UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-K/A
                                (AMENDMENT NO. 1)

|X|               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the Fiscal Year Ended December 31, 2001

                                       OR

|_|             TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                 For the Transition Period from ______ to ______

                         Commission File Number 0-21849

                          METROPOLIS REALTY TRUST, INC.
             (Exact name of registrant as specified in its charter)

            MARYLAND                                              13-3910684
(State or other jurisdiction of                                 (IRS Employer
 incorporation or organization)                              Identification No.)

                                 410 Park Avenue
                                   14th Floor
                            New York, New York 10022
          (Address of principal executive offices, including zip code)

                                 (212) 655-0220
              (Registrant's telephone number, including area code)

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

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

                                 Title of Class
                Class A Common Stock, par value $10.00 per share

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 |_|
<PAGE>

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of 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. |X|

As of March 15, 2002, there were 13,004,946 shares of the registrant's Common
Stock issued and outstanding.

Of the registrant's 13,004,946 shares of Common Stock issued and outstanding,
approximately 8,658,193 shares are held by affiliates of the registrant and
approximately 4,346,753 shares are held by non-affiliates of the registrant.

The Common Stock is not listed on any exchange; the Company does not intend to
list the Common Stock on any exchange in the near term; there is not currently a
public market for the Common Stock; and there can be no assurance that an active
trading market for the Common Stock will develop or be sustained.

                      DOCUMENTS INCORPORATED BY REFERENCE:

The Exhibits to (i) the Company's Registration Statement on Form 10, as amended,
(ii) the Company's definitive Information Statement on Schedule 14C, filed with
the Commission on October 29, 1999, and (iii) the Company's Annual Report on
Form 10-K filed with the Commission on March 30, 2000 are hereby incorporated by
reference in Part IV of this Annual Report on Form 10-K.


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<PAGE>

                                TABLE OF CONTENTS

PART I ......................................................................  1
   ITEM 1.  BUSINESS ........................................................  1
   ITEM 2.  PROPERTY ........................................................  9
   ITEM 3.  LEGAL PROCEEDINGS ............................................... 14
   ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ............. 14

PART II ..................................................................... 14
   ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
            MATTERS ......................................................... 14
   ITEM 6.  SELECTED FINANCIAL DATA ......................................... 16
   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
            AND RESULTS OF OPERATIONS ....................................... 17
   ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ...... 20
   ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ..................... 21
   ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
            AND FINANCIAL DISCLOSURE ........................................ 33

PART III .................................................................... 34
   ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT .............. 34
   ITEM 11. EXECUTIVE COMPENSATION .......................................... 36
   ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT .. 39
   ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .................. 42

PART IV ..................................................................... 45
   ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
            FORM 8-K ........................................................ 45

             CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
           PROVISIONS OF THE SECURITIES LITIGATION REFORM ACT OF 1995

      WHEN USED IN THIS ANNUAL REPORT ON FORM 10-K, THE WORDS "BELIEVES,"
"ANTICIPATES," "EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS. STATEMENTS LOOKING FORWARD IN TIME ARE INCLUDED IN
THIS ANNUAL REPORT ON FORM 10-K PURSUANT TO THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH STATEMENTS ARE SUBJECT TO
CERTAIN RISKS AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY, INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH IN "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND
"BUSINESS -- QUALIFICATION AS A REIT". READERS ARE CAUTIONED NOT TO PLACE UNDUE
RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE
HEREOF OR THEREOF. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY REVISE THESE
FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES OCCURRING AFTER
THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS. THE
COMPANY'S ACTUAL RESULTS OR OUTCOMES MAY DIFFER MATERIALLY FROM THOSE
ANTICIPATED.


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<PAGE>

                                     PART I

ITEM 1. BUSINESS

      Business

      Metropolis Realty Trust, Inc., a Maryland corporation (the "Company"), is
a real estate investment trust (a "REIT"), which was formed on May 13, 1996. The
Company's principal assets consist of its interests in 1290 Partners, L.P., a
Delaware limited partnership (the "1290 Property Owning Partnership") through
which it owns 1290 Avenue of the Americas (the "1290 Property"), as described
below under "ITEM 2. -- PROPERTY." The Company's principal business objective is
to operate the 1290 Property in a manner that will maximize the 1290 Property's
revenues and value and in turn maximize funds from operations and stockholder
value. As further described under "ITEM 13. -- CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS -- Asset Manager" and " -- Management and Leasing Agreements," the
1290 Property Owning Partnership has retained Capital Trust, Inc. (the "Asset
Manager") to serve as asset manager and Tishman Speyer Properties, L.P. (the
"Property Manager/Leasing Agent") to serve as property manager/leasing agent to
manage the day-to-day operations of the 1290 Property.

      Competition

      Numerous office building properties in New York City compete with the 1290
Property in attracting tenants to lease space. Some of these competing
properties are newer or better located than the 1290 Property. The amount of
space available in competitive commercial properties in the New York City area
could have a material effect on the 1290 Property Owning Partnership's ability
to lease space in the 1290 Property and on the rents charged. However, the 1290
Property is currently approximately 99% leased. Over the next five years,
approximately 28% of the total rentable square feet of the building is subject
to expiring leases, of which 7% has been leased to an existing tenant as
expansion space at the 1290 Property. See "Item 2 -- Property."

      Employees

      The Company does not have any employees. The 1290 Property Owning
Partnership is a party to labor agreements with respect to union employees
employed at the 1290 Property. The Property Manager/Leasing Agent has employed
such union employees on behalf of the 1290 Property Owning Partnership. The
Company believes that there are no unfunded retiree benefits liabilities under
the pension plans established pursuant to the labor agreements referred to
above.

      Qualification as a REIT

      The Company has elected to be taxed as a REIT under Sections 856 through
860 of the Internal Revenue Code of 1986, as amended (the "Internal Revenue
Code"), commencing with its taxable year ended December 31, 1996. As a REIT, the
Company (subject to certain exceptions) generally will not be subject to federal
income taxation on income it distributes to stockholders. For any year in which
the Company does not meet the requirements for qualifying to be taxed as a REIT,
it will be taxed as a corporation. Although the Company believes that it will
operate in such a manner so as to qualify to be taxed as a REIT, qualification
as a REIT involves the application of highly technical and complex Internal
Revenue Code provisions for which there are only limited judicial or
administrative interpretations. The determination of various factual matters and
circumstances not entirely within the Company's control may affect its ability
to qualify and to continue to qualify as a REIT. Moreover, no assurance can be
given that legislation, new regulations, administrative interpretations or court
decisions will not change

<PAGE>

the tax laws with respect to qualification as a REIT or the Federal income tax
consequences of such qualification.

      To obtain the tax treatment accorded to a REIT under the Internal Revenue
Code, the Company generally will be required each year to distribute to its
stockholders at least 90% of its taxable income. The Company will be subject to
income tax on any of its undistributed taxable income and net capital gains, and
to a 4% nondeductible excise tax on the amount, if any, by which certain
distributions paid by it with respect to any calendar year are less than the sum
of 85% of its ordinary income plus 95% of its capital gain net income for the
calendar year, plus 100% of its undistributed income from prior years.

      The Company intends to make distributions to its stockholders to comply
with the distribution provisions of the Internal Revenue Code and to avoid
Federal income taxes and the nondeductible 4% excise tax. A substantial portion
of the Company's income will consist of the income of the 1290 Property Owning
Partnership and the Company's cash flow will consist primarily of distributions
from the 1290 Property Owning Partnership.

      Differences in timing between the receipt of income and the payment of
expenses in arriving at taxable income of the Company or the 1290 Property
Owning Partnership, the effect of nondeductible capital expenditures, the
creation of reserves or required debt amortization payments could require the
Company to borrow funds on a short-term or long-term basis to meet the
distribution requirements that are necessary to continue to qualify as a REIT.
In such circumstances, the Company might need to borrow funds to avoid adverse
tax consequences even if the Company's management believes that the then
prevailing market conditions generally are not favorable for such borrowings or
that such borrowings are not advisable in the absence of such tax
considerations. There is no assurance that the Company will be able to continue
to satisfy the annual distribution requirement so as to qualify as a REIT.

      In order for the Company to qualify as a REIT under the Internal Revenue
Code, not more than 50% in value of its outstanding stock may be owned, directly
or indirectly, by five or fewer individuals (defined in the Internal Revenue
Code to include certain entities) during the last half of a taxable year (other
than the first year) (the "Five or Fewer Requirement"), and such shares of stock
must be beneficially owned by 100 or more persons during at least 335 days of a
taxable year of 12 months (other than the first year) or during a proportionate
part of a shorter taxable year. In order to protect the Company against the risk
of losing its status as a REIT on account of a concentration of ownership among
its stockholders, the Company's Amended and Restated Articles of Incorporation
(the "Charter"), subject to certain exceptions, provides that no Person (as
defined in the Charter) may beneficially own, or be deemed to own by virtue of
the attribution provisions of the Internal Revenue Code, more than 7.9% (the
"Ownership Limit") of the aggregate value of the Company's shares of stock. The
restrictions contained in the Charter, however, may not ensure that the Company
will be able to satisfy the Five or Fewer Requirement in all cases. If the
Company fails to satisfy such requirement, the Company's status as a REIT will
terminate, and the Company will not be able to prevent such termination. If the
Company were to fail to qualify as a REIT in any taxable year, the Company would
be subject to Federal income tax (including any applicable alternative minimum
tax) on its taxable income at regular corporate rates, and would not be allowed
a deduction in computing its taxable income for amounts distributed to its
stockholders. Moreover, unless entitled to relief under certain statutory
provisions, the Company also would be ineligible for qualification as a REIT for
the four taxable years following the year during which qualification was lost.
Such disqualification would reduce the net earnings of the Company available for
investment or distribution to its stockholders due to the additional tax
liability of the Company for the years involved.


                                       2
<PAGE>

      Subject to certain exceptions, the Charter does not permit any person to
acquire or own (either actually or constructively under the applicable
attribution rules of the Code) more than the Ownership Limit. In addition, no
holder may own or acquire (either actually or constructively under the
applicable attribution rules of the Code) shares of any class of the Company's
common stock, par value $10.00 per share (the "Common Stock"), if such ownership
or acquisition (i) would cause more than 50% in value of the outstanding Common
Stock to be owned by five or fewer individuals or (ii) would otherwise result in
the Company failing to qualify as a REIT. The Charter provides that the
foregoing ownership restrictions will not apply to persons designated by Apollo
Real Estate Investment Fund, L.P. ("Apollo") provided that the aggregate
percentage by which all individuals permitted, by designation, to exceed the
Ownership Limit will not be greater than 10%.

      Any attempted acquisition (actual or constructive) of Common Stock by a
person who, as a result of such acquisition, would violate certain of the
limitations set forth in the Charter will cause the Common Stock purportedly
transferred to be automatically transferred to the trustee of a trust for the
benefit of a charitable beneficiary and such shares will not be entitled to
voting rights or rights to distributions and the transfer resulting in such
violation may be deemed void ab initio. Violations of the ownership limitations
may result in a repurchase by the Company of shares in excess of the Ownership
Limit.

      Certain Federal Income Tax Considerations for Stockholders

      The following is a summary of the principal United States federal income
tax considerations regarding the ownership and disposition of the Common Stock
and is for general information only. This summary does not address all tax
consequences that may be applicable to a beneficial owner of the Common Stock,
including tax considerations that arise from rules of general application to all
taxpayers or to certain classes of investors or that are generally assumed to be
known by investors. The discussion below is addressed to holders that acquire
the Common Stock as capital assets. It does not discuss state, local or foreign
tax consequences and does not address

      o     persons that may be subject to special treatment or special
            circumstances under United States federal income tax law, such as
            banks and other financial institutions, insurance companies, thrift
            institutions, regulated investment companies, real estate investment
            trusts, tax-exempt entities, dealers in securities or currencies, or
            traders in securities that elect mark to market treatment;

      o     persons that will hold the Common Stock as part of a position in a
            "straddle" or as part of a "hedging", "conversion" or other
            integrated investment transaction for United States federal income
            tax purposes; or

      o     persons whose functional currency is not the U.S. dollar.

      If an entity treated as a partnership for United States federal income tax
purposes holds the Common Stock, the tax treatment of a partner will generally
depend upon the status of the partner and the activities of the partnership. If
you are a partner of a partnership holding the Common Stock, you should consult
your own tax advisors. For the purposes of this discussion, the term "U.S.
Holder" means a holder that is (1) a citizen or resident of the United States;
(2) a corporation or other entity taxable as a corporation created or organized
under the laws of the United States or any of its political subdivisions; (3) an
estate the income of which is subject to U.S. federal income taxation regardless
of its source; or (4) a trust if a U.S. court is able to exercise primary
supervision over administration of the trust and one or more United States
persons (as defined in section 7701(a)(30) of the Code) have authority to
control all substantial decisions of the trust.


                                       3
<PAGE>

      The discussion below is based on the Code, Treasury Regulations, Internal
Revenue Service rulings and pronouncements and judicial decisions as of the date
hereof, all of which are subject to change (possibly with retroactive effect).

      EACH PROSPECTIVE PURCHASER IS ENCOURAGED TO CONSULT ITS OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE OWNERSHIP, AND SALE OR OTHER
DISPOSITION OF THE COMMON STOCK, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN
AND OTHER TAX CONSEQUENCES OF SUCH OWNERSHIP, DISPOSITION AND OF POTENTIAL
CHANGES IN APPLICABLE TAX LAWS.

      Taxation of U.S. Holders

      Distributions

      In any year in which the Company qualifies to be taxed as a REIT,
distributions made to a U.S. Holder from current or accumulated earnings and
profits will be taxed to the U.S. Holder as ordinary income, except that
distributions of net capital gains designated by the Company as capital gain
distributions will be taxed to holders of Common Stock as long-term capital
gains. Distributions distributed by the Company are not eligible for the
dividends-received deduction. To the extent that distributions are not made out
of current or accumulated earnings and profits, they will constitute a return of
capital, rather than distribution or capital gain income, and will reduce the
tax basis in the U.S. Holder's Common Stock with respect to which the
distribution is paid or, to the extent that they exceed the basis, will be taxed
in the same manner as gain from the sale of such Common Stock. The Company may
elect to retain long-term capital gains and pay corporate-level income tax on
them and treat the retained gains as if they had been distributed to holders of
the Common Stock. In this case, each U.S. Holder would include in income, as
long-term capital gain, its proportionate share of the undistributed gains and
would be deemed to have paid its proportionate share of the tax paid by the
Company with respect thereto. In addition, the basis for a U.S. Holder's Common
Stock would be increased by the amount of the undistributed long-term capital
gain included in its income, less the amount of the tax it is deemed to have
paid with respect thereto.

      Sale, Exchange or Redemption of the Common Stock

      Gain or loss upon a sale or exchange of the Common Stock generally will be
treated as long-term capital gain or loss, if such Common Stock has been held as
a capital asset for more than one year. If the Common Stock is redeemed, such
redemption will be a taxable event to U.S. Holders. Generally, redemption of the
Common Stock for cash will be treated as a sale or exchange if the redemption:

      o     results in a "complete termination" of the holder's interest in the
            Company under Section 302(b)(3) of the Code;

      o     is "substantially disproportionate" with respect to the holder under
            Section 302(b)(2) of the Code; or

      o     is "not essentially equivalent to a distribution" with respect to
            the holder under Section 302(b)(l) of the Code.

      If the redemption of the Common Stock satisfies any of the foregoing tests
with respect to a holder, such holder will recognize gain or loss based on the
difference between the amount of cash or fair market value of property received
and the U.S. Holder's tax basis in the redeemed Common Stock. If


                                       4
<PAGE>

the redemption does not satisfy any of the foregoing tests, the gross proceeds
will be treated as a distribution taxable as ordinary income or capital gain to
the extent of the Company's current or accumulated earnings and profits and any
excess will be treated first as a return of capital to the extent of the
holder's tax basis in the redeemed Common Stock and then as a gain from the sale
or exchange of such Common Stock, as described above under "-- Taxation of U.S.
Holders".

      Information Reporting Requirements and Backup Withholding Tax

      The Company will report to its stockholders and the Internal Revenue
Service the amount of ordinary and capital gains distributions paid or deemed
paid during each calendar year, and the amount of tax withheld or deemed paid,
if any.

      Under certain circumstances, a U.S. Holder of the Common Stock may be
subject to backup withholding on payments made with respect to, or cash proceeds
of a sale or exchange of, the Common Stock. Backup withholding will apply only
if the holder:

      o     fails to furnish the person required to withhold with its Taxpayer
            Identification Number ("TIN") which, for an individual, would be his
            or her Social Security Number;

      o     furnishes an incorrect TIN;

      o     is notified by the IRS that it has failed properly to report
            payments of interest and distributions; or

      o     under certain circumstances, fails to certify, under penalty of
            perjury, that it has furnished a correct TIN and has not been
            notified by the IRS that it is subject to backup withholding for
            failure to report interest and distribution payments.

      Backup withholding will not apply with respect to payments made to certain
exempt recipients, such as corporations and tax-exempt organizations. A U.S.
Holder should consult with a tax advisor regarding qualification for exemption
from backup withholding and the procedure for obtaining such an exemption.
Backup withholding is not an additional tax. Rather, the amount of any backup
withholding with respect to a payment to a U.S. Holder will be allowed as a
credit against such U.S. Holder's U.S. federal income tax liability and may
entitle such U.S. Holder to a refund, provided that the required information is
furnished to the IRS.

      Taxation of Non-U.S. Holders

      The rules governing U.S. federal income taxation of a nonresident alien
individual or a non-U.S. corporation (a "Non-U.S. Holder") are complex and no
attempt will be made herein to provide more than a limited summary of such
rules. Prospective Non-U.S. Holders should consult with their own tax advisors
to determine the impact of U.S. federal, state and local income tax laws with
regard to an investment in Common Stock, including any reporting requirements.

      Distributions

      Distributions, other than distributions that are treated as attributable
to gain from sales or exchanges by the Company of U.S. real property interests
(discussed below) and other than distributions designated by the Company as
capital gain dividends, will be treated as ordinary income to the extent that
they are made out of current or accumulated earnings and profits of the Company.
Such distributions to


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<PAGE>

Non-U.S. Holders will ordinarily be subject to a withholding tax equal to 30% of
the gross amount of the distribution, unless an applicable tax treaty reduces
that tax. However, if income from the investment in the Common Stock is treated
as effectively connected with the Non-U.S. Holder's conduct of a U.S. trade or
business, the Non-U.S. Holder generally will be subject to tax at graduated
rates in the same manner as U.S. Holders are taxed with respect to such
dividends (and may also be subject to the 30% branch profits tax if the
stockholder is a foreign corporation).

      The Company expects to withhold U.S. tax at the rate of 30% on the gross
amount of any dividends, other than dividends treated as attributable to gain
from sales or exchanges of U.S. real property interests and capital gain
dividends, paid to a Non-U.S. Holder, unless (i) a lower treaty rate applies and
the required form evidencing eligibility for that reduced rate is filed with the
Company or the appropriate withholding agent or (ii) the Non-U.S. Holder files
an IRS Form W-8ECI (or a successor form) with the Company or the appropriate
withholding agent claiming that the distributions are "effectively connected"
income.

      Capital Gain Dividends

      For any year in which the Company qualifies as a REIT, distributions that
are attributable to gain from sales or exchanges by the Company of U.S. real
property interests will be taxed to a Non-U.S. Holder under the provisions of
the Foreign Investment in Real Property Tax Act of 1980, as amended ("FIRPTA").
Under FIRPTA, these distributions are taxed to a Non-U.S. Holder as if such gain
were effectively connected with a U.S. business. Thus, subject to any applicable
alternative minimum tax (and special alternative minimum tax in the case of
nonresident alien individuals), Non-U.S. Holders will be taxed on such
distributions at a maximum of 20% U.S. federal capital gains tax rate (or 25% to
the extent such dividends are attributable to certain "depreciation recapture"
with respect to real properties). The Company generally is required by
applicable Treasury Regulations under FIRPTA to withhold at a rate of 35% (or
possibly a lower rate under certain circumstances) on any distribution that
could be designated by the Company as a capital gain dividend. The amount
withheld is creditable against the Non-U.S. Holder's U.S. tax liability.

      Sales of Common Stock

      Gain recognized by a Non-U.S. Holder upon a sale or exchange of Common
Stock generally will not be taxed under FIRPTA if the Company is a "domestically
controlled REIT," defined generally as a REIT in respect of which at all times
during a specified testing period less than 50% in value of the Company's shares
is and was held directly or indirectly by foreign persons. It is currently
anticipated that the Company will continue to be a "domestically controlled
REIT," and, therefore, that the sale of Common Stock will not be subject to
taxation under FIRPTA. However, gain not subject to FIRPTA will be taxable to a
Non-U.S. Holder if (i) investment in the Common Stock is treated as "effectively
connected" with the Non-U.S. Holder's U.S. trade or business, in which case the
Non-U.S. Holder will be subject to the same treatment as U.S. Holders with
respect to such gain, or (ii) the Non-U.S. Holder is a nonresident alien
individual who was present in the United States for 183 days or more during the
taxable year and has a "tax home" in the United States, or maintains an office
or a fixed place of business in the United States to which the gain is
attributable, in which case the nonresident alien individual will be subject to
a 30% tax on the individual's capital gains. A similar rule will apply to
capital gain dividends not subject to FIRPTA.


                                       6
<PAGE>

      Policy with Respect to Certain Activities

      Investments

      As indicated above, the Company's principal asset consists of its interest
in the 1290 Property Owning Partnership through which it owns the 1290 Property.
The Company's principal business objective is to operate the 1290 Property in a
manner that will maximize the 1290 Property's revenues and value and in turn
maximize funds from operations and stockholder value. The Company has not made
any investments during the last three fiscal years other than its investment in
the 1290 Property and the 237 Property (as defined below), and does not
anticipate that it will make any additional investments of any nature (including
investments in real estate) in the future.

      On November 23, 1999, the Company sold all of its interests in the
property located at 237 Park Avenue (the "237 Property") for an aggregate
purchase price of $372,000,000, subject to customary prorations and certain
adjustments. Such prorations and adjustments reduced the aggregate purchase
price to approximately $357,862,000.

      The Charter provides that the Company may not sell the 1290 Property or
consummate any acquisition of any asset in excess of $25 million which is
unrelated to the 1290 Property without the affirmative vote of the Company's
stockholders holding at least 66 2/3% of the outstanding shares of the Company's
Common Stock. This provision of the Charter may not be amended without the
affirmative vote of the Company's stockholders holding at least 66 2/3% of the
outstanding shares of the Company's Common Stock.

      Issuance of Senior Securities

      Pursuant to the Company's Charter, the Board of Directors has the right,
without the consent of the Company's stockholders, to issue Preferred Stock in
one or more series consisting of such number of shares and having such
preferences, conversion and other rights, voting powers, restrictions and
limitations as to dividends, qualifications and terms and conditions of
redemption as the Board of Directors may from time to time determine. The
Company has not made any issuance of Preferred Stock during the last three
fiscal years, and does not anticipate that it will do so in the future.

      Borrowing

      The Company does not presently have any policy with respect to the amounts
that the Company may borrow. In December 1999, the 1290 Property Owning
Partnership refinanced mortgage indebtedness secured by the 1290 Property of
approximately $224,900,000 and obtained a $425,000,000 mortgage loan (the "1290
Mortgage Loan"). Interest on the 1290 Mortgage Loan is based on LIBOR plus 2%
and requires interest only payments through maturity on January 2, 2003. The
Company does not anticipate that it will borrow any additional amounts in the
future.

      Lending

      The Company does not presently have any policy pertaining to the Company's
ability to make loans to third parties. The Company has not made any loans to
third parties during the last three fiscal years, and does not anticipate that
it will do so in the future.


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<PAGE>

      Underwriting

      The Company does not presently have any policy pertaining to the Company's
ability to underwrite the securities of other issuers. The Company has not
underwritten the securities of any issuer during the last three fiscal years,
and does not anticipate that it will do so in the future.

      Issuance of Securities in Exchange for Property

      In accordance with the Company's Charter, the Board of Directors has the
right, without the consent of the Company's stockholders, to issue from time to
time shares of the Company's stock of any class or series, or securities or
rights convertible into shares of the Company's stock, for such consideration as
the Board of Directors deems advisable in its sole discretion. The Company has
not issued any shares of its Common Stock in exchange for any property during
the last three fiscal years, and does not anticipate that it will do so in the
future.

      Repurchasing of Shares

      In accordance with the Company's Charter, the Company has the right to
repurchase or redeem shares of the Common Stock in order to preserve the
Company's status as a REIT. This right may only be amended by the affirmative
vote of the Company's stockholders holding at least 66 2/3% of the outstanding
shares of the Company's Common Stock. The Company has not repurchased or
redeemed any of its outstanding shares of Common Stock during the last three
fiscal years, and does not anticipate that it will do so in the future.

      Reporting

      The Company files each year with the Securities and Exchange Commission
quarterly reports on Form 10-Q and an annual report on Form 10-K. The Company's
quarterly report on Form 10-Q contains unaudited financial statements of the
Company for the fiscal quarter to which such quarterly report relates. The
Company's annual report on Form 10-K contains audited financial statements of
the Company for the fiscal year to which such annual report relates, and such
audited financial statements are certified by an independent public accountant.
Copies of the Company's Form 10-K for the prior fiscal year and Form 10-Q for
the most recent fiscal quarter have been provided by the Company to its
stockholders in connection with each annual meeting of the Company's
stockholders. The Company intends to continue making such filings with the
Securities and Exchange Commission and providing such reports to its
stockholders in connection with annual stockholder meetings for so long as the
Company is registered under the Securities Exchange Act of 1934, as amended.

      Recent Developments

      On April 16, 2002, the Company entered into an agreement to sell all of
its interests in the 1290 Property to an affiliate of Jamestown ("Jamestown"), a
real estate investment and management company with offices in Atlanta, Georgia
and Cologne, Germany. On May 7, 2002, the Company entered into an amended and
restated agreement to sell all of its interests in the 1290 Property to an
affiliate of Jamestown. The purchase price under the amended and restated
agreement is $745,500,000, subject to certain adjustments and customary
prorations. The transaction is expected to close during the third quarter of
2002, although there can be no assurance that the sale will be consummated. If
the transaction is consummated, the Company will no longer own any real estate
assets and intends to dissolve and distribute its net assets to its
stockholders.


                                       8
<PAGE>

ITEM 2. PROPERTY

      The 1290 Property

      The 1290 Property Owning Partnership holds the fee title to the 1290
Property and all improvements thereon. The 1290 Property, completed in 1963, is
a 43-story, first class commercial office building with approximately 2,000,000
rentable square feet of space. The building is centrally located in midtown
Manhattan and is connected to the famed "Rockefeller Center" complex via an
underground passageway.

      The average occupancy rates for the 1290 Property for the years 1997
through 2001 were approximately 97%, 99%, 99%, 99% and 99%, respectively.

      As of December 31, 2001, the 1290 Property was approximately 99% leased
and there were leases and license agreements with 31 tenants and 8 licensees
covering approximately 1,960,000 rentable square feet of space. For the years
ended December 31, 2001, 2000, 1999, 1998 and 1997, the annual average rent
(including electricity and additional rent payable on account of operating
expenses, porters wage, and real estate tax escalations) for office space leased
in the building was approximately $45.86, $43.87, $43.02, $40.89 and $41.00 per
square foot, respectively. For the year ended December 31, 2001, approximately
72,000 square feet of space was under lease to retail tenants, at an average
annual rent (including electricity and additional rent payable on account of
operating expenses, porters wage and real estate tax escalations) of
approximately $82.58 per rentable square foot. As of December 31, 2001,
approximately 5,000 rentable square feet of storage space was available for
rent.

      The building serves as the corporate headquarters of The Equitable Life
Assurance Society of the United States (also known as AXA Financial Advisors)
("Equitable"). In addition to Equitable, the building houses a variety of
tenants, including financial institutions, entertainment companies and law
firms.


                                       9
<PAGE>

      The following table summarizes certain information regarding the largest
leases at the 1290 Property as of December 31, 2001, including the leases of
Equitable and Warner Communications, Inc. ("Warner") which each occupy in excess
of ten percent (10%) of the rentable square footage at the Property:

<TABLE>
<CAPTION>
                                                                            Annual Base
                                                             Leased          Rent per          Gross Rent          Date(s) of
                                                             Square         Square Foot        per Square            Lease
Tenant                           Nature of Business         Footage(1)       Leased(2)       Foot Leased(3)        Expiration
------                           ------------------         ----------       ---------       --------------        ----------
<S>                              <C>                         <C>             <C>                <C>                <C>
Equitable (AXA Financial         Insurance/Financial         777,578         $38.16(4)          $42.89(4)           12/31/11(5)
Advisors)                        Services

Warner Communications, Inc.      Entertainment               226,373         $41.91(6)          $45.59(6)            6/30/12(7)

Robinson Silverman               Law Firm                    125,744         $52.29(8)          $58.53(8)            3/31/04

The Bank of New York             Financial Services          107,448         $39.44(9)          $42.78(9)           12/31/10(10)

EMI Entertainment World, Inc.    Entertainment               104,553         $37.95(11)         $43.29(11)           9/30/02(12)

Deutsche Bank, AG                Financial Services          100,380         $41.00             $44.99               2/14/14

Morrison Foerster                Law Firm                     93,606         $50.19(13)         $56.33(13)           9/30/12(14)

ABN-AMRO                         Financial Services           87,626         $57.00(15)         $63.07(15)          10/31/14

GMAC                             Financial Services           81,892         $33.50             $37.66              12/31/10

Other Office and Retail Tenants  Various                     259,948         $50.57             $58.16             2001-2016
</TABLE>

(1)   Leased square footage does not include approximately 7,700 square feet of
      vacant storage space and the building office.

(2)   Annual Base Rent means the amount contractually due (excluding adjustments
      related to recoveries from tenants for operating expenses, porters wage,
      real estate taxes, utilities or other items and rent concessions) for the
      year ended December 31, 2001. The Company believes that base rent is a
      conservative and appropriate measure for comparative purposes of
      commercial real estate rental revenue from office building properties that
      do not generate percentage rents based on sales.

(3)   Gross Rent means Annual Base Rent plus recoveries from tenants for
      operating expenses, porters wage, real estate taxes, utilities and other
      items.

(4)   Does not include 42,110 square feet leased in the basement at an Annual
      Base Rent of $28.01 per square foot and Gross Rent of $28.26 per square
      foot.

(5)   Leases with Equitable expire December 31, 2015 (with respect to 13,689
      square feet), December 31, 2011 (with respect to 626,668 square feet and
      38,454 square feet in the basement) and December 31, 2008 (with respect to
      95,111 square feet and 3,656 square feet in the basement).

(6)   Does not include 2,615 square feet of space leased in the basement at an
      Annual Base Rent of $22.00 per square foot and Gross Rent of $24.50 per
      square foot.

(7)   Leases with Warner expire September 30, 2004 (with respect to 66,367
      square feet) and June 30, 2012 (with respect to 157,391 square feet and
      2,615 square feet in the basement).

(8)   Does not include 1,800 square feet of space leased in the basement at an
      Annual Base Rent of $24.00 per square foot and Gross Rent of $24.75 per
      square foot.


                                       10
<PAGE>

(9)   Does not include 11,633 square feet of space leased in the basement at an
      Annual Base Rent and Gross Rent of $45.00 per square foot.

(10)  Leases with The Bank of New York expire April 30, 2003 (with respect to
      31,402 square feet and 11,633 square feet in the basement) and December
      31, 2010 (with respect to 64,413 square feet).

(11)  Does not include 2,456 square feet of space leased in the basement at an
      Annual Base Rent of $26.80 per square foot and Gross Rent of $30.84 per
      square foot.

(12)  Leases with EMI expire September 30, 2002 (with respect to 75,474 square
      feet and 923 square feet in the basement) and September 30, 2012 (with
      respect to 26,623 square feet and 1,533 square feet in the basement). Of
      the space expiring September 30, 2002, Morrison Foerster has leased 75,474
      square feet through September 30, 2012. EMI has the option to terminate
      its lease effective September 30, 2007 by giving the 1290 Property Owning
      Partnership written notice on or before September 30, 2006 and by paying a
      termination fee of $1,258,000.

(13)  Does not include 879 square feet of space leased in the basement at an
      Annual Base Rent of $28.00 per square foot and Gross Rent of $30.36 per
      square foot.

(14)  Leases with Morrison & Forester expire on February 28, 2003 (with respect
      to 17,468 square feet) and September 30, 2012 (with respect to 75,259
      square feet and 879 square feet in the basement).

(15)  Does not include 6,746 square feet of space leased in the basement at an
      Annual Base Rent and Gross Rent of $26.65 per square foot.

      The renewal provisions set forth in the leases of Equitable and Warner,
the two tenants occupying in excess of 10% of the rentable square footage at the
1290 Property, are summarized below.

      Equitable has the option to renew its lease on an "as is" basis with
respect to all or a specific portion of the space currently leased by it for one
additional term of either five or ten years. In order to exercise the option,
Equitable must occupy at least 50% of the total square footage originally leased
by it. The option must be exercised by Equitable at least 18 months prior to the
lease's expiration date of December 31, 2011. The renewal rent to be paid by
Equitable would be an amount equal to the fair market rent for the space as
determined on the date the renewal option is exercised, multiplied by a discount
factor of either 97.5% (for a five-year option) or 95% (for a ten-year option).

      Warner has the option to renew its lease on the 4th floor of the 1290
Property on an "as is" basis for an additional term of five years. Warner must
exercise the option at least 12 months prior to the lease's expiration date of
September 30, 2004, and Warner must occupy all such space. The renewal rent to
be paid by Warner would be the greater of (i) the fair market rent for the space
as determined six months prior to the commencement date of the extension term,
and (ii) the current fixed annual rent inclusive of taxes and operating
escalation payments.

      Warner has the option to renew its lease for the 23rd through 29th floors
of the 1290 Property on an "as is" basis for one additional term of five years.
Warner must exercise the option at least 18 months prior to the lease's
expiration date of June 30, 2012 and Warner must occupy at least 70% of the
total space originally leased by it. The renewal option does not apply to any
space on the 23rd through 29th floors surrendered by Warner prior to the option
exercise date. The renewal rent to be paid by Warner would be the greater of (i)
the discounted fair market rent (which is equal to (a) the fair market rent for
such space determined on the date on which the renewal term begins, multiplied
by (b) 95%, plus (c) taxes and operating escalation payments made in respect of
such space), and (ii) (x) the current annual fixed rent, less (y) eighteen cents
per square foot, plus (z) any additional charges for taxes and operating
escalation payments due immediately prior to the expiration date of the lease.


                                       11
<PAGE>

      Expenditures for capital projects for the 1290 Property in 2001 aggregated
approximately $477,000 and related primarily to (i) the completion of the
elevator modernization program; (ii) the completion of a 100-ton chiller
installation for the lobby; (iii) the upgrade and modernization of the video
surveillance system; and (iv) the modernization of the truck lift. Anticipated
expenditures for capital projects for the 1290 Property in 2002 are
approximately $75,000 (which amount shall be paid out of the Company's net cash
flow) and relate to the completion of the modernization of the trucklift. Any
assessment of additional taxes against the Company in respect of such
improvement would be immaterial.

      As of December 31, 2001, the aggregate gross and adjusted tax basis of the
building, improvements, furniture and equipment relating to the 1290 Property
are, for federal income tax purposes, approximately $545,000,000 and
$215,000,000, respectively. In general, the majority of the tax basis in the
building is being depreciated over an 18 to 19 year period using the ACRS method
of depreciation. Building and tenant improvements are generally depreciated over
a 31 to 39 year period using the straight-line method of depreciation.


                                       12
<PAGE>

      The following table shows anticipated lease expirations on an aggregate
basis for each calendar year from 2002 through and including 2011. Such chart
assumes that there will be no early terminations of leases and that leases
expire without extension by existing tenants pursuant to lease options.

<TABLE>
<CAPTION>
                                        Rentable                           Percentage of Total
                                      Square Feet                            Property Owning
                                      Subject to     Annual Base Rent      Partnership Annual
Year of Lease         Number of        Expiring       Represented by      Base Rent Represented
 Expiration        Leases Expiring      Leases       Expiring Leases        by Expiring Leases
-------------      ---------------    -----------    ----------------     ---------------------
<S>                      <C>            <C>             <C>                       <C>
    2002                  4             102,660         $ 2,613,096                3.17%

    2003                  3              61,075         $ 2,957,440                3.50%

    2004                  5             234,757         $11,476,188               14.71%

    2005                  8              54,754         $ 2,901,468                3.99%

    2006                  3              94,538         $ 3,894,336                5.62%

    2007                 --                  --                  --                  --

    2008                  2             116,070         $ 6,168,528                9.12%

    2009                  1              10,000         $   150,000                 .24%

    2010                  2             146,305         $ 6,279,314                9.86%

    2011                  1             665,122         $25,171,284               43.82%
</TABLE>

      Annual real estate taxes assessed against the 1290 Property for the fiscal
year ending June 30, 2002 and for each of the fiscal years ended June 30, 2001,
2000, and 1999 were $18,076,000, $17,442,000, $17,755,000, and $17,964,000,
respectively, which amounts were calculated on assessed values of approximately
$186,120,000, $178,560,000, $185,400,000, and $175,500,000, respectively. See --
Other Assets -- "Tax Certiorari Proceedings and Tenant Reimbursement Claims."

      In December 1999, the 1290 Property Owning Partnership refinanced mortgage
indebtedness secured by the 1290 Property of approximately $224,900,000 and
obtained the 1290 Mortgage Loan. Interest on the 1290 Mortgage Loan is based on
LIBOR plus 2% and requires interest only payments through maturity on January 2,
2003. The principal amount owed under the 1290 Mortgage Loan as of December 31,
2001 was $425,000,000. The 1290 Property Owning Partnership has a one time right
(subject to achieving certain conditions, including a debt service coverage
ratio, loan to value ratio and the payment of a 25 basis point extension fee),
at its option, to extend the maturity for a period of twelve months. The 1290
Mortgage Loan may be repaid in whole without penalty.

      In the opinion of the Company's management, the 1290 Property is
adequately covered by insurance.

      The 237 Property

      A wholly-owned subsidiary of the Company owned the 237 Property and all
improvements thereon through November 22, 1999. On November 22, 1999, the
Company sold all of its interests in the 237 Property for an aggregate purchase
price of $372,000,000, subject to customary prorations and certain adjustments.
Such prorations and adjustments reduced the aggregate purchase price to
approximately $357,862,000.


                                       13
<PAGE>

      Other Assets

      Tax Certiorari Proceedings and Tenant Reimbursement Claims

      Tax certiorari proceedings have been settled with the City of New York for
over-assessment of property taxes for the tax years ending June 30, 1991 through
June 30, 1996 with respect to the 1290 Property. The Company received net
proceeds of approximately $6,519,000 in December 2000 after payment of
approximately $876,000 of fees and expenses incurred in connection with such
proceedings. Of this amount, approximately $3,211,000 was expected to be
reimbursed to tenants and was included in restricted cash as of December 31,
2000. During 2001, approximately $2,027,000 was reimbursed to tenants. The
remaining balance of $1,184,000 is included in restricted cash as of December
31, 2001. The net proceeds were approximately $3,800,000 in excess of estimated
net proceeds and were included in miscellaneous income in 2000.

      Tax certiorari proceedings have been commenced which remain outstanding
against the City of New York for over-assessment of property taxes for the tax
years ending June 30, 1997 through June 30, 2001 with respect to the 1290
Property.

ITEM 3. LEGAL PROCEEDINGS

      There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business of the Company, against or
involving the Company, the 1290 Property Owning Partnership or the 1290
Property.

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

      The Annual Meeting of Stockholders for fiscal year 2001 was held on
January 22, 2002. At such meeting, the stockholders of the Company (i) elected
William L. Mack, Lee S. Neibart, Bruce H. Spector, John R.S. Jacobsson, John R.
Klopp, Russel S. Bernard, David A. Strumwasser and David Roberts as directors of
the Company, each of their terms to expire in 2002, and (ii) ratified Deloitte &
Touche LLP as the Company's independent auditors for the year ended December 31,
2001.

                                    PART II

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

      The Common Stock is not listed on any exchange, the Company does not
intend to list the Common Stock on any exchange in the near term, there is not
currently a public market for the Common Stock and there can be no assurance
that an active trading market for the Common Stock will develop or be sustained.
On October 10, 2001, the classification of the Common Stock into two classes of
Common Stock terminated pursuant to the terms of the Charter. All shares of
Class A and Class B Common Stock were automatically converted into a single
class of Class A Common Stock. As of March 15, 2002, there were approximately
111 holders of record of the Company's Class A Common Stock.

      Distribution Policy

      On March 6, 1997, the Board of Directors adopted a distribution policy
calling for regular quarterly distributions. The Board of Directors, in its sole
discretion, determines the actual distribution rate based on a number of
factors, including the amount of cash available for distribution, the Company's
financial condition, capital expenditure requirements for the 1290 Property, the
annual distribution requirements under the REIT provisions of the Internal
Revenue Code and such other factors as the Board of Directors deems relevant.
The Company intends to make distributions to comply with the REIT distribution
requirements. In order to maintain its qualification as a REIT, the Company must
make


                                       14
<PAGE>

annual distributions to stockholders of at least 90% of its taxable income
(excluding capital gains). The Company has made the following distributions for
its two most recent fiscal years:

                                                          Amount of Distribution
Date of Distribution        Type of Distribution                (Per Share)
--------------------        --------------------          ----------------------
April 13, 2000                     Regular                        $.15
July 13, 2000                      Regular                        $.15
October 12, 2000                   Regular                        $.15
December 14, 2000                  Regular                        $.25
April 16, 2001                     Regular                        $.25
July 16, 2001                      Regular                        $.25
October 19, 2001                   Regular                        $.25
December 28, 2001                  Regular                        $.25

      On March 20, 2002 the Company announced a regular quarterly dividend of
$0.25 per share, which is payable on April 15, 2002 to stockholders of record as
of March 29, 2002.


                                       15
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

      The following table sets forth selected historical financial data.

CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands, except share amounts)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                              Years Ended December 31,

                                                   2001              2000              1999              1998              1997
                                                   ----              ----              ----              ----              ----
<S>                                            <C>               <C>               <C>               <C>               <C>
REVENUES
   Rental income                               $     91,030      $     90,073      $    126,434      $    134,754      $    129,617
   Lease termination income                              --                --            26,455                --                --
   Miscellaneous income                               2,936             5,245             4,669             4,889             1,190
                                               ------------      ------------      ------------      ------------      ------------
      Total revenues                                 93,966            95,318           157,558           139,643           130,807
                                               ------------      ------------      ------------      ------------      ------------

OPERATING EXPENSES
   Real estate taxes                                 17,821            18,266            27,414            27,733            26,813
   Operating and maintenance                          5,518             5,173             6,756             7,119             7,224
   Utilities                                          9,450             8,186             6,991             6,674             6,870
   Payroll                                            3,480             3,091             4,323             4,430             4,332
   Management fees                                    1,820             1,770             2,198             2,298             2,121
   Professional fees                                    524               932             1,960             3,451             2,055
   General and administrative                           328               430               980               562             1,032
   Bad debt expense                                   1,301                --               585                --               329
   Depreciation and amortization                     11,981            11,680            16,245            14,466            13,347
                                               ------------      ------------      ------------      ------------      ------------
      Total operating expenses                       52,223            49,528            67,452            66,733            64,123
                                               ------------      ------------      ------------      ------------      ------------

OTHER ITEMS
   Interest income                                      973             2,917             3,759             3,293             3,676
   Interest expense                                 (41,400)          (41,464)          (33,582)          (35,800)          (36,233)
   Write-off of note receivable                          --                --            (1,088)               --                --
   Write-off of deferred financing costs                 --                --            (2,307)               --                --
                                               ------------      ------------      ------------      ------------      ------------
      Total other items                             (40,427)          (38,547)          (33,218)          (32,507)          (32,557)
                                               ------------      ------------      ------------      ------------      ------------

GAIN ON SALE OF PROPERTY                                 --                --            50,445                --                --
                                               ------------      ------------      ------------      ------------      ------------

GAIN ON REPURCHASE OF MINORITY INTEREST              13,009                --                --                --                --
                                               ------------      ------------      ------------      ------------      ------------

NET INCOME                                     $     14,325      $      7,243      $    107,333      $     40,403      $     34,127
                                               ============      ============      ============      ============      ============

Net Income Per Common Share:

Net income                                     $       1.10      $        .56      $       8.27      $       3.12      $       2.63
                                               ------------      ------------      ------------      ------------      ------------
Weighted average common shares outstanding       13,004,307        12,997,699        12,971,262        12,967,153        12,963,963
                                               ------------      ------------      ------------      ------------      ------------

Net Income Per Common Share (assuming
dilution):

Net income                                     $       1.10      $        .56      $       8.26      $       3.11      $       2.63
                                               ------------      ------------      ------------      ------------      ------------
Weighted average common shares
outstanding (assuming dilution)                  13,004,307        13,000,699        12,998,646        12,993,666        12,988,963
                                               ------------      ------------      ------------      ------------      ------------

Total assets as of year end                    $    460,346      $    477,076      $    475,276      $    767,771      $    757,932
                                               ------------      ------------      ------------      ------------      ------------

Long-term debt as of year end                  $    425,000      $    425,000      $    425,000      $    410,625      $    418,125
                                               ------------      ------------      ------------      ------------      ------------

Cash dividends declared per common share       $       1.00      $        .70      $      31.50      $       1.50      $       2.75
                                               ------------      ------------      ------------      ------------      ------------
</TABLE>


                                       16
<PAGE>

On November 22, 1999, the Company sold the 237 Property. The following
represents the condensed results of operations for the 237 Property for the
period January 1, 1999 through November 21, 1999:

                                                 (In thousands)

      REVENUES:
      Rental income                                 $ 43,618
      Lease termination income                        25,855
      Miscellaneous income                               495
                                                    --------

      Total revenues                                  69,968
                                                    --------

      OPERATING EXPENSES:
      Real estate taxes                                9,324
      Operating and maintenance                        2,300
      Utilities                                          572
      Payroll                                          1,539
      Management fees                                    635
      Professional fees                                  515
      General and administrative                         285
      Depreciation and amortization                    5,624
                                                    --------

      Total operating expenses                        20,794
                                                    --------

      OTHER ITEMS:
      Interest income                                  1,100
      Interest expense                               (11,801)
                                                    --------
      Total other items                              (10,701)
                                                    --------

      NET INCOME                                    $ 38,473
                                                    ========

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

      The following discussion should be read in conjunction with Selected
Financial Data and the financial statements included in "ITEM 6. -- SELECTED
FINANCIAL DATA" and "ITEM 8. -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA."

      Overview

      The Company was formed on May 13, 1996 and commenced operations on October
10, 1996. The Company is a Maryland corporation that qualifies as a REIT for tax
purposes.

      Prior to November 22, 1999, the Company owned and operated the 237
Property and the 1290 Property. On November 22, 1999, the Company sold its
interests in the 237 Property. Consequently, the Company's principal business
objective is to operate the 1290 Property in a manner that will maximize the
1290 Property's revenues and value and in turn maximize funds from operations
and stockholder value.

      The 1290 Property is a 43-story Class A commercial office building with
approximately 2,000,000 rentable square feet of space. The building is centrally
located in midtown Manhattan and is connected to the famed "Rockefeller Center"
complex via an underground passageway. The 1290 Property serves as the corporate
headquarters for Equitable and is currently approximately 99% leased. Over the
next five years, approximately 28% of the total rentable area of the building is
subject to expiring leases, of which 7% has been leased to an existing tenant as
expansion space at the 1290 Property.


                                       17
<PAGE>

      The 1290 Property Owning Partnership has retained Tishman Speyer
Properties, L.P. to serve as the property manager and leasing agent, which is
responsible for managing the daily operations of the 1290 Property, and Capital
Trust, Inc. to serve as the Asset Manager. The Company has also entered into a
REIT Management Agreement with Tishman Speyer Properties, L.P. to perform
certain accounting, administrative and REIT compliance monitoring services.

      On October 10, 2001, the classification of the Common Stock into two
classes of Common Stock terminated pursuant to the terms of the Charter. All
shares of Class A and Class B Common Stock were automatically converted into a
single class of Class A Common Stock. As of December 31, 2001, 13,001,346 shares
of Class A Common Stock, par value $10.00 per share, were issued and
outstanding. The Common Stock of the Company is not listed on any exchange, and
the Company does not intend to list the Common Stock on any exchange in the near
term.

      The assets and results of operations of the 1290 Property are reported in
the consolidated financial statements of the Company using the consolidation
method of accounting.

      Historical Consolidated Statement of Income, year ended December 31, 2001

      Rental income for the year ended December 31, 2001 increased by
approximately $1,036, an increase of 1.2% from the year ended December 31, 2000.
This increase is primarily due to the commencement of new leases at higher
market rents and scheduled rent increases in existing leases.

      Miscellaneous income for the year ended December 31, 2001 decreased by
approximately $2,309, a decrease of 44.0% from the year ended December 31, 2000.
This decrease is primarily due to: (i) $2,100 that was recognized in December
2000 related to real estate tax refunds received for the tax years ending June
30, 1991 through June 30, 1996 and (ii) $1,000 that was received in June 2000
from a tenant at the 1290 Property in connection with the occupancy of space
that the tenant was previously subleasing and now leases directly. This decrease
is offset by an increase in tenant submetered electric charges of $629 during
2001.

      Operating expenses for the year ended December 31, 2001 were $52,223, an
increase of 5.4% from the year ended December 31, 2000. This increase is
primarily attributable to increases in (i) bad debt expense resulting from the
write-off of certain tenant receivables acquired from the Company's
predecessors, (ii) utility expense, (iii) payroll expense resulting from annual
wage increases and (iv) depreciation and amortization related to additions to
building and tenant improvements in 2000 and 2001. These increases were offset
by a decrease in professional fees as 2000 includes amounts incurred related to
the sale of the 237 Property. Operating expenses as a percentage of base rental
income and escalation income increased to 57.4% for the year ended December 31,
2001 as compared to 55% for the year ended December 31, 2000.

      Interest income for the year ended December 31, 2001 decreased by
approximately $1,944, a decrease of 66.7% from the year ended December 31, 2000.
This decrease was due to approximately $1,700 of interest income that was
recognized in December 2000 related to the receipt of real estate tax refunds
received in 2000. In addition, interest income decreased due to a decline in
interest rates during 2001 as compared to 2000.

      On March 23, 2001, the Company exercised its right to repurchase the 4.95%
limited partnership interest in the 1290 Property Owning Partnership (the
"Subordinated Minority Interest") that was owned by 237/1290 Upper Tier
Associates, L.P. (the "Upper Tier LP"), in accordance with the Agreement of
Limited Partnership of the 1290 Property Owning Partnership. The exercise of
such repurchase right resulted in a payment of approximately $1,400 by the
Company to the Upper Tier LP and a gain to the Company of $13,009.


                                       18
<PAGE>

      Historical Consolidated Statement of Income, year ended December 31, 2000

      Rental income for the year ended December 31, 2000 decreased by
approximately $36,361, a decrease of 28.8% from the year ended December 31,
1999. This decrease was the result of the sale of the 237 Property on November
22, 1999. This decrease is offset by an increase in base rents at the 1290
Property associated with new leases, and an increase in operating escalations at
the 1290 Property, which was primarily the result of an increase in utility
expense in 2000.

      Miscellaneous income in 1999 includes approximately $2,900 related to the
reversal of a reserve for utility tax claims settled during 1999. Miscellaneous
income in 2000 includes $2,100 that was recognized in December 2000 related to
the real estate tax refunds received for the tax years ending June 30, 1991
through June 30, 1996. Miscellaneous income in 2000 also included $1,000 that
was received in June 2000 from a tenant at the 1290 Property in connection with
the occupancy of space that the tenant was previously subleasing and now leases
directly.

      Operating expenses for the year ended December 31, 2000 were $49,528, a
decrease of 26.6% from the year ended December 31, 1999. This decrease was the
result of the sale of the 237 Property on November 22, 1999. This decrease is
partially offset by increases in utilities, repairs and maintenance, payroll and
management fees at the 1290 Property and an increase in depreciation and
amortization related to additions to building and tenant improvements in 1999
and 2000. Operating expenses as a percentage of base rental income and
escalation income is 55.0% in 2000 versus 53.3% in 1999.

      Interest income for the year ended December 31, 2000 decreased by
approximately $842, a decrease of 22.4% from the year ended December 31, 1999.
This decrease was the result of the sale of the 237 Property on November 22,
1999, and a reduction in cash held by the Company, offset by approximately
$1,700 of interest income that was recognized in December 2000 related to the
real estate tax refunds received for the tax years ending June 30, 1991 through
June 30, 1996.

      Interest expense for the year ended December 31, 2000 increased by
approximately $7,882, an increase of 23.5% from the year ended December 31,
1999. This increase is due to a higher level of mortgage indebtedness, a higher
interest rate on such indebtedness and an increase in the amortization of
deferred financing costs associated with such indebtedness.

      Liquidity and Capital Resources

      During 2001, the Company generated cash flows from operations of
approximately $13,747. The Company used this cash and cash on hand to pay
dividends in the amount of $13,001, pay leasing commissions of approximately
$2,069 and fund building and tenant improvements of approximately $614.

      At December 31, 2001, the Company had unrestricted cash on hand of
approximately $11,012. At December 31, 2000, the Company had unrestricted cash
on hand of approximately $15,066.

      In December 1999, the 1290 Property Owning Partnership refinanced mortgage
indebtedness secured by the 1290 Property of approximately $224,900, and
obtained the 1290 Mortgage Loan. Interest on the 1290 Mortgage Loan is based on
LIBOR plus 2% and requires interest only payments through maturity on January 2,
2003. The 1290 Property Owning Partnership has a one time right (subject to
achieving certain conditions, including a debt service coverage ratio, loan to
value ratio and the payment of a 25 basis point extension fee), at its option,
to extend the maturity for a period of twelve months. The 1290 Mortgage Loan may
be repaid in whole without penalty.


                                       19
<PAGE>

      Recent Pronouncements

      Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting
for Derivative Instruments and Hedging Activities, was implemented by the
Company on January 1, 2001. SFAS No. 133, as amended and interpreted,
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. All derivatives, whether designated as hedging relationships
or not, are required to be recorded on the balance sheet at fair value. If the
derivative is designated as a fair-value hedge, the changes in the fair value of
the derivative and the hedged item are recognized in earnings. If the derivative
is designated as a cash-flow hedge, the effective portion of changes in the fair
value of the derivative is recorded in other comprehensive (loss) income and
will be recognized in the income statement when the hedged item affects
earnings. The ineffective portion of changes in the fair value of the derivative
designated as a cash flow hedge is recognized in the income statement. SFAS No.
133 defines new requirements for designation and documentation of hedging
relationships as well as ongoing effectiveness assessments in order to use hedge
accounting. For a derivative that does not qualify as a hedge, changes in fair
value are recognized in earnings.

      On January 1, 2001, the Company recorded approximately $6,900 in other
comprehensive loss as a cumulative transition adjustment, to record its interest
rate swap agreement (see Note 4 to the Company's financial statements included
in response to Item 8 hereof) at its estimated fair value as of that date.

      In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long Lived Assets (effective January 1, 2002). SFAS
No. 144 supersedes existing accounting literature dealing with impairment and
disposal of long-lived assets, including discontinued operations. It addresses
financial accounting and reporting for the impairment of long-lived assets and
for long-lived assets to be disposed of, and expands current reporting for
discontinued operations to include disposals of a "component" of an entity that
has been disposed of or is classified as held for sale. The Company is in the
process of evaluating the financial statement impact of the adoption of this
standard.

      ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      The 1290 Property Owning Partnership and Morgan Stanley Derivative
Products, Inc. entered into an Interest Rate Exchange Agreement effective
December 13, 1999 (the "1290 Swap Agreement"). The 1290 Swap Agreement provides
that the 1290 Property Owning Partnership will pay interest at an effective rate
of 8.4995% per annum on the notional amount of $425,000. Management believes
that the risk of incurring losses related to the credit risk is remote and that
any losses would be immaterial.

      The maturity date of the 1290 Mortgage Loan and the termination date of
the 1290 Swap Agreement are identical. The estimate of the cost to unwind the
1290 Swap Agreement is approximately $19,439 at December 31, 2001. The Company
has no intention of unwinding the 1290 Swap Agreement.


                                       20
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          METROPOLIS REALTY TRUST, INC.
                          INDEX TO FINANCIAL STATEMENTS

                                                                            Page
                                                                            ----
HISTORICAL FINANCIAL STATEMENTS

   Independent Auditors' Report ...........................................   22

   Consolidated Balance Sheets as of December 31, 2001 and 2000 ...........   23

   Consolidated Statements of Income and Comprehensive Loss for
   the years ended December 31, 2001, 2000 and 1999 .......................   24

   Consolidated Statements of Stockholders' Equity for years ended
   December 31, 2001, 2000, and 1999 ......................................   25

   Consolidated Statements of Cash Flows for years ended December 31,
   2001, 2000 and 1999 ....................................................   26

   Notes to Consolidated Financial Statements .............................   27


                                       21
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Stockholders of Metropolis Realty Trust, Inc.

We have audited the accompanying consolidated balance sheets of Metropolis
Realty Trust, Inc. and Subsidiaries as of December 31, 2001 and 2000 and the
related consolidated statements of income and comprehensive loss, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 2001. 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 of America. 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Metropolis Realty Trust, Inc. and
Subsidiaries as of December 31, 2001 and 2000 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles generally accepted in
the United States of America.

Deloitte & Touche LLP
New York, New York
January 18, 2002


                                       22
<PAGE>

METROPOLIS REALTY TRUST, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
ASSETS                                                                              December 31,
                                                                                   2001           2000
                                                                                   ----           ----
<S>                                                                           <C>            <C>
Rental property - net of accumulated depreciation of $48,077 and $37,601,
   respectively                                                               $ 358,709      $ 368,152
Cash and cash equivalents                                                        11,012         15,066
Escrow deposits and restricted cash                                               7,506          5,669
Tenant security deposits                                                            203            228
Due from tenants - net of doubtful accounts of $0 and $2,745,
    respectively                                                                  2,138          4,874
Deferred financing costs - net of amortization of $8,830 and $4,515,
   respectively                                                                   4,101          8,401
Notes receivable                                                                    275            289
Deferred rent receivable                                                         50,119         48,828
Prepaid real estate taxes                                                         8,986          8,721
Deferred leasing costs, net of amortization of $4,132 and $2,627,
   respectively                                                                  17,016         16,451
Other assets                                                                        281            397
                                                                              ---------      ---------

TOTAL ASSETS                                                                  $ 460,346      $ 477,076
                                                                              =========      =========

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities

   Mortgage loan                                                              $ 425,000      $ 425,000
   Accounts payable and accrued expenses                                          8,009          8,327
   Tenants security deposits, unearned revenue and credits due tenants            2,135          5,463
   Derivative investment                                                         17,897             --
                                                                              ---------      ---------

Total Liabilities                                                               453,041        438,790
                                                                              ---------      ---------

Subordinated Minority Interest                                                       --         14,409
                                                                              ---------      ---------

Stockholders' Equity
   Preferred Stock - $10 par value, 10,000,000 shares authorized, none
   issued or outstanding
   Common Stock - $10 par value, 50,000,000 shares
   authorized, (13,001,346 Class A shares outstanding as of December
   31, 2001; 8,059,586 Class A shares and 4,936,060 Class B shares
   outstanding as of December 31, 2000)                                         130,013        130,012
   Paid-in capital                                                              175,847        175,847
   Accumulated Other Comprehensive Loss                                         (17,897)            --
   Deficit                                                                     (280,658)      (281,982)
                                                                              ---------      ---------

   Total Stockholders' Equity                                                     7,305         23,877
                                                                              ---------      ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                    $ 460,346      $ 477,076
                                                                              =========      =========
</TABLE>

      See notes to consolidated financial statements.


                                       23
<PAGE>

METROPOLIS REALTY TRUST, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE LOSS
(in thousands, except share amounts)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                        Years Ended December 31,

                                                                 2001              2000              1999
                                                                 ----              ----              ----
<S>                                                      <C>               <C>               <C>
REVENUES:
   Base rental income                                    $     86,165      $     85,129      $    114,983
   Lease termination income                                        --                --            26,455
   Operating escalation income                                  4,865             4,944            11,451
   Miscellaneous income                                         2,936             5,245             4,669
                                                         ------------      ------------      ------------
      Total revenues                                           93,966            95,318           157,558
                                                         ------------      ------------      ------------

OPERATING EXPENSES:
   Real estate taxes                                           17,821            18,266            27,414
   Operating and maintenance                                    5,518             5,173             6,756
   Utilities                                                    9,450             8,186             6,991
   Payroll                                                      3,480             3,091             4,323
   Management fees                                              1,820             1,770             2,198
   Professional fees                                              524               932             1,960
   General and administrative                                     328               430               980
   Bad debt expense                                             1,301                --               585
   Depreciation and amortization                               11,981            11,680            16,245
                                                         ------------      ------------      ------------
      Total operating expenses                                 52,223            49,528            67,452
                                                         ------------      ------------      ------------

OTHER ITEMS:
   Interest income                                                973             2,917             3,759
   Interest expense                                           (41,400)          (41,464)          (33,582)
   Write-off of note receivable                                    --                --            (1,088)
   Write-off of deferred financing costs                           --                --            (2,307)
                                                         ------------      ------------      ------------
      Total other items                                       (40,427)          (38,547)          (33,218)
                                                         ------------      ------------      ------------

GAIN ON SALE OF PROPERTY                                           --                --            50,445
                                                         ------------      ------------      ------------
GAIN ON REPURCHASE OF MINORITY INTEREST                        13,009                --                --
                                                         ------------      ------------      ------------

NET INCOME                                                     14,325             7,243           107,333

OTHER COMPREHENSIVE LOSS                                      (17,897)               --                --
                                                         ------------      ------------      ------------

COMPREHENSIVE (LOSS) INCOME                              $     (3,572)     $      7,243      $    107,333
                                                         ============      ============      ============

NET INCOME PER COMMON SHARE:

   Net income                                            $       1.10      $        .56      $       8.27
                                                         ------------      ------------      ------------
   Weighted average common shares outstanding              13,001,307        12,997,699        12,971,262
                                                         ------------      ------------      ------------

NET INCOME PER COMMON SHARE
(assuming dilution):

   Net income                                            $       1.10      $        .56      $       8.26
                                                         ------------      ------------      ------------
   Weighted average common shares outstanding
   (including 3,000 shares of common stock
   issuable upon the exercise of outstanding options
   as of December 31, 2001, 2000, and 1999,
   respectively)                                           13,004,307        13,000,699        12,998,646
                                                         ------------      ------------      ------------
</TABLE>

      See notes to consolidated financial statements.


                                       24
<PAGE>

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                 Retained            Total
                                               Common Stock       Paid-in        Earnings        Stockholders'
                                               at Par Value       Capital        (Deficit)           Equity
                                               ------------       -------        ---------       -------------
<S>                                              <C>             <C>             <C>               <C>
BALANCE, DECEMBER 31, 1998                       $129,706        $175,844        $  21,522         $ 327,072
Shares issued under Directors' Stock Plan             250              --               --               250
Net income                                             --              --          107,333           107,333
Dividends paid                                         --              --         (408,950)         (408,950)
                                                 --------        --------        ---------         ---------
BALANCE, DECEMBER 31, 1999                        129,956         175,844         (280,095)           25,705
Shares issued under Directors' Stock Plan              56               3               --                59
Net income                                             --              --            7,243             7,243
Dividends paid                                         --              --           (9,130)           (9,130)
                                                 --------        --------        ---------         ---------
BALANCE, DECEMBER 31, 2000                        130,012         175,847         (281,982)           23,877
Shares issued under Directors' Stock Plan               1              --               --                 1
Net income                                             --              --           14,325            14,325
Other comprehensive loss                               --              --          (17,897)          (17,897)
Dividends paid                                         --              --          (13,001)          (13,001)
                                                 --------        --------        ---------         ---------
BALANCE, DECEMBER 31, 2001                       $130,013        $175,847        ($298,555)        $   7,305
                                                 ========        ========        =========         =========
</TABLE>

See notes to consolidated financial statements.


                                       25
<PAGE>

METROPOLIS REALTY TRUST, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                               Years Ended December 31,

                                                                            2001          2000          1999
                                                                            ----          ----          ----
<S>                                                                       <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                $ 14,325      $  7,243      $ 107,333
Adjustments to reconcile net income to net cash provided by operating
activities:
   Gain on sale of property                                                     --            --        (50,445)
   Gain on purchase of minority interest                                   (13,009)           --             --
   Write-off of deferred financing costs                                        --            --          2,307
   Depreciation and amortization                                            16,297        15,987         17,440
   Bad debt expense                                                          1,301            --            585
   Write-off of note receivable                                                 --            --          1,088
   Change in:
      Increase in escrow deposits and restricted cash                       (1,836)       (2,490)        (2,516)
      Decrease/(increase) in due from tenants                                1,434        (2,427)         1,057
      Decrease/(increase)in tenant security deposits                            24            (2)           416
      (Increase)/decrease in prepaid expenses and other assets                (151)          149          5,345
      Decrease in real estate tax refunds                                       --         3,175          2,421
      Increase in deferred rent receivable                                  (1,291)       (2,719)       (15,229)
      (Decrease)/increase in accounts payable and accrued expenses             (30)         (373)         3,619
      (Decrease)/increase in tenant security deposits, unearned
      revenue and credits due tenants                                       (3,326)        4,000           (990)
                                                                          --------      --------      ---------
   Net cash provided by operating activities                                13,738        22,543         72,431
                                                                          --------      --------      ---------

CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from sale of property                                                  --            --        344,259
Additions to building and equipment                                         (1,033)       (4,155)       (12,308)
Leasing costs                                                               (2,357)       (2,982)       (21,250)
Changes in notes receivable                                                     14          (289)         8,218
                                                                          --------      --------      ---------
   Net cash (used) provided in investing activities                         (3,376)       (7,426)       318,919
                                                                          --------      --------      ---------

CASH FLOW FROM FINANCING ACTIVITIES:
Purchase of minority interest                                               (1,400)           --             --
Proceeds from mortgage note payable                                             --            --        425,000
Financing costs                                                                (16)          (93)       (12,823)
Payments on secured notes                                                       --            --       (410,625)
Dividends paid                                                             (13,001)       (9,130)      (408,950)
Distribution to subordinated minority interests                                 --            --           (446)
Issuance of shares of common stock                                               1            59            250
                                                                          --------      --------      ---------
   Net cash used in financing activities                                   (14,416)       (9,164)      (407,594)
                                                                          --------      --------      ---------

(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS                            (4,054)        5,953        (16,244)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                              15,066         9,113         25,357
                                                                          --------      --------      ---------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                  $ 11,012      $ 15,066      $   9,113
                                                                          ========      ========      =========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
    Interest paid                                                         $ 37,283      $ 34,046      $  32,387
                                                                          ========      ========      =========
    Dividends declared                                                    $ 13,001      $  9,100      $ 408,950
                                                                          ========      ========      =========

NON-CASH INVESTING AND FINANCING ACTIVITIES:
    Liabilities disposed of in connection with sale of property                 --            --      $ 170,009
                                                                          --------      --------      =========
</TABLE>

      See notes to consolidated financial statements.


                                       26
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
(in thousands, except share amounts)
--------------------------------------------------------------------------------

1.    BACKGROUND, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
      POLICIES

      Organization - Metropolis Realty Trust, Inc., a Maryland corporation
      ("Metropolis" or the "Company"), was formed on May 13, 1996 to facilitate
      the consummation of the Second Amended Joint Plan of Reorganization of 237
      Park Avenue Associates, L.L.C. ("237 LLC") and 1290 Associates, L.L.C.
      ("1290 LLC" and together with 237 LLC, the "Predecessors"), dated
      September 20, 1996 (the "Plan"). Pursuant to the Plan, on October 10,
      1996, the date operations commenced ("Effective Date"), the Company
      acquired the interests of 237 LLC and 1290 LLC in the properties located
      at 237 Park Avenue (the "237 Property") and 1290 Avenue of the Americas
      (the "1290 Property," and together with the 237 Property, the
      "Properties").

      On November 22, 1999, the Company sold all of its interests in the 237
      Property. Following such sale and as of December 31, 2000, the Company
      owned a 94.05% partnership interest, as limited partner, in 1290 Partners,
      L.P., a Delaware limited partnership (the "1290 Property Owning
      Partnership"). The 1290 Property Owning Partnership owns the 1290
      Property. A wholly-owned subsidiary of the Company ("1290 GP Corp.") owns
      a 1% interest, as general partner, in the 1290 Property Owning
      Partnership. The remaining 4.95% interest in the 1290 Property Owning
      Partnership was owned by 237/1290 Upper Tier Associates, L.P., a Delaware
      limited partnership (the "Upper Tier LP"). On March 23, 2001, the Company
      acquired the limited partnership interest held by the Upper Tier LP for
      $1,400 in accordance with the Agreement of Limited Partnership of the 1290
      Property Owning Partnership. Upon consummation of such transaction, as of
      December 31, 2001, the Company directly and indirectly owns 100% of the
      1290 Property Owning Partnership.

      Basis of Presentation - The consolidated financial statements include
      Metropolis and each of the entities through which Metropolis indirectly
      owns the Properties. All significant intercompany accounts and
      transactions have been eliminated in consolidation. Actual results could
      differ from those estimates. Certain 2000 and 1999 amounts have been
      reclassified to conform with the 2001 presentation.

      Rental Property - Rental property is carried at cost, net of accumulated
      depreciation and amortization, and includes land, building, tenant
      improvements and building improvements. Land is carried at $63,500, as of
      December 31, 2001 and 2000. Building, tenant improvements and building
      improvements are carried at $343,286 and $342,253 as of December 31, 2001
      and December 31, 2000, respectively. If a property is determined to be
      impaired, it must be written down to its estimated fair value. Fair value
      is defined as the amount for which the asset could be bought or sold in a
      current transaction, that is, other than a forced or liquidation sale. No
      impairment of the 1290 Property exists as of December 31, 2001 and 2000.

      Cash and Cash Equivalents - Cash and cash equivalents includes investments
      purchased with an original maturity of three months or less.

      Depreciation and Amortization - Building and building improvements are
      depreciated over their useful lives of 40 years using the straight-line
      method. Furniture and fixtures are depreciated over their useful lives,
      ranging from 5 to 7 years. Tenant improvements are amortized on a
      straight-line basis over the terms of the respective leases.


                                       27
<PAGE>

      Deferred Charges - Deferred financing costs are amortized over the term of
      the related loan. Direct costs related to leasing are amortized over the
      related lease term.

      Rental Income - Rental income is recognized on a straight-line basis over
      the terms of the related leases. Differences between actual base amounts
      due from tenant leases and the straight-line basis are included in
      deferred rent receivable.

      Escrow Deposits and Restricted Cash - Escrow deposits and restricted cash
      for the years ended December 31, 2001 and 2000 includes reserves for
      tenant improvements, leasing commissions, insurance, real estate taxes and
      real estate tax refunds.

      Recent Pronouncement - Statement of Financial Accounting Standards
      ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging
      Activities, was implemented by the Company on January 1, 2001. SFAS No.
      133, as amended and interpreted, establishes accounting and reporting
      standards for derivative instruments, including certain derivative
      instruments embedded in other contracts, and for hedging activities. All
      derivatives, whether designated as hedging relationships or not, are
      required to be recorded on the balance sheet at fair value. If the
      derivative is designated as a fair-value hedge, the changes in the fair
      value of the derivative and the hedged item are recognized in earnings. If
      the derivative is designated as a cash-flow hedge, the effective portion
      of changes in the fair value of the derivative is recorded in other
      comprehensive (loss) income and will be recognized in the income statement
      when the hedged item affects earnings. The ineffective portion of changes
      in the fair value of the derivative designated as a cash flow hedge is
      recognized in the income statement. SFAS No. 133 defines new requirements
      for designation and documentation of hedging relationships as well as
      ongoing effectiveness assessments in order to use hedge accounting. For a
      derivative that does not qualify as a hedge, changes in fair value are
      recognized in earnings.

      At January 1, 2001 the Company recorded approximately $6,900 in other
      comprehensive loss as a cumulative transition adjustment to record the
      1290 Swap Agreement (See Note 4) at its estimated fair value as of that
      date.

      In August 2001, the FASB issued SFAS No. 144, Accounting for the
      Impairment or Disposal of Long Lived Assets (effective January 1, 2002).
      SFAS No. 144 supersedes existing accounting literature dealing with
      impairment and disposal of long-lived assets, including discontinued
      operations. It addresses financial accounting and reporting for the
      impairment of long-lived assets and for long-lived assets to be disposed
      of, and expands current reporting for discontinued operations to include
      disposals of a "component" of an entity that has been disposed of or is
      classified as held for sale. The Company is in the process of evaluating
      the financial statement impact of the adoption of this standard.

      Use of Estimates - The presentation of the financial statements requires
      estimates and assumptions that affect the reported amounts of assets and
      liabilities as of December 31, 2001 and 2000 and the reported amounts of
      revenues and expenses during the reporting periods. Actual results could
      differ from those estimates.

      Fair Value of Financial Instruments - The carrying amount of cash and cash
      equivalents, escrow deposits and restricted cash, tenant security
      deposits, accounts receivable and accounts payable are a reasonable
      estimate of their fair value due to their short-term nature. Management
      believes the fair market value of the mortgage loan payable approximates
      the carrying value at December 31, 2001 and 2000. The fair value estimates
      presented herein are based on pertinent information available to
      management as of December 31, 2001 and 2000.


                                       28
<PAGE>

      Income Taxes - The Company qualifies as a REIT under the Internal Revenue
      Code, as amended, and will generally not be taxed at the corporate level
      on income it currently distributes to its stockholders so long as it,
      among other things, distributes at least 90% of its REIT taxable income.

2.    SALE OF PROPERTY

      On September 23, 1999, the Company entered into an Interest Purchase
      Agreement with 237 Park Investors, L.L.C., pursuant to which the Company
      agreed to sell all of its interests in the 237 Property for an aggregate
      purchase price of $372,000, subject to customary prorations and certain
      adjustments (the "237 Property Sale").

      On November 22, 1999, the Company consummated the 237 Property Sale and
      recognized a gain of $50,445. Net assets as of the date of sale were
      $293,814. The following represents the results of operations for the 237
      Property for the period January 1, 1999 through November 21, 1999:

            REVENUES:
            Base rental income                          $ 34,261
            Lease termination income                      25,855
            Operating escalation income                    9,357
            Miscellaneous income                             495
                                                        --------

            Total revenues                                69,968
                                                        --------

            OPERATING EXPENSES:
            Real estate taxes                              9,324
            Operating and maintenance                      2,300
            Utilities                                        572
            Payroll                                        1,539
            Management fees                                  635
            Professional fees                                515
            General and administrative                       285
            Depreciation and amortization                  5,624
                                                        --------

            Total operating expenses                      20,794
                                                        --------

            OTHER ITEMS:
            Interest income                                1,100
            Interest expense                             (11,801)
                                                        --------

            Total other items                            (10,701)
                                                        --------

            NET INCOME                                  $ 38,473
                                                        ========

3.    REAL ESTATE TAX REFUNDS

      Tax certiorari proceedings have been settled with the City of New York for
      over-assessment of property taxes for the tax years ending June 30, 1991
      through June 30, 1996 with respect to the 1290 Property. The Company
      received net proceeds of approximately $6,519 in December 2000 after
      payment of approximately $876 of fees and expenses incurred in connection
      with such proceedings. Of this amount, approximately $3,211 was expected
      to be reimbursed to tenants and was included in escrow deposits and
      restricted cash at December 31, 2000. During 2001, approximately $2,027
      was reimbursed to tenants. The remaining balance to be reimbursed of
      approximately $1,184 is included in escrow deposits and restricted cash as
      of December 31, 2001. Such net proceeds were approximately $3,800 in
      excess of estimated net proceeds and are included in miscellaneous income
      in 2000.


                                       29
<PAGE>

      Tax certiorari proceedings have been commenced which remain outstanding
      against the City of New York for over-assessment of property taxes for the
      tax years ending June 30, 1997 through June 30, 2001 with respect to the
      1290 Property. The outcome of these proceedings cannot be presently
      estimated.

4.    MORTGAGE LOAN

      In December 1999, the 1290 Property Owning Partnership refinanced mortgage
      indebtedness secured by the 1290 Property of approximately $224,900,000
      and obtained a $425,000 mortgage loan (the "1290 Mortgage Loan"). Interest
      on the 1290 Mortgage Loan is based on LIBOR plus 2% and requires interest
      only payments through maturity on January 2, 2003. The 1290 Property
      Owning Partnership has a one time right (subject to achieving certain
      conditions, including a debt service coverage ratio, loan to value ratio
      and the payment of a 25 basis point extension fee), at its option, to
      extend the maturity for a period of twelve months. The 1290 Mortgage Loan
      may be repaid in whole without penalty. The costs associated with securing
      the 1290 Mortgage Loan of approximately $12,916 are included in deferred
      financing costs and are amortized over the term of the 1290 Mortgage Loan
      as a component of interest expense. Unamortized costs associated with the
      prior mortgage indebtedness of approximately $2,307 were written off in
      1999.

      The 1290 Property Owning Partnership and Morgan Stanley Derivative
      Products, Inc. entered into an Interest Rate Exchange Agreement effective
      December 13, 1999 (the "1290 Swap Agreement"). The 1290 Swap Agreement
      provides that the 1290 Property Owning Partnership will pay interest at an
      effective rate of 8.4995% per annum on the notional amount of $425,000.
      Management believes that the risk of incurring losses related to the
      credit risk is remote and that any losses would be immaterial.

      The 1290 Swap Agreement has been designated as a cash flow hedge and was
      deemed to be perfectly effective during 2001. As such, changes in the fair
      value of the 1290 Swap Agreement during the year ended December 31, 2001
      have been reflected as other comprehensive loss in the accompanying
      statement of income and comprehensive loss. The difference between accrued
      interest expense calculated at the effective rate under the 1290 Swap
      Agreement and accrued interest expense calculated at the interest rate
      under the 1290 Mortgage Loan is recognized currently in earnings as
      interest.

      The maturity date of the 1290 Mortgage Loan and the termination date of
      the 1290 Swap Agreement are identical. The estimate of the cost to unwind
      the 1290 Swap Agreement is approximately $19,439 at December 31, 2001. The
      Company has no intention of unwinding the 1290 Swap Agreement. The Company
      estimates that approximately $18,254 of net derivative loss included in
      accumulated other comprehensive loss will be reclassified into earnings
      within the next 12 months.

5.    ACCOUNTS PAYABLE AND ACCRUED EXPENSES

      Accounts payable and accrued expenses as of December 31, 2001 and 2000
      include property operating expenses payable and tenant claims against real
      estate tax proceeds.

6.    SUBORDINATED MINORITY INTEREST

      The Subordinated Minority Interest represented the 99% limited partnership
      interest that JMB/NYC Office Building Associates, L.P. owned of the Upper
      Tier LP which in turn owned a subordinated 4.95% limited partnership
      interest in the 1290 Property Owning Partnership (the "Subordinated
      Minority Interest"). On March 23, 2001, the Company exercised its right to
      acquire the Subordinated Minority Interest held by the Upper Tier LP for
      $1,400 in accordance with the Agreement of Limited Partnership of the 1290
      Property Ownership Partnership.


                                       30
<PAGE>

7.    STOCKHOLDERS' EQUITY

      The Company has the authority to issue 50,000,000 shares of common stock,
      par value $10 per share (the "Common Stock"), and 10,000,000 shares of
      Preferred Stock, par value $10 per share. On October 10, 2001, the
      classification of the Common Stock into two classes of Common Stock
      terminated pursuant to the terms of the Charter. All shares of Class A and
      Class B Common Stock were automatically converted into a single class of
      Class A Common Stock. As of December 31, 2001, there were 13,001,346
      shares of the Company's Class A Common Stock issued and outstanding.

8.    STOCK PLAN AND REGISTRATION RIGHTS

      The Board of Directors of the Company adopted a Directors' Stock Plan
      effective October 10, 1996. Pursuant to the Stock Plan, the Board of
      Directors of the Company has the authority to issue to members of the
      Company's Board of Directors options to purchase, in the aggregate,
      100,000 shares of Common Stock. On the Effective Date, the initial members
      of the Company's Board of Directors were granted options entitling each
      director to purchase an aggregate of 3,000 shares of Common Stock at an
      exercise price of $25 per share.

      Pursuant to the Stock Plan, each Director received 400 shares of Common
      Stock at the annual meetings in 1997, 1998 and 2000 in consideration for
      services rendered to the Company during such years. The value of such
      shares was based upon the most recent price at which shares of the
      Company's Common Stock were traded prior to such grant of shares and is
      included as an operating expense.

      As of December 31, 2001, there were outstanding options to acquire an
      aggregate of 3,000 shares of Common Stock at an exercise price of $12.50
      per share.

      The Company has entered into a Registration Rights Agreement between the
      Company and certain holders of Common Stock. The Registration Rights
      Agreement permits such stockholders to demand, subject to certain
      conditions, that the Company register their Common Stock for sale and
      provides all of the Company's stockholders with the right to participate
      proportionally in any public offering of the Company's securities.

9.    RELATED PARTY TRANSACTIONS

      Sale of 237 Property/Refinancing of 1290 Property - John R. Klopp, a
      director, officer and stockholder of the Company, is employed by Capital
      Trust, Inc., the parent company of Victor Capital Group L.P. ("VCG"). VCG
      acted as one of the Company's representatives in connection with the sale
      of the 237 Property in November 1999. Pursuant to the terms of the
      retention agreement between VCG and the Company, VCG was paid a fee equal
      to $930 (0.25% of the total transaction value). In addition, VCG was paid
      approximately $1,594 by the Company in December 1999 as a fee in
      connection with the refinancing of the debt pertaining to the 1290
      Property.

      Asset Management - The Company has entered into an Asset Management
      Agreement with a company ("Asset Manager") that is directly affiliated
      with two of Metropolis' stockholders. One of these stockholders is also a
      Director and Officer of the Company. The Asset Manager provides asset
      advisory, consultation and management services for the Company. Fees for
      such services are payable in arrears, at a rate of $25 per month. The
      Asset Management Agreement also provides for reimbursement for costs and
      expenses for contractors and professional fees, payable as incurred. Asset
      management fees incurred for the years ended December 31, 2001, 2000, and
      1999 were approximately $300 each year.


                                       31
<PAGE>

      Property Management - The Company has also entered into a Management and
      Leasing Agreement with a company ("Property Manager/Leasing Agent") that
      is an affiliate of a stockholder. The Property Manager/Leasing Agent
      managed, operated and provided all supervisory, management and leasing
      services for the 1290 Property for the years ended December 31, 2001, 2000
      and 1999 and for the 237 Property for the year ended December 31, 1999.
      The Management and Leasing Agreement provides for a fee of 1.5% of gross
      revenues, payable monthly, and reimbursement for overhead and all
      reasonable out-of-pocket expenses incurred. The Management and Leasing
      Agreement also provides for leasing commissions to be calculated on a
      sliding scale percentage basis of the lease's base rent. Fees incurred
      under the Management and Leasing Agreement for the years ended December
      31, 2001, 2000, and 1999 totaled approximately $2,071, $2,295, and $5,528,
      respectively.

      An affiliate of the Property Manager/Leasing Agent provided the cleaning
      services for the 1290 Property for the months January through February of
      2001 and the years ended December 31, 2000 and 1999 and for the 237
      Property for the year ended December 31, 1999. Fees incurred for cleaning
      services for the years ended December 31, 2001, 2000, and 1999 totaled
      $405, $2,499, and $3,680, respectively.

      REIT Management - The Company has entered into a REIT Management Agreement
      with the Property Manager/Leasing Agent ("REIT Manager"). The REIT Manager
      performs certain accounting, administrative and monitoring services. The
      REIT Management Agreement provides for compensation to the REIT Manager of
      a monthly fee and reimbursement of documented out-of-pocket expenses. Fees
      incurred under the REIT Management Agreement for the years ended December
      31, 2001, 2000, and 1999 were $126, $137, and $125, respectively.

10.   LEASES

      Minimum future rents (excluding escalation rentals) due to the Company
      under noncancellable leases as of December 31, 2001 are as follows:

                2002                                  $  82,256
                2003                                     84,260
                2004                                     77,837
                2005                                     72,567
                2006                                     69,135
                Thereafter                              360,736
                                                       --------
                                                       $746,791
                                                       ========


                                       32
<PAGE>

11.   QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

                    (In Thousands, Except Per Share Amounts)
                              Fiscal Quarters Ended

<TABLE>
<CAPTION>
2001                                        1Q          2Q          3Q           4Q
-------------------------------------------------------------------------------------
<S>                                      <C>         <C>         <C>          <C>
Total revenues                            22,787      23,718      23,275       24,186
Net income                                13,604         344         120          257
Net income per share                     $  1.05     $  0.03     $  0.01      $  0.01
Net income per share assuming
     dilution                            $  1.05     $  0.03     $  0.01      $  0.01

<CAPTION>
2000                                        1Q          2Q          3Q           4Q
-------------------------------------------------------------------------------------
<S>                                      <C>         <C>         <C>          <C>
Total revenues                            21,875      23,777      22,495       27,171
Net income (loss)                            475       2,117        (315)       4,966
Net income (loss) per share              $  0.04     $  0.16     $ (0.02)     $  0.38
Net income (loss) per share assuming
     dilution                            $  0.04     $  0.16     $ (0.02)     $  0.38

<CAPTION>
1999                                        1Q          2Q          3Q           4Q
-------------------------------------------------------------------------------------
<S>                                      <C>         <C>         <C>          <C>
Total revenues                            32,813      59,145      33,631       31,969
Net income                                 8,772      35,126       5,532       57,903
Net income per share                     $  0.68     $  2.71     $  0.43      $  4.45
Net income per share assuming
     dilution                            $  0.68     $  2.70     $  0.43      $  4.45
</TABLE>

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

      None.


                                       33
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The directors and executive officers of the Company as of December 31, 2001 are
as follows:

Name                              Age     Position
----                              ---     --------

William L. Mack................   62      Director and Chairman of the Board

Lee S. Neibart.................   51      Director and President

Bruce H. Spector...............   59      Director

John R.S. Jacobsson............   33      Director, Vice President and Secretary

John R. Klopp..................   48      Director and Vice President

Russel S. Bernard..............   44      Director

David A. Strumwasser...........   50      Director

David Roberts..................   39      Director

      Each of the officers and directors listed above, other than John R. Klopp
and John R.S. Jacobsson, has served in the positions listed for the Company
since September 1996. Mr. Klopp has served as a Director since September 1996
and as an officer since December 1996. Mr. Jacobsson has served as a Director
since October 1997 and as an officer since December 1996.

      William L. Mack has served as the Chairman of the Board of Directors of
the Company since 1996. Mr. Mack is the managing partner of Apollo Real Estate
Advisors, L.P. ("AREA"), the manager of five opportunistic real estate
investment funds, which he co-founded in 1993, and serves as President of its
corporate general partner. Beginning in 1969, Mr. Mack served as Managing
Partner of the Mack Company, where he oversaw the dynamic growth of the Mack
Company's office, industrial, retail and hotel facilities. Mr. Mack has served
as a director of Mack-Cali Realty Corporation ("Mack-Cali") since the 1997
merger of the Mack Company's office portfolio into Mack-Cali and has served as
Chairman of Mack-Cali since June 2000. Mr. Mack is also a director of The Bear
Stearns Companies, Inc., an investment banking firm, Vail Resorts, Inc., an
owner and operator of Colorado ski resorts, and Wyndham International, Inc., an
owner and operator of a national chain of hotel properties. Mr. Mack attended
the Wharton School of Business and Finance at the University of Pennsylvania and
received a B.S. degree in business administration, finance and real estate from
New York University.

      Lee S. Neibart is a partner of AREA with which he has been associated
since 1993, and directs portfolio and asset management. From 1979 to 1993, he
was Executive Vice President and Chief Operating Officer of the Robert Martin
Company, a private real estate development and management firm. Mr. Neibart is a
director of Atlantic Gulf Communities Corp., a land development company, Roland
International Corporation, a land development company, Wyndham International,
Inc., and Meadowbrook Golf Group, Inc., an owner and operator of golf courses.
Mr. Neibart received a B.A. from the University of Wisconsin and an M.B.A. from
New York University.

      Bruce H. Spector is a partner of AREA with which he has been associated
since 1993, and has been responsible for advising on matters of reorganization
strategy. From 1967 to 1992, Mr. Spector was a member of the law firm of
Stutman, Treister and Glatt, spending a substantial amount of that time as a
senior partner and head of the firm's executive committee. Mr. Spector is a
director of Pacer International, Inc., a national intermodal and logistics
company, Vail Resorts, Inc. and Park Media,


                                       34
<PAGE>

LLC, a firm specializing in bringing advertising revenue to the owners of
parking venues. Mr. Spector received a B.A. from the University of Southern
California and a J.D. from the UCLA School of Law.

      John R.S. Jacobsson is a partner of AREA with which he has been associated
since its founding in 1993. Mr. Jacobsson is responsible for investments,
investment management and capital raising at AREA and co-heads its Japanese
investment program. Prior to 1993, Mr. Jacobsson was associated with the
acquisitions group of Trammell Crow Ventures, a real estate investment firm. Mr.
Jacobsson is a director of Koger Equity, Inc., Roland International Corporation
and Oasis Car Wash, Inc., an owner and operator of car washes. Mr. Jacobsson
received a B.A. from Harvard College in 1990.

      John R. Klopp has been a director of Capital Trust, Inc. ("Capital
Trust"), an investment management and finance company focused on the commercial
real estate industry, since January 1997, and the Chief Executive Officer, a
Vice Chairman and the President of Capital Trust since February 1997, July 1997
and January 1999, respectively. Mr. Klopp was a founder and a Managing Partner
of Victor Capital Group L.P. ("VCG") from 1989 until the acquisition of VCG by
Capital Trust in July 1997. From 1982 to 1989 Mr. Klopp was a Managing Director
and co-head of Chemical Realty Corporation ("Chemical Realty"), the real estate
investment banking affiliate of Chemical Bank. Prior to founding Chemical
Realty, Mr. Klopp held various positions with Chemical Bank's Real Estate
Division, where he was responsible for originating, closing and monitoring
portfolios of construction and interim loans. He received a B.A. from Tufts
University in 1976 with a major in economics and an M.B.A. in 1978 from the
Wharton School of Business and Finance at the University of Pennsylvania with a
major in real estate and finance.

      Russel S. Bernard is a Principal of Oaktree Capital Management, LLC
("Oaktree"), with which he has been associated since 1995, and is the portfolio
manager of Oaktree's real estate and mortgage funds. Prior to joining Oaktree in
1995, Mr. Bernard was a Managing Director of Trust Company of the West ("TCW").
Under subadvisory relationships with Oaktree, Mr. Bernard continues to serve as
portfolio manager for the TCW Special Credits distressed mortgage funds. From
1986 to 1994, Mr. Bernard was a partner in Win Properties, Inc., a national real
estate investment company, where he was responsible for the acquisition,
financing and operation of a national real estate portfolio. Mr. Bernard holds a
B.S. in Business Management and Marketing from Cornell University.

      David A. Strumwasser is a Principal of Whippoorwill Associates,
Incorporated ("Whippoorwill"), an investment management firm, and has served as
a Managing Director and General Counsel of Whippoorwill since 1993. From 1984 to
1993, Mr. Strumwasser was a Partner and co-head of the Bankruptcy and
Reorganization Practice at the New York law firm of Berlack, Israels & Liberman
LLP. Prior to that, he practiced bankruptcy law at Anderson Kill & Olick, LLP
from 1981 to 1984, and at Weil, Gotshal & Manges LLP from 1976 to 1979. From
1979 to 1981, Mr. Strumwasser was an Assistant Vice President at Citicorp
Industrial Credit, Inc. Mr. Strumwasser is a director of Barneys New York, Inc.,
a luxury retailer. Mr. Strumwasser received a B.A. in political science from the
State University of New York at Buffalo in 1973 and a J.D. from Boston College
Law School in 1976.

      David Roberts has been a Managing Director of Angelo, Gordon & Co., L.P.
("Angelo, Gordon"), an investment management firm, since 1993, where he oversees
the firm's real estate and special situations investment activities. From 1988
until 1993, Mr. Roberts was a principal of Gordon Investment Corporation, a
Canadian merchant bank, where he participated in a wide variety of principal
transactions including investments in the real estate and mortgage banking
industries. Prior to that, Mr. Roberts worked in the Corporate Finance
Department of L.F. Rothschild & Co. Incorporated, an investment bank, as a
Senior Vice President specializing in mergers and acquisitions. Mr. Roberts has
a B.S. in Economics from the Wharton School of the University of Pennsylvania.


                                       35
<PAGE>

      Prior to October 10, 2001, the Company's Board of Directors was divided
into five classes. Each director in such class was elected by a specifically
designated stockholder (or class of stockholders) in accordance with the
Charter. The initial terms of the first, second, third and fourth classes
expired in 1997, 1998, 1999 and 2000, respectively, after which time each such
class of directors was elected for a term which expired at the annual meeting of
stockholders for fiscal year 2001, which meeting was held in January 2002. The
initial term of the fifth class of directors expired immediately prior to such
annual meeting.

      On October 10, 2001, the classification of the Common Stock into two
classes of Common Stock terminated pursuant to the terms of the Charter. All
shares of Class A and Class B Common Stock were automatically converted into a
single class of Class A Common Stock.

      Pursuant to the Charter, the Company's Board of Directors is no longer
divided into classes and each director will be elected for one-year terms by the
holders of the Class A Common Stock voting as a single class. The Charter does
require, however, that the Company will at all times have at least two directors
that are not affiliated with Apollo, any Transferee (as defined in the Charter)
or any other stockholder of more than 10% of the stock of the Company.

      Compliance with Section 16(a) of the Exchange Act

      Section 16(a) of the Securities and Exchange Act of 1934 (the "Exchange
Act") requires the Company's officers and directors, and persons who own more
than 10% of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Officers, directors and 10% stockholders are required by regulation
of the Securities and Exchange Commission to furnish the Company with copies of
all Section 16(a) forms they file. Based solely on its review of Forms 3, 4 and
5 available to the Company and written representations from certain of the
directors, officers and 10% stockholders that no form is required to be filed,
the Company believes that no director, officer or beneficial owner of more than
10% of the Common Stock failed to file on a timely basis reports required
pursuant to Section 16(a) of the Exchange Act with respect to 2001.

ITEM 11. EXECUTIVE COMPENSATION

      The Company has no employees and none of its executive officers, including
the Company's president (who acts in a capacity similar to that of a chief
executive officer), receives any compensation in their capacities as executive
officers.


                                       36
<PAGE>

<TABLE>
<CAPTION>
                                     Annual Compensation                   Long-Term Compensation
                             ----------------------------------    ------------------------------------
                                                                             Awards             Payouts
                                                                   ------------------------     -------
    Name                                                                         Securities
    and                                            Other Annual    Restricted    Underlying      LTIP        All other
  Principal                  Salary     Bonus      Compensation       Stock       Options/      Payouts     Compensation
  Position          Year       ($)       ($)            ($)         Award ($)     SARs (#)        ($)            ($)
------------------------------------------------------------------------------------------------------------------------
<S>                 <C>         <C>       <C>      <C>                  <C>           <C>          <C>        <C>
Lee S. Neibart,
President           2001        $0        $0       $23,000(1)(2)        $0            0            $0         $  750(3)
                    ----------------------------------------------------------------------------------------------------
                    2000        $0        $0       $21,400(1)(2)        $0            0            $0         $  750(3)
                    ----------------------------------------------------------------------------------------------------
                    1999        $0        $0       $20,000(1)(2)        $0            0            $0         $3,000(3)
------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)   Represents annual retainer paid to Mr. Neibart in his capacity as a
      director of the Company in an amount of $15,000 for the years 2001 and
      2000 and $20,000 for the year 1999.

(2)   Mr. Neibart also received 400 shares of Common Stock as compensation in
      his capacity as a director of the Company pursuant to the Company's 1996
      Directors' Stock Option Plan for the years 2001 and 2000. Mr. Neibart did
      not receive any shares of Common Stock as compensation in the year 1999.
      There is not currently a public market for the shares of Common Stock,
      however, the Company has determined that the fair market value of these
      shares on the date they were granted to Mr. Neibart was approximately
      $16.00 per share for the shares granted to him in 2000 and approximately
      $20.00 per share for the shares granted to him in 2001.

(3)   Represents fees paid to Mr. Neibart in his capacity as a director of the
      Company for the attendance of the Company's Board of Directors meeting.
      Mr. Neibart was paid $750 for each meeting of the Company's Board of
      Directors that he attended in 2001, 2000 and 1999. There was one meeting
      of the Company's Board of Directors in each of 2001 and 2000, and four
      meetings in 1999. Mr. Neibart attended all such meetings.

      On July 9, 2002, the Board of Directors authorized the payment of $50,000
to each of Messrs. Jacobsson, Vice President and Secretary of the Company;
Andrew Cohen, Vice President of the Company; Stuart Koenig, Treasurer of the
Company, and Ms. Jeremy FitzGerald, Vice President of the Company, upon the
consummation of the sale transaction to Jamestown. This payment was authorized
in recognition of the contribution made by each of these officers to the
negotiation, structuring and consummation of the sale transaction.

      For fiscal year 2001, the members of the Board of Directors earned (i)
$15,000 in cash as an annual retainer, (ii) 400 shares of Common Stock issued
under the Company's 1996 Directors' Stock Option Plan (as amended, the "Stock
Plan") and (iii) $750.00 per meeting of the Board of Directors attended by such
member. Upon election to the Board of Directors, each initial Director received
options (the "Options") to purchase 3,000 shares of the Company's Class A Common
Stock which vested over two years.

      On December 13, 1999, the Board of Directors decreased the exercise price
of all outstanding options by $15.00 per share in consideration of a special
distribution to stockholders of $15.00 per share that was made on December 10,
1999. On December 23, 1999, each member of the Board of Directors (except Mr.
Jacobsson) exercised his Options. On December 28, 1999, the Board of Directors
decreased the exercise price of Mr. Jacobsson's options by another $15.00 per
share to $12.50 per share in consideration of a second special distribution to
stockholders of $15.00 per share that was made on December 27, 1999. See
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -- Description
of Stock Plan."


                                       37
<PAGE>

      The Company has purchased a directors' and officers' liability insurance
policy in the amount of $10,000,000.

      John R.S. Jacobsson, Lee S. Neibart and John R. Klopp are also the
directors of a wholly-owned subsidiary of the Company ("1290 GP Corp.") which
owns a 1% interest, as general partner, in the 1290 Property Owning Partnership.
The officers of the Company and 1290 GP Corp. are identical. The officers of the
Company will not receive any compensation from the Company other than any
compensation they may receive as directors. The directors and officers of 1290
GP Corp. will not receive any compensation from 1290 GP Corp.

      In January 2000, the directors of the Company appointed Lee S. Neibart,
John R.S. Jacobsson and John R. Klopp to serve as the members of the Company's
audit committee. Messrs. Neibart and Jacobsson are partners of AREA which is the
general partner of Apollo Real Estate Investment Fund, L.P., a significant
stockholder of the Company. Mr. Klopp is the Chief Executive Officer of Capital
Trust, Inc. whose relationship to the Company is described under "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS -- Asset Manager." The audit committee
does not serve pursuant to a written charter. Its purposes are to (i) make
recommendations concerning the engagement of the Company's independent public
accountants, (ii) review with the Company's independent public accountants the
policies, procedures and results of the audit engagement, (iii) approve
professional services provided by the Company's independent public accountants,
(iv) review the independence of the Company's independent public accountants,
(v) consider the range of audit and non-audit fees, (vi) review the adequacy of
the Company's internal accounting controls, and (vii) recommend information to
be included in the Company's quarterly reports on Forms 10-Q and annual reports
on Forms 10-K.


                                       38
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The information set forth in the following table is furnished as of March
15, 2002, with respect to any person (including any "group," as that term is
used in Section 13(d)(3) of the Exchange Act) who is known to the Company to be
the beneficial owner of more than 5% of any class of the Company's voting
securities, and as to those shares of the Company's equity securities
beneficially owned by each of its directors, its executive officers, and all of
its executive officers and directors as a group. As of March 15, 2002, there
were 13,004,946 shares of Common Stock outstanding.

<TABLE>
<CAPTION>
                                                                  Number of Shares   Percent of Common
                                                                 Beneficially Owned        Stock
                                                                 ------------------  -----------------
<S>                                                                   <C>                  <C>
Principal Stockholders

Apollo Real Estate Investment Fund, L.P. (1)                          4,936,060            38.0%
The TCW Group, Inc. (2)                                               2,254,341            17.3%
TCW Asset Management Company (2)                                      2,254,341            17.3%
Oaktree Capital Management, LLC (3)                                   1,917,463            14.7%
The Goldman Sachs Group, Inc. (4)                                     1,127,021             8.7%
WSB Realty, L.L.C. (5)                                                1,122,421             8.6%
Goldman, Sachs & Co. (5)                                              1,122,421             8.6%
Whitehall Street Real Estate Limited Partnership V (5)                1,122,421             8.6%
WH Advisors, L.L.C. V (5)                                             1,122,421             8.6%
Angelo, Gordon & Co., L.P. (6)                                        1,094,143             8.4%
John M. Angelo (6)                                                    1,094,143             8.4%
Michael L. Gordon (6)                                                 1,094,143             8.4%
Intermarket Corp. (7)                                                   931,000             7.2%

Directors and Executive Officers

William L. Mack (8)                                                   4,940,660            38.0%
Lee S. Neibart (9)                                                    4,940,660            38.0%
John R.S. Jacobsson (10)                                              4,940,660            38.0%
Bruce H. Spector (11)                                                 4,940,660            38.0%
John R. Klopp (12)                                                       24,600              *
Russel S. Bernard (13)                                                1,917,463            14.7%
David A. Strumwasser (14)                                               294,103             2.3%
David Roberts (15)                                                            0              *
                                                                      ----------
Directors and Executive Officers as a group (8 persons) (16)          7,190,626            55.3%
                                                                      ==========

</TABLE>

*     Less than 1%

(1)   Held of record by Atwell & Co., c/o The Chase Manhattan Bank, N.A., 4 New
      York Plaza, New York, NY 10004. Apollo Real Estate Advisors is the
      managing general partner of Apollo Real Estate Investment Fund and a joint
      reporting person with respect to beneficial ownership of these shares of
      common stock according to an executed certificate, dated as of August 4,
      2002, of the Vice President and Treasurer of Apollo Real Estate
      Management, Inc., the general partner of Apollo Real Estate Advisors, and
      delivered to Holdings and Metropolis Trust. Apollo Real Estate Investment
      Fund is located at Two Manhattanville Road, Purchase, New York 10577.

(2)   Includes 1,586,814 shares as to which voting and dispositive power is
      shared with Oaktree Capital Management, LLC ("Oaktree") as an investment
      sub-adviser to TCW Asset Management Company for various limited
      partnerships, trusts and third party accounts for which TCW Asset
      Management Company


                                       39
<PAGE>

      acts as general partner or investment manager. The TCW Group, Inc. is the
      parent company of TCW Asset Management Company. Also includes 667,527
      shares held by various limited partnerships, trusts and third party
      accounts for which TCW Special Credits acts as general partner or
      investment manager; TCW Asset Management Company is the managing general
      partner of TCW Special Credits. The shares shown are held of record by (i)
      Hare & Co., c/o Investors Bank and Trust Company, 200 Clarendon Street,
      Boston, Massachusetts 02117-9130 (58,124 shares), and (ii) Cede & Co., 55
      Water Street, New York, New York 10041 (2,196,217 shares). To the extent
      permitted by applicable law, The TCW Group Inc., TCW Asset Management
      Company and Robert Day hereby disclaim beneficial ownership of such
      shares. The TCW Group, Inc. and TCW Asset Management Company are located
      at 865 South Figueroa Street, Suite 1800, Los Angeles, CA 90017.

(3)   Includes 1,586,814 shares as to which voting and dispositive power is
      shared with TCW Asset Management Company, which acts as general partner or
      investment manager for certain funds and accounts for which Oaktree acts
      as an investment sub-adviser. Also includes 284,839 shares held by two
      limited partnerships of which Oaktree is general partner and 41,210 shares
      held by a third party account for which Oaktree acts as investment
      manager. The 326,049 shares as to which Oaktree has sole voting and
      dispositive power are held of record by (i) Cun & Co., c/o The Bank of New
      York, P.O. Box 1068, Wall Street Station, New York, NY 10005 (176,049
      shares) and (ii) Cede & Co., 55 Water Street, New York, New York 10041
      (150,000 shares). Also includes 4,600 shares held directly by Oaktree. To
      the extent permitted by applicable law, Oaktree hereby disclaims
      beneficial ownership of such shares. Oaktree is located at 333 South Grand
      Avenue, 28th Floor, Los Angeles, CA 90071.

(4)   According to Amendment No. 3 to the Schedule 13G filed by The Goldman
      Sachs Group, Inc. with the Securities and Exchange Commission on February
      13, 2001, includes 1,122,421 shares with respect to which voting and
      dispositive power is shared with (i) Goldman, Sachs & Co., (ii) WSB
      Realty, L.L.C., (iii) Whitehall Street Real Estate Limited Partnership V
      and (iv) WH Advisors, L.L.C. V. The Goldman Sachs Group, Inc. is located
      at 85 Broad Street, New York, NY 10004.

(5)   Does not include 4,600 shares owned by The Goldman Sachs Group, Inc.
      According to Amendment No. 3 to the Schedule 13G filed by The Goldman
      Sachs Group, Inc. with the Securities and Exchange Commission on February
      13, 2001, voting and dispositive power with respect to these shares is
      held among: (i) Goldman, Sachs & Co., (ii) The Goldman Sachs Group, Inc.,
      (iii) WSB Realty, L.L.C., (iv) Whitehall Street Real Estate Limited
      Partnership V and (v) WH Advisors, L.L.C. V. Each of these entities is
      located at 85 Broad Street, New York, NY 10004.

(6)   The address of Angelo, Gordon & Co., L.P. ("Angelo, Gordon"), John M.
      Angelo and Michael L. Gordon is 245 Park Avenue, New York, NY 10167.
      According to Amendment No. 3 to the Schedule 13G filed by Angelo, Gordon
      with the Securities and Exchange Commission on February 8, 2002, these
      1,094,143 shares are reported as beneficially owned by: (i) Angelo,
      Gordon, (ii) John M. Angelo, in his capacities as a general partner of AG
      Partners, L.P., the sole general partner of Angelo, Gordon, and the chief
      executive officer of Angelo, Gordon and (iii) Michael L. Gordon, in his
      capacities as the other general partner of AG Partners, L.P. and the chief
      operating officer of Angelo, Gordon.

(7)   Intermarket Corp.'s address is 667 Madison Avenue, New York, NY 10021.

(8)   Includes 4,936,060 shares owned by Apollo. Mr. Mack is the managing
      partner of AREA, the general partner of Apollo, and the President of
      AREA's corporate general partner. Includes 1,600 shares of Common Stock
      issued directly to Mr. Mack, and 3,000 shares of Common Stock issued upon
      the exercise of options granted to Mr. Mack, under the Company's Stock
      Plan. Mr. Mack disclaims beneficial ownership of the shares of Common
      Stock owned by Apollo.

(9)   Includes 4,936,060 shares owned by Apollo. Mr. Neibart is a partner of
      AREA. Includes 1,600 shares of Common Stock issued directly to Mr.
      Neibart, and 3,000 shares of Common Stock issued upon the exercise of
      options granted to Mr. Neibart, under the Company's Stock Plan. Mr.
      Neibart disclaims beneficial ownership of the shares of Common Stock owned
      by Apollo.


                                       40
<PAGE>

(10)  Includes 4,936,060 shares owned by Apollo. Mr. Jacobsson is a partner of
      AREA. Includes 1,600 shares of Common Stock issued directly to Mr.
      Jacobsson, and 3,000 shares of Common Stock issuable upon the exercise of
      options granted to Mr. Jacobsson, under the Company's Stock Plan. Mr.
      Jacobsson disclaims beneficial ownership of the shares of Common Stock
      owned by Apollo.

(11)  Includes 4,936,060 shares owned by Apollo. Mr. Spector is a partner of
      AREA. Includes 1,600 shares of Common Stock issued directly to Mr.
      Spector, and 3,000 shares of Common Stock issued upon the exercise of
      options granted to Mr. Spector, under the Company's Stock Plan. Mr.
      Spector disclaims beneficial ownership of the shares of Common Stock owned
      by Apollo.

(12)  Includes 1,600 shares of Common Stock issued directly to Mr. Klopp, and
      3,000 shares of Common Stock issued upon the exercise of options granted
      to Mr. Klopp, under the Company's Stock Plan.

(13)  Includes 1,912,863 shares owned by (i) funds and accounts managed by
      Oaktree and (ii) limited partnerships of which Oaktree serves as a general
      partner. Includes 1,600 shares of Common Stock issued directly to Mr.
      Bernard, and 3,000 shares of Common Stock issued upon the exercise of
      options granted to Mr. Bernard, under the Company's Stock Plan, all of
      which shares were transferred by Mr. Bernard to Oaktree. Mr. Bernard is a
      Principal of Oaktree. Mr. Bernard disclaims beneficial ownership of the
      shares of Common Stock owned by funds and accounts managed by Oaktree, the
      shares of Common Stock owned by limited partnerships of which Oaktree
      serves as a general partner, and the shares of Common Stock owned directly
      by Oaktree.

(14)  Includes 289,503 shares held by various limited partnerships, a trust and
      third party accounts for which Whippoorwill has discretionary authority
      and acts as general partner or investment manager. Includes 1,600 shares
      of Common Stock issued directly to Mr. Strumwasser, and 3,000 shares of
      Common Stock issued upon the exercise of options granted to Mr.
      Strumwasser, under the Company's Stock Plan, all of which shares were
      transferred by Mr. Strumwasser to Whippoorwill pursuant to the terms of
      his employment with Whippoorwill. Mr. Strumwasser is a Principal, Managing
      Director and the General Counsel of Whippoorwill. Mr. Strumwasser
      disclaims beneficial ownership of the shares of Common Stock owned by
      discretionary accounts or trusts managed by Whippoorwill, the shares of
      common stock owned by limited partnerships of which Whippoorwill serves as
      general partner, and the shares of common stock owned by Whippoorwill
      directly as set forth above.

(15)  Does not include shares owned by Angelo, Gordon. Does not include 1,600
      shares of Common Stock issued directly to Mr. Roberts, and 3,000 shares of
      Common Stock issued upon the exercise of options granted to Mr. Roberts,
      under the Company's Stock Plan, all of which shares were transferred by
      Mr. Roberts to Angelo, Gordon pursuant to the terms of his employment with
      Angelo, Gordon. Mr. Roberts is a Managing Director of Angelo, Gordon. Mr.
      Roberts disclaims beneficial ownership of the shares of Common Stock owned
      by Angelo, Gordon.

(16)  See notes 8 through 15 above with respect to the nature of the ownership
      of Directors and Executive Officers as a group, including disclaimers of
      beneficial ownership described therein.

      Description of Stock Plan

      The following is a summary of the material terms of the Stock Plan, as
amended. Such summary does not purport to be complete and is qualified in its
entirety by reference to the Stock Plan, a copy of which has been filed as
Exhibit 10.5 hereto.

      The Board of Directors adopted the Stock Plan on October 10, 1996 (the
"Effective Date"), and amended the Stock Plan on December 13, 1999. The purpose
of the Stock Plan is to attract and retain qualified persons as Directors.
Pursuant to the Stock Plan, the Board of Directors of the Company has the
authority to issue to members of the Company's Board of Directors options to
purchase, in the aggregate, 100,000 shares of Class A Common Stock. Pursuant to
the Plan of Reorganization of


                                       41
<PAGE>

the Company's predecessors and the Stock Plan, on the Effective Date, the
initial members of the Company's Board of Directors were each granted 3,000
Options. After the adjustment of the Options' exercise prices, each such
Director exercised his Options on December 23, 1999, as more particularly
described under "EXECUTIVE COMPENSATION." In March 1998, John R.S. Jacobsson was
granted options entitling him to purchase an aggregate of 3,000 shares of Class
A Common Stock at an exercise price of $42.50 per share. Such options were
issued in July 1998, and are fully exercisable as of December 31, 2000. The
exercise price of Mr. Jacobsson's options was adjusted to $27.50 and to $12.50
on December 13, 1999 and December 28, 1999, respectively, as more particularly
described under "EXECUTIVE COMPENSATION."

      Each Director who is elected or appointed after the Effective Date will be
granted options to purchase 3,000 shares of Class A Common Stock on the date of
the meeting of the Company's stockholders at which such Director is first
elected to the Board of Directors or the date of the Board of Directors meeting
at which such Director is first appointed to the Board of Directors to fill a
vacancy on the Board of Directors. Each holder of an option issued under the
Stock Plan will be entitled to exercise the option to purchase one-third of the
shares of Common Stock covered by such option on the date of original issuance
thereof, one-third on the first anniversary of such date and one-third on the
second anniversary of such date, in each case, any time prior to the tenth
anniversary of the date of grant.

      If the holder of an option ceases to serve as a Director of the Company
for any reason, options that have been previously granted to such holder and
that have not been vested will be forfeited and options that are vested as of
the date of such cessation may be exercised by such holder in accordance with
and subject to the Stock Plan. If the holder of an option dies while serving as
a Director of the Company, options that have been previously granted to such
holder and that are vested as of the date of such holder's death may be
exercised by such holder's legal representative in accordance with and subject
to the Stock Plan.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Asset Manager

      The Company has retained Capital Trust to serve as the Company's Asset
Manager pursuant to an Asset Management Agreement, dated as of December 22, 2000
(the "Asset Management Agreement"). John R. Klopp, one of the Company's
Directors and an officer and a stockholder of the Company, is the Chief
Executive Officer of Capital Trust. Pursuant to the Asset Management Agreement,
the Asset Manager serves as the Company's advisor and consultant with respect to
the management of the 1290 Property and the Company's interests in the 1290
Property Owning Partnership.

      The Asset Management Agreement had an initial term of one year, which term
is automatically extended for consecutive one-year periods thereafter unless the
Company or the Asset Manager notifies the other at least 30 days before the then
current term would otherwise terminate of its election not to extend the term.

      The Company may terminate the Asset Management Agreement (i) after the
expiration of a cure period, by notice to the Asset Manager if the Asset Manager
defaults in any material respect in its performance under the Asset Management
Agreement, and (ii) immediately upon notice to the Asset Manager if the 1290
Property is sold or if there is a change in control of the Asset Manager. The
Asset Manager may terminate the Asset Management Agreement if the Company
defaults in the payment of any amount due and payable to the Asset Manager and
such default continues for 30 days after the Asset Manager's written notice to
the Company of such default. Either party may terminate the Asset


                                       42
<PAGE>

Management Agreement by giving notice to the other upon the occurrence of
certain events relating to the bankruptcy or insolvency of the other party.

      Pursuant to the Asset Management Agreement, the Company pays the Asset
Manager a fee (the "Asset Management Fee") in an amount equal to $25,000 per
month. Asset management fees incurred for each of the years ended December 31,
2001, 2000, and 1999 aggregated approximately $300,000. In addition to the
payment of the Asset Management Fee, the Company reimburses the Asset Manager
for certain expenses. If the Company believes that the Asset Management Fee
should be reduced and the parties are unable in good faith to agree upon a
reduced fee, the Asset Management Agreement will be terminable by either party
upon 90 days' notice to the other.

      Management and Leasing Agreements

      The 1290 Property Owning Partnership entered into a management and leasing
agreement, dated as of the Effective Date (the "Property Management Agreement"),
with the Property Manager/Leasing Agent. Nyprop, LLC, a stockholder of the
Company, is an affiliate of the Property Manager/Leasing Agent. Pursuant to the
Property Management Agreement, the Property Manager/Leasing Agent performed all
supervisory, management and leasing services and functions reasonably necessary
or incidental to the leasing, management and operations of the 1290 Property for
the years ended December 31, 2001, 2000, and 1999 and for the 237 Property for
the year ended December 31, 1999. Fees under the Property Management Agreement
for the years ended December 31, 2001, 2000, and 1999 totaled approximately
$2,071,000, $2,295,000, and $5,528,000, respectively.

      An affiliate of the Property Manager/Leasing Agent provided cleaning
services for the 1290 Property for the months January through February of 2001
and for the years ended December 31, 2000 and 1999 and for the 237 Property for
the year ended December 31, 1999. Fees incurred for cleaning services for the
years ended December 31, 2001, 2000, and 1999 totaled $405,000, $2,499,000, and
$3,680,000, respectively.

      The Property Management Agreement had an initial term of two years, which
term is automatically extended for additional consecutive 90-day terms until
such time as the 1290 Property Owning Partnership notifies the Property
Manager/Leasing Agent in writing, at least 30 days before the then current term
would otherwise terminate, of its election not to extend the term of the
Property Management Agreement.

      The 1290 Property Owning Partnership may terminate the Property Management
Agreement on 60 days notice if the 1290 Property is either sold by the 1290
Property Owning Partnership or refinanced by the 1290 Property Owning
Partnership pursuant to a securitized financing of the 1290 Property; provided
that termination of the Property Management Agreement as a result of such
financing will only be effective if the Property Manager/Leasing Agent is not
approved by the rating agency participating in such financing. In addition, the
1290 Property Owning Partnership may terminate the Property Management Agreement
(i) after a certain cure period, upon notice to the Property Manager/Leasing
Agent if the Property Manager/Leasing Agent breaches a material term of the
Property Management Agreement, and (ii) immediately upon notice to the Property
Manager/Leasing Agent if (x) the Property Manager/Leasing Agent or any principal
of the Property Manager/Leasing Agent intentionally misappropriates funds of the
1290 Property Owning Partnership or commits fraud against the 1290 Property
Owning Partnership or (y) there is a change in control of the Property
Manager/Leasing Agent. The Property Manager/Leasing Agent may terminate the
Property Management Agreement (i) after a certain cure period, upon notice to
the 1290 Property Owning Partnership if the 1290 Property Owning Partnership
breaches a material term of the Property Management Agreement, and (ii) upon 60
days notice to the 1290 Property Owning Partnership if the 1290 Property Owning
Partnership fails to


                                       43
<PAGE>

provide funds on a consistent basis to operate and maintain the 1290 Property.
Either party may terminate the Property Management Agreement upon notice to the
other party if (x) a petition in bankruptcy is filed against the other party and
is not dismissed within 60 days, (y) a trustee, receiver or other custodian is
appointed for a substantial portion of the other party's assets and is not
vacated within 60 days or (z) the other party makes an assignment for the
benefit of its creditors.

      Pursuant to the Property Management Agreement, the 1290 Property Owning
Partnership (i) pays the Property Manager/Leasing Agent a fee in an amount equal
to 1.5% of gross revenues from the 1290 Property, which fee is paid monthly, and
(ii) reimburses the Property Manager/Leasing Agent for all reasonable
out-of-pocket expenses incurred by the Property Manager/Leasing Agent related to
the performance of its responsibilities under the Property Management Agreement,
to the extent set forth in the annual budget. In addition, the Property
Manager/Leasing Agent is entitled to receive commissions in connection with the
leasing of space at the 1290 Property and renewals and extensions of leases.

      The Company has entered into a REIT Management Agreement with the Property
Manager/Leasing Agent ("REIT Manager"). The REIT Manager performs certain
accounting, administrative and monitoring services. The REIT Management
Agreement provides for compensation to the REIT Manager of monthly fees of
approximately $10,500 per month, and reimbursement of documented out-of-pocket
expenses. Fees incurred under the REIT Management Agreement for the years ended
December 31, 2001, 2000, and 1999 were $126,000, $137,000, and $125,000,
respectively.


                                       44
<PAGE>

                                    PART IV

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

(a)(1)      Financial Statements are included in response to Item 8 hereof.

(a)(2)      Financial Statement Schedules have been omitted because they are
            inapplicable, not required, or the information is included in the
            financial statements or notes thereto.

(a)(3)      Exhibits

2.1         Second Amended Joint Plan of Reorganization of 237 Park Avenue
            Associates, L.L.C. and 1290 Associates, L.L.C.*

2.2         Technical Amendment to Second Amended Joint Plan of Reorganization
            of 237 Park Avenue Associates, L.L.C. and 1290 Associates, L.L.C. *

2.3         Second Technical Amendment to Second Amended Joint Plan of
            Reorganization of 237 Park Avenue Associates, L.L.C. and 1290
            Associates, L.L.C. *

3.1         Articles of Amendment and Restatement of Metropolis Realty Trust,
            Inc., dated October 7, 1996. *

3.2         Amended and Restated By-Laws of Metropolis Realty Trust, Inc. *

10.1        Agreement and Plan of Merger among 1290 Associates, L.L.C., 237 Park
            Avenue Associates, L.L.C. and 237/1290 Upper Tier Associates, L.P.,
            as of October 10, 1996. *

10.2        Amended and Restated Partnership Agreement of 1290 Partners, L.P.,
            dated November 22, 1999.***

10.3        Third Amended and Restated Limited Partnership Agreement of 237/1290
            Upper Tier Associates, L.P., dated November 19, 1999.***

10.4        Redemption and Substitution Agreement among JMB/NYC Office Building
            Associates, L.P., O&Y Equity Company, L.P., O&Y NY Building Corp.,
            237/1290 Upper Tier GP Corp., and 237/1290 Upper Tier Associates,
            L.P., dated October 10, 1996. *

10.5        Amended and Restated Metropolis Realty Trust, Inc. 1996 Directors'
            Stock Plan. ***

10.6        Form of Metropolis Realty Trust, Inc. Stock Option Agreement for
            Directors.*

10.7        Form of Indemnification Agreement, dated as of October 10, 1996. *

10.8        Registration Rights Agreement, dated as of October 10, 1996. *

10.9        Indemnification Agreement given by Property Partners, L.P.,
            Carlyle-XIII Associates, L.P., and Carlyle-XIV Associates, L.P. to
            Metropolis Realty Trust, Inc., dated as of October 10, 1996. *

10.10       Modification of Operating Agreement of 237 Park Avenue Associates,
            L.L.C., dated as of October 10, 1996. *

10.11       Debt Contribution Agreement, dated as of October 10, 1996, among
            Metropolis Realty Trust, Inc., 237/1290 Lower Tier Associates, L.P.,
            237 Park Partners, L.P., and 1290 Partners, L.P. *

10.12       Debt Assumption, Release and Security Agreement (237 Excess amount)
            dated October 10, 1996. *


                                       45
<PAGE>

10.13       Debt Assumption, Release and Security Agreement (1290 Excess amount)
            dated October 10, 1996. *

10.14       Release of Assumed Debt and Termination of Security Interest by
            Bankers Trust Company for the benefit of O&Y NY Building Corp. and
            O&Y Equity Company, L.P., dated as of October 10, 1996. *

10.15       237 Property Contribution Agreement between 237/1290 Upper Tier
            Associates, L.P., 237/1290 Lower Tier Associates, L.P. and 237 Park
            Partners, L.P., dated as of October 10, 1996. *

10.16       1290 Property Contribution Agreement among 237/1290 Upper Tier
            Associates, L.P., 237/1290 Lower Tier Associates, L.P. and 1290
            Partners, L.P., dated as of October 10, 1996.*

10.17       Loan Agreement among 1290 Partners, L.P., Lenders Party thereto and
            General Electric Capital Corporation, dated December 13, 1999.***

10.18       Amended, Restated and Consolidated Promissory Note, made by 1290
            Partners, L.P. in favor of General Electric Capital Corporation,
            dated December 13, 1999.***

10.19       Amended, Restated and Consolidated Mortgage and Security Agreement,
            between 1290 Partners, L.P. and General Electric Capital
            Corporation, dated December 13, 1999.***

10.20       Indemnification and Pledge Agreement between 1290 Partners, L.P. and
            Apollo Real Estate Investment Fund, L.P., dated December 13,
            1999.***

10.21       Management and Leasing Agreement between 237 Park Partners, L.P. and
            Tishman Speyer Properties, L.P. *

10.22       Management and Leasing Agreement between 1290 Partners, L.P. and
            Tishman Speyer Properties, L.P. *

10.23       Asset Management Agreement between Metropolis Realty Trust, Inc. and
            970 Management, L.L.C., dated as of October 10, 1996. *

10.24       Interest Purchase Agreement between Metropolis Realty Trust, Inc.,
            237 GP Corp., 237 Park Investors, L.L.C. and Escrow Agent, dated as
            of September 23, 1999. **

10.25       Restructuring Agreement between Metropolis Realty Trust, Inc., 237
            GP Corp., JMB/NYC Office Building Associates, L.P., certain other
            holders of indirect interests in 237 Park Avenue and certain
            affiliates of 237 Park Investors, L.L.C., dated as of October 28,
            1999. **

(b)         Reports on Form 8-K incorporated by reference.

            None.

(c)         Exhibits. Refer to paragraph (a)(3) under this Item 14.

(d)         Not applicable.

----------
*           Incorporated by reference to the registrant's Registration Statement
            on Form 10 (File No. 0-21849) and any amendments thereto.

**          Incorporated by reference to the registrant's definitive Information
            Statement on Schedule 14C filed with the Securities and Exchange
            Commission on October 29, 1999.

***         Incorporated by reference to the Registrant's Annual Report on Form
            10-K filed with the Securities and Exchange Commission on March 30,
            2000.


                                       46
<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.

                                        METROPOLIS REALTY TRUST, INC.


                                        By: /s/ Lee S. Neibart
                                           -------------------------------------
                                        Name:  Lee S. Neibart
                                        Title: President and Director


                                        By: /s/ Stuart Koenig
                                           -------------------------------------
                                        Name:  Stuart Koenig
                                        Title: Principal Financial Officer

Date: August 12, 2002

      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.

      Signature                           Title                        Date
      ---------                           -----                        ----


/s/ Lee S. Neibart                President and Director         August 12, 2002
-------------------------
Lee S. Neibart


/s/ William L. Mack         Chairman of the Board and Director   August 12, 2002
-------------------------
William L. Mack


/s/ John R.S. Jacobsson        Vice President, Secretary and     August 12, 2002
-------------------------                Director
John R.S. Jacobsson


/s/ John R. Klopp               Vice President and Director      August 12, 2002
-------------------------
John R. Klopp


/s/ Bruce H. Spector                     Director                August 12, 2002
-------------------------
Bruce H. Spector


/s/ Russel S. Bernard                    Director                August 12, 2002
-------------------------
Russel S. Bernard


/s/ David A. Strumwasser                 Director                August 12, 2002
-------------------------
David A. Strumwasser


/s/ David Roberts                        Director                August 12, 2002
-------------------------
David Roberts


                                       47