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

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


                                    FORM 10-Q


               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 2000

                         Commission file number: 0-30162



                             FRONTLINE CAPITAL GROUP
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                             <C>
Delaware                                                                                   11-3383642
--------                                                                                   ----------
(State other jurisdiction of incorporation of organization)      (IRS. Employer Identification Number)


1350 Avenue of the Americas, New York, NY                                                       10019
-----------------------------------------                                                       -----
(Address of principal executive office)                                                     (zip code)
</TABLE>


                                 (212) 931-8000
               (Registrant's telephone number including area code)


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


     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)  Yes X No __, and (2) has been
subject to such filing requirements for the past 90 days. Yes X No .


     This company has only one class of common  stock,  issued at $.01 par value
per share with 34,719,254 shares outstanding as of May 5, 2000


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


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

<PAGE>


                    FRONTLINE CAPITAL GROUP AND SUBSIDIARIES
                                QUARTERLY REPORT
                    FOR THE THREE MONTHS ENDED MARCH 31, 2000

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

     INDEX                                                                                                   PAGE
-------------------------------------------------------------------------------------------------------------------
     PART I.  FINANCIAL INFORMATION
-------------------------------------------------------------------------------------------------------------------
<S>            <C>                                                                                         <C>
     Item 1.           Financial Statements

                       Consolidated  Balance Sheets of FrontLine  Capital Group and  Subsidiaries
                       as of March 31, 2000 (unaudited) and December 31, 1999....................             3


                       Consolidated Statements of Operations of FrontLine Capital Group and
                       Subsidiaries for the three months ended March 31, 2000 and 1999
                       (unaudited)..............................................................              4


                       Consolidated  Statements  of Cash  Flows of  FrontLine  Capital  Group and
                       Subsidiaries   for  the  three  months  ended  March  31,  2000  and  1999             5
                       (unaudited)...............................................................

                       Notes to the Consolidated Financial Statements of FrontLine Capital Group
                       and Subsidiaries (unaudited)..............................................             6

     Item 2.           Management's Discussion and Analysis of Financial Condition and Results of
                       Operations................................................................             20

     Item 3.           Quantitative and Qualitative Disclosures about Market Risk................             27
-------------------------------------------------------------------------------------------------------------------
     PART II. OTHER INFORMATION
-------------------------------------------------------------------------------------------------------------------
     Item 1.           Legal Proceedings.........................................................             28
     Item 2.           Changes in Securities and Use of Proceeds.................................             28
     Item 3.           Defaults Upon Senior Securities...........................................             28
     Item 4.           Submission of Matters to a Vote of Securities Holders.....................             28
     Item 5.           Other Information.........................................................             28
     Item 6.           Exhibits and reports on Form 8-K..........................................             28
-------------------------------------------------------------------------------------------------------------------
     SIGNATURES                                                                                               29
-------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       2

<PAGE>

PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS


                    FRONTLINE CAPITAL GROUP AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                 MARCH 31, 2000         DECEMBER 31, 1999
                                                                              -------------------     --------------------
<S>                                                                            <C>                    <C>
                                                                                  (UNAUDITED)
ASSETS:
Current Assets:
Cash and cash equivalents.....................................                        $   89,846              $    32,740
Restricted cash...............................................                            18,472                   21,572
Accounts receivable, net of allowance for doubtful accounts of
$1,106 in 2000 and $861 in 1999                                                            9,335                    8,426
Other current assets..........................................                            16,635                   16,008
                                                                                     -----------              -----------
    TOTAL CURRENT ASSETS......................................                           134,288                   78,746

Ownership interests in and advances to Partner Companies (Note 3)                         87,095                   61,207
Other ownership interest (Note 8) ............................                            27,694                   36,626
Intangible assets, net........................................                           275,124                  239,412
Property and equipment, net...................................                            93,323                   80,425
Other assets, net.............................................                            40,225                   45,567
                                                                                     -----------              -----------
    TOTAL  ASSETS.............................................                        $  657,749               $  541,983
                                                                                     ===========              ===========

LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Accounts payable and accrued expenses.........................                        $   44,245               $   51,383
Current portion of notes payable..............................                            13,075                   12,500
Deferred rent payable ........................................                             2,427                    2,165
Other current liabilities.....................................                             1,037                    1,139
                                                                                     -----------              -----------
     Total Current Liabilities................................                            60,784                   67,187

Credit facilities with related parties........................                           128,715                  121,848
Secured credit facility ......................................                                --                   44,407
Notes payable (Note 5) .......................................                           119,125                  108,125
Deferred rent payable ........................................                            25,990                   22,794
Other liabilities.............................................                            29,317                   28,175
                                                                                     -----------              -----------
     Total Liabilities........................................                           363,931                  392,536
                                                                                     -----------              -----------


Minority Interest.............................................                            15,338                   35,338

Commitments and Contingencies ................................
Shareholders' Equity:  (Notes 1 and 6)
8.875% Cumulative convertible preferred stock, $.01 par value,
25,000,000 shares authorized, 26,000 and 0 issued and outstanding,
at March 31, 2000 and December 31, 1999, respectively.........                               --                       --
Common stock, $.01 par value, 100,000,000 shares authorized,
34,683,722 and 30,672,794 shares issued and outstanding, at
 March 31, 2000 and December 31,1999, respectively............                               347                      307
Additional paid in capital....................................                           366,696                  162,054
Accumulated deficit...........................................                           (88,563)                 (48,252)
                                                                                     -----------              -----------

    TOTAL SHAREHOLDERS' EQUITY................................                           278,480                  114,109
                                                                                     -----------              -----------
     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...............                        $  657,749               $  541,983
                                                                                     ===========              ===========
</TABLE>

          (See accompanying notes to consolidated financial statements)


                                       3

<PAGE>


                    FRONTLINE CAPITAL GROUP AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                       THREE MONTHS              THREE MONTHS
                                                                                          ENDED                      ENDED
                                                                                      MARCH 31, 2000             MARCH 31, 1999
                                                                                    -----------------           ----------------
<S>                                                                               <C>                         <C>
OPERATING REVENUES:
Executive office suite income................................................          $    36,071                $     27,065
Support services and other...................................................               26,502                      19,793
                                                                                    -----------------           ----------------
  TOTAL OPERATING REVENUES...................................................               62,573                      46,858
                                                                                    -----------------           ----------------

OPERATING EXPENSES:
Cost of revenue..............................................................               49,779                      37,187
Partner Company general and administrative expenses..........................                7,167                       2,562
                                                                                    -----------------           ----------------
  TOTAL OPERATING EXPENSES...................................................               56,946                      39,749
                                                                                    -----------------           ----------------

  PARTNER COMPANY OPERATING INCOME...........................................                5,627                       7,109

PARTNER COMPANY OTHER INCOME (EXPENSES):
Development stage Partner Company............................................               (1,563)                        --
Merger and integration costs.................................................                 (826)                      (744)
Depreciation and amortization................................................               (6,219)                    (2,816)
Interest expense, net (Note 7) ..............................................               (3,382)                    (1,905)
                                                                                    -----------------           ----------------

PARTNER COMPANY INCOME (LOSS)................................................               (6,363)                     1,644

CORPORATE INCOME (EXPENSES):
General and administrative expenses..........................................               (4,234)                      (891)
New hire expenses............................................................                 (738)                        --
Depreciation and amortization................................................                  (43)                        (8)
Amortization of deferred charges.............................................               (1,652)                        --
Interest  expense, net ......................................................               (6,621)                      (768)
                                                                                    -----------------           ----------------

LOSS BEFORE PROVISION FOR INCOME TAXES, MINORITY INTEREST, EQUITY IN LOSS
OF PARTNER COMPANIES AND OTHER OWNERSHIP INTEREST, EXTRAORDINARY LOSS AND
DISTRIBUTION TO PREFERRED SHAREHOLDER........................................              (19,651)                       (23)
Provision for income taxes...................................................                 (190)                      (750)
Minority interest............................................................                  902                       (550)
Equity in loss of Partner Companies and other ownership interest (Note 3) ...              (18,378)                      (631)
                                                                                    -----------------           ----------------

LOSS BEFORE EXTRAORDINARY LOSS AND DISTRIBUTION TO PREFERRED SHAREHOLDER.....              (37,317)                    (1,954)

Extraordinary loss on extinguishment of debt (Note 6) .......................               (2,648)                        --
                                                                                    -----------------           ----------------

NET LOSS BEFORE DISTRIBUTION TO PREFERRED SHAREHOLDER                                      (39,965)                    (1,954)

Distribution to Preferred Shareholder........................................                 (346)                       --
                                                                                    -----------------           ----------------

NET LOSS  APPLICABLE TO COMMON SHAREHOLDERS..................................           $  (40,311)               $   (1,954)
                                                                                    =================           ================

BASIC AND DILUTED NET LOSS PER WEIGHTED AVERAGE COMMON SHARE.................           $    (1.27)               $    (0.08)
                                                                                    =================           =============

BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING.................           31,717,891                24,686,042
                                                                                    =================           =============
</TABLE>


          (See accompanying notes to consolidated financial statements)


                                       4

<PAGE>


                    FRONTLINE CAPITAL GROUP AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                                THREE MONTHS          THREE MONTHS
                                                                                                    ENDED                 ENDED
                                                                                                MARCH 31, 2000        MARCH 31, 1999
                                                                                               ----------------      ---------------
<S>                                                                                          <C>                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss before distribution to Preferred Shareholder                                             $  (39,965)           $   (1,954)
Adjustments to reconcile net loss before distribution to Preferred Shareholder to net
cash provided by (used in) operating activities:
     Depreciation  and amortization ..................................................                 6,262                 2,824
     Extraordinary loss on early extinguishment of debt...............................                 2,648                    --
     Equity in loss of Partner Companies and other ownership interest.................                18,378                   631
     Minority interest................................................................                  (902)                  550
     Provision for income taxes.......................................................                   190                   750
     Non-cash compensation............................................................                 1,652                    --
Changes in operating assets and liabilities:
     Accounts receivable, net.........................................................                  (873)               (1,615)
     Acquisition costs and other assets...............................................                (4,495)                2,705
     Equipment........................................................................                  (861)                   (9)
     Deferred rent payable............................................................                 1,363                   997
     Accounts payable and accrued expenses............................................                (7,130)               (1,138)
     Other liabilities................................................................                   213                    --
     Affiliate receivables............................................................                  (419)                1,896
                                                                                                   -----------          ----------
Net cash provided by (used in) operating activities...................................               (23,939)                5,637

CASH FLOWS FROM INVESTING ACTIVITIES:
     Acquisitions of Executive Office Suite Centers...................................               (11,608)              (19,624)
     Restricted cash..................................................................                 3,100                10,000
     Acquisition of ownership interests and advances to Partner Companies.............               (71,473)               (7,940)
     Other ownership interest.........................................................                 8,708                  (399)
                                                                                                   -----------          ----------
Net cash used in investing activities.................................................               (71,273)              (17,963)

CASH FLOWS FROM FINANCING ACTIVITIES:
     Issuance of common stock and warrants, net of costs..............................               154,481                     3
     Issuance of preferred stock, net of costs........................................                24,530                    --
     Deferred financing costs.........................................................                  (559)                 (787)
     Net proceeds from credit facilities with related parties.........................                 6,867                 4,402
     Net proceeds from notes payable..................................................                11,575                 8,887
     Capital leases...................................................................                  (263)                   --
     Exercise of options..............................................................                    94                  (691)
     Net proceeds from secured credit facility........................................               (44,407)                   --
                                                                                                   -----------          ----------
     Net cash provided by financing activities........................................               152,318                11,814
                                                                                                   -----------          ----------

CASH AND CASH EQUIVALENTS:
Net increase (decrease)...............................................................                57,106                  (512)
Beginning of period...................................................................                32,740                 5,641
                                                                                                   -----------          ----------
End of period.........................................................................             $  89,846             $   5,129
                                                                                                   ===========          ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    Cash paid during the period for interest..........................................             $   6,292             $   2,286
                                                                                                   ===========          ==========
    Cash paid during the year for income taxes........................................             $   3,155                   --
                                                                                                   ===========          ==========
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
       Contribution of assets from Interoffice Superholdings Corporation and
 Reckson Executive Centers, Inc. to predecessor entity................................             $      --             $ (21,409)
                                                                                                   ===========          ==========
</TABLE>

          (See accompanying notes to consolidated financial statements)


                                       5

<PAGE>
                    FRONTLINE CAPITAL GROUP AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000
                                   (UNAUDITED)

1.   DESCRIPTION OF THE COMPANY


FrontLine   Capital  Group   ("FrontLine"   or  the  "Company")  is  building  a
collaborative network of companies that use the Internet and new technologies to
empower  small to medium  size  enterprises  ("SME's"),  entrepreneurs,  and the
mobile  workforce,  the fastest  growing  segment of the new economy.  FrontLine
provides its Partner  Companies  with the  capital,  customer  base,  management
resources,  and relationships  they need for fast-growth and long-term  success.
The Partner  Companies in turn provide small to medium size  business  customers
with the information,  tools and services they need to become more  competitive,
at a price they can afford. In this way, FrontLine achieves its vision along two
parallel tracks:  FrontLine  empowers the entrepreneurs that make up its network
of Partner  Companies,  and empowers the entrepreneurs that make up its customer
base.

The  Company  acquires   significant,   long-term  stakes  in  targeted  Partner
Companies,  which it incorporates into a collaborative network of e-commerce and
e-services  companies,  seeking to accelerate  their growth and increasing their
likelihood  of success.  FrontLine  has  developed  an  extensive  e-Cooperative
platform that allows its Partner  Companies to benefit from its  operational and
management  resources and experience,  the Company's  extensive customer base as
well as gain  significant  synergies  from other  existing  and  future  Partner
Companies. The e-Cooperative consists of the:

     o    enterprise  Development Group ("eDG") - eDG offers strategic planning,
          project management and functional expertise in areas of organizational
          design, recruiting, finance and technology strategy.

     o    Advisory Board - a group of recognized  business and academic  leaders
          provides strategic insight, expertise, relationships and access to new
          opportunities and potential  alliances for the Company and its Partner
          Companies.

     o    Network of Partner Companies - facilitates  learning and collaboration
          among all Partner  Companies and provides access to the customer base,
          resources and relationships of the entire network. It also facilitates
          business partnerships among Partner Companies, including cross-selling
          and cross-marketing opportunities.

     o    Virtual  and  Physical - Global  workplace  solutions  provider  which
          offers the  Partner  Companies  the  ability to access the virtual and
          physical global  infastruture  as well as a distribution  network to a
          customer base of SME's.

The Company's strategy is to continue to expand its network of Partner Companies
and  its  e-Cooperative  platform  by  pursuing  additional   acquisitions  that
complement and enhance the overall  network.  FrontLine seeks to add significant
value to its Partner  Companies with the goal of creating  industry leaders that
have the potential to become public companies,  act as industry consolidators or
merge  with  the  proper  strategic  partners.  FrontLine  targets  early  stage
companies that can benefit from FrontLine's  entire franchise and therefore have
the potential to create  significant  value for  FrontLine.

FrontLine  seeks to focus its  future  acquisitions  in the  Internet  sector by
targeting three types of e-commerce and e-services companies:

     o    e-commerce and  infrastructure:  companies  that primarily  deliver or
          enable the delivery of goods and services over the Internet;

     o    Virtual   brick  and  mortar:   companies   that  combine  a  physical
          infrastructure  with an Internet  enable model to enhance the delivery
          of their services; and

     o    Internet-based  outsourcing:  companies  that  utilize the Internet to
          enable the outsourcing of non-core business functions.

Although the Company  refers to the companies in which it has acquired an equity
and  cost  ownership  interest  as its  "Partner  Companies"  and  that it has a
"partnership"  with  these  companies,  it does  not act as an  agent  or  legal
representative  for any of  these  companies,  it does  not  have  the  power or
authority to legally bind any of its Partner  Companies and it does not have the
types of liabilities in relation to its Partner Companies that a general partner
of a partnership would have.
                                       6

<PAGE>

                    FRONTLINE CAPITAL GROUP AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000
                                   (UNAUDITED)


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The  accompanying  consolidated  financial  statements  present the consolidated
financial  position of the Company and its majority owned  subsidiaries,  VANTAS
Incorporated ("VANTAS") and OneXstream.com,  Inc. at March 31, 2000 and December
31, 1999, and the results of their operations and their cash flows for the three
months ended March 31, 2000 and 1999. All significant  intercompany balances and
transactions have been eliminated in the consolidated financial statements.

The accompanying  unaudited consolidated financial statements have been prepared
in  accordance  with  generally  accepted  accounting   principles  for  interim
financial  information and with the  instructions to Form 10-Q and Article 10 of
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
footnotes by generally  accepted  accounting  principles for complete  financial
statements. In the opinion of management,  all adjustments (consisting of normal
recurring  accruals)  considered  necessary  for a fair  presentation  have been
included.  Operating results for the three month period ended March 31, 2000, is
not  necessarily  indicative  of the results  that may be expected  for the year
ended December 31, 2000.

The  balance  sheet at  December  31,  1999 has been  derived  from the  audited
financial  statements  at that date but does not include all of the  information
and footnotes required by generally accepted accounting  principles for complete
financial statements.

For further  information,  refer to the  consolidated  financial  statements and
footnotes  thereto  included in the Company's annual report on Form 10-K for the
year ended December 31, 1999.

ACCOUNTING  FOR OWNERSHIP  INTERESTS IN PARTNER  COMPANIES  AND OTHER  OWNERSHIP
INTEREST

The  interests  that  FrontLine  acquires  in its  Partner  Companies  and other
ownership interest are accounted for under one of three methods:  consolidation,
equity method and cost method.  The  applicable  accounting  method is generally
determined  based on the  Company's  voting  interest  and  rights  in a Partner
Company.

Consolidation.  Partner  Companies in which the Company  directly or  indirectly
owns more than 50% of the outstanding voting securities are generally  accounted
for under the consolidation  method of accounting.  Under this method, a Partner
Company's results of operations are reflected within the Company's  Consolidated
Statements  of   Operations.   All   significant   inter-company   accounts  and
transactions  have  been  eliminated.  Participation  of other  Partner  Company
shareholders  in the earnings or losses of a  consolidated  Partner  Company are
reflected  in the caption  "Minority  interest"  in the  Company's  Consolidated
Statements of Operations.  Minority interest adjusts the Company's  consolidated
results of  operations  to reflect only the  Company's  share of the earnings or
losses of the consolidated Partner Company.



                                       7

<PAGE>


                    FRONTLINE CAPITAL GROUP AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000
                                   (UNAUDITED)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Equity Method. Partner Companies and other ownership interests whose results are
not consolidated, but over whom the Company exercises significant influence, are
accounted for under the equity method of accounting.  Whether or not the Company
exercises  significant  influence  with  respect  to a Partner  Company or other
ownership interest depends on an evaluation of several factors including,  among
others,  representation on the Partner  Company's or other ownership  interest's
Board of Directors and ownership level, which is generally a 20% to 50% interest
in the voting  securities of the Partner Company and other ownership  interests,
including  voting  rights  associated  with the  Company's  holdings  in common,
preferred and any other convertible instruments in the Partner Company and other
ownership interests.  Under the equity method of accounting, a Partner Company's
or other ownership  interest's  accounts are not reflected  within the Company's
Consolidated  Statements  of  Operations;  however,  FrontLine's  share  of  the
earnings  or  losses of the  Partner  Company  or other  ownership  interest  is
reflected  in the  caption  "Equity  in  loss of  Partner  Companies  and  other
ownership interests" in the Consolidated Statements of Operations.

The  amount by which  the  Company's  carrying  value  exceeds  its share of the
underlying  net  assets  of  Partner  Companies  or  other  ownership  interests
accounted  for  under  the  consolidation  or equity  method  of  accounting  is
amortized on a  straight-line  basis over 30 years which  adjusts the  Company's
share of the Partner Company's or other ownership interest's earnings or losses.

Cost Method.  Partner Companies not accounted for under the consolidation or the
equity  method  of  accounting  are  accounted  for  under  the cost  method  of
accounting.  Under this method, the Company's share of the earnings or losses of
such companies is not included in the Consolidated Statements of Operations. The
Company also  recognizes  income from dividends on  distributed  earnings of its
Partner Companies. However, cost method impairment charges are recognized in the
Consolidated  Statement of Operations  with the new cost basis not written-up if
circumstances  suggest  that the value of the Partner  Company has  subsequently
recovered.

The  Company  records  its  ownership  interest  in debt  securities  of Partner
Companies  accounted for under the cost method at cost as it has the ability and
intent  to hold  these  securities  until  maturity.  The  Company  records  its
ownership  interests in equity  securities  of Partner  Companies  accounted for
under the cost method at cost, unless these securities have readily determinable
fair values based on quoted market prices,  in which case these  interests would
be classified as  available-for-sale  securities or some other classification in
accordance with Statement of Financial  Accounting  Standards  ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities".  In addition
to  the  Company's   investments  in  voting  and  non-voting  equity  and  debt
securities,  it also periodically makes advances to its Partner Companies in the
form of promissory  notes which are  accounted  for in accordance  with SFAS No.
114, "Accounting by Creditors for Impairment of a Loan".

The Company continually  evaluates the carrying value of its ownership interests
in and advances to each of its Partner  Companies for possible  impairment based
on achievement of business plan  objectives  and  milestones,  the value of each
ownership  interest in the Partner  Company  relative  to  carrying  value,  the
financial  condition and prospects of the Partner  Company,  and other  relevant
factors.  The business plan  objectives  and  milestones  the Company  considers
include,   among  others,  those  related  to  financial   performance  such  as
achievement  of planned  financial  results  or  completion  of capital  raising
activities,  and those that are not  primarily  financial  in nature such as the
launching of a web site, business development  activities,  or the hiring of key
employees.  The fair value of the Company's  ownership interests in and advances
to privately held Partner  Companies is generally  determined based on the value
at which  independent third parties have invested or have committed to invest in
the Partner Companies.

CASH AND CASH EQUIVALENTS

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


                                       8


<PAGE>


                    FRONTLINE CAPITAL GROUP AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000
                                   (UNAUDITED)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

REVENUE RECOGNITION

The Company's  operating revenues for the three months ended March 31, 2000 were
primarily  attributable to VANTAS. VANTAS' revenue is derived primarily from the
operation of their  executive  office suites and the range of  telecommunication
and business  support  services  provided to clients,  and are recognized as the
related services are provided.

PROPERTY AND EQUIPMENT

Property and  equipment is stated at cost.  Depreciation  is  calculated  on the
straight-line  method over the estimated  useful lives of the assets which range
from five to seven years.  Leasehold  improvements are amortized over the lesser
of the term of the related lease or the estimated useful lives of the assets. As
of  March  31,  2000,  and  December  31,  1999,  accumulated  depreciation  and
amortization were approximately $20.2 million and $14.0 million, respectively.

INTANGIBLE ASSETS

Intangible  assets  consist  primarily  of  goodwill  which is the excess of the
purchase  price over the net assets of acquired  companies by  FrontLine  and is
being amortized on the straight-line method primarily over 30 years. As of March
31, 2000, and December 31, 1999,  accumulated  amortization  were  approximately
$9.1 million and $9.0 million, respectively.

If there is an event or change in circumstances that indicates that the basis of
FrontLine's long-lived intangibles may not be recoverable, FrontLine's policy is
to assess any  impairment  in value by making a  comparison  of the  current and
projected  operating cash flows of the business  center for which the intangible
relates  over its  remaining  useful  life,  on an  undiscounted  basis,  to the
carrying  amount of the intangible.  Such carrying amount would be adjusted,  if
necessary, to reflect an impairment in the value of the intangible assets.

STOCK BASED COMPENSATION

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 and grants because
the alternative fair value accounting  provided for under Statement of Financial
Accounting Standard ("SFAS") No. 123, "Accounting for Stock-Based Compensation,"
("SFAS 123") requires the use of option valuation models that were not developed
for use in valuing employee stock options.

INCOME TAXES

The Company  accounts for income taxes under the liability method which requires
recognition  of  deferred  tax assets and  liabilities  based upon the  expected
future tax consequences of events included in the Company's financial statements
and tax returns.  Under this method,  deferred  tax assets and  liabilities  are
determined based on the difference between the financial statement and tax bases
of assets  and  liabilities  using  enacted  tax rates in effect for the year in
which the differences are expected to reverse.  For the three months ended March
31, 2000 and March 31, 1999,  the Company  recognized a current state income tax
provision of approximately $0.2 million and $0.8 million, respectively.

Additionally,  deferred tax assets are recognized for temporary differences that
will result in  deductible  amounts in future  years.  A valuation  allowance is
recognized if it is more likely than not that some portion of the deferred asset
will not be  recognized.  The Company  has  recognized  a deferred  tax asset of
approximately $3.0 million and $9.9 million  attributable to VANTAS at March 31,
2000 and December 31, 1999,  respectively.  The remaining deferred tax assets at
March 31,  2000 and  December  31, 1999 have been  reserved  for 100% due to the
uncertainty as to whether these assets will have benefit in future periods.


                                       9

<PAGE>


                    FRONTLINE CAPITAL GROUP AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000
                                   (UNAUDITED)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107,  "Disclosures About Fair Value of Financial  Instruments" requires
FrontLine  to disclose the  estimated  fair values of its  financial  instrument
assets and liabilities. The carrying amounts approximate fair value for cash and
cash  equivalents  because of the short maturity of those  instruments.  For the
loans payable to affiliates and others,  the estimated  fair value  approximates
the recorded balance.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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

USE OF ESTIMATES

The preparation of financial  statements in conformity  with generally  accepted
accounting principles 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.

RECLASSIFICATIONS

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



                                       10

<PAGE>


                    FRONTLINE CAPITAL GROUP AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000
                                   (UNAUDITED)

3.   OWNERSHIP INTERESTS IN PARTNER COMPANIES

Partner Companies at March 31, 2000 and December 31, 1999 included:

<TABLE>
<CAPTION>
                                                         Voting Ownership on a Basic Basis      Voting Ownership on a Diluted Basis
                          Partner       Applicable       ---------------------------------      -----------------------------------
                          Company       Accounting
                           Since          Method         March 31, 2000    December 31, 1999    March 31, 2000    December 31, 1999
                          -------       ----------       --------------    -----------------    --------------    -----------------
<S>                      <C>           <C>              <C>               <C>                  <C>               <C>
AdOutlet.com                1999           Cost               12%                 12%                 10%                10%
DitigalWork.com             1999           Cost               <1%                 <1%                 <1%                <1%
EmployeeMatters, Inc.       1999          Equity              53%                 53%                 45%                45%
Giftcertificates.com        1999           Cost               <1%                 <1%                 <1%                <1%
LiveCapital.com             2000           Cost                4%                 N/A                 4%                 N/A
NeoCarta Ventures           1999           Cost                4%                 4%                  4%                  4%
OneXstream.com, Inc.        1998       Consolidation          93%                 93%                 80%                80%
OnSite Access, Inc.         1997          Equity              37%                 37%                 22%                22%
Opus360 Corporation         1999           Cost               <1%                 <1%                 <1%                <1%
PIPE9 Corporation           1999          Equity              31%                 31%                 26%                26%
RealtyIQ.com                1999          Equity              68%                 68%                 54%                54%
UpShot.com                  2000          Equity              20%                 N/A                 18%                N/A
VANTAS Incorporated         1998       Consolidation          84%                 84%                 76%                 76%
</TABLE>

The Company's ownership interests in Partner Companies are classified  according
to the applicable  accounting method utilized at March 31, 2000 and December 31,
1999. The carrying  value  represents  the Company's  acquisition  cost less any
impairment charges, plus or minus the Company's share of such Partner Companies'
income or loss. The cost basis represents the Company's  acquisition  costs less
any  impairment  charges in such  Partner  Companies.  The  Company's  ownership
interests in and advances to Partner  Companies  accounted  for under the equity
method or cost method of accounting are as follows (in thousands):

<TABLE>
<CAPTION>
                                 March 31, 2000                                      December 31, 1999
                                 --------------                                      -----------------
                    Carrying Value              Cost Basis             Carrying Value                Cost Basis
                    --------------              ----------             --------------                ----------
<S>               <C>                        <C>                      <C>                           <C>
Equity Method           $  72,395                $ 101,483                  $ 54,807                    $65,741
Cost Method                14,700                   14,700                     6,400                      6,400
                         --------                                             ------
                        $  87,095                                           $ 61,207
                         ========                                             ======
</TABLE>


The  following are the Company's  summarized  losses on ownership  interests in
Partner Companies and other ownership interest (in thousands):

<TABLE>
<CAPTION>
                                                                              FOR THE THREE          FOR THE THREE
                                                                               MONTHS ENDED          MONTHS ENDED
                                                                              MARCH 31, 2000         MARCH 31, 1999
                                                                             ---------------         ---------------
<S>                                                                          <C>                   <C>
OnSite Access, Inc. and predecessor entity...........................          $   (8,628)             $    (22)
EmployeeMatters, Inc. ...............................................              (2,879)                   --
PIPE9 Corporation....................................................              (2,024)                   --
RealtyIQ.com.........................................................              (4,317)                   --
UpShot.com...........................................................                (305)                   --
Other ownership interest.............................................                (225)                 (609)
                                                                             ---------------         ---------------
EQUITY IN LOSS OF PARTNER COMPANIES AND OTHER OWNERSHIP INTEREST.....          $  (18,378)             $   (631)
                                                                             ===============         ===============
</TABLE>


                                       11

<PAGE>

                    FRONTLINE CAPITAL GROUP AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000
                                   (UNAUDITED)

3.   OWNERSHIP INTERESTS IN PARTNER COMPANIES (CONTINUED)

The  Company's  ownership  interests  in Partner  Companies  are  summarized  as
follows:

EXECUTIVE OFFICE SUITES AND VIRTUAL OFFICE SERVICES
---------------------------------------------------

VANTAS AND PREDECESSOR ENTITIES

As of March 31, 2000,  VANTAS  operates 206 business  centers in 27 states,  the
District  of  Columbia,  France and Mexico  and  manages 5 others for  unrelated
property owners.  VANTAS provides fully furnished  individual offices and suites
and a full range of  telecommunication  and  business  support  services  to its
clients that generally  require 2,000 square feet or less of traditional  office
space.  VANTAS  does not own the real estate in which the  business  centers are
located.

In the first quarter of 2000,  the Company paid  approximately  $43.3 million in
cash and issued  1,294,103  shares of its common  stock in  connection  with the
completion  of  all  remaining  stock  purchase  agreements  with  other  VANTAS
stockholders to increase its ownership  interest to approximately 84% on a basic
basis and 76% on a diluted basis.

As a result of the stepped acquisition during 1999 of a controlling  interest in
VANTAS,  the Company changed the accounting  method for its investment in VANTAS
from the equity method to  consolidation  during the fourth  quarter of 1999 and
subsequently restated all 1999 quarters.

On January 21, 2000, the Company executed an agreement and plan of merger of two
executive  suites  companies (the  "Merger"),  HQ Global  Workplaces,  Inc., and
VANTAS.  The  merged  company  will  retain the name HQ Global  Workplaces  ("HQ
Global")  and will become the world's  largest  virtual and  physical  workplace
solutions provider with over 460 locations in 17 countries.

In connection with the Merger, (i) each share of the common stock of VANTAS will
be  converted  into the right to  receive  $8.00 per share in cash and (ii) each
share of the convertible  preferred stock of VANTAS that is outstanding  will be
converted  into the right to  receive  that  number  of shares of the  surviving
corporation  that  equal to the  product  of the  number of shares of the common
stock of VANTAS that such stockholder would have been entitled to receive had it
converted its shares  immediately  prior to the Merger and the Conversion  Ratio
(as defined in the Merger  Agreement),  subject,  in each case, to adjustment as
provided  in the  Merger  Agreement.  In  connection  with  the  Merger,  VANTAS
established  a $35 million  letter of credit and  FrontLine  paid $15 million in
cash. This letter of credit is collateralized by shares of VANTAS that are owned
by FrontLine and guaranteed by FrontLine on a nonrecourse  basis.  Under certain
circumstances,  if this  Merger is not  consummated  by May 31,  2000,  then the
current owners of HQ Global  Workplaces can call the letter of credit and retain
the deposit.

The  merger is  expected  to be  financed  by $350  million  of HQ Global  debt,
carryover equity from the seller  representing  approximately  19% of the merged
entity and $195 million of new equity from strategic acquisitions. Subsequent to
this transaction, it is anticipated that FrontLine will own approximately 50% of
the merged entity.

During the three months ended March 31, 2000 and March 31, 1999, VANTAS recorded
deferred credits of approximately  $2.5 million and $0.7 million,  respectively,
related to tenant improvements,  which are reimbursed by landlords and amortized
against rent expenses over the lives of the leases.


                                       12

<PAGE>


                    FRONTLINE CAPITAL GROUP AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000
                                   (UNAUDITED)


3.   OWNERSHIP INTERESTS IN PARTNER COMPANIES (CONTINUED)

E-BUSINESSES
------------

ONSITE ACCESS

Summarized financial  information,  a summary of the Company's investment in and
advances to OnSite Access, Inc. ("OnSite") and FrontLine's share of its loss, is
as follows (in thousands):

BALANCE SHEET

<TABLE>
<CAPTION>
                                                                             MARCH 31, 2000             DECEMBER 31, 1999
                                                                             --------------             -----------------
<S>                                                                         <C>                        <C>
Current assets                                                                $       8,510                 $      25,535
Property and equipment, net                                                          50,708                        20,052
Intangibles, net                                                                     65,172                        25,055
Other assets                                                                         10,037                         4,132
                                                                             --------------                --------------
     Total Assets                                                             $     134,427                 $      74,774
                                                                             ==============                ==============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
Current liabilities                                                           $      28,344                 $      13,702
Other Liabilities                                                                    23,498                         1,913
                                                                             --------------                --------------
     Total Liabilities                                                               51,842                        15,615
                                                                             --------------                --------------

REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT):
FrontLines' net investment in OnSite                                                 30,389                        39,017
Add:Cumulative net loss allocation                                                   16,765                         8,137
Less: Payment to OnSite shareholder                                                 (23,593)                      (23,593)
Less: Excess acquisition costs                                                         (595)                         (595)
                                                                             --------------                --------------
FrontLine preferred and common stock in OnSite                                       22,966                        22,966
Non FrontLine preferred and common stock                                            154,144                       104,274
Stockholders' loans for restricted stock                                             (4,339)                       (2,471)
Deferred equity compensation                                                        (26,131)                      (24,878)
Dividend on preferred stock                                                          (3,875)                       (2,080)
Accumulated deficit                                                                 (60,180)                      (38,652)
                                                                             --------------                --------------


     Total  Redeemable   Preferred  Stock  and   Stockholders'   Equity              82,585                        59,159
(deficit)                                                                    --------------                --------------
     Total Liabilities and Stockholders' Equity (deficit)                     $     134,427                 $      74,774
                                                                             ==============                ==============
</TABLE>


                                       13

<PAGE>


                    FRONTLINE CAPITAL GROUP AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000
                                   (UNAUDITED)

3.   OWNERSHIP INTERESTS IN PARTNER COMPANIES (CONTINUED)

ONSITE ACCESS (CONTINUED)

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
                                                              FOR THE THREE
                                                               MONTHS ENDED
                                                              MARCH 31, 2000
                                                             ----------------
<S>                                                         <C>
Revenues                                                       $       1,751
                                                             ----------------
Expenses:
     Direct costs of revenue                                           1,788
     Selling, general and administrative                              17,665
     Depreciation and amortization                                     3,978
     Interest expense (income)                                          (152)
                                                             ----------------
Total operating expenses                                              23,279

Net loss                                                             (21,528)
                                                             ----------------
Other interests, share of net loss                                   (12,900)
                                                             ----------------
FrontLines' share of net loss                                  $      (8,628)
                                                             ================
</TABLE>

OnSite has currently filed for an initial public offering of its common stock.

OTHER E-BUSINESSES

During the first  quarter of 2000,  the  Company  invested  approximately  $23.5
million to purchase  ownership  interests in two new  e-business  companies  and
funded $20.1 million of commitments to existing Partner Companies. Subsequent to
March 31,  2000,  the  Company  funded an  additional  $8.9  million to existing
Partner Companies.

4.   PARENT COMPANY FINANCIAL INFORMATION

The Company's  consolidated financial statements reflect all consolidated VANTAS
and   OneXstream.com,   Inc.   ("OneXstream.com")   accounted   for   under  the
consolidation  method of  accounting at March 31, 2000 and December 31, 1999 and
for the three months ended March 31, 2000 and 1999.

Parent  Company  financial  information  is provided  to present  the  financial
position   and  results  of   operations   of  the  Company  as  if  VANTAS  and
OneXstream.com  were accounted for under the equity method of accounting for all
periods presented.  The Company's share of VANTAS and OneXstream.com  losses are
included in "Equity in loss Partner Companies and other ownership  interests" in
the Parent Company  Statements of Operations for all periods  presented based on
the Company's ownership percentage in each period.


                                       14



<PAGE>


                    FRONTLINE CAPITAL GROUP AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000
                                   (UNAUDITED)

4.   PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)

PARENT COMPANY BALANCE SHEETS (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                              MARCH 31, 2000           DECEMBER 31, 1999
                                                                            ------------------        --------------------
<S>
ASSETS                                                                         <C>                      <C>
     Current assets                                                           $     79,197                $     28,933
     Ownership interests in and advances to Partner Companies                      287,192                     197,714
     Other assets                                                                   56,760                      67,089
                                                                            ------------------        --------------------
          TOTAL ASSETS                                                        $    423,149                $    293,736
                                                                            ==================        ====================
LIABILITIES AND SHAREHOLDERS' EQUITY
     Current liabilities                                                      $     15,954                $     13,372
     Non-current liabilities                                                       128,715                     166,255
     Shareholders' equity                                                          278,480                     114,109
                                                                            ------------------        --------------------
          TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                          $    423,149                $    293,736
                                                                            ==================        ====================
</TABLE>

<TABLE>
<CAPTION>
PARENT COMPANY STATEMENTS OF OPERATIONS (IN THOUSANDS)                         FOR THE THREE                 FOR THE THREE
                                                                               MONTHS ENDED                  MONTHS ENDED
                                                                              MARCH 31, 2000                MARCH 31, 1999
                                                                           --------------------           -------------------
<S>                                                                       <C>                            <C>
REVENUES                                                                          $      83                     $      83
                                                                           --------------------           -------------------
Operating expenses                                                                   (4,972)                         (891)
Other expenses                                                                       (1,695)                           (8)
Interest expense, net                                                                (6,621)                         (768)
                                                                           --------------------           -------------------
TOTAL EXPENSES                                                                      (13,288)                       (1,667)
                                                                           --------------------           -------------------
LOSS  BEFORE  EQUITY IN LOSS OF PARTNER  COMPANIES  AND OTHER  OWNERSHIP
INTEREST, EXTRAORDINARY LOSS AND DISTRIBUTION TO PREFERRED SHAREHOLDER              (13,205)                       (1,584)
Equity in loss of Partner Companies and other ownership interest                    (24,112)                         (370)
                                                                           --------------------           -------------------
LOSS BEFORE EXTRAORDINARY LOSS AND DISTRIBUTION TO PREFERRED SHAREHOLDER            (37,317)                       (1,954)
Extraordinary loss from early extinguishment of debt                                 (2,648)                           --
Distribution to Preferred Shareholder                                                  (346)                           --
                                                                           --------------------           -------------------
       NET LOSS APPLICABLE TO COMMON SHAREHOLDERS                                 $ (40,311)                     $ (1,954)
                                                                           ====================           ===================
</TABLE>



                                       15

<PAGE>


                    FRONTLINE CAPITAL GROUP AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000
                                   (UNAUDITED)


5.   NOTES PAYABLE

VANTAS  currently has a credit  agreement with various lending  institutions for
$157.9 million. The credit agreement provides for a $5 million acquisition loan,
$127.9 million term loans, (comprised of Term Loan A for up to $38.0 million and
Term Loan B for up to $89.9 million) and a $25 million revolving loan, including
letters of credit. The credit agreement contains certain financial covenants one
of  which  requires  VANTAS  not to  exceed  a  maximum  ratio  of  consolidated
indebtedness  to   consolidated   earnings   before   interest,   income  taxes,
depreciation  and  amortization.  There are also other  covenants  pertaining to
additional  financial ratios and limitations on capital  expenditures.  At March
31, 2000,  VANTAS did not meet  certain of its  financial  covenants.  VANTAS is
currently  negotiating  with its  lenders  for an  increase in the amount of the
credit  agreement  and/or waiver of those  covenants in connection  with VANTAS'
proposed  merger with HQ Global  Workplaces.  VANTAS has  obtained a  commitment
letter  for  the  provision  of  a  new  credit  facility,  subject  to  various
conditions,  which  would  provide  a  portion  of the  financing  necessary  to
consummate  the  merger,  including  funds  necessary  to  refinance  the credit
facility.  Accordingly,  $119.1  million  of this  debt has been  classified  as
long-term as of March 31, 2000.  There can be no assurance that VANTAS will meet
the conditions required to satisfy the existing  commitment,  that the HQ Global
merger  will occur or that,  if the HQ Global  Workplace  merger does not occur,
VANTAS will be able to obtain a waiver with respect to the  financial  covenants
contained in the credit facility for the fiscal quarter ended March 31, 2000 and
satisfy such covenants or obtain a waiver thereafter.


The $38 million Term Loan A had $28 million  outstanding at March 31, 2000 which
requires  quarterly  principal  payments.  The final principal payment is due on
June 30, 2002.

The $89.9  million Term Loan B had $89.5 million  outstanding  at March 31, 2000
which requires quarterly principal payments.  The final principal payment is due
on November 6, 2005.

At March  31,  2000  $18.5  million  of the Term  Loan  was  funded  into a cash
collateral  account that VANTAS will be permitted to utilize in connection  with
permitted acquisitions.

The $25 million revolving loan commitment had $14.7 million outstanding at March
31, 2000. The final principal payment is due on November 6, 2003.

At March 31, 2000,  VANTAS had  outstanding  letters of credit of  approximately
$10.2  million for  landlord  security  deposits  which  reduced the  borrowings
available under the revolving loan commitment.

6.   SHAREHOLDERS' EQUITY

In January 2000, the Board of Directors for the Company  approved the 2000 stock
option plan and reserved 2,500,000 shares of common stock for issuance.

As part of the Company's ongoing investment in organizational infrastructure and
the retention of high quality senior management,  certain incentive stock option
awards were  granted on March 24, 1999 when the closing  stock price was $4.625.
These incentive  compensation awards were subject to stockholder approval of the
1999 Stock Option Plan which  occurred on June 24, 1999,  when the closing stock
price was $14.9375.  Pursuant to financial  accounting  guidelines  the date for
measuring  compensation  costs would be June 24,  1999.  These  awards vest over
various  periods  ranging  from six months to three  years and include tax loans
which will be forgiven one year thereafter.  During the three months ended March
31,  2000,  results  include  approximately  $1.7  million or $.05 per basic and
diluted share,  associated with these awards, the majority, of which is non-cash
in nature. In addition,  pursuant to the 1999 stock option plan,  550,000 shares
reserved  were  issued in August  1999,  resulting  in $3.5  million of deferred
compensation, net of amortization, as of March 31, 2000.

During the three months ended March 31, 2000,  the Company  completed  preferred
stock  offerings of 26,000  shares of 8.875%  Cumulative  Convertible  Preferred
Stock, at a price of $1,000 per share with net proceeds of $24.6 million.  These
shares are convertible into the Company's common stock at a price of $70.48.  On
May 6, 2000, the Company paid a preferred dividend to the preferred  shareholder
of approximately $0.6 million.


                                       16

<PAGE>


                    FRONTLINE CAPITAL GROUP AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000
                                   (UNAUDITED)

6.   SHAREHOLDERS' EQUITY (CONTINUTED)

On March 7, 2000, an investment partnership invested $30 million to purchase 1.5
million warrants to acquire FrontLine's common stock at an exercise price of $70
per  share.  The  warrants  have a term  of 3.25  years.  The  Company  utilized
approximately  half of these  proceeds to reduce its $60 million  Secured Credit
Facility ("Credit Facility") with a significant financial institution.

On March 31, 2000,  the Company  sold  approximately  2.6 million  shares of its
common  stock at a price of $47.25 per share for an aggregate  consideration  of
approximately $122.6 million.  Proceeds from the sale were utilized to repay the
remaining  portion  of  the  Credit  Facility.  As a  result,  certain  deferred
financing costs of  approximately  $2.6 million  incurred in connection with the
established of the Credit Facility were expensed as an extraordinary loss in the
accompanying consolidated statements of operations.

7.   TRANSACTIONS WITH RELATED PARTIES

The Company has a Credit  Facility  with  Reckson  Operating  Partnership,  L.P.
("Reckson") in the amount of $100 million  ("FrontLine  Facility").  Reckson has
advanced  the  Company  approximately  $92.7  million at March 31,  2000.  These
advances bear interest at 12% per annum.  Additionally,  FrontLine established a
$100 million  facility  with Reckson for funding the Reckson  Strategic  Venture
Partners, LLC ("Reckson Strategic")  investments ("Reckson Strategic Facility").
As of March 31, 2000, Reckson has advanced FrontLine approximately $36.0 million
under the  Reckson  Strategic  Facility  and has  invested  approximately  $24.8
million under the facility in joint ventures with Reckson  Strategic.  The total
outstanding at March 31, 2000,  owed by FrontLine  under both Credit  Facilities
was approximately $128.7 million.  Interest accrued on these facilities at March
31, 2000,  was  approximately  $8.6  million.  Both of the FrontLine and Reckson
Strategic Facilities expire in June 2003.  Currently,  the Company has two short
term open letters of credit  totaling $3.2 million,  which have been utilized as
consideration  for future FrontLine  investment  acquisitions.  These letters of
credit decrease the availability under the FrontLine Facility.

The Company is entitled to a cumulative annual management fee of $2 million with
respect to Reckson  Strategic,  of which $1.5  million is  subordinate  to Paine
Webber  receiving  an annual  minimum  rate of return of 16% and a return of its
capital.  The earned fee for the three months ended March 31, 2000 and March 31,
1999 was approximately $0.1 million in both periods.

The  Company  reimburses  Reckson  with  respect to general  and  administrative
expenses (including payroll expenses) incurred by Reckson for the benefit of the
Company.   These  services  include  payroll,  human  resources  and  accounting
services.  During the three months ended March 31, 2000 and March 31, 1999,  the
Company reimbursed  approximately  $0.4 million and $0.2 million,  respectively,
for such activities.

8.   OTHER OWNERSHIP INTEREST

Reckson  Strategic  invests in operating  companies with experienced  management
teams in real estate and real estate  related  market  sectors  which are in the
early stages of their growth cycle or offer unique  circumstances for attractive
investments,  as well as platforms for future growth. Through RSVP Holdings, LLC
("Holdings"),  the  Company  is a  managing  member and 100% owner of the common
equity of Reckson  Strategic.  New World  Realty,  LLC,  an entity  owned by two
individuals  retained by Holdings,  (the "RSVP Managing  Directors"),  acts as a
managing member of Holdings,  and have a carried interest which provides for the
RSVP Managing  Directors to receive a share in the profits of Reckson  Strategic
after the Company,  Paine Webber Real Estate Securities,  Inc., ("Paine Webber")
and Stratum Realty Fund, L.P.  ("Stratum") have received certain minimum returns
and a return of capital.  Paine Webber and Stratum are non-managing  members and
preferred  equity  owners  who have  committed  $150  million  and $50  million,
respectively, in capital (the "Preferred Equity Facility") and shares in profits
and losses of Reckson Strategic with the Company,  subject to a maximum internal
rate of return of 16% of invested capital.

For the three months ended March 31, 2000 and March 31, 1999,  FrontLine's share
of  Holdings'  losses were was  approximately  $0.2  million  and $0.6  million,
respectively.

                                       17

<PAGE>

                    FRONTLINE CAPITAL GROUP AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000
                                   (UNAUDITED)

9.   SEGMENT DISCLOSURE

Each of the segments has a managing  director who reports  directly to the Board
of  Directors/Executive  Committees  who  have  been  identified  as  the  Chief
Operating  Decision  Makers  ("CODM")  because  of their  final  authority  over
resource allocation decisions and performance assessment.

The CODM evaluate the operating performance of these segments based on sectors.

FrontLine's  governance and control rights are generally exercised through Board
of Directors seats and through representation on the executive committees of the
various segment entities.

The  following  table sets forth the Company's  segments and their  revenues and
expenses and other related disclosures as required by SFAS No. 131,  "Disclosure
about  Segments of an Enterprise and Related  Information"  ("SFAS 131") for the
three months ended March 31, 2000 and 1999 (in thousands).

<TABLE>
<CAPTION>
                                                                         MARCH 31, 2000

                                  EXECUTIVE OFFICE
                                     SUITES AND
                               VIRTUAL OFFICE SERVICES         E-BUSINESSES        OTHER OPERATIONS         TOTAL
                               ------------------------     -------------------    ------------------    ----------
<S>                           <C>                          <C>                    <C>                    <C>

Total Assets                          $        435,582           $      87,095         $     135,072      $ 657,749
                                      -----------------     -------------------    ------------------    ----------
Total Operating Revenues                        62,490                      --                    83         62,573
                                      -----------------     -------------------    ------------------    ----------
Total Operating Expenses                        56,946                      --                    --         56,946
                                      -----------------     -------------------    ------------------    ----------
Other Income (Expenses),
Provision for Income Taxes, and
Minority Interest                               (8,957)                 (1,583)              (14,026)       (24,566)
                                      -----------------     -------------------    ------------------    ----------
Equity in Loss of Partner
Companies and Other
Ownership Interest                                  --                 (18,153)                 (225)       (18,378)
                                      -----------------     -------------------    ------------------    ----------
Extraordinary Loss from Early
Extinguishment of Debt                              --                      --                (2,648)        (2,648)
                                      -----------------     -------------------    ------------------    ----------
Distribution to Preferred shareholder               --                      --                  (346)          (346)
                                      -----------------     -------------------    ------------------    ----------
Net Loss                             $         (3,413)         $      (19,736)        $      (17,162)     $ (40,311)
                                      -----------------     -------------------    ------------------    ----------
</TABLE>


<PAGE>


                    FRONTLINE CAPITAL GROUP AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000
                                   (UNAUDITED)


9.   SEGMENT DISCLOSURE (CONTINUED)

<TABLE>
<CAPTION>
                                                                        MARCH 31, 1999
                                                                       ---------------
                                    EXECUTIVE OFFICE
                                       SUITES AND
                                VIRTUAL OFFICE SERVICES        E-BUSINESSES        OTHER OPERATIONS          TOTAL
                                -------------------------    ------------------    ------------------    -------------
<S>                             <C>                          <C>                  <C>                    <C>
Total Operating Revenues              $        46,775       $       --                $      83           $  46,858
                                      ---------------      ------------            ------------          ----------
Total Operating Expenses                       39,749               --                       --              39,749
                                      ---------------      ------------            ------------          ----------
Other Income (Expenses),
Provision for Income Taxes,
and Minority Interest                          (6,766)              --                  (1,666)              (8,432)
                                      ---------------      ------------            ------------          ----------
Equity in Loss of Partner
Companies and Other Ownership                     --               (22)                   (609)                (631)
Interest
                                      ---------------      ------------            ------------          -----------

Net Income (Loss)                     $           260       $      (22)              $  (2,192)          $  (1,954)
                                      ---------------      ------------            ------------          -----------
</TABLE>


                                       19

<PAGE>


ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

The following  discussion  should be read in conjunction  with the  accompanying
Financial  Statements of FrontLine  Capital Group (the "Company" or "FrontLine")
and related notes thereto.

The  Company  considers  certain  statements  set  forth  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, with respect to
the  Company's   expectations  for  future  periods.   Certain   forward-looking
statements, including, without limitation, statements relating to the ability to
identify  and acquire  interest in new Partner  Companies,  consummation  of the
merger with HQ Global  Workplaces,  Inc,  the  financing  of the  Company's  and
Partner Companies',  operations, the timing and success of such acquisitions and
the  ability to  integrate  and manage  effectively  its  various  acquisitions,
involve certain risks and uncertainties.  Although the Company believes that the
expectation 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 and Partner Companies can give no
assurance that its  expectations  will be achieved.  Certain  factors that might
cause the results of the Company and Partner Companies to differ materially from
those indicated by such forward-looking statements include, among other factors,
general  economic  conditions,  a lack of attractive  business  opportunities or
suitable  acquisitions,  the Company's  dependence  upon  financing from Reckson
Operating  Partnership,  L.P.,  ("Reckson") conflicts of interest of management,
competition  for  targeted  acquisitions  and the ability to  otherwise  finance
business opportunities.  Consequently, such forward-looking statements should be
regarded  solely as reflections of the Company's and Partner  Companies  current
operating and  development  plans and  estimates.  These plans and estimates are
subject  to  revision  from  time  to  time as  additional  information  becomes
available,  and actual results may differ from those indicated in the referenced
statements.

OVERVIEW AND BACKGROUND

FrontLine is building a collaborative network of companies that use the Internet
and new  technologies  to empower  small to medium size  enterprises  ("SME's"),
entrepreneurs,  and the mobile workforce, the fastest growing segment of the new
economy.  FrontLine  provides its Partner  Companies with the capital,  customer
base,  management  resources,  and  relationships  they need for fast-growth and
long-term  success.  The Partner  Companies in turn provide small to medium size
business customers with the information,  tools and services they need to become
more competitive,  at a price they can afford. In this way,  FrontLine  achieves
its vision along two parallel tracks:  FrontLine empowers the entrepreneurs that
make up its network of Partner  Companies,  and empowers the entrepreneurs  that
make up its customer base.

The Company is to acquire  significant,  long-term  stakes in  targeted  Partner
Companies, which will be incorporated into a collaborative network of e-commerce
and  e-services  companies,  in effect to  accelerate  their growth and increase
their likelihood of success.  FrontLine has developed an extensive e-Cooperative
platform that allows its Partner  Companies to benefit from its  operational and
management resources and experience and the Company's extensive customer base as
well as gain  significant  synergies  from other  existing  and  future  Partner
Companies. The e-Cooperative consists of the:

o    enterprise  Development  Group  or  eDG - eDG  offers  strategic  planning,
     project management and functional  expertise in the areas of organizational
     design, recruiting, finance and technology strategy.

o    Advisory  Board - a group  of  recognized  business  and  academic  leaders
     provides  strategic  insight,  expertise,  relationships  and access to new
     opportunities  and  potential  alliances  for the  Company  and its Partner
     Companies.

o    Network of Partner Companies - facilitates learning and collaboration among
     all Partner  Companies and provides access to the customer base,  resources
     and  relationships  of the entire  network.  It also  facilitates  business
     partnerships   among  Partner   Companies,   including   cross-selling  and
     cross-marketing opportunities.

o    Virtual and Physical - Global workplace solutions provider which offers the
     Partner  Companies  the ability to access the virtual and  physical  global
     infrastructure  as well as a  distribution  network to a  customer  base of
     SMEs.

The Company's strategy is to continue to expand its network of Partner Companies
and  its  e-Cooperative  platform  by  pursuing  additional   acquisitions  that
complement and enhance the overall  network.  FrontLine seeks to add significant
value to its Partner  Companies with the goal of creating  industry leaders that
have the potential to become public companies,  act as industry consolidators or
merge  with  the  proper  strategic  partners.  FrontLine  targets  early  stage
companies that can benefit from FrontLine's  entire franchise and therefore have
the potential to create significant value for FrontLine.


                                       20

<PAGE>


FrontLine  seeks to focus its  future  acquisitions  in the  Internet  sector by
targeting three types of e-commerce and e-services companies:

     o    e-Commerce  and  infrastructure:  companies that deliver or enable the
          delivery of goods and services over the Internet;

     o    Virtual   brick  and  mortar:   companies   that  combine  a  physical
          infrastructure with an Internet-enabled  model to enhance the delivery
          of their services; and

     o    Internet-based  outsourcing:  companies  that  utilize the Internet to
          enable the outsourcing of non-core business functions.

Although the Company  refers to the companies in which it has acquired an equity
and  cost  ownership  interest  as its  "Partner  Companies"  and  that it has a
"partnership"  with  these  companies,  it does  not act as an  agent  or  legal
representative  for any of  these  companies,  it does  not  have  the  power or
authority to legally bind any of its Partner  Companies and it does not have the
types of liabilities in relation to its Partner Companies that a general partner
of a partnership would have.

Because FrontLine acquires significant interests in e-commerce  companies,  many
of which generate net losses, FrontLine has experienced, and expects to continue
to experience,  significant volatility in the quarterly results. Management does
not know if the Company  will  report net income in any  period,  and expects to
report net losses for the foreseeable future.  While most Partner Companies have
consistently reported losses, the Company may experience  significant volatility
from period to period due to one-time  transactions and other events  incidental
to the ownership interests in and advances to Partner Companies. On a continuous
basis,  but no less  frequently  than at the  end of  each  quarterly  reporting
period,  management  evaluates the carrying value of the ownership  interests in
and advances to each of the Partner  Companies for possible  impairment based on
achievement of business plan objectives and  milestones,  the fair value of each
ownership  interest  and  advance in the  Partner  Company  relative to carrying
value, the financial  condition and prospects of the Partner Company,  and other
relevant  factors.  The business plan  objectives and milestones  that are taken
into consideration include, among others, those related to financial performance
such as  achievement  of  planned  financial  results or  completion  of capital
raising  activities,  and those that are more  operational in nature such as the
launching  of a web site or the hiring of key  employees.  The fair value of the
ownership  interests  in and advances to  privately  held  Partner  Companies is
generally  determined based on the value at which independent third parties have
invested or have committed to invest in Partner Companies.

The presentation and content of the Company's financial  statements is largely a
function of the  presentation  and content of the  financial  statements  of the
Partner  Companies.  As a result,  to the extent  Partner  Companies  change the
presentation or content of their financial statements, as may be required by the
Securities  and Exchange  Commission  or changes in accounting  literature,  the
presentation and content of the Company's financial statements may also change.

EFFECT OF VARIOUS ACCOUNTING METHODS ON RESULTS OF OPERATIONS

The various interests that FrontLine acquires in Partner Companies are accounted
for under one of three  methods:  consolidation,  equity method and cost method.
The applicable  accounting method is generally determined based on the Company's
voting interest in a Partner Company.

Consolidation.  Partner  Companies in which the Company  directly or  indirectly
owns more than 50% of the outstanding  voting  securities and controls the board
of directors  are  generally  accounted  for under the  consolidation  method of
accounting.  Under this method,  a Partner  Company's  results of operations are
reflected  within the Company's  Consolidated  Statements of Operations.  In the
fourth  quarter  1999,  the  Company  acquired  control  of VANTAS  Incorporated
("VANTAS") (See Note 3 to the Consolidated Financial Statements).  Additionally,
the  Company  consolidates  OneXstream.com,   Inc.  with  FrontLine's  financial
statements.  Participation of other Partner Company shareholders in the earnings
or losses of a consolidated  Partner Company is reflected in a caption "Minority
interest"  in the  Consolidated  Statements  of  Operations.  Minority  interest
adjusts the  consolidated  net results of operations to reflect only FrontLine's
share of the earnings or losses of the consolidated Partner Company.

The effect of a Partner Company's  results of operations on FrontLine's  results
of  operations is generally  the same under either the  consolidation  method of
accounting  and the equity  method of  accounting,  because  under each of these
methods only FrontLine's share of the earnings or losses of a Partner Company is
reflected  in the  results  of  operations  in the  Consolidated  Statements  of
Operations.
                                       21
<PAGE>

Equity Method.  Partner Companies whose results are not  consolidated,  but over
whom the Company exercises  significant  influence,  are generally accounted for
under the equity  method of  accounting.  Whether or not the  Company  exercises
significant influence with respect to a Partner Company depends on an evaluation
of several  factors  including;  among  others,  representation  on the  Partner
Company's  board of directors and ownership  level,  which is generally a 20% to
50% interest in the voting  securities of the Partner Company,  including voting
rights  associated  with the Company's  holdings in common,  preferred and other
convertible  instruments  in the  Partner  Company.  Under the equity  method of
accounting,  a Partner Company's accounts are not reflected within the Company's
Consolidated  Statements  of  Operations;  however,  FrontLine's  share  of  the
earnings or losses of the Partner Company is reflected in the caption "Equity in
loss of Partner  Companies  and other  ownership  interest" in the  Consolidated
Statements of Operations.

Partner Companies accounted for under the equity method of accounting included:

<TABLE>
<CAPTION>
                                     PARTNER           VOTING OWNERSHIP ON BASIC BASIS           VOTING OWNERSHIP ON DILUTED BASIS
                                     COMPANY           -------------------------------           ---------------------------------
                                      SINCE         MARCH 31, 2000      DECEMBER 31, 1999       MARCH 31, 2000    DECEMBER 31, 1999
                                     --------       --------------      -----------------       --------------    -----------------
<S>                                 <C>            <C>                 <C>                     <C>               <C>
           EmployeeMatters, Inc.      1999               53%                   53%                   45%                45%
           OnSite Access, Inc.        1997               37%                   37%                   22%                22%
           PIPE9 Corporation          1999               31%                   31%                   26%                26%
           RealtyIQ.com               1999               68%                   68%                   54%                54%
           UpShot.com                 2000               20%                   N/A                   18%                N/A
</TABLE>

FrontLine  has  representation  on the  board of  directors  of all of the above
Partner Companies,  and as of March 31, 2000, generally owned voting convertible
preferred  stock in all of  them.  Most of  FrontLine's  equity  method  Partner
Companies  are in a very  early  stage of  development  and  have not  generated
significant revenues. In addition, equity method Partner Companies have incurred
substantial  losses since their  inception and are expected to continue to incur
substantial losses in 2000.

Cost Method.  Partner Companies not accounted for under either the consolidation
or the equity  method of  accounting  are accounted for under the cost method of
accounting.  Under this method, the Company's share of the earnings or losses of
these companies is not included in the Consolidated Statements of Operations.

Partner Companies accounted for under the cost method of accounting included:

<TABLE>
<CAPTION>
                                                       VOTING OWNERSHIP ON BASIC BASIS         VOTING OWNERSHIP ON DILUTED BASIS
                                       PARTNER         -------------------------------         -----------------------------------
                                       COMPANY
                                        SINCE      MARCH 31, 2000       DECEMBER 31, 1999      MARCH 31, 2000   DECEMBER 31, 1999
                                       --------    --------------       -----------------      --------------   -----------------
<S>                                   <C>         <C>                  <C>                    <C>              <C>
           AdOutlet. com                1999              12%                   12%                  10%                10%
           DigitalWork.com              1999              <1%                   <1%                  <1%                <1%
           Giftcertificates.com         1999              <1%                   <1%                  <1%                <1%
           LiveCapital.com              2000              4%                    N/A                   4%                N/A
           NeoCarta Ventures            1999              4%                     4%                   4%                4%
           Opus 360 Corporation         1999              <1%                   <1%                  <1%                <1%
</TABLE>

The cost method Partner  Companies are in a very early stage of development  and
have not generated significant  revenues.  In addition,  FrontLine's cost method
Partner  Companies  incurred  substantial  losses since their  inception and are
expected to continue to incur substantial losses in 2000.


EFFECT OF CONSOLIDATION ON THE PRESENTATION OF FRONTLINE'S FINANCIAL STATEMENTS

The presentation of FrontLine's  financial  statements may differ from period to
period primarily due to whether or not the


                                       22

<PAGE>

consolidation  method  of  accounting  or the  equity  method of  accounting  is
applied.  To  understand  the  Company's  results of  operations  and  financial
position  without  the  effect of the  consolidation  of  VANTAS,  Note 4 to the
consolidated   financial  statements  summarizes  the  Company's  Statements  of
Operations and Balance Sheets treating the ownership interest in VANTAS as if it
were  accounted  for  under the  equity  method of  accounting  for all  periods
presented. FrontLine's share of VANTAS' losses is included in "Equity in loss of
Partner Companies and other ownership interest."

RESULTS OF OPERATIONS

The reportable segments in FrontLine's financial statements are Executive Office
Suites and Virtual Office Services, e-Businesses and Other Operations. Executive
Office Suites and Virtual Office Services  includes the effect of  consolidating
the operations of VANTAS.  e-Businesses  includes the effect of transactions and
other  events  incidental  to the  ownership  interest  in  FrontLine's  Partner
Companies,  excluding  VANTAS.  Other  Operations  represents  the  expenses  of
providing  strategic  and  operational  support to the  Partner  Companies,  the
administrative  costs related to these  expenses and  FrontLine's  operations in
general.

EXECUTIVE OFFICE SUITES AND VIRTUAL OFFICE SERVICES

FrontLine's  operating  revenues and  substantially  all of its Partner  Company
operating  expenses for the three months ended March 31, 2000 and March 31, 1999
were attributable to VANTAS. The following is a discussion of VANTAS' results of
operations for the three months ended March 31, 2000.

VANTAS'  executive office suite income for the three months ended March 31, 2000
was $62.5 million,  an increase of $15.7 million or 33.6% from the corresponding
period in 1999.

Acquired  Executive  Office  Suites that were  effective  after  January 1, 1998
("Acquired  Office Suites") had income for the three months ended March 31, 2000
of $10.9 million,  an increase of $9.5 million from the corresponding  period in
1999.  This  increase  in income  resulted  primarily  from the  acquisition  of
executive office suites during the twelve months ended March 31, 2000.

Executive Office Suites,  excluding Acquired and Developing Office Suites,  that
were operating for the entire  comparable period of the prior year ("Same Office
Suites"), had income for the three months ended March 31, 2000 of $48.5 million,
an  increase of $4.1  million,  or 9.2% from the  corresponding  period in 1999.
While office occupancy levels remained  relatively  stable at approximately  89%
for the  comparable  periods,  the increase in executive  office  income of $2.1
million,  or 8.6%, was due to more  favorable  office  pricing.  The increase in
support  service  revenues  of $2.0  million,  or 9.8%  from  1999 is  partially
attributable to an increase in broadband Internet access, information technology
support services and administrative support services.

Developing  Executive Office Suite ("Developing  Office Suites") income was $3.0
million for the three months  ended March 31, 2000,  an increase of $2.1 million
from the corresponding period in 1999. For the three months ended March 31, 2000
and  1999  there  were 18 and 7  Developing  Office  Suites  that  were  opened,
respectively. This increase is primarily due to the greater number of Developing
Office Suites opened during the three months ended March 31, 2000.

Executive  Office Suite  expenses for the three months ended March 31, 2000 were
$49.8  million,  representing  an  increase  of $15.4  million or 44.6% from the
corresponding period in 1999.

Acquired  Office  Suite  expenses  for the three months ended March 31, 2000 and
1999 were $9.0 million and $0.8 million  respectively,  representing an increase
of $8.2 million from the  corresponding  period in 1999. This increase  resulted
primarily from an increase in the number of executive  office suites acquired as
compared to those acquired in the comparable period of the prior year.

Same Office Suite  expenses for the three months ended March 31, 2000 were $36.3
million,  an increase of $3.9 million or 12.1% from the corresponding  period in
1999. This increase is primarily  attributable to higher rent expense  resulting
from inflation adjusted rental increases and support service expenses associated
with increased greater support service revenues.

Developing  Office Suite expenses for the three months ended March 31, 2000 were
$4.5 million, an increase of $3.3 million from the corresponding period in 1999.
This  increase is due to a total of 28  Developing  Office  Suites with expenses
during the


                                       23

<PAGE>


three months  ended March 31, 2000 as compared to 13  Developing  Office  Suites
during the three months ended March 31, 1999.

For the three months ended March 31, 2000,  other  expenses were $16.8  million,
representing an increase of $6.0 million or 54.7% from the corresponding  period
in 1999.  This  increase is  primarily  attributable  to  corporate  general and
administrative  expenses,  depreciation and amortization and interest expense of
$1.8  million,  $2.6  million  and $1.5  million  or  33.1%,  88.2%  and  77.6%,
respectively.

The increase in corporate general and  administrative  expenses was attributable
to increases in the corporate personnel infrastructure and its associated travel
and related expenses,  related office expansion, and professional and consulting
fees  associated  with  VANTAS'  growth.   The  increase  in  depreciation   and
amortization  relates to fixed assets acquired and goodwill  associated with the
mergers  and  acquisitions.  It is also  attributable  to an increase in capital
expenditures associated with technology  infrastructure  additions and leasehold
improvements  for  Developing  and  Same  Office  Suites.  Interest  expense  is
primarily  related to VANTAS'  credit  agreement.  This  increase  resulted from
interest  expense  on  borrowings  related to  VANTAS'  acquisitions  as well as
increases in interest rates.

VANTAS incurred merger and integration  costs of approximately  $0.8 million and
$0.7  million for the three  months  ended  March 31,  2000 and March 31,  1999,
respectively,   in  connection  with  mergers  and  one-time  costs  related  to
agreements   with   shareholders   of  VANTAS  to  purchase  a  portion  of  the
shareholders' securities in VANTAS.

E-BUSINESSES

A significant  portion of FrontLine's  net loss is derived from  corporations in
which it holds a significant minority ownership interest accounted for under the
equity method of accounting.  Equity loss  fluctuates with the number of Partner
Companies  accounted for under the equity method,  FrontLine's  voting ownership
percentage in these  companies,  the  amortization of goodwill  related to newly
acquired equity method Partner Companies, and the results of operations of these
companies.  As of March 31, 2000,  FrontLine  accounted  for five of its Partner
Companies  under this method as compared to one Partner Company during the three
months ended March 31, 1999. All five of these companies incurred losses for the
three months ended March 31, 2000. Under this method,  the results of operations
of these entities are not  consolidated  within the  Consolidated  Statements of
Operations;  however,  FrontLine's share of these companies' losses is reflected
in the  caption  "Equity  in loss  of  Partner  Companies  and  other  ownership
interest"  in the  Consolidated  Statements  of  Operations.  (See Note 3 of the
Consolidated Financial Statements).

In addition, the consolidated results of OneXstream,  Inc, have been expensed as
development stage company due to its early phase of existence.  No revenues have
been generated since its inception.

OTHER OPERATIONS

FrontLine's  Other Operations  consist  primarily of general and  administrative
cost for  compensation,  office  costs,  and  outside  services  such as  legal,
accounting and travel related costs. As the number of FrontLine's employees grow
to support its  operations and those of its Partner  Companies,  its general and
administrative costs will increase. As a result of the increase in the number of
employees  from 5 to 40  between  March  31,  1999 and  March  31,  2000 and the
increase in the  acquisition  of  interests  in Partner  Companies,  general and
administrative costs for the three months ended March 31, 2000 increased by $3.3
million as compared to the same period in 1999.  FrontLine  plans to continue to
increase the number of new employees and build its overall infrastructure. These
costs are  expected  to continue to be higher  compared to  historical  periods.
During the three months ended March 31, 2000, the Company recorded  compensation
costs of approximately $1.7 million in connection with incentive stock awards to
management and $0.7 million associated with new hire costs.

FrontLine's  interest  expense  for the three  months  ended  March 31, 2000 was
approximately  $6.6 million compared to approximately $0.8 million for the three
months ended March 31,  1999.  The increase is due to an increase in the amounts
borrowed  under the Company's  existing  credit  facilities  and the $60 million
Secured Credit Facility.

Included in Other Operations is FrontLine's ownership interest in RSVP Holdings,
LLC. For the three  months ended March 31, 2000 and March 31, 1999,  FrontLine's
share of RSVP  Holdings,  LLC's loss was  approximately  $0.2  million  and $0.6
million, respectively.


                                       24

<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

FrontLine has funded operations and investing  activities  through a combination
of borrowings  under various  credit  facilities  and issuances of the Company's
equity securities.

FrontLine funded approximately $86.9 million in cash and issued $24.6 million of
the Company's  common stock to acquire  interests in or make advances to new and
existing  Partner  Companies during the three months ended March 31, 2000. These
companies include:  EmployeeMatters,  Inc., LiveCapital.com,  NeoCarta Ventures,
RealtyIQ.com, UpShot.com and VANTAS Incorporated.

The Company has a credit  facility  with  Reckson in the amount of $100  million
("FrontLine  Facility").  Additionally,  Reckson Strategic Venture Partners, LLC
("Reckson  Strategic") has  established a $100 million  facility with Reckson to
fund  Reckson  Strategic  investments.  Note  7 to  the  consolidated  financial
statements  summarizes  the  outstanding  amounts and terms of the FrontLine and
Reckson  Strategic  Facilities.  The Company  had  approximately  $92.7  million
outstanding  under the  FrontLine  Facility at March 31, 2000.  Borrowings  were
primarily used to fund acquisitions of ownership  interests in Partner Companies
and general  operations.  Approximately  $36.0 million was outstanding under the
Reckson Strategic  Facility at March 31, 2000. These borrowings were utilized to
fund Reckson Strategic  investments and general  operations.  At March 31, 2000,
$43.8 million was available on these Facilities.

FrontLine's  secured credit  facility for $60 million was fully drawn and repaid
during  the three  months  ended  March 31,  2000,  and is  therefore  no longer
available.

On January 21, 2000,  the Company  entered into a merger  agreement  pursuant to
which VANTAS will be merged with HQ Global  Workplaces,  Inc. which is scheduled
to close by May 31, 2000.  The merger is expected to be financed by $350 million
of HQ Global debt,  carryover equity from the seller representing  approximately
19%  of the  merged  entity  and  $195  million  of new  equity  from  strategic
acquisitions.  VANTAS  has  established  a $35  million  letter  of  credit  and
FrontLine  paid $15 million in cash to secure the  obligations  under the merger
agreement.  This letter of credit is  collateralized  by shares of VANTAS  stock
that are owned by FrontLine and guaranteed by FrontLine on a nonrecourse  basis.
In the event that the  letter of credit is drawn upon and the lender  forecloses
upon the Company's shares of VANTAS,  VANTAS is obliged to reimburse the Company
in the form of additional  shares of VANTAS for any loss of the Company's shares
of  VANTAS  provided  that such  loss was not a result  of the  Company's  gross
negligence.  FrontLine has obtained commitments for the debt financing which are
subject  to  certain  conditions  and is in  negotiations  to obtain  the equity
financing.  However,  no  assurance  can be  given  that  the  Company  will  be
successful in obtaining the equity financing required under the merger agreement
such that the merger will be consummated on its current terms or that the merger
will not be consummated for any other reason.

VANTAS has a credit  agreement  in the  amount of $157.9  million  (the  "Credit
Agreement")  with a  significant  financial  institution.  The credit  agreement
contains certain financial  covenants one of which requires VANTAS not to exceed
a maximum ratio of consolidated  indebtedness  to  consolidated  earnings before
interest,  income taxes,  depreciation  and  amortization.  There are also other
covenants  pertaining to additional  financial ratios and limitations on capital
expenditures.  At March 31, 2000,  VANTAS did not meet certain of its  financial
covenants.  VANTAS is currently  negotiating with its lenders for an increase in
the  amount  of the  credit  agreement  and/or  waiver  of  those  covenants  in
connection with VANTAS'  proposed merger with HQ Global  Workplaces.  VANTAS has
obtained a commitment letter for the provision of a new credit facility, subject
to  satisfaction  of various  conditions,  which would  provide a portion of the
financing  necessary to  consummate  the merger,  including  funds  necessary to
refinance the credit  facility.  There can be no assurance that VANTAS will meet
the conditions required to satisfy the existing  commitment,  that the HQ Global
Workplaces merger will occur or that, if the HQ Global Workplace merger does not
occur,  VANTAS  will be able to obtain a waiver  with  respect to the  financial
covenants  contained in the credit  facility for the fiscal  quarter ended March
31, 2000 and satisfy such  covenants or obtain a waiver  thereafter.  Currently,
VANTAS has short term letters of credit totaling $10.2 million.

                                       25

<PAGE>


The Company also funded  investing  activities  for the three months ended March
31, 2000 with net proceeds of approximately $24.6 million from the completion of
26,000 shares of privately placed Convertible Preferred Stock offerings.  On May
6, 2000, the Company paid a preferred  dividend to the preferred  shareholder of
approximately $0.6 million.

On March 7, 2000, an investment partnership invested $30 million to purchase 1.5
million warrants to acquire FrontLine's common stock at an exercise price of $70
per  share.  The  warrants  have a term  of 3.25  years.  The  Company  utilized
approximately  half of these  proceeds to reduce its $60 million  Secured Credit
Facility ("Credit  Facility") with a significant  financial  institution and the
remaining  portion  will be  utilized  for  acquisitions  of interest in Partner
Companies and working capital purposes.

On March 31, 2000,  the Company  sold  approximately  2.6 million  shares of its
common stock at a price of $47.25 per shares for an aggregate  consideration  of
approximately $122.6 million.  Proceeds from the sale were utilized to repay the
remaining  portion  of  the  Credit  Facility.  As a  result,  certain  deferred
financing costs of  approximately  $2.6 million were incurred in connection with
the Credit Facility were expensed as an  extraordinary  loss in the accompanying
consolidated statements of operations.

Subsequent to March 31, 2000, the Company  funded an additional  $8.9 million to
existing Partner Companies.

Currently,  the  Company  has two  short-term  letters of credit  totaling  $3.2
million,  which  have been  utilized  as  deposits  for future  acquisitions  of
ownership interests in Partner Companies.

FrontLine's operations do not require intensive capital expenditures. There were
no significant capital expenditure commitments as of March 31, 2000.

FrontLine  will continue to evaluate  acquisition  opportunities  and expects to
acquire additional  ownership interests in new and existing Partner Companies in
the next 12 months,  all of which  could make it  necessary  for the  Company to
raise additional funds. The Company may not be able to obtain additional bank or
other  financing  beyond this period,  or may only be able to do so on terms not
favorable or acceptable to the Company.  If additional  funds are raised through
the  issuance  of  equity  securities,   existing  shareholders  may  experience
significant dilution. Although management believes that it will continue to have
access to the public markets,  the  availability  and amount of funds from these
markets  is  subject  to  numerous  factors  including  some that are beyond the
Company's control, and therefore is not assured.

INFLATION

The Credit  Facilities  generally bear interest at variable  rates.  These rates
will be  influenced  by changes in the prime rate and is  sensitive to inflation
and other economic factors. A significant  increase in interest rates may have a
negative impact on the earnings of the Company due to the variable interest rate
under the Credit Facilities.


                                       26


<PAGE>


ITEM 3. QUANTITIVE AND QUALITIVE DISCLOSURES ABOUT MARKET RISK

The primary  market risk facing the Company is interest  rate risk on its Credit
Facilities.  The  Company  does not hedge  interest  rate risk  using  financial
instruments.  The Credit  Facilities  bear  interest at the greater of the prime
rate plus 2% or 12% (with  interest on balances  outstanding  more than one year
increasing  by 4% of the  previous  year's  rate).  The rate of  interest on the
Credit  Facilities  will be  influenced  by  changes  in the  prime  rate and is
sensitive to inflation and other  economic  factors.  A significant  increase in
interest rates may have a negative  impact on the earnings of the Company due to
the variable interest rate under the Credit Facilities.

The following  table sets forth the  Company's  Credit  Facilities  obligations,
principal cash flows by scheduled maturity,  weighted average interest rates and
estimated fair market value ("FMV") at March 31, 2000 (in thousands).

<TABLE>
<CAPTION>
                                        For the year ended December 31,
                    2000      2001     2002        2003        2004      Thereafter        Total         FMV
                    ----      ----     ----        ----        ----      ----------        -----         ---
<S>                <C>       <C>      <C>       <C>           <C>       <C>               <C>           <C>
Variable rate       $--       $--       $--      $128,715       $--       $ --           $128,715       $128,715

Average
interest rate        --        --        --         12.02%       --         --             12.02%             --
</TABLE>

The  primary  market  risk  facing  VANTAS is  interest  rate risk on its Credit
Agreement.  As of March  31,  2000,  VANTAS  hedged  interest  rate  risk  using
financial  instruments for a limited amount of its outstanding  debt. The Credit
Agreement bears interest  ranging from LIBOR plus 3.0% to LIBOR plus 3.75% for a
one,  three or six month period at the election of VANTAS.  The rate of interest
on the Credit Agreement will be influenced by changes in short-term rates and is
sensitive to inflation and other  economic  factors.  A significant  increase in
interest  rates may have a negative  impact on the earnings of VANTAS due to the
variable interest under the Credit Agreement.

Based on variable rate debt levels,  a 10% change in market  interest  rates (59
basis points on a weighted-average) would have an approximate 2.8% impact on the
VANTAS' interest expense, net.

VANTAS  has not,  and does not plan  to,  enter  into any  derivative  financial
instruments for trading or speculative  purposes.  As of March 31, 2000,  VANTAS
had no other material exposure to market risk.



                                       27

<PAGE>


PART II - OTHER INFORMATION

Item 1. Legal Proceedings - None
Item 2. Changes in Securities and Use of Proceeds

The following  securities were issued in transactions  pursuant to the exemption
from registration  under Section 4(2) of the Securities Act of 1933 and involved
only accredited investors.

From  January 26, 2000 to March 17,  2000,  the  Company  completed  convertible
preferred stock offerings,  to an accredited investor, of an aggregate of 26,000
shares of 8.875%  Cumulative  Convertible  Preferred Stock, at a price of $1,000
per share, for net proceeds of $24.6 million.

Dividends  on the  Preferred  Stock  are  payable  quarterly  in cash or, at the
Company's  election,  in common stock,  provided  certain  conditions  have been
satisfied.  The Preferred Stock is redeemable on or after the third  anniversary
of the date of issuance  and is  convertible  at any time,  at the option of the
holder,  on or after  the one year  anniversary  of the  date of  issuance.  The
Preferred  Stock is convertible  into shares of the Company's  common stock at a
price of $70.48.

On March 7, 2000, an investment partnership invested $30 million to purchase 1.5
million  warrants to acquire the Company's  common stock at an exercise price of
$70 per share.  The  warrants  have a term of 3.25 years.  The Company  utilized
approximately  half of these  proceeds to reduce its $60 million  Secured Credit
Facility with a significant financial institution.

Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Securities Holders - None
Item 5. Other information - None
Item 6. Exhibits and Reports on Form 8-K

<TABLE>
<S>                                       <C>
Form 8K  dated January 25, 2000             Relating to the Company's execution of merger agreements
                                            with VANTAS Incorporated and HQ Global Workplaces, Inc.



Form 8K dated February 15, 2000             Relating to the Company's completion of
                                            the acquisitions of ownership interests in VANTAS Incorporated.



Form 8K dated, March 2, 2000                Relating to the filing of financial  statements with respect to
                                            the  Company's  execution  of  merger  agreements  with  VANTAS
                                            Incorporated and HQ Global Workplaces, Inc.



Form 8K dated March 2, 2000                 Relating to the filing of the  financial  information  relating
                                            to the merger of VANTAS  Incorporated and HQ Global Workplaces,
                                            Inc.



Form 8K dated March 28, 2000                Relating to the Company's name change to FrontLine Capital
                                            Group, the issuance of 8.75% Cumulative Convertible Preferred
                                            Stock and Warrant Purchase Agreement with Gotham Partners,
                                            L.P. and affiliates.
</TABLE>

Exhibit 10.1 Letter Amendment to Frontline Capital Group's Credit Agreements.


                                       28

<PAGE>



SIGNATURES

Pursuant to the  requirements  of the  Securities  and Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                         FRONTLINE CAPITAL GROUP

                         By: \s\ Scott H. Rechler
                           --------------------------
                         Scott H. Rechler, President and Chief Executive Officer
                                           (Principal Executive Officer)

                             \s\ Michael Maturo
                            -------------------------
                            Michael Maturo, Executive Vice President
                                 and Chief Financial Officer
                                (Principal Financial and Accounting Officer)

DATE: May 15, 2000




                                       29