Edgar Filing: RECKSON ASSOCIATES REALTY CORP

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

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 2001
OR

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to

Commission File Number 1-13762
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RECKSON ASSOCIATES REALTY CORP.
(Exact name of registrant as specified in its charter)

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

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

Registrant's telephone number, including area code: (631) 694-6900

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Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of Each Exchange on Which Registered
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Class A common stock, $.01 par value New York Stock Exchange
Class B common stock, $.01 par value New York Stock Exchange
Class A preferred stock, $.01 par value New York Stock Exchange

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

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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

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

The aggregate market value of the shares of Class A common stock and Class
B common stock held by non-affiliates was approximately $1,417 million based on
the closing prices on the New York Stock Exchange for such shares on March 14,
2002.

The Company has two classes of common stock, issued at $.01 par value per
share with 50,007,168 and 10,283,513 shares of Class A common stock and Class B
common stock outstanding, respectively as of March 14, 2002.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement for the Annual Shareholder's
Meeting to be held May 23, 2002 are incorporated by reference into Part III.
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TABLE OF CONTENTS

ITEM
NO. PAGE
------- ------

PART I
1. Business ..................................................................... I-1
2. Properties ................................................................... I-9
3. Legal Proceedings ............................................................ I-19
4. Submission of Matters to a Vote of Security Holders .......................... I-19

PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters ........ II-1
6. Selected Financial Data ...................................................... II-2
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations .................................................................. II-3
7(a). Quantitative and Qualitative Disclosures about Market Risk ................... II-15
8. Financial Statements and Supplementary Data .................................. II-16
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure .................................................................. II-16

PART III
10. Directors and Executive Officers of the Registrant ........................... III-1
11. Executive Compensation ....................................................... III-1
12. Security Ownership of Certain Beneficial Owners and Management ............... III-1
13. Certain Relationships and Related Transactions ............................... III-1

PART IV
14. Financial Statements and Schedules, Exhibits and Reports on Form 8-K ........ IV-1

PART I

ITEM 1. BUSINESS

GENERAL

Reckson Associates Realty Corp. was incorporated in September 1994 and
commenced operations effective with the completion of its initial public
offering (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 more than 40 years,
Reckson has been engaged in the business of owning, developing, acquiring,
constructing, managing and leasing office and industrial properties in the New
York tri-state area (the "Tri-State Area"). Based on industry surveys,
management believes that the Company is one of the largest owners and operators
of Class A suburban and commercial business district ("CBD") office properties
and industrial properties in the Tri-State Area. The Company operates as a
fully integrated, self-administered and self-managed real estate investment
trust ("REIT"). As of December 31, 2001 the Company owned 182 properties
(including 11 joint venture properties) in the Tri-State Area suburban and CBD
markets, encompassing approximately 20.6 million rentable square feet, all of
which are managed by the Company. These properties include 60 Class A suburban
office properties encompassing approximately 8.5 million rentable square feet,
of which 42 of these properties or 74% as measured by square footage, are
located within the Company's ten office parks. Reckson has historically
emphasized the development and acquisition of properties that are part of
large-scale suburban office parks. The Company believes that owning properties
in planned office and industrial parks provides certain strategic advantages,
including the following: (i) certain tenants prefer being located in a park
with other high quality companies to enhance their corporate image, (ii) parks
afford tenants certain aesthetic amenities such as a common landscaping plan,
standardization of signage and common dining and recreational facilities, (iii)
tenants may expand (or contract) their business within a park, enabling them to
centralize business functions and (iv) a park provides tenants with access to
other tenants and may facilitate business relationships between tenants. The
properties also include 17 Class A CBD office properties encompassing
approximately 5.3 million rentable square feet. The CBD office properties
consist of five properties located in New York City, eight properties located
in Stamford, CT and four properties located in White Plains, NY. Additionally,
the properties include 103 industrial properties encompassing approximately 6.8
million rentable square feet, of which 72 of these properties, or 59% as
measured by square footage, are located within the Company's three industrial
parks. The properties also include two retail properties comprising
approximately 20,000 rentable square feet.

Through its ownership of properties in the key CBD and suburban office
markets in the Tri-State Area, the Company believes it has a unique competitive
advantage as the trend toward the regional decentralization of the workplace
increases. Due to the events of September 11th, as well as 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. The Company believes 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 each of the key CBD and suburban office markets in the
Tri-State Area.

The Company also owns approximately 254 acres of land in 12 separate
parcels of which the Company can develop approximately two million square feet
of office space and approximately 450,000 square feet of industrial space. The
Company is also obligated to purchase, during the first quarter of 2002, 52.7
acres of land located in Valhalla, NY on which the Company can develop
approximately 875,000 square feet of office space. In addition, the Company
owns a 32 acre land parcel located in Rye Brook, NY which is under contract for
sale for approximately $22.3 million. The closing is scheduled to occur during
2002. Since the IPO the Company has developed or redeveloped 14 properties
encompassing approximately 2.1 million square feet of office and industrial
space.

I-1

The Company also owns a 357,000 square foot office building located in
Orlando, Florida and has invested approximately $17.0 million in a note
receivable secured by a partnership interest in Omni Partners, L. P., owner of
the Omni, a 575,000 square foot Class A Office Property located in Uniondale,
NY, effectively increasing its economic interest in the property owning
partnership and $36.5 million under three notes which are secured by a minority
partner's preferred unit interest in the Operating Partnership and certain real
property (the "Note Receivable Investments").

During July 1998, the Company formed Metropolitan Partners, LLC
("Metropolitan") for the purpose of acquiring Class A office properties in New
York City. Currently the Company owns, through Metropolitan, five Class A
office properties aggregating approximately 3.5 million square feet.

During September 2000, the Company formed a joint venture (the "Tri-State
JV") with Teachers Insurance and Annuity Association ("TIAA") and contributed
eight Class A suburban office properties aggregating approximately 1.5 million
square feet to the Tri-State JV 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 the Company. As a result, the Company realized a
gain of approximately $15.2 million. For purposes of its financial statements
the Company consolidates this joint venture.

On December 21, 2001, the Company formed a joint venture 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, NY for
$220.5 million which included $122.1 million of its proportionate share of
secured mortgage debt and approximately $98.4 million of cash which was then
distributed to the Company. As a result, the Company realized a gain of
approximately $18.9 million. For purposes of its financial statements the
Company consolidates this joint venture.

As of December 31, 2001, the Company has invested approximately $59.8
million in REIT-qualified joint ventures with Reckson Strategic Venture
Partners, LLC ("RSVP"), a real estate venture capital fund created as a
research and development vehicle for the Company to invest in alternative real
estate sectors outside the Company's core office and industrial focus (see
Recent Developments-Other Investing Activities).

All of the Company's interests in its properties, the Note Receivable
Investments and land are held directly or indirectly by, and all of its
operations are conducted through, the Operating Partnership. Reckson Associates
Realty Corp. controls the Operating Partnership as the sole general partner and
as of December 31, 2001, owned approximately 89% of the Operating Partnership's
outstanding common units of limited partnership ("OP Units") and Class B common
units of limited partnership interest.

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

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

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

The Company's principal executive offices are located at 225 Broadhollow
Road, Melville, New York 11747 and its telephone number at that location is
(631) 694-6900. At December 31, 2001, the Company had 311 employees.

RECENT DEVELOPMENTS

Acquisitions, Dispositions and Investing Activities

On October 29, 2001, the Company, at its option, acquired the lessor's
rights to the air rights lease agreement for the property located at 120 West
45th Street, New York, NY for approximately $7.7 million. As a result, the
Company's obligation to pay rent under this lease agreement was eliminated.

I-2

On December 21, 2001, Metropolitan sold a 49% indirect interest in the
property located at 919 Third Avenue, New York, NY for $220.5 million which
included $122.1 million of its proportionate share of secured mortgage debt and
approximately $98.4 million of cash. As a result, the Company realized a gain
of approximately $18.9 million.

During the year ended December 31, 2001, the Company sold five office
properties aggregating approximately 678,000 square feet for $82.1 million, a
26,000 square foot industrial property for $2.8 million and its remaining
preferred interest in Keystone Property Trust for $35.7 million. As a result of
these sales the Company realized a net gain of approximately $1.3 million. Net
proceeds from these sales were used primarily to repay borrowings under the
Credit Facility and to establish an escrow account with a qualified
intermediary for a future exchange of real property pursuant to Section 1031 of
the Internal Revenue Code of 1986. The Company has identified approximately
52.7 acres of land located in Valhalla, NY for the purposes of this exchange.

Subsequent to December 31, 2001, the Company entered into a contract to
sell two Class A office properties, located in Westchester County, NY,
aggregating approximately 157,000 square feet for approximately $18.5 million.
The closing is scheduled to occur during the second quarter of 2002.

Other Investing Activities

During 1997, the Company formed FrontLine Capital Group, formerly Reckson
Service Industries, Inc., ("FrontLine") and RSVP. RSVP is a real estate venture
capital fund which invests primarily in real estate and real estate operating
companies outside the Company's core office and industrial focus and 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 for FrontLine to use in its investment activities, operations and other
general corporate purposes. The Company has advanced approximately $93.4
million under the FrontLine Facility. The Operating Partnership also approved
the funding of investments of up to $100 million relating to RSVP (the "RSVP
Commitment"), through RSVP-controlled joint ventures (for REIT-qualified
investments) 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"). During March 2001, the Company increased the RSVP
Commitment to $110 million and as of December 31, 2001, approximately $109.1
million had been funded through the RSVP Commitment, of which $59.8 million
represents investments by the Company in RSVP-controlled (REIT-qualified) joint
ventures and $49.3 million represents loans made to FrontLine under the RSVP
Facility. As of December 31, 2001, interest accrued (net of reserves) under the
FrontLine Facility and the RSVP Facility was approximately $19.6 million.

At June 30, 2001, the Company assessed the recoverability of the FrontLine
Loans and reserved approximately $3.5 million of the interest accrued during
the three-month period then ended. In addition, the Company formed a committee
of its Board of Directors, comprised solely of independent directors, to
consider any actions to be taken by the Company in connection with the
FrontLine Loans and its investments in joint ventures with RSVP. During the
third quarter of 2001, the Company noted a significant deterioration in
FrontLine's operations and financial condition and, based on its assessment of
value and recoverability and considering the findings and recommendations of
the committee and its financial advisor, the Company recorded a $163 million
valuation reserve charge, inclusive of anticipated costs, in its consolidated
statements of operations relating to its investments in the FrontLine Loans and
joint ventures with RSVP. The Company has discontinued the accrual of interest
income with respect to the FrontLine Loans. The Company has also reserved
against its share of GAAP equity in earnings from the RSVP controlled joint
ventures funded through the RSVP Commitment until such income is realized
through cash distributions.

At December 31, 2001, the Company, pursuant to Section 166 of the Internal
Revenue Code of 1986, charged off $70 million of the aforementioned reserve
directly related to the FrontLine Facility, including accrued interest.
Subsequent to December 31, 2001, the Company charged off an additional $38
million of the reserve directly related to the FrontLine Facility, including
accrued interest and $47 million of the reserve directly related to the RSVP
Facility, including accrued interest.

I-3

FrontLine is in default under the FrontLine Loans from the Operating
Partnership and has reported that it is currently in discussions with its
creditors, including the Company, and that it may be required to seek
protection from creditors under federal bankruptcy laws.

As a result of the foregoing, the net carrying value of the Company's
investments in the FrontLine Loans and joint venture investments with RSVP,
inclusive of the Company's share of previously accrued GAAP equity in earnings
on those investments, is approximately $65.0 million. Such amount has been
reflected in investments in service companies and affiliate loans and joint
ventures on the Company's consolidated balance sheet.

Both the FrontLine Facility and the RSVP Facility have a term of five
years, are unsecured and advances under each are recourse obligations of
FrontLine. Notwithstanding the valuation reserve, under the terms of the credit
facilities, interest accrues on the FrontLine Loans at a rate equal to the
greater of (a) the prime rate plus two percent and (b) 12% per annum, with the
rate on amounts that are outstanding for more than one year increasing annually
at a rate of four percent of the prior year's rate. In March 2001, the credit
facilities were amended to provide that (i) interest is payable only at
maturity and (ii) the Company may transfer all or any portion of its rights or
obligations under the credit facilities to its affiliates. The Company
requested these changes as a result of changes in REIT tax laws.

The Operating Partnership and FrontLine entered into an intercompany
agreement (the "Reckson Intercompany Agreement") to formalize their
relationship at the time of the spin-off of FrontLine and to limit conflicts of
interest. Under the Reckson Intercompany Agreement, among other provisions, (i)
FrontLine granted the Operating Partnership a right of first opportunity to
make any REIT-qualified investment that becomes available to FrontLine and (ii)
the Operating Partnership granted FrontLine a right to (a) provide the
Operating Partnership and its tenants with commercial services for occupants of
office, industrial and other property types and (b) become the lessee of any
real property acquired by the Operating Partnership if the Operating
Partnership determines that, consistent with the Company's status as a REIT, it
is required to enter into a "master" lease agreement.

The following table sets forth the Company's invested capital (before
valuation reserves) in RSVP controlled (REIT-qualified) joint ventures and
amounts which were advanced under the RSVP Commitment to FrontLine, for its
investment in RSVP controlled investments (in thousands):

RSVP CONTROLLED AMOUNTS
JOINT VENTURES ADVANCED TOTAL
----------------- ---------- ----------

Privatization ..................... $21,480 $ 3,520 $ 25,000
Student Housing ................... 18,086 3,935 22,021
Medical Offices ................... 20,185 -- 20,185
Parking ........................... -- 9,091 9,091
Resorts ........................... -- 8,057 8,057
Net leased retail ................. -- 3,180 3,180
Other assets and overhead ......... -- 21,598 21,598
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$59,751 $49,381 $109,132
======= ======= ========

Included in these investments is approximately $18.9 million of cash that
has been contributed to the respective RSVP controlled joint ventures or
advanced under the RSVP Commitment to FrontLine and is being held, along with
cash from the preferred investors.

I-4

Leasing Activity

During the year ended December 31, 2001, the Company executed 276 leases
encompassing approximately 2.6 million square feet. The following table
summarizes the leasing activity by location and property type:

LEASED AVERAGE
SQUARE EFFECTIVE
NUMBER OF LEASES FEET RENT (1)
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CBD office properties
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Connecticut ....................... 26 148,443 $ 29.99
New York City ..................... 13 101,483 $ 55.26
Westchester ....................... 17 84,780 $ 24.87
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Subtotal/Weighted average ......... 56 334,706 $ 36.36
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Suburban office properties
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Long Island ....................... 69 471,077 $ 25.67
New Jersey ........................ 28 422,322 $ 26.14
Westchester ....................... 59 443,448 $ 22.94
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Subtotal/Weighted average ......... 156 1,336,847 $ 24.91
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Industrial properties
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Long Island ....................... 59 814,170 $ 7.67
New Jersey ........................ 4 97,998 $ 7.74
Westchester ....................... 1 8,169 $ 9.68
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Subtotal/Weighted average ......... 64 920,337 $ 7.70
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Total ............................. 276 2,591,890
=== =========

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

Financing Activities

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

The Company utilizes the Credit Facility primarily to finance real estate
investments, fund its real estate development activities and for working
capital purposes. At December 31, 2001, the Company had availability under the
Credit Facility to borrow an additional $303.4 million (of which, $37.4 million
has been allocated for outstanding undrawn letters of credit). Subsequent to
December 31, 2001, the Company paid down the Credit Facility by $84.6 million
which was received from the sale of a 49% interest in the property located at
919 Third Avenue, New York, NY and thereby increasing its availability under
the Credit Facility to $388 million.

On June 1, 2001, the Company refinanced a $70 million short-term variable
rate mortgage note with a five year $75 million fixed rate mortgage note, which
bears interest at 6.52% per annum. In addition, on July 18, 2001, the Company
refinanced a $200 million short-term variable rate mortgage note with a ten
year $250 million fixed rate mortgage note, which bears interest at 6.867% per
annum. The net proceeds of approximately $50.4 million received by the Company
as a result of these refinancings was used to repay maturing fixed rate debt,
the Credit Facility and for working capital purposes.

I-5

On July 24, 2001, the Company repaid a mortgage note in the amount of
approximately $15.5 million from a portion of the proceeds received from the
secured debt financing of the property located at 919 Third Avenue, New York,
NY. In addition, during the fourth quarter of 2001, the Company repaid two
mortgage notes in the aggregate amount of approximately $8.8 million through a
draw under the Credit Facility and from available cash on hand.

Stock and Other Equity Offerings

During the year ended December 31, 2001, approximately 11,553 preferred
units of limited partnership interest in the Operating Partnership, with a
liquidation preference value of approximately $11.6 million, were exchanged for
456,351 OP Units at an average price of $25.32 per OP Unit. In addition,
660,370 OP Units were exchanged for an equal number of shares of the Company's
Class A common stock.

Metropolitan is controlled by the Company. A minority partner owned an $85
million preferred equity investment in Metropolitan which accrued distributions
at a rate of 7.5% per annum for a two-year period (May 24, 1999 through May 30,
2001). On May 31, 2001, the minority partner, at its election, converted its
preferred equity investment into 3,453,881 shares of the Company's Class A
common stock based on a conversion price of $24.61 per share. As a result of
the minority partner's conversion of their preferred equity investment, the
Company owns 100% of Metropolitan.

The Board of Directors of the Company has authorized the purchase of up to
an additional five million shares of the Company's Class B common stock and/or
its Class A common stock. Transactions conducted on the New York Stock Exchange
will be effected in accordance with the safe harbor provisions of the Securities
Exchange Act of 1934 and may be terminated by the Company at any time.
Previously, the Company purchased and retired 1,410,804 shares of Class B common
stock at an average price of $21.48 per Class B share and 61,704 shares of Class
A common stock at an average price of $23.03 per Class A share for an aggregate
purchase price of approximately $31.7 million.

CORPORATE STRATEGIES AND GROWTH OPPORTUNITIES

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

Corporate Strategies. Management believes that throughout its 40-year
operating history, Reckson has created value in its properties through a
variety of market cycles by implementing the operating strategies described
below. These operating strategies include: (i) a multidisciplinary leasing
approach that involves architectural design and construction personnel as well
as leasing professionals, (ii) innovative marketing programs that strategically
position the Company's properties and distinguish its 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 the Company's 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 technology advanced systems and tools that
provides meaningful information, on a real time basis, throughout the entire
organization and (vi) an acquisition and development strategy that is
continuously adjusted in light of anticipated changes in market conditions and
that seeks to capitalize on management's multidisciplinary expertise and market
knowledge to modify, upgrade and reposition a property in its marketplace in
order to maximize value.

The Company also intends to adhere to a policy of maintaining a stabilized
debt ratio (defined as the total debt of the Company as a percentage of the sum
of the Company's total debt and the market value of its equity) of not more
than 50%. As of December 31, 2001, the Company's debt ratio was

I-6

approximately 41.1%. This calculation is net of minority partners'
proportionate share of joint venture debt and including the Company's share of
unconsolidated joint venture debt. This debt ratio is intended to provide the
Company with financial flexibility to select the optimal source of capital
(whether debt or equity) with which to finance external growth.

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

Internal Growth. To the extent the Long Island, Westchester, New Jersey
and Southern Connecticut suburban office and industrial markets remain stable
and begin to recover with new supply management believes the Company is well
positioned to benefit from rental revenue growth through: (i) contractual
annual compounding of 3-4% Base Rent increases (defined as fixed gross rental
amounts that excludes payments on account of real estate taxes, operating
expense escalations and base electrical charges) on approximately 85% of
existing leases from its Long Island properties, (ii) periodic contractual
increases in Base Rent on existing leases from its Westchester properties, the
New Jersey properties and the Southern Connecticut properties and (iii) the
potential for increases to Base Rents as leases expire and space is re-leased
at the higher rents that exist in the current market environment.

During 1999, the Company entered the New York City office market. The New
York City office market is currently experiencing favorable supply and demand
characteristics exceeding those currently in the Company's suburban markets and
is also characterized by similar lack of available land supply and other
barriers to entry that limit competition. The Company's New York City office
buildings offer superior potential for increase in Base Rents as described in
(iii) above. Since the formation of the Company's New York City division, it
has acquired five Class A office properties aggregating approximately 3.5
million square feet.

External Growth. The Company seeks to acquire multi-tenant Class A office
buildings in New York City and the surrounding Tri-State Area core suburban
markets as well as industrial properties located in the Tri-State Area.
Management believes that the Tri-State Area presents opportunities to acquire
or invest in properties at attractive yields. The Company believes that its
(i) capital structure, in particular its Credit Facility providing for a
maximum borrowing amount of up to $575 million, (ii) ability to acquire a
property for OP Units and thereby defer the seller's income tax on gain,
(iii) operating economies of scale, (iv) relationships with financial
institutions and private real estate owners, (v) fully integrated operations in
its five existing divisions and (vi) its substantial position and franchise in
the submarkets in which it owns properties will enhance the Company's ability
to identify and capitalize on acquisition opportunities. The Company also
intends to selectively develop new Class A suburban and CBD office and
industrial properties and to continue to redevelop existing properties as these
opportunities arise. The Company will concentrate its development activities on
industrial and Class A suburban and CBD office properties within the Tri-State
Area. The Company's expansion into the New York City office market has provided
it with additional opportunities to acquire interests in properties at
attractive yields. The Company also believes that the addition of its New York
City division provides additional leasing and operational facilities and
enhances its overall franchise value by being the only real estate operating
company in the Tri-State Area with significant presence in both Manhattan and
each of the surrounding sub-markets.

In addition, when valuations for commercial real estate properties are
high, the Company will seek to sell certain properties or interests therein to
realize value and profit created. The Company will then

I-7

seek opportunities to reinvest the capital realized from these dispositions
back into value-added assets in the Company's core Tri-State Area markets, as
well as pursue its stock repurchase program.

ENVIRONMENTAL MATTERS

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

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

I-8

ITEM 2. PROPERTIES

GENERAL

As of December 31, 2001 the Company owned 182 properties (including 11
joint venture properties) in the Tri-State Area suburban and CBD markets,
encompassing approximately 20.6 million rentable square feet, all of which are
managed by the Company. The properties include 60 Class A suburban office
properties encompassing approximately 8.5 million rentable square feet, of
which 42 of these properties or 74% as measured by square footage, are located
within the Company's ten office parks. Reckson has historically emphasized the
development and acquisition of properties that are part of large-scale suburban
office parks. The Company believes that owning properties in planned office and
industrial parks provides certain strategic advantages, including the
following: (i) certain tenants prefer being located in a park with other high
quality companies to enhance their corporate image, (ii) parks afford tenants
certain aesthetic amenities such as a common landscaping plan, standardization
of signage and common dining and recreational facilities, (iii) tenants may
expand (or contract) their business within a park, enabling them to centralize
business functions and (iv) a park provides tenants with access to other
tenants and may facilitate business relationships between tenants. The
properties also include 17 Class A CBD office properties encompassing
approximately 5.3 million rentable square feet. The CBD office properties
consist of five properties located in New York City, eight properties located
in Stamford, CT and four properties located in White Plains, NY. Additionally,
the Company owns 103 industrial properties encompassing approximately 6.8
million rentable square feet, of which 72 of these properties, or 59% as
measured by square footage, are located within the Company's three industrial
parks. The properties also include two retail properties comprising
approximately 20,000 rentable square feet. The Company also owns a 357,000
square foot office property located in Orlando, Florida.

Set forth below is a summary of certain information relating to the
Company's properties, categorized by office and industrial properties, as of
December 31, 2001.

OFFICE PROPERTIES

General

As of December 31, 2001, the Company owned or had an interest in 60 Class
A suburban office properties encompassing approximately 8.5 million square feet
and 17 Class A CBD office properties encompassing approximately 5.3 million
square feet. As of December 31, 2001, the office properties were approximately
96.1% leased (percent leased excludes properties under development) to
approximately 1141 tenants.

The office properties are Class A office buildings and are well-located,
well-maintained and professionally managed. In addition, these properties are
modern with high finishes and achieve among the highest rent, occupancy and
tenant retention rates within their sub-markets. Forty two of the 60 suburban
office properties are located within the Company's ten office parks. The
buildings in these office parks offer a full array of amenities including
health clubs, racquetball courts, sun decks, restaurants, computer controlled
HVAC access systems and conference centers. Management believes that the
location, quality of construction and amenities as well as the Company's
reputation for providing a high level of tenant service have enabled the
Company to attract and retain a national tenant base. The office tenants
include national service companies, such as telecommunications firms, "Big
Five" accounting firms, securities brokerage houses, insurance companies and
health care providers. The 17 Class A CBD office properties consist of five
properties located in New York City, eight properties located in Stamford, CT
and four properties located in White Plains, NY.

The office properties are leased to both national and local tenants.
Leases on the office properties are typically written for terms ranging from
five to ten years and require: (i) payment of a fixed gross rental amount that
excludes payments on account of real estate tax, operating expense escalations
and base electrical charges ("Base Rent"), (ii) payment of a base electrical
charge, (iii) payment of real estate tax escalations over a base year, (iv)
payment of compounded annual increases to Base Rent and/or payment of operating
expense escalations over a base year, (v) payment of overtime HVAC and electric

I-9

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, 2001
for each of the office properties.

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

Suburban Office Properties:
Huntington Melville Corporate
Center, Melville, NY
Leasehold
395 North Service Rd .................. 100% (2,081) 1988 7.5
200 Broadhollow Rd .................... 100% Fee 1981 4.6
48 South Service Rd ................... 100% Fee 1986 7.3
35 Pinelawn Rd ........................ 100% Fee 1980 6.0
275 Broadhollow Rd .................... 51% Fee 1970 5.8
58 South Service Rd (3) ............... 100% Fee 2000 16.5
1305 Old Walt Whitman Rd .............. 51% Fee 1998 (5) 18.1
----
Total--Huntington Melville
Corporate Center (4) ................. 65.8
----
North Shore Atrium, Syosset, NY
6800 Jericho Turnpike (North Shore
Atrium I) ............................ 100% Fee 1977 13.0
6900 Jericho Turnpike (North Shore
Atrium II) ........................... 100% Fee 1982 5.0
----
Total--North Shore Atrium ............. 18.0
----
Nassau West Corporate Center,
Mitchel Field, NY
50 Charles Lindbergh Blvd. Leasehold
(Nassau West Corporate Center II) .... 100% (2,082) 1984 9.1
60 Charles Lindbergh Blvd. Leasehold
(Nassau West Corporate Center I) ..... 100% (2,082) 1989 7.8
Leasehold
51 Charles Lindbergh Blvd ............. 100% (2,084) 1989 6.6
Leasehold
55 Charles Lindbergh Blvd. ............ 100% (2,082) 1982 10.0
Leasehold
333 Earl Ovington Blvd. (The Omni) 60% (2,088) 1991 30.6
Leasehold
90 Merrick Ave ........................ 51% (2,084) 1985 13.2
----
Total--Nassau West Corporate
Center ............................... 77.3
----
Tarrytown Corporate Center
Tarrytown, NY
505 White Plains Road ................. 100% Fee 1974 1.4
520 White Plains Road ................. 60% Fee (6) 1981 6.8
555 White Plains Road ................. 100% Fee 1972 4.2
560 White Plains Road ................. 100% Fee 1980 4.0
580 White Plains Road ................. 100% Fee 1977 6.1
660 White Plains Road ................. 100% Fee 1983 10.9
----
Total--Tarrytown Corporate Center ..... 33.4
----
Reckson Executive Park
Rye Brook, NY
1 International Dr .................... 100% Fee 1983 N/A
2 International Dr .................... 100% Fee 1983 N/A
3 International Dr .................... 100% Fee 1983 N/A
4 International Dr. ................... 100% Fee 1986 N/A
5 International Dr. ................... 100% Fee 1986 N/A
6 International Dr. ................... 100% Fee 1986 N/A

Total--Reckson Executive Park ......... 44.4
----
Summit at Valhalla Valhalla, NY
100 Summit Dr. ........................ 100% Fee 1988 11.3
200 Summit Dr. ........................ 100% Fee 1990 18.0
500 Summit Dr. ........................ 100% Fee 1986 29.1
----
Total--Summit at Valhalla ............. 58.4
----
Mt. Pleasant Corporate Center .........
115/117 Stevens Ave. .................. 100% Fee 1984 5.0
----

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

Suburban Office Properties:
Huntington Melville Corporate
Center, Melville, NY
395 North Service Rd .................. 4 187,393 100.0% $ 5,290,551 $ 28.24 7
200 Broadhollow Rd .................... 4 67,432 99.9% $ 1,740,394 $ 25.84 12
48 South Service Rd ................... 4 125,372 97.9% $ 3,376,836 $ 27.51 8
35 Pinelawn Rd ........................ 2 105,241 99.9% $ 2,501,409 $ 23.80 30
275 Broadhollow Rd .................... 4 126,250 100.0% $ 3,249,912 $ 25.74 26
58 South Service Rd (3) ............... 4 277,500 36.1% $ 3,221,317 $ 37.13 5
1305 Old Walt Whitman Rd .............. 3 164,166 100.0% $ 4,333,478 $ 26.40 6
------- ----------- --
Total--Huntington Melville
Corporate Center (4) ................. 1,053,354 99.6% $23,713,897 $ 27.16 94
--------- ----------- --
North Shore Atrium, Syosset, NY
6800 Jericho Turnpike (North Shore
Atrium I) ............................ 2 209,028 95.3% $ 4,384,109 $ 22.01 44
6900 Jericho Turnpike (North Shore
Atrium II) ........................... 4 95,149 100.0% $ 2,322,699 $ 25.88 14
--------- ----------- --
Total--North Shore Atrium ............. 304,177 96.8% $ 6,706,808 $ 22.78 58
--------- ----------- --
Nassau West Corporate Center,
Mitchel Field, NY
50 Charles Lindbergh Blvd.
(Nassau West Corporate Center II) .... 6 211,845 95.4% $ 5,132,201 $ 25.40 22
60 Charles Lindbergh Blvd.
(Nassau West Corporate Center I) ..... 2 195,998 100.0% $ 4,739,146 $ 24.19 6

51 Charles Lindbergh Blvd ............. 1 108,000 100.0% $ 2,389,432 $ 22.12 1
55 Charles Lindbergh Blvd. ............ 2 214,581 100.0% $ 2,680,134 $ 12.49 3
333 Earl Ovington Blvd. (The Omni) 10 575,000 93.3% $17,328,627 $ 32.30 27
90 Merrick Ave ........................ 9 225,597 100.0% $ 6,097,485 $ 31.01 21
--------- ----------- --
Total--Nassau West Corporate
Center ............................... 1,531,021 96.8% $38,367,025 $ 25.89 80
--------- ----------- --
Tarrytown Corporate Center
Tarrytown, NY
505 White Plains Road ................. 2 26,468 94.3% $ 516,036 $ 21.40 22
520 White Plains Road ................. 6 171,761 100.0% $ 3,723,762 $ 21.68 3
555 White Plains Road ................. 5 121,585 78.2% $ 2,382,006 $ 25.04 9
560 White Plains Road ................. 6 126,471 80.5% $ 2,332,941 $ 24.93 18
580 White Plains Road ................. 6 170,726 99.3% $ 4,020,506 $ 23.73 23
660 White Plains Road ................. 6 258,715 94.1% $ 5,035,392 $ 21.03 44
--------- ----------- --
Total--Tarrytown Corporate Center ..... 875,726 92.1% $18,010,643 $ 22.33 119
--------- ----------- ---
Reckson Executive Park
Rye Brook, NY
1 International Dr .................... 3 90,000 100.0% $ 1,237,500 $ 13.75 1
2 International Dr .................... 3 90,000 100.0% $ 1,237,500 $ 13.75 1
3 International Dr .................... 3 91,174 100.0% $ 2,072,372 $ 24.37 6
4 International Dr. ................... 3 86,694 89.3% $ 2,067,378 $ 25.71 9
5 International Dr. ................... 3 90,000 100.0% $ 2,242,500 $ 24.42 1
6 International Dr. ................... 3 94,016 100.0% $ 975,777 $ 10.38 9
--------- ----------- ---
Total--Reckson Executive Park ......... 541,884 98.8% $ 9,833,027 $ 18.37 27
--------- ----------- ---
Summit at Valhalla Valhalla, NY
100 Summit Dr. ........................ 4 249,551 95.7% $ 5,499,974 $ 24.32 7
200 Summit Dr. ........................ 4 240,834 89.7% $ 4,265,547 $ 19.56 14
500 Summit Dr. ........................ 4 208,660 100.0% $ 5,216,500 $ 25.00 2
--------- ----------- ---
Total--Summit at Valhalla ............. 699,045 93.4% $14,982,021 $ 22.95 23
--------- ----------- ---
Mt. Pleasant Corporate Center .........
115/117 Stevens Ave. .................. 3 162,004 98.3% $ 2,814,281 $ 17.67 19
--------- ----------- ---

I-10

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

Total--Mt Pleasant Corporate Center 5.0
-----
Stand-alone Long Island Properties
400 Garden City Plaza
Garden City, NY .......................... 51% Fee 1989 5.7
88 Duryea Rd.
Melville, NY ............................. 100% Fee 1986 1.5
310 East Shore Rd.
Great Neck, NY ........................... 100% Fee 1981 1.5
333 East Shore Rd. Leasehold
Great Neck, NY ........................... 100% (2,030) 1976 1.5
520 Broadhollow Rd
Melville, NY ............................. 100% Fee 1978 7.0
1660 Walt Whitman Rd.
Melville, NY ............................. 100% Fee 1980 6.5
150 Motor Parkway
Hauppauge, NY ............................ 100% Fee 1984 11.3
120 Mineola Blvd
Mineola, NY .............................. 100% Fee 1989 0.7
538 Broadhollow Road
Melville, NY ............................. 100% Fee 1986 7.5
50 Marcus Drive,
Melville, NY ............................. 100% Fee 2000 12.9
-----
Total--Stand-alone Long Island ............ 56.1
-----
Stand-alone Westchester
Properties
120 White Plains Rd.
Tarrytown, NY ............................ 51% Fee 1984 9.7
80 Grasslands
Elmsford, NY ............................. 100% Fee 1989 4.9
-----
Total--Stand-alone Westchester
Properties ............................... 14.6
-----
Executive Hill Office Park
West Orange, NJ
100 Executive Dr .......................... 100% Fee 1978 10.1
200 Executive Dr .......................... 100% Fee 1980 8.2
300 Executive Dr .......................... 100% Fee 1984 8.7
10 Rooney Circle .......................... 100% Fee 1971 5.2
-----
Total--Executive Hill Office Park ......... 32.2
-----
University Square
Princeton, NJ
100 Campus Dr. ............................ 100% Fee 1987 N/A
104 Campus Dr. ............................ 100% Fee 1987 N/A
115 Campus Dr. ............................ 100% Fee 1987 N/A

Total--University Square .................. 11.0
-----
Short Hills Office Complex
Short Hills, NJ
101 John F. Kennedy Parkway ............... 100% Fee 1981 9.0
103 John F. Kennedy Parkway (3) ........... 100% Fee 1981 6.0
51 John F Kennedy Parkway ................. 51% Fee 1988 11.0
-----
Total--Short Hills Office (4) ............. 26.0
-----
Stand-alone New Jersey Properties
99 Cherry Hill Road
Parsippany, NJ ........................... 100% Fee 1982 8.8
119 Cherry Hill Road
Parsippany, NJ ........................... 100% Fee 1982 9.3
One Eagle Rock
Hanover, NJ .............................. 100% Fee 1986 10.4
3 University Plaza
Hackensack, NJ ........................... 100% Fee 1985 10.6
1255 Broad Street
Clifton, NJ .............................. 100% Fee 1968 11.1
492 River Rd,
Nutley, NJ ............................... 100% Fee 1952 17.3
-----
Total--Stand-alone New Jersey
Properties ............................... 67.5
-----
Total--Suburban Office Properties (4) ..... 509.7
-----

Total--Mt Pleasant Corporate Center 162,004 98.3% $ 2,814,281 $ 17.67 19
------- ------------ --
Stand-alone Long Island Properties
400 Garden City Plaza
Garden City, NY .......................... 5 176,073 99.0% $ 4,331,760 $ 24.12 25
88 Duryea Rd.
Melville, NY ............................. 2 25,061 95.3% $ 514,134 $ 21.53 4
310 East Shore Rd.
Great Neck, NY ........................... 4 50,000 94.3% $ 1,116,541 $ 25.60 18
333 East Shore Rd.
Great Neck, NY ........................... 2 17,715 99.6% $ 386,981 $ 21.93 9
520 Broadhollow Rd
Melville, NY ............................. 1 85,784 100.0% $ 1,751,132 $ 20.41 3
1660 Walt Whitman Rd.
Melville, NY ............................. 1 73,115 74.9% $ 1,052,950 $ 19.23 6
150 Motor Parkway
Hauppauge, NY ............................ 4 191,447 85.8% $ 3,997,164 $ 24.34 27
120 Mineola Blvd
Mineola, NY .............................. 6 101,000 91.8% $ 2,452,486 $ 26.46 14
538 Broadhollow Road
Melville, NY ............................. 4 180,339 86.2% $ 3,972,297 $ 25.54 10
50 Marcus Drive,
Melville, NY ............................. 2 163,762 100.0% $ 1,852,302 $ 11.31 1
------- ------------ --
Total--Stand-alone Long Island ............ 1,064,296 92.0% $ 21,427,747 $ 21.88 117
--------- ------------ ---
Stand-alone Westchester
Properties
120 White Plains Rd.
Tarrytown, NY ............................ 6 197,785 97.0% $ 4,825,559 $ 25.14 15
80 Grasslands
Elmsford, NY ............................. 3 87,114 100.0% $ 1,861,347 $ 21.37 7
--------- ------------ ---
Total--Stand-alone Westchester
Properties ............................... 284,899 97.9% $ 6,686,906 $ 23.97 22
--------- ------------ ---
Executive Hill Office Park
West Orange, NJ
100 Executive Dr .......................... 3 92,872 89.6% $ 1,565,149 $ 18.81 9
200 Executive Dr .......................... 4 102,630 97.4% $ 2,187,825 $ 21.89 19
300 Executive Dr .......................... 4 126,196 84.9% $ 2,230,592 $ 20.81 16
10 Rooney Circle .......................... 3 69,684 100.0% $ 1,079,135 $ 15.49 2
--------- ------------ ---
Total--Executive Hill Office Park ......... 391,382 92.0% $ 7,062,701 $ 19.61 46
--------- ------------ ---
University Square
Princeton, NJ
100 Campus Dr. ............................ 1 27,888 100.0% $ 648,433 $ 23.25 3
104 Campus Dr. ............................ 1 70,239 100.0% $ 1,663,171 $ 23.68 2
115 Campus Dr. ............................ 1 33,600 100.0% $ 699,039 $ 20.80 2
--------- ------------ ---
Total--University Square .................. 131,727 100.0% $ 3,010,643 $ 22.86 7
--------- ------------ ---
Short Hills Office Complex
Short Hills, NJ
101 John F. Kennedy Parkway ............... 6 195,000 100.0% $ 5,908,500 $ 30.30 1
103 John F. Kennedy Parkway (3) ........... 4 129,508 0.0% $ 0 $ 0.00 0
51 John F Kennedy Parkway ................. 5 250,642 100.0% $ 8,790,239 $ 33.79 18
--------- ------------ ---
Total--Short Hills Office (4) ............. 575,150 100.0% $ 14,698,739 $ 32.98 19
--------- ------------ ---
Stand-alone New Jersey Properties
99 Cherry Hill Road
Parsippany, NJ ........................... 3 93,250 72.4% $ 1,318,140 $ 19.51 13
119 Cherry Hill Road
Parsippany, NJ ........................... 3 95,724 96.4% $ 1,902,254 $ 21.28 18
One Eagle Rock
Hanover, NJ .............................. 3 142,438 100.0% $ 3,253,993 $ 22.84 8
3 University Plaza
Hackensack, NJ ........................... 6 217,008 100.0% $ 4,815,746 $ 22.19 24
1255 Broad Street
Clifton, NJ .............................. 2 193,574 100.0% $ 4,259,924 $ 22.01 3
492 River Rd,
Nutley, NJ ............................... 13 130,009 100.0% $ 2,177,651 $ 16.75 1
--------- ------------ ---
Total--Stand-alone New Jersey
Properties ............................... 872,003 96.7% $ 17,727,708 $ 21.02 67
--------- ------------ ---
Total--Suburban Office Properties (4) ..... 8,486,668 95.8% $185,042,146 $ 23.49 698
--------- ------------ ------- ---

I-11

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

CBD Office Properties:

Landmark Square
Stamford, CT
One Landmark Square .............. 100% Fee 1973 N/A
Two Landmark Square .............. 100% Fee 1976 N/A
Three Landmark Square ............ 100% Fee 1978 N/A
Four Landmark Square ............. 100% Fee 1977 N/A
Five Landmark Square ............. 100% Fee 1976 N/A
Six Landmark Square .............. 100% Fee 1984 N/A
Total--Landmark Square ........... 7.2
-----
Stamford Towers
Stamford, CT
680 Washington Blvd. ............. 51% Fee 1989 1.3
750 Washington Blvd. ............. 51% Fee 1989 2.4
-----
Total--Stamford Towers ........... 3.7
-----
Stand-alone Westchester
Properties
235 Main Street,
White Plains, NY ................ 100% Fee 1974(5) 0.4
245 Main Street
White Plains, NY ................ 100% Fee 1983 0.4
360 Hamilton Avenue
White Plains, NY ................ 100% Fee 1977 1.5
140 Grand Street
White Plains, NY ................ 100% Fee 1991 2.2
-----
Total--Stand-alone Westchester
Properties ...................... 4.5
-----
New York City Properties
120 W. 45th Street
New York, NY .................... 100% Fee 1989 0.4
100 Wall Street
New York, NY .................... 100% Fee 1969 0.5
810 Seventh Avenue
New York, NY .................... 100% Fee 1970 0.6
919 Third Avenue
New York, NY .................... 51% Fee (7) 1971 1.5
1350 Avenue of the Americas
New York, NY .................... 100% Fee 1966 0.6
-----
Total--New York City Office
Properties ...................... 3.6
-----
Total--CBD Office Properties ..... 19.0
-----
Total--Office Properties (4) ..... 528.7
=====

CBD Office Properties:

Landmark Square
Stamford, CT
One Landmark Square .............. 22 296,716 88.0% $ 6,853,319 $ 26.40 57
Two Landmark Square .............. 3 39,701 84.7% $ 750,814 $ 23.33 9
Three Landmark Square ............ 6 128,286 94.7% $ 2,835,161 $ 23.34 17
Four Landmark Square ............. 5 104,446 92.2% $ 2,184,130 $ 23.44 15
Five Landmark Square ............. 3 58,000 100.0% $ 304,222 $ 5.25 3
Six Landmark Square .............. 10 171,899 97.4% $ 3,983,225 $ 23.80 11
------- ------------ ---
Total--Landmark Square ........... 799,048 92.3% $ 16,910,871 $ 22.93 112
------- ------------ ---
Stamford Towers
Stamford, CT
680 Washington Blvd. ............. 11 132,759 99.5% $ 3,914,298 $ 29.64 6
750 Washington Blvd. ............. 11 192,108 99.6% $ 4,732,157 $ 24.74 12
------- ------------ ---
Total--Stamford Towers ........... 324,867 99.5% $ 8,646,455 $ 24.59 18
------- ------------ ---
Stand-alone Westchester
Properties
235 Main Street,
White Plains, NY ................ 6 83,237 93.3% $ 1,568,248 $ 20.81 30
245 Main Street
White Plains, NY ................ 6 73,543 87.4% $ 1,349,526 $ 21.00 18
360 Hamilton Avenue
White Plains, NY ................ 12 382,000 99.3% $ 9,888,592 $ 26.80 25
140 Grand Street
White Plains, NY ................ 9 130,136 93.0% $ 2,984,619 $ 24.66 16
------- ------------ ---

Total--Stand-alone Westchester
Properties ...................... 668,916 96.0% $ 15,790,985 $ 24.57 89
------- ------------ ---
New York City Properties
120 W. 45th Street
New York, NY .................... 40 443,109 89.4% $ 15,893,044 $ 40.21 42
100 Wall Street
New York, NY .................... 29 466,226 96.2% $ 14,351,760 $ 32.01 37
810 Seventh Avenue
New York, NY .................... 42 692,060 97.6% $ 23,523,107 $ 34.82 37
919 Third Avenue
New York, NY .................... 47 1,356,115 99.5% $ 52,773,806 $ 39.60 25
1350 Avenue of the Americas
New York, NY .................... 35 540,000 96.3% $ 18,359,230 $ 35.42 83
--------- ------------ ---
Total--New York City Office
Properties ...................... 3,497,510 96.9% $124,900,947 $ 36.71 224
--------- ------------ ---
Total--CBD Office Properties ..... 5,290,341 96.3% $166,249,258 $ 32.63 443
--------- ------------ ---
Total--Office Properties (4) ..... 13,777,009 96.1% $351,291,404 $ 27.34 1,141
========== ============ =====

------------------
(1) Ground lease expirations assume exercise of renewal options by the lessee.
(2) Represents Base Rent, net of electric reimbursment, of signed leases at
December 31, 2001 adjusted for scheduled contractual increases during the
12 months ending December 31, 2002. Total Base Rent for these purposes
reflects the effect of any lease expirations that occur during the
12-month period ending December 31, 2002. Amounts included in rental
revenue for financial reporting purposes have been determined on a
straight-line basis rather than on the basis of contractual rent as set
forth in the foregoing table.
(3) Property is currently under development.
(4) Percent leased and annual base rent per leased square foot excludes
properties under development.
(5) Year renovated.
(6) The actual fee interest in is held by the County of Westchester Industrial
Development Agency. The fee interest in 520 White Plains Road may be
acquired if the outstanding principal under certain loan agreements and
annual basic installments are prepaid in full.
(7) There is a ground lease in place on a small portion of the land which
expires in 2066.

I-12

INDUSTRIAL PROPERTIES

General

As of December 31, 2001, the Company owned or had an interest in 103
industrial properties that encompass approximately 6.8 million rentable square
feet. As of December 31, 2001, the industrial properties were approximately
91.7% leased (percentage leased excludes properties under development) to
approximately 238 tenants. Many of the industrial properties have been
constructed with high ceiling heights (i.e., above 18 feet), upscale office
building facades, parking in excess of zoning requirements, drive-in and/or
loading dock facilities and other features which permit them to be leased for
industrial and/or office purposes.

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

Approximately 87%, as measured by square footage, of the industrial
properties, are located on Long Island. Sixty eight percent of these
properties, as measured by square footage, are located in the following three
industrial parks developed by Reckson: (i) Vanderbilt Industrial Park, (ii)
Airport International Plaza and (iii) County Line Industrial Center.

In addition to the industrial properties on Long Island, the Company owns
eight industrial properties encompassing approximately 917,000 square feet in
the other suburban markets.

The following table sets forth certain information as of December 31, 2001
for each of the industrial properties.

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

Industrial Properties:
Vanderbilt Industrial Park
Hauppauge, NY
360 Vanderbilt Motor
Parkway ..................... 100% Fee 1967 4.2 16
410 Vanderbilt Motor
Parkway ..................... 100% Fee 1965 3.0 15
595 Old Willets Path ......... 100% Fee 1968 3.5 14
611 Old Willets Path ......... 100% Fee 1963 3.0 14
631/641 Old Willets Path ..... 100% Fee 1965 1.9 14
651/661 Old Willets Path ..... 100% Fee 1966 2.0 14
681 Old Willets Path ......... 100% Fee 1961 1.3 14
740 Old Willets Path ......... 100% Fee 1965 3.5 14
325 Rabro Dr. ................ 100% Fee 1967 2.7 14
250 Kennedy Dr. .............. 100% Fee 1979 7.0 16
90 Plant Ave. ................ 100% Fee 1972 4.3 16
110 Plant Ave. ............... 100% Fee 1974 6.8 18
55 Engineers Rd. ............. 100% Fee 1968 3.0 18
65 Engineers Rd. ............. 100% Fee 1969 1.8 22
85 Engineers Rd. ............. 100% Fee 1968 2.3 18
100 Engineers Rd. ............ 100% Fee 1968 5.0 14
150 Engineers Rd. ............ 100% Fee 1969 6.8 22
20 Oser Ave. ................. 100% Fee 1979 5.0 16
30 Oser Ave. ................. 100% Fee 1978 4.4 16
40 Oser Ave. ................. 100% Fee 1974 3.1 16
50 Oser Ave. ................. 100% Fee 1975 4.1 21
60 Oser Ave. ................. 100% Fee 1975 3.3 21
63 Oser Ave. ................. 100% Fee 1974 1.2 20
65 Oser Ave. ................. 100% Fee 1975 1.2 18
73 Oser Ave. ................. 100% Fee 1974 1.2 20
80 Oser Ave. ................. 100% Fee 1974 1.1 18

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

Industrial Properties:
Vanderbilt Industrial Park
Hauppauge, NY
360 Vanderbilt Motor
Parkway ..................... 62% 54,000 100.0% $285,255 $ 5.28 1
410 Vanderbilt Motor
Parkway ..................... 7% 41,784 100.0% $266,688 $ 6.38 4
595 Old Willets Path ......... 14% 31,670 81.7% $162,043 $ 6.26 3
611 Old Willets Path ......... 11% 20,000 50.0% $ 43,810 $ 4.39 1
631/641 Old Willets Path ..... 31% 25,000 100.0% $125,868 $ 5.03 4
651/661 Old Willets Path ..... 45% 25,000 100.0% $163,755 $ 6.55 7
681 Old Willets Path ......... 10% 15,000 100.0% $106,511 $ 7.10 1
740 Old Willets Path ......... 5% 30,000 100.0% $ 29,670 $ 0.99 1
325 Rabro Dr. ................ 10% 35,473 100.0% $147,374 $ 4.15 2
250 Kennedy Dr. .............. 9% 127,980 100.0% $455,298 $ 3.56 1
90 Plant Ave. ................ 13% 74,915 100.0% $448,325 $ 5.98 3
110 Plant Ave. ............... 8% 125,000 0.0% $ 0 $ 0.00 0
55 Engineers Rd. ............. 8% 36,000 100.0% $362,434 $ 10.07 1
65 Engineers Rd. ............. 10% 23,000 100.0% $155,729 $ 6.77 1
85 Engineers Rd. ............. 5% 40,800 100.0% $119,988 $ 2.94 2
100 Engineers Rd. ............ 11% 88,000 0.0% $ 0 $ 0.00 0
150 Engineers Rd. ............ 11% 135,000 100.0% $424,195 $ 3.14 1
20 Oser Ave. ................. 18% 42,000 98.7% $377,060 $ 9.10 2
30 Oser Ave. ................. 21% 42,000 82.1% $252,082 $ 7.31 4
40 Oser Ave. ................. 33% 59,800 100.0% $402,543 $ 6.73 13
50 Oser Ave. ................. 15% 60,000 100.0% $246,000 $ 4.10 1
60 Oser Ave. ................. 19% 48,000 100.0% $196,800 $ 4.10 1
63 Oser Ave. ................. 9% 22,000 0.0% $ 0 $ 0.00 0
65 Oser Ave. ................. 10% 20,000 100.0% $111,673 $ 5.58 1
73 Oser Ave. ................. 15% 20,000 100.0% $134,493 $ 6.72 1
80 Oser Ave. ................. 25% 19,500 100.0% $ 70,525 $ 3.62 1

I-13

85 Nicon Ct. .................. 100% Fee 1978 6.1 30
90 Oser Ave. .................. 100% Fee 1973 1.1 16
104 Parkway Dr. ............... 100% Fee 1985 1.8 15
110 Ricefield Ln. ............. 100% Fee 1980 2.0 15
120 Ricefield Ln. ............. 100% Fee 1983 2.0 15
125 Ricefield Ln. ............. 100% Fee 1973 2.0 14
135 Ricefield Ln. ............. 100% Fee 1981 2.1 15
85 Adams Dr. .................. 100% Fee 1980 1.8 15
395 Oser Ave. ................. 100% Fee 1980 6.1 14
185 Oser Ave. ................. 100% Fee 1974 2.0 18
25 Davids Dr. ................. 100% Fee 1975 3.2 20
45 Adams Ave. ................. 100% Fee 1979 2.1 18
225 Oser Ave. ................. 100% Fee 1977 1.2 14
180 Oser Ave. ................. 100% Fee 1978 3.4 16
360 Oser Ave. ................. 100% Fee 1981 1.3 18
400 Oser Ave. ................. 100% Fee 1982 9.5 16
375 Oser Ave. ................. 100% Fee 1981 1.2 18
425 Rabro Drive ............... 100% Fee 1980 4.0 16
390 Motor Parkway ............. 100% Fee 1980 10.0 14
400 Moreland Road(3) .......... 100% Fee 1967 6.3 17
600 Old Willets Path .......... 100% Fee 1965 4.5 14
-----
Total-Vanderbilt Industrial
Park(4) ...................... 160.4
-----
Airport International Plaza
Islip, NY
20 Orville Dr. ................ 100% Fee 1978 1.0 16
25 Orville Dr. ................ 100% Fee 1970 2.2 16
50 Orville Dr. ................ 100% Fee 1976 1.6 15
65 Orville Dr. ................ 100% Fee 1971 2.2 14
70 Orville Dr. ................ 100% Fee 1975 2.3 22
80 Orville Dr. ................ 100% Fee 1988 6.5 16
85 Orville Dr. ................ 100% Fee 1974 1.9 14
95 Orville Dr. ................ 100% Fee 1974 1.8 14
110 Orville Dr. ............... 100% Fee 1979 6.4 24
180 Orville Dr. ............... 100% Fee 1982 2.3 16
1101 Lakeland Ave. ............ 100% Fee 1983 4.9 20
1385 Lakeland Ave. ............ 100% Fee 1973 2.4 16
125 Wilbur Place .............. 100% Fee 1977 4.0 16
140 Wilbur Place .............. 100% Fee 1973 3.1 20
160 Wilbur Place .............. 100% Fee 1978 3.9 16
170 Wilbur Place .............. 100% Fee 1979 4.9 16
4040 Veterans Highway ......... 100% Fee 1972 1.0 14
120 Wilbur Place .............. 100% Fee 1972 2.8 16
2002 Orville Drive North ...... 100% Fee 2000 15.8 24
2004 Orville Drive North ...... 100% Fee 1998 7.4 24
2005 Orville Drive North ...... 100% Fee 1999 8.7 24
-----
Total-Airport
International Plaza .......... 87.1
-----
County Line Industrial
Center
Melville, NY
5 Hub Dr ...................... 100% Fee 1979 6.9 20
10 Hub Dr. .................... 100% Fee 1975 6.6 20
30 Hub Drive .................. 100% Fee 1976 5.1 20
265 Spagnoli Rd. .............. 100% Fee 1978 6.0 20
-----
Total-County Line
Industrial Center ............ 24.6
-----
Standalone Long Island
Properties
Islip/Islandia
32 Windsor Pl.
Islip, NY .................... 100% Fee 1971 2.5 18
42 Windsor Pl.
Islip, NY .................... 100% Fee 1972 2.4 18
208 Blydenburgh Rd.
Islandia, NY ................. 100% Fee 1969 2.4 14
210 Blydenburgh Rd.
Islandia, NY ................. 100% Fee 1969 1.2 14
71 Hoffman Ln.
Islandia, NY ................. 100% Fee 1970 5.8 16
135 Fell Ct.
Islip, NY .................... 100% Fee 1965 3.2 16
-----
Subtotal Islip/Islandia 17.5
-----

85 Nicon Ct. .................. 10% 104,000 100.0% $ 566,714 $ 5.45 1
90 Oser Ave. .................. 26% 37,500 100.0% $ 136,875 $ 3.65 1
104 Parkway Dr. ............... 50% 27,600 100.0% $ 106,536 $ 3.86 1
110 Ricefield Ln. ............. 25% 32,264 100.0% $ 172,038 $ 5.33 1
120 Ricefield Ln. ............. 24% 33,100 100.0% $ 187,360 $ 5.66 1
125 Ricefield Ln. ............. 20% 30,495 100.0% $ 213,524 $ 7.00 1
135 Ricefield Ln. ............. 10% 32,340 100.0% $ 215,685 $ 6.67 1
85 Adams Dr. .................. 90% 20,000 100.0% $ 280,000 $ 14.00 1
395 Oser Ave. ................. 100% 50,000 99.0% $ 452,925 $ 9.15 1
185 Oser Ave. ................. 40% 30,000 100.0% $ 195,250 $ 6.51 1
25 Davids Dr. ................. 90% 40,000 100.0% $ 340,000 $ 8.50 1
45 Adams Ave. ................. 90% 28,000 100.0% $ 245,000 $ 8.75 1
225 Oser Ave. ................. 80% 10,000 99.6% $ 116,175 $ 11.67 1
180 Oser Ave. ................. 35% 61,264 100.0% $ 491,344 $ 8.02 9
360 Oser Ave. ................. 35% 23,000 100.0% $ 135,777 $ 5.90 1
400 Oser Ave. ................. 30% 164,936 94.3% $ 1,358,265 $ 8.74 26
375 Oser Ave. ................. 40% 20,000 100.0% $ 69,626 $ 3.48 1
425 Rabro Drive ............... 25% 65,421 100.0% $ 695,098 $ 10.63 1
390 Motor Parkway ............. 4% 181,060 100.0% $ 998,576 $ 5.52 1
400 Moreland Road(3) .......... 10% 56,875 0.0% $ 0 $ 0.00 0
600 Old Willets Path .......... 25% 69,627 100.0% $ 421,264 $ 6.05 1
------- ----------- --
Total-Vanderbilt Industrial
Park(4) ...................... 2,379,404 88.4% $12,486,151 $ 6.08 110
--------- ----------- ---
Airport International Plaza
Islip, NY
20 Orville Dr. ................ 50% 12,900 100.0% $ 188,989 $ 14.65 1
25 Orville Dr. ................ 100% 33,655 100.0% $ 506,572 $ 15.05 2
50 Orville Dr. ................ 20% 28,000 99.8% $ 264,493 $ 9.48 3
65 Orville Dr. ................ 13% 32,000 100.0% $ 197,117 $ 6.16 2
70 Orville Dr. ................ 7% 41,508 100.0% $ 340,037 $ 8.19 2
80 Orville Dr. ................ 21% 92,544 90.4% $ 577,727 $ 6.90 6
85 Orville Dr. ................ 20% 25,000 100.0% $ 166,992 $ 6.66 2
95 Orville Dr. ................ 10% 25,300 100.0% $ 130,717 $ 5.17 1
110 Orville Dr. ............... 15% 110,000 100.0% $ 665,500 $ 6.05 1
180 Orville Dr. ............... 18% 37,612 100.0% $ 199,900 $ 5.31 2
1101 Lakeland Ave. ............ 8% 90,411 100.0% $ 546,987 $ 6.05 1
1385 Lakeland Ave. ............ 18% 35,000 100.0% $ 196,181 $ 5.61 3
125 Wilbur Place .............. 31% 62,686 87.0% $ 365,036 $ 6.69 10
140 Wilbur Place .............. 37% 48,500 100.0% $ 304,322 $ 6.27 2
160 Wilbur Place .............. 30% 62,710 100.0% $ 544,667 $ 8.69 2
170 Wilbur Place .............. 28% 72,062 100.0% $ 446,784 $ 6.19 6
4040 Veterans Highway ......... 100% 2,800 100.0% $ 20,649 $ 7.37 1
120 Wilbur Place .............. 15% 34,866 100.0% $ 234,011 $ 6.71 4
2002 Orville Drive North ...... 17% 206,000 100.0% $ 1,734,856 $ 8.42 2
2004 Orville Drive North ...... 20% 106,515 100.0% $ 761,324 $ 7.15 1
2005 Orville Drive North ...... 20% 130,010 100.0% $ 983,816 $ 7.57 1
--------- ----------- ---
Total-Airport
International Plaza .......... 1,290,079 98.7% $ 9,376,677 $ 7.36 55
--------- ----------- ---
County Line Industrial
Center
Melville, NY
5 Hub Dr ...................... 20% 88,001 100.0% $ 556,565 $ 6.32 2
10 Hub Dr. .................... 15% 95,671 100.0% $ 723,670 $ 7.56 3
30 Hub Drive .................. 18% 73,127 100.0% $ 499,492 $ 6.83 2
265 Spagnoli Rd. .............. 28% 85,555 100.0% $ 700,554 $ 8.19 3
--------- ----------- ---
Total-County Line
Industrial Center ............ 342,354 100.0% $ 2,480,281 $ 7.24 10
--------- ----------- ---
Standalone Long Island
Properties
Islip/Islandia
32 Windsor Pl.
Islip, NY .................... 10% 43,000 100.0% $ 149,892 $ 3.49 1
42 Windsor Pl.
Islip, NY .................... 8% 65,000 100.0% $ 151,667 $ 2.33 1
208 Blydenburgh Rd.
Islandia, NY ................. 17% 24,000 100.0% $ 123,430 $ 5.14 4
210 Blydenburgh Rd.
Islandia, NY ................. 16% 20,000 100.0% $ 114,224 $ 5.71 2
71 Hoffman Ln.
Islandia, NY ................. 10% 30,400 100.0% $ 82,561 $ 2.72 1
135 Fell Ct.
Islip, NY .................... 20% 30,124 100.0% $ 244,205 $ 8.11 1
--------- ----------- ---
Subtotal Islip/Islandia 212,524 100.0% $ 865,979 $ 4.07 10
--------- ----------- ---

I-14

Farmingdale
70 Schmitt Boulevard,
Farmingdale, NY ........... 100% Fee 1975 4.4 18
105 Price Parkway,
Farmingdale, NY ........... 100% Fee 1969 12.0 26
110 Bi County Blvd.
Farmingdale, NY ........... 100% Fee 1984 9.5 19
-----
Subtotal Farmingdale 25.9
-----
Melville
70 Maxess Rd,
Melville, NY .............. 100% Fee 1969 9.3 15
20 Melville Park Rd,
Melville, NY .............. 100% Fee 1965 4.0 23
45 Melville Park Drive,
Melville, NY .............. 100% Fee 1998 4.2 24
65 Marcus Drive.
Melville, NY .............. 100% Fee 1968 5.0 16
-----
Subtotal Melville 22.5
-----
Hauppauge
300 Motor Parkway,
Hauppauge, NY ............. 100% Fee 1979 4.2 14
1516 Motor Parkway,
Hauppauge, NY ............. 100% Fee 1981 7.9 24
-----
Subtotal Hauppauge ......... 12.1
-----
Other
933 Motor Parkway
Smithtown, NY ............. 100% Fee 1973 5.6 20
65 S. Service Rd.
Plainview, NY(5) .......... 100% Fee 1961 1.6 14
85 S. Service Rd.
Plainview, NY ............. 100% Fee 1961 1.6 14
19 Nicholas Dr.,
Yaphank, NY (6) ........... 100% Fee 1989 29.6 24
48 Harbor Park Dr.,
Port Washington, NY ....... 100% Fee 1976 2.7 16
110 Marcus Dr.,
Huntington, NY ............ 100% Fee 1980 6.1 20
35 Engle St.,
Hicksville, NY ............ 100% Leasehold(7) 1966 4.0 24
100 Andrews Rd.,
Hicksville, NY ............ 100% Fee 1954 11.7 25
-----
Subtotal other 62.9
-----
Total Long Island
Properties ................ 413.0
-----
Standalone Westchester
Properties
100 Grasslands Rd.,
Elmsford, NY .............. 100% Fee 1964 3.6 16
500 Saw Mill Rd.,
Elmsford, NY .............. 100% Fee 1968 7.3 22
-----
Total-Standalone
Westchester Industrial
Properties ................ 10.9
-----
Standalone New Jersey
Industrial Properties
40 Cragwood Rd,
South Plainfield, NJ ...... 100% Fee 1965 13.5 16
100 Forge Way,
Rockaway, NJ .............. 100% Fee 1986 3.5 24
200 Forge Way,
Rockaway, NJ .............. 100% Fee 1989 12.7 28
300 Forge Way,
Rockaway, NJ .............. 100% Fee 1989 4.2 24
400 Forge Way,
Rockaway, NJ .............. 100% Fee 1989 12.8 28
-----
Total New Jersey
Standalone
Industrial Properties ..... 46.7
-----
Standalone Connecticut
Industrial Property
710 Bridgeport
Shelton, CT ............... 100% Fee 1971-1979 36.1 22
-----
Total Connecticut
Standalone Industrial
Property 36.1
-----
Total-Industrial
Properties (4) 506.7
=====

Farmingdale
70 Schmitt Boulevard,
Farmingdale, NY ........... 10% 76,312 100.0% $ 582,060 $ 7.63 1
105 Price Parkway,
Farmingdale, NY ........... 9% 297,000 100.0% $ 1,473,075 $ 4.96 1
110 Bi County Blvd.
Farmingdale, NY ........... 45% 147,303 99.6% $ 1,435,514 $ 10.37 10
------- ----------- --
Subtotal Farmingdale 520,615 99.9% $ 3,490,649 $ 6.71 12
------- ----------- --
Melville
70 Maxess Rd,
Melville, NY .............. 38% 78,600 100.0% $ 720,577 $ 9.17 1
20 Melville Park Rd,
Melville, NY .............. 66% 67,922 100.0% $ 401,204 $ 5.91 1
45 Melville Park Drive,
Melville, NY .............. 22% 40,247 100.0% $ 584,542 $ 14.52 1
65 Marcus Drive.
Melville, NY .............. 50% 60,000 100.0% $ 646,375 $ 10.77 1
------- ----------- --
Subtotal Melville 246,769 100.0% $ 2,352,698 $ 9.53 4
------- ----------- --
Hauppauge
300 Motor Parkway,
Hauppauge, NY ............. 100% 55,942 96.8% $ 880,587 $ 17.92 9
1516 Motor Parkway,
Hauppauge, NY ............. 5% 140,000 100.0% $ 878,850 $ 6.28 1
------- ----------- --
Subtotal Hauppauge ......... 195,942 99.1% $ 1,759,437 $ 9.06 10
------- ----------- --
Other
933 Motor Parkway
Smithtown, NY ............. 26% 48,000 50.0% $ 153,387 $ 6.39 1
65 S. Service Rd.
Plainview, NY(5) .......... 10% 10,000 100.0% $ 61,499 $ 6.15 1
85 S. Service Rd.
Plainview, NY ............. 60% 20,000 100.0% $ 132,113 $ 6.61 2
19 Nicholas Dr.,
Yaphank, NY (6) ........... 5% 230,000 100.0% $ 1,353,042 $ 5.88 1
48 Harbor Park Dr.,
Port Washington, NY ....... 100% 35,000 100.0% $ 765,072 $ 21.86 1
110 Marcus Dr.,
Huntington, NY ............ 39% 78,240 100.0% $ 526,364 $ 6.73 1
35 Engle St.,
Hicksville, NY ............ 8% 120,283 100.0% $ 610,892 $ 5.08 1
100 Andrews Rd.,
Hicksville, NY ............ 12% 167,754 100.0% $ 1,188,780 $ 7.09 2
------- ----------- --
Subtotal other 709,277 96.6% $ 4,791,149 $ 7.00 10
------- ----------- --
Total Long Island
Properties ................ 5,896,964 94.7% $37,603,021 $ 6.80 216
--------- ----------- ---
Standalone Westchester
Properties
100 Grasslands Rd.,
Elmsford, NY .............. 100% 47,690 100.0% $ 825,670 $ 17.31 4
500 Saw Mill Rd.,
Elmsford, NY .............. 17% 92,000 100.0% $ 920,000 $ 10.00 1
--------- ----------- ---
Total-Standalone
Westchester Industrial
Properties ................ 139,690 100.0% $ 1,745,670 $ 12.50 5
--------- ----------- ---
Standalone New Jersey
Industrial Properties
40 Cragwood Rd,
South Plainfield, NJ ...... 49% 135,000 67.2% $ 1,421,202 $ 15.68 4
100 Forge Way,
Rockaway, NJ .............. 12% 20,150 100.0% $ 174,597 $ 8.66 5
200 Forge Way,
Rockaway, NJ .............. 23% 72,118 100.0% $ 586,560 $ 8.13 2
300 Forge Way,
Rockaway, NJ .............. 37% 24,200 100.0% $ 230,050 $ 9.51 2
400 Forge Way,
Rockaway, NJ .............. 20% 73,000 100.0% $ 499,620 $ 6.84 3
--------- ----------- ---
Total New Jersey
Standalone
Industrial Properties ..... 324,468 86.3% $ 2,912,029 $ 10.40 16
--------- ----------- ---
Standalone Connecticut
Industrial Property
710 Bridgeport
Shelton, CT ............... 30% 452,414 54.3% $ 2,032,502 $ 8.27 1
--------- ----------- ---
Total Connecticut
Standalone Industrial
Property 452,414 54.3% $ 2,032,502 $ 8.27 1
--------- ----------- ---
Total-Industrial
Properties (4) 6,813,536 91.7% $44,293,222 $ 7.15 238
========= =========== ===

I-15

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

(2) Represents Base Rent, net of electric reimbursement, of signed leases at
December 31, 2001 adjusted for scheduled contractual increases during the
12 months ending December 31, 2002. Total Base Rent for these purposes
reflects the effect of any lease expirations that occur during the 12
month period ending December 31, 2002. Amounts included in rental revenue
for financial reporting purposes have been determined on a straight-line
basis rather than on the basis of contractual rent as set forth in the
foregoing table.

(3) Property under redevelopment.

(4) Percent leased and annual base rent per leased square foot excludes
properties under development.

(5) Property was sold subsequent to December 31, 2001

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

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

RETAIL PROPERTIES

As of December 31, 2001, the Company owned two free-standing 10,000 square
foot retail properties located in Great Neck and Huntington, New York of which
one property is fully leased and one property is vacant.

DEVELOPMENTS IN PROGRESS

As of December 31, 2001, the Company had invested approximately $143.7
million in developments in progress. This amount includes approximately $62.4
million relating to existing buildings encompassing approximately 464,000
square feet. In addition, the Company has also invested approximately $81.3
million relating to 13 parcels of land which it can develop approximately 2.8
million square feet of office and industrial space. One of these parcels, a 32
acre land parcel located in Rye Brook, NY, is currently under contract for sale
and is scheduled to close during 2002. In addition, the Company is scheduled to
acquire, during the first quarter of 2002, 52.7 acres of land located in
Valhalla, NY on which the Company can develop approximately 875,000 square feet
of office space.

THE OPTION PROPERTIES

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

As of December 31, 2001, the Company has acquired four of the Option
Properties for an aggregate purchase price of approximately $35 million and the
issuance of approximately 475,000 OP Units. In addition, during 1998, one of
the Option Properties was sold by Reckson to a third party.

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

I-16

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

The following table sets forth annual and per square foot recurring,
non-incremental revenue-generating capital expenditures and non-incremental
revenue-generating tenant improvement costs and leasing commissions incurred by
the Company to retain revenues attributable to existing leased space for the
period 1997 through 2001 for the Company's office and industrial properties. As
noted, incremental revenue-generating tenant improvement costs and leasing
commissions are excluded from the table set forth immediately below. The
historical capital expenditures, tenant improvement costs and leasing
commissions set forth below are not necessarily indicative of future recurring,
non-incremental revenue-generating capital expenditures or non-incremental
revenue-generating tenant improvement costs and leasing commissions.

1997 1998 1999 2000 2001
---- ---- ---- ---- ----

NON-INCREMENTAL REVENUE GENERATING
CAPITAL EXPENDITURES
Suburban Office Properties
Total .................................... $ 1,108,675 $ 2,004,976 $ 2,298,899 $ 3,289,116 $ 4,606,069
Per square foot .......................... $ 0.22 $ 0.23 $ 0.23 $ 0.33 $ 0.45
NYC Office Properties
Total .................................... N/A N/A N/A $ 946,718 $ 1,584,501
Per square foot .......................... N/A N/A N/A $ 0.38 $ 0.45
Industrial Properties ....................
Total .................................... $ 733,233 $ 1,205,266 $ 1,048,688 $ 813,431 $ 711,666
Per square foot .......................... $ 0.15 $ 0.12 $ 0.11 $ 0.11 $ 0.11
NON-INCREMENTAL REVENUE GENERATING TENANT
IMPROVEMENT COSTS AND LEASING COMMISSIONS
Long Island Office Properties
Annual Tenant Improvement Costs .......... $ 784,044 $ 1,140,251 $ 1,009,357 $ 2,853,706 $ 2,722,457
Per square foot improved ................. 7.00 3.98 4.73 6.99 8.47
Annual Leasing Commissions .............. $ 415,822 $ 418,191 $ 551,762 $ 2,208,604 $ 1,444,412
Per square foot leased .................. 4.83 1.46 2.59 4.96 4.49
Total per square foot ................... $ 11.83 $ 5.44 $ 7.32 $ 11.95 $ 12.96
Westchester Office Properties
Annual Tenant Improvement Costs ......... $ 1,211,665 $ 711,160 $ 1,316,611 $ 1,860,027 $ 2,584,728
Per square foot improved ................ 8.9 4.45 5.62 5.72 5.91
Annual Leasing Commissions .............. $ 366,257 $ 286,150 $ 457,730 $ 412,226 $ 1,263,012
Per square foot leased .................. 2.69 1.79 1.96 3.00 2.89
Total per square foot ................... $ 11.59 $ 6.24 $ 7.58 $ 8.72 $ 8.80
Connecticut Office Properties
Annual Tenant Improvement Costs ......... $ 1,022,421 $ 202,880 $ 179,043 $ 385,531 $ 213,909
Per square foot improved ................ 13.39 5.92 4.88 4.19 1.46
Annual Leasing Commissions .............. $ 256,615 $ 151,063 $ 110,252 $ 453,435 $ 209,322
Per square foot leased .................. 3.36 4.41 3.00 4.92 1.43
Total per square foot ................... $ 16.75 $ 10.33 $ 7.88 $ 9.11 $ 2.89
New Jersey Office Properties
Annual Tenant Improvement Costs ......... N/A $ 654,877 $ 454,054 $ 1,580,323 $ 1,146,385
Per square foot improved ................ N/A 3.78 2.29 6.71 2.92
Annual Leasing Commissions .............. N/A $ 396,127 $ 787,065 $ 1,031,950 $ 1,602,962
Per square foot leased .................. N/A 2.08 3.96 4.44 4.08
Total per square foot ................... N/A $ 5.86 $ 6.25 $ 11.15 $ 7.00
New York Office Properties
Annual Tenant Improvement Costs ......... N/A N/A N/A $ 65,267 $ 788,930
Per square foot improved ................ N/A N/A N/A 1.79 15.69
Annual Leasing Commissions .............. N/A N/A N/A $ 418,185 $ 1,098,829
Per square foot leased .................. N/A N/A N/A 11.50 21.86
Total per square foot ................... N/A N/A N/A $ 13.29 $ 37.55
Industrial Properties
Annual Tenant Improvement Costs ......... $ 230,466 $ 283,842 $ 375,646 $ 650,216 $ 1,366,488
Per square foot improved ................ 0.55 0.76 0.25 0.95 1.65
Annual Leasing Commissions .............. $ 81,013 $ 200,154 $ 835,108 $ 436,506 $ 354,572
Per square foot leased .................. 0.19 0.44 0.56 0.64 0.43
Total per square foot ................... $ 0.74 $ 1.20 $ 0.81 $ 1.59 $ 2.08

I-17

MORTGAGE INDEBTEDNESS

The following table sets forth certain information regarding the mortgage
debt of the Company, as of December 31, 2001.

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

80 Orville Drive .................... $ 2,616 10.10% February 1, 2004 (3)
395 North Service Road .............. 20,117 6.45% October 26, 2005 (2)
200 Summit Lake Drive ............... 19,770 9.25% January 1, 2006 25 year
1350 Avenue of the Americas ......... 75,000 6.52% June 1, 2006 30 year (5)
Landmark Square ..................... 46,069 8.02% October 7, 2006 25 year
100 Summit Lake Drive ............... 20,373 8.50% April 1, 2007 15 year
333 Earl Ovington Blvd (1) .......... 54,785 7.72% August 14, 2007 25 year
810 7th Avenue ...................... 84,280 7.73% August 1, 2009 25 year
100 Wall Street ..................... 36,522 7.73% August 1, 2009 25 year
6800 Jericho Turnpike ............... 14,131 8.07% July 1, 2010 25 year
6900 Jericho Turnpike ................ 7,458 8.07% July 1, 2010 25 year
580 White Plains Road ............... 12,879 7.86% September 1, 2010 25 year
919 3rd Avenue (6) .................. 249,080 6.867% August 1, 2011 30 year
110 Bi-County Blvd. ................. 3,849 9.125% November 30, 2012 20 year
120 West 45th Street ................ 65,214 6.82%(4) November 1, 2027 28 year
One Orlando Center .................. 38,934 6.82%(4) November 1, 2027 28 year
---------
Total ............................... $ 751,077
=========

----------------
(1) The Company has a 60% general partnership interest in this property and its
proportionate share of the aggregate principal amount of the mortgage debt
is approximately $32.9 million.

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

(3) Interest only

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

(5) Interest only for the first year; 30 years thereafter.

(6) The company has a 51% membership interest in this property and its
proportionate share of the aggregate principal amount of the mortgage debt
is approximately $127.0 million.

I-18

ITEM 3. LEGAL PROCEEDINGS

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

On or about October 3, 2001, Burgess Services, LLC ("Burgess Services"),
Dominion Venture Group, LLC ("Dominion Venture Group") and certain affiliated
parties commenced an action in Oklahoma State Court against Reckson Strategic
Venture Partners ("RSVP"), the Company, and RAP-Dominion LLC ("RAP-Dominion"),
a joint venture through which the Company invested with RSVP in a venture with
certain of the plaintiffs. The plaintiff's petition alleges, among other
things, that the defendants committed an anticipatory breach of the joint
venture agreements and defrauded them into contributing assets into the joint
venture. Plaintiff's petition seeks unspecified monetary damages, equitable
relief and a declaratory adjudication of the parties' contractual rights,
including whether a certain "buy-sell" provision has been properly triggered.
The case was removed to the United States District Court for the Western
District of Oklahoma. The Defendants, including the Company, have denied all
allegations. In addition, the defendants counter-sued plaintiffs for breach of
their contractual and fiduciary duties, and misappropriation of approximately
$30 million of the proceeds from the sale of an asset owned by the venture
which the defendants claim was wrongly applied to pay off certain loans that
Burgess and his wife personally guaranteed, rather than distributed to
RAP-Dominion in accordance with the joint venture agreement. The defendants
also allege that not only was the buy-sell trigger invalidly triggered, but the
valuation formulas proposed violate the agreement. The Company believes that
the claims asserted against it and RAP-Dominion are without merit and intends
to defend against them vigorously. The Company also intends to pursue its
rights to recover the misappropriated funds and other appropriate relief.

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, 2001.

I-19

PART II

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

CLASS A COMMON STOCK

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

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

March 31, 2000 .............. $ 21.313 $ 17.688 $ .37125
June 30, 2000 ............... $ 24.063 $ 18.750 $ .3860 (1)
September 30, 2000 .......... $ 26.813 $ 23.625 $ .3860
December 31, 2000 ........... $ 26.000 $ 21.875 $ .3860

March 31, 2001 .............. $ 25.88 $ 21.90 $ .3860
June 30, 2001 ............... $ 23.90 $ 21.14 $ .4246 (2)
September 30, 2001 .......... $ 24.15 $ 21.90 $ .4246
December 31, 2001 ........... $ 24.46 $ 22.15 $ .4246

(1) Commencing with the distribution for the quarter ending June 30, 2000, the
Board of Directors of the Company increased the quarterly distribution to
$.3860 per share, which is equivalent to an annual distribution of $1.544
per share.

(2) Commencing with the distribution for the quarter ending June 30, 2001, the
Board of Directors of the Company increased the quarterly distribution to
$.4246 per share, which is equivalent to an annual distribution of $1.6984
per share.

During the three months ended December 31, 2001, the Registrant issued
150,825 shares of its Class A common stock, par value $0.01 per share, in
exchange for an equal number of units of limited partnership interest of the
Operating Partnership. This transaction was exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933.

CLASS B COMMON STOCK

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

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

March 31, 2000 .............. $ 22.875 $ 18.875 $ .5600
June 30, 2000 ............... $ 25.438 $ 19.938 $ .5867 (1)
September 30, 2000 .......... $ 27.563 $ 24.625 $ .6000
December 31, 2000 ........... $ 27.563 $ 22.500 $ .6000

March 31, 2001 .............. $ 27.50 $ 22.90 $ .6000
June 30, 2001 ............... $ 25.00 $ 22.40 $ .6164 (2)
September 30, 2001 .......... $ 25.60 $ 23.29 $ .6492
December 31, 2001 ........... $ 25.76 $ 23.55 $ .6492

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

(2) Commencing with the distribution for the three month period ended July 31,
2001, the Board of Directors of the Company increased the quarterly
distribution to $.6492 per share, which is equivalent to an annual
distribution of $2.5968 per share.

II-1

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

RECKSON ASSOCIATES REALTY CORP.
-------------------------------
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
2001 2000
--------------- --------------

OPERATING DATA:
Total revenues ............................................................ $ 540,468 $ 509,938
Total expenses ............................................................ 395,414 373,711
Income (before minority interests, preferred dividends and
distributions, valuation reserves and extraordinary loss) ................ 145,054 136,227
Preferred dividends and distributions ..................................... 23,977 28,012
Minority interests ........................................................ 10,248 20,789
Valuation reserves on investments in affiliate loans and joint ventures
and other investments .................................................... 166,101 --
Extraordinary loss (net of minority interests' share) ..................... 2,595 1,396
Net income (loss) allocable to Class A common shareholders ................ (44,243) 62,989
Net income (loss) allocable to Class B common shareholders ................ (13,624) 23,041
PER SHARE DATA - CLASS A COMMON SHAREHOLDERS:
Basic:
Basic net income (loss) before extraordinary loss ......................... $ (.88) $ 1.49
Extraordinary loss ........................................................ (.04) (.03)
Basic net income (loss) ................................................... (.92) 1.46
Weighted average shares outstanding ....................................... 48,121 43,070
Diluted:
Diluted net income (loss) before extraordinary loss ....................... $ (.88) $ 1.47
Extraordinary loss ........................................................ (.04) (.02)
Diluted net income (loss) ................................................. (.92) 1.45
Diluted weighted average shares outstanding ............................... 48,121 43,545
PER SHARE DATA - CLASS B COMMON SHAREHOLDERS:
Basic:
Basic net income (loss) before extraordinary loss ......................... $ (1.26) $ 2.28
Extraordinary loss ........................................................ (.06) (.04)
Basic net Income (loss) ................................................... (1.32) 2.24
Weighted average shares outstanding ....................................... 10,284 10,284
Diluted:
Diluted net income (loss) before extraordinary loss ....................... $ (1.26) $ 1.62
Extraordinary loss ........................................................ (.06) (.03)
Diluted net income (loss) ................................................. (1.32) 1.59
Diluted weighted average shares outstanding ............................... 10,284 10,284
BALANCE SHEET DATA (PERIOD END):
Commercial real estate properties, before accumulated depreciation ........ $ 2,880,879 $ 2,770,607
Cash and cash equivalents (4) ............................................. 121,975 17,843
Total assets .............................................................. 2,994,218 2,998,030
Mortgage notes payable .................................................... 751,077 728,971
Unsecured credit facility (4) ............................................. 271,600 216,600
Unsecured term loan ....................................................... -- --
Senior unsecured notes .................................................... 449,463 449,385
Market value of equity (1) ................................................ 1,915,587 2,016,390
Total market capitalization including debt (1 and 2) ...................... 3,251,599 3,397,204
OTHER DATA:
Funds from operations (basic) (3) ......................................... $ 179,687 $ 167,782
Funds from operations (diluted) (3) ....................................... $ 206,288 $ 202,169
Total square feet (at end of period) ...................................... 20,611 21,291
Number of properties (at end of period) ................................... 182 188

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

OPERATING DATA:
Total revenues ............................................................ $ 403,153 $ 266,373 $ 153,395
Total expenses ............................................................ 299,111 201,892 107,905
Income (before minority interests, preferred dividends and
distributions, valuation reserves and extraordinary loss) ................ 104,042 64,481 45,490
Preferred dividends and distributions ..................................... 27,001 14,244 --
Minority interests ........................................................ 16,209 10,672 8,624
Valuation reserves on investments in affiliate loans and joint ventures
and other investments .................................................... -- -- --
Extraordinary loss (net of minority interests' share) ..................... 555 1,670 2,230
Net income (loss) allocable to Class A common shareholders ................ 47,529 37,895 34,636
Net income (loss) allocable to Class B common shareholders ................ 12,748 -- --
PER SHARE DATA - CLASS A COMMON SHAREHOLDERS:
Basic:
Basic net income (loss) before extraordinary loss ......................... $ 1.19 $ 1.00 $ 1.13
Extraordinary loss ........................................................ (.01) (.04) (.07)
Basic net income (loss) ................................................... 1.18 0.96 1.06
Weighted average shares outstanding ....................................... 40,270 39,473 32,727

Diluted:
Diluted net income (loss) before extraordinary loss ....................... $ 1.18 $ .99 $ 1.11
Extraordinary loss ........................................................ (.01) (.04) (.07)
Diluted net income (loss) ................................................. 1.17 .95 1.04
Diluted weighted average shares outstanding ............................... 40,676 40,010 33,260
PER SHARE DATA - CLASS B COMMON SHAREHOLDERS:
Basic:
Basic net income (loss) before extraordinary loss ......................... $ 1.91 $ -- $ --
Extraordinary loss ........................................................ (.02) -- --
Basic net Income (loss) ................................................... 1.89 -- --
Weighted average shares outstanding ....................................... 6,744 -- --

Diluted:
Diluted net income (loss) before extraordinary loss ....................... $ 1.27 $ -- $ --
Extraordinary loss ........................................................ (.01) -- --
Diluted net income (loss) ................................................. 1.26 -- --
Diluted weighted average shares outstanding ............................... 6,744 -- --

BALANCE SHEET DATA (PERIOD END):
Commercial real estate properties, before accumulated depreciation ........ $ 2,208,399 $ 1,737,133 $ 1,011,228
Cash and cash equivalents (4) ............................................. 21,368 2,349 21,828
Total assets .............................................................. 2,733,878 1,854,816 1,113,257
Mortgage notes payable .................................................... 459,174 253,463 180,023
Unsecured credit facility (4) ............................................. 297,600 465,850 210,250
Unsecured term loan ....................................................... 75,000 20,000 --
Senior unsecured notes .................................................... 449,313 150,000 150,000
Market value of equity (1) ................................................ 1,726,845 1,332,882 1,141,592
Total market capitalization including debt (1 and 2) ...................... 2,993,756 2,199,936 1,668,800

OTHER DATA:
Funds from operations (basic) (3) ......................................... $ 130,820 $ 97,697 $ 69,548
Funds from operations (diluted) (3) ....................................... $ 161,681 $ 99,450 $ 69,548
Total square feet (at end of period) ...................................... 21,385 21,000 13,645
Number of properties (at end of period) ................................... 189 204 155

(1) Based on the sum of:
(i) the market value of the Company's Class A common stock and
operating partnership units (assuming conversion) of 57,469,595,
53,046,928, 48,076,648, 47,800,049 and 44,988,846 at December 31,
2001, 2000, 1999, 1998 and 1997, respectively (based on a per
share/unit price of $23.36, $25.06, $20.50, $22.19 and $25.38 at
December 31, 2001, 2000, 1999, 1998 and 1997, respectively),

(ii) the market value of the Company's Class B common stock of
10,283,513, 10,283,513 and 10,283,763 shares at December 31, 2001,
2000 and 1999, respectively (based on a per share price of $25.51,
$27.19 and $22.75 at December 31, 2001, 2000 and 1999,
respectively),

(iii) the liquidation preference value of 11,192,000, 11,192,000 and
15,192,000 shares of the Company's preferred stock at December 31,
2001, 2000 and 1999, respectively (based on a per share value of
$25.00),

(iv) the liquidation preference value of 30,965, 42,518 and 42,518 of
the operating partnership's preferred units at December 31, 2001,
2000 and 1999, respectively (based on a per unit value of $1,000)
and

(v) at December 31, 2000 and December 31, 1999, the contributed value
of a minority partners' preferred interest of $85 million.

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

(3) See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" for a discussion of funds from operations.

(4) On January 4, 2002, approximately $85 million of the cash proceeds received
from the sale of a 49% interest in the property located at 919 Third Avenue,
New York, NY, was used to pay down the Company's unsecured credit facility.

II-2

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

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

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.
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 and industrial
properties in the New York Tri-State area; changes in interest rate levels;
downturns in rental rate levels in our markets and our ability to lease or
release space in a timely manner at current or anticipated rental rate levels;
the availability of financing to us or our tenants; changes in operating costs,
including utility, security and insurance costs; repayment of debt owed to the
Company by third parties (including FrontLine Capital Group); risks associated
with joint ventures; 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.

CRITICAL ACCOUNTING POLICIES

The consolidated financial statements of the Company include accounts of
the Company and all majority-owned subsidiaries. The preparation of financial
statements in conformity with accounting principles generally accepted in the
United States 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

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
Company's balance sheets. The leases also typically provide for tenant
reimbursements of common area maintenance and other operating expenses and real
estate taxes. Ancillary and other property related income is recognized in the
period earned.

The Company makes estimates of the collectibility of its accounts
receivables related to base rents, tenant escalations and reimbursements and
other revenue or income. The Company specifically analyzes tenant receivables
and analyzes historical bad debts, customer credit worthiness, current economic
trends

II-3

and changes in customer payment terms when evaluating the adequacy of its
allowance for doubtful accounts. In addition, when tenants are in bankruptcy
the Company makes estimates of the expected recovery of pre-petition
administrative and damage claims. In some cases, the ultimate resolution of
those claims can exceed beyond a year. These estimates have a direct impact on
the Company's net income, because a higher bad debt reserve results in less net
income.

The Company records interest income on investments in mortgage notes and
notes receivable on an accrual basis of accounting. The Company does not accrue
interest on impaired loans where, in the judgment of management, collection of
interest according to the contractual terms is considered doubtful. Among the
factors the Company considers in making an evaluation of the collectibility of
interest are: (i) the status of the loan, (ii) the value of the underlying
collateral, (iii) the financial condition of the borrower and (iv) anticipated
future events.

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

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 maintenance and repairs
are charged to operations as 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 are amortized on a straight-line basis over the term of the
related leases.

The Company is required to make subjective assessments as to the useful
lives of its 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 the Company's net income. Should the
Company 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 the Company of certain other lease related costs must be
made when the Company has a reason to believe that the tenant will not be able
to execute under the term of the lease as originally expected.

Long Lived Assets

On a periodic basis, management assesses whether there are any indicators
that the value of the real estate properties may be impaired. A property'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
property are less than the carrying value of the property. Such cash flows
consider factors such as expected future operating income, trends and
prospects, as well as the effects of demand, competition and other factors. To
the extent impairment has occurred, the loss will be measured as the excess of
the carrying amount of the property over the fair value of the property.

The Company is required to make subjective assessments as to whether there
are impairments in the value of its real estate properties and other
investments. These assessments have a direct impact on the Company's net
income, because taking an impairment results in an immediate negative
adjustment to net income.

Stock-Based Compensation

II-4

models that were not developed for use in valuing employee stock options. Under
APB 25, no compensation expense is recognized upon the granting of stock
options when the exercise price of the Company's employee stock options equals
the market price of the underlying stock on the date of grant. The Company
provides additional pro forma disclosures as required under Statement 123 in
the notes to its consolidated financial statements.

OVERVIEW AND BACKGROUND

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

The Company is a self-administered and self managed real estate investment
trust ("REIT") engaged in the ownership, acquisition, leasing, financing,
management and development of office and industrial 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 tri-state area (the
"Tri-State Area").

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. These services are currently provided by
Reckson Management, Inc., RANY Management Group, Inc., and Reckson Construction
Group, Inc. (collectively, the "Service Companies"). The Operating Partnership
owns a 97% non-controlling interest in the Service Companies. An entity which
is owned by certain executive officers of the Company owns a 3% controlling
interest in the Service Companies.

The Company owns all of its interests in its real properties, directly or
indirectly, through Reckson Operating Partnership, L.P. (the "Operating
Partnership"). As of December 31, 2001 the Company owned 182 properties
(including 11 joint venture properties) in the Tri-State Area suburban and CBD
markets, encompassing approximately 20.6 million rentable square feet, all of
which are managed by the Company. These properties include 60 Class A suburban
office properties encompassing approximately 8.5 million rentable square feet,
of which 42 of these properties or 74% as measured by square footage, are
located within the Company's ten office parks. Reckson has historically
emphasized the development and acquisition of properties that are part of
large-scale suburban office parks. The Company believes that owning properties
in planned office and industrial parks provides certain strategic advantages,
including the following: (i) certain tenants prefer being located in a park
with other high quality companies to enhance their corporate image, (ii) parks
afford tenants certain aesthetic amenities such as a common landscaping plan,
standardization of signage and common dining and recreational facilities, (iii)
tenants may expand (or contract) their business within a park, enabling them to
centralize business

II-5

functions and (iv) a park provides tenants with access to other tenants and may
facilitate business relationships between tenants. The properties also include
17 Class A CBD office properties encompassing approximately 5.3 million
rentable square feet. The CBD office properties consist of five properties
located in New York City, eight properties located in Stamford, CT and four
properties located in White Plains, NY. Additionally, the properties include
103 industrial properties encompassing approximately 6.8 million rentable
square feet, of which 72 of these properties, or 59% as measured by square
footage, are located within the Company's three industrial parks. The
properties also include two retail properties comprising approximately 20,000
rentable square feet.

The market capitalization of the Company at December 31, 2001 was
approximately $3.3 billion. The Company's market capitalization is based on the
sum of (i) the market value of the Company's Class A common stock and common
units of limited partnership interest in the Operating Partnership ("OP Units")
(assuming conversion) of $23.36 per share/unit (based on the closing price of
the Company's Class A common stock on December 31, 2001), (ii) the market value
of the Company's Class B common stock of $25.51 per share (based on the closing
price of the Company's Class B common stock on December 31, 2001), (iii) the
liquidation preference value of the Company's Series A preferred and Series B
preferred stock of $25 per share, (iv) the liquidation preference value of the
Operating Partnership's preferred units of $1,000 per unit and (v)
approximately $1.3 billion (including its share of joint venture debt and net
of minority partners' interests share of joint venture debt) of debt
outstanding at December 31, 2001. As a result, the Company's total debt to
total market capitalization ratio at December 31, 2001 equaled approximately
41.1%. At December 31, 2001, the Company had approximately $122 million of cash
and cash equivalents on hand of which approximately $98.4 million was generated
from the sale of a 49% interest in one of its major CBD assets. On January 4,
2002, the Company repaid approximately $85 million of its short term debt from
its cash and cash equivalents on hand.

II-6

unsecured credit facility with FrontLine (the "FrontLine Facility") in the
amount of $100 million for FrontLine to use in its investment activities,
operations and other general corporate purposes. The Company has advanced
approximately $93.4 million under the FrontLine Facility. The Operating
Partnership also approved the funding of investments of up to $100 million
relating to RSVP (the "RSVP Commitment"), through RSVP-controlled joint
ventures (for REIT-qualified investments) 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"). During March 2001, the Company
increased the RSVP Commitment to $110 million and as of December 31, 2001,
approximately $109.1 million had been funded through the RSVP Commitment, of
which $59.8 million represents investments by the Company in RSVP-controlled
(REIT-qualified) joint ventures and $49.3 million represents loans made to
FrontLine under the RSVP Facility. As of December 31, 2001, interest accrued
(net of reserves) under the FrontLine Facility and the RSVP Facility was
approximately $19.6 million.

II-7

investment that becomes available to FrontLine and (ii) the Operating
Partnership granted FrontLine a right to (a) provide the Operating Partnership
and its tenants with commercial services for occupants of office, industrial
and other property types and (b) become the lessee of any real property
acquired by the Operating Partnership if the Operating Partnership determines
that, consistent with the Company's status as a REIT, it is required to enter
into a "master" lease agreement.

HQ Global Workplaces, Inc., ("HQ") one of the largest providers of
flexible officing solutions in the world and which is controlled by FrontLine
currently operates eleven executive office centers in the Company's properties,
three of which are held through joint ventures. The leases under which these
office centers operate expire between 2008 and 2011, encompass approximately
225,000 square feet and have current contractual annual base rents of
approximately $6.7 million. Currently, three of these office centers (including
one joint venture location) aggregating 55,000 square feet with current
contractual annual base rents of $1.4 million are in default under their lease
terms. In addition, HQ has been experiencing financial difficulties and on
March 13, 2002, voluntarily filed a petition for relief under Chapter 11 of the
U.S. Bankruptcy Code. There can be no assurances as to whether HQ will affirm
or reject its existing leases with the Company. At this time it cannot be
determined what impact their financial difficulties and bankruptcy filing will
have on their ability to meet their future lease obligations with the Company.

Scott H. Rechler, who serves as Co-Chief Executive Officer and a director
of the Company, serves as Chief Executive Officer and Chairman of the Board of
Directors of FrontLine. The Company's directors and officers own approximately
15.9% of FrontLine's outstanding common stock. Scott H. Rechler also serves as
non-executive Chairman of the Board of HQ.

RESULTS OF OPERATIONS

The Company's total revenues increased by $30.5 million or 6.0% from 2000
to 2001 and $106.8 million or 26.5% from 1999 to 2000. Property operating
revenues, which include base rents and tenant escalations and reimbursements
("Property Operating Revenues") increased by $45.7 million or 10.1% from 2000
to 2001 and $82.9 million or 22.5% from 1999 to 2000. The 2001 increase in
Property Operating Revenues is primarily attributable to increases in rental
rates in our "same store" properties amounting to $29.3 million. In addition,
$12.4 million of the increase was generated by the lease up of newly developed
and redeveloped properties added to the operating portfolio. The increase in
Property Operating Revenues offset the decrease of $15.2 million in other
revenues. This decrease is primarily due to a decrease of $11.6 million related
to interest earned on advances made under the FrontLine Loans. In addition,
$2.3 million of the decrease is attributable to lower equity in earnings of
real estate joint ventures and service companies. The 2000 increase in Property
Operating Revenues is substantially attributable to the Company's entrance into
the New York City market. The 1999 and 2000 acquisitions of the five properties
comprising the New York City portfolio represented $48.6 million, or 58.6%, of
the increase in Property Operating Revenues. Property Operating Revenues were
also positively impacted by approximately $15.3 million from increases in
occupancies and rental rates in our "same store" properties, and approximately
$9.6 million from the lease up of newly developed and redeveloped properties
added to the operating portfolio. These increases offset the impact of $14.8
million of Property Operating Revenues that were generated from "Big Box"
industrial properties that were sold in 1999. The remaining balance of the
increase in total revenues for 2000 is primarily attributable to an increase in
gain on dispositions of real estate of approximately $11.8 million and an
increase of approximately $8.1 million in other revenue related to interest
earned on advances made under the FrontLine Loans.

The Company's base rent reflects the positive impact of the straight-line
rent adjustment of $41.6 million in 2001, $38.8 million in 2000 and $10.7
million in 1999. The 2001 and 2000 straight-line rent adjustment includes $26.9
million and $23.3 million, respectively, generated from the property located at
919 Third Avenue, New York, NY, which is attributable to rental abatement
periods for the three largest tenants.

Property operating expenses, real estate taxes and ground rents ("Property
Expenses") increased by $11.2 million or 7.1% from 2000 to 2001 and $31.5
million or 25.0% from 1999 to 2000. The 2001 increase in Property Expenses is
primarily due to an increase of $10.2 million in our "same-store" properties
which consists of a $6.2 million increase in property operating expenses and a
$4.0 million increase in real

II-8

estate taxes. The increase in Property Expenses is also attributable to
increases in labor costs, maintenance contracts and security costs. In
addition, there was an increase in Property Expenses of $2.7 million due to
higher occupancy levels at our developed and redeveloped properties. The 2000
increase in Property Expenses is substantially attributable to the Company's
entrance into the New York City market. The 1999 and 2000 acquisitions of the
five properties comprising the New York City portfolio represented $25.0
million, or 79.4%, of the increase in Property Expenses. In addition, $6.5
million of the increase is attributable to expense growth in our "same store"
properties.

Gross operating margins (defined as Property Operating Revenues less
Property Expenses, taken as a percentage of Property Operating Revenues) for
2001, 2000 and 1999 were 66.1%, 65.2% and 65.9%, respectively. The increase
from 2000 to 2001 is primarily due to an increase in rental rates. The slight
decrease from 1999 to 2000 in the gross operating margin percentages resulted
from a larger proportionate share of gross operating margin derived from office
properties, which has a lower gross margin percentage. The higher proportionate
share of the gross operating margin attributable to the office properties was a
result of the acquisition of five properties representing the Company's
entrance into the New York City market and the disposition of net leased "Big
Box" industrial properties. This shift in the composition of the portfolio was
offset by increases in rental rates and operating efficiencies realized as a
result of operating a larger portfolio of properties with concentration of
properties in office and industrial parks or in its established sub-markets.

Marketing, general and administrative expenses were $30.7 million in 2001,
$27.4 million in 2000 and $24.3 million in 1999. The increase in marketing,
general and administrative expenses is primarily due to the increased costs of
opening and maintaining the Company's New York City division and maintaining
offices and infrastructure in each of the Company's markets including Long
Island, Westchester, Southern Connecticut and Northern New Jersey and
administrative costs associated with the growth of the Company. The Company's
business strategy has been to expand further into the Tri-State Area suburban
and CBD markets and the New York City market by applying its standards for high
quality office and industrial space and premier tenant service to its New
Jersey, Westchester, Southern Connecticut and New York City divisions. In doing
this, the Company seeks to create a superior franchise value that it enjoys in
its home base of Long Island. Over the past three years the Company has
supported this effort by increasing its marketing programs and strengthening
its resources and operating systems. The cost of these efforts is reflected in
both marketing, general and administrative expenses as well as the revenue
growth of the Company. To a lesser extent, in 2001, the increase in marketing,
general and administrative costs was impacted by legal and professional fees
incurred in connection with certain cancelled acquisition transactions and
amortization of deferred compensation costs. Marketing, general and
administrative expense as a percentage of total revenues were 5.7% in 2001,
5.4% in 2000 and 6.0% in 1999.

Interest expense was $93.1 million in 2001, $96.3 million in 2000 and
$74.3 million in 1999. The decrease of $3.2 million from 2000 to 2001 is
attributable to lower interest rates and a decreased average balance on the
Company's unsecured credit facility. This was partially offset by an increase
in the Company's mortgage notes payable which was the result of the refinancing
of the property located at 919 Third Avenue, New York, NY. The increase of
$22.0 million from 1999 to 2000 is primarily attributable to the debt incurred
in connection with the acquisition of the five properties comprising the New
York City portfolio. In addition, the increase was also attributable to a full
year of interest on $300 million of senior unsecured notes issued in March
1999. The weighted average balance outstanding on the Company's unsecured
credit facility was $284.5 million in 2001, $416.5 million in 2000 and $423.8
million in 1999.

Included in depreciation and amortization expense is amortized financing
costs of $4.5 million in 2001, $4.1 million in 2000 and $3.4 million in 1999.
The increase of approximately $700,000 from 1999 to 2000 is primarily
attributable to the secured financings of the 919 Third Avenue and 1350 Avenue
of the Americas properties located in New York, NY.

II-9

For the year ended December 31, 2001, the Company's consolidated statement
of operations includes valuation reserve charges of $166.1 million which is
comprised of the following: (i) Valuation reserve charges, inclusive of
anticipated costs, of $163 million related to the Company's investments in the
FrontLine Loans and joint ventures with RSVP (see Overview and Background for a
further discussion of this valuation reserve charge), (ii) In November 1999,
the Company received 176,186 shares of the common stock of FrontLine as fees in
connection with the FrontLine Loans. As a result of certain tax rule provisions
included in the REIT Modernization Act, it was determined that the Company
could no longer maintain any equity position in FrontLine. As part of a
compensation program, the Company distributed these shares to certain
non-executive employees subject to recourse loans. The loans were scheduled to
be forgiven over time based on continued employment with the Company. Based on
the current value of FrontLine's common stock the Company has established a
valuation reserve charge relating to the outstanding balance of these loans in
the amount of $2.4 million and (iii) Based on the Company's value assessment of
its investment in Captivate Network, Inc., an unrelated technology based
service company, the Company recorded a valuation reserve charge of
approximately $700,000.

Extraordinary losses, net of limited partners' minority interest, resulted
in a $2.6 million loss in 2001, a $1.4 million loss in 2000 and a $555,000 loss
in 1999. The extraordinary losses were all attributed to the write-offs of
certain deferred loan costs incurred in connection with the Company's
refinancing of its debt.

LIQUIDITY AND CAPITAL RESOURCES

Summary of Cash Flows

Net cash provided by operating activities totaled $186.0 million in 2001,
$169.2 million in 2000 and $153.5 million in 1999. Increases for each year were
primarily attributable to the growth in cash flow provided by the acquisition
of properties and/or the increased occupancy levels of the Company's
development properties and the increase in rental rates in all of the Company's
markets.

Net cash used in investing activities totaled $87.5 million in 2001,
$261.3 million in 2000 and $391.8 million in 1999. Cash used in investing
activities related primarily to investments in real estate properties including
development costs. Included in these investing activities is the Company's
investments of approximately $18.7 million, $16.3 million and $14.7 million in
RSVP-controlled (REIT qualified) joint ventures in each of the years then
ended. In addition, during 1999, the Company invested approximately $277.5
million for the acquisition of the first mortgage note securing the property
located at 919 Third Avenue, New York, NY. Cash used in investing activities
was offset by proceeds from the redemption of the Company's preferred equity
investments in Keystone Property Trust in 2001 and 2000 as well as from sales
of real estate, securities and mortgage note receivable repayments in each of
the years then ended.

Net cash provided by financing activities totaled $5.7 million in 2001,
$88.6 million in 2000 and $257.4 million in 1999. Cash provided by financing
activities related primarily to proceeds from secured debt financings, minority
partner contributions and advances under the Company's unsecured credit
facility and term loan in each of the years then ended. Cash provided by
financing activities in 1999 was also provided by the issuance of the Company's
Series B preferred stock and senior unsecured notes. Cash provided by financing
activities was offset by advances made under the FrontLine Loans of
approximately $7.2 million, $13.6 million and $81.0 million in each of the
years then ended. Cash provided by financing activities was also offset by
principal payments on secured borrowings, the unsecured credit facility and
term loan as well as loan equity issuance costs and dividends and
distributions.

Investing Activities

II-10

During the year ended December 31, 2001, the Company sold five office
properties aggregating approximately 678,000 square feet for $82.1 million, a
26,000 square foot industrial property for $2.8 million and its remaining
preferred interest in Keystone Property Trust for $35.7 million. As a result of
these sales the Company realized a net gain of approximately $1.3 million. Net
proceeds from these sales were used primarily to repay borrowings under the
Company's unsecured credit facility and to establish an escrow account with a
qualified intermediary for a future exchange of real property pursuant to
Section 1031 of the Internal Revenue Code of 1986. The Company has identified
approximately 52.7 acres of land located in Valhalla, NY for the purposes of
this exchange.

RSVP CONTROLLED AMOUNTS
JOINT VENTURES ADVANCED TOTAL
----------------- ---------- ----------

Financing Activities

During 2001, the Company paid cash dividends on its Class A common stock
of approximately $1.62 per share and approximately $2.50 per share on its Class
B common stock.

Metropolitan is controlled by the Company. A minority partner owned an $85
million preferred equity investment in Metropolitan which accrued distributions
at a rate of 7.5% per annum for a two-year period (May 24, 1999 through May 30,
2001). On May 31, 2001, the minority partner, at its election, converted its
preferred equity investment into 3,453,881 shares of the Company's Class A
common stock based on a conversion price of $24.61 per share. As a result of
the minority partner's conversion of its preferred equity investment, the
Company owns 100% of Metropolitan.

II-11

As of December 31, 2001, the Company had a three year $575 million
unsecured revolving credit facility (the "Credit Facility") from JPMorgan Chase
Bank, as administrative agent, UBS Warburg LLC as syndication agent and
Deutsche Bank as documentation agent. The Credit Facility matures in September
2003 and borrowings under the Credit Facility are currently priced off LIBOR
plus 105 basis points.

On June 1, 2001, the Company refinanced a $70 million short term variable
rate mortgage note with a five year $75 million fixed rate mortgage note, which
bears interest at 6.52% per annum. In addition, on July 18, 2001, the Company
refinanced a $200 million short term variable rate mortgage note with a ten
year $250 million fixed rate mortgage note, which bears interest at 6.867% per
annum. The net proceeds of approximately $50.4 million received by the Company
as a result of these refinancings was used to repay maturing fixed rate debt,
the Credit Facility and for working capital purposes.

Capitalization

The Company's indebtedness at December 31, 2001 totaled approximately $1.3
billion (including its share of joint venture debt and net of minority
partners' interests share of joint venture debt) and was comprised of $271.6
million outstanding under the Credit Facility, approximately $449.5 million of
senior unsecured notes and approximately $614.9 million of mortgage
indebtedness with a weighted average interest rate of approximately 7.4% and a
weighted average maturity of approximately 10.1 years. Based on the Company's
total market capitalization of approximately $3.3 billion at December 31, 2001
(calculated based on the sum of (i) the market value of the Company's Class A
common stock and OP Units, assuming conversion, (ii) the market value of the
Company's Class B common stock, (iii) the liquidation preference value of the
Company's preferred stock, (iv) the liquidation preference value of the
Operating Partnership's preferred units and (v) the $1.3 billion of debt), the
Company's debt represented approximately 41.1% of its total market
capitalization. At December 31, 2001, the Company had approximately $122
million of cash and cash equivalents on hand of which approximately $98.4
million was generated from the sale of a 49% interest in one of its major CBD
assets. On January 4, 2002, the Company repaid approximately $85 million of its
short-term debt from its cash and cash equivalents on hand.

II-12

Contractual Obligations and Commercial Commitments

The following table sets forth the Company's significant debt obligations
by scheduled principal cash flow payments and maturity date and its commercial
commitments by scheduled maturity at December 31, 2001 (in thousands):

MATURITY DATE
---------------------------------------------------------------
2002 2003 2004 2005 2006 THEREAFTER TOTAL
----------- ---------- ---------- ---------- ---------- ----------- -------------

Mortgage notes
payable (1) ......... $ 11,356 $ 12,559 $ 13,493 $14,462 $ 14,097 $130,347 $ 196,314
Mortgage notes
payable (2) ......... -- -- 2,616 18,553 129,920 403,674 554,763
Senior unsecured
notes ............... -- -- 100,000 -- -- 350,000 450,000
Unsecured credit
facility ............ -- 271,600 -- -- -- -- 271,600
Land lease
obligations ......... 2,688 2,687 2,811 2,814 2,795 49,921 63,716
Air rights lease
obligations ......... 366 369 379 379 379 4,658 6,530
-------- -------- -------- ------- -------- -------- ----------
$ 14,410 $287,215 $119,299 $36,208 $147,191 $938,600 $1,542,923
======== ======== ======== ======= ======== ======== ==========

(1) Scheduled principal amortization payments

(2) Principal payments due at maturity

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.

In addition, at December 31, 2001, the Company had approximately $24.3
million and $13.1 million in outstanding undrawn standby letters of credit
issued under the Credit Facility which expire in 2002 and 2003, respectively.

The Company is also obligated to purchase, for approximately $23.8
million, 52.7 acres of land located in Valhalla, NY on which the Company can
develop approximately 875,000 square feet of office space. This acquisition
will be financed in part from the sale proceeds of an office property currently
being held by a qualified intermediary for the purposes of an exchange of real
property pursuant to Section 1031 of the Internal Revenue Code of 1986 and is
scheduled to close during the first quarter of 2002.

Thirteen of the Company's office properties and two of the Company's
industrial properties which were acquired by the issuance of OP Units are
subject to agreements limiting the Company's ability to transfer them prior to
agreed upon dates without the consent of the limited partner who transferred
the respective property to the Company. In the event the Company transfers any
of these properties prior to the expiration of these limitations, the Company
may be required to make a payment relating to taxes incurred by the limited
partner. The limitations on nine of the properties expire prior to June 30,
2003. The limitations on the remaining properties expire between 2007 and 2013.

Eleven of the Company's office properties are held in joint ventures which
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 ranging from 2003 to 2005, rights of first offer, and
buy/sell provisions.

Historically, rental revenue has been the principal source of funds to pay
operating expenses, debt service and capital expenditures, excluding
non-recurring capital expenditures of the Company. The Company expects to meet
its short-term liquidity requirements generally through its net cash provided
by operating activities along with the Credit Facility previously discussed.
The Credit Facility contains

II-13

several financial covenants with which the Company must be in compliance in
order to borrow funds thereunder. The Company expects to meet certain of its
financing requirements through long-term secured and unsecured borrowings and
the issuance of debt and equity securities of the Company. In addition, the
Company also believes that it will, from time to time, generate funds from the
disposition of certain of its real estate properties or interests therein. The
Company will refinance existing mortgage indebtedness or indebtedness under the
Credit Facility at maturity or retire such debt through the issuance of
additional debt securities or additional equity securities. The Company
anticipates that the current balance of cash and cash equivalents and cash
flows from operating activities, together with cash available from borrowings
and equity offerings, will be adequate to meet the capital and liquidity
requirements of the Company in both the short and long-term.

As a result of current economic conditions, certain companies who make up
our tenant base have either not renewed their leases upon expiration or have
paid the Company to terminate their leases. In addition, vacancy rates in our
markets have been trending higher and in some instances our asking rents in our
markets have been trending lower. Additionally, due to the events of September
11th, the Company anticipates higher operating expenses as they relate to
certain insurance coverage and security measures.

In order to qualify as a REIT for federal income tax purposes, the Company
is required to make distributions to its stockholders of at least 90% of REIT
taxable income. The Company expects to use its cash flow from operating
activities for distributions to stockholders and for payment of recurring,
non-incremental revenue-generating expenditures. The Company intends to invest
amounts accumulated for distribution in short-term investments.

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

INFLATION

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

The Credit Facility bears interest at a variable rate, which will be
influenced by changes in short-term interest rates, and is sensitive to
inflation.

FUNDS FROM OPERATIONS

Management believes that funds from operations ("FFO") is an appropriate
measure of performance of an equity REIT. FFO is defined by the National
Association of Real Estate Investment Trusts ("NAREIT") as net income or loss,
excluding gains or losses from debt restructuring and sales of properties plus
depreciation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures. FFO does not represent cash generated from
operating activities in accordance with GAAP and is not indicative of cash
available to fund cash needs. FFO should not be considered as an alternative to
net income as an indicator of the Company's operating performance or as an
alternative to cash flow as a measure of liquidity. (See Selected Financial
Data). FFO for the year ended December 31, 2001 excludes $163 million of
valuation reserves on investments in affiliate loans and joint ventures.

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

II-14

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

2001 2000 1999
------------ ------------ ------------

Income before minority interests, preferred dividends and distributions, valuation
reserves and extraordinary loss ..................................................... $ 145,054 $ 136,227 $ 104,042
Less:
Minority partners' interests in consolidated partnerships ........................... 15,975 9,120 6,802
Limited partners' minority interest in the operating partnership .................... (5,727) 11,669 9,407
Preferred dividends and distributions ............................................... 23,977 28,012 27,001
Valuation reserves on investments in affiliate loans and joint ventures and other
investments ........................................................................ 166,101 -- --
Extraordinary loss, net of limited partners' minority interest in the operating
partnership of $303, $175 and $74, respectively .................................... 2,595 1,396 555
--------- --------- ---------
Net income (loss) allocable to common shareholders ................................... (57,867) 86,030 60,277
Adjustments for basic Funds From Operations
Add:
Limited partners' minority interest in the operating partnership .................... -- 11,669 9,407
Real estate depreciation and amortization ........................................... 100,967 90,552 72,124
Minority partners' interests in consolidated partnerships ........................... 15,975 9,120 6,802
Valuation reserves on investments in affiliate loans and joint ventures ............. 163,000 -- --
Extraordinary loss, net of limited partners' minority interest in the operating
partnership of $303, $175 and $74, respectively .................................... 2,595 1,396 555
Less:
Limited partners' minority interest in the operating partnership .................... 5,727 -- --
Gain on sales of real estate ........................................................ 20,173 18,669 10,052
Amounts distributable to minority partners in consolidated partnerships ............. 19,083 12,316 8,293
--------- --------- ---------
Basic Funds From Operations .......................................................... 179,687 167,782 130,820
Add:
Dividends and distributions on dilutive shares and units ............................ 26,601 34,387 30,861
--------- --------- ---------
Diluted Funds From Operations ........................................................ $ 206,288 $ 202,169 $ 161,681
========= ========= =========
Weighted Average Shares/OP Units outstanding (1) ..................................... 66,057 61,050 54,719
========= ========= =========
Diluted Weighted Average Shares/OP Units outstanding (1) ............................. 79,027 78,119 70,013
========= ========= =========

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

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

The primary market risk facing the Company is interest rate risk on its
long term debt, mortgage notes and notes receivable. The Company will, when
advantageous, hedge its interest rate risk using financial instruments. The
Company is not subject to foreign currency risk.

The Company manages its exposure to interest rate risk on its variable
rate indebtedness by borrowing on a short-term basis under its Credit Facility
until such time as it is able to retire the short-term variable rate debt with
either a long-term fixed rate debt offering, long term mortgage debt, equity
offerings or through sales or partial sales of assets.

The Company will recognize all derivatives on the balance sheet at fair
value. Derivatives that are not hedges will be adjusted to fair value through
income. If a derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of the derivative will either be offset against the
change in fair value of the hedged asset, liability or firm commitment through
earnings, or recognized in other comprehensive income until the hedged item is
recognized in earnings. The ineffective portion of a derivative's change in
fair value will be immediately recognized in earnings.

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

II-15

The following table sets forth the Company's long term debt obligations by
scheduled principal cash flow payments and maturity date, weighted average
interest rates and estimated FMV at December 31, 2001 (dollars in thousands):

FOR THE YEAR ENDED DECEMBER 31
-----------------------------------------------------------------------
2002 2003 2004 2005 2006
------------- ------------- -------------- ------------- --------------

Long term debt:
Fixed rate .............. $ 11,356 $ 12,559 $ 116,109 $ 33,015 $ 144,017
Weighted average
interest rate ......... 7.52% 7.50% 7.47% 6.92% 7.38%
Variable rate ........... $ -- $ 271,600 $ -- $ -- $ --
Weighted average
interest rate ......... --% 3.53% --% --% --%

THEREAFTER TOTAL (1) FMV
-------------- ---------------- --------------

Long term debt:
Fixed rate .............. $ 884,021 $ 1,201,077 $ 1,221,125
Weighted average
interest rate ......... 7.34% 7.35%
Variable rate ........... $ -- $ 271,600 $ 271,600
Weighted average
interest rate ......... --% 3.53%

(1) Includes unamortized issuance discounts of $537 on the 5 and 10-year senior
unsecured notes issued on March 26, 1999 which are due at maturity.

In addition, the Company has assessed the market risk for its variable
rate debt, which is based upon LIBOR, and believes that a one percent increase
in the LIBOR rate would have an approximate $2.7 million annual increase in
interest expense based on approximately $271.6 million of variable rate debt
outstanding at December 31, 2001.

The following table sets forth the Company's mortgage notes and notes
receivable by scheduled maturity date, weighted average interest rates and
estimated FMV at December 31, 2001 (dollars in thousands):

FOR THE YEAR ENDED DECEMBER 31
-----------------------------------------------------
2002 2003 2004 2005 2006 THEREAFTER TOTAL (2) FMV
------------ -------- ------------- -------- -------- ------------ ------------- -----------

Mortgage notes and
notes receivable:
Fixed rate .............. $ 1,165 $ -- $ 36,500 $ -- $ -- $ 16,990 $ 54,655 $ 55,939
Weighted average
interest rate ......... 9.00% --% 10.23% --% --% 11.88% 10.72%

(2) Excludes interest receivables aggregating approximately $1,579.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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

None.

II-16

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 the
Company's definitive proxy statement for the 2002 annual meeting of stockholders
is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information contained in the section captioned "Executive
Compensation" of the Company's definitive proxy statement for the 2002 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 the Company's prior or future
filings under the Securities Act of 1933 or the Securities Exchange Act of
1934, except to the extent the Company specifically incorporates 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

The information contained in the section captioned "Principal and
Management Stockholders" of the Company's definitive proxy statement for the
2002 annual meeting of stockholders is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information contained in the section captioned "Certain Relationships
and Related Transactions" of the Company's definitive proxy statement for the
2002 annual meeting of the stockholders is incorporated herein by reference.

III-1

PART IV

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

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

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

PAGE
------

RECKSON ASSOCIATES REALTY CORP.
Report of Independent Auditors .................................................. IV-5
Consolidated Balance Sheets as of December 31, 2001 and December 31, 2000 ....... IV-6
Consolidated Statements of Operations for the years ended December 31, 2001,
2000 and 1999 ................................................................. IV-7
Consolidated Statements of Stockholders' Equity for the years ended December 31,
2001, 2000 and 1999. .......................................................... IV-8
Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000
and 1999 . .................................................................... IV-9
Notes to Consolidated Financial Statements ...................................... IV-10
Schedule III - Real Estate and Accumulated Depreciation ......................... IV-31

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

IV-1

(3) Exhibits

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

3.1 a Amended and Restated Articles of Incorporation of the Registrant
3.2 i Amended and Restated By-Laws of the Registrant
3.3 e Articles Supplementary of the Registrant Establishing and Fixing the Rights and Preferences of a Series
of Shares of Preferred Stock filed with the Maryland State Department of Assessments and Taxation on
April 9, 1998
3.4 j Articles Supplementary of the Registrant Establishing and Fixing the Rights and Preferences of a Class
of Shares of Common Stock filed with the Maryland State Department of Assessments and Taxation on
May 24, 1999
3.5 h Articles Supplementary of the Registrant Establishing and Fixing the Rights and Preferences of a Series
of Shares of Preferred Stock filed with the Maryland State Department of Assessments and Taxation on
May 28, 1999
3.6 j Articles of Amendment of the Registrant filed with the Maryland State Department of Assessments and
Taxation on January 4, 2000
3.7 j Articles Supplementary of the Registrant filed with the Maryland State Department of Assessments and
Taxation on January 11, 2000
3.8 q 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
4.1 b Specimen Share Certificate of Class A Common Stock
4.2 l Specimen Share Certificate of Class B Exchangeable Common Stock
4.3 e Specimen Share Certificate of Series A Preferred Stock
4.4 g Form of 7.40% Notes due 2004 of Reckson Operating Partnership, L.P. (the "Operating Partnership")
4.5 g Form of 7.75% Notes due 2009 of the Operating Partnership
4.6 g Indenture, dated March 26, 1999, among the Operating Partnership, the Registrant, and The Bank of
New York, as trustee
4.7 k Rights Agreement, dated as of October 13, 2000, between the Registrant and American Stock Transfer
& Trust Company, as Rights Agent, which includes, as Exhibit A thereto, the Form of Articles
Supplementary, as Exhibit B thereto, the Form of Right Certificate, and as Exhibit C thereto, the
Summary of Rights to Purchase Preferred Shares
10.1 a Amended and Restated Agreement of Limited Partnership of the Operating Partnership
10.2 e Supplement to the Amended and Restated Agreement of Limited Partnership of the Operating
Partnership Establishing Series A Preferred Units of Limited Partnership Interest
10.3 e Supplement to the Amended and Restated Agreement of Limited Partnership of the Operating
Partnership Establishing Series B Preferred Units of Limited Partnership Interest
10.4 e Supplement to the Amended and Restated Agreement of Limited Partnership of the Operating
Partnership Establishing Series C Preferred Units of Limited Partnership Interest
10.5 e Supplement to the Amended and Restated Agreement of Limited Partnership of the Operating
Partnership Establishing Series D Preferred Units of Limited Partnership Interest
10.6 j Supplement to the Amended and Restated Agreement of Limited Partnership of the Operating
Partnership Establishing Series B Common Units of Limited Partnership Interest
10.7 j Supplement to the Amended and Restated Agreement of Limited Partnership of the Operating
Partnership Establishing Series E Preferred Partnership Units of Limited Partnership Interest
10.8 n Supplement to the Amended and Restated Agreement of Limited Partnership of the Operating
Partnership Establishing the Series F Junior Participating Preferred Partnership Units
10.9 d Third Amended and Restated Agreement of Limited Partnership of Omni Partners, L.P.
10.10 k Amendment and Restatement of Employment and Noncompetition Agreement, dated as of August 15,
2000, between the Registrant and Donald Rechler
10.11 k Amendment and Restatement of Employment and Noncompetition Agreement, dated as of August 15,
2000, between the Registrant and Scott Rechler
10.12 k Amendment and Restatement of Employment and Noncompetition Agreement, dated as of August 15,
2000, between the Registrant and Mitchell Rechler
10.13 k Amendment and Restatement of Employment and Noncompetition Agreement, dated as of August 15,
2000, between the Registrant and Gregg Rechler
10.14 k Amendment and Restatement of Employment and Noncompetition Agreement, dated as of August 15,
2000, between the Registrant and Roger Rechler
10.15 k Amendment and Restatement of Employment and Noncompetition Agreement, dated as of August 15,
2000, between the Registrant and Michael Maturo
10.16 k Amendment and Restatement of Employment and Noncompetition Agreement, dated as of August 15,
2000, between the Registrant and Jason Barnett
10.17 a Purchase Option Agreements relating to the Reckson Option Properties
10.18 a Purchase Option Agreements relating to the Other Option Properties
10.19 m Amended and Restated 1995 Stock Option Plan
10.20 c 1996 Employee Stock Option Plan

IV-2

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

10.21 b Ground Leases for certain of the properties
10.22 a Indemnity Agreement relating to 100 Oser Avenue
10.23 m Amended and Restated 1997 Stock Option Plan
10.24 d 1998 Stock Option Plan
10.25 d Note Purchase Agreement for the Senior Unsecured Notes
10.26 k Amendment and Restatement of Severance Agreement, dated as of August 15, 2000, between the
Registrant and Donald Rechler
10.27 k Amendment and Restatement of Severance Agreement, dated as of August 15, 2000, between the
Registrant and Scott Rechler
10.28 k Amendment and Restatement of Severance Agreement, dated as of August 15, 2000, between the
Registrant and Mitchell Rechler
10.29 k Amendment and Restatement of Severance Agreement, dated as of August 15, 2000, between the
Registrant and Gregg Rechler
10.30 k Amendment and Restatement of Severance Agreement, dated as of August 15, 2000, between the
Registrant and Roger Rechler
10.31 k Amendment and Restatement of Severance Agreement, dated as of August 15, 2000, between the
Registrant and Michael Maturo
10.32 k Amendment and Restatement of Severance Agreement, dated as of August 15, 2000, between the
Registrant and Jason Barnett
10.33 f Intercompany Agreement by and between the Operating Partnership and Reckson Service Industries,
Inc., dated May 13, 1998
10.34 j Amended and Restated Credit Agreement dated as of August 4, 1999 between Reckson Service
Industries, Inc., as borrower, and the Operating Partnership, as Lender, relating to Reckson Strategic
Venture Partners, LLC ("RSVP Credit Agreement")
10.35 j Amended and Restated Credit Agreement dated as of August 4, 1999 between Reckson Service
Industries, Inc., as borrower, and the Operating Partnership, as Lender, relating to the operations of
Reckson Service Industries, Inc. ("RSI Credit Agreement")
10.36 j Letter Agreement, dated November 30, 1999, amending the RSVP Credit Agreement and the RSI
Credit Agreement
10.37 o Second Amendment to the Amended and Restated Credit Agreement, dated March 30, 2001, between
the Operating Partnership and FrontLine Capital Group
10.38 p Loan Agreement, dated as of June 1, 2001, between 1350 LLC, as Borrower, and Secore Financial
Corporation, as Lender
10.39 p Loan Agreement, dated as of July 18, 2001, between Metropolitan 919 3rd Avenue, LLC, as Borrower,
and Secore Financial Corporation, as Lender
10.40 k $575 million Credit Facility dated as of September 7, 2000 among Reckson Operating Partnership, L.P.,
The Chase Manhattan Bank, UBS Warburg Dillon Read, Deutsche Bank and Chase Securities Inc.
10.41 k Guaranty Agreement dated as of September 7, 2000 among the Registrant, The Chase Manhattan Bank
and UBS Warburg LLC
10.42 k Operating Agreement dated as of September 28, 2000 between Reckson Tri-State Member LLC
(together with its permitted successors and assigns) and TIAA Tri-State LLC
10.43 n 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
10.44 n Consolidated, Amended and Restated Secured Promissory Note relating to Metropolitan 810 7th Ave.,
LLC and 100 Wall Company LLC
10.45 r Amended and Restated Operating Agreement of 919 JV LLC
12.1 Statement of Ratios of Earnings to Fixed Charges

21.1 Statement of Subsidiaries

23.0 Consent of Independent Auditors

24.1 Power of Attorney (included in Part IV of the Form 10-K)

----------

(a) Previously filed as an exhibit to the Registrant's Registration Statement Form S-11 (No. 333-1280) and incorporated
herein by reference.
(b) Previously filed as an exhibit to the Registrant's Registration Statement Form S-11 (No. 33-84324) and incorporated
herein by reference.
(c) Previously filed as an exhibit to the Registrant's Form 8-K report filed with the SEC on November 25, 1996 and
incorporated herein by reference.
(d) Previously filed as an exhibit to the Registrant's Form 10-K filed with the SEC on March 26, 1998 and incorporated
herein by reference.
(e) Previously filed as an exhibit to the Registrant's Form 8-K report filed with the SEC on March 1, 1999 and
incorporated herein by reference.
(f) Previously filed as an exhibit to the Registrant's Form 10-K filed with the SEC on March 16, 1999 and incorporated
herein by reference.
(g) Previously filed as an exhibit to the Registrant's Form 8-K filed with SEC on March 26, 1999 and incorporated herein
by reference.
(h) Previously filed as an exhibit to the Registrant's Form 8-K filed with SEC on June 7, 1999 and incorporated herein by
reference.
(i) Previously filed as an exhibit to the Registrant's Form 10-Q filed with the SEC on November 13, 2000 and incorporated
herein by reference.
(j) Previously filed as an exhibit to the Registrant's Form 10-K filed with the SEC on March 17, 2000 and incorporated
herein by reference.
(k) Previously filed as an exhibit to the Registrant's Form 8-K filed with the SEC on October 17, 2000 and incorporated
herein by reference.
(l) Previously filed as an exhibit to the Registrant's Form S-4 (No. 333-74285) and incorporated herein by reference.
(m) Previously filed as an exhibit to the Registrant's Form 10-Q filed with the SEC on November 13, 2001 and incorporated
herein by reference.
(n) Previously filed as an exhibit to the Registrant's Form 10-K filed with the SEC on March 21, 2001 and incorporated
herein by reference.
(o) Previously filed as an exhibit to the Registrant's Form 10-Q filed with the SEC on May 14, 2001 and incorporated
herein by reference.
(p) Previously filed as an exhibit to the Registrant's Form 10-Q filed with the SEC on August 14, 2001 and incorporated
herein by reference.
(q) Included as an exhibit to Exhibit 4.7.
(r) Previously filed as an exhibit to the Registrant's Form 8-K filed with the SEC on January 8, 2002 and incorporated
herein by reference.

(B) REPORTS ON FORM 8-K:

On October 16, 2001, the Registrant filed a report on Form 8-K relating to the
status of FrontLine Capital Group's indebtedness to the Operating Partnership

On November 6, 2001, the Registrant submitted a report on Form 8-K under Item 9
thereof in order to submit its third quarter presentation.

On November 7, 2001, the Registrant submitted a report on Form 8-K under Item 9
thereof in order to submit supplemental operating and financial data for the
third quarter.

IV-3

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on March 19 ,
2002.

RECKSON ASSOCIATES REALTY CORP.

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

KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and directors
of Reckson Associates Realty Corp. hereby severally constitute and appoint
Scott H. Rechler, Mitchell D. 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 19, 2002.

SIGNATURE TITLE SIGNATURE TITLE
--------- ----- --------- -----

/s/ Donald J. Rechler Chairman of the Board, /s/ Harvey R. Blau Director
----------------------- Co-Chief Executive Officer ---------------------------
Donald J. Rechler and Director (Principal Harvey R. Blau
Executive Officer)

/s/ Scott H. Rechler Co-Chief Executive Officer Director
----------------------- and Director ---------------------------
Scott H. Rechler Leonard Feinstein

/s/ Mitchell D. Rechler Co-President, Chief Director
----------------------- Administrative Officer ---------------------------
Mitchell D. Rechler and Director Herve A. Kevenides

/s/ Gregg M. Rechler Co-President, Chief /s/ John V.N. Klein Director
----------------------- Operating Officer and ---------------------------
Gregg M. Rechler Director John V.N. Klein

/s/ Michael Maturo Executive Vice President, /s/ Lewis S. Ranieri Director
----------------------- Treasurer and Chief ---------------------------
Michael Maturo Financial Officer (Principal Lewis S. Ranieri
Financial Officer and
Principal Accounting
Officer)

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

IV-4

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders

Reckson Associates Realty Corp.

We have audited the accompanying consolidated balance sheets of Reckson
Associates Realty Corp. as of December 31, 2001 and 2000, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 2001. We have also
audited the financial statement schedule listed in the index at item 14(a).
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Reckson
Associates Realty Corp. at December 31, 2001 and 2000, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.

ERNST & YOUNG LLP

New York, New York
February 20, 2002,
except for Note 13,
as to which the date
is March 13, 2002

IV-5

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

DECEMBER 31,
---------------------------------
2001 2000
--------------- ---------------

ASSETS
Commercial real estate properties, at cost: (Notes 2, 3, 5 and 6)
Land ........................................................................ $ 408,837 $ 396,482
Buildings and improvements .................................................. 2,328,374 2,219,448
Developments in progress:
Land ........................................................................ 69,365 60,918
Development costs ........................................................... 74,303 93,759
Furniture, fixtures and equipment ........................................... 7,725 7,138
----------- -----------
2,888,604 2,777,745
Less accumulated depreciation ........................................... (361,960) (288,479)
----------- -----------
2,526,644 2,489,266
Investments in real estate joint ventures ................................... 5,744 5,348
Investment in mortgage notes and notes receivable (Note 6) .................. 56,234 58,220
Cash and cash equivalents (Note 9) .......................................... 121,975 17,843
Tenant receivables .......................................................... 9,633 11,511
Investments in service companies and affiliate loans and joint ventures
(Note 8) ................................................................... 79,184 215,660
Deferred rents receivable ................................................... 81,089 67,930
Prepaid expenses and other assets ........................................... 45,495 68,895
Contract and land deposits and pre-acquisition costs ........................ 3,782 1,676
Deferred leasing and loan costs, less accumulated amortization of $41,411
and $32,773, respectively .................................................. 64,438 61,681
----------- -----------
Total Assets ................................................................ $ 2,994,218 $ 2,998,030
=========== ===========
LIABILITIES
Mortgage notes payable (Note 2) ............................................. $ 751,077 $ 728,971
Unsecured credit facility (Note 3) .......................................... 271,600 216,600
Senior unsecured notes (Note 4) ............................................. 449,463 449,385
Accrued expenses and other liabilities ...................................... 87,683 95,393
Dividends and distributions payable ......................................... 32,988 28,801
----------- -----------
Total Liabilities ........................................................... 1,592,811 1,519,150
----------- -----------
Minority partners' interests in consolidated partnerships ................... 242,698 226,350
Preferred unit interest in the operating partnership ........................ 30,965 42,518
Limited partners' minority interest in the operating partnership ............ 81,887 97,353
----------- -----------
355,550 366,221
----------- -----------
Commitments and contingencies (Notes 9,10 and 13) ........................... -- --
STOCKHOLDERS' EQUITY (NOTE 7)
Preferred Stock, $.01 par value, 25,000,000 shares authorized
Series A preferred stock, 9,192,000 shares issued and outstanding .......... 92 92
Series B preferred stock, 2,000,000 shares issued and outstanding .......... 20 20
Common Stock, $.01 par value, 100,000,000 shares authorized
Class A common stock, 49,982,377 and 45,352,286 shares issued and
outstanding, respectively ................................................ 500 454
Class B common stock, 10,283,513 shares issued and outstanding ............. 103 103
Additional paid in capital .................................................. 1,045,142 1,111,990
----------- -----------
Total Stockholders' Equity .................................................. 1,045,857 1,112,659
----------- -----------
Total Liabilities and Stockholders' Equity .................................. $ 2,994,218 $ 2,998,030
=========== ===========

(see accompanying notes to financial statements)

IV-6

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

FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------
2001 2000 1999
-------------- -------------- --------------

REVENUES (NOTE 10):
Base Rents ................................................................. $ 437,802 $ 397,327 $ 324,146
Tenant escalations and reimbursements ...................................... 59,969 54,750 44,989
Equity in earnings of real estate joint ventures and service companies. 2,087 4,383 2,148
Interest income on mortgage notes and notes receivable ..................... 6,238 8,212 7,944
Gain on sales of real estate (Note 6) ...................................... 20,173 18,669 10,052
Investment and other income ................................................ 14,199 26,597 13,874
----------- ----------- -----------
Total Revenues ............................................................. 540,468 509,938 403,153
----------- ----------- -----------
EXPENSES:
Property operating expenses ................................................ 168,664 157,456 125,994
Marketing, general and administrative ...................................... 30,747 27,371 24,293
Interest ................................................................... 93,072 96,337 74,320
Depreciation and amortization .............................................. 102,931 92,547 74,504
----------- ----------- -----------
Total Expenses ............................................................. 395,414 373,711 299,111
----------- ----------- -----------
Income before minority interests, preferred dividends and
distributions, valuation reserves and extraordinary loss .................. 145,054 136,227 104,042
Minority partners' interests in consolidated partnerships .................. (15,975) (9,120) (6,802)
Limited partners' minority interest in the operating partnership ........... 5,727 (11,669) (9,407)
Distributions to preferred unit holders .................................... (2,111) (2,641) (2,641)
Valuation reserves on investments in affiliate loans and joint ventures
and other investments (Notes 8 and 13) .................................... (166,101) -- --
----------- ----------- -----------
Income (loss) before extraordinary loss and dividends to preferred
shareholders .............................................................. (33,406) 112,797 85,192
Extraordinary loss on extinguishment of debts, net of limited partners'
minority interest share of $303, $175 and $74, respectively ............... (2,595) (1,396) (555)
----------- ----------- -----------
Net Income (loss) .......................................................... (36,001) 111,401 84,637
Dividends to preferred shareholders ........................................ (21,866) (25,371) (24,360)
----------- ----------- -----------
Net income (loss) allocable to common shareholders ......................... $ (57,867) $ 86,030 $ 60,277
=========== =========== ===========
Net income (loss) allocable to:
Class A common shareholders ............................................... $ (44,243) $ 62,989 $ 47,529
Class B common shareholders ............................................... (13,624) 23,041 12,748
----------- ----------- -----------
Total ...................................................................... $ (57,867) $ 86,030 $ 60,277
=========== =========== ===========
Basic net income (loss) per weighted average common share:
Class A common ............................................................ $ (.88) $ 1.49 $ 1.19
Extraordinary loss per Class A common ..................................... (.04) (.03) (.01)
----------- ----------- -----------
Basic net income (loss) per Class A common ................................ $ (.92) $ 1.46 $ 1.18
=========== =========== ===========
Class B common ............................................................ $ (1.26) $ 2.28 $ 1.91
Extraordinary loss per Class B common ..................................... (.06) (.04) (.02)
----------- ----------- -----------
Basic net income (loss) per Class B common ................................ $ (1.32) $ 2.24 $ 1.89
=========== =========== ===========
Basic weighted average common shares outstanding:
Class A common ............................................................ 48,121,000 43,070,000 40,270,000
Class B common ............................................................ 10,284,000 10,284,000 6,744,000
Diluted net income (loss) per weighted average common share:
Class A common ............................................................ $ (.92) $ 1.45 $ 1.17
Class B common ............................................................ $ (1.32) $ 1.59 $ 1.26
Diluted weighted average common shares outstanding:
Class A common ............................................................ 48,121,000 43,545,000 40,676,000
Class B common ............................................................ 10,284,000 10,284,000 6,744,000

(see accompanying notes to financial statements)

IV-7

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

CLASS A CLASS B SERIES A SERIES B
COMMON COMMON PREFERRED PREFERRED
STOCK STOCK STOCK STOCK
--------- --------- ----------- -----------

Stockholders' equity
January 1, 1999 .............. $400 $ -- $ 92 $ --
Net proceeds from
preferred stock offering ..... -- -- -- 60
Net proceeds from Class B
common stock offering ........ -- 117 -- --
Repurchases of Class B
common stock ................. -- (14) -- --
Redemption of OP Units ........ -- -- -- --
Net proceeds from long
term compensation
issuances .................... 4 -- -- --
Net income .................... -- -- -- --
Dividends and distributions
paid and payable ............. -- -- -- --
---- ----- ---- ------
Stockholders' equity
December 31, 1999 ............ 404 103 92 60
Conversion of Series B
Preferred Stock .............. 42 -- -- (40)
Redemption of OP Units ........ -- -- -- --
Net proceeds from long
term compensation
issuances .................... 8 -- -- --
Net income .................... -- -- -- --
Dividends and distributions
paid and payable ............. -- -- -- --
---- ----- ---- ------
Stockholders' equity
December 31, 2000 ............ 454 103 92 20
Issuance of OP Units .......... -- -- -- --
Redemption of OP Units ........ 6 -- -- --
Net proceeds from long
term compensation
issuances .................... 5 -- -- --
Issuance of Class A
common Stock ................. 35 -- -- --
Repurchases of Class A
common Stock ................. -- -- -- --
Net loss ...................... -- -- -- --
Dividends and distributions
paid and payable ............. -- -- -- --
---- ----- ---- ------
Stockholders' equity
December 31, 2001 ............ $500 $ 103 $ 92 $ 20
==== ===== ==== ======

LIMITED
ADDITIONAL TOTAL PARTNERS'
PAID IN RETAINED STOCKHOLDERS' MINORITY
CAPITAL EARNINGS EQUITY INTEREST
--------------- ------------ --------------- ------------

Stockholders' equity
January 1, 1999 .............. $ 705,572 $ -- $ 706,064 $ 94,125
Net proceeds from
preferred stock offering ..... 149,940 -- 150,000 --
Net proceeds from Class B
common stock offering ........ 302,536 -- 302,653 --
Repurchases of Class B
common stock ................. (30,273) -- (30,287) --
Redemption of OP Units ........ -- -- -- (1,485)
Net proceeds from long
term compensation
issuances .................... 1,593 -- 1,597 --
Net income .................... -- 60,277 60,277 9,333
Dividends and distributions
paid and payable ............. (13,071) (60,277) (73,348) (10,987)
----------- ---------- ----------- ----------
Stockholders' equity
December 31, 1999 ............ 1,116,297 -- 1,116,956 90,986
Conversion of Series B
Preferred Stock .............. (6,765) -- (6,763) 6,763
Redemption of OP Units ........ -- -- -- (125)
Net proceeds from long
term compensation
issuances .................... 6,656 -- 6,664 --
Net income .................... -- 86,030 86,030 11,494
Dividends and distributions
paid and payable ............. (4,198) (86,030) (90,228) (11,765)
----------- ---------- ----------- ----------
Stockholders' equity
December 31, 2000 ............ 1,111,990 -- 1,112,659 97,353
Issuance of OP Units .......... -- -- -- 11,557
Redemption of OP Units ........ 15,412 -- 15,418 (15,577)
Net proceeds from long
term compensation
issuances .................... 6,423 -- 6,428 --
Issuance of Class A
common Stock ................. 77,777 -- 77,812 7,188
Repurchases of Class A
common Stock ................. (1,421) -- (1,421) --
Net loss ...................... -- (57,867) (57,867) (6,030)
Dividends and distributions
paid and payable ............. (165,039) 57,867 (107,172) (12,604)
----------- ---------- ----------- ----------
Stockholders' equity
December 31, 2001 ............ $ 1,045,142 $ -- $ 1,045,857 $ 81,887
=========== ========== =========== ==========

(see accompanying notes to financial statements)

IV-8

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

FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------
2001 2000 1999
-------------- ------------ ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) .............................................................. $ (36,001) $ 111,401 $ 84,637
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization .................................................. 102,931 92,547 74,504
Extraordinary loss, net of minority interests .................................. 2,595 1,396 555
Minority partners' interests in consolidated partnerships ...................... 15,975 9,120 6,802
Limited partners' minority interest in the operating partnership ............... (5,727) 11,669 9,407
Gain on sales of real estate, securities and mortgage repayment ................ (20,173) (18,669) (9,657)
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 ......... (2,087) (4,383) (2,148)
Changes in operating assets and liabilities:
Deferred rents receivable ...................................................... (38,186) (35,798) (2,158)
Prepaid expenses and other assets .............................................. (4,925) (9,582) (24,414)
Tenant and affiliate receivables ............................................... 1,878 (6,394) 42
Accrued expenses and other liabilities ......................................... 3,607 17,857 15,888
---------- ---------- ----------
Net cash provided by operating activities ...................................... 185,988 169,164 153,458
---------- ---------- ----------
CASH FLOWS FROM INVESTMENT ACTIVITIES:
Purchases of commercial real estate properties ................................. -- (190,548) (284,741)
Investment in mortgage notes and notes receivable .............................. -- -- (295,048)
Increase in contract deposits and pre-acquisition costs ........................ (3,267) (2,023) (12,650)
Additions to developments in progress .......................................... (8,260) (13,392) (9,615)
Additions to commercial real estate properties ................................. (152,074) (89,818) (28,135)
Payment of leasing costs ....................................................... (10,513) (24,082) (16,467)
Distributions from investments in real estate joint ventures ................... 82 368 442
Additions to furniture, fixtures and equipment ................................. (635) (742) (461)
Investments in affiliate joint ventures ........................................ (25,056) (10,780) (15,033)
Proceeds from redemption of Keystone Property Trust preferred securities ....... 35,700 19,903 --
Proceeds from sales of real estate, securities and mortgage note receivable
repayments .................................................................... 76,503 49,810 269,916
---------- ---------- ----------
Net cash used in investing activities .......................................... (87,520) (261,304) (391,792)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from secured borrowings ............................................... 325,000 297,163 125,548
Principal payments on secured borrowings ....................................... (302,894) (27,367) (4,714)
Proceeds from issuance of senior unsecured notes, net of issuance costs ........ -- -- 299,262
Proceeds from issuance of preferred stock, net of issuance costs ............... -- -- 148,000
Payment of loan and equity issuance costs ...................................... (6,252) (11,649) (8,264)
Investments in affiliate loans and service companies ........................... (12,388) (12,516) (125,007)
Proceeds from unsecured credit facility and term loan .......................... 153,000 689,600 397,500
Principal payments on unsecured credit facility and term loan .................. (98,000) (845,600) (510,750)
Repurchases of Class B common stock ............................................ -- -- (30,287)
Repurchases of Class A common stock ............................................ (1,421) -- --
Proceeds from issuance of common stock and exercise of options, net of
issuance costs ................................................................ 2,813 4,010 1,512
Contributions by minority partners in consolidated partnerships ................ 101,832 135,975 75,500
Distributions to minority partners in consolidated partnerships ................ (16,458) (12,632) (6,701)
Distributions to limited partners in the operating partnership ................. (12,395) (11,654) (11,177)
Distributions to preferred unit holders ........................................ (2,231) (2,641) (2,641)
Dividends to common shareholders ............................................... (103,118) (87,437) (68,031)
Dividends to preferred shareholders ............................................ (21,824) (26,637) (22,397)
---------- ---------- ----------
Net cash provided by financing activities ...................................... 5,664 88,615 257,353
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents ........................... 104,132 (3,525) 19,019
Cash and cash equivalents at beginning of period ............................... 17,843 21,368 2,349
---------- ---------- ----------
Cash and cash equivalents at end of period ..................................... $ 121,975 $ 17,843 $ 21,368
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest, including interest capitalized ....... $ 105,087 $ 106,106 $ 77,014
========== ========== ==========

(see accompanying notes to financial statements)

IV-9

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

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

ORGANIZATION AND FORMATION OF THE COMPANY

The Company was incorporated in Maryland in September 1994. In June 1995,
the Company completed an Initial Public Offering (the "IPO") and commenced
operations.

The Company became the sole general partner of Reckson Operating
Partnership, L.P. (the "Operating Partnership") by contributing substantially
all of the net proceeds of the IPO, in exchange for an approximate 73% interest
in the Operating Partnership. All Properties acquired by the Company are held
by or through the Operating Partnership. In conjunction with the IPO, the
Operating Partnership executed various option and purchase agreements whereby
it issued common units of limited partnership interest in the Operating
Partnership ("OP Units") to certain continuing investors in exchange for (i)
interests in certain property partnerships, (ii) fee simple and leasehold
interests in properties and development land, (iii) certain business assets of
executive center entities and (iv) 100% of the non-voting preferred stock of
the management and construction companies. At December 31, 2001, the Company's
ownership percentage in the Operating Partnership is approximately 88.9%.

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements include the
consolidated financial position of the Company and the Operating Partnership at
December 31, 2001 and 2000 and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2001. The
Operating Partnership's investments in majority owned and/or controlled real
estate joint ventures are reflected in the accompanying financial statements on
a consolidated basis with a reduction for the minority partners' interest. The
operating results of the service companies currently conducted by Reckson
Management Group, Inc., RANY Management Group, Inc. and Reckson Construction
Group, Inc. ("RCG") in which the Operating Partnership owns a non-controlling
interest are reflected in the accompanying financial statements on the equity
method of accounting. The Operating Partnership also invests in real estate
joint ventures where it may own less than a controlling interest. Such
investments are also reflected in the accompanying financial statements on the
equity method of accounting. All significant intercompany balances and
transactions have been eliminated in the consolidated financial statements.

The minority interests at December 31, 2001 represent an approximate 11.1%
limited partnership minority interest in the Operating Partnership, a 49%
interest in RT Tri-State LLC, owner of an eight property suburban office
portfolio, a 40% interest in Omni Partners, L.P., owner of a 575,000 square
foot suburban office property and a 49% interest in Metropolitan 919 Third
Avenue, LLC, owner of the property located at 919 Third Avenue, New York, NY.

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States ("GAAP") requires management
to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates.

IV-10

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

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

Real Estate

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

Cash Equivalents

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

Tenant's lease security deposits aggregating approximately $5.1 million
and $6.1 million at December 31, 2001 and 2000, 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. 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 federal 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 federal income taxes at regular 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 for taxation as a REIT, the Company may be subject to certain state
and local taxes 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 taxable REIT subsidiaries is 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

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

IV-11

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

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

Among the factors the Company considers in making an evaluation of the
collectibility of interest are: (i) the status of the loan, (ii) the value of
the underlying collateral, (iii) the financial condition of the borrower and
(iv) anticipated future events.

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

Earnings Per Share

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

Stock Options

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

Recent Pronouncements

FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which became effective January 1, 2001 requires the Company to
recognize all derivatives on the balance sheet at fair value. Derivatives that
are not hedges must be adjusted to fair value through income. If a derivative
is a hedge, depending on the nature of the hedge, changes in the fair value of
the derivative will either be offset against the change in fair value of the
hedged asset, liability, or firm commitment through earnings, or recognized in
accumulated other comprehensive income ("OCI") until the hedged item is
recognized in earnings. The ineffective portion of a derivative's change in
fair value will be immediately recognized in earnings. As of January 1, 2001,
the carrying value of the Company's derivatives equaled their fair value and as
a result no cumulative effect changes were recorded. Additionally, as of June
30, 2001, the fair value of the Company's derivatives equaled approximately
$3.7 million and was reflected in other assets and OCI on the Company's balance
sheet. On July 18, 2001, the mortgage note payable to which these derivatives
relate to was funded (see Note 2) and their fair value at that time was
approximately $676,000 less than their carrying value. This amount is being
amortized to interest expense over the term of the mortgage note to which it
relates. Because of the Company's minimal use of derivatives, the adoption of
this Statement did not have a significant effect on earnings or the financial
position of the Company.

In October 2001, the FASB issued Statement No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" which supersedes FASB Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of"; however it retains the fundamental

IV-12

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

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

provisions of that statement related to the recognition and measurement of the
impairment of long-lived assets to be "held and used". In addition, the
Statement provides more guidance on estimating cash flows when performing a
recoverability test, requires that a long-lived asset or asset group to be
disposed of other than by sale (e.g. abandoned) be classified as "held and
used" until it is disposed of, and establishes more restrictive criteria to
classify an asset or asset group as "held for sale". The Company's management
does not anticipate that the adoption of this statement will have an effect on
the earnings or the financial position of the Company.

Reclassifications

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

2. MORTGAGE NOTES PAYABLE

On June 1, 2001, the Company refinanced a $70 million short-term variable
rate mortgage note with a five year $75 million fixed rate mortgage note, which
bears interest at 6.52% per annum. In addition, on July 18, 2001, the Company
refinanced a $200 million short-term variable rate mortgage note with a ten
year $250 million fixed rate mortgage note, which bears interest at 6.867% per
annum. As a result of these refinancings, certain unamortized loan costs were
written-off and accounted for as an extraordinary loss on the accompanying
statement of operations. The net proceeds of approximately $50.4 million
received by the Company as a result of these refinancings was used to repay
maturing fixed rate debt, the Company's unsecured credit facility and for
working capital purposes.

At December 31, 2001, there were 16 fixed rate mortgage notes payable with
an aggregate outstanding principal amount of approximately $751.1 million.
Properties with an aggregate carrying value at December 31, 2001 of
approximately $1.5 billion are pledged as collateral against the mortgage notes
payable. In addition, approximately $46.1 million of the $751.1 million is
recourse to the Company. The mortgage notes bear interest at rates ranging from
6.45% to 10.10%, and mature between 2004 and 2027. The weighted average
interest rates on the outstanding mortgage notes payable at December 31, 2001,
2000 and 1999 were approximately 7.3%, 7.8% and 7.6%, respectively. Certain of
the mortgage notes payable are guaranteed by certain limited partners in the
Operating Partnership and/or the Company.

Scheduled principal repayments to be made during the next five years and
thereafter, for mortgage notes payable outstanding at December 31, 2001, are as
follows (in thousands):

SCHEDULED PRINCIPAL DUE AT MATURITY TOTAL
--------------------- ----------------- -----------

2002 ................ $ 11,356 $ -- $ 11,356
2003 ................ 12,559 -- 12,559
2004 ................ 13,493 2,616 16,109
2005 ................ 14,462 18,553 33,015
2006 ................ 14,097 129,920 144,017
Thereafter .......... 130,347 403,674 534,021
--------- --------- ---------
$ 196,314 $ 554,763 $ 751,077
========= ========= =========

3. UNSECURED CREDIT FACILITY

IV-13

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

3. UNSECURED CREDIT FACILITY - (CONTINUED)

The Company utilizes the Credit Facility primarily to finance real estate
investments, fund its real estate development activities and for working
capital purposes. At December 31, 2001, the Company had availability under the
Credit Facility to borrow an additional $303.4 million (of which, $37.4 million
has been allocated for outstanding undrawn letters of credit). Subsequent to
December 31, 2001, the Company paid down the Credit Facility by $84.6 million
which was received from the sale of a 49% interest in the property located at
919 Third Avenue, New York, NY (see Note 6) and thereby increased its
availability under the Credit Facility to $388 million.

The Company capitalized interest incurred on borrowings to fund certain
development projects in the amount of $10.2 million, $11.5 million and $9.8
million for the years ended December 31, 2001, 2000 and 1999, respectively.

4. SENIOR UNSECURED NOTES

As of December 31, 2001, the Operating Partnership had outstanding
approximately $449.5 million (net of issuance discounts) of senior unsecured
notes (the "Senior Unsecured Notes"). The following table sets forth the
Operating Partnership's Senior Unsecured Notes and other related disclosures
(dollars in thousands):

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

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

Interest on the Senior Unsecured Notes is payable semiannually with
principal and unpaid interest due on the scheduled maturity dates. In addition,
the Senior Unsecured Notes issued on March 26, 1999 were issued at an aggregate
discount of $738,000. Such discount is being amortized over the term of the
Senior Unsecured Notes to which they relate.

5. LAND LEASES AND AIR RIGHTS

The Company leases, pursuant to noncancellable operating leases, the land
on which twelve of its buildings were constructed. The leases, which contain
renewal options, expire between 2009 and 2084. The leases either contain
provisions for scheduled increases in the minimum rent at specified intervals
or for adjustments to rent based upon the fair market value of the underlying
land or other indexes at specified intervals. Minimum ground rent is recognized
on a straight-line basis over the terms of the leases. The excess of amounts
recognized over amounts contractually due is approximately $3.0 million and
$2.7 million at December 31, 2001 and 2000, respectively. These amounts are
included in accrued expenses and other liabilities on the accompanying balance
sheets.

In addition, the Company, through the acquisition of certain properties,
is subject to two air rights lease agreements. These lease agreements have
terms expiring between 2048 and 2073, including renewal options.

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

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

2002 ................. $ 2,688 $ 366
2003 ................. 2,687 369
2004 ................. 2,811 379
2005 ................. 2,814 379
2006 ................. 2,795 379
Thereafter ........... 49,921 4,658
------- ------
$63,716 $6,530
======= ======

IV-14

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

5. LAND LEASES AND AIR RIGHTS - (CONTINUED)

During 2001, the Company, at its option, acquired the lessor's rights to
the air rights lease agreement for the property located at 120 West 45th
Street, New York, NY for approximately $7.7 million. As a result, the Company's
obligation to pay rent under this lease agreement was eliminated.

6. COMMERCIAL REAL ESTATE INVESTMENTS

As of December 31, 2001, the Company owned and operated 77 office
properties (inclusive of eleven office properties owned through joint ventures)
comprising approximately 13.8 million square feet, 103 industrial properties
comprising approximately 6.8 million square feet and two retail properties
comprising approximately 20,000 square feet located in the Tri-State Area.

The Company also owns approximately 254 acres of land in 12 separate
parcels of which the Company can develop approximately two million square feet
of office space and approximately 450,000 square feet of industrial space. The
Company is also obligated to purchase, during the first quarter of 2002, 52.7
acres of land located in Valhalla, NY on which the Company can develop
approximately 875,000 square feet of office space. In addition, the Company
owns a 32 acre land parcel in Rye Brook, NY which is under contract for sale
for approximately $22.3 million. The closing is scheduled to occur during 2002.

The Company also owns a 357,000 square foot office building in Orlando,
Florida and has invested approximately $17.0 million in a note receivable
secured by a partnership interest in Omni Partner's, L.P., owner of the Omni, a
575,000 square foot Class A office property located in Uniondale, NY and $36.5
million under three notes which bear interest at rates ranging from 10.5% to
12% per annum and are secured by a minority partner's preferred unit interest
in the Operating Partnership and certain real property.

On December 21, 2001, the Company formed a joint venture with the New York
State Teachers' Retirement System ("NYSTRS") whereby NYSTRS acquired a 49%
indirect interest in the property located at 919 Third Avenue, New York, NY for
$220.5 million which included $122.1 million of its proportionate share of
secured mortgage debt and approximately $98.4 million of cash which was then
distributed to the Company. As a result, the Company realized a gain of
approximately $18.9 million. Subsequent to December 31, 2001, net proceeds from
this sale were used primarily to repay borrowings under the Credit Facility and
for working capital purposes.

IV-15

RECKSON ASSOCIATES REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. STOCKHOLDERS' EQUITY

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

The Company currently has issued and outstanding 10,283,513 shares of
Class B Exchangeable Common Stock, par value $.01 per share (the "Class B
common stock"). The shares of Class B common stock currently receive an annual
dividend of $2.5968 per share, which is subject to adjustment annually based on
a formula which measures increases or decreases in the Company's Funds From
Operations, as defined, over a base year. The shares of Class B common stock
are exchangeable at any time, at the option of the holder, into an equal number
of shares of Class A common stock, par value $.01 per share, of the Company
subject to customary antidilution adjustments. The Company, at its option, may
redeem any or all of the Class B common stock in exchange for an equal number
of shares of the Company's Class A common stock at any time following November
23, 2003.

The Board of Directors of the Company has authorized the purchase of up to
an additional five million shares of the Company's Class B common stock and/or
its Class A common stock. Transactions conducted on the New York Stock Exchange
will be effected in accordance with the safe harbor provisions of the Securities
Exchange Act of 1934 and may be terminated by the Company at any time.
Previously, the Company had purchased and retired 1,410,804 shares of Class B
common stock at an average price of $21.48 per Class B share and 61,704 shares
of Class A common stock at an average price of $23.03 per Class A share for an
aggregate purchase price of approximately $31.7 million.

The Company currently has issued and outstanding 9,192,000 shares of
7.625% Series A Convertible Cumulative Preferred Stock (the "Series A preferred
stock"). The Series A preferred stock is redeemable by the Company on or after
April 13, 2003 at a price of approximately $25.95 per share with such price
decreasing, at annual intervals, to $25.00 per share over a five year period.
In addition, the Series A preferred stock, at the option of the holder, is
convertible anytime into the Company's Class A common stock at a price of
$28.51 per share.

The Company currently has issued and outstanding two million shares of
Series B Convertible Cumulative Preferred Stock (the "Series B preferred
stock"). The Series B preferred stock is redeemable by the Company as follows:
(i) on or after March 2, 2002 to and including June 2, 2003, at an amount which
provides an annual rate of return in respect to such share of 15%, (ii) on or
after June 3, 2003 to and including June 2, 2004, $25.50 per share and (iii) on
or after June 3, 2004 and thereafter, $25.00 per share. In addition, the Series
B preferred stock, at the option of the holder, is convertible at anytime into
the Company's Class A common stock at a price of $26.05 per share. The Series B
preferred stock currently accumulates dividends at a rate of 8.85% per annum.

During the year ended December 31, 2001, approximately 11,553 preferred
units of the Operating Partnership, with a liquidation preference value of
approximately $11.6 million, were exchanged for 456,351 OP Units at an average
price of $25.32 per OP Unit. In addition, 660,370 OP Units were exchanged for
an equal number of shares of the Company's Class A common stock.

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 Class A 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 Class A common stock, or announces a tender offer which would
result in beneficial ownership by a person or group of 15% or more of the Class
A common stock. If any person acquires 15% or more of the outstanding shares of
Class A common stock or if the Company is acquired in a

IV-16

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

7. STOCKHOLDERS' EQUITY - (CONTINUED)

merger after such an acquisition, all Rights holders except the acquiring
person will be entitled to purchase the Company's Class A 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.

During July 1998, the Company formed Metropolitan Partners, LLC
("Metropolitan") for the purpose of acquiring Class A office properties in New
York City. Metropolitan is controlled by the Company. A minority partner owned
an $85 million preferred equity investment in Metropolitan which accrued
distributions at a rate of 7.5% per annum for a two-year period (May 24, 1999
through May 30, 2001). On May 31, 2001, the minority partner, at its election,
converted its preferred equity investment into 3,453,881 shares of the
Company's Class A common stock based on a conversion price of $24.61 per share.
As a result of the minority partner's conversion of their preferred equity
investment, the Company owns 100% of Metropolitan.

The Company has made loans to certain executive officers to purchase
1,372,393 shares of its Class A common stock at market prices ranging from
$18.44 per share to $27.13 per share. The loans bear interest at the mid-term
Applicable Federal Rate and are secured by the shares purchased. Such loans
including accrued interest will be ratably forgiven each year on the annual
anniversary of the grant date based upon amortization periods ranging from four
to ten years and in certain instances based on meeting certain performance
criteria. Loans which are secured by 310,834 shares of Class A common stock are
due with a balloon payment on the fifth anniversary of the grant date occurring
in 2002. The loan balances aggregated approximately $24.3 million and $18.7
million at December 31, 2001 and 2000, respectively and have been included as a
reduction of additional paid in capital on the accompanying consolidated
statements of stockholders' equity.

IV-17

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

7. STOCKHOLDERS' EQUITY - (CONTINUED)

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

2001 2000 1999
---- ---- ----

Numerator:
Income (loss) before dividends to preferred
shareholders, extraordinary loss and income
allocated to Class B shareholders ......................... $ (33,406) $ 112,797 $ 85,192
Dividends to preferred shareholders ........................ (21,866) (25,371) (24,360)
Extraordinary loss (net of share applicable to limited
partners and Class B common shareholders) ................. (1,971) (1,032) (389)
(Income) loss allocated to Class B common
shareholders .............................................. 13,000 (23,405) (12,914)
--------- --------- ---------
Numerator for basic and diluted net income (loss) per
share ..................................................... $ (44,243) $ 62,989 $ 47,529
========= ========= =========
Denominator:
Denominator for basic net income (loss) per share-
weighted average Class A common shares .................... 48,121 43,070 40,270
Effect of dilutive securities:
Common stock equivalents ................................... -- 475 406
--------- --------- ---------
Denominator for diluted net income (loss) per Class A
common share-adjusted weighted average shares and
assumed conversions ....................................... 48,121 43,545 40,676
========= ========= =========
Basic net income (loss) per Class A common share:
Basic net income (loss) before extraordinary loss ......... $ (.88) $ 1.49 $ 1.19
Extraordinary loss ........................................ (.04) (.03) (.01)
--------- --------- ---------
Basic net income (loss) per Class A common share . $ (.92) $ 1.46 $ 1.18
========= ========= =========
Diluted net income (loss) per Class A common share:
Diluted net income (loss) before extraordinary loss . $ (.88) $ 1.47 $ 1.18
Extraordinary loss ........................................ (.04) (.02) (.01)
--------- --------- ---------
Diluted net income (loss) per Class A common share $ (.92) $ 1.45 $ 1.17
========= ========= =========

IV-18

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

7. STOCKHOLDERS' EQUITY - (CONTINUED)

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

2001 2000 1999
---- ---- ----

Numerator:
Income (loss) before dividends to preferred shareholders,
extraordinary loss and income allocated to Class A common
shareholders ................................................. $ (33,406) $ 112,797 $ 85,192
Dividends to preferred shareholders ............................ (21,866) (25,371) (24,360)
Extraordinary loss (net of share applicable to limited partners
and Class A common shareholders) ............................. (624) (364) (166)
(Income) loss allocated to Class A common shareholders ......... 42,272 (64,021) (47,918)
--------- --------- ---------
Numerator for basic net income (loss) per share ................. (13,624) 23,041 12,748
Add back:
Net income allocated to Class A common shareholders ............ -- 62,989 47,529
Limited partners' minority interest in the operating
partnership .................................................. -- 11,669 9,407
--------- --------- ---------
Numerator for diluted net income (loss) per share .............. $ (13,624) $ 97,699 $ 69,684
========= ========= =========
Denominator:
Denominator for basic net income (loss) per share-weighted
average Class B common shares ................................ 10,284 10,284 6,744
Effect of dilutive securities:
Weighted average Class A common shares outstanding ............. -- 43,070 40,270
Weighted average OP Units outstanding .......................... -- 7,696 7,705
Common stock equivalents ....................................... -- 475 406
--------- --------- ---------
Denominator for diluted net income (loss) per Class B common
share-adjusted weighted average shares and assumed
conversions .................................................... 10,284 61,525 55,125
========= ========= =========
Basic net income (loss) per Class B common share:
Basic net income (loss) before extraordinary loss .............. $ (1.26) $ 2.28 $ 1.91
Extraordinary loss ............................................. (.06) (.04) (.02)
--------- --------- ---------
Basic net income (loss) per Class B common share ............... $ (1.32) $ 2.24 $ 1.89
========= ========= =========
Diluted net income (loss) per Class B common share:
Diluted net income (loss) before extraordinary loss ............ $ (1.26) $ 1.62 $ 1.27
Extraordinary loss ............................................. (.06) (.03) (.01)
--------- --------- ---------
Diluted net income (loss) per Class B common share ............. $ (1.32) $ 1.59 $ 1.26
========= ========= =========

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

IV-19

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

7. STOCKHOLDERS' EQUITY - (CONTINUED)

Employee Stock Option Plans and Related Disclosures

The Company has established the 1995, 1996, 1997 and 1998 Employee Stock
Option Plans (the "Plans") for the purpose of attracting and retaining
executive officers, directors and other key employees. As of December 31, 2001,
1,500,000, 400,000, 3,000,000 and 3,000,000 of the Company's authorized Class A
common shares have been reserved for issuance under the 1995, 1996, 1997 and
1998 Plans, respectively.

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

EXERCISE PRICE RANGE
------------------------
OPTIONS
GRANTED(1) FROM (1) TO (1)
------------ ---------- -----------

1995 Employee Stock Option Plan ......... 1,545,038 $ 12.04 $ 25.56
1996 Employee Stock Option Plan ......... 262,100 $ 19.63 $ 26.13
1997 Employee Stock Option Plan ......... 2,485,965 $ 22.67 $ 27.04
1998 Employee Stock Option Plan ......... 2,280,501 $ 17.75 $ 25.67
---------
Total ................................ 6,573,604
=========

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

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 178,500 shares of Class A common stock pursuant to the 1995 Employee
Stock Option Plan at exercise prices ranging from $12.04 to $25.56 per share
and options to purchase 3,000 shares of Class A common stock pursuant to the
1997 Employee Stock Option Plan at an exercise price of $25.23 per share. The
options granted to the independent directors were exercisable on the date of
the grant.

During 2001 and 2000, employees exercised 182,596 and 280,087 options,
respectively resulting in proceeds to the Company of approximately $2.8 million
and $4.2 million, respectively.

Pro forma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of
Statement 123. The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 2001, 2000 and 1999, respectively: risk-free
interest rate of 5%; dividend yields of 7.52%, 7.31% and 8.23%; volatility
factors of the expected market price of the Company's Class A common stock of
..202 and a weighted-average expected life of the option of five years.

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

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

IV-20

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

7. STOCKHOLDERS' EQUITY - (CONTINUED)

The following table sets forth the Company's pro forma information for its
Class A common stockholders for the years ended December 31:

2001 2000 1999
---- ---- ----

Pro forma net income (loss) (in thousands) .............................. $ (44,719) $ 62,671 $ 46,744
========== ========= =========
Basic pro forma net income (loss) per weighted average share ............ $ (.93) $ 1.46 $ 1.16
========== ========= =========
Diluted pro forma net income (loss) per weighted average share .......... $ (.93) $ 1.44 $ 1.15
========== ========= =========

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

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

Outstanding -- January 1, 1999 ........... 4,733,644 $ 22.22
Granted .................................. 619,217 $ 20.82
Exercised ................................ (88,308) $ 13.99
Forfeited ................................ (90,632) $ 23.44
---------
Outstanding -- December 31, 1999 ......... 5,173,921 $ 22.17
Granted .................................. 737,750 $ 22.86
Exercised ................................ (280,087) $ 13.00
Forfeited ................................ (145,000) $ 22.50
---------
Outstanding -- December 31, 2000 ......... 5,486,584 $ 22.70
Granted .................................. 177,500 $ 22.61
Exercised ................................ (182,596) $ 15.41
Forfeited ................................ (118,133) $ 22.84
---------
Outstanding -- December 31, 2001 ......... 5,363,355 $ 23.16
=========

The weighted average fair value of options granted for the years ended
December 31, 2001, 2000 and 1999 was $1.94, $2.15 and $2.10, respectively. In
addition, there were 4,674,716 options at a weighted average per share exercise
price of $22.80, 4,498,828 options at a weighted average per share exercise
price of $22.70 and 5,137,588 options at a weighted average per share exercise
price of $22.17 exercisable at December 31, 2001, 2000 and 1999, respectively.

Exercise prices for options outstanding as of December 31, 2001 ranged
from $12.04 per share to $27.04 per share. The weighted-average remaining
contractual life of those options is approximately 6.67 years.

8. RELATED PARTY TRANSACTIONS

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

In connection with the IPO, the Company was granted a ten year option
period to acquire ten properties which are either owned by the Reckson Group,
the predecessor to the Company, or in which the Reckson Group owns a
non-controlling minority interest. As of December 31, 2001 one of these
properties was sold by the Reckson Group to a third party and four of these
properties were acquired by the Company for an aggregate purchase price of
approximately $35 million, which included the issuance of approximately 475,000
OP Units valued at approximately $8.8 million.

During July 1999, the Company sold its interest in a 852,000 square foot
development property to RCG in exchange for a $12.3 million note. The note
accrued interest annually at the rate of 12%, had a five-year maturity and was
prepayable in whole or in part. During October 1999, RCG made a payment

IV-21

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

8. RELATED PARTY TRANSACTIONS - (CONTINUED)

to the Company, in the form of 97 shares of its non-voting preferred stock,
valued at approximately $4.0 million, towards accrued interest and principal
due under the note. During August 2001, RCG made a cash payment to the Company
for the remaining balance due under the note plus accrued interest.

During 1997, the Company formed FrontLine Capital Group, formerly Reckson
Service Industries, Inc., ("FrontLine") and Reckson Strategic Venture Partners,
LLC ("RSVP"). RSVP is a real estate venture capital fund which invests
primarily in real estate and real estate operating companies outside the
Company's core office and industrial focus and 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 for
FrontLine to use in its investment activities, operations and other general
corporate purposes. The Company has advanced approximately $93.4 million under
the FrontLine Facility. The Operating Partnership also approved the funding of
investments of up to $100 million relating to RSVP (the "RSVP Commitment"),
through RSVP-controlled joint ventures (for REIT-qualified investments) 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").
During March 2001, the Company increased the RSVP Commitment to $110 million
and as of December 31, 2001, approximately $109.1 million had been funded
through the RSVP Commitment, of which $59.8 million represents investments by
the Company in RSVP-controlled (REIT-qualified) joint ventures and $49.3
million represents loans made to FrontLine under the RSVP Facility. As of
December 31, 2001, interest accrued (net of reserves) under the FrontLine
Facility and the RSVP Facility was approximately $ 19.6 million.

IV-22

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

8. RELATED PARTY TRANSACTIONS - (CONTINUED)

In November 1999, the Company received 176,186 shares of the common stock
of FrontLine as fees in connection with the FrontLine Loans. As a result of
certain tax rule provisions included in the REIT Modernization Act, it was
determined that the Company could no longer maintain any equity position in
FrontLine. As part of a compensation program, the Company distributed these
shares to certain non-executive employees subject to recourse loans. The loans
were scheduled to be forgiven over time based on continued employment with the
Company. Based on the current value of FrontLine's common stock the Company has
established a valuation reserve charge relating to the outstanding balance of
these loans in the amount of $2.4 million.

IV-23

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

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, 2001 as required by FASB Statement No.
107.

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

The fair value of the Company's long-term debt, mortgage notes, accounts
payable and accrued expenses and accounts and notes receivable is estimated
based on discounting future cash flows at interest rates that management
believes reflects the risks associated with long-term debt, mortgage notes,
accounts payable and accrued expenses and accounts and notes receivable of
similar risk and duration. At December 31, 2001, the estimated aggregate fair
value of the Company's mortgage notes and notes receivable exceeded their
carrying value by approximately $1.2 million and the aggregate fair value of
the Company's long term debt exceeded its carrying value by approximately $20.0
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

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

Expected future minimum rents to be received over the next five years and
thereafter from leases in effect at December 31, 2001 are as follows (in
thousands):

2002 ...................... $ 403,421
2003 ...................... 379,005
2004 ...................... 350,930
2005 ...................... 307,900
2006 ...................... 258,663
Thereafter ................ 1,315,340
-----------
$ 3,015,259
===========

11. SEGMENT DISCLOSURE

The Company owns all of the interests in its real estate properties by or
through the Operating Partnership. The Company's portfolio consists of Class A
office properties located within the New York City metropolitan area and Class
A suburban office and industrial properties located and operated within the
Tri-State Area (the "Core Portfolio"). The Company's portfolio also includes
one office property located in Orlando, Florida. The Company has managing
directors who report directly to the Co-Presidents and Chief Financial Officer
who have been identified as the Chief Operating Decision Makers because of
their final authority over resource allocation, decisions and performance
assessment.

The Company does not consider (i) interest incurred on its Credit Facility
and Senior Unsecured Notes and (ii) the operating performance of the office
property located in Orlando, Florida as part of its Core Portfolio's property
operating performance.

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

IV-24

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

11. SEGMENT DISCLOSURE - (CONTINUED)

The following tables set forth the components of the Company's revenues
and expenses and other related disclosures, as required by FASB Statement 131
"Disclosures about segments of an enterprise and related information", for the
years ended December 31 (in thousands):

2001
--------------------------------------------------------
CORE PORTFOLIO OTHER CONSOLIDATED TOTALS
---------------- -------------- --------------------

REVENUES:
Base rents, tenant escalations and reimbursements . $ 488,515 $ 9,256 $ 497,771
Equity in earnings of real estate joint ventures and
service companies ................................. -- 2,087 2,087
Other income ....................................... 28,772 11,838 40,610
----------- ---------- -----------
Total Revenues ..................................... 517,287 23,181 540,468
----------- ---------- -----------
EXPENSES:
Property expenses .................................. 165,730 2,934 168,664
Marketing, general and administrative .............. 20,660 10,087 30,747
Interest ........................................... 51,378 41,694 93,072
Depreciation and amortization ...................... 95,303 7,628 102,931
----------- ---------- -----------
Total Expenses ..................................... 333,071 62,343 395,414
----------- ---------- -----------
Income (loss) before minority interests, preferred
dividends and distributions, valuation reserves
and extraordinary loss ............................ $ 184,216 $ (39,162) $ 145,054
=========== ========== ===========
Total assets ....................................... $ 2,763,771 $ 230,447 $ 2,994,218
=========== ========== ===========

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

REVENUES:
Base rents, tenant escalations and
reimbursements .................................. $ 442,326 $ 9,751 $ 452,077
Equity in earnings of real estate joint ventures
and service companies ........................... -- 4,383 4,383
Other income ..................................... 1,212 52,266 53,478
----------- --------- -----------
Total Revenues ................................... 443,538 66,400 509,938
----------- --------- -----------
EXPENSES:
Property expenses ................................ 154,930 2,526 157,456
Marketing, general and administrative ............ 20,606 6,765 27,371
Interest ......................................... 40,465 55,872 96,337
Depreciation and amortization .................... 84,401 8,146 92,547
----------- --------- -----------
Total Expenses ................................... 300,402 73,309 373,711
----------- --------- -----------
Income (loss) before minority interests, preferred
dividends and distributions and extraordinary
loss ............................................ $ 143,136 $ (6,909) $ 136,227
=========== ========= ===========
Total assets ..................................... $ 2,604,494 $ 393,536 $ 2,998,030
=========== ========= ===========

IV-25

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

11. SEGMENT DISCLOSURE - (CONTINUED)

1999
--------------------------------------------------------
CORE PORTFOLIO OTHER CONSOLIDATED TOTALS
---------------- -------------- --------------------

REVENUES:
Base rents, tenant escalations and reimbursements . $ 340,293 $ 28,842 $ 369,135
Equity in earnings of real estate joint ventures and
service companies ................................. -- 2,148 2,148
Other income ....................................... 448 31,422 31,870
----------- ---------- -----------
Total Revenues ..................................... 340,741 62,412 403,153
----------- ---------- -----------
EXPENSES:
Property expenses .................................. 119,270 6,724 125,994
Marketing, general and administrative .............. 16,981 7,312 24,293
Interest ........................................... 25,167 49,153 74,320
Depreciation and amortization ...................... 64,097 10,407 74,504
----------- ---------- -----------
Total Expenses ..................................... 225,515 73,596 299,111
----------- ---------- -----------
Income (loss) before minority interests, preferred
dividends and distributions and extraordinary
loss .............................................. $ 115,226 $ (11,184) $ 104,042
=========== ========== ===========
Total assets ....................................... $ 2,317,195 $ 416,683 $ 2,733,878
=========== ========== ===========

12. NON-CASH INVESTING AND FINANCING ACTIVITIES

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

On May 31, 2001, Metropolitan's minority partner, at its election,
converted its preferred equity investment into 3,453,881 shares of the
Company's Class A common stock based on a conversion price of $24.61 per share.

On December 21, 2001, in connection with the sale of a 49% indirect
interest in the property located at 919 Third Avenue, New York, NY, the
Company's share of secured mortgage debt was reduced by approximately $122.1
million.

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

13. COMMITMENTS AND CONTINGENCIES

The Company has entered into amended and restated employment and
noncompetition agreements with its chairman and six executive officers. The
agreements are for five years and expire on August 15, 2005.

The Company is obligated to purchase, for approximately $23.8 million,
52.7 acres of land located in Valhalla, NY on which the Company can develop
approximately 875,000 square feet of office space. This acquisition will be
financed in part from the sale proceeds of an office property currently being
held by a qualified intermediary for the purposes of an exchange of real
property pursuant to Section 1031 of the Internal Revenue Code of 1986 and is
scheduled to close in the first quarter of 2002.

The Company had outstanding undrawn letters of credit against its Credit
Facility of approximately $37.4 million and $51.3 million at December 31, 2001
and 2000, respectively.

IV-26

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

13. COMMITMENTS AND CONTINGENCIES - (CONTINUED)

During 2001, based on the Company's value assessment of its investment in
Captivate Network, Inc., an unrelated technology based service company, the
Company recorded a valuation reserve charge of approximately $700,000 in its
consolidated statements of operations.

The Company sponsors a defined contribution savings plan pursuant to
section 401(k) of the Internal Revenue Code. Under such plan, there are no
prior service costs. Employees are generally eligible to participate in the
plan after six months of service. Employer contributions are based on a
discretionary amount determined by the Company's management. As of December 31,
2001, the Company has not made any contributions to the plan.

14. INCOME TAXES

The following table sets forth the Company's reconciliation of GAAP net
income to taxable income for the years ended December 31 (in thousands and
unaudited):

2001(ESTIMATED) 2000 1999
----------------- ----------- ------------

GAAP net income (loss) .................................. $ (36,001) $ 111,401 $ 84,637
Minority interests and distributions to preferred
unit holders ........................................... 12,359 23,430 18,850
Extraordinary loss on extinguishment of debts
(net of limited partners' minority interest). .......... 2,595 1,396 555
Add: GAAP depreciation and amortization ................. 102,931 92,547 74,504
Less: Tax depreciation and amortization ................. (74,127) (57,293) (52,146)
GAAP/tax difference on gains/losses from capital
transactions ........................................... (10,097) (8,255) 17,404
Straight-line rental income adjustment .................. (41,595) (38,785) (10,699)
GAAP/tax difference on reserve charge-off ............... 93,000 -- --
Other GAAP/tax differences, net ......................... 10,189 6,445 (3,426)
--------- --------- ---------
Taxable income before minority interests ................ 59,254 130,886 129,679
Minority interests ...................................... (20,246) (31,083) (34,898)
--------- --------- ---------
Taxable income to REIT .................................. $ 39,008 $ 99,803 $ 94,781
========= ========= =========

IV-27

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

14. INCOME TAXES - (CONTINUED)

The following table sets forth the Company's reconciliation of cash
distributions to the dividends paid deduction for the years ended December 31
(in thousands):

2001 (ESTIMATED) 2000 1999
------------------ ----------- ----------

Total cash distributions ........................... $ 124,942 $114,074 $ 90,428
Less: Cash distributions on restricted shares ...... (1,560) (1,059) (482)
Return of capital .................................. (74,691) -- --
--------- -------- --------
Cash dividends paid ................................ 48,691 113,015 89,946
Less: dividends designated to prior year ........... -- (8,688) (3,399)
Add: dividends designated from following year ...... -- -- 8,688
--------- -------- --------
Dividends paid deduction ........................... $ 48,691 $104,327 $ 95,235
========= ======== ========

The following table sets forth the characterization of the Company's
taxable distributions per share on its Class A common and Class B common stock
for the years ended December 31:

2001 (ESTIMATED) 2000 1999
CLASS A COMMON STOCK ------------------------ ------------------------ ------------------------

Ordinary income ......................... $ .349 21.5% $ 1.364 90.0% $ 1.236 92.7%
Return of capital ....................... 1.192 73.5% 0.000 0.0% 0.000 0.0%
Long-term rate capital gains ............ .019 1.2% 0.086 5.7% 0.097 7.3%
Unrecaptured Section 1250 gain .......... .061 3.8% 0.065 4.3% 0.000 0.0%
-------- ----- -------- ----- -------- -----
Totals .................................. $ 1.621 100.0% $ 1.515 100.0% $ 1.333 100.0%
======== ===== ======== ===== ======== =====

2001 (ESTIMATED) 2000 1999
CLASS B COMMON STOCK ------------------------ ------------------------ ------------------------

Ordinary income ......................... $ .537 21.5% $ 2.090 90.0% $ 0.912 92.7%
Return of capital ....................... 1.838 73.5% 0.000 0.0% 0.000 0.0%
Long-term rate capital gains ............ .029 1.2% 0.131 5.7% 0.071 7.3%
Unrecaptured Section 1250 gain .......... .094 3.8% 0.099 4.3% 0.000 0.0%
-------- ----- -------- ----- -------- -----
Totals .................................. $ 2.498 100.0% $ 2.320 100.0% $ 0.983 100.0%
======== ===== ======== ===== ======== =====

IV-28

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

15. QUARTERLY FINANCIAL DATA (UNAUDITED)

The following summary represents the Company's results of operations for
each fiscal quarter during 2001 and 2000 (in thousands, except share amounts):

2001
----------------------------------------------------------------
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
--------------- ---------------- --------------- ---------------

Total revenues $ 130,886 $ 132,387 $ 133,027 $ 144,168
=========== =========== =========== ===========
Income before preferred dividends and
distributions, minority interests, valuation
reserves and extraordinary loss ............... $ 35,243 $ 32,368 $ 31,079 $ 46,364
Preferred dividends and distributions .......... (6,085) (5,928) (5,996) (5,968)
Minority interests ............................. (8,470) (6,681) 11,592 (6,689)
Valuation reserves on investments in affiliate
loans and joint ventures and other
investments ................................... -- -- (163,000) (3,101)
Extraordinary loss ............................. -- -- (2,595) --
----------- ----------- ----------- -----------
Net income (loss) allocable to common
shareholders .................................. $ 20,688 $ 19,759 $ (128,920) $ 30,606
=========== =========== =========== ===========
Net income (loss) allocable to: ................
Class A common shareholders ................... $ 15,308 $ 15,109 $ (97,944) $ 23,284
Class B common shareholders ................... 5,380 4,650 (30,976) 7,322
----------- ----------- ----------- -----------
Total .......................................... $ 20,688 $ 19,759 $ (128,920) $ 30,606
=========== =========== =========== ===========
Basic net income (loss) per weighted average
common share:
Class A common ................................ $ .34 $ .32 $ (1.93) $ .47
Extraordinary loss per Class A common ......... -- -- (.04) --
----------- ----------- ----------- -----------
Basic net income (loss) per weighted average
Class A commonshare ......................... $ .34 $ .32 $ (1.97) $ .47
=========== =========== =========== ===========
Class B common ................................ $ .52 $ .45 $ (2.95) $ .71
Extraordinary loss per Class B common ......... -- -- (.06) --
----------- ----------- ----------- -----------
Basic net income (loss) per weighted average
Class B common .............................. $ .52 $ .45 $ (3.01) $ .71
=========== =========== =========== ===========
Basic weighted average common shares
outstanding:
Class A common ................................ 45,483,544 47,221,917 49,715,423 49,994,025
Class B common ................................ 10,283,513 10,283,513 10,283,513 10,283,513
Diluted net income (loss) per weighted average
common share:
Class A common ................................ $ .33 $ .32 $ (1.97) $ .46
Class B common ................................ $ .37 $ .34 $ (3.01) $ .50
Diluted weighted average common shares
outstanding:
Class A common ................................ 45,949,816 47,600,390 49,715,423 51,005,494
Class B common ................................ 10,283,513 10,283,513 10,283,513 10,283,513

IV-29

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

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

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

Total revenues ................................ $ 117,659 $ 125,455 $ 140,302 $ 126,522
=========== =========== =========== ===========
Income before preferred dividends and
distributions, minority interests and
extraordinary loss ........................... $ 28,080 $ 35,836 $ 43,383 $ 28,928
Preferred dividends and distributions ......... (7,985) (7,857) (6,085) (6,085)
Minority interests ............................ (4,253) (5,008) (5,924) (5,604)
Extraordinary loss ............................ -- -- (1,396) --
----------- ----------- ----------- -----------
Net income allocable to common
shareholders ................................. $ 15,842 $ 22,971 $ 29,978 $ 17,239
----------- ----------- ----------- -----------
Net income allocable to:
Class A common shareholders .................. $ 11,446 $ 16,655 $ 22,143 $ 12,745
Class B common shareholders .................. 4,396 6,316 7,835 4,494
----------- ----------- ----------- -----------
Total ......................................... $ 15,842 $ 22,971 $ 29,978 $ 17,239
=========== =========== =========== ===========
Basic net income per weighted average
common share:
Class A common ............................... $ .28 $ .40 $ .51 $ .28
Extraordinary loss per Class A common ......... -- -- (.02) --
----------- ----------- ----------- -----------
Basic net income per weighted average
Class A common ............................... $ .28 $ .40 $ .49 $ .28
=========== =========== =========== ===========
Class B common ............................... $ .43 $ .61 $ .80 $ .44
Extraordinary loss per Class B common -- -- (.04) --
----------- ----------- ----------- -----------
Basic net income per weighted average
Class B common ............................... .43 $ .61 $ .76 $ .44
=========== =========== =========== ===========
Basic weighted average common shares
outstanding:
Class A common ............................... 40,382,182 41,343,118 45,178,451 45,326,438
Class B common ............................... 10,283,598 10,283,513 10,283,513 10,283,513
Diluted net income per weighted average
common share:
Class A common ............................... $ .28 $ .40 $ .48 $ .28
Class B common ............................... $ .31 $ .44 $ .53 $ .31
Diluted weighted average common shares
outstanding:
Class A common ............................... 40,709,045 41,700,478 49,818,354 45,954,256
Class B common ............................... 10,283,598 10,283,513 10,283,513 10,283,513

IV-30

RECKSON ASSOCIATES REALTY CORP.
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2001
(IN THOUSANDS)

COLUMN A COLUMN B COLUMN C
--------------------------------------------------------- ---------------- ------------------------------
INITIAL COST
------------------------------
BUILDINGS AND
DESCRIPTION ENCUMBRANCE LAND IMPROVEMENTS
--------------------------------------------------------- ---------------- -------------- ---------------

Vanderbilt Industrial Park, Hauppauge, New York
(27 buildings in an industrial park) ................... -- $ 1,940 $ 9,955
85 Nicon Court, Hauppauge, New York .................... -- 797 2,818
104 Parkway Drive So., Hauppauge, New York ............. -- 54 804
125 Ricefield Lane, Hauppauge, New York ................ -- 13 852
110 Ricefield Lane, Hauppauge, New York ................ -- 33 1,043
120 Ricefield Lane, Hauppauge, New York ................ -- 16 1,051
135 Ricefield Lane, Hauppauge, New York ................ -- 24 906
1997 Portfolio Acquisition, Hauppauge, New York
(10 additional buildings in Vanderbilt Industrial
Park) .................................................. -- 930 (B) 20,619
425 Rabro Drive, Hauppauge, New York ................... -- 665 3,489
600 Old Willets Path, Hauppauge, New York .............. -- 295 3,521
Airport International Plaza, Islip, New York
(17 buildings in an industrial park) ................... 2,616 (C) 1,263 13,608
120 Wilbur Place, Islip, New York ...................... -- 202 1,154
2004 Orville Drive North, Islip, New York .............. -- 633 4,226
2005 Orville Drive North, Islip, New York .............. -- 984 5,410
County Line Industrial Center, Melville, New York
(3 buildings in an industrial park) .................... -- 628 3,686
30 Hub Drive, Melville, New York ....................... -- 469 1,571
32 Windsor Place, Islip, New York ....................... -- 32 321
42 Windsor Place, Islip, New York ....................... -- 48 327
505 Walt Whitman Rd., Huntington, New York .............. -- 140 42
1170 Northern Blvd., N. Great Neck, New York ............ -- 30 99
50 Charles Lindbergh Blvd., Mitchel Field, New York ..... -- (A) 12,089
200 Broadhollow Road, Melville, New York ................ -- 338 3,354
48 South Service Road, Melville, New York ............... -- 1,652 10,245
395 North Service Road, Melville, New York .............. 20,117 (A) 15,551
6800 Jericho Turnpike, Syosset, New York ................ 14,131 582 6,566
6900 Jericho Turnpike, Syosset, New York ................ 7,458 385 4,228

COLUMN A COLUMN D COLUMN E COLUMN F
--------------------------------------------------------- ---------------------- -------------------------------- --------------
COST CAPITALIZED,
SUBSEQUENT TO GROSS AMOUNT AT WHICH
ACQUISITION CARRIED AT CLOSE OF PERIOD
---------------------- --------------------------------
BUILDINGS AND BUILDINGS AND ACCUMULATED
DESCRIPTION LAND IMPROVEMENTS LAND IMPROVEMENTS TOTAL DEPRECIATION
--------------------------------------------------------- ------ --------------- ------- --------------- -------- --------------

Vanderbilt Industrial Park, Hauppauge, New York
(27 buildings in an industrial park) ................... -- 11,434 1,940 21,389 23,329 15,509
85 Nicon Court, Hauppauge, New York .................... -- 64 797 2,882 3,679 577
104 Parkway Drive So., Hauppauge, New York ............. -- 200 54 1,004 1,058 198
125 Ricefield Lane, Hauppauge, New York ................ -- 330 13 1,182 1,195 362
110 Ricefield Lane, Hauppauge, New York ................ 1 57 34 1,100 1,134 230
120 Ricefield Lane, Hauppauge, New York ................ -- 422 16 1,473 1,489 243
135 Ricefield Lane, Hauppauge, New York ................ -- 473 24 1,379 1,403 450
1997 Portfolio Acquisition, Hauppauge, New York
(10 additional buildings in Vanderbilt Industrial
Park) .................................................. -- 3,451 930 24,070 25,000 4,477
425 Rabro Drive, Hauppauge, New York ................... -- 398 665 3,887 4,552 573
600 Old Willets Path, Hauppauge, New York .............. -- 727 295 4,248 4,543 573
Airport International Plaza, Islip, New York
(17 buildings in an industrial park) ................... -- 11,346 1,263 24,954 26,217 16,785
120 Wilbur Place, Islip, New York ...................... 8 232 210 1,386 1,596 169
2004 Orville Drive North, Islip, New York .............. -- 1,431 633 5,657 6,290 1,305
2005 Orville Drive North, Islip, New York .............. -- 1,176 984 6,586 7,570 717
County Line Industrial Center, Melville, New York
(3 buildings in an industrial park) .................... -- 2,843 628 6,529 7,157 4,948
30 Hub Drive, Melville, New York ....................... -- 322 469 1,893 2,362 444
32 Windsor Place, Islip, New York ....................... -- 46 32 367 399 367
42 Windsor Place, Islip, New York ....................... -- 548 48 875 923 819
505 Walt Whitman Rd., Huntington, New York .............. -- 59 140 101 241 87
1170 Northern Blvd., N. Great Neck, New York ............ -- 34 30 133 163 130
50 Charles Lindbergh Blvd., Mitchel Field, New York ..... -- 5,564 0 17,653 17,653 10,768
200 Broadhollow Road, Melville, New York ................ -- 3,538 338 6,892 7,230 4,405
48 South Service Road, Melville, New York ............... -- 5,382 1,652 15,627 17,279 8,605
395 North Service Road, Melville, New York .............. -- 7,474 0 23,025 23,025 12,697
6800 Jericho Turnpike, Syosset, New York ................ -- 10,230 582 16,796 17,378 10,377
6900 Jericho Turnpike, Syosset, New York ................ -- 3,743 385 7,971 8,356 4,622

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

Vanderbilt Industrial Park, Hauppauge, New York
(27 buildings in an industrial park) ................... 1961-1979 1961-1979 10-30 Years
85 Nicon Court, Hauppauge, New York .................... 1984 1995 10-30 Years
104 Parkway Drive So., Hauppauge, New York ............. 1985 1996 10-30 Years
125 Ricefield Lane, Hauppauge, New York ................ 1973 1996 10-30 Years
110 Ricefield Lane, Hauppauge, New York ................ 1980 1996 10-30 Years
120 Ricefield Lane, Hauppauge, New York ................ 1983 1996 10-30 Years
135 Ricefield Lane, Hauppauge, New York ................ 1981 1996 10-30 Years
1997 Portfolio Acquisition, Hauppauge, New York
(10 additional buildings in Vanderbilt Industrial
Park) .................................................. 1974-1982 1997 10-30 Years
425 Rabro Drive, Hauppauge, New York ................... 1980 1997 10-30 Years
600 Old Willets Path, Hauppauge, New York .............. 1999 1999 10-30 Years
Airport International Plaza, Islip, New York
(17 buildings in an industrial park) ................... 1970-1988 1970-1988 10-30 Years
120 Wilbur Place, Islip, New York ...................... 1972 1998 10-30 Years
2004 Orville Drive North, Islip, New York .............. 1998 1996 10-30 Years
2005 Orville Drive North, Islip, New York .............. 1999 1996 10-30 Years
County Line Industrial Center, Melville, New York
(3 buildings in an industrial park) .................... 1975-1979 1975-1979 10-30 Years
30 Hub Drive, Melville, New York ....................... 1976 1996 10-30 Years
32 Windsor Place, Islip, New York ....................... 1971 1971 10-30 Years
42 Windsor Place, Islip, New York ....................... 1972 1972 10-30 Years
505 Walt Whitman Rd., Huntington, New York .............. 1950 1968 10-30 Years
1170 Northern Blvd., N. Great Neck, New York ............ 1947 1962 10-30 Years
50 Charles Lindbergh Blvd., Mitchel Field, New York ..... 1984 1984 10-30 Years
200 Broadhollow Road, Melville, New York ................ 1981 1981 10-30 Years
48 South Service Road, Melville, New York ............... 1986 1986 10-30 Years
395 North Service Road, Melville, New York .............. 1988 1988 10-30 Years
6800 Jericho Turnpike, Syosset, New York ................ 1977 1978 10-30 Years
6900 Jericho Turnpike, Syosset, New York ................ 1982 1982 10-30 Years

Continued

IV-31

RECKSON ASSOCIATES REALTY CORP.
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2001 (CONTINUED)
(IN THOUSANDS)

COLUMN A COLUMN B COLUMN C
-------------------------------------------------------- ------------- ------------------------------
INITIAL COST
------------------------------
BUILDINGS AND
DESCRIPTION ENCUMBRANCE LAND IMPROVEMENTS
-------------------------------------------------------- ------------- -------------- ---------------

300 Motor Parkway, Hauppauge, New York ................. -- 276 1,136
88 Duryea Road Melville, New York ...................... -- 200 1,565
210 Blydenburgh Road, Islandia, New York ............... -- 11 158
208 Blydenburgh Road, Islandia, New York ............... -- 12 192
71 Hoffman Lane, Islandia, New York .................... -- 19 260
933 Motor Parkway, Hauppauge, New York ................. -- 106 375
65 and 85 South Service Road, Plainview, New York . -- 40 218
333 Earl Ovington Blvd., (Omni), Mitchel Field,
New York .............................................. 54,785 (A) 67,221
135 Fell Court, Islip, New York ........................ -- 462 1,265
40 Cragwood Road, South Plainfield, New Jersey ......... -- 725 7,131
110 Marcus Drive, Huntington, New York ................. -- 390 1,499
333 East Shore Road, Great Neck, New York .............. -- (A) 564
310 East Shore Road, Great Neck, New York .............. -- 485 2,009
70 Schmitt Blvd., Farmingdale, New York ................ -- 727 3,408
19 Nicholas Drive, Yaphank, New York ................... -- 160 7,399
1516 Motor Parkway, Hauppauge, New York ................ -- 603 6,722
35 Pinelawn Road, Melville, New York ................... -- 999 7,073
520 Broadhollow Road, Melville, New York ............... -- 457 5,572
1660 Walt Whitman Road, Melville, New York ............. -- 370 5,072
70 Maxess Road, Melville, New York ..................... -- 367 1,859
20 Melville Park Rd., Melville, New York ............... -- 391 2,650
105 Price Parkway, Farmingdale, New York ............... -- 2,030 6,327
48 Harbor Park Drive, Port Washington, New York ........ -- 1,304 2,247
60 Charles Lindbergh, Mitchel Field, New York .......... -- (A) 20,800
235 Main Street, White Plains, New York ................ -- 933 5,375
245 Main Street, White Plains, New York ................ -- 1,235 7,284
505 White Plains Road, Tarrytown, New York ............. -- 210 1,332
555 White Plains Road, Tarrytown, New York ............. -- 712 4,133
560 White Plains Road, Tarrytown, New York ............. -- 1,521 8,756
580 White Plains Road, Tarrytown, New York ............. 12,879 2,414 14,595

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

300 Motor Parkway, Hauppauge, New York ................. -- 1,695 276 2,831 3,107
88 Duryea Road Melville, New York ...................... -- 843 200 2,408 2,608
210 Blydenburgh Road, Islandia, New York ............... -- 167 11 325 336
208 Blydenburgh Road, Islandia, New York ............... -- 188 12 380 392
71 Hoffman Lane, Islandia, New York .................... -- 172 19 432 451
933 Motor Parkway, Hauppauge, New York ................. -- 396 106 771 877
65 and 85 South Service Road, Plainview, New York . -- 17 40 235 275
333 Earl Ovington Blvd., (Omni), Mitchel Field,
New York .............................................. -- 20,517 0 87,738 87,738
135 Fell Court, Islip, New York ........................ -- 273 462 1,538 2,000
40 Cragwood Road, South Plainfield, New Jersey ......... -- 6,217 725 13,348 14,073
110 Marcus Drive, Huntington, New York ................. -- 107 390 1,606 1,996
333 East Shore Road, Great Neck, New York .............. -- 357 0 921 921
310 East Shore Road, Great Neck, New York .............. -- 1,852 485 3,861 4,346
70 Schmitt Blvd., Farmingdale, New York ................ -- 33 727 3,441 4,168
19 Nicholas Drive, Yaphank, New York ................... -- 6,136 160 13,535 13,695
1516 Motor Parkway, Hauppauge, New York ................ -- 379 603 7,101 7,704
35 Pinelawn Road, Melville, New York ................... -- 2,500 999 9,573 10,572
520 Broadhollow Road, Melville, New York ............... (1) 2,633 456 8,205 8,661
1660 Walt Whitman Road, Melville, New York ............. -- 718 370 5,790 6,160
70 Maxess Road, Melville, New York ..................... 95 2,957 462 4,816 5,278
20 Melville Park Rd., Melville, New York ............... -- 101 391 2,751 3,142
105 Price Parkway, Farmingdale, New York ............... -- 469 2,030 6,796 8,826
48 Harbor Park Drive, Port Washington, New York ........ -- 106 1,304 2,353 3,657
60 Charles Lindbergh, Mitchel Field, New York .......... -- 4,004 0 24,804 24,804
235 Main Street, White Plains, New York ................ -- 1,332 933 6,707 7,640
245 Main Street, White Plains, New York ................ 1 869 1,236 8,153 9,389
505 White Plains Road, Tarrytown, New York ............. -- 321 210 1,653 1,863
555 White Plains Road, Tarrytown, New York ............. 51 4,590 763 8,723 9,486
560 White Plains Road, Tarrytown, New York ............. (1) 3,047 1,520 11,803 13,323
580 White Plains Road, Tarrytown, New York ............. -- 3,503 2,414 18,098 20,512

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

300 Motor Parkway, Hauppauge, New York ................. 1,661 1979 1979 10-30 Years
88 Duryea Road Melville, New York ...................... 1,429 1980 1980 10-30 Years
210 Blydenburgh Road, Islandia, New York ............... 308 1969 1969 10-30 Years
208 Blydenburgh Road, Islandia, New York ............... 340 1969 1969 10-30 Years
71 Hoffman Lane, Islandia, New York .................... 431 1970 1970 10-30 Years
933 Motor Parkway, Hauppauge, New York ................. 662 1973 1973 10-30 Years
65 and 85 South Service Road, Plainview, New York . 227 1961 1961 10-30 Years
333 Earl Ovington Blvd., (Omni), Mitchel Field,
New York .............................................. 27,134 1990 1995 10-30 Years
135 Fell Court, Islip, New York ........................ 445 1965 1992 10-30 Years
40 Cragwood Road, South Plainfield, New Jersey ......... 7,934 1970 1983 10-30 Years
110 Marcus Drive, Huntington, New York ................. 1,270 1980 1980 10-30 Years
333 East Shore Road, Great Neck, New York .............. 641 1976 1976 10-30 Years
310 East Shore Road, Great Neck, New York .............. 2,019 1981 1981 10-30 Years
70 Schmitt Blvd., Farmingdale, New York ................ 729 1965 1995 10-30 Years
19 Nicholas Drive, Yaphank, New York ................... 2,080 1989 1995 10-30 Years
1516 Motor Parkway, Hauppauge, New York ................ 1,482 1981 1995 10-30 Years
35 Pinelawn Road, Melville, New York ................... 2,386 1980 1995 10-30 Years
520 Broadhollow Road, Melville, New York ............... 2,242 1978 1995 10-30 Years
1660 Walt Whitman Road, Melville, New York ............. 1,187 1980 1995 10-30 Years
70 Maxess Road, Melville, New York ..................... 1,019 1967 1995 10-30 Years
20 Melville Park Rd., Melville, New York ............... 519 1965 1996 10-30 Years
105 Price Parkway, Farmingdale, New York ............... 1,400 1969 1996 10-30 Years
48 Harbor Park Drive, Port Washington, New York ........ 479 1976 1996 10-30 Years
60 Charles Lindbergh, Mitchel Field, New York .......... 4,985 1989 1996 10-30 Years
235 Main Street, White Plains, New York ................ 1,472 1974 1996 10-30 Years
245 Main Street, White Plains, New York ................ 1,891 1983 1996 10-30 Years
505 White Plains Road, Tarrytown, New York ............. 422 1974 1996 10-30 Years
555 White Plains Road, Tarrytown, New York ............. 3,086 1972 1996 10-30 Years
560 White Plains Road, Tarrytown, New York ............. 3,072 1980 1996 10-30 Years
580 White Plains Road, Tarrytown, New York ............. 4,463 1997 1996 10-30 Years

Continued

IV-32

RECKSON ASSOCIATES REALTY CORP.
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2001 (CONTINUED)
(IN THOUSANDS)

COLUMN A COLUMN B COLUMN C
----------------------------------------------------------- ------------- ----------------------------
INITIAL COST
----------------------------
BUILDINGS AND
DESCRIPTION ENCUMBRANCE LAND IMPROVEMENTS
----------------------------------------------------------- ------------- ------------ ---------------

660 White Plains Road, Tarrytown, New York ................ -- 3,929 22,640
Landmark Square, Stamford, Connecticut .................... 46,069 11,603 64,466
110 Bi-County Blvd., Farmingdale, New York ................ 3,849 2,342 6,665
One Eagle Rock, East Hanover, New Jersey .................. -- 803 7,563
710 Bridgeport Avenue, Shelton, Connecticut ............... -- 5,405 21,620
101 JFK Expressway, Short Hills, New Jersey ............... -- 7,745 43,889
10 Rooney Circle, West Orange, New Jersey ................. -- 1,302 4,615
Executive Hill Office Park, West Orange, New Jersey . -- 7,629 31,288
3 University Plaza, Hackensack, New Jersey ................ -- 7,894 11,846
150 Motor Parkway, Hauppauge, New York .................... -- 1,114 20,430
Reckson Executive Park, Ryebrook, New York ................ -- 18,343 55,028
University Square, Princeton, New Jersey .................. -- 3,288 8,888
100 Andrews Road, Hicksville, New York .................... -- 2,337 1,711
80 Grasslands, Elmsford, New York ......................... -- 1,208 6,728
65 Marcus Drive, Melville, New York ....................... -- 295 1,966
100 Forge Way, Rockaway, New Jersey ....................... -- 315 902
200 Forge Way, Rockaway, New Jersey ....................... -- 1,128 3,228
300 Forge Way, Rockaway, New Jersey ....................... -- 376 1,075
400 Forge Way, Rockaway, New Jersey ....................... -- 1,142 3,267
51-55 Charles Lindbergh Blvd., Mitchel Field, New York -- (A) 27,975
100 Summit Drive, Valhalla, New York ...................... 20,373 3,007 41,351
115/117 Stevens Avenue, Valhalla, New York ................ -- 1,094 22,490
200 Summit Lake Drive, Valhalla, New York ................. 19,770 4,343 37,305
140 Grand Street, White Plains, New York .................. -- 1,932 18,744
500 Summit Lake Drive, Valhalla, New York ................. -- 7,052 37,309
99 Cherry Hill Road, Parsippany, New Jersey ............... -- 2,360 7,508
119 Cherry Hill Road, Parsippany, New Jersey .............. -- 2,512 7,622
45 Melville Park Road, Melville, New York ................. -- 355 1,487
500 Saw Mill River Road, Elmsford, New York ............... -- 1,542 3,796
120 W. 45th Street, New York, New York .................... 65,214 28,757 162,809

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

660 White Plains Road, Tarrytown, New York ................ 45 5,662 3,974 28,302 32,276
Landmark Square, Stamford, Connecticut .................... 832 29,831 12,435 94,297 106,732
110 Bi-County Blvd., Farmingdale, New York ................ -- 308 2,342 6,973 9,315
One Eagle Rock, East Hanover, New Jersey .................. -- 3,151 803 10,714 11,517
710 Bridgeport Avenue, Shelton, Connecticut ............... 7 824 5,412 22,444 27,856
101 JFK Expressway, Short Hills, New Jersey ............... (3,098) (16,382) 4,647 27,507 32,154
10 Rooney Circle, West Orange, New Jersey ................. 1 584 1,303 5,199 6,502
Executive Hill Office Park, West Orange, New Jersey . 4 1,649 7,633 32,937 40,570
3 University Plaza, Hackensack, New Jersey ................ -- 2,885 7,894 14,731 22,625
150 Motor Parkway, Hauppauge, New York .................... -- 3,055 1,114 23,485 24,599
Reckson Executive Park, Ryebrook, New York ................ -- 3,202 18,343 58,230 76,573
University Square, Princeton, New Jersey .................. (1) 968 3,287 9,856 13,143
100 Andrews Road, Hicksville, New York .................... 151 5,742 2,488 7,453 9,941
80 Grasslands, Elmsford, New York ......................... -- 576 1,208 7,304 8,512
65 Marcus Drive, Melville, New York ....................... 56 883 351 2,849 3,200
100 Forge Way, Rockaway, New Jersey ....................... -- 98 315 1,000 1,315
200 Forge Way, Rockaway, New Jersey ....................... -- 370 1,128 3,598 4,726
300 Forge Way, Rockaway, New Jersey ....................... -- 254 376 1,329 1,705
400 Forge Way, Rockaway, New Jersey ....................... -- 254 1,142 3,521 4,663
51-55 Charles Lindbergh Blvd., Mitchel Field, New York -- 4,292 0 32,267 32,267
100 Summit Drive, Valhalla, New York ...................... -- 4,569 3,007 45,920 48,927
115/117 Stevens Avenue, Valhalla, New York ................ -- 1,787 1,094 24,277 25,371
200 Summit Lake Drive, Valhalla, New York ................. -- 2,875 4,343 40,180 44,523
140 Grand Street, White Plains, New York .................. (1) 709 1,931 19,453 21,384
500 Summit Lake Drive, Valhalla, New York ................. -- 7,845 7,052 45,154 52,206
99 Cherry Hill Road, Parsippany, New Jersey ............... (1) 627 2,359 8,135 10,494
119 Cherry Hill Road, Parsippany, New Jersey .............. -- 1,054 2,512 8,676 11,188
45 Melville Park Road, Melville, New York ................. (1) 1,822 354 3,309 3,663
500 Saw Mill River Road, Elmsford, New York ............... -- 205 1,542 4,001 5,543
120 W. 45th Street, New York, New York .................... 7,732(E) 1,635 36,489 164,444 200,933

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

660 White Plains Road, Tarrytown, New York ................ 6,787 1983 1996 10-30 Years
Landmark Square, Stamford, Connecticut .................... 15,820 1973-1984 1996 10-30 Years
110 Bi-County Blvd., Farmingdale, New York ................ 1,235 1984 1997 10-30 Years
One Eagle Rock, East Hanover, New Jersey .................. 2,383 1986 1997 10-30 Years
710 Bridgeport Avenue, Shelton, Connecticut ............... 3,704 1971-1979 1997 10-30 Years
101 JFK Expressway, Short Hills, New Jersey ............... 4,197 1981 1997 10-30 Years
10 Rooney Circle, West Orange, New Jersey ................. 894 1971 1997 10-30 Years
Executive Hill Office Park, West Orange, New Jersey . 5,178 1978-1984 1997 10-30 Years
3 University Plaza, Hackensack, New Jersey ................ 2,534 1985 1997 10-30 Years
150 Motor Parkway, Hauppauge, New York .................... 3,996 1984 1997 10-30 Years
Reckson Executive Park, Ryebrook, New York ................ 8,293 1983-1986 1997 10-30 Years
University Square, Princeton, New Jersey .................. 1,317 1987 1997 10-30 Years
100 Andrews Road, Hicksville, New York .................... 1,555 1954 1996 10-30 Years
80 Grasslands, Elmsford, New York ......................... 1,083 1989/1964 1997 10-30 Years
65 Marcus Drive, Melville, New York ....................... 594 1968 1996 10-30 Years
100 Forge Way, Rockaway, New Jersey ....................... 148 1986 1998 10-30 Years
200 Forge Way, Rockaway, New Jersey ....................... 460 1989 1998 10-30 Years
300 Forge Way, Rockaway, New Jersey ....................... 252 1989 1998 10-30 Years
400 Forge Way, Rockaway, New Jersey ....................... 470 1989 1998 10-30 Years
51-55 Charles Lindbergh Blvd., Mitchel Field, New York 5,760 1981 1998 10-30 Years
100 Summit Drive, Valhalla, New York ...................... 6,329 1988 1998 10-30 Years
115/117 Stevens Avenue, Valhalla, New York ................ 2,989 1984 1998 10-30 Years
200 Summit Lake Drive, Valhalla, New York ................. 5,053 1990 1998 10-30 Years
140 Grand Street, White Plains, New York .................. 2,475 1991 1998 10-30 Years
500 Summit Lake Drive, Valhalla, New York ................. 5,363 1986 1998 10-30 Years
99 Cherry Hill Road, Parsippany, New Jersey ............... 983 1982 1998 10-30 Years
119 Cherry Hill Road, Parsippany, New Jersey .............. 1,083 1982 1998 10-30 Years
45 Melville Park Road, Melville, New York ................. 585 1998 1998 10-30 Years
500 Saw Mill River Road, Elmsford, New York ............... 534 1968 1998 10-30 Years
120 W. 45th Street, New York, New York .................... 14,544 1998 1999 10-30 Years

Continued

IV-33

RECKSON ASSOCIATES REALTY CORP.
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2001 (CONTINUED)
(IN THOUSANDS)

COLUMN A COLUMN B COLUMN C
------------------------------------------------------- ------------- ---------------------------------
INITIAL COST
---------------------------------
BUILDINGS AND
DESCRIPTION ENCUMBRANCE LAND IMPROVEMENTS
------------------------------------------------------- ------------- ----------------- ---------------

1255 Broad Street, Clifton, New Jersey ................ -- 1,329 15,869
810 7th Avenue, New York, New York .................... 84,280 26,984 (A) 152,767
120 Mineola Blvd., Mineola, New York .................. -- 1,869 10,603
100 Wall Street, New York, New York ................... 36,522 11,749 66,517
One Orlando, Orlando, Florida ......................... 38,934 9,386 51,136
1350 Avenue of the Americas, New York, New York . 75,000 19,222 109,168
919 3rd Avenue, New York, New York .................... 249,080 101,644 (A) 205,736
538 Broadhollow Road, Melville, New York .............. -- 3,900 21,413
360 Hamilton Avenue, White Plains, New York ........... -- 2,838 34,606
492 River Road, Nutley, New Jersey .................... -- 2,615 5,102
275 Broadhollow Road, Melville, New York .............. -- 3,850 12,958
400 Garden City Plaza, Garden City, New York .......... -- 9,081 17,004
90 Merrick Avenue, East Meadow, New York .............. -- (A) 23,804
120 White Plains Road, Tarrytown, New York ............ -- 3,852 24,861
100 White Plains Road, Tarrytown, New York ............ -- 79 472
51 JFK Parkway, Short Hills, New Jersey ............... -- 10,053 62,504
680 Washington Blvd, Stamford, Connecticut ............ -- 4,561 23,698
750 Washington Blvd, Stamford, Connecticut ............ -- 7,527 31,940
1305 Walt Whitman Road, Melville, New York ............ -- 3,934 24,040
50 Marcus Drive, Melville, New York ................... -- 930 13,600
100 Grasslands Road, Elmsford, New York ............... -- 289 3,382
2002 Orville Drive North, Bohemia, New York ........... -- 1,950 9,959
390 Motor Parkway, Hauppauge, New York ................ -- 240 5,787
58 South Service Road (D), Melville, New York ......... -- 1,061 --
Land held for development ............................. -- 69,365 --
Developments in progress .............................. -- -- 74,303
Other property ........................................ -- -- --
-------- ----------- ----------
Total ................................................. $751,077 $ 458,772 $2,009,172
======== =========== ==========

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

1255 Broad Street, Clifton, New Jersey ................ -- 4,069 1,329 19,938 21,267
810 7th Avenue, New York, New York .................... 117 10,738 27,101 163,505 190,606
120 Mineola Blvd., Mineola, New York .................. 5 689 1,874 11,292 13,166
100 Wall Street, New York, New York ................... 93 8,280 11,842 74,797 86,639
One Orlando, Orlando, Florida ......................... 32 1,715 9,418 52,851 62,269
1350 Avenue of the Americas, New York, New York . -- 15,268 19,222 124,436 143,658
919 3rd Avenue, New York, New York .................... 12,795 84,386 114,439 290,122 404,561
538 Broadhollow Road, Melville, New York .............. -- 1,007 3,900 22,420 26,320
360 Hamilton Avenue, White Plains, New York ........... -- 20,897 2,838 55,503 58,341
492 River Road, Nutley, New Jersey .................... -- 4,145 2,615 9,247 11,862
275 Broadhollow Road, Melville, New York .............. -- 120 3,850 13,078 16,928
400 Garden City Plaza, Garden City, New York .......... -- 421 9,081 17,425 26,506
90 Merrick Avenue, East Meadow, New York .............. -- 956 0 24,760 24,760
120 White Plains Road, Tarrytown, New York ............ -- 141 3,852 25,002 28,854
100 White Plains Road, Tarrytown, New York ............ -- 72 79 544 623
51 JFK Parkway, Short Hills, New Jersey ............... 1 319 10,054 62,823 72,877
680 Washington Blvd, Stamford, Connecticut ............ -- 60 4,561 23,758 28,319
750 Washington Blvd, Stamford, Connecticut ............ -- 65 7,527 32,005 39,532
1305 Walt Whitman Road, Melville, New York ............ -- 10 3,934 24,050 27,984
50 Marcus Drive, Melville, New York ................... -- 4,670 930 18,270 19,200
100 Grasslands Road, Elmsford, New York ............... -- 1,192 289 4,574 4,863
2002 Orville Drive North, Bohemia, New York ........... -- 253 1,950 10,212 12,162
390 Motor Parkway, Hauppauge, New York ................ -- 817 240 6,604 6,844
58 South Service Road (D), Melville, New York ......... 507 9,807 1,568 9,807 11,375
Land held for development ............................. -- -- 69,365 -- 69,365
Developments in progress .............................. -- -- -- 74,303 74,303
Other property ........................................ -- 14,051 -- 14,051 (B) 14,051
------- -------- -------- ---------- ----------
Total ................................................. $19,430 $393,505 $478,202 $2,402,677 $2,880,879
======= ======== ======== ========== ==========

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

1255 Broad Street, Clifton, New Jersey ................ 1,964 1999 1999 10-30 Years
810 7th Avenue, New York, New York .................... 14,441 1970 1999 10-30 Years
120 Mineola Blvd., Mineola, New York .................. 1,016 1977 1999 10-30 Years
100 Wall Street, New York, New York ................... 6,542 1969 1999 10-30 Years
One Orlando, Orlando, Florida ......................... 4,607 1987 1999 10-30 Years
1350 Avenue of the Americas, New York, New York . 7,813 1966 2000 10-30 Years
919 3rd Avenue, New York, New York .................... 5,342 1970 2000 10-30 Years
538 Broadhollow Road, Melville, New York .............. 1,125 2000 2000 10-30 Years
360 Hamilton Avenue, White Plains, New York ........... 4,005 2000 2000 10-30 Years
492 River Road, Nutley, New Jersey .................... 448 2000 2000 10-30 Years
275 Broadhollow Road, Melville, New York .............. 1,355 1970 1997 10-30 Years
400 Garden City Plaza, Garden City, New York .......... 1,468 1989 1997 10-30 Years
90 Merrick Avenue, East Meadow, New York .............. 2,527 1985 1997 10-30 Years
120 White Plains Road, Tarrytown, New York ............ 2,241 1984 1997 10-30 Years
100 White Plains Road, Tarrytown, New York ............ 21 1984 1997 10-30 Years
51 JFK Parkway, Short Hills, New Jersey ............... 5,399 1988 1998 10-30 Years
680 Washington Blvd, Stamford, Connecticut ............ 2,011 1989 1998 10-30 Years
750 Washington Blvd, Stamford, Connecticut ............ 2,610 1989 1998 10-30 Years
1305 Walt Whitman Road, Melville, New York ............ 2,002 1999 1999 10-30 Years
50 Marcus Drive, Melville, New York ................... 419 2001 1998 10-30 Years
100 Grasslands Road, Elmsford, New York ............... 156 2001 1997 10-30 Years
2002 Orville Drive North, Bohemia, New York ........... 482 2001 1996 10-30 Years
390 Motor Parkway, Hauppauge, New York ................ 789 2001 1997 10-30 Years
58 South Service Road (D), Melville, New York ......... 32 2001 1998 10-30 Years
Land held for development ............................. -- N/A Various N/A
Developments in progress .............................. --
Other property ........................................ 3,847
------
Total ................................................. $357,112
========

-------------
A These land parcels, or a portion of the land parcels, on which the building
and improvements were constructed are subject to a ground lease.
B The land parcel on which the building and improvements were constructed for
one property is subject to a ground lease.
C The Encumbrance of $2,616 is related to one property.
D As of December 31, 2001 this asset was partially under development. As a
result, certain costs have been classified as development costs on the
company's balance sheet.
E Costs incurred to acquire the lessor's rights to an air rights lease
agreement.
The aggregate cost of Federal Income Tax purposes was approximately $2,115
million at December 31, 2001.

IV-34

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

The changes in real estate for each of the periods in the three years
ended December 31, 2001 are as follows:

2001 2000 1999
------------- ------------- -------------

Real estate balance at
beginning of period ................ $2,770,607 $2,208,399 $1,737,133
Improvements / revaluations ......... 193,492 166,260 57,571
Disposal, including write-off of
fully depreciated building
improvements ....................... (83,220) (52,092) (317,864)
Acquisitions ........................ -- 448,040 731,559
---------- ---------- ----------
Balance at end of period ............ $2,880,879 $2,770,607 $2,208,399
========== ========== ==========

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, 2001 are as follows:

2001 2000 1999
----------- ----------- -----------

Balance at beginning of period ...... $ 284,315 $215,112 $156,231
Depreciation for period ............. 83,316 71,478 65,471
Disposal, including write-off of
fully depreciated building
improvements ....................... (10,519) (2,275) (6,590)
--------- -------- --------
Balance at end of period ............ $ 357,112 $284,315 $215,112
========= ======== ========

IV-35

(3) Exhibits

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

IV-36

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

21.1 Statement of Subsidiaries

23.0 Consent of Independent Auditors

24.1 Power of Attorney (included in Part IV of the Form 10-K)

----------

IV-37