================================================================================
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549


                                   FORM 10-K

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

                                      OR

[  ] Transition  Report  Pursuant  to  Section  13  or  15(d)  of the Securities
        Exchange Act of 1934 for the transition period from     to
                        Commission File Number 0-30162

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




<TABLE>
<CAPTION>
                     DELAWARE                                  11-3383642
<S>                                                        <C>
             (State or other jurisdiction of                (I.R.S. Employer
              incorporation or organization)               Identification No.)

               1350 AVENUE OF THE AMERICAS                       10019
                     NEW YORK, NY
       (Address of principal executive offices)                (Zip Code)

</TABLE>

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

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





<TABLE>
<CAPTION>
         TITLE OF EACH CLASS            NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------------------------   ------------------------------------------
<S>                                    <C>
      Common Stock, $.01 par value                       NASDAQ

</TABLE>

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

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

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

     The  aggregate  market  value  of  the  shares  of  common  stock  held  by
non-affiliates  was approximately $1.0 billion based on the closing price on the
NASDAQ for such shares on March 20, 2000.

     The  number  of  the  Registrant's  shares  of common stock outstanding was
32,025,230 as of March 20, 2000.


                      DOCUMENTS INCORPORATED BY REFERENCE

     Portions  of  the Registrant's Proxy Statement for the Annual Shareholder's
Meeting to be held in June 2000 are incorporated by reference into Part III.
================================================================================
<PAGE>

                               TABLE OF CONTENTS





<TABLE>
<CAPTION>
 ITEM                                                                                     FORM 10-K
  NO.                                                                                    REPORT PAGE
------                                                                                   ------------
<S>      <C>                                                                             <C>
                                                  PART I
1.       Business ....................................................................       I-1
2.       Properties ..................................................................       I-11
3.       Legal Proceedings ...........................................................       I-11
4.       Submission of Matters to a Vote of Security Holders .........................       I-11

                                                 PART II
5.       Market for Registrant's Common Equity and Related Stockholder Matters .......       II-1
6.       Selected Financial Data .....................................................       II-2
7.       Management's Discussion and Analysis of Financial Condition and Results of
         Operations ..................................................................       II-3
7a.      Quantitative and Qualitative Disclosures about Market Risk ..................      II-10
8.       Financial Statements and Supplementary Data .................................      II-11
9.       Changes in and Disagreements with Accountants on Accounting and Financial
         Disclosure ..................................................................      II-11

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

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

<PAGE>

                                     PART I

ITEM 1. BUSINESS

THE COMPANY

     FrontLine   Capital  Group,  formerly  Reckson  Service  Industries,  Inc.,
("FrontLine"  or  the  "Company"),  was  formed on July 15, 1997. FrontLine is a
publicly  traded  operating  company  that  acquires interests in and develops a
network  of  business-to-business  ("B2B")  e-commerce  and  e-services Internet
companies  (the  "Partner  Companies") focused on serving small and medium-sized
enterprises  ("SMEs"),  including  independent professionals, entrepreneurs, and
the mobile workforces of larger companies.

     SMEs  account  for  approximately  51%  of the U.S. gross domestic product.
Internet-based  solutions  can  provide  SME  owners with the ability to operate
their   businesses   more   efficiently   and   affordably,   allowing  them  to
realistically  compete  with  larger  corporations.  As  of  March 24, 2000, the
Company  has  invested  approximately  $316.8  million  in 13 Partner Companies,
including the organic development of one Partner Company.

     The  Company  acquires  significant, long-term ownership stakes in targeted
Partner   Companies   and  integrates  them  into  a  collaborative  network  of
companies,  seeking  to accelerate their growth and increase their likelihood of
long-term  success.  FrontLine has developed an extensive e-Cooperative platform
that  allows  its  Partner Companies to gain access to the growing customer base
of   its  existing  and  future  Partner  Companies  and  to  benefit  from  its
operational   and  management  resources.  The  e-Cooperative  consists  of  the
following elements:

     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  Click and Mortar -- 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.

     FrontLine  endeavors to understand the needs of SMEs and build a network of
companies   that   deliver  a  suite  of  Internet  applications,  services  and
infrastructure  to  help  SMEs  streamline  operations,  outsource  key business
processes and focus on their core competencies.

INDUSTRY OVERVIEW

     The  growth  in the B2B e-commerce and e-services sector is attributable to
several  favorable  trends,  including  the  growth  of  the Internet due to the
increased  access  to  broadband  connectivity,  the  proliferation of effective
Internet-based  applications  and  outsourced  solutions and the growth of small
and medium-sized enterprises, or SMEs.

GROWTH OF THE INTERNET

     Forrester  Research estimates that the B2B e-commerce market will grow from
$43  billion  in  1998  to  more  than  $1.3  trillion  by 2003 and that the B2B
e-services  market  will  grow  from  $2.8 billion in 1998 to approximately $220
billion  in  2003.  Further,  Forrester  Research  estimates  that  by  2003 B2B
e-commerce  will  account  for  approximately  93%  of  all  Internet  commerce.
Although  still  in  early  phases,  a number of factors are converging that are
contributing to the rapid acceleration of B2B e-commerce and e-services.


                                      I-1
<PAGE>

     The  first  factor  is  increasing  Internet access, particularly access to
broadband  connectivity.  According to Forrester Research, over 2.5 million U.S.
businesses,  or  35%  of  all enterprises, have access to the Internet today. In
addition,  the  proliferation  of  broadband solutions is enabling functionality
and  service  levels  previously unavailable, particularly to SMEs. According to
Forrester  Research,  the  percentage  of enterprises with broadband access will
grow  from  7%  in  1998  to  30%  in  2003.  FrontLine believes that as network
reliability  and  performance  improve,  businesses  will  increasingly rely and
depend upon Internet-based solutions.

     The  second  factor is the adoption of standardized platforms, applications
and  protocols  that allows for a more cost-effective deployment of applications
and  services to a wide and diverse group of users. Historically, B2B e-commerce
has  occurred  through  electronic  data  interchange over proprietary networks,
which  are costly and available only to a limited number of participants. Today,
a  number  of  standardized  component  applications  have  been developed which
dramatically reduce the cost and time of building e-commerce systems.

     The  third  and  most  compelling  reason for the rapid acceleration of B2B
e-commerce   solutions  is  the  return  on  investment  ("ROI")  for  adopters.
Businesses  use  the Internet as a means to enhance the operating performance of
their  businesses.  With  the  increase in global competition and the increasing
speed  of  business  adaptation,  companies are becoming increasingly reliant on
the Internet to obtain a competitive advantage.


GROWTH OF SMES

     SMEs  represent  approximately  51%  of  the  U.S.  gross domestic product.
Internet-based  solutions  can  provide  SME  owners with the ability to operate
their  businesses  more efficiently and affordably, allowing them to effectively
compete with larger corporations.

     Today,  the  Internet  enables SMEs to communicate with their suppliers and
customers  as  well  as to purchase and sell products/services in geographically
diverse  markets.  It  also  allows  them  to  reduce transaction costs, improve
service  and  react  more  quickly  to  changing market conditions. According to
International  Data  Corporation,  Internet  penetration  will steadily increase
among  SMEs  through the year 2002. Nearly 70% of SMEs will have Internet access
in  2002.  Today,  over  31%  of  SMEs  in the United States use the Internet to
conduct  commerce.  International Data Corporation also estimates that SMEs will
generate  30%  of  worldwide Internet commerce revenue by 2003, an increase from
17% in 1997.

     As  SMEs have become more competitive, many larger companies have responded
to  this  threat by moving their workforces closer to their customers, suppliers
and  markets.  As  a  result, the workforce of these larger companies has become
more  mobile.  According  to  Dataquest,  there  will be an estimated 36 million
mobile  workers  by  2003. When operating in a mobile environment, these workers
need  access  to  the  resources  typically  available  at the corporate office.
Internet-based  and  outsourced  solutions  are  likely to provide many of these
services.


INVESTMENT CRITERIA AND APPROACH

     The  Company  has  developed  an  investment strategy targeted at acquiring
interests  in  B2B  companies  that  serve the SME market, including independent
professionals,  entrepreneurs  and  the  mobile  workforces of larger companies.
FrontLine's  investment  philosophy  focuses  on  actively  researching emerging
industry  sectors,  seeking  opportunities  in  the customer base of its Partner
Companies,  and examining market segments that are complimentary to the existing
partner  network.  FrontLine  seeks  to  take  significant  long-term  ownership
interests  in  its  Partner  Companies.  In  order to take an active role in the
affairs  of  a  new  Partner  Company,  FrontLine  generally  requires  board of
director  and  board  committee  representation. In this manner, the Company can
better integrate the new Partner Company into its e-Cooperative network.


                                      I-2
<PAGE>

   FrontLine  primarily  targets  three  types  of B2B e-commerce and e-services
      companies:

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

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

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

     The  Company  applies  a  disciplined analysis when it evaluates whether to
acquire  an  interest  in  an  e-commerce  or e-services company. In this review
process, the following factors are considered:


Industry Related Criteria:

   o   Market Size and  Growth.  FrontLine  seeks to invest in markets  that can
       sustain significant growth rates for at least five years or large markets
       that have the potential for consolidation or evolution.

   o   Inefficiency.  FrontLine  considers  whether the industry is  information
       intensive and suffers from  inefficiencies  in  information  distribution
       that may be  alleviated  by  improving  the  delivery  mechanism  through
       e-commerce and e-services.

   o   Barriers and Margins. FrontLine considers the ability to maintain margins
       within an industry by  recognizing  barriers to entry created by physical
       assets,  customer  relationships  and switching  costs,  and the relative
       value proposition of new models.

   o   Competition.  FrontLine  evaluates  the  amount  of  competition  that  a
       potential   Partner  Company  faces  from   e-commerce,   e-services  and
       traditional businesses.


Company Related Criteria:

   o   Industry Leader Potential.  FrontLine  considers the ability of a company
       to become a leader in its market based on the business model,  management
       team and competitive landscape.

   o   Compelling value/service proposition.  FrontLine evaluates the ability of
       a new or  evolving  business  model to have a  significant  impact on its
       industry  by  offering  a  compelling  value  proposition  to the user or
       increasing  the level of service  provided.  The new model must present a
       clearly demonstrable ROI to the user.

   o   Customer  Targets.  FrontLine is focused on companies  that service SMEs,
       the  mobile   workforce,   as  well  as   professional   individuals  and
       organizations.


FrontLine Related Criteria:

   o   Significant  Ownership.  The Company considers whether it will be able to
       acquire  a  significant  ownership  interest  in  the  potential  Partner
       Company,  influence the strategic direction of the company,  and actively
       develop a long-term partnership with the company.

   o   e-Cooperative  Value Added. The Company  considers the extent to which it
       can add value to the Partner  Company  through the eDG,  Advisory  Board,
       e-Cooperative network and customer base.

   o   Network  Synergy  Gained.  The  Company  considers  the degree to which a
       potential  Partner Company will add value to its Partner Company network.
       This is based on the ability of the Partner  Company to offer product and
       service synergies and to expand the customer base.

     Based   on  the  Company's  strategy  of  acquiring  significant  ownership
interests  in  and  adding  value to its Partner Companies, it generally targets
early  stage  B2B e-commerce companies. These early stage companies benefit from
FrontLine's  operating and strategic support and provide it with the opportunity
to  share  significantly  from  the potential value creation FrontLine provides.
The  Company also considers investments in later stage companies if they provide
significant network synergies.


                                      I-3
<PAGE>

OPERATING STRATEGY

     FrontLine's  operating  strategy  is  focused  on  securing small to medium
sized  companies,  including  professionals, entrepreneurs and mobile workforces
of  large  corporations,  through  its  network of B2B e-commerce and e-services
Internet  companies.  FrontLine  seeks  to  accelerate  growth opportunities and
increase  the  likelihood  of  success of its Partner Companies by utilizing the
resources  of  the  e-Cooperative.  These  collective  resources  enable Partner
Companies  to reduce their time to market without sacrificing the development of
infrastructure that is required for long-term success.

     The  e-Cooperative  consists  of  the eDG and Advisory Board as well as the
collaborative  network  of  Partner  Companies.  Through  eDG,  which  currently
consists  of  12  experienced  professionals, FrontLine offers Partner Companies
access  to substantial management resources in areas such as strategic planning,
project  management  and  functional  expertise  in  the areas of organizational
design,   sales  and  marketing,  human  resources  and  organizational  design,
recruiting,  finance  and  technology.  To augment internal resources, FrontLine
has  developed,  and  will continue to enhance, an Advisory Board with expertise
in  such areas as strategic management, marketing and technology. Currently, the
Advisory  Board  is  comprised  of  seven  members  and  active  discussions are
continuing  with  others.  The  Advisory  Board  offers  management  guidance to
Partner  Companies  and  provides  the Company with new business and acquisition
opportunities.

     In   addition   to   assisting   individual  Partner  Companies,  FrontLine
facilitates  collaboration  among  its  Partner  Companies  to  foster strategic
relationships,  cross  selling, and knowledge sharing across the entire network.
As  a  Partner  Company  is  added  to  the network, the Partner Company has the
ability  to  accelerate  its  growth  by accessing the collective customer base.
This  customer  base  is  especially  valuable  because its members have similar
needs and the propensity to use Internet-based solutions.

     In  addition  to  assisting  Partner  Companies,  the  Company  may use the
resources  of  the eDG and the Advisory Board to organically develop new Partner
Companies.  If  FrontLine is unable to identify a potential Partner Company that
satisfies  its  acquisition criteria in industry sectors that FrontLine views as
attractive,  the  Company  may seek to organically develop a Partner Company. In
order  to  internally  develop  a  Partner  Company,  FrontLine will formulate a
business  plan, act as interim management, identify a dedicated management team,
and  actively  support  the  development  of  the  Partner  Company  through the
resources of the eDG.


EDG AND THE ADVISORY BOARD

     Based  on  the  rapid  pace  of development of B2B e-commerce, the value of
"first  mover"  advantage, and the incremental value realized by market leaders,
FrontLine  seeks  to  accelerate the time to market of its Partner Companies and
increase  their  likelihood  of  success. To do so, FrontLine provides strategic
guidance  to  its Partner Companies regarding market positioning, business model
development  and market trends. In addition, the Company advises Partner Company
management  on day-to-day matters. The Company also provides significant support
through  active  involvement in ongoing operational issues and, where necessary,
act as interim management for its Partner Companies.

     FrontLine  assists its Partner Companies by providing access to the skilled
managers  within the eDG who guide its Partner Companies in the following areas:


   o   Strategic  Guidance.  FrontLine's  management  team works with the senior
       management  of Partner  Companies to enhance their  business  strategies,
       refine their business models and develop effective execution plans.

   o   Business  Development.  B2B e-commerce  and  e-services  companies may be
       involved in  evaluating,  structuring  and  negotiating  joint  ventures,
       strategic alliances,  joint marketing  agreements,  acquisitions or other
       transactions.  The Company's  management team, Advisory Board,  strategic
       investors and other Partner  Companies  will provide  assistance in these
       areas.

   o   Sales and Marketing.  The Company's  management team provides guidance to
       Partner  Companies in their sales,  marketing,  product  positioning  and
       advertising efforts.


                                      I-4
<PAGE>

   o   Executive  Recruiting and Human  Resources.  FrontLine's  management team
       assists  Partner   Companies  in  recruiting  key  executive  talent.  In
       providing this assistance,  the Company leverages the contacts  developed
       by its network of Partner Companies, eDG and Advisory Board.

   o   Technology.  FrontLine's  management team provides Partner Companies with
       guidance  in  technology  strategy  and  assists  in  the  resolution  of
       technology development issues. In addition,  FrontLine is a Global Client
       Partner of iXL  Enterprises,  which  enables it to  provide  its  Partner
       Companies with preferential access to world-class service offered by iXL.
       This  relationship  provides  its  Partner  Companies  with  access and a
       service level typically available only to Fortune 500 companies.

   o   Finance.  The Company is  dedicated to  providing  financial  guidance to
       Partner  Companies  in  areas  such  as  corporate   finance,   financial
       reporting,   accounting  and  treasury  operations.  In  providing  these
       services, the Company leverages the skills and experience of its internal
       finance and accounting group, as well as the Partner Company network.

   o   Customer Research and Knowledge. FrontLine continues to build substantial
       knowledge  of the  collective  customer  base  of its  Partner  Companies
       through customer surveys,  focus groups and other research.  Through this
       knowledge and close customer relationships,  FrontLine can anticipate new
       investment  opportunities  and assist Partner Companies in developing and
       launching new products and services.

COLLABORATIVE NETWORK OF PARTNER COMPANIES -- SELF-REINFORCING MODEL

     One  of  the Company's principal goals is to form a Partner Company network
that  can rapidly increase the value of each individual Partner Company. This is
achieved  by  encouraging  each company in the network to leverage the strengths
and  resources  of  the other Partner Companies. As individual Partner Companies
grow  into  leadership positions, the network will become stronger. As the value
of  the  network grows, the Company will seek to attract an increasing number of
quality  Partner  Companies.  The Company refers to this as the self-reinforcing
model.

     To   accomplish   this   self-reinforcing   model,   FrontLine  facilitates
collaboration   among  its  Partner  Companies  by  assisting  them  in  forming
strategic  alliances  and  in  the  sharing  of knowledge relating to the common
customer  base.  These strategic alliances offer the Partner Companies access to
a  large  customer  base  with similar needs and the ability to deliver enhanced
product  and service offerings. FrontLine encourages these relationships through
its  networking  events  and  Partner  Company  forums.  FrontLine also provides
resources  to  encourage  the  sharing  of  knowledge and best practices between
Partner  Companies. This information sharing occurs both through the interaction
of  its  management  as well as through its Knowledge On-Line system ("KOL") and
its  Customer  Knowledge  Program.  KOL is an intranet and extranet available to
each  Partner  Company.  The  system  is  intended to contain best practices and
lessons   learned   by  the  Partner  Companies  as  well  as  general  industry
information  and  tools  (e.g.,  standard  legal agreements, employee handbooks,
legal and accounting guides).

     The  Company  also  utilizes  the  collective  resources  of the network to
provide   its   Partner   Companies  with  access  to  a  comprehensive  set  of
professional   and  business  resources.  A  primary  mission  of  its  business
development   group   is   to   form  significant  business  relationships  with
organizations  that provide critical resources to Partner Companies and assure a
level  of  service  they  could  not  achieve  on their own. These relationships
include  services  such  as  legal,  accounting, public relations, banking, real
estate   and  technology.  A  particular  problem  for  early  stage  e-commerce
companies  is  accessing  the  resources  of  the  leading  web  development and
technology  firms.  To  provide  FrontLine's Partner Companies with preferential
access  to  such  service,  FrontLine  has become a Global Client Partner of iXL
Enterprises  which  enables  it  to provide its Partner Companies with access to
world-class   service  typically  available  only  to  Fortune  1000  companies.
FrontLine  will  continue to establish such relationships with other value added
service and product providers.

REPORTABLE SEGMENTS OVERVIEW

     FrontLine's  financial  statements  include  the  effect  of  consolidating
VANTAS  Incorporated ("VANTAS") and OneXstream.com, Inc. ("OneXstream") in 1999.
The   reportable  segments  are  Executive  Office  Suites  and  Virtual  Office
Services, e-Businesses and Other Operations. Executive Office


                                      I-5
<PAGE>

Suites  and  Virtual Office Services includes the effect of consolidating VANTAS
for  the  year  ended  December  31, 1999 and the effect of the equity method of
accounting  for  InterOffice  SuperHoldings  Corporation  and  Reckson Executive
Centers,  LLC  for  the  year ended December 31, 1998. e-Businesses includes the
effect  of  transactions  and other events incidental to the ownership interests
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.

     Financial  information  about  the Company's industry segments may be found
in  Note 13 to the Company's consolidated financial statements presented in Item
8 of this Annual Report on Form 10-K.


CURRENT PARTNER COMPANIES

     As  of  March  24,  2000,  FrontLine  owns  stakes in the following Partner
Companies:


<TABLE>
<CAPTION>
                                                         FUTURE
                               INVESTED         %      COMMITTED   RESULTING   RESULTING
                                CAPITAL       OWNED     CAPITAL     % OWNED     % OWNED
PARTNER COMPANY                  (MM)        (BASIC)      (MM)      (BASIC)    (DILUTED)
-------------------------- ---------------- --------- ----------- ----------- -----------
<S>                        <C>              <C>       <C>         <C>         <C>
OnSite Access, Inc. ......    $  46.0  (1)      37%         --         37%         22%
VANTAS Incorporated.......      211.5  (2)      84%     $  1.3         84%         76%
UpShot.com ...............       16.0           20%         --         20%         18%
EmployeeMatters, Inc......       10.0           53%        5.0         53%         45%
LiveCapital.com ..........        7.5            4%         --          4%          4%
RealtyIQ.com .............       13.7  (3)      68%        4.6         68%         54%
CommerceInc                       4.9           31%        7.1         31%         26%
 Corporation .............
AdOutlet.com .............        2.0           12%         --         12%         10%
DigitalWork, Inc. ........        2.0           <1%         --         <1%         <1%
NeoCarta Ventures ........        2.0            4%        8.0          4%          4%
Opus360 Corporation ......        1.0           <1%         --         <1%         <1%
GiftCertificates.com .....        0.2           <1%         --         <1%         <1%
OneXstream, Inc. .........         --           93%         --         93%         80%



<CAPTION>
PARTNER COMPANY                                            DESCRIPTION
-------------------------- --------------------------------------------------------------------------
<S>                        <C>
OnSite Access, Inc. ...... A building-centric, integrated communications services provider
VANTAS Incorporated....... A virtual and physical office solutions provider
UpShot.com ............... Web-based sales management solutions for SMEs
EmployeeMatters, Inc...... A fully-integrated Internet-based employee benefits and human resource
                           administration outsourcing company
LiveCapital.com .......... Marketplace through which SMEs may acquire financing
RealtyIQ.com ............. Web-based provider of comprehensive commercial real estate information
CommerceInc
 Corporation ............. Web-based infomediary focused on B2B e-commerce
AdOutlet.com ............. Marketplace for advertising space and time across all media
DigitalWork, Inc. ........ A B2B portal for SMEs providing a platform to complete a range of
                           business tasks
NeoCarta Ventures ........ Strategic investment into venture capital fund
Opus360 Corporation ...... Marketplace for knowledge workers and project opportunities
GiftCertificates.com ..... A leading e-commerce provider of gift certificates
OneXstream, Inc. ......... Business portal that will offer e-services of FrontLine Partner Companies
                           to SMEs
</TABLE>

----------
(1) Includes $23.6 million in FrontLine common stock.
(2) Includes $58.0 million in FrontLine common stock.
(3) Includes $2.1 million in FrontLine common stock.


     VANTAS   Incorporated   ("VANTAS").  The  Company  entered  into  a  merger
agreement  in  January  2000 pursuant to which VANTAS Incorporated, a company in
which  it  owns  an  approximate  84%  interest,  will  be merged with HQ Global
Workplaces,  Inc.  ("HQ").  The  merger  will create the world's largest virtual
workplace  solutions  provider  and  comprehensive e-fulfillment enterprise. The
new  company,  HQ  Global  Workplaces, will serve approximately 43,000 customers
through  463 owned, managed or franchised centers in 17 countries. The merger is
scheduled  to  close by April 30, 2000 and will be financed through the issuance
of  new  equity  of  HQ  Global  Workplaces and approximately $350 million of HQ
Global  Workplaces  debt.  VANTAS has posted a letter of credit in the amount of
$35  million  to  secure the obligations under the merger agreement. The Company
has  pledged  approximately  15  million  shares  of  VANTAS stock to secure its
nonrecourse  guarantee  of  the  letter  of  credit.  In the event the letter of
credit  is  drawn  upon  and  the lender forecloses upon the Company's shares of
VANTAS,  VANTAS  is obligated 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 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.


                                      I-6
<PAGE>

     HQ  Global  Workplaces  will  provide  a  unique  component  of FrontLine's
e-Cooperative.  FrontLine believes the formation of HQ Global Workplaces creates
the potential to add significant value to its Partner Company network by:

   o   Enabling  Partner  Companies.  By  utilizing  the  centers,  its  Partner
       Companies  will gain  access  to local  points of  presence  for  service
       delivery, sales, and customer support. Obtaining fully operational office
       space  typically  involves a lengthy  and  burdensome  process  including
       finding  suitable  space,  negotiating  lease terms,  building out of the
       space,   selecting  staff,   and  developing   technology  and  operating
       infrastructure.  FrontLine  is and will  continue to utilize the over 463
       VANTAS/HQ Global Workplace  centers to provide its Partner Companies with
       a  rapid  deployment  platform  and  turnkey   infrastructure   including
       technology,  operations,  and staffing.  As an example,  EmployeeMatters,
       Inc.  plans to locate sales  people in VANTAS  centers to provide a local
       point of contact with its  customers.  Additionally,  it is  contemplated
       that Opus360 will enter into a national  agreement with VANTAS to provide
       the independent  contractors served by Opus360 with executive and virtual
       office  services.  The  Company  will  continue  to form such  beneficial
       relationships with Partner Companies.


   o   Broadband  Connected  Community.  By providing the Partner Companies with
       access  to a  broadband  connected  community  throughout  the HQ  Global
       Workplaces  centers,  FrontLine will enable them to  effectively  design,
       test and launch new  Internet-based  business  services.  Optimizing  the
       functionality  of many  emerging  B2B  e-commerce  services  will require
       access to high bandwidth  connectivity.  Through the HQ Global  Workplace
       centers,  the Company  will  provide  broadband  access to  approximately
       43,000 customers.


   o   Incubators.  HQ Global  Workplaces  will provide an in-place  facility to
       foster  the  development  of seed  stage and early  stage B2B  e-commerce
       companies.  A portion  of certain HQ Global  Workplaces  centers  will be
       dedicated  exclusively  to seed  stage  and early  stage  B2B  e-commerce
       companies.  The Company will offer these companies physical office space,
       the business support services currently provided by HQ Global Workplaces,
       plus a host of other  services to support  their growth and  development.
       The  Company   believes   that  its  ability  to  offer  these   services
       distinguishes it from other providers of incubators.  These services will
       be provided by the eDG, an  operational  team  dedicated to the incubator
       centers,  and by third  parties.  The eDG and incubator team will provide
       services similar to those provided to the Partner Companies. In addition,
       FrontLine  is  developing  programs  with a number  of third  parties  to
       provide  assistance in the areas of technology,  finance and  accounting,
       and legal,  among  others.  The Company  also intends to provide seed and
       follow on capital  to the  companies  it  incubates.  FrontLine  plans to
       pursue the development of numerous new e-commerce and e-services  Partner
       Companies through these centers.


   o   Providing  Proprietary Deal Flow. Today  approximately 40% of VANTAS' and
       HQ's customers are technology and telecommunications companies. FrontLine
       intends to develop  systems and  marketing  programs  to actively  source
       acquisition opportunities from this base of members.


     Executive  suites  are  a  cost-effective alternative to traditional office
space  offering  flexible,  fully  furnished  and  staffed  offices,  which  are
immediately  available  for  varying lengths of time. Thus, executive suites are
able   to   accommodate   the   needs  of  businesses  ranging  from  individual
entrepreneurs  to branches of Fortune 500 firms. Although cost is one motivation
of  utilizing  an  executive suite, the ability to access a full service turnkey
solution   has   become   increasingly  important.  VANTAS  also  leverages  its
infrastructure  to  provide  virtual office services to over 4,000 customers who
do not maintain an office in a VANTAS center.


     The  Executive Suite Association estimates there are 80 million square feet
of  available  serviced  workspace  in the United States, representing 3% of the
total  office  market.  The U.S. executive suite industry generates an estimated
$3 billion in sales per year.


     VANTAS'  Management team includes David Rupert, Chief Operating Officer and
interim  Chief  Executive  Officer, who previously was President of the Business
Services division of Pitney Bowes. Scott


                                      I-7
<PAGE>

Rechler,  FrontLines'  Chief  Executive  Officer,  serves as the chairman of the
Board  of  Directors  of  VANTAS  and  will  serve  as the Chairman of HQ Global
Workplaces  upon the consummation of the merger. Certain other senior members of
the Company's management team serve on the Board of Directors of VANTAS.

     In  connection  with  the  merger,  the  Company has agreed to enter into a
stockholders  agreement  with  certain of the holders of HQ who will continue to
hold  a  $120 million common stock investment in HQ Global Workplaces which will
provide  the holders with a right to put their shares of HQ Global Workplaces to
FrontLine  at  various times during the two years subsequent to the merger if an
initial  public  offering of the common stock of HQ Global Workplaces satisfying
certain  criteria  has  not  occurred.  The  put  right  provides that up to $20
million  of  the holders' shares may be put to FrontLine in November 2000, up to
50%  of  the  holders'  shares  may be put to FrontLine in December 2001 and any
remaining  shares  of  the holders may be put to FrontLine in July 2002. The put
is  payable in cash or the Company's common stock (valued at the time of closing
under the put) at its option.

     The   Stockholders   Agreement  also  provides  for  participation  rights,
tag-along  rights,  board  representation  and a limited right of first offer to
the  HQ  Holders  and  contains certain tax-related provisions. The Stockholders
Agreement  also  grants  FrontLine a right of first offer with respect to the HQ
Holders'   Surviving  Corporation  Shares.  The  Company  has  filed  additional
information  regarding  this transaction with the SEC in Current Reports on Form
8-K which are incorporated into this document by reference.

     OnSite  Access,  Inc.  ("OnSite").  OnSite  is an integrated communications
provider  offering SMEs a range of voice and data services, including high speed
Internet  access  and  enhanced  services.  OnSite's "building centric" model is
based  on partnering with owners of multi-tenant office buildings throughout the
United  States.  By  aggregating  the  usage  of  several small and medium sized
tenants,  OnSite  is  able  to  provide cost-effective access to high-bandwidth,
high-availability  digital  telecommunications,  high-speed  Internet access and
data  network  services through the use of fiber-optic and DSL technology, which
would otherwise be cost prohibitive to most SMEs.

     FrontLine  initially  invested in OnSite in February 1998, and subsequently
orchestrated  a second round financing with a private equity investor group that
included  Spectrum  Equity  Investors,  Crosspoint Venture Partners, J.P. Morgan
Capital,  AT&T  Ventures and Veritech Ventures. The Board of Directors of OnSite
consists  of  seven  members, two of which are elected by FrontLine. The Company
also has the right to representation on committees of the Board.

     On  December  15,  1999,  OnSite filed a registration statement on Form S-1
with  the  Securities  and  Exchange  Commission  covering  the  initial  public
offering  of  its  common  stock.  On  February 16, 2000, Winstar Communications
filed  a  lawsuit  in  New  York state court against an OnSite executive, Howard
Taylor,  alleging  breach of Mr. Taylor's non-compete agreement with Winstar and
the  alleged  use  of  Winstar's  confidential  information. No assurance can be
given  as  to  the  impact,  if  any,  on  OnSite  of the Winstar litigation. In
addition,  there  can  be  no  assurance that the OnSite initial public offering
will be consummated or, if consummated, the timing of such offering.

     EmployeeMatters,    Inc.("EmployeeMatters").    EmployeeMatters    is    an
Internet-based  employee benefits and human resources administration outsourcing
company.

     EmployeeMatters'   objective   is   to   be   the   dominant   provider  of
Internet-based,  fully  integrated  employee  administration and human resources
outsourcing  services  to SMEs in white collar sectors. EmployeeMatters seeks to
provide  products  and  services in the areas of payroll processing, 401(k) plan
administration,  insurance,  financial  services,  group  purchasing  and  other
services.  EmployeeMatters' initial target market includes two million companies
and  10  million  employees  nationally.  EmployeeMatters' strategy is to enable
these  companies  to increase their profitability by reducing time and resources
spent  on  non-revenue producing activities, assisting clients in attracting and
retaining  high-quality  employees,  and  reducing  the costs and risks of human
resource and employee administration.

     EmployeeMatters'  management includes co-founders Elliot Cooperstone, Chief
Executive  Officer,  and H. Thach Pham, Chief Financial Officer. Mr. Cooperstone
was  previously  Executive Vice President of Payroll Transfers, Inc., one of the
nation's largest professional employer organizations and Executive


                                      I-8
<PAGE>

Vice  President  and  Chief  Administrative  Officer  of  Alexander  & Alexander
Services,  Inc.,  a  $1.3 billion global insurance brokerage and human resources
consulting  firm.  Mr. Pham was, until recently, a Vice President in the Mergers
and  Acquisitions Department of Morgan Stanley Dean Witter. Previously, he was a
founding  partner  of  Grauer  &  Wheat,  Inc., a private merchant bank, and the
Chief  Financial  Officer  of  Pinnacle Brands, Inc., a Grauer & Wheat Portfolio
Company.

     The  Board of Directors of EmployeeMatters consists of five members, two of
which  are elected by FrontLine and one of which is an independent director. The
Company also has the right to representation on committees of the Board.

     OneXstream.  The  Company  is  actively developing a portal that will bring
together  a  suite  of  services and applications to create a virtual workplace.
The  portal  will  integrate  the products and services of its Partner Companies
plus  a  number  or  proprietary  services,  as  well  as  products and services
provided   through   strategic   alliances   with  third  parties.  The  Company
anticipates  that  the  portal  will  provide  customers with a host of business
resources   in  the  areas  of  office  support  (i.e.,  virtual  administrative
assistants,  human  resource  and  bookkeeping,  call center outsourcing, etc.),
workflow  support (i.e., tools tailored for specific users including sales force
automation  and project management), technology support (i.e., hosted e-commerce
web  sites,  data  back-up,  conferences  call  services,  etc.)  and purchasing
support  (i.e.,  purchasing  of  office  supplies  and equipment, communications
products and services, marketing services, etc.).

     Through  OneXstream,  FrontLine is creating an integrated resource for SMEs
to  purchase a wide variety of business services. In addition, through strategic
alliances  and  co-branding,  FrontLine anticipates that the portal will enhance
the  value  of  its Partner Companies by increasing their exposure and potential
customer base.

     RealtyIQ.com   ("RealtyIQ").   RealtyIQ   develops,   owns  and  manages  a
proprietary   database  of  comprehensive  commercial  real  estate  information
targeted  at  real  estate professionals. Through its service, RealtyIQ provides
commercial  real  estate  brokers,  owners,  and asset managers easy, affordable
access   to  comprehensive  data  on  office,  industrial,  flex,  research  and
development and retail buildings.

     RealtyIQ   was   founded   in  October  1991  by  two  former  real  estate
professionals  and  a  software  engineer to develop a comprehensive, up-to-date
database  for  commercial properties in Manhattan. Today, its service has become
an  industry standard for commercial real estate information. RealtyIQ maintains
a  national  database  of property data that it intends to use as the foundation
for a comprehensive commercial real estate portal.

     CommerceInc  Corporation  ("CommerceInc").  CommerceInc is an "infomediary"
on  the  world  wide  web  specifically  focused  on enabling the B2B e-commerce
marketplace.  CommerceInc  maintains  an  11 million record database of detailed
information  on  SMEs which it compiles by integrating and enhancing a number of
databases.

     CommerceInc  compiles  and  presents data on SMEs via the Internet to allow
buyers  to  make informed supplier choices and allows suppliers to better target
potential  customers. CommerceInc has agreements with Dunn & Bradstreet ("D&B"),
American  Express and others providing it access to its initial base of business
profiles  ("Supplier  Cards").  CommerceInc  combines  this  data with data from
other  databases to produce an enhanced data set. CommerceInc's end product is a
detailed  Supplier  Card  that  includes  a  complete  overview  of each company
including:  products  and  services,  supplier  description,  location,  contact
information, customers, credit information and other relevant information.

     CommerceInc  primarily  distributes  its  products through its own web site
and  through distribution agreements with other web sites, particularly portals.
The  distribution agreements allow CommerceInc to maintain the new and refreshed
data,  and  also reach many more suppliers and customers. Today, CommerceInc has
distribution  agreements  with  Excite's  small  business  web site and Business
Week's  small  business  web site (and other McGraw Hill companies). CommerceInc
is  currently  negotiating  significant content and distribution agreements with
potential partners.

     UpShot.com.  UpShot.com based in Mountain View, California, was launched in
January 1997 to build,  sell, and support a family of Web-based  sales solutions
that allows companies to track leads, close


                                      I-9
<PAGE>

business   faster,   and  forecast  sales  more  accurately  in  an  affordable,
web-based,  hassle-free,  and  secure  environment.  Today, UpShot has more than
35,000  subscribers  and has won numerous industry awards, including awards from
Microsoft and others.

     LiveCapital.com.  LiveCapital.com  is  a leading on-line business financing
center  for  SMEs.  Businesses visiting LiveCapital.com can comparison shop for,
apply  for,  and  secure loans, lines of credit, credit cards, equipment leases,
and   more   from  reputable  financial  institutions.  Loan  offerings  include
SBA-backed  loans of up to $2.5 million. In less than five minutes, visitors can
complete  one  short  application, have it screened against the lending criteria
of  multiple  leading  financial  institutions,  and  instantly  secure multiple
financing  options.  LiveCapital.com's  proprietary technology provides a unique
functionality  where  applicants  are  offered  decisions  from multiple lenders
within seconds of submitting an application.

     LiveCapital.com  now  receives more than 500 daily applications, and, since
launching  in June 1999, has offered SMEs more than $500 million in financing to
become  one  of the country's top 20 originators of small business financing. In
the  last  two  months  alone,  LiveCapital.com  has  tripled  its  lender base,
developing  a  network  of  25  leading  financial  institutions that businesses
seeking   financing  can  access.  LiveCapital.com's  lending  partners  include
American Express, Union Bank of California and Heller Financial.

     AdOutlet.com.  AdOutlet.com  is  an  on-line marketplace for the buying and
selling  of  advertising providing a B2B e-commerce solution to meet the growing
demands  of  media  buyers and media suppliers. AdOutlet.com is headquartered in
New  York,  New  York  and has offices in Columbus, Ohio, Chicago, Illinois, Los
Angeles,  California  and  will  soon  establish  an  office  in  San Francisco,
California.

     NeoCarta  Ventures.  NeoCarta  Ventures  is a limited partnership fund that
invests  in  e-commerce companies. The Fund was sponsored by principals of Kelso
&  Company,  a private equity firm, Bert Ellis, the Chairman and Chief Executive
Officer  of  iXL  Enterprises  and  a  member  of FrontLine's Advisory Board and
others.   This  investment  provides  FrontLine  with  an  expanded  network  of
relationships and access to additional deal flow.

     Other  Ownership  Stakes.  Opus360 Corporation ("Opus360") provides a suite
of  services  across  the spectrum of a project-based workforce. These web-based
services   enable  organizations  to  manage  their  internal  resources,  their
vendors'  resources,  as  well as the largest virtual workforce and most diverse
group  of independent consultants and freelancers through FreeAgent.com. Opus360
is  a  private  company  backed by a consortium of investors including Safeguard
Scientifics,  Crosspoint  Ventures  and  MSD  Capital.  Opus360  and  VANTAS are
negotiating  a  national  service  agreement to provide office suite and virtual
office  services  to  Opus360's  free  agents. Based on the anticipated value of
this  relationship  FrontLine  was  able  to make an investment into this highly
sought after company after the financing round had been closed.

     The    Company    also    has    interests    in    Digitalwork.com    and
Giftcertificates.com.  Digitalwork.com  is  an on-line "do-it-yourself" business
agency  that provides entrepreneurs with a suite of easy to use on-line services
organized  into  workshops,  enabling  them  to complete routine business tasks,
including   marketing,  human  resources  and  financial  services,  easily  and
effectively.  Giftcertificates.com  is  a  destination  site that offers branded
gift certificates for the nation's leading retailers, restaurants and hotels.

     In  addition  to FrontLine's Partner Company Network, it is also a managing
member  of  a  $300  million venture capital vehicle ("Reckson Strategic") which
invests  in  real  estate operating companies and offers these companies capital
and  strategic  guidance  to aid in their development. Reckson Strategic targets
companies  that  are well positioned to capitalize upon positive demographic and
socio-economic   trends.  Reckson  Strategic  is  funded  with  a  $200  million
commitment  from  Paine  Webber  Real Estate Securities, Inc. and a $100 million
commitment from the Company.

     Potential   Partner   Company  Acquisitions.  Having  established  a  solid
foundation  of  Partner  Companies,  the  Company  has grown its Partner Company
network   and   has   significantly   increased   its  pipeline  of  acquisition
opportunities.  Within  the  next quarter, it is anticipated that FrontLine will
commit


                                      I-10
<PAGE>

to  acquire  interests  in  several  additional Partner Companies. Over the next
year,  FrontLine  anticipates  making  a significant investment into new Partner
Companies.  FrontLine anticipates that these acquisitions will consist mainly of
significant  stakes  in  Partner  Companies  that  will  benefit  from  the full
resources  of  its e-Cooperative. In addition, FrontLine may selectively acquire
smaller  stakes  in  a  number of companies to solidify strategic relationships.
The  Company's  future  acquisitions  are dependent upon its continued access to
capital   as  well  as  its  ability  to  identify  attractive  Partner  Company
acquisition opportunities.

     The  Company's  executive  offices  are  located  at  1350  Avenue  of  the
Americas,  New  York,  New York 10019, and its telephone number at that location
is  (212)  931-8000.  At  December  31,  1999,  the Company had approximately 26
employees.


ITEM 2. PROPERTIES

     The  Company's  principal office is located at 1350 Avenue of the Americas,
New York, New York, 10019.

     VANTAS  Incorporated,  a  consolidated  subsidiary,  leases  its  principal
offices  at  90  Park  Avenue,  New  York,  New York, 10016. In addition, VANTAS
leases  space  for 201 business centers that are primarily located in the United
States.  See Note 10 to the financial statements for a summary of the associated
commitments.

     Management  believes  that  such  properties  are  sufficient to meet their
present  needs  and  does  not  anticipate any difficulty in securing additional
space, as needed, on terms acceptable to the Company.


ITEM 3. LEGAL PROCEEDINGS

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


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

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


                                      I-11
<PAGE>

                                    PART II


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

     The  Company's  common stock began trading over-the-counter ("OTC") on June
29,  1998  under  the  symbol  "RSII"and is traded on the NASDAQ National Market
("NASDAQ")  under  the  symbol  "RSII".  The  following  table  sets  forth  the
quarterly  high  and  low  closing  bid  prices  per  share  of the common stock
reported  for  each  respective  quarter. These OTC and NASDAQ market quotations
reflect  inter-dealer  prices,  without  retail mark-up, mark-down or commission
and  may  not  necessarily  represent  actual transactions. Since inception, the
Company  has  not paid any dividends to its shareholders. Under the terms of the
Company's  credit  facilities,  as  long as there are outstanding advances under
such  facilities,  the Company is prohibited from paying dividends on any shares
of its capital stock.

<TABLE>
<CAPTION>
                                         HIGH          LOW
                                     -----------   -----------
<S>                                  <C>           <C>
     June 29, 1998 ...............    $  4.063      $  3.625
     June 30, 1998 ...............    $  3.750      $  3.125
     September 30, 1998 ..........    $  4.500      $  2.000
     December 31, 1998 ...........    $  4.625      $  1.688
     March 31, 1999 ..............    $  5.718      $  3.500
     June 30, 1999 ...............    $ 17.125      $  4.062
     September 30, 1999 ..........    $ 19.625      $ 12.500
     December 31, 1999 ...........    $ 68.312      $ 15.250
</TABLE>

     The  approximate number of shareholders of the Company's common stock as of
March 3, 2000 was 437.

     From  January  26,  2000,  and  February  28,  2000,  the Company completed
convertible  preferred  stock  offerings  to  Warburg Dillon Read, LLC of 26,000
shares  of  8.875%  Cumulative Convertible Preferred Stock, with net proceeds of
$24.6  million.  These shares are convertible into the Company's common stock at
prices ranging from $66.30 to $75.08.

     On  March  7,  2000,  Gotham  Partners  Management  Co., LLC ("Gotham"), an
investment  partnership  that  invests in public and private companies in a wide
range  of industries and stages of development, invested $30 million to purchase
1.5  million  warrants  for  FrontLine's  common  stick for $20 per warrant. The
warrant's  have an exercise price of $70 per share and a term of 3.25 years. The
Company  utilized  approximately  half  of  these  proceeds to reduce the Credit
Facility  and  the  remaining  portion  will  be  utilized  for  acquisitions of
interests in Partner Companies and working capital purposes.


UNREGISTERED SALES OF SECURITIES

     In connection with its  acquisitions of ownership  interests in VANTAS from
November 1999 through  February 2000, the Company issued 3,122,202 shares of its
common stock in transactions  exempt from registration under Section 4(2) of the
Securities Act of 1933 ("Section 4(2)").

     In connection  with its  acquisitions  of ownership  interests in OnSite in
October  1999,  the  Company  issued  1,731,597  shares of its  common  stock in
transactions exempt from registration under Section 4 (2).

     In connection  with its  amendments of the FrontLine and Reckson  Strategic
Facilities in November  1999,  the Company  issued  176,186 shares of its common
stock in a transaction exempt from registration under Section 4 (2).

     In connection with its acquisitions of ownership interests in RealtyIQ.com,
in  December  1999 the Company  issued  52,578  shares of its common  stock in a
transaction exempt from registration under Section 4 (2).

     In   connection   with  its   acquisitions   of   ownership   interests  in
EmployeeMatters, Inc., in December 1999, the Company issued warrants to purchase
200,000  shares of its common  stock in  transactions  exempt from  registration
under Section 4 (2).

                                      II-1
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT SHARE AMOUNTS)





<TABLE>
<CAPTION>
                                                         FOR THE                FOR THE           FOR THE PERIOD
                                                       YEAR ENDED              YEAR ENDED        JULY 15, 1997 TO
                                                  DECEMBER 31, 1999(2)     DECEMBER 31, 1998     DECEMBER 31, 1997
                                                 ----------------------   -------------------   ------------------
<S>                                              <C>                      <C>                   <C>
OPERATIONS SUMMARY:
 Operating revenues ..........................         $215,376                $   336               $   --
 Partner Company operating income ............           27,927                    336                   --
 Corporate general and administrative ........           (9,509)                (2,613)                (479)
 Equity in earnings (loss) of Partner
   Companies and other ownership interest.....          (10,599)                (3,966)                 223
 Net loss ....................................         $(39,847)               $(8,147)              $ (258)
PER SHARE DATA: (1)
 Basic and diluted net loss ..................         $  (1.56)               $ (0.56)              $   --
BALANCE SHEET DATA (PERIOD END):
 Cash and cash equivalents ...................         $ 32,740                $ 2,026               $  130
 Working capital .............................           11,559                    132                   11
 Ownership interests in and advances to
   Partner Companies .........................           61,207                 30,277                  325
 Other ownership interest ....................           36,626                 15,561                5,520
 Intangible assets ...........................          239,412                     --                   --
 Total assets ................................          541,983                 58,843                7,519
 Credit facilities ...........................          166,255                 40,981                   --
 Notes payable ...............................          108,125                     --                   --
 Total shareholders' equity ..................         $114,109                $15,968               $4,222

</TABLE>

----------
(1) Based  on  25,600,985 and 14,522,513 weighted average shares of common stock
    outstanding for the years ended December 31, 1999 and 1998, respectively.

(2) Reflects   the   Company's  acquisition  and  consolidation  of  a  majority
    ownership interest in VANTAS Incorporated in 1999.

No dividends were paid in any of the periods presented.

                                      II-2
<PAGE>

ITEM  7. 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, formerly Reckson
Service  Industries,  Inc.,  ("FrontLine"  or  the  "Company") 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  interests  in  commercial  service  companies,  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  is  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 the
Company undertakes no obligation to update these plans and estimates.

OVERVIEW AND BACKGROUND

     FrontLine  was  formed  on July 15, 1997 and is a publicly-traded operating
company  that  identifies,  acquires  interests  in,  and  develops a network of
business-to-business  ("B2B")  e-commerce  and e-service companies (the "Partner
Companies")   that   service   small  and  medium  sized  enterprises  ("SMEs"),
independent professionals and the mobile workforce of larger companies.

     The  Company's goal 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 an effort 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   Click and Mortar -- 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.


                                      II-3
<PAGE>

     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 B2B 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  B2B  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,


                                      II-4
<PAGE>

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.


     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  earnings  (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   DECEMBER 31, 1999   DECEMBER 31, 1998   DECEMBER 31, 1999   DECEMBER 31, 1998
                                   -------- ------------------- ------------------- ------------------- ------------------
<S>                                <C>      <C>                 <C>                 <C>                 <C>
CommerceInc. Corporation .........   1999          31%                 N/A                  26%                N/A
EmployeeMatters, Inc. ............   1999          53%                 N/A                  45%                N/A
OnSite Access, Inc. ..............   1997          37%                  1%                  22%                 1%
RealtyIQ.com .....................   1999          68%                 N/A                  54%                N/A
UpShot.com .......................   2000          *20%                N/A                 *18%                N/A
VANTAS Incorporated ..............   1998          N/A                 21%                 N/A                 21%
</TABLE>

----------
* Ownership interest acquired in February 2000.


FrontLine  has  representation  on  the  board  of directors of all of the above
Partner  Companies,  and  as  of  December  31,  1999,  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.


                                      II-5
<PAGE>

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


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

----------
* Ownership interest acquired in February 2000.


     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 consolidation method of
accounting  or the equity method of accounting is applied. For example, previous
to  the fourth quarter of 1999, VANTAS was accounted for under the equity method
of   accounting;  however,  due  to  the  acquisition  of  additional  interests
resulting  in  voting  control  VANTAS  was subsequently consolidated during the
fourth quarter of 1999.

     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 earnings (loss)
of Partner Companies and other ownership interest."


RESULTS OF OPERATIONS

     The  Company  commenced  operations on July 15, 1997 and primarily incurred
startup  costs  through December 31, 1998. Therefore, the following periods, the
years ended December 31, 1999 and 1998, respectively, are not comparable.

     FrontLine's  financial  statements  include  the  effect  of  consolidating
VANTAS  and  OneXstream.com, Inc. in 1999. The reportable segments 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 for the year ended December 31, 1999 and
the  effect  of  the  equity  method of accounting for Interoffice SuperHoldings
Corporation  ("InterOffice")  and  Reckson  Executive  Centers, LLC for the year
ended  December  31,  1998. 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

     VANTAS  was  formed in January 1999 as a result of a merger of Interoffice,
Reckson Executive Centers, LLC and Alliance National Incorporated.

     A  significant  portion  of  FrontLine's  operating revenues and all of its
operating  expenses  for  the  year ended December 31, 1999 were attributable to
VANTAS.  The  following is a discussion of VANTAS' results of operations for the
year ended December 31, 1999.


                                      II-6
<PAGE>

     VANTAS'  executive office suite income for the year ended December 31, 1999
was  approximately  $124.6  million. Executive office suite income was primarily
derived  from  rental  income  for  newly acquired and existing executive office
suites  in  1999.  Support  service  and  other  revenues of approximately $90.8
million  for  the  year  ended  December  31, 1999 was primarily attributable to
broadband   Internet   access,   information  technology  support  services  and
administrative support services.

     VANTAS'  operating expenses were approximately $187.4 million, representing
87%  of  operating  revenues. Approximately $175.5 million of operating expenses
consisted  of  the  costs  of  operating  the  executive  office  suite centers.
Approximately  $82.7  million  of  the  costs  represented  rent expense for the
office  suites, approximately $31.1 million was related to the cost of providing
support  services  to  tenants  and  approximately  $61.7 million was related to
center  general  and  administrative  costs. Operating expenses of approximately
$12.0  million  of  general  and administrative expense was primarily related to
the  increase  of  the  corporate staff and related office space associated with
the Company's growth during the year ended December 31, 1999.

     VANTAS  incurred  merger  and  integration  costs  of  approximately  $26.7
million  for  the  year  ended  December 31, 1999 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.

     For  the  year ended December 31, 1999, VANTAS incurred interest expense of
approximately   $10.3   million.  Interest  expense  was  primarily  related  to
borrowings  under  VANTAS'  credit facility for funding acquisitions during 1999
and prior periods.

     At   December  31,  1999,  VANTAS  recognized  an  income  tax  benefit  of
approximately  $2.8  million,  net  of  an  applicable  valuation  allowance  on
deferred tax assets.

     For  the year ended December 31, 1998, the Company's share of Interoffice's
income  was  less  than  $.1  million under the equity method of accounting. The
Company's  share  of losses for Reckson Executive Centers, LLC was approximately
$.1 million.


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  income  (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 December 31, 1999, FrontLine accounted for
four  of  its  Partner  Companies  under  this method as compared to two Partner
Companies  during  the year ended December 31, 1998. All four of these companies
incurred  losses  for  the  year ended December 31, 1999. 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 earnings (loss) of
Partner  Companies  and other ownership interest" in the Consolidated Statements
of Operations.


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 and the increase in the acquisition of interests in
Partner  Companies, general and administrative costs for the year ended December
31,  1999  was approximately $9.5 million compared to approximately $2.6 million
for  the year ended December 31, 1998 and approximately $.5 million for the 1997
period.  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 year ended December 31, 1999,
the  Company  recorded  compensation  costs  of  approximately  $8.5  million in
connection with incentive stock awards to management.


                                      II-7
<PAGE>

     FrontLine's  interest  expense, before the consolidation of VANTAS, for the
year  ended  December  31,  1999  was  approximately  $8.1  million  compared to
approximately  $0.6  million  for the year ended December 31, 1998 and less than
$0.1  million  for  the  1997  period. The increase is due to an increase in the
amounts  advanced under the Company's existing credit facilities and the secured
credit facility.

     Included  in  Other  Operations  is  FrontLine's ownership interest in RSVP
Holdings,  LLC.  For the year ended December 31, 1999, FrontLine's share of RSVP
Holdings, LLC's income was approximately $0.3 million.


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 common stock.

     FrontLine  funded  approximately  $132.6  million  in cash and issued $59.1
million  of  the Company's common stock to acquire interests in or make advances
to  new  and existing Partner Companies during the year ended December 31, 1999.
These    companies    include:    AdOutlet.com,    CommerceInc.    Corporation,
DigitalWork.com,  EmployeeMatters, Inc. Giftcertificates.com, NeoCarta Ventures,
OnSite  Access, Inc., Opus360 Corporation, RealtyIQ.com and VANTAS Incorporated.


     Prior  to  1999,  the Company established 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 8 to
the  consolidated  financial  statements  summarizes the outstanding amounts and
terms  of  the  FrontLine  and  Reckson  Strategic  Facilities.  The Company had
approximately   $79.5  million  outstanding  under  the  FrontLine  Facility  at
December  31,  1999.  Borrowings  were  primarily  used  to fund acquisitions of
ownership  interests  in Partner Companies and general operations. Approximately
$42.3  million  was outstanding under the Reckson Strategic Facility at December
31,  1999.  These borrowings were utilized to fund Reckson Strategic investments
and  general  operations.  At  December 31, 1999, $39.0 million was available on
these Facilities.

     In  November  1999, the Board of Directors of FrontLine approved amendments
to  the  credit  facilities  with  Reckson  necessary  in order for FrontLine to
proceed  with certain proposed acquisition financings. As consideration for such
approvals,  FrontLine  paid  a  fee  to Reckson in the form of 176,186 shares of
FrontLine's common stock which were valued at $20.31 per share.

     On  November  30,  1999,  the  Company  entered  into  a $60 million credit
facility  ("Credit  Facility")  with a significant financial institution to fund
transactions  to  acquire  additional  ownership interests in Partner Companies.
The  Credit  Facility  prohibits  the  Company from borrowing from third parties
without  consent  of the lender. Note 5 to the consolidated financial statements
summarizes  the terms of the Credit Facility. As of December 31, 1999, the total
available  on  the  Credit  Facility  was  approximately $15.6 million. In March
2000,  the  Credit  Facility  was  amended to permit the Company to use proceeds
from  certain  equity  offerings  for  general  corporate  purposes  in  lieu of
repayment to the Credit Facility.

     VANTAS  has a credit agreement with various lending institutions for $157.9
million.  The  credit  agreement  provides  for  a  $5  million acquisition loan
commitment,  $127.9  million  term  loans  and  a  $25  million  revolving  loan
commitment,  including letters of credit. As of December 31, 1999, $21.5 million
of  the  term loan was funded into a cash collateral account that VANTAS will be
permitted  to  utilize  in connection with permitted acquisitions. There were no
borrowings  outstanding  under  the  acquisition  and revolving loan commitment.
VANTAS  had  outstanding  letters  of  credit of approximately $10.1 million for
landlord  security  deposits  which  reduced  the  borrowing available under the
revolving  loan  commitment.  Note  6  to  the consolidated financial statements
summarizes  the  terms  of  VANTAS'  credit  agreement  and outstanding balances
thereunder.



                                      II-8
<PAGE>

     On February 22, 2000,  VANTAS and the lenders  entered into an amendment to
the credit facility whereby certain of the financial  covenants contained in the
credit  facility were amended.  VANTAS has obtained a commitment  letter for the
provision  of  a  new  credit  facility,  subject  to  satisfaction  of  various
conditions,  which would replace the credit facility upon consummation of the HQ
Global  Workplaces  Merger.  There  can  be no  assurance  that  the  HQ  Global
Workplaces Merger will occur or that, if the HQ Global Workplace Merger does not
occur,  VANTAS will be able to meet certain of the financial covenants contained
in the credit facility for fiscal quarters subsequent to December 31, 1999.

     FrontLine  also  funded  investments  of  ownership  interests  in  Partner
Companies  through  the  issuance  of  FrontLine's common stock. During the year
ended  December  31,  1999,  the  Company  issued approximately $59.1 million of
FrontLine's common stock to acquire interests in Partner Companies.

     On  December  16,  1999,  the Company issued 1,437,500 shares of its common
stock  in  a  public offering at $47.25 per share for an aggregate consideration
of  approximately  $63.9 million. Proceeds of the public offering were primarily
used for purchases of additional ownership interests in Partner Companies.

     Subsequent  to  December  31,  1999, the Company funded approximately $78.6
million  in  cash  and issued $24.6 million of common stock to acquire interests
in  or  make  advances  to  new  and  existing  Partner  Companies.  New Partner
Companies include LiveCapital.com and UpShot.com.

     On  January  21, 2000, the Company entered into a merger agreement pursuant
to  which  VANTAS  will  be merged with HQ Global Workplaces, Inc. The merger is
scheduled  to  close by April 30, 2000 and requires FrontLine to obtain and will
be  financed  through  the  issuance  of  new equity of HQ Global Workplaces and
approximately  $350  million  of  HQ Global Workplaces debt. VANTAS has posted a
letter  of  credit  in the amount of $35 million to secure the obligations under
the  merger  agreement.  The Company has pledged approximately 15 million shares
of  VANTAS stock to secure its nonrecourse guarantee of the letter of credit. In
the  event the letter of credit is drawn upon and the lender forecloses upon the
Company's  shares of VANTAS, VANTAS is obligated 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.

     The  Company  also  funded  investing activities subsequent to December 31,
1999  with  net  proceeds  of approximately $24.6 million from the completion of
26,000 shares of privately placed Convertible Preferred Stock.

     On  March  7,  2000,  Gotham Partners ("Gotham"), an investment partnership
that  invests  in public and private companies in a wide range of industries and
stages  of  development,  and certain affiliates of Gotham, invested $30 million
to  purchase  1.5  million  warrants  to  acquire FrontLine's common stock at an
exercise  price  of  $70 per share for $20 per warrant. The warrants have a term
of  3.25  years.  The  Company  utilized approximately half of these proceeds to
reduce  the  Credit  Facility  and  the  remaining  portion will be utilized for
acquisitions of interest in Partner Companies and working capital purposes.

     Currently,  the  Company has two short-term letters of credit totaling $7.7
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 December 31,
1999.


     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 will make it necessary for the Company to
raise  additional  funds.  The  existing  secured credit facility matures in May
2000;  although  it  contains a three-month potential extension, the Company may
not  be able to renew this facility or obtain additional bank or other financing
beyond  this period, and may be required to repay the amounts borrowed under the
Credit  Facility  at  times  when it does not have sufficient internal funds, or
may  only  be able to do so on terms not favorable or acceptable to the Company.
If additional funds are


                                      II-9
<PAGE>

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.


IMPACT OF YEAR 2000

     In  prior  years,  the  Company discussed the nature of the progress of its
plans  to  become  Year  2000  ready.  In  late  1999, the Company completed its
remediation   of  testing  of  systems.  As  a  result  of  those  planning  and
implementation  efforts,  the  Company experienced no significant disruptions in
mission  critical  information technology and non-information technology systems
and  believes those systems successfully responded to the Year 2000 date change.
The  Company  expensed  approximately $.1 million during 1999 in connection with
remediating  its  systems.  The  Company  is  not aware of any material problems
resulting  from  Year  2000  issues,  either  with  its  products,  its internal
systems,  or  the  products  and  services  of  third  parties. The Company will
continue  to monitor its mission critical computer applications and those of its
suppliers  and  vendors  throughout the Year 2000 to ensure that any latent Year
2000 matters that may arise are addressed promptly.


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.


ITEM 7A. QUANTITATIVE AND QUALITATIVE 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 years 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 December 31, 1999 (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 .........     $ 44,407      $ --     $ ---       $ 121,848      $ --        $ --         $ 166,255      $166,255
Average interest
 rate .................         8.56%       --        --           12.01%       --          --             11.09%           --
</TABLE>

     The  primary  market risk facing VANTAS is interest rate risk on its credit
agreement.  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.  As  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% increase in market interest
rates  throughout  1999  (approximately  50  basis  points on a weighted average
basis)  would  have  an approximate 5.3% impact on VANTAS' interest expense, net
for the year ended December 31, 1999.


                                     II-10
<PAGE>

     VANTAS  has  not, and does not plan to, enter into any derivative financial
instruments  for  trading  or  speculative  purposes.  As  of December 31, 1999,
VANTAS had no other material exposure to market risk.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The response to this item is included in Item 14 of this Form 10-K.


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

     None.

                                     II-11
<PAGE>

                                   PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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


ITEM 11. EXECUTIVE COMPENSATION

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


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

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


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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


                                     III-1
<PAGE>

                                    PART IV


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

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

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





<TABLE>
<CAPTION>
                                                                                    PAGE
                                                                                   ------
<S>                                                                                <C>
   Report of Independent Auditors ..............................................    IV-6
   Consolidated Balance Sheets as of December 31, 1999 and December 31, 1998 ...    IV-7
   Consolidated Statements of Operations for the years ended December 31, 1999,
     December 31, 1998 and the period July 15, 1997 (commencement of operations)
     to December 31, 1997 ......................................................    IV-8
   Consolidated Statements of Shareholders' Equity for the years ended December
     31, 1999, December 31, 1998 and the period July 15, 1997 (commencement of
     operations) to December 31, 1997 ..........................................    IV-9
   Consolidated Statements of Cash Flows for the years ended December 31, 1999,
     December 31, 1998 and the period July 15, 1997 (commencement of operations)
     to December 31, 1997. .....................................................   IV-10
   Notes to Consolidated Financial Statements ..................................   IV-11

</TABLE>

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


                                      IV-1
<PAGE>
(3) Exhibits

<TABLE>
<CAPTION>
  EXHIBIT
  NUMBER                                                         DESCRIPTION
---------- ---------------------------------------------------------------------------------------------------------------------
<S>        <C>
 3.1(1)    Certificate of Incorporation
 3.2       Amended and Restated By-Laws of Registrant
 3.3(6)    Amended and Restated Certificate of Incorporation
 4.1(1)    Specimen Share Certificate of Common Stock
 4.2       Specimen Warrant W-1, dated December 7, 1999, in the name Elliot S. Cooperstone to purchase 100,000 shares of common
           stock
 4.3       Specimen Warrant W-2, dated December 7, 1999, in the name H. Thach Pham to purchase 100,000 shares of common stock
 4.4       Specimen Option O-1, dated December 7, 1999, in the name of Reckson Service Industries, Inc. to purchase 394,737
           shares of common stock of
           eSourceOne, Inc. owned by Elliot S. Cooperstone
 4.5       Specimen Option O-2, dated December 7, 1999, in the name of Reckson Service Industries, Inc. to purchase 394,737
           shares of common stock of
           eSourceOne, Inc. owned by H. Thach Pham
 4.9(14)   Certificate of Designations Establishing and Fixing the Rights of Series A-1 Cumulative Preferred Stock
 4.10(14)  Certificate of Designations Establishing and Fixing the Rights of Series A-2 Cumulative Preferred Stock
 4.11(14)  Certificate of Designations Establishing and Fixing the Rights of Series A-3 Cumulative Preferred Stock
 4.12(14)  Certificate of Designations Establishing and Fixing the Rights of Series A-4 Cumulative Preferred Stock
 4.13(14)  Certificate of Designations Establishing and Fixing the Rights of Series A-5 Cumulative Preferred Stock
 4.14(14)  Certificate of Designations Establishing and Fixing the Rights of Series A-6 Cumulative Preferred Stock
 4.16(14)  Specimen Warrant W-1, dated March 7, 2000, in the name Gorham Partners, L.P. to purchase 1,000,000 shares of common stock
 4.17(14)  Specimen  Warrant W-2, dated March 7, 2000, in the name Gorham Partners III, L.P. to purchase 30,000 shares of common
           stock
 4.18(14)  Specimen Warrant W-3, dated March 7, 2000, in the name Gorham Partners International,  Inc. to purchase 50,000 shares
           of common stock
10.0       Subscription Agreement as of February 7, 2000, by and between Reckson Service Industries, Inc. and VANTAS
           Incorporated
10.1(6)    Intercompany Agreement between Reckson Operating Partnership, L.P. and Reckson Service Industries, Inc. dated May
           13, 1998
10.2A      Amended and Restated Credit Agreement between Reckson Operating Partnership, L.P. and Reckson Service Industries,
           Inc. relating to the operations of
           Reckson Strategic Venture Partners, LLC dated August 4, 1999
10.2B      Amended and Restated Credit Agreement between Reckson Operating Partnership, L.P. and Reckson Service Industries,
           Inc. relating to the operations of
           Reckson Service Industries, Inc. dated August 4, 1999
10.2C(12)  Amendment to Amended and Restated Credit Agreements between Reckson Operating Partnership, L.P. and Reckson Service
           Industries dated November
           30, 1999
10.3(1)    Limited Liability Company Agreement of OnSite Ventures, LLC
10.4(1)    Limited Liability Company of RSVP Holdings, LLC
10.5A(1)   Operating Agreement of Reckson Strategic Venture Partners, LLC
10.5B(1)   Supplemental Agreement to Operating Agreement of Reckson Strategic Venture Partners, LLC
10.6(1)    Registration Rights Agreement between Reckson Service Industries, Inc. and certain affiliates thereof dated May 13,
           1998
10.7(6)    Loan Agreement regarding On-Site Convertible Loans
10.8A(1)   Stock Option Plan
10.8B(6)   1998 Employee Stock Option Plan
10.8C(7)   1999 Stock Option Plan
10.8D      2000 Employee Stock Option Plan
10.9(1)    Employment Agreement of Steven H. Shepsman
10.10(1)   Employment Agreement of Seth B. Lipsay
10.11(1)   Limited Liability Company Agreement of Interoffice Superholdings, LLC by and among Interoffice Superholdings, LLC,
           RSI I/O Holdings, Inc., JAH I/O,
           LLC and Rieger I/O LLC
10.12      Fifth Amended and Restated Stockholders' Agreement, dated by and among VANTAS Incorporated and certain
           securityholders identified therein
10.13(2)   Letter Agreement dated November 9, 1998 by and between JAH I/O LLC and Reckson Management Group, Inc., Reckson
           Service Industries, Inc., RSI I/O
           Holdings, Inc., and Reckson Office Centers, LLC
10.14(2)   Letter Agreement by and between Reckson Service Industries, Inc., and RFIA, LLC
10.15(3)   Amended and Restated Operating Agreement of Assisted Living Investments LLC
10.16(4)   Operating Agreement of Dominion Venture Group LLC
10.17(5)   Agreement and Plan of Merger by and among Alliance National Incorporated, Alliance Holding Inc., Interoffice
           Superholdings Corporation and Interoffice
           Superholdings, LLC
10.18(5)   Agreement and Plan of Merger by and among Alliance National Incorporated, ANI Holdings, Inc., Reckson Executive
           Centers, Inc., and Reckson Office
           Centers, LLC
10.19(6)   $44 million Senior Secured Promissory Note of On-Site Ventures, LLC
10.20(8)   Investor Rights Agreement, by and among OnSite Access, Inc. and certain investors and individuals within management
10.21(8)   Voting Agreement, by and among OnSite Access, Inc. and certain investors
10.22(8)   Purchase Agreement regarding Series B, Series C and Series D Preferred Stock of OnSite Access, Inc.
10.23(9)   Series D Convertible Preferred Stock Securities Purchase Agreement, dated as of July 29, 1999 by and among VANTAS
           Incorporated and several
           Purchasers
10.24(10)  Stock Purchase Agreement, dated as of August 10, 1999, by and among eSourceOne, Inc., Reckson Service Industries,
           Inc. and RSI ESO, Inc.
10.25(10)  Registration Rights Agreement, dated as of August 10, 1999, by and among eSourceOne, Inc., Reckson Service
           Industries, Inc., RSI ESO, Inc., Elliott S.
           Cooperstone and H. Thach Pham
10.26(10)  Stockholders' Agreement, dated as of August 10, 1999, by and among eSourceOne, Inc. and certain stockholders
10.27(11)  Stock Purchase Agreement, dated as of August 19, 1999, among Reckson Service Industries, Inc., RSI I/O Holdings,
           Inc., Cahill, Warnock Strategic Partners
           Fund L.P., Strategic Associates, L.P. and David L. Warnock
10.28(11)  Letter Agreement, dated as of September 23, 1999, among Reckson Service Industries, Inc., RSI I/O Holdings, Inc.,
           RSI-OnSite Holdings LLC, RSI-OSA
           Holdings, Inc., JAH Realties, L.P., Veritech Ventures LLC and JAH I/O LLC
10.29(11)  Letter of Amendment to Letter Agreement, dated as of September 23, 1999, among Reckson Service Industries, Inc., RSI
           I/O Holdings, Inc., RSI-OnSite
           Holdings LLC, RSI-OSA Holdings, Inc., JAH Realties, L.P., Veritech Ventures LLC and JAH I/O LLC
</TABLE>

                                      IV-2
<PAGE>


<TABLE>
<CAPTION>
   EXHIBIT
   NUMBER                                                       DESCRIPTION
------------ -------------------------------------------------------------------------------------------------------------------
<S>          <C>
10.30(12)    Credit Agreement, dated November 30, 1999, by and among Reckson Service Industries, Inc. and Warburg Dillon Read,
             LLC and UBS AG, Stamford
             Branch
10.31(12)    Equity Interest Pledge and Security Agreement, dated November 30, 1999, by and among the parties therein and UBS
             AG, Stamford Branch
10.32(12)    Interest Rate Cap Agreement, Pledge and Security Agreement, dated November 30, 1999, among Reckson Service
             Industries, Inc. and Warburg Dillon
             Read, LLC and UBS AG, Stamford Branch
10.33(12)    November 30, 1999 Promissory Note for $60,000,000 to the order of UBS AG, Stamford Branch
10.34(13)    Agreement and Plan of Merger by and among HQ Global Workplaces, Inc. and CarrAmerica Realty Corporation and VANTAS
             Incorporated and Reckson
             Service Industries, Inc., dated as of January 20, 2000
10.35(13)    Stock Purchase Agreement between CarrAmerica Realty Corporation and Reckson Service Industries, Inc., dated as of
             January 20, 2000
10.36(13)    Stock Purchase Agreement among CarrAmerica Realty Corporation, OmniOffices (UK) Limited and OmniOffices (Lux) 1929
             Holding Company S.A. and
             VANTAS Incorporated and Reckson Service Industries, Inc., dated as of January 20, 2000
10.37(8)     Certificate of Designation of Series A, Series B, Series C and Series D Preferred Stock of OnSite Access, Inc.
10.38(13)    Form of Stockholders Agreement by and among HQ Global Workplaces, Inc., Reckson Service Industries, Inc.,
             CarrAmerica Realty Corporation and
             certain other stockholders of HQ Global Workplaces, Inc.
10.39        Amended and Restated Credit Agreement among VANTAS, Various Banks, and Paribas, as agent, dated as of January 16,
             1997, as amended and restated
             as of November 6, 1998 and August 3, 1999
10.40        Exchange Agreement, dated December 7, 1999, by and among Reckson Service Industries, Inc., Elliot S. Cooperstone
             and H. Thach Pham
10.41        Warrant Registration Rights Agreement, dated December 7, 1999, by and among Reckson Service Industries, Inc.,
             Elliot S. Cooperstone and H. Thach
             Pham
10.42(14)    Warrant Registration Rights Agreement, dated as of March 7, 2000 between Reckson Service Industries, Inc., and
             Gotham Partners, L.P., Gotham Partners,
             III, L.P. and Gotham Partners International, Ltd.
12.1         Statement of Ratios of Earnings to Fixed Charges
21.1         Statement of Subsidiaries of Reckson Service Industries, Inc.
23.0         Consent of Independent Accountants
24.1         Powers of Attorney (included in Part IV of this Form 10-K)
27.0         Financial Data Schedule
</TABLE>

----------
(1)  Previously  filed  as an exhibit to Registration Statement on Form S-1 (No.
333-44419) and incorporated herein by reference.


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


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


(4)  Previously  filed  as  an  exhibit to the Company's Form 8-K filed with the
SEC on September 11, 1998 and incorporated herein by reference.


(5)  Previously  filed  as  an  exhibit to the Company's Form 8-K filed with the
SEC on December 1, 1998 and incorporated herein by reference.


(6)  Previously  filed  as  an exhibit to the Company's Form 10-K filed with the
SEC on March 31, 1999 and incorporated herein by reference.


(7)  Previously  filed as an exhibit to Registration Statement on Form S-8 filed
with the SEC on July 29, 1999 and incorporated herein by reference.


(8)  Previously  filed  as  an  exhibit to the Company's Form 8-K filed with the
SEC on July 16, 1999 and incorporated herein by reference.


(9)  Previously  filed  as  an  exhibit to the Company's Form 8-K filed with the
SEC on August 31, 1999 and incorporated herein by reference.


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


(11) Previously  filed  as  an  exhibit to the Company's Form 8-K filed with the
SEC on October 12, 1999 and incorporated herein by reference.


(12) Previously  filed  as  an  exhibit to the Company's Form 8-K filed with the
SEC on December 13, 1999 and incorporated herein by reference.


(13) Previously  filed  as  an  exhibit to the Company's Form 8-K filed with the
SEC on January 25, 2000 and incorporated herein by reference.


(14) Previously  filed  as  an  exhibit to the Company's Form 8-K filed with the
SEC on March 28, 2000 and incorporated herein by reference.

                                      IV-3
<PAGE>

(3) Exhibits
(b) Reports on Form 8-K

On  October  12,  1999, the Company filed a report on Form 8-K with respect to a
stock  purchase  agreement  with  Cahill, Warnock Strategic Partners Fund, L.P.,
Strategic   Associates,   L.P.,   and   David  L.  Warnock  to  purchase  VANTAS
Incorporated stock.


On  October  14,  1999,  the  Company  filed a report on Form 8-K announcing the
lapse  of  a  right  of first refusal of certain VANTAS shareholders pursuant to
the terms of a stockholder's agreement.


On  October 28, 1999, the Company filed a report on Form 8-K with respect to the
purchase  of an entity which indirectly owns shares of OnSite Access, Inc., from
a certain affiliate.


On  December  13,  1999,  the  Company  filed  a report on Form 8-K announcing a
secured  credit  facility with Warburg Dillon Read, LLC, as Arranger and UBS AG,
Stamford Branch as Administrative Agent.


On  December  13,  1999,  the Company filed a report on Form 8-K relating to the
filing  of  proforma financial statements with respect to the purchase of shares
to increase the Company's ownership interest in VANTAS Incorporated.


On  December  29,  1999,  the Company filed a report on Form 8-K relating to the
underwritten public offering on December 16, 1999.

                                      IV-4
<PAGE>

                                  SIGNATURES

     Pursuant  to  the  requirements  of  Section  13 or 15(d) of the Securities
Exchange  Act  of  1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on March 29, 2000.


                   FRONTLINE CAPITAL GROUP



                                     By:   /s/ Scott Rechler
                                          -------------------------------------

                                            (Scott Rechler)
                                          President,   Chief  Executive  Officer
                                          and Director

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

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





<TABLE>
<CAPTION>
           NAME                                       TITLE                                  DATE
--------------------------   -------------------------------------------------------   ---------------
<S>                          <C>                                                       <C>
/s/ Scott H. Rechler         President, Chief Executive Officer and Director           March 29, 2000
---------------------
 (Scott H. Rechler)
/s/ Michael Maturo           Executive Vice President, Chief Financial Officer and     March 29, 2000
---------------------
                             Director (Principal Financial Officer and Accounting
 (Michael Maturo)
                             Officer)
/s/ Donald J. Rechler        Chairman of the Board and Director                        March 29, 2000
---------------------
 (Donald J. Rechler)
/s/ Roger M. Rechler         Member of Management Advisory Committee and               March 29, 2000
---------------------
                             Director
 (Roger M. Rechler)
/s/ Mitchell d.. Rechler     Secretary, Member of Management Advisory                  March 29, 2000
---------------------
                             Committee and Director
 (Mitchell D. Rechler)
/s/ Gregg M.. Rechler        Member of Management Advisory Committee and               March 29, 2000
---------------------
                             Director
 (Gregg M. Rechler)
/s/ Paul Amoruso             Independent Director                                      March 29, 2000
---------------------
 (Paul Amoruso)
/s/ Ronald Cooper            Independent Director                                      March 29, 2000
---------------------
 (Ronald Cooper)
</TABLE>

                                      IV-5
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
Reckson Service Industries, Inc.

     We  have  audited  the  accompanying consolidated balance sheets of Reckson
Service  Industries, Inc. and Subsidiaries (d/b/a FrontLine Capital Group) as of
December 31,   1999  and  1998,  and  the  related  consolidated  statements  of
operations,  shareholders'  equity,  and cash flows for the years ended December
31,  1999  and  1998  and  for  the  period  for  July 15, 1997 (commencement of
operations)   to   December   31,  1997.  These  financial  statements  are  the
responsibility  of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

     In  our opinion, the financial statements referred to above present fairly,
in  all  material  respects,  the  consolidated  financial  position  of Reckson
Service  Industries, Inc. and Subsidiaries (d/b/a FrontLine Capital Group) as of
December  31,  1999  and  1998, and the consolidated results of their operations
and  their cash flows for the years ended December 31, 1999 and 1998 and for the
period  from July 15, 1997 (commencement of operations) to December 31, 1997, in
conformity with accounting principles generally accepted in the United States.

                   ERNST & YOUNG LLP
New York, New York
February 22, 2000


                                      IV-6
<PAGE>

               RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
                        (D/B/A FRONTLINE CAPITAL GROUP)
                          CONSOLIDATED BALANCE SHEETS
                     (IN THOUSANDS, EXCEPT SHARE AMOUNTS)





<TABLE>
<CAPTION>
                                                                           DECEMBER 31,
                                                                   ----------------------------
                                                                        1999           1998
                                                                   -------------   ------------
<S>                                                                <C>             <C>
ASSETS:
Current Assets:
Cash and cash equivalents ......................................     $  32,740       $  2,026
Restricted cash (Notes 2 and 6) ................................        21,572             --
Accounts receivable, net of allowance for doubtful accounts of
 $861 in 1999...................................................         8,426             --
Other current assets ...........................................        16,008             --
                                                                     ---------       --------
   Total Current Assets ........................................        78,746          2,026
Ownership interests in and advances to Partner Companies
 (Note 3) ......................................................        61,207         30,277
Other ownership interest (Note 9) ..............................        36,626         15,561
Intangible assets (net) (Note 2) ...............................       239,412             --
Property and equipment (net) (Note 2) ..........................        80,425            100
Other assets (net) (Notes 2 and 8) .............................        45,567         10,879
                                                                     ---------       --------
   TOTAL ASSETS ................................................     $ 541,983       $ 58,843
                                                                     =========       ========

LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Accounts payable and accrued expenses ..........................     $  51,383       $  1,894
Current portion of notes payable (Note 6) ......................        12,500             --
Deferred rent payable (Note 10) ................................         2,165             --
Other current liabilities ......................................         1,139             --
                                                                     ---------       --------
   Total Current Liabilities ...................................        67,187          1,894
Credit facilities with related parties (Note 8) ................       121,848         40,981
Secured credit facility (Note 5) ...............................        44,407             --
Notes payable (Note 6) .........................................       108,125             --
Deferred rent payable (Note 10) ................................        22,794             --
Other liabilities ..............................................        28,175             --
                                                                     ---------       --------
   TOTAL LIABILITIES ...........................................       392,536         42,875
                                                                     ---------       --------
MINORITY INTEREST ..............................................        35,338             --
COMMITMENTS AND CONTINGENCIES (NOTES 8 AND 10) .................            --             --
SHAREHOLDERS' EQUITY: (NOTES 1 AND 7)
Preferred stock, $.01 par value 25,000,000 shares authorized,
 none issued ...................................................            --             --
Common stock, $.01 par value, 100,000,000 shares authorized,
 30,672,794 and 24,685,514 shares issued and outstanding, at
 December 31, 1999 and December 31, 1998, respectively .........           307            247
Additional paid in capital .....................................       162,054         24,126
Accumulated deficit ............................................       (48,252)        (8,405)
                                                                     ---------       --------
   TOTAL SHAREHOLDERS' EQUITY                                          114,109         15,968
                                                                     ---------       --------
   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ..................     $ 541,983       $ 58,843
                                                                     =========       ========

</TABLE>

         (See accompanying notes to consolidated financial statements)

                                      IV-7
<PAGE>

               RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
                        (D/B/A FRONTLINE CAPITAL GROUP)
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT SHARE AMOUNTS)





<TABLE>
<CAPTION>
                                                                                                        FOR THE PERIOD
                                                                                                         JULY 15, 1997
                                                                FOR THE               FOR THE          (COMMENCEMENT OF
                                                               YEAR ENDED            YEAR ENDED         OPERATIONS) TO
                                                           DECEMBER 31, 1999     DECEMBER 31, 1998     DECEMBER 31, 1997
                                                          -------------------   -------------------   ------------------
<S>                                                       <C>                   <C>                   <C>
OPERATING REVENUES:
Executive office suite income .........................       $   124,564           $        --            $   --
Support services and other (Note 8) ...................            90,812                   336                --
                                                              -----------           -----------            ------
 TOTAL OPERATING REVENUES .............................           215,376                   336                --
                                                              -----------           -----------            ------

OPERATING EXPENSES:
Cost of revenue .......................................           175,454                    --                --
Partner Company general and administrative expenses.               11,995                    --                --
                                                              -----------           -----------            ------
 TOTAL OPERATING EXPENSES .............................           187,449                    --                --
                                                              -----------           -----------            ------
 PARTNER COMPANY OPERATING INCOME .....................            27,927                   336                --
                                                              -----------           -----------            ------
OTHER INCOME ( EXPENSES):
Merger and integration costs (Note 2) .................           (26,730)                   --                --
Corporate general and administrative expenses .........            (9,509)               (2,613)             (479)
Depreciation and amortization .........................           (15,680)               (1,260)                 (8)
Amortization of deferred charges (Note 7) .............            (8,455)                   --                --
Interest (expense) income (Note 8) ....................           (18,432)                 (644)                6
                                                              -----------           -----------            --------
LOSS BEFORE BENEFIT FOR INCOME TAXES, MINORITY INTEREST
 AND EQUITY IN EARNINGS (LOSS) OF PARTNER COMPANIES
 AND OTHER OWNERSHIP INTEREST .........................           (50,879)               (4,181)             (481)
Benefit for income taxes ..............................             2,841                    --                --
                                                              -----------           -----------            --------
LOSS BEFORE MINORITY INTEREST AND EQUITY IN EARNINGS
 (LOSS) OF PARTNER COMPANIES AND OTHER OWNERSHIP
 INTEREST .............................................           (48,038)               (4,181)             (481)
Minority interest .....................................            18,790                    --                --
Equity in earnings (loss) of Partner Companies and
 other ownership interest (Note 3) ....................           (10,599)               (3,966)              223
                                                              -----------           -----------            --------
NET LOSS ..............................................       $   (39,847)          $    (8,147)           $ (258)
                                                              ===========           ===========            ========
Basic and diluted net loss per weighted average
 common share .........................................       $     (1.56)          $      (.56)           $   --
                                                              ===========           ===========            ========
Basic and diluted weighted average common shares
 outstanding ..........................................        25,600,985            14,522,513                --
                                                              ===========           ===========            ========
</TABLE>

         (See accompanying notes to consolidated financial statements)


                                      IV-8
<PAGE>

               RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
                        (D/B/A FRONTLINE CAPITAL GROUP)
                CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                                (IN THOUSANDS)





<TABLE>
<CAPTION>
                                                                                                       TOTAL
                                                      COMMON   ADDITIONAL PAID IN   ACCUMULATIVE   SHAREHOLDERS'
                                                       STOCK         CAPITAL           DEFICIT        EQUITY
                                                     -------- -------------------- -------------- --------------
<S>                                                  <C>      <C>                  <C>            <C>
Initial capitalization, July 15, 1997 ..............   $ --         $  4,480         $      --      $   4,480
Net Loss ...........................................     --               --              (258)          (258)
                                                       ----         --------         ---------      ---------
Shareholders' equity, December 31,1997 .............     --            4,480              (258)         4,222
Distribution of shares .............................     41               --                --             41
Proceeds from rights offering, net of costs of
 $1,296.............................................    206           19,646                --         19,852
Net loss ...........................................     --               --            (8,147)        (8,147)
                                                       ----         --------         ---------      ---------
Shareholders' equity, December 31, 1998 ............    247           24,126            (8,405)        15,968
Issuance of common stock ...........................     44           71,923                --         71,967
Proceeds from the exercise of employee options.           2              274                --            276
Issuance of Warrants (Note 3) ......................     --            2,172                --          2,172
Proceeds from public offering, net of costs of
 $4,348.............................................     14           63,559                --         63,573
Net loss ...........................................     --               --           (39,847)       (39,847)
                                                       ----         --------         ---------      ---------
Shareholders' equity, December 31, 1999 ............   $307         $162,054         $ (48,252)     $ 114,109
                                                       ====         ========         =========      =========
</TABLE>

         (See accompanying notes to consolidated financial statements)

                                      IV-9
<PAGE>

               RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
                        (D/B/A FRONTLINE CAPITAL GROUP)
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                                                              FOR THE PERIOD
                                                                                                               JULY 15, 1997
                                                                    FOR THE YEAR          FOR THE YEAR       (COMMENCEMENT OF
                                                                       ENDED                 ENDED            OPERATIONS) TO
                                                                 DECEMBER 31, 1999     DECEMBER 31, 1998     DECEMBER 31, 1997
                                                                -------------------   -------------------   ------------------
<S>                                                             <C>                   <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss ....................................................       $  (39,847)            $  (8,147)            $   (258)
Adjustments to reconcile net loss to net cash provided
 by (used in) operating activities:
 Amortization and depreciation ..............................           15,680                    39                    8
 Equity in (earnings) loss of Partner Companies and
   other ownership interest .................................           10,599                 3,966                 (223)
 Minority interest ..........................................          (18,790)                   --                   --
 Benefit for income taxes ...................................           (2,841)                   --                   --
 Non-cash compensation ......................................           18,000                    --                   --
Changes in operating assets and liabilities:
 Accounts receivable, net ...................................           (1,329)                   --                   --
 Other assets ...............................................           (6,532)               (1,453)                 (30)
 Equipment ..................................................             (341)                 (115)                  --
 Deferred rent ..............................................            4,889                    --                   --
 Organization and pre-acquisition costs .....................               --                   658                 (690)
 Accounts payable and accrued expenses ......................           32,762                 1,774                  119
 Other liabilities ..........................................               88                    --                   --
 Affiliates receivables .....................................            7,427               (11,741)               2,345
                                                                    ----------             ---------             --------
Net cash provided by (used in) operating activities .........           19,765               (15,019)               1,271
                                                                    ----------             ---------             --------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Acquisitions of Executive Office Suite Centers .............          (88,870)                   --                   --
 Restricted cash ............................................          (10,318)                   --                   --
 Acquisition of ownership interests and advances to
   Partner Companies ........................................         (111,572)              (30,077)                (325)
 Other ownership interest ...................................          (20,760)              (13,882)              (1,674)
                                                                    ----------             ---------             --------
Net cash used in investing activities .......................         (231,520)              (43,959)              (1,999)
                                                                    ----------             ---------             --------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Issuance of common stock, net ..............................           69,911                    --                   --
 Capital contributions ......................................               --                    --                  857
 Deferred financing costs ...................................           (4,398)                   --                   --
 Costs of capital ...........................................             (457)                   --                   --
 Net proceeds from credit facilities with related
   parties ..................................................          128,492                40,982                   --
 Capital leases .............................................           (2,226)                   --                   --
 Exercise of options ........................................            3,125                    --                   --
 Net proceeds from secured credit facility ..................           44,407                    --                   --
 Net proceeds from rights offering ..........................               --                19,893                   --
                                                                    ----------             ---------             --------
 Net cash provided by financing activities ..................          238,854                60,875                  857
                                                                    ----------             ---------             --------
CASH AND CASH EQUIVALENTS:
 Net increase ...............................................           27,099                 1,897                  129
 Beginning of year ..........................................            5,641                   129                   --
                                                                    ----------             ---------             --------
 End of year ................................................       $   32,740             $   2,026             $    129
                                                                    ==========             =========             ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 Cash paid during the year for interest .....................       $   14,253             $     816             $     --
                                                                    ==========             =========             ========
 Cash paid during the year for income taxes .................       $    2,009             $      --             $     --
                                                                    ==========             =========             ========

</TABLE>

         (See accompanying notes to consolidated financial statements)

                                     IV-10
<PAGE>

               RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
                        (D/B/A FRONTLINE CAPITAL GROUP)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          DECEMBER 31, 1999 AND 1998

1. DESCRIPTION OF THE COMPANY

     Reckson  Service  Industries, Inc. and Subsidiaries d/b/a FrontLine Capital
Group  ("FrontLine" or the "Company"), was formed on July 15, 1997. FrontLine is
a  publicly-traded operating company that identifies, acquires interests in, and
develops  a  network  of  business-to-business  ("B2B") e-commerce and e-service
companies  (the  "Partner  Companies")  that  service  small  and  medium  sized
enterprises,  independent  professionals  and  the  mobile  workforce  of larger
companies.

     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 guidance,
     organizational   design,   human   resources,   recruiting  and  technology
     assistance to its Partner Companies,

   o Collaborative  network  of  Partner  Companies -- Enables Partner Companies
     to   share   collective   knowledge  and  benefit  from  cross-selling  and
     cross-marketing business development opportunities,

   o Advisory   Board   --   The   Advisory   Board   of   independent  industry
     professionals  will  supplement  FrontLine's  eDG  by  providing management
     guidance to Partner Companies and sourcing new business opportunities.

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 B2B e-commerce and e-services companies:

   o Internet-based  outsourcing  (i.e.  companies  that utilize the Internet to
     enable the outsourcing of non-core business functions),

   o e-commerce  and  infrastructure (i.e. companies that primarily deliver or
     enable the delivery of goods and services over the Internet),

   o Virtual   office   solutions   (i.e.  companies  that  combine  a  physical
     infrastructure  with  an  Internet enabled model to enhance the delivery of
     their services).

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.


                                     IV-11
<PAGE>

               RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
                        (D/B/A FRONTLINE CAPITAL GROUP)
                   DECEMBER 31, 1999 AND 1998 - (CONTINUED )

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
December  31,  1999  and 1998 and the results of their operations and their cash
flows  for  the  years  ended December 31, 1999 and 1998 and for the period July
15,  1997  to  December  31,  1997.  All  significant  intercompany balances and
transactions have been eliminated in the consolidated financial statements.


CHANGE IN ACCOUNTING PRINCIPLE

     In   1999,  the  Company  changed  its  balance  sheet  presentation  to  a
classified  balance  sheet. The balance sheet in prior years, beginning in 1998,
was  presented  as  unclassified. The new method was adopted in conjunction with
the  consolidation  of  VANTAS,  a  service company, and has been applied to the
prior  year's  balance sheet to conform to the 1999 presentation. The change has
no effect on the consolidated statement of operations.

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.

     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 earnings (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.


                                     IV-12
<PAGE>

               RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
                        (D/B/A FRONTLINE CAPITAL GROUP)
                    DECEMBER 31, 1999 AND 1998 - (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

     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.


RESTRICTED CASH

     VANTAS  has restricted cash of approximately $21.6 million that was held at
December 31, 1999 for future acquisitions of executive office suite centers.


REVENUE RECOGNITION

     The  Company's operating revenues for the year ended December 31, 1999 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.


RECEIVABLES AND CONCENTRATION OF CREDIT RISK

     VANTAS  performs  credit  evaluations of its clients and generally requires
at  least  two months' rent as a security deposit. VANTAS facilities are located
primarily  throughout  the  United  States,  which  limits  VANTAS'  exposure to
certain economic risks, based upon local economic conditions.


                                     IV-13
<PAGE>

               RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
                        (D/B/A FRONTLINE CAPITAL GROUP)
                    DECEMBER 31, 1999 AND 1998 - (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

     VANTAS'  cash  balances are held primarily at one financial institution and
may,  at  times, exceed insurable amounts. VANTAS believes it mitigates its risk
by  investing  in or through a major financial institution. Recoverability would
be dependent upon the performance of the institution.

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  December  31,  1999, accumulated depreciation was approximately
$14.0 million.

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

DEFERRED FINANCING COSTS

     The  Company  has  amortized  deferred financing costs over the term of the
related   debt.   As   of   December  31,  1999,  accumulated  amortization  was
approximately $2.0 million.

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
December 31, 1999 accumulated amortization was approximately $9.0 million.

     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.

RENT EXPENSE

     Generally  accepted  accounting  principles  require  that  rent expense be
recognized  on  a  straight-line  basis  over the term of the related lease. The
difference  between the rent expense recognized for financial reporting purposes
and  the  actual  payments  made  in  accordance  with  the  lease  agreement is
recognized as a deferred rent liability.

MERGER AND INTEGRATION COSTS

     VANTAS  incurred  merger  and  integration  costs  during  the  year  ended
December  31,  1999  in  connection with its merger with FrontLine. Such charges
consisted   primarily  of  compensation  expense,  professional  fees,  business
process re-engineering and other integration costs.

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 Financial Accounting
Standard   Board   ("FASB")  Statement  No.  123,  "Accounting  for  Stock-Based
Compensation,"  ("FAS  123")  requires  the  use of option valuation models that
were not developed for use in valuing employee stock options.


                                     IV-14
<PAGE>

               RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
                        (D/B/A FRONTLINE CAPITAL GROUP)
                    DECEMBER 31, 1999 AND 1998 - (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

INCOME TAXES

     At  inception,  the  Company  adopted  SFAS No. 109, "Accounting for Income
Taxes"  ("SFAS  109"),  which  prescribes  an  asset  and  liability  method  of
accounting  for income taxes. Under SFAS 109, 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  $9.9  million attributable to VANTAS at
December  31,  1999.  The remaining deferred tax assets at December 31, 1999 and
1998  have  been  reserved  for  100% due to the uncertainty as to whether these
assets will have benefit in future periods.

     VANTAS  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 VANTAS' 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. At December 31, 1999, VANTAS
recognized a current income tax benefit of approximately $2.8 million.


EARNINGS PER SHARE

     In  1997,  the  FASB  issued Statement No. 128, "Earnings per Share" ("SFAS
128").  SFAS  128 replaced the calculation of primary and fully diluted earnings
per  share  with  basic  and diluted earnings per share. Unlike primary earnings
per  share,  basic  earnings per share excludes any dilutive effects of options,
warrants  and convertible securities. Diluted earnings per share is very similar
to  the  previously  reported fully diluted earnings per share. All earnings per
share  amounts  for  all  periods have been presented to conform to the SFAS 128
requirements.


COMPREHENSIVE INCOME

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


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.


DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION

     In  1997,  the FASB issued Statement No. 131 "Disclosures about Segments of
an  Enterprise  and  Related  Information"  ("SFAS  131") which is effective for
fiscal  years  beginning after December 15, 1997. SFAS 131 establishes standards
for   reporting   information  about  operating  segments  in  annual  financial
statements  and  in interim financial reports. It also establishes standards for
related  disclosures  about  products  and  services, geographic areas and major
customers.  The  adoption  of  this  standard  had  no  impact  on the Company's
financial  position  or  results of operations, but did effect the disclosure of
segment information, see Note 13.


                                     IV-15
<PAGE>

               RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
                        (D/B/A FRONTLINE CAPITAL GROUP)
                    DECEMBER 31, 1999 AND 1998 - (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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


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.


3. OWNERSHIP INTERESTS IN PARTNER COMPANIES

Partner Companies at December 31, 1999 and December 31, 1998 included:


<TABLE>
<CAPTION>
                                                             VOTING OWNERSHIP ON A BASIC  VOTING OWNERSHIP ON A DILUTED
                                                                        BASIS                        BASIS
                                                            ----------------------------- ----------------------------
                                   PARTNER     APPLICABLE
                                   COMPANY     ACCOUNTING    DECEMBER 31,   DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                    SINCE        METHOD          1999           1998           1999           1998
                                  --------- --------------- -------------- -------------- -------------- -------------
<S>                               <C>       <C>             <C>            <C>            <C>            <C>
AdOutlet.com ....................   1999          Cost            12%           N/A             10%           N/A
CommerceInc. Corporation ........   1999         Equity           31%           N/A             26%           N/A
DitigalWork.com .................   1999          Cost            <1%           N/A             <1%           N/A
EmployeeMatters, Inc. ...........   1999         Equity           53%           N/A             45%           N/A
Giftcertificates.com ............   1999          Cost            <1%           N/A             <1%           N/A
LiveCapital.com .................   2000          Cost           **4%           N/A            **4%           N/A
Neo Carta Ventures ..............   1999          Cost             4%           N/A              4%           N/A
OneXstream.com, Inc. ............   1998     Consolidation        93%           59%             80%           59%
OnSite Access, Inc. .............   1997         Equity           37%           1%              22%           1%
Opus360 Corporation .............   1999          Cost            <1%           N/A             <1%           N/A
RealtyIQ.com ....................   1999         Equity           68%           N/A             54%           N/A
UpShot.com ......................   2000         Equity         **20%           N/A            **18%          N/A
VANTAS Incorporated .............   1998     Consolidation       *84%           21%            *76%           21%
</TABLE>

----------
*  Included additional ownership interest acquired in January 2000.

** Ownership interest acquired in February 2000.


     The  Company's  ownership  interests  in  Partner  Companies are classified
according  to the applicable accounting method utilized at December 31, 1999 and
1998.  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):


                                     IV-16
<PAGE>

               RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
                        (D/B/A FRONTLINE CAPITAL GROUP)
                    DECEMBER 31, 1999 AND 1998 - (CONTINUED)

3. OWNERSHIP INTERESTS IN PARTNER COMPANIES - (CONTINUED)


<TABLE>
<CAPTION>
                                 DECEMBER 31, 1999                DECEMBER 31, 1998
                          -------------------------------   ------------------------------
                           CARRYING VALUE     COST BASIS     CARRYING VALUE     COST BASIS
                          ----------------   ------------   ----------------   -----------
<S>                       <C>                <C>            <C>                <C>
Equity Method .........        $54,807          $65,741          $30,277         $30,402
Cost Method ...........          6,400            6,400               --              --
                               -------                           -------
                               $61,207                           $30,277
                               =======                           =======
</TABLE>

     The  following  are the Company's summarized earnings/(losses) on ownership
interests in Partner Companies (in thousands):

<TABLE>
<CAPTION>
                                                                                            FOR THE PERIOD
                                                                                             JULY 15, 1997
                                                                                           (COMMENCEMENT OF
                                             FOR THE YEAR ENDED     FOR THE YEAR ENDED      OPERATIONS) TO
                                              DECEMBER 31, 1999      DECEMBER 31, 1998     DECEMBER 31, 1997
                                            --------------------   --------------------   ------------------
<S>                                         <C>                    <C>                    <C>
VANTAS and predecessor entities .........        $      --                $ (95)                 $  --
OnSite Access, Inc. and predecessor
 entity .................................           (8,137)                 (30)                    --
EmployeeMatters,Inc. ....................           (2,230)                  --                     --
CommerceInc. Corporation ................             (526)                  --                     --
RealtyIQ.com ............................              (11)                  --                     --
Other ownership interests ...............               --                  119                    223
                                                 ---------                -----                  -----
Net income (loss) on ownership interests
 in Partner Companies ...................        $ (10,904)               $  (6)                 $ 223
                                                 =========                =====                  =====
</TABLE>

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


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

VANTAS AND PREDECESSOR ENTITIES

     On  January  8, 1999, InterOffice Superholdings Corporation ("InterOffice")
(36  executive  office  suite  centers)  and  Reckson  Executive  Centers,  Inc.
("Reckson  Executive")  (8  executive office suite centers) merged with Alliance
National  Incorporated, a holding company which owned and operated approximately
90  nationally  located  executive  office  suite  centers  (the  "Merger").  To
effectuate  the  merger,  the Company contributed approximately $21.4 million of
assets.  The  merged  entity changed its name to VANTAS Incorporated ("VANTAS").
The  stockholders  of  InterOffice  and  Reckson  Executive received convertible
Series  C Preferred Stock of VANTAS representing approximately 40% of the equity
interest  in  VANTAS  of  which  approximately  23%  of  VANTAS was owned by the
Company as of the merger.

     As  of  December  31,  1999,  VANTAS  operates  201  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.

     During  the  third  quarter of 1999, the Company increased its ownership in
VANTAS  to approximately 35% on a basic basis and 29% on a diluted basis through
an  additional  $23.0  million  equity  ownership  interest as a part of a $30.0
million financing by VANTAS.


                                     IV-17
<PAGE>

               RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
                        (D/B/A FRONTLINE CAPITAL GROUP)
                    DECEMBER 31, 1999 AND 1998 - (CONTINUED)

3. OWNERSHIP INTERESTS IN PARTNER COMPANIES - (CONTINUED)

     Subsequently,   the  Company  entered  into  a  number  of  stock  purchase
agreements   with  other  VANTAS  stockholders  to  increase  its  ownership  to
approximately  84%  on  a  basic  basis and 76% on a diluted basis. The terms to
acquire  these  VANTAS shares were generally to pay 70% of the purchase price in
cash  and the remaining 30% in FrontLine stock, which at the time had a value of
$19.00  per  share.  The  closings  for these transaction have been taking place
periodically  since  November  30,  1999  and are anticipated to be completed by
March  31, 2000. As of December 31, 1999, the Company had expended approximately
$59.8  million  in  cash  and  issued  1,828,099  shares of its common stock. In
closings  subsequent  to  December  31, 1999, the Company has paid approximately
$42.0  million  in  cash  and  issued  1,294,103 shares of its common stock. One
final  closing  remains,  at  which  time  the  Company  will  pay  a balance of
approximately $1.3 million in cash.

     As  a  result  of  this  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.


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


ONSITE ACCESS

     In  1998,  the Company had owned a 1% interest on a basic and diluted basis
in  On-Site  Ventures,  LLC,  ("On-Site"),  a  company  that  provides  advanced
telecommunications  systems  and  services  within  commercial  buildings and/or
building  complexes.  The Company had also advanced On-Site $6.5 million through
December  31, 1998 to fund operating costs under the terms of a 12% subordinated
convertible note.

     On  April  16, 1999, the Company contributed approximately $5.25 million to
On-Site  as  part  of  a  $60.0  million private equity financing agreement (the
"Financing  Transaction")  which  included FrontLine and several strategic third
party  private  equity  investors.  The equity agreement required the Company to
fund  up  to  $15  million.  On July 1, 1999, On-Site merged into OnSite Access,
Inc.  ("OnSite Access"), a Delaware corporation whereby, closings were completed
for  approximately  $20.5  million  of  additional equity in connection with the
Financing  Transaction.  The  investors,  including  FrontLine, in the Financing
Transaction  were  committed to invest the remaining $39.5 million, subject only
to  satisfaction  of  the  conditions  of  the  Financing  Transaction  and  the
corporation's  call  for  funds. In addition, in connection with the merger, the
principal  and  accrued interest outstanding under the $6.5 million subordinated
FrontLine  loan was converted into 5,869,000 shares of Preferred Stock issued to
FrontLine.  On  October  15, 1999, the Company increased its ownership in OnSite
Access  by  7%  to  36%  on  a basic basis by issuing 1,731,597 shares of common
stock  valued  at  $13.63  per  share  to  another OnSite Access shareholder. At
December  31,  1999, FrontLine had funded its entire capital commitment and owns
approximately  37%  and  22%  of  OnSite  Access  on  a basic and diluted basis,
respectively.


                                     IV-18
<PAGE>

               RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
                        (D/B/A FRONTLINE CAPITAL GROUP)
                    DECEMBER 31, 1999 AND 1998 - (CONTINUED)

3. OWNERSHIP INTERESTS IN PARTNER COMPANIES - (CONTINUED)

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


BALANCE SHEET





<TABLE>
<CAPTION>
                                                                           DECEMBER 31, 1999
                                                                          ------------------
<S>                                                                       <C>
Current assets ........................................................       $  25,535
Property and equipment (net) ..........................................          20,052
Intangibles (net) .....................................................          25,055
Other assets ..........................................................           4,132
                                                                              ---------
Total Assets ..........................................................       $  74,774
                                                                              =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
Current liabilities ...................................................       $  13,702
Other Liabilities .....................................................           1,913
                                                                              ---------
   Total Liabilities ..................................................          15,615
                                                                              ---------
REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT):
Non FrontLine preferred and common stock ..............................         104,274
Stockholders' loans for restricted stock ..............................          (2,471)
Deferred equity compensation ..........................................         (24,878)
Accumulated deficit ...................................................         (40,732)
                                                                              ---------
FrontLines' net investment in OnSite Access ...........................          39,017
Add: Net loss allocation ..............................................           8,137
Less: Payment to OnSite shareholder ...................................         (23,593)
Less: Excess acquisition costs ........................................            (595)
                                                                              ---------
FrontLine preferred and common stock in OnSite Access .................          22,966
                                                                              ---------
   Total Redeemable Preferred Stock and Stockholders' Equity (deficit)           59,159
                                                                              ---------
   Total Liabilities and Stockholders' Equity (deficit) ...............       $  74,774
                                                                              =========

</TABLE>


                                     IV-19
<PAGE>

               RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
                        (D/B/A FRONTLINE CAPITAL GROUP)
                    DECEMBER 31, 1999 AND 1998 - (CONTINUED)

3. OWNERSHIP INTERESTS IN PARTNER COMPANIES - (CONTINUED)

STATEMENT OF OPERATIONS


<TABLE>
<CAPTION>
                                                  FOR THE YEAR ENDED
                                                  DECEMBER 31, 1999
                                                 -------------------
<S>                                              <C>
Revenues .....................................        $   3,646
                                                      ---------
Expenses:
 Direct costs of revenue .....................            3,090
 Selling, general and administrative .........           29,361
 Depreciation and amortization ...............            2,838
 Interest expense (net) ......................              899
                                                      ---------
Total operating expenses .....................           36,188
Net loss .....................................          (32,542)
                                                      ---------
Other interests, share of net loss ...........          (24,405)
                                                      ---------
FrontLines' share of net loss ................        $  (8,137)
                                                      =========
</TABLE>

OTHER E-BUSINESSES
     On  August  11,  1999,  FrontLine  acquired  a 53% on a basic basis and 45%
noncontrolling  interest  on  a  fully  diluted  basis  in EmployeeMatters, Inc.
("EmployeeMatters")  for  a  purchase  price  of  $15.0 million. At the time, $5
million  was  paid  in  cash  and  $10  million  was  in  the  form  of  a note.
EmployeeMatters  is an Internet-based employee benefits and human administration
outsourcing company targeting small and medium-size businesses.

     FrontLine  acquired  Series  A  Preferred Stock of EmployeeMatters which is
convertible  into shares of common stock of EmployeeMatters. The Preferred Stock
will  convert  automatically  in  the event EmployeeMatters completes an initial
public  offering  within  certain  parameters.  FrontLine  is  also committed to
invest  an  additional  $7.5 million in connection with a future equity funding.
FrontLine  also entered into a Stockholders' Agreement and a Registration Rights
Agreement  in  respect  of  certain  governance,  voting and stockholder rights,
including  rights  with  respect  to board representation, rights of first offer
with  respect  to  their EmployeeMatters stock, pre-emptive rights, registration
rights and other matters.

     In  December  1999,  the Company issued warrants to purchase 200,000 shares
of  the  Company's  common stock to the executive officers of EmployeeMatters in
exchange  for  options  to  purchase 789,474 shares of EmployeeMatters. The fair
market  value  of these warrants is approximately $2.2 million, as determined by
the  Black-Scholes  valuation  pricing  model.  This  value  is  included in the
Company's investment in EmployeeMatters at December 31, 1999.

     In  1999,  the  Company has invested approximately $15.5 million and issued
approximately  53,000  shares  of its common stock for non-controlling interests
in seven other e-business Partner Companies.

     Subsequent  to  December  31,  1999, the Company has invested approximately
$23.5   million   to  purchase  ownership  interests  in  two  other  e-business
companies.


                                     IV-20
<PAGE>

               RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
                        (D/B/A FRONTLINE CAPITAL GROUP)
                   DECEMBER 31, 1999 AND 1998 - (CONTINUED )

4. PARENT COMPANY FINANCIAL INFORMATION

     The  Company's  consolidated  financial statements reflect VANTAS accounted
for  under  the  consolidation  method of accounting for the year ended December
31,  1999  and  VANTAS  under the equity method of accounting for the year ended
December 31, 1998.

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


PARENT COMPANY BALANCE SHEETS (IN THOUSANDS)





<TABLE>
<CAPTION>
                                                           DECEMBER 31, 1999     DECEMBER 31, 1998
                                                          -------------------   ------------------
<S>                                                       <C>                   <C>
ASSETS
 Current assets .......................................        $  28,933             $  2,026
 Ownership interests in and advances to Partner
   Companies ..........................................          197,859               30,277
 Other assets .........................................           67,089               26,540
                                                               ---------             --------
   TOTAL ASSETS .......................................        $ 293,881             $ 58,843
                                                               =========             ========
Liabilities and Shareholders' Equity
 Current liabilities ..................................        $  13,372             $  1,894
 Non-current liabilities ..............................          166,255               40,982
 Shareholders' equity .................................          114,254               15,967
                                                               ---------             --------
   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .........        $ 293,881             $ 58,843
                                                               =========             ========

</TABLE>


<TABLE>
<CAPTION>
                                                                                          FOR THE PERIOD
                                                                                           JULY 15, 1997
                                                FOR THE YEAR          FOR THE YEAR       (COMMENCEMENT OF
                                                   ENDED                 ENDED            OPERATIONS) TO
PARENT COMPANY STATEMENTS OF OPERATIONS      DECEMBER 31, 1999     DECEMBER 31, 1998     DECEMBER 31, 1997
(IN THOUSANDS)                              -------------------   -------------------   ------------------
<S>                                         <C>                   <C>                   <C>
Revenues ................................       $      333             $     336             $   --
                                                ----------             ---------             ------
Operating expenses ......................           (9,509)               (2,613)              (479)
Other expenses ..........................           (9,130)               (1,260)                  (8)
Interest (expense) income ...............           (8,167)                 (644)                 6
                                                ----------             ---------             --------
Total expenses ..........................           26,806                 4,517               (481)
                                                ----------             ---------             --------
Loss before equity in earnings income
 (loss) of Partner Companies ............          (26,473)               (4,181)              (481)
Equity in earnings (loss) of Partner
 Companies and other ownership
 interests ..............................          (13,228)               (3,966)               223
                                                ----------             ---------             --------
Net loss ................................       $  (39,701)            $  (8,147)            $ (258)
                                                ==========             =========             ========
</TABLE>


                                     IV-21
<PAGE>

               RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
                        (D/B/A FRONTLINE CAPITAL GROUP)
                   DECEMBER 31, 1999 AND 1998 - (CONTINUED )

5. SECURED CREDIT FACILITY

     On  November  30,  1999,  the  Company  entered  into  a $60 million credit
facility  (the  "Credit Facility") with a significant financial institution. The
Credit  Facility  matures  on  May  30,  2000,  and  provides  for a three month
extension  provision. FrontLine's ability to borrow under the Credit Facility is
subject  to  the  satisfaction  of certain financial covenants. Borrowings under
the  Credit  Facility are secured directly or indirectly by 17,452,876 shares of
VANTAS  and  21,837,184  shares  of  OnSite Access. As of December 31, 1999, the
total  outstanding  on  the Credit Facility was approximately $44.4 million. The
balance of the facility was drawn subsequent to year end.


6. 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  commitment,  $127.9  million  term loans, and a $25 million revolving loan
commitment,  including  letters of credit. The credit agreements contain certain
covenants dealing with debt to equity ratios.

     During  1999,  interest  on  each  commitment  ranged from LIBOR plus 3.00%
(9.5%  at  December  31, 1999) to LIBOR plus 3.75% (10.25% at December 31, 1999)
for  a  one,  three or six month period, at the election of VANTAS. During 1998,
interest  on each commitment ranged from LIBOR plus 3.00% (8.56% at December 31,
1998)  to  LIBOR  plus 3.5% (9.06% at December 31, 1998) for a one, three or six
month period, at the election of VANTAS.

     Pursuant  to  the  credit  agreement,  the  lending  institutions  have  an
assignment  of  leases  and  rents  associated  with VANTAS' business centers to
collateralize the notes payable.


ACQUISITION LOAN COMMITMENT

     The  credit  agreement  provides VANTAS with an acquisition loan commitment
which   allows  VANTAS  to  make  acquisitions  subject  to  certain  terms  and
conditions.  As of December 31, 1999, VANTAS had no borrowings outstanding under
the  acquisition  loan  commitment.  In  accordance  with  the credit agreement,
VANTAS  cannot  borrow  under  the acquisition loan commitment after November 6,
2000.  Principal repayments under the acquisition loan commitment shall commence
on  December  31,  2001 and are based upon percentages of the amount borrowed as
follows:





<TABLE>
<CAPTION>
                PERIOD                   REPAYMENT PERCENTAGE
-------------------------------------   ---------------------
<S>                                     <C>
       December 2001-September 2002     2.5% quarterly
       December 2002-September 2003     10% quarterly
       November 2003                    50%

</TABLE>

TERM LOANS

     The  $38  million  Term  Loan A had $31 million outstanding at December 31,
1999  which  requires  quarterly principal payments. The final principal payment
is due on June 30, 2002.

     The  $89.9  million  Term  Loan B had $89.6 million outstanding at December
31,  1999  which  requires  quarterly  principal  payments.  The final principal
payment is due on November 6, 2005.

     At  December  31,  1999,  $21.5  million of the Term Loan was funded into a
cash  collateral  account that VANTAS will be permitted to utilize in connection
with permitted acquisitions.


                                     IV-22
<PAGE>

               RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
                        (D/B/A FRONTLINE CAPITAL GROUP)
                    DECEMBER 31, 1999 AND 1998 - (CONTINUED)

6. NOTES PAYABLE - (CONTINUED)

     The  total future principal repayments as of December 31, 1999 for the Term
Loans of VANTAS for each of the next five fiscal years are (in thousands):


<TABLE>
<CAPTION>
                                 TERM A       TERM B        TOTAL
                               ----------   ----------   -----------
<S>                            <C>          <C>          <C>
  2000 .....................    $12,000      $   500      $ 12,500
  2001 .....................     14,300          500        14,800
  2002 .....................      4,700       15,250        19,950
  2003 .....................         --       19,500        19,500
  2004 .....................         --       23,751        23,751
  Thereafter ...............         --       30,124        30,124
                                -------      -------      --------
                                $31,000      $89,625      $120,625
                                =======      =======      ========

</TABLE>

REVOLVING LOAN COMMITMENT

     The  $25  million  revolving  loan commitment, which expires on November 6,
2003, had no outstanding balance at December 31, 1999.

     At  December  31,  1999,  VANTAS  had  outstanding  letters  of  credit  of
approximately  $10.1  million  for  landlord security deposits which reduced the
borrowings available under the revolving loan commitment.

     The  carrying  value of the notes payable approximates its fair value as of
December 31, 1999.


7. SHAREHOLDERS EQUITY

     The  Company has established the 1998 stock option plan, 1998 "broad based"
stock  option  plan  and 1999 stock option plan (the "Plans") for the purpose of
attracting  and retaining directors, executive officers, other key employees and
advisory  board  members.  As  of  December  31,  1999,  3,700,376,  100,000 and
1,750,000  of  the  Company's  authorized shares have been reserved for issuance
under  the 1998 stock option plan, 1998 "broad based" stock option plan and 1999
stock option plan, respectively.

     The   following   table  sets  forth  the  outstanding  options  and  their
corresponding exercise price per share:





<TABLE>
<CAPTION>
                                                 OPTIONS      EXERCISE PRICE RANGE
                                               -----------   ---------------------
                                                 GRANTED              FROM                TO
                                               -----------   ---------------------   -----------
<S>                                            <C>           <C>                     <C>
1998 Stock Option Plan .....................    3,700,376           $ 1.04             $  2.00
1998 Broad Based Stock Option Plan .........      100,000           $ 2.00             $  2.00
1999 Stock Option Plan .....................    1,643,500           $ 4.63             $ 55.00
Other Options ..............................      171,165           $ 2.00             $ 28.69
                                                ---------
Total ......................................    5,615,041
                                                =========
</TABLE>

     Options  granted  to  officers  under the 1998 stock option plan were fully
vested  on January 1, 1999. Options granted to new employees vest in three equal
installments  on  the  first,  second and third anniversaries of the date of the
grant.

     Pursuant  to  the  1999  stock option plan, 550,000 shares of the 1,750,000
shares  reserved  were  issued in August 1999. At December 31, 1999, the Company
has  recorded  deferred  compensation  of  approximately  $3.9  million,  net of
amortization.


                                     IV-23
<PAGE>

               RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
                        (D/B/A FRONTLINE CAPITAL GROUP)
                    DECEMBER 31, 1999 AND 1998 - (CONTINUED)

7. SHAREHOLDERS EQUITY - (CONTINUED)

ADVISORY BOARD

     In  December  1999,  the  Company  formed  an advisory board to provide its
Partner  Companies  with  strategic  guidance  and be actively involved in their
development.  As  of  December  31,  1999,  the  advisory  board consists of six
members.  These  members  were granted a total of 120,000 options under the 1999
stock  option  plan  with  exercise  prices ranging from $26.72 to $28.69. These
options  vest  in  three  equal  installments  on  the  first,  second and third
anniversaries  of the date of the grant. In accordance with FAS 123, the Company
is  amortizing  into  compensation  expense  over three years the fair values of
these options determined by the Black-Scholes option valuation model.

STOCK OPTION PLANS

     Options  granted under the Plans are exercisable at the market price on the
date  of  the  grant and, subject to termination of employment, expire ten years
from date of the grant, are not transferable other than on death.

     Pro  forma  information  regarding  net  income  and  earnings per share is
required  by  FAS  123,  and has been determined as if the Company had accounted
for  its employee stock options under the fair value method of FAS 123. The fair
value   for   these  options  was  estimated  at  the  date  of  grant  using  a
Black-Scholes   option   pricing   model  with  the  following  weighted-average
assumptions  for  1999  and  1998,  risk-free  interest  rate of 5%, no expected
dividend  yield,  a  volatility  factor  of  the  expected  market  price of the
Company's  common stock of 1.367 and 1.723, respectively, and a weighted-average
expected life of the option of 7 years.

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

     For  purposes  of  pro  forma  disclosures, the estimated fair value of the
options  is amortized to expense over the options' vesting period. For the years
ended December 31, 1999 and 1998 the Company's pro forma information follows:

<TABLE>
<CAPTION>
                                                   1999          1998
                                              ------------- -------------
<S>                                           <C>           <C>
       Pro forma net loss (in thousands)        $ (43,474)    $ (11,495)
                                                ---------     ---------
       Basic and diluted net loss per share     $   (1.70)    $    (.79)
                                                ---------     ---------

</TABLE>

A  summary of the Company's stock option activity, and related information is as
follows:

<TABLE>
<CAPTION>
                                                             WEIGHTED-AVERAGE     WEIGHTED-AVERAGE
                                                OPTIONS       EXERCISE PRICE         FAIR VALUE
                                             ------------   ------------------   -----------------
<S>                                          <C>            <C>                  <C>
Outstanding -- December 31, 1997 .........           --          $    --              $    --
 Granted .................................    3,731,541             1.16                 1.15
 Exercised ...............................           --               --                   --
 Forfeited ...............................           --               --                   --
                                              ---------          -------              -------
Outstanding -- December 31, 1998 .........    3,731,541         $   1.16             $   1.15
 Granted .................................    1,883,500            14.59                13.23
 Exercised ...............................     (210,000)            1.31                 1.24
 Forfeited ...............................           --               --                   --
                                              ---------         --------             --------
Outstanding -- December 31, 1999 .........    5,405,041         $  15.78             $  14.35
                                              =========         ========             ========
</TABLE>

                                     IV-24
<PAGE>

               RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
                        (D/B/A FRONTLINE CAPITAL GROUP)
                    DECEMBER 31, 1999 AND 1998 - (CONTINUED)

7. SHAREHOLDERS EQUITY - (CONTINUED)

     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  year  ended  December  31, 1999, results include approximately $8.5
million  or $0.33 per basic and diluted share, associated with these awards, the
majority, of which is non-cash in nature.

     On  December  16,  1999, the Company issued 1,437,500 shares of it's common
stock  in  a  public offering at $47.25 per share for an aggregate consideration
of approximately $63.9 million.

     Subsequent  to  December  31,  1999,  the Company completed preferred stock
offerings  of 23,000 shares of 8.875% Cumulative Convertible Preferred Stock, at
a  price  of  $1,000  per share with net proceeds of $21.7 million. These shares
are  convertible  into  the Company's common stock at prices ranging from $66.30
to $75.08.

     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.

8. TRANSACTIONS WITH RELATED PARTIES

     On  June  15,  1998, the Company established a credit facility with Reckson
Operating   Partnership,   L.P.  ("Reckson")  in  the  amount  of  $100  million
("FrontLine  Facility")  for  their  service sector operations and other general
corporate  purposes.  Reckson  has  advanced  the  Company  approximately  $79.5
million  at  December  31,  1999. These advances bear interest at 12% per annum.
Additionally,  FrontLine  established  a $100 million RSVP Facility with Reckson
for  funding the Reckson Strategic investments. As of December 31, 1999, Reckson
has  advanced  FrontLine approximately $42.3 million under the RSVP Facility and
has  invested  approximately  $24.8 million under the facility in joint ventures
with  Reckson  Strategic.  The  total  outstanding at December 31, 1999, owed by
FrontLine  under  both  credit  facilities  was  approximately  $121.8  million.
Interest  accrued  on  these  facilities at December 31, 1999, was approximately
$5.5  million.  Both  of  the FrontLine and RSVP facilities expire in June 2003.
Currently,  the  Company has two short term open letters of credit totaling $7.7
million,  which  have  been  utilized  as  consideration  for  future  FrontLine
investment  acquisitions.  These  letters  of  credit  decrease the availability
under the FrontLine Facility.

     In  November  1999,  the  Board  of Directors of both FrontLine and Reckson
approved  amendments  to  the credit facilities necessary in order for FrontLine
to  proceed  with  certain  short-term  financings for proposed acquisitions. As
consideration  for  such  approvals, FrontLine paid a fee to Reckson in the form
of  176,186  shares  of  FrontLine common stock which have been valued at $20.31
per  share.  The fee of approximately $3.6 million has been included in deferred
financing  costs  and is generally being amortized over the estimated nine month
benefit period.

     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  unsubordinated  amounts for the years ended December 31,
1999 and 1998 were approximately $.5 million and $.4 million, respectively.

     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  1999  and  1998,  the  Company  reimbursed  approximately $.5
million and $.4 million, respectively, for such activities.


                                     IV-25
<PAGE>

               RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
                        (D/B/A FRONTLINE CAPITAL GROUP)
                   DECEMBER 31, 1999 AND 1998 - (CONTINUED )

9. OTHER OWNERSHIP INTEREST

     Reckson  Strategic  Venture  Partners, LLC ("Reckson Strategic") was formed
on  March  5,  1998 to invest 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  and  Paine  Webber  Real  Estate  Securities, Inc., ("Paine
Webber")  have  received  certain minimum returns and a return of capital. Paine
Webber  is  a  non-managing  member and preferred equity owner who has committed
$200  million 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. On April 24, 1998, Paine Webber
assigned   25%   of   its   preferred  equity  interest  in  Reckson  Strategic,
representing  an  unfunded  capital  commitment of $50 million to Stratum Realty
Fund,  L.P. ("Stratum"). The assignment provided Stratum with similar rights and
priorities.  On  March  17,  1999,  Paine  Webber transferred all of its rights,
title  and  interest  in  its initial invested capital to Stratum. This transfer
included  the  right  to  distributions  based upon the amount of funded capital
contributions.  As  a result of this transfer, Stratum has funded its entire $50
million commitment as of December 31, 1999.

     Summarized  financial information and a summary of the Company's investment
in,  advances  to Holdings and FrontLine's share of loss at December 31, 1998 is
as follows (in thousands):

<TABLE>
<CAPTION>
                                                                      DECEMBER 31, 1998
                                                                     ------------------
<S>                                                                  <C>
BALANCE SHEET
ASSETS:
Investment in Dominion Venture Group, LLC ........................        $ 29,289
Other equity investments .........................................           5,971
Other assets .....................................................           9,491
                                                                          --------
TOTAL ASSETS .....................................................        $ 44,751
                                                                          ========
LIABILITIES AND MEMBERS' EQUITY
Total Liabilities ................................................        $  2,988
                                                                          --------
Minority interest ................................................          31,202
Preferred capital offering costs .................................          (5,000)
FrontLine ownership interest in and advances to Holdings .........          15,561
                                                                          --------
TOTAL LIABILITIES AND MEMBERS' EQUITY ............................        $ 44,751
                                                                          ========
</TABLE>

                                     IV-26
<PAGE>

               RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
                        (D/B/A FRONTLINE CAPITAL GROUP)
                    DECEMBER 31, 1999 AND 1998 - (CONTINUED)

9. OTHER OWNERSHIP INTEREST - (CONTINUED)

<TABLE>
<CAPTION>
                                                       FOR THE PERIOD FROM
                                                       FEBRUARY 26, 1998 TO
                                                        DECEMBER 31, 1998
                                                      ---------------------
<S>                                                   <C>
STATEMENT OF OPERATIONS
Revenues ..........................................         $     646
Net loss on equity investments ....................            (3,747)
Expenses ..........................................             7,122
                                                            ---------
Net loss ..........................................           (10,223)
Minority interest share of loss ...................            (6,264)
                                                            ---------
FrontLine's share of net loss of Holdings .........         $  (3,959)
                                                            =========
</TABLE>

In  1998, the Company made a non-cash contribution of approximately $1.9 million
to Reckson Strategic.

In 1999, the operating results for Reckson Strategic were not significant.


10. COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

     VANTAS  and  its  subsidiaries lease certain business center facilities and
their  corporate  offices  under  noncancellable  operating  leases  expiring at
various  dates  through  2014.  Certain of these noncancellable operating leases
provide for renewal options.

     Minimum  future rental payments under these noncancellable operating leases
as  of  December  31,  1999 for each of the next five years and in the aggregate
are approximately, (in thousands):

<TABLE>
<S>                           <C>
  2000 ....................    $ 87,933
  2001 ....................      86,677
  2002 ....................      79,617
  2003 ....................      75,162
  2004 ....................      67,324
  Thereafter ..............     215,484
                               --------
                               $612,197
                               ========

</TABLE>

     VANTAS  is  also  generally  obligated  to  reimburse  the  lessor  for its
proportionate  share  of operating expenses, which are not included in the above
amounts.

OTHER

     From  time-to-time,  legal  actions are brought against the Company and its
Partner  Companies  in the ordinary course of business. Management believes such
matters  will  not  have a significant adverse effect on the Company's financial
position.

11. SUPPLEMENTAL DISCLOSURES OF VANTAS NON-CASH ACTIVITIES

     During  the  year  ended  December  31,  1999,  VANTAS,  through  a merger,
obtained  45  business centers and received cash of $8.4 million in exchange for
the  issuance  of  13,325,424  shares  of  Series C Convertible Preferred Stock,
approximately  $1.6  million  in  cash  and the assumption of approximately $4.6
million  in  transaction  related  liabilities,  approximately  $2.1  million of
capital  lease  obligations,  approximately  $5.5  million  in tenants' security
deposits, approximately $3.8 million in other long term


                                     IV-27
<PAGE>

               RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
                        (D/B/A FRONTLINE CAPITAL GROUP)
                    DECEMBER 31, 1999 AND 1998 - (CONTINUED)

11. SUPPLEMENTAL DISCLOSURES OF VANTAS NON-CASH ACTIVITIES- (CONTINUED)

liabilities.   Net   assets   acquired   included  net  accounts  receivable  of
approximately  $2.3  million  prepaid expenses and other assets of approximately
$.5  million,  security  deposits  of approximately $.5 million, deferred income
taxes of approximately $.9 million and restricted cash of $1.3 million.

     During  the  year  ended  December  31,  1999,  VANTAS acquired 42 business
centers   for  approximately  $44.9  million  in  cash  and  the  assumption  of
approximately  $2.5  million  in  transaction related liabilities, approximately
$.5  million  of  capital  lease  obligations,  approximately  $3.6  million  in
tenants'  security  deposits  and  approximately  $.4 million in other long term
liabilities.   Net   assets   acquired   included  net  accounts  receivable  of
approximately  $.9  million,  prepaid expenses and other assets of approximately
$.8  million  and  security  deposits  and  other  assets  of approximately $1.2
million.

     During  the  year  ended  December  31,  1999, VANTAS recorded compensation
expense  of  approximately  $12.5  million  related to an agreement with certain
shareholders  of VANTAS and a principal shareholder, relating to the purchase of
a  portion  of  such shareholders' securities in VANTAS. In connection with this
agreement,  certain shareholders exercised vested stock options for which VANTAS
received  notes  receivable  of  approximately  $.9  million,  in respect of the
aggregate exercise price for such options.

     During  the  year ended December 31, 1999, VANTAS recorded deferred credits
of  approximately  $11.8  million  related  to  tenant  improvements,  which are
reimbursed  by  landlords  and  amortized against rent expense over the lives of
the leases.

12. SUBSEQUENT EVENTS

     On  January  21, 2000, the Company executed an agreement and plan of merger
of  two  executive  suites  companies  (the "Merger"), HQ Global Workplaces, 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.

     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 as a deposit. In the
event  the Merger is not consummated under certain circumstances; this letter of
credit  is  collateralized  by  15,057,487  shares  of  VANTAS that are owned by
FrontLine and guaranteed by FrontLine on a nonrecourse basis.

     As  part  of  the  transaction,  the  owners  of  HQ Global Workplaces will
receive  $380  million  in  cash  (inclusive of the repayment of indebtedness of
HQ's  credit  facility) and approximately 19 percent of the equity in HQ Global.
It  is  anticipated  that  FrontLine  will  own  approximately  50 percent of HQ
Global.  This  transaction  is expected to be funded with bank debt of HQ Global
and  equity.  The transaction is anticipated to close in April 2000. As a result
of  the  Merger,  it  is  anticipated  that  HQ Global will be consolidated into
FrontLine.

13. SEGMENT DISCLOSURE (UNAUDITED)

     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.


                                     IV-28
<PAGE>

               RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
                        (D/B/A FRONTLINE CAPITAL GROUP)
                    DECEMBER 31, 1999 AND 1998 - (CONTINUED)

13. SEGMENT DISCLOSURE (UNAUDITED) - (CONTINUED)

     The  CODM  evaluates  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 131 for the
years ended December 31,1999 and 1998 (in thousands).


<TABLE>
<CAPTION>
                                                             DECEMBER 31, 1999
                                ----------------------------------------------------------------------------
                                 EXECUTIVE OFFICE SUITES
                                           AND                                    OTHER
                                 VIRTUAL OFFICE SERVICES     E-BUSINESSES      OPERATIONS          TOTAL
                                -------------------------   --------------   --------------   --------------
<S>                             <C>                         <C>              <C>              <C>
TOTAL ASSETS ................           $ 332,457             $   61,207       $  148,319       $  541,983
                                        ---------             ----------       ----------       ----------
TOTAL OPERATING
 REVENUES ...................             215,043                     --              333          215,376
                                        ---------             ----------       ----------       ----------
TOTAL OPERATING
 EXPENSES ...................             187,449                     --               --          187,449
                                        ---------             ----------       ----------       ----------
OTHER INCOME
 (EXPENSES), BENEFIT FOR
 INCOME TAXES, AND
 MINORITY INTEREST ..........             (30,223)                    --          (26,952)         (57,175)
                                        ---------             ----------       ----------       ----------
EQUITY IN EARNINGS
 (LOSS) OF PARTNER
 COMPANIES AND OTHER
 OWNERSHIP INTEREST .........                  --                (10,904)             305          (10,599)
                                        ---------             ----------       ----------       ----------
NET INCOME (LOSS) ...........           $  (2,629)            $  (10,904)      $  (26,314)      $  (39,847)
                                        ---------             ----------       ----------       ----------
</TABLE>

<TABLE>
<CAPTION>
                                                            DECEMBER 31, 1998
                                -------------------------------------------------------------------------
                                 EXECUTIVE OFFICE SUITES
                                           AND                                   OTHER
                                 VIRTUAL OFFICE SERVICES     E-BUSINESSES     OPERATIONS        TOTAL
                                -------------------------   --------------   ------------   -------------
<S>                             <C>                         <C>              <C>            <C>
TOTAL ASSETS ................           $ 23,176               $ 7,101        $  28,566       $  58,843
                                        --------               -------        ---------       ---------
TOTAL OPERATING
 REVENUES ...................                 --                    --              336             336
                                        --------               -------        ---------       ---------
TOTAL OPERATING
 EXPENSES ...................                 --                    --               --              --
                                        --------               -------        ---------       ---------
OTHER INCOME
 (EXPENSES), BENEFIT FOR
 INCOME TAXES, AND
 MINORITY INTEREST ..........                 --                    --           (4,517)         (4,517)
                                        --------               -------        ---------       ---------
EQUITY IN EARNINGS
 (LOSS) OF PARTNER
 COMPANIES AND OTHER
 OWNERSHIP INTEREST .........                (95)                  (30)          (3,841)         (3,966)
                                        --------               -------        ---------       ---------
NET INCOME (LOSS) ...........           $    (95)              $   (30)       $  (8,022)      $  (8,147)
                                        --------               -------        ---------       ---------
</TABLE>

                                     IV-29
<PAGE>

               RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
                        (D/B/A FRONTLINE CAPITAL GROUP)
                   DECEMBER 31, 1999 AND 1998 - (CONTINUED )

14. QUARTERLY FINANCIAL DATA (UNAUDITED)

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


<TABLE>
<CAPTION>
                                                        FIRST         SECOND         THIRD         FOURTH
1999                                                   QUARTER       QUARTER        QUARTER       QUARTER
--------------------------------------------------- ------------- ------------- -------------- -------------
<S>                                                 <C>           <C>           <C>            <C>
Revenues reported by the Company ..................  $        83   $        83   $        83    $        83
Revenues reported by VANTAS .......................       46,775        52,588        58,081         57,600
                                                     -----------   -----------   -----------    -----------
Total revenues ....................................       46,858        52,671        58,164         57,683
Expenses reported by the Company ..................        1,667         8,755         6,846          9,684
Expenses reported by VANTAS .......................       46,049        52,038        58,545         79,830
                                                     -----------   -----------   -----------    -----------
Total expenses ....................................       47,716        60,793        65,391         89,514
Minority interest .................................         (466)         (322)          398         19,180
Loss on ownership interests .......................         (631)       (1,392)       (4,911)        (3,665)
                                                     -----------   -----------   -----------    -----------
Net loss ..........................................  $    (1,955)  $    (9,836)  $   (11,740)   $   (16,316)
                                                     ===========   ===========   ===========    ===========
Basic and diluted net loss per weighted average
 common share .....................................  $     (0.08)  $     (0.40)  $     (0.47)   $     (0.59)
                                                     ===========   ===========   ===========    ===========
Basic and diluted weighted average common
 shares outstanding ...............................   24,686,042    24,712,383    25,163,301     27,812,667
                                                     ===========   ===========   ===========    ===========
</TABLE>


<TABLE>
<CAPTION>
                                                      FIRST           SECOND      THIRD           FOURTH
1998                                                 QUARTER         QUARTER      QUARTER         QUARTER
-----------------------------------------------   -------------   -------------   -------------   -------------
<S>                                               <C>             <C>             <C>             <C>
Total revenues ................................    $       47      $      205     $      495      $      595
                                                   ----------      ----------     ----------      ----------
Total expenses ................................           400             595          1,004           3,525
                                                   ----------      ----------     ----------      ----------
Loss on ownership interests ...................          (424)            (26)          (735)         (2,780)
                                                   ----------      ----------     ----------      ----------
Net loss ......................................    $     (777)     $     (416)    $   (1,244)     $   (5,710)
                                                   ==========      ==========     ==========      ==========
Basic and diluted net loss per weighted average
 common share .................................    $    (0.20)     $    (0.09)    $    (0.05)     $    (0.23)
                                                   ==========      ==========     ==========      ==========
Basic and diluted weighted average common
 shares outstanding ...........................     3,864,573       4,513,975     24,685,514      24,685,514
                                                   ==========      ==========     ==========      ==========
</TABLE>

     The  above  quarterly information for 1998 has been restated to reflect the
Company's early adoption of SOP 98-5.



                                     IV-30
<PAGE>
Exhibits

<TABLE>
<CAPTION>
  EXHIBIT
  NUMBER                                                       DESCRIPTION
----------  ----------------------------------------------------------------------------------------------------------------------
<S>        <C>
 3.1(1)    Certificate of Incorporation
 3.2       Amended and Restated By-Laws of Registrant
 3.3(6)    Amended and Restated Certificate of Incorporation
 4.1(1)    Specimen Share Certificate of Common Stock
 4.2       Specimen Warrant W-1, dated December 7, 1999, in the name Elliot S. Cooperstone to purchase 100,000 shares of common
           stock
 4.3       Specimen Warrant W-2, dated December 7, 1999, in the name H. Thach Pham to purchase 100,000 shares of common stock
 4.4       Specimen Option O-1, dated December 7, 1999, in the name of Reckson Service Industries, Inc. to purchase 394,737
           shares of common stock of eSourceOne,
           Inc. owned by Elliot S. Cooperstone
 4.5       Specimen Option O-2, dated December 7, 1999, in the name of Reckson Service Industries, Inc. to purchase 394,737
           shares of common stock of eSourceOne,
           Inc. owned by H. Thach Pham
 4.9(14)   Certificate of Designations Establishing and Fixing the Rights of Series A-1 Cumulative Preferred Stock
 4.10(14)  Certificate of Designations Establishing and Fixing the Rights of Series A-2 Cumulative Preferred Stock
 4.11(14)  Certificate of Designations Establishing and Fixing the Rights of Series A-3 Cumulative Preferred Stock
 4.12(14)  Certificate of Designations Establishing and Fixing the Rights of Series A-4 Cumulative Preferred Stock
 4.13(14)  Certificate of Designations Establishing and Fixing the Rights of Series A-5 Cumulative Preferred Stock
 4.14(14)  Certificate of Designations Establishing and Fixing the Rights of Series A-6 Cumulative Preferred Stock
 4.16(14)  Specimen Warrant W-1, dated March 7, 2000, in the name Gorham Partners, L.P. to purchase 1,000,000 shares of common stock
 4.17(14)  Specimen  Warrant W-2, dated March 7, 2000, in the name Gorham Partners III, L.P. to purchase 30,000 shares of common
           stock
 4.18(14)  Specimen Warrant W-3, dated March 7, 2000, in the name Gorham Partners International,  Inc. to purchase 50,000 shares
           of common stock
10.0       Subscription Agreement as of February 7, 2000, by and between Reckson Service Industries, Inc. and VANTAS
           Incorporated
10.1(6)    Intercompany Agreement between Reckson Operating Partnership, L.P. and Reckson Service Industries, Inc. dated May
           13, 1998
10.2A      Amended and Restated Credit Agreement between Reckson Operating Partnership, L.P. and Reckson Service Industries,
           Inc. relating to the operations of
           Reckson Strategic Venture Partners, LLC dated August 4, 1999
10.2B      Amended and Restated Credit Agreement between Reckson Operating Partnership, L.P. and Reckson Service Industries,
           Inc. relating to the operations of
           Reckson Service Industries, Inc. dated August 4, 1999
10.2C(12)  Amendment to Amended and Restated Credit Agreements between Reckson Operating Partnership, L.P. and Reckson Service
           Industries dated November 30,
           1999
10.3(1)    Limited Liability Company Agreement of OnSite Ventures, LLC
10.4(1)    Limited Liability Company of RSVP Holdings, LLC
10.5A(1)   Operating Agreement of Reckson Strategic Venture Partners, LLC
10.5B(1)   Supplemental Agreement to Operating Agreement of Reckson Strategic Venture Partners, LLC
10.6(1)    Registration Rights Agreement between Reckson Service Industries, Inc. and certain affiliates thereof dated May 13,
           1998
10.7(6)    Loan Agreement regarding On-Site Convertible Loans
10.8A(1)   Stock Option Plan
10.8B(6)   1998 Employee Stock Option Plan
10.8C(7)   1999 Stock Option Plan
10.8D      2000 Employee Stock Option Plan
10.9(1)    Employment Agreement of Steven H. Shepsman
10.10(1)   Employment Agreement of Seth B. Lipsay
10.11(1)   Limited Liability Company Agreement of Interoffice Superholdings, LLC by and among Interoffice Superholdings, LLC,
           RSI I/O Holdings, Inc., JAH I/O, LLC
           and Rieger I/O LLC
10.12      Fifth Amended and Restated Stockholders' Agreement, dated by and among VANTAS Incorporated and certain
           securityholders indentified therein
10.13(2)   Letter Agreement dated November 9, 1998 by and between JAH I/O LLC and Reckson Management Group, Inc., Reckson
           Service Industries, Inc., RSI I/O
           Holdings, Inc., and Reckson Office Centers, LLC
10.14(2)   Letter Agreement by and between Reckson Service Industries, Inc., and RFIA, LLC
10.15(3)   Amended and Restated Operating Agreement of Assisted Living Investments LLC
10.16(4)   Operating Agreement of Dominion Venture Group LLC
10.17(5)   Agreement and Plan of Merger by and among Alliance National Incorporated, Alliance Holding Inc., Interoffice
           Superholdings Corporation and Interoffice
           Superholdings, LLC
10.18(5)   Agreement and Plan of Merger by and among Alliance National Incorporated, ANI Holdings, Inc., Reckson Executive
           Centers, Inc., and Reckson Office Centers,
           LLC
10.19(6)   $44 million Senior Secured Promissory Note of On-Site Ventures, LLC
10.20(8)   Investor Rights Agreement, by and among OnSite Access, Inc. and certain investors and individuals within management
10.21(8)   Voting Agreement, by and among OnSite Access, Inc. and certain investors
10.22(8)   Purchase Agreement regarding Series B, Series C and Series D Preferred Stock of OnSite Access, Inc.
10.23(9)   Series D Convertible Preferred Stock Securities Purchase Agreement, dated as of July 29, 1999 by and among VANTAS
           Incorporated and several Purchasers
10.24(10)  Stock Purchase Agreement, dated as of August 10, 1999, by and among eSourceOne, Inc., Reckson Service Industries,
           Inc. and RSI ESO, Inc.
10.25(10)  Registration Rights Agreement, dated as of August 10, 1999, by and among eSourceOne, Inc., Reckson Service
           Industries, Inc., RSI ESO, Inc., Elliott S.
           Cooperstone and H. Thach Pham
10.26(10)  Stockholders' Agreement, dated as of August 10, 1999, by and among eSourceOne, Inc. and certain stockholders
10.27(11)  Stock Purchase Agreement, dated as of August 19, 1999, among Reckson Service Industries, Inc., RSI I/O Holdings,
           Inc., Cahill, Warnock Strategic Partners Fund
           L.P., Strategic Associates, L.P. and David L. Warnock
10.28(11)  Letter Agreement, dated as of September 23, 1999, among Reckson Service Industries, Inc., RSI I/O Holdings, Inc.,
           RSI-OnSite Holdings LLC, RSI-OSA
           Holdings, Inc., JAH Realties, L.P., Veritech Ventures LLC and JAH I/O LLC
10.29(11)  Letter of Amendment to Letter Agreement, dated as of September 23, 1999, among Reckson Service Industries, Inc., RSI
           I/O Holdings, Inc., RSI-OnSite
           Holdings LLC, RSI-OSA Holdings, Inc., JAH Realties, L.P., Veritech Ventures LLC and JAH I/O LLC
10.30(12)  Credit Agreement, dated November 30, 1999, by and among Reckson Service Industries, Inc. and Warburg Dillon Read,
           LLC and UBS AG, Stamford Branch
</TABLE>

                                     IV-31
<PAGE>
<TABLE>
<CAPTION>
   EXHIBIT
   NUMBER                                                 DESCRIPTION
------------ ----------------------------------------------------------------------------------------------------------------------
<S>          <C>
10.31(12)    Equity Interest Pledge and Security Agreement, dated November 30, 1999, by and among the parties therein and UBS
             AG, Stamford Branch
10.32(12)    Interest Rate Cap Agreement, Pledge and Security Agreement, dated November 30, 1999, among Reckson Service
             Industries, Inc. and Warburg Dillon Read,
             LLC and UBS AG, Stamford Branch
10.33(12)    November 30, 1999 Promissory Note for $60,000,000 to the order of UBS AG, Stamford Branch
10.34(13)    Agreement and Plan of Merger by and among HQ Global Workplaces, Inc. and CarrAmerica Realty Corporation and VANTAS
             Incorporated and Reckson
             Service Industries, Inc., dated as of January 20, 2000
10.35(13)    Stock Purchase Agreement between CarrAmerica Realty Corporation and Reckson Service Industries, Inc., dated as of
             January 20, 2000
10.36(13)    Stock Purchase Agreement among CarrAmerica Realty Corporation, OmniOffices (UK) Limited and OmniOffices (Lux) 1929
             Holding Company S.A. and
             VANTAS Incorporated and Reckson Service Industries, Inc., dated as of January 20, 2000
10.37(8)     Certificate of Designation of Series A, Series B, Series C and Series D Preferred Stock of OnSite Access, Inc.
10.38(13)    Form of Stockholders Agreement by and among HQ Global Workplaces, Inc., Reckson Service Industries, Inc.,
             CarrAmerica Realty Corporation and certain
             other stockholders of HQ Global Workplaces, Inc.
10.39        Amended and Restated Credit Agreement among VANTAS, Various Banks, and Paribas, as agent, dated as of January 16,
             1997, as amended and restated as
             of November 6, 1998 and August 3, 1999
10.40        Exchange Agreement, dated December 7, 1999, by and among Reckson Service Industries, Inc., Elliot S. Cooperstone
             and H. Thach Pham
10.41        Warrant Registration Rights Agreement, dated December 7, 1999, by and among Reckson Service Industries, Inc.,
             Elliot S. Cooperstone and H. Thach Pham
10.42(14)    Warrant Registration Rights Agreement, dated as of March 7, 2000 between Reckson Service Industries, Inc., and
             Gotham Partners, L.P., Gotham Partners III, L.P. and Gotham Partners International, Ltd.
12.1         Statement of Ratios of Earnings to Fixed Charges
21.1         Statement of Subsidiaries of Reckson Service Industries, Inc.
23.0         Consent of Independent Accountants
24.1         Powers of Attorney (included in Part IV of this Form 10-K)
27.0         Financial Data Schedule
</TABLE>
1 Previously  filed  as  an  exhibit  to Registration Statement on Form S-1 (No.
   333-44419) and incorporated herein by reference.

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

3 Previously  filed  as  an exhibit to the Company's Form 8-K filed with the SEC
   on September 8, 1998 and incorporated herein by reference.

4 Previously  filed  as  an exhibit to the Company's Form 8-K filed with the SEC
   on September 11, 1998 and incorporated herein by reference.

5 Previously  filed  as  an exhibit to the Company's Form 8-K filed with the SEC
   on December 1, 1998 and incorporated herein by reference.

6 Previously  filed  as an exhibit to the Company's Form 10-K filed with the SEC
   on March 31, 1999 and incorporated herein by reference.

7   Previously  filed  as an exhibit to Registration Statement on Form S-8 filed
   with the SEC on July 29, 1999 and incorporated herein by reference.

8 Previously  filed  as  an exhibit to the Company's Form 8-K filed with the SEC
   on July 16, 1999 and incorporated herein by reference.

9 Previously  filed  as  an exhibit to the Company's Form 8-K filed with the SEC
   on August 31, 1999 and incorporated herein by reference.

10 Previously  filed  as an exhibit to the Company's Form 8-K filed with the SEC
   on September 1, 1999 and incorporated herein by reference.

11 Previously  filed  as an exhibit to the Company's Form 8-K filed with the SEC
   on October 12, 1999 and incorporated herein by reference.

12 Previously  filed  as an exhibit to the Company's Form 8-K filed with the SEC
   on December 13, 1999 and incorporated herein by reference.

13 Previously  filed  as an exhibit to the Company's Form 8-K filed with the SEC
   on January 25, 2000 and incorporated herein by reference.

14 Previously  filed  as an exhibit to the Company's Form 8-K filed with the SEC
   on March 28, 2000 and incorporated herein by reference.
                                     IV-32