setoff had not occurred.

         14.12. SEVERABILITY. In case any provision in or obligation under this
Agreement or the other Loan Documents shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.

         14.13. HEADINGS. Section headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement or be given any substantive effect.

         14.14. GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, AND THE
RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS CONFLICT OF LAWS
PRINCIPLES.

         14.15. LIMITATION OF LIABILITY. No claim may be made by any Lender, the
Arranger, the Administrative Agent, or any other Person against any Lender
(acting in any capacity hereunder) or the Affiliates, directors, officers,
employees, attorneys or agents of any of them for any consequential or punitive
damages in respect of any claim for breach of contract or any other theory of
liability arising out of or related to the transactions contemplated by this
Agreement, or any act, omission or event occurring in connection therewith; and
each Lender, the Arranger and the Administrative Agent hereby waives, releases
and agrees not to sue upon any such claim for any such damages, whether or not
accrued and whether or not known or suspected to exist in its favor.

         14.16. SUCCESSORS AND ASSIGNS. This Agreement and the other Loan
Documents shall be binding upon the parties hereto and their respective
successors and assigns and shall inure to the benefit of the parties hereto and
the successors and permitted assigns of the Lenders. Except as otherwise
provided in Section 10.6, the rights and obligations hereunder of the Borrower,
or any interest therein, may not be assigned without the written consent of all
Lenders (and any such attempted assignment without such consent shall be null
and void).

         14.17. CERTAIN CONSENTS AND WAIVERS OF THE BORROWER.

              (a) Personal Jurisdiction. (i) EACH OF THE AGENTS, THE LENDERS,
AND THE BORROWER IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS
PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY NEW YORK STATE COURT OR
FEDERAL COURT SITTING IN NEW YORK, NEW YORK, AND ANY COURT HAVING JURISDICTION
OVER APPEALS OF MATTERS HEARD IN SUCH COURTS, IN ANY ACTION OR PROCEEDING
ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT, WHETHER ARISING IN
CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR RECOGNITION OR ENFORCEMENT OF ANY
JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES
THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH
FEDERAL COURT. EACH OF THE AGENTS, THE LENDERS AND THE BORROWER AGREES THAT A
FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW. EACH OF THE AGENTS, THE LENDERS, AND THE BORROWER WAIVES IN ALL
DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING
THE DISPUTE.

                                      -80-


              (ii) THE BORROWER AGREES THAT THE ADMINISTRATIVE AGENT SHALL HAVE
THE RIGHT TO PROCEED AGAINST THE BORROWER OR ITS PROPERTY IN A COURT IN ANY
LOCATION NECESSARY OR APPROPRIATE TO ENABLE THE ADMINISTRATIVE AGENT AND THE
LENDERS TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE
ADMINISTRATIVE AGENT OR ANY LENDER. THE BORROWER WAIVES ANY OBJECTION THAT IT
MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE ADMINISTRATIVE AGENT OR ANY
LENDER MAY COMMENCE A PROCEEDING DESCRIBED IN THIS SECTION.

              (b) Service of Process. THE BORROWER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE BORROWER'S PROCESS AGENT OR THE BORROWER'S NOTICE
ADDRESS SPECIFIED IN SECTION 14.8 HEREOF, SUCH SERVICE TO BECOME EFFECTIVE UPON
RECEIPT. THE BORROWER IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF THE ADMINISTRATIVE AGENT OR THE LENDERS TO BRING PROCEEDINGS AGAINST
THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION.

              (c) WAIVER OF JURY TRIAL. EACH OF THE AGENTS AND THE LENDERS AND
THE BORROWER IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.

                                      -81-


         14.18. COUNTERPARTS; EFFECTIVENESS; INCONSISTENCIES. This Agreement and
any amendments, waivers, consents, or supplements hereto may be executed in
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument. This Agreement shall become effective against the Borrower and
each Agent and Lender on the Closing Date. This Agreement and each of the other
Loan Documents shall be construed to the extent reasonable to be consistent one
with the other, but to the extent that the terms and conditions of this
Agreement are actually inconsistent with the terms and conditions of any other
Loan Document, this Agreement shall govern.

         14.19. LIMITATION ON AGREEMENTS. All agreements between the Borrower,
the Administrative Agent, the Arranger and each Lender in the Loan Documents are
hereby expressly limited so that in no event shall any of the Loans or other
amounts payable by the Borrower under any of the Loan Documents be directly or
indirectly secured (within the meaning of Regulation U) by Margin Stock.

         14.20. DISCLAIMERS. The Administrative Agent, the Arranger and the
Lenders shall not be liable to any contractor, subcontractor, supplier, laborer,
architect, engineer, tenant or other party for services performed or materials
supplied in connection with any work performed on the Projects, including any TI
Work. The Administrative Agent, the Arranger and the Lenders shall not be liable
for any debts or claims accruing in favor of any such parties against the
Borrower or others or against any of the Projects. The Borrower is not and shall
not be an agent of any Agent, the Arranger or the Lenders for any purposes and
none of the Lenders, the Arranger, or the Agents shall be deemed partners or
joint venturers with Borrower. None of the Administrative Agent, the Arranger or
the Lenders shall be deemed to be in privity of contract with any contractor or
provider of services to any Project, nor shall any payment of funds directly to
a contractor or subcontractor or provider of services be deemed to create any
third party beneficiary status or recognition of same by any of the
Administrative Agent, the Arranger or the Lenders and the Borrower agrees to
hold the Administrative Agent, the Arranger and the Lenders harmless from any of
the damages and expenses resulting from such a construction of the relationship
of the parties or any assertion thereof.

         14.21. ENTIRE AGREEMENT. This Agreement, taken together with all of the
other Loan Documents, embodies the entire agreement and understanding among the
parties hereto and supersedes all prior agreements and understandings, written
and oral, relating to the subject matter hereof.

         14.22. CONFIDENTIALITY. Each of the Agents, the Arranger and the
Lenders agrees to keep confidential all non-public information provided to it by
the Borrower pursuant to this Agreement that is designated by the Borrower as
confidential; provided that nothing herein shall prevent the Agents or the
Lenders from disclosing any such information (a) to the Agents, any other Lender
or any Lender Affiliate (provided such Lender Affiliate is made aware of the
confidentiality of such information and agrees to keep such information
confidential), (b) to any Assignee, Participant or prospective Assignee or
Participant or any actual or prospective counterparty (or its advisors) to any
swap or derivative transactions relating to the Borrower and its Obligations
(provided such Person is made aware of the confidentiality of such information
and agrees to keep such information confidential), (c) to the employees,
directors, agents, attorneys, accountants and other professional advisors of any
Lender, Assignee, Participant, prospective Assignee or Participant who are
advised of the provisions of this Section, (d) upon the request or demand of any
Governmental Authority having or asserting jurisdiction over either Agent or any
Lender, (e) in response to any order of any court or other Governmental
Authority or as may otherwise be required pursuant to any Requirement of Law,
(f) if requested or required to do so in connection with the exercise of any
remedy hereunder or under any other Loan Document, (g) upon the advice of
counsel that such disclosure is required by law, (h) with the consent of the
Borrower, (i) in connection with any litigation to which any Agent, Arranger or
Lender is a party, or (j) to the extent such information becomes publicly
available other than as a result of a breach of this Section 14.22 or becomes
available to any Agent, Arranger or Lender on a nonconfidential basis from a
source other than the Borrower.

                                      -82-


         14.23. INTENTIONALLY OMITTED.

         14.24. USA PATRIOT ACT. Each of the Lenders hereby notifies Borrower
that pursuant to the requirements of the USA Patriot Act (Title III of
Pub.L.107-56 (signed into law October 26, 2001)) (the "ACT"), it is required to
obtain, verify and record information that identifies Borrower, which
information includes the name and address of Borrower and other information that
will allow such Bank to identify Borrower in accordance with the Act. Neither
the execution and delivery of the Notes and the other Loan Documents by the
Borrower nor the use of the proceeds of the Loans, will violate the Trading with
the Enemy Act, as amended, or any of the foreign assets control regulations of
the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as
amended) or the Anti-Terrorism Order or any enabling legislation or executive
order relating to any of the same. Without limiting the generality of the
foregoing, none of the Borrower, the Company, nor any of their respective
Subsidiaries (a) is or will become a blocked person described in Section 1 of
the Anti-Terrorism Order or (b) engages or will engage in any dealings or
transactions or be otherwise associated with any such blocked person in any
manner which violates applicable law or regulation.

    [Remainder of Page Intentionally Left Blank--Signature Pages to Follow]

                                      -83-


         IN WITNESS WHEREOF the undersigned have duly executed this Agreement as
a sealed instrument as of the date first set forth above.

                                    BORROWER:

                                    RECKSON OPERATING PARTNERSHIP, L.P.

                                    By: Reckson Associates Realty Corp.


                                    By: ________________________________
                                         Name:
                                         Title:

                                    Address for Notices:

                                    225 Broadhollow Road
                                    Melville, New York 11747

                                    Attention: Michael Maturo

                                    Telephone: 631-622-6630
                                    Telecopy: 631-622-8994
                                    Taxpayer Identification Number:  11-3233647








                     [Signature page to Term Loan Agreement]


                              LENDER:

                              GOLDMAN SACHS MORTGAGE COMPANY,
                              individually and as Administrative Agent

                              By: Goldman Sachs Real Estate Funding Corp.,
                                  its General Partner


                                       By: ________________________________
                                             Name:
                                             Title:





                     [Signature page to Term Loan Agreement]



                                   SCHEDULE LC


                                                            
I.         ADMINISTRATIVE AGENT
           Goldman Sachs Mortgage Company
                Notice Address:                                Goldman Sachs Mortgage Company
                                                               85 Broad Street
                                                               New York, New York  10004
                                                               Attention: Mark Buono
                                                               Telecopy:  (212) 346-3594



II.        LENDERS
           a.   Goldman Sachs Mortgage Company
                Notice Address, Domestic and Eurodollar        Goldman Sachs Mortgage Company
                Lending Office:                                85 Broad Street
                                                               New York, New York  10004
                                                               Attention: Mark Buono
                                                               Telecopy:  (212) 346-3594


                Eurodollar Affiliate:                          None


                Pro Rata Share:                                100%


                Term Loan Commitment:                          $250,000,000.00

EX-12.1

                                                                    Exhibit 12.1

                         RECKSON ASSOCIATES REALTY CORP.
                       RATIOS OF EARNINGS TO FIXED CHARGES
                                       AND
          RATIOS OF EARNINGS TO FIXED CHARGES, PREFERRED DIVIDENDS AND
                             PREFERRED DISTRIBUTIONS


      The following table sets forth the Company's consolidated ratios of
earnings to fixed charges for the years ended December 31:

    2005          2004         2003          2002          2001
- -----------     --------    ---------     ---------      ---------
   2.03x         1.57x        1.43x         1.65x          2.12x



         The following table sets forth the Company's consolidated ratios of
earnings to fixed charges, preferred dividends and preferred distributions for
the years ended December 31:


   2005           2004         2003          2002          2001
- -----------     --------    ---------     ---------      ---------
  2.03x          1.25x        1.15x         1.33x          1.67x



      The above ratios were calculated in accordance with Item 503 of Regulation
S-K. As a result, all years prior to 2005 have been restated to exclude
additional income from discontinued operations than previously reported and, for
years 2002 and 2001, include certain costs associated with losses from
extinguishment of debt in accordance with FASB Statement No. 145 which was
adopted by the Company on January 1, 2003. These costs were previously reported
as extraordinary losses and excluded from prior reported ratios.

EX-21.1

                                                                    Exhibit 21.1

                         RECKSON ASSOCIATES REALTY CORP.
                            STATEMENT OF SUBSIDIARIES



Name                                                   State of Organization
- ---------------------------------------------------    ------------------------
100 Wall Company LLC                                   Delaware
100 Wall Mezz Lender LLC                               Delaware
100 Wall MM LLC                                        Delaware
1055 Washington Boulevard LLC                          Delaware
1166 Junior Mezz Lender LLC                            Delaware
1305 Walt Whitman LLC                                  Delaware
1325 Class B Holder LLC                                Delaware
1325 Mezz Lender LLC                                   Delaware
1350 Corp LLC                                          Delaware
1350 LLC                                               Delaware
1350 Mezzanine Corp.                                   Delaware
1350 Mezzanine LLC                                     Delaware
275 Broadhollow LLC                                    Delaware
360 Hamilton Plaza, L.L.C.                             Delaware
400 Garden City LLC                                    Delaware
520 L.L.C.                                             Delaware
72 Madison Mezz Lender LLC                             Delaware
90 Merrick LLC                                         Delaware
919 JV LLC                                             Delaware
919 Member LLC                                         Delaware
919 Property Manager LLC                               Delaware
919 Third Avenue LLC                                   Delaware
BEC EAB LLC                                            Delaware
Cragwood LLC                                           Delaware
Magnolia Associates, LTD                               Florida
Metropolitan 810 7th Ave MM, LLC                       Delaware
Metropolitan 810 7th Ave, LLC                          Delaware
Metropolitan 919 3rd Ave LLC                           Delaware
Metropolitan 919 Manager LLC                           Delaware
Metropolitan 919 MM LLC                                Delaware
Metropolitan Mineola GP LLC                            Delaware
Metropolitan Operating Partnership, L.P.               Delaware
Metropolitan Orlando GP LLC                            Delaware
Metropolitan Partners LLC                              Delaware
Omni Partners, L.P.                                    Delaware
One Court Square Holdings LLC                          Delaware
One Court Square Member LLC                            Delaware
RA 10 Rooney Circle LLC                                Delaware
RA 10 Rooney Circle Owner  LLC                         Delaware
RA 100 Executive Drive LLC                             Delaware
RA 100 Grasslands Road LLC                             Delaware
RA 119 Cherry Hill Road LLC                            Delaware
RA 150 Motor Parkway LLC                               Delaware
RA 1660 Walt Whitman Road LLC                          Delaware
RA 200 Broadhollow Road LLC                            Delaware
RA 200 Broadhollow Road Owner LLC                      Delaware
RA 200 Executive Drive LLC                             Delaware
RA 225 High Ridge LLC                                  Delaware
RA 300 Executive Drive LLC                             Delaware
RA 300 Motor Parkway LLC                               Delaware
RA 35 Pinelawn Road LLC                                Delaware
RA 492 River Road LLC                                  Delaware
RA 50 Marcus Drive LLC                                 Delaware
RA 505 White Plains Road LLC                           Delaware
RA 520 Broadhallow Road LLC                            Delaware
RA 55 Charles Lindenbergh Boulevard LLC                Delaware
RA 55 CLB LLC                                          Delaware
RA 555 White Plains Road LLC                           Delaware
RA 555 White Plains Road Owner  LLC                    Delaware
RA 560 White Plains Road LLC                           Delaware
RA 560 White Plains Road Owner LLC                     Delaware
RA 580 White Plains Road LLC                           Delaware
RA 660 White Plains Road LLC                           Delaware
RA 6800 Jericho Turnpike LLC                           Delaware
RA 6900 Jericho Turnpike LLC                           Delaware
RA 710 Bridgeport Avenue LLC                           Delaware
RA 72 Eagle Rock Avenue LLC                            Delaware
RA 80 Grasslands Road LLC                              Delaware
RA 88 Duryea Road LLC                                  Delaware
RA 99 Cherry Hill Road LLC                             Delaware



Name                                                   State of Organization
- ---------------------------------------------------    ------------------------
RANY Management Group                                  Delaware
RANY Management Group, Inc.                            Delaware
RCG Holdings Inc.                                      Delaware
RCG Kennedy Drive LLC                                  Delaware
Reckson 1 Giralda LLC                                  Delaware
Reckson 1166  Bridge LLC                               Delaware
Reckson 1185 Avenue of the Americas LLC                Delaware
Reckson 120 White Plains Road LLC                      New York
Reckson 300 Broadhollow LLC                            Delaware
Reckson 520 Holdings LLC                               Delaware
Reckson 7 Giralda LLC                                  Delaware
Reckson 7 Giralda Owner LLC                            Delaware
Reckson 711Westchester Avenue LLC                      Delaware
Reckson Acquisition LLC                                Delaware
Reckson Associates Realty Corp.                        Delaware
Reckson Australia Asset Manager LLC                    Delaware
Reckson Australia Holdings LLC                         Delaware
Reckson Australia LPT Corporation                      Maryland
Reckson Australia Operating Company LLC                Delaware
Reckson Australian RE Holdings Inc                     Delaware
Reckson Construction & Development LLC                 Delaware
Reckson Construction Group New York, Inc.              New York
Reckson Court Square LLC                               Delaware
Reckson Cross Westchester  IV LLC                      Delaware
Reckson Cross Westchester  LLC                         Delaware
Reckson Cross Westchester  V LLC                       Delaware
Reckson Cross Westchester II LLC                       Delaware
Reckson Cross Westchester III LLC                      Delaware
Reckson EAB, LLC                                       Delaware
Reckson Finance, Inc.                                  Delaware
Reckson Financing LLC                                  Delaware
Reckson FS Limited Partnership                         Delaware
Reckson Management Group, Inc.                         New York
Reckson Management Partners, L.L.C.                    New York
Reckson Mezz 1185 Avenue of the Americas LLC           Delaware
Reckson Mezz. LLC                                      New York
Reckson MHC LLC                                        Delaware
Reckson Operating Partnership, L.P.                    Delaware
Reckson Plaza LLC                                      Delaware
Reckson Protective TRS Corp                            Delaware
Reckson Short Hills, LLC                               Delaware
Reckson Tilles Mezz Lender LLC                         Delaware
Reckson Tri-State Member LLC                           Delaware
Reckson/Stamford Towers, LLC                           Delaware
RM Square, LLC                                         New York
ROP EAB Funding LLC                                    Delaware
ROP Mezzanine Holdings, LLC                            Delaware
RT Tri-State LLC                                       Delaware
Tower Mineola L.P.                                     Delaware
Reckson Australian Management Limited                  Victoria, AU

EX-23.1

                                                                    Exhibit 23.1

                         RECKSON ASSOCIATES REALTY CORP.
            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



We consent to the incorporation by reference in the Registration Statements
Forms S-3 (No. 333-115997, No. 333-11801, No. 333-46883, No. 333-29003, No.
333-46094, No. 333-61170 and No. 333-68686) and in the related Prospectus and
Forms S-8 (No. 333-87235, No. 333-66283, No. 333-66273, No. 333-45359, No.
333-04526, No. 333-38814, No. 333-102163 and No. 333-102174) pertaining to the
Stock Option Plans, of Reckson Associates Realty Corp., of our reports dated
March 7, 2006, with respect to the consolidated financial statements and
schedule of Reckson Associates Realty Corp., Reckson Associates Realty Corp.
management's assessment of the effectiveness of internal control over financial
reporting, and the effectiveness of internal control over financial reporting of
Reckson Associates Realty Corp., included in this Annual Report Form 10-K for
the year ended December 31, 2005.



                                                              Ernst & Young, LLP


New York, New York
March 7, 2006

EX-31.1

                                                                    Exhibit 31.1

                         RECKSON ASSOCIATES REALTY CORP.
           CERTIFICATION OF SCOTT H. RECHLER, CHAIRMAN OF THE BOARD,
            CHIEF EXECUTIVE OFFICER AND PRESIDENT OF THE REGISTRANT,
                   PURSUANT TO RULE 13a - 14(a)/15(d) - 14(a)


I, Scott H. Rechler, certify that:

1.       I have reviewed this annual report on Form 10-K of Reckson Associates
         Realty Corp.;

2.       Based on my knowledge, this report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this report, fairly present in all material
         respects the financial condition, results of operations and cash flows
         of the Registrant as of, and for, the periods presented in this report;

4.       The Registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
         control over financial reporting (as defined in Exchange Act Rules
         13a-15(f) and 15d-15(f)) for the Registrant and have:

         a)       designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the Registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         b)       designed such internal control over financial reporting, or
                  caused such internal control over financial reporting to be
                  designed under our supervision, to provide reasonable
                  assurance regarding the reliability of financial reporting and
                  the preparation of financial statements for external purposes
                  in accordance with generally accepted accounting principles;

         c)       evaluated the effectiveness of the Registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         d)       disclosed in this report any change in the Registrant's
                  internal control over financial reporting that occurred during
                  the Registrant's most recent fiscal quarter (the Registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the Registrant's internal control over financial
                  reporting; and

5.       The Registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the Registrant's auditors and the audit committee of the
         Registrant's board of directors (or persons performing the equivalent
         functions):

         a)       all significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  Registrant's ability to record, process, summarize and report
                  financial information; and

         b)       any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  Registrant's internal control over financial reporting.


Date: March 7, 2006
                                            /s/ Scott H. Rechler
                                           ---------------------
                                           Scott H. Rechler
                                           Chairman of the Board,
                                           Chief Executive Officer and President

EX-31.2

                                                                    Exhibit 31.2

                         RECKSON ASSOCIATES REALTY CORP.
    CERTIFICATION OF MICHAEL MATURO, EXECUTIVE VICE PRESIDENT, TREASURER AND
                   CHIEF FINANCIAL OFFICER OF THE REGISTRANT,
                   PURSUANT TO RULE 13a - 14(a)/15(d) - 14(a)

I, Michael Maturo, certify that:

1.       I have reviewed this annual report on Form 10-K of Reckson Associates
         Realty Corp.;

2.       Based on my knowledge, this report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this report, fairly present in all material
         respects the financial condition, results of operations and cash flows
         of the Registrant as of, and for, the periods presented in this report;

4.       The Registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
         control over financial reporting (as defined in Exchange Act Rules
         13a-15(f) and 15d-15(f)) for the Registrant and have:

         a)       designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the Registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         b)       designed such internal control over financial reporting, or
                  caused such internal control over financial reporting to be
                  designed under our supervision, to provide reasonable
                  assurance regarding the reliability of financial reporting and
                  the preparation of financial statements for external purposes
                  in accordance with generally accepted accounting principles;

         c)       evaluated the effectiveness of the Registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         d)       disclosed in this report any change in the Registrant's
                  internal control over financial reporting that occurred during
                  the Registrant's most recent fiscal quarter (the Registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the Registrant's internal control over financial
                  reporting; and

5.       The Registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the Registrant's auditors and the audit committee of the
         Registrant's board of directors (or persons performing the equivalent
         functions):

         a)       all significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  Registrant's ability to record, process, summarize and report
                  financial information; and

         b)       any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  Registrant's internal control over financial reporting.


Date: March 7, 2006
                                            /s/ Michael Maturo
                                           -----------------------------------
                                           Michael Maturo
                                           Executive Vice President, Treasurer
                                           and Chief Financial Officer

EX-32.1

                                                                    Exhibit 32.1

                         RECKSON ASSOCIATES REALTY CORP.
    CERTIFICATION OF SCOTT H. RECHLER, CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE
                    OFFICER AND PRESIDENT OF THE REGISTRANT,
                            PURSUANT TO SECTION 1350
               OF CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE


I, Scott H. Rechler, Chairman of the Board, Chief Executive Officer and
President of Reckson Associates Realty Corp. (the "Company"), certify pursuant
to section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1)       The Annual Report on Form 10-K of the Company for the annual period
         ended December 31, 2005 (the "Report") fully complies with the
         requirements of Section 13(a) or 15(d) of the Securities Exchange Act
         of 1934 (15 U.S.C. 78m or 78o(d)); and

2)       The information contained in the Report fairly presents, in all
         material respects, the financial condition and results of operations of
         the Company.

Dated:  March 7, 2006
                                  By   /s/ Scott H. Rechler
                                  ----------------------------------------------
                                           Scott H. Rechler
                                           Chairman of the Board,
                                           Chief Executive Officer and President

A signed original of this written statement required by section 906 has been
provided to Reckson Associates Realty Corp. and will be furnished to the
Securities and Exchange Commission or its staff upon request.

EX-32.2

                                                                    Exhibit 32.2

                         RECKSON ASSOCIATES REALTY CORP.
    CERTIFICATION OF MICHAEL MATURO, EXECUTIVE VICE PRESIDENT, TREASURER AND
                   CHIEF FINANCIAL OFFICER OF THE REGISTRANT,
  PURSUANT TO SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE


I, Michael Maturo, Executive Vice President, Treasurer and Chief Financial
Officer of Reckson Associates Realty Corp. (the "Company"), certify pursuant to
section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1)       The Annual Report on Form 10-K of the Company for the annual period
         ended December 31, 2005 (the "Report") fully complies with the
         requirements of Section 13(a) or 15(d) of the Securities Exchange Act
         of 1934 (15 U.S.C. 78m or 78o(d)); and

2)       The information contained in the Report fairly presents, in all
         material respects, the financial condition and results of operations of
         the Company.

Dated:  March 7, 2006
                                 By  /s/ Michael Maturo
                                     -------------------------------------------
                                         Michael Maturo
                                         Executive Vice President, Treasurer and
                                         Chief Financial Officer

A signed original of this written statement required by section 906 has been
provided to Reckson Associates Realty Corp. and will be furnished to the
Securities and Exchange Commission or its staff upon request.