UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

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


                                    FORM 10-K

[X]               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the Fiscal Year Ended December 31, 1999

                                       OR

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

                         Commission File Number 0-21849
                      ------------------------------------


                          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.)


                                605 Third Avenue
                                   26th Floor
                            New York, New York 10016
          (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
                Class B 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]

Of the Company's 12,997,646 shares of Common Stock outstanding, 9,354,410 shares
are held by affiliates of the Registrant  and 3,643,236 of the Company's  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.

As of February 29, 2000, there were 12,997,646 shares of the Registrant's Common
Stock issued and outstanding.


                      DOCUMENTS INCORPORATED BY REFERENCE:

The Exhibits to the Company  Registration  Statement on Form 10, as amended, and
the Exhibits to the Company's definitive  Information Statement on Schedule 14C,
filed with the  Commission  on October  29,  1999,  are hereby  incorporated  by
reference in Item 14 of this Annual Report on Form 10-K.


                                      -ii-

<PAGE>



                                TABLE OF CONTENTS


PART I   .....................................................................1
         ITEM 1.    BUSINESS..................................................1
         ITEM 2.    PROPERTY..................................................6
         ITEM 3.    LEGAL PROCEEDINGS........................................10
         ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......10

PART II  ....................................................................11
         ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
                    STOCKHOLDER MATTERS......................................11
         ITEM 6.    SELECTED FINANCIAL DATA..................................12
         ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                    CONDITION AND RESULTS OF OPERATIONS......................13
         ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES
                    ABOUT MARKET RISK........................................16
         ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..............17
         ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                    ACCOUNTING AND FINANCIAL DISCLOSURE......................30

PART III ....................................................................31
         ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......31
         ITEM 11.   EXECUTIVE COMPENSATION...................................33
         ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                    AND MANAGEMENT...........................................34
         ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...........37
         ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
                    ON FORM 8-K..............................................39


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



             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.

                                     -iii-


<PAGE>



                                     PART I


ITEM 1.           BUSINESS

                  Overview

                  Metropolis  Realty Trust,  Inc., a Maryland  corporation  (the
"Company"), is a real estate investment trust (a "REIT"). 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 (as amended,  the "Plan"),  and,  thereby,  acquire the
interests of 237 LLC and 1290 LLC in the properties  located in New York City at
237 Park Avenue (the "237  Property") and 1290 Avenue of the Americas (the "1290
Property,"  and  together  with  the  237  Property,   the  "Properties").   The
Predecessors  were two of the many  companies,  partnerships  and joint ventures
that collectively constituted the United States operations of the Olympia & York
("O&Y")  group of  companies.  The  transactions  contemplated  by the Plan were
consummated on October 10, 1996 (the "Effective Date").

                  On November 22, 1999, the Company sold all of its interests in
the 237 Property.  Following  such sale and as of December 31, 1999, the Company
owns 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  is  owned by  237/1290  Upper  Tier
Associates,  L.P., a Delaware  limited  partnership  (the "Upper Tier LP").  The
4.95% interest is subordinated to the 94.05% partnership interest of the Company
with respect to certain  priority  distributions  from the 1290 Property  Owning
Partnership.  The Upper Tier LP and the 1290  Property  Owning  Partnership  are
hereinafter referred to, collectively, as the "Partnerships."




                                        1

<PAGE>



[GRAPHIC OMITTED]






                                        2

<PAGE>



                  Sale of 237 Property

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

                  On October 27, 1999, in connection with 237 Property Sale, the
Company entered into a Restructuring Agreement ("Restructuring  Agreement") with
the 237 Buyer  and  certain  other  holders  of  indirect  interests  in the 237
Property,  pursuant  to which the  Company  agreed,  directly  and  through  its
subsidiaries,  to (i) convert the  partnership  that owned the 237 Property to a
Delaware  limited  liability  company ("237 Property  LLC");  (ii) liquidate the
partnership  that held the  interests in the 237 Property and the 1290  Property
(the "Lower Tier LP") and cause Lower Tier LP to distribute  its interest in the
1290 Property  Owning  Partnership and 237 Property LLC to the Company and Upper
Tier LP in  proportion  to their  interests  in Lower Tier LP; (iii) cause Upper
Tier  LP to  contribute  its  interest  in 237  Property  LLC  to a  partnership
affiliated with the 237 Buyer (the "Buyer  Affiliated  Partnership") in exchange
for partnership units in the Buyer Affiliated  Partnership having a market value
as of the  Closing  Date of  $505,050;  (iv) assign to an  affiliate  of JMB/NYC
Office Building Associates,  L.P.  ("JMB/NYC"),  the Company's interest in notes
pursuant to which the Company might otherwise have been able to receive payments
of up to $750,000 upon the  distribution  of cash flow from 237 Property LLC and
1290 Property Owning Partnership;  (v) amend the indemnity agreement between the
Company and JMB/NYC and certain of its affiliates  (the "JMB  Indemnitors"),  by
reducing the maximum amount for which the JMB Indemnitors could be liable to the
Company and its affiliates  from  $25,000,000 to  approximately  $14,286,000 and
releasing   approximately  43%  of  the  $10,000,000  collateral  securing  such
indemnity  obligations;  and (vi) amend the  partnership  agreement  of the 1290
Property Owning Partnership (the "1290 Property Owning  Partnership  Agreement")
and the  limited  partnership  agreement  of  Upper  Tier LP  (the  "Upper  Tier
Partnership  Agreement") to provide that (A) if JMB/NYC exercises its right (the
"JMB Put Right"),  which right is exercisable  commencing in September  2001, to
cause the  Company to  acquire  the  interest  held by Upper Tier LP in the 1290
Property Owning Partnership (the "Upper Tier LP Interest"), the Company would be
required to pay to JMB/NYC the greater of (x)  $1,000,000 and (y) the Put Amount
(as defined  below),  (B) if the Company  exercises its right (the "Company Call
Right"),  which right is  exercisable  commencing  in March 2001, to acquire the
Upper Tier LP  Interest,  the  Company  would be  required to pay to JMB/NYC the
greater of (x)  $1,400,000 and (y) the Call Amount (as defined  below),  and (C)
the Company may sell the 1290  Property,  its  partnership  interest in the 1290
Property Owning Partnership or greater than a 51% interest in the Company itself
at any time after January 1, 2000;  provided  that in connection  with such sale
the Company pays to JMB/NYC $4,500,000.  "Put Amount" means the price based upon
a multiple of the net operating  income of the 1290 Property for the immediately
preceding  calendar year reduced by the debt  encumbering  the 1290 Property and
any priority  distributions  to which the Company is entitled as general partner
of the Lower Tier Limited Partnership.  "Call Amount" means the price based upon
a multiple of twice the net operating income of the 1290 Property for the period
of January 1, 2000  through June 30, 2000  reduced by the debt  encumbering  the
1290 Property and any priority distributions to which the Company is entitled as
general partner of the Lower Tier Limited Partnership.

                  The Company does not intend to sell the 1290 Property prior to
March 2001 and intends to exercise the Company Call Right in March 2001.  If the
Company exercises the Company Call Right in March 2001, the Company expects that
it would be required to pay  $1,400,000 to JMB/NYC.  Pursuant to the  agreements
that existed  prior to their  amendment  in  accordance  with the  Restructuring
Agreement, the Company estimates that it would have been required to pay JMB/NYC
significantly  less than  $1,000,000  upon the  exercise of the JMB Put Right or
$1,400,000 upon the exercise of the Company Call Right.

                  On November 22, 1999, the Company consummated the 237 Property
Sale. After repayment of the mortgage indebtedness  encumbering the 237 Property
of  approximately  $162,708,000,  the net proceeds of the 237 Property Sale were
distributed to the Company's  stockholders as part of the dividend of $15.00 per
share of the Company's Common Stock on December 10, 1999.



                                        3

<PAGE>



                  The Refinancing of the 1290 Property

                  On December 13, 1999,  the 1290  Property  Owning  Partnership
repaid  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 1290
Property  Owning  Partnership  has a one time right, at its option to extend the
maturity  for a period of 12 months  (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). The 1290 Mortgage Loan may not be prepaid prior
to June 30, 2000.  If prepaid  between  July 1, 2000 and December 31, 2000,  the
1290 Mortgage Loan can be repaid with a prepayment  premium equal to one-half of
one percent (.5%) of the outstanding  principal balance.  The 1290 Mortgage Loan
may be repaid in whole after  December  31,  2000,  without  penalty.  The costs
associated with securing the 1290 Mortgage Loan of approximately $12,823,000 are
included in deferred financing costs and are amortized over the term of the 1290
Mortgage Loan. Unamortized costs associated with the prior mortgage indebtedness
of approximately $2,307,000 were written off.

                  Business

                  The Company's principal assets consist of its interests in the
Partnerships  through which it owns 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. The
Company  may acquire  additional  properties  in the future,  although it has no
present plans to do so. As further  described under "CERTAIN  RELATIONSHIPS  AND
RELATED  TRANSACTIONS  --  Asset  Manager"  and  "  --  Management  and  Leasing
Agreements,"  the 1290 Property Owning  Partnership has retained 970 Management,
LLC (the "Asset  Manager"),  an affiliate of Victor Capital Group, L.P. ("VCG"),
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, with leases aggregating
approximately  21% of the total rentable square feet expiring over the next five
years. See "Item 2 -- Property."

                  Employees

                  The Company  does not have any  employees.  The 1290  Property
Owning  Partnership  assumed the Predecessors'  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) will not be subject to federal
income  taxation at the corporate level on income it distributes to stockholders
so long as it distributes at least 95% of its REIT taxable income.  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


                                        4

<PAGE>



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

                  To obtain the favorable 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 95% 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.

                  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


                                        5

<PAGE>



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.


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
1,970,000  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  1995  through  1999  were  approximately  78%,  90%,  97%,  99% and  99%,
respectively.

                  As of December 31, 1999,  the 1290 Property was  approximately
99% leased and there were  leases and license  agreements  with 32 tenants and 4
licensees  covering  approximately  1,938,000 rentable square feet of space. For
the year ended December 31, 1999, 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  $43.02 per square  foot.  For the year ended  December  31, 1999,
approximately  73,000 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  $66.81  per  rentable  square  foot.  As of  December  31,  1999,
approximately  29,000  rentable  square  feet of office  and  storage  space was
available for rent.

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



                                        6

<PAGE>



                  The following table summarizes certain  information  regarding
the largest leases at the 1290 Property as of December 31, 1999:

<TABLE>
<CAPTION>
                                                                             Annual Base Rent      Gross Rent        Date(s) of
                                                         Leased square          per square         per square          Lease
Tenant                              Nature of Business      footage(1)        foot leased(2)     foot leased(3)      Expiration
------                              ------------------      -------            -----------        -----------         ----------
<S>                                <C>                       <C>                <C>               <C>              <C>
Equitable                          Insurance/Financial
                                   Services                  625,261            $36.59(4)         $39.17(4)        12/31/11(5)

Warner Communications, Inc.        Entertainment             276,345            $40.03(6)        $43.05(6)        6/30/12(7)

The Bank of New York               Financial Services        107,448            $39.44(8)         $41.09(8)        12/31/10(9)

EMI Entertainment World, Inc.      Entertainment             129,927            $36.97(10)        $40.51(10)       9/30/02(11)

Deutsche Bank, AG                  Financial Services        125,243            $40.81            $42.65           2/14/14(12)

Robinson Silverman                 Law Firm                   99,954            $49.15(13)        $53.94(13)       3/31/04

Morrison Foerster                  Law Firm                   93,606            $49.96(14)        $53.25(14)       9/30/12

ABN-AMRO                           Financial Services         87,626            $57.00(15)        $57.41(15)       10/31/14

GMAC                               Financial Services         81,892            $33.50            $34.28           12/31/10

Other Office and Retail Tenants    Various                   311,029            $43.12            $49.41           2000-2013
</TABLE>

(1)  Leased square footage does not include  approximately 32,000 square feet of
     vacant storage and office 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,  1999.  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  22,411  square  feet leased in the  basement at an Annual
     Base Rent of $24.00  per  square  foot and Gross  Rent of $27.66 per square
     foot.

(5)  Leases with  Equitable  expire  December 31, 2011 (with  respect to 554,322
     square feet and 22,411  square feet in the  basement) and December 30, 2008
     (with respect to 48,528 square feet).

(6)  Does not include  11,097  square feet of space leased in the basement at an
     Annual  Base Rent of $15.42  per  square  foot and Gross Rent of $16.98 per
     square foot.

(7)  Leases with Warner expire  February 28, 2000 (with respect to 28,056 square
     feet and 8,482  square  feet in the  basement);  September  30,  2004 (with
     respect to 79,801 square feet);  and June 30, 2012 (with respect to 157,391
     square feet and 2,615 square feet in the  basement).  Of the space expiring
     February 28, 2000,  Equitable  has leased  28,056  square feet,  commencing
     March 1, 2000 at an Annual  Base Rent of $51.82  per  square  foot with six
     months of free rent and reimbursement of tenant  improvements of $40.00 per
     square  foot;  and 5,940 square feet in the basement at an Annual Base Rent
     of $30.00 per square foot.

(8)  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.

(9)  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).

(10) 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 $29.22 per
     square foot.


                                        7

<PAGE>



(11) Leases with EMI expire  September 30, 2002 (with respect to 100,848  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  basement).  Of the
     space  expiring  September  30, 2002,  Morrison  Foerster has leased 25,158
     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.

(12) Leases  with  Deutsche  Bank expire on  December  31, 1999 with  respect to
     24,863 square feet and on February 14, 2014 with respect to 100,380  square
     feet.  Equitable  has leased the 24,863 square feet  commencing  January 1,
     2000 at an Annual  Base Rent of $48.00 per  square  foot with six months of
     free rent and  reimbursement  of tenant  improvements  of $40.00 per square
     foot.

(13) Does not include  1,800  square feet of space  leased in the basement at an
     Annual  Base Rent of $23.50  per  square  foot and Gross Rent of $24.25 per
     square foot.

(14) Does not  include  879 square  feet of space  leased in the  basement at an
     Annual  Base Rent of $27.75  per  square  foot and Gross Rent of $30.11 per
     square foot.

(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.

                  Expenditures  for capital  projects  for the 1290  Property in
1999  aggregated  approximately  $760,000  and  related  primarily  to  (i)  the
continuation of the elevator  modernization program and (ii) removal of asbestos
in certain mechanical rooms.  Anticipated  expenditures for capital projects for
the 1290 Property in 2000 are approximately  $1,310,000 and relate primarily to:
(i)  the  completion  of  the  elevator  modernization  program;  (ii)  asbestos
abatement and  replacement  of concourse  and subcellar VAT flooring;  and (iii)
installation of a 100 ton chiller for the lobby.

                  An  environmental   report  prepared  for  the  1290  Property
indicated  that the 1290  Property  contained  asbestos or  asbestos  containing
materials in several mechanical rooms and certain other locations. The remaining
cost of removing the asbestos in accordance  with the operations and maintenance
plan for the 1290  Property is  estimated  to be  approximately  $130,000 and is
anticipated to be completed in 2000.

                  The following table shows  anticipated lease expirations on an
aggregate  basis for each calendar  year from 2000 through and  including  2009.
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>
                                                                                   Percentage of Total
                                                                                     Property Owning
                                                                                    Partnership Annual
                                         Rentable Square      Annual Base Rent          Base Rent
   Year of Lease        Number of        Feet Subject to       Represented by          Represented
    Expiration       Leases Expiring     Expiring Leases       Expiring Leases      by Expiring Leases
   ------------      ---------------     ---------------      -----------------    -------------------

       <S>                <C>              <C>           <C>   <C>                      <C>
       2000               4                 48,141       $      1,612,490                2.49%
       2001               3                  5,803       $        157,724                 .20%
       2002               3                101,974       $      3,727,188                4.78%
       2003               2                 43,607       $      1,978,703                2.60%
       2004               5                222,401       $     10,995,148               14.89%
       2005               6                 51,345       $      2,259,186                3.31%
       2006               2                 91,042       $      3,811,650                6.00%
       2007               -                   -                     -                      -
       2008               2                116,070       $      6,362,037               10.85%
       2009               1                 10,000       $        150,000                 .26%
</TABLE>

                  Annual real estate taxes  assessed  against the 1290  Property
for the fiscal years ended June 30, 2000, 1999, 1998 and 1997 were  $17,755,000,
$17,964,000, $17,152,000 and $17,300,000, respectively, which amounts were


                                        8

<PAGE>



calculated  on  assessed  values of  approximately  $185,400,000,  $175,500,000,
$168,750,000 and $168,750,000,  respectively. See -- "Tax Certiorari Proceedings
and Tenant Reimbursement Claims."

                  The 237 Property

                  The 237  Property  Owning  Partnership  and its  successor  in
interest,  237  Property  LLC,  held  fee  title  to 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.

                  Other Assets

                  Tax Certiorari Proceedings and Tenant Reimbursement Claims

                  2 Broadway  Associates,  L.P. ("2 Broadway LP")  commenced tax
certiorari  proceedings  against  the City of New York  for  over-assessment  of
property  taxes for the tax years ended June 30, 1988 through June 30, 1995 with
respect to the 2 Broadway Property. The rights to the proceeds of the 2 Broadway
Property tax certiorari proceedings were assigned to the Company pursuant to the
Plan. The Company settled such proceedings with the City of New York on July 14,
1998 and received net proceeds of approximately  $8,342,000 after reimbursements
to tenants and $2,238,000 of fees and expenses  incurred in connection with such
proceedings.  Such net  proceeds  were  approximately  $3,280,000  in  excess of
estimated  net proceeds and are included in  miscellaneous  income in 1998.  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, 1995 through June 30, 1998 with respect to the 237 Property and for the
tax years  ending June 30, 1991  through  June 30, 2001 with respect to the 1290
Property.  The  Company  transferred  to the 237 Buyer the right to pursue,  and
receive the proceeds of, such  actions  with  respect to the 237  Property.  The
Company  has  reflected   real  estate  tax  proceeds  of  $3,175,000   and  the
corresponding tenant reimbursements,  fees and expenses of $2,800,000 related to
the 1290 Property in the balance sheet as of December 31, 1999.

                  Priority Utility Tax Claims

                  2 Broadway

                  Pursuant to the reorganization  plan related to the 2 Broadway
Property  (the  "2  Broadway  Plan"),  and  an  Assumption  and  Indemnification
Agreement,  dated as of the Effective  Date, (i) the Company assumed any and all
remaining  obligations  of 1290 LLC and 2  Broadway  LP in  connection  with any
claims  reserved pursuant  to section 9.3 of the 2 Broadway  Plan,  and (ii) the
Company  received all amounts  remaining in the 2 Broadway claims  reserve.  The
obligations  assumed,  and amounts  remaining in the 2 Broadway  claims reserve,
related  primarily  to  settlement  of  potential  utility tax claims  against 2
Broadway LP by the taxing  authorities of the City and State of New York (the "2
Broadway  Utility Tax Claims").  In December  1997,  the Company  entered into a
resolution  with New York City  settling the 2 Broadway  Utility Tax Claims with
respect to the New York City utility taxes for an aggregate of $177,000.  No New
York City utility tax exposure exists for 2 Broadway.

                  Also during 1997, the Company executed a Voluntary  Disclosure
Agreement  with New York State on behalf of 2 Broadway LP with regard to utility
tax  exposure  through  1995.  The amount  paid under the  Voluntary  Disclosure
Agreement was  approximately  $16,000,  approximately  $2,900,000  less than the
Company had budgeted for such claim. The Agreement was finalized and accepted by
New York State in June 1999, and a document was forwarded from New York State to
the  Company  stating  that it is up to date for  utility tax through the end of
calendar  year  1995.  No New York  State  utility  tax  exposure  exists  for 2
Broadway.



                                        9

<PAGE>



                  1290 Property and 237 Property

                  The New York City taxing  authorities also filed claims in the
Predecessors bankruptcy cases alleging nonpayment of New York City utility taxes
in respect of the 1290 Property and the 237 Property (the "Priority  Utility Tax
Claims").  The Plan granted the Company the exclusive  right to  compromise  and
settle such claims;  provided,  that in connection  with any such  compromise or
settlement,  the Company is required to indemnify the previous holders of equity
interests in the Predecessors (and their successors and assigns) from all claims
which may be made by the City or State of New York in respect of utility  taxes,
interest and penalties related to the 1290 Property and 237 Property unless such
settlement includes a release of such holders from all such claims.

                  In December 1997, the Company  entered into a resolution  with
New York City settling the Priority  Utility Tax Claims with respect to New York
City utility taxes for an aggregate of $93,000, approximately $357,000 less than
the original  assessment.  No New York City utility tax exposure  exists for the
1290 Property and the 237 Property.

                  For New York State Utility Tax  purposes,  returns were timely
filed in respect of the 1290  Property  and the 237  Property for tax years 1992
through  1996.  As of March 15,  2000,  no New York State  utility tax  exposure
exists for the 1290 Property and the 237 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 Partnerships or the 1290 Property.

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

                  A special  meeting of the Company's  stockholders  was held on
November 22, 1999. At such meeting, the Company's  stockholders voted to approve
the sale of the 237 Property.



                                       10

<PAGE>



                                     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.  As of February 29,  2000,  there were  approximately  105 holders of
record of the  Company's  Class A Common  Stock and one  holder of record of the
Company's Class B 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 annual  distributions  to  stockholders of at least 95% 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)
   --------------------      --------------------           -----------

      March 17, 1998                 Regular                     $0.50

      December 31, 1998              Regular                     $0.50
                                     Special                     $0.50

      April 15, 1999                 Regular                     $0.50

      July 15, 1999                  Regular                     $0.50

      October 15, 1999               Regular                     $0.50

      December 10, 1999              Special                   $15.00(1)

      December 27, 1999              Special                   $15.00(2)

(1)   Includes net proceeds of the 237 Property's sale.
(2)   Includes net proceeds of the refinancing of the 1290 Property.


         On March 23, 2000 the Company announced a regular quarterly dividend of
$0.15 per share, which is payable on April 14, 2000 to stockholders of record as
of March 31, 2000.



                                       11

<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>
                                                                                                                Period October
                                                                                                                   10, 1996
                                                                                                                (commencement
                                                                                                              of operations) to
                                                                 Years Ended December 31,                        December 31,
                                                      1999                   1998                 1997               1996
                                                      ----                   ----                 ----               ----
REVENUES
<S>                                              <C>                   <C>                   <C>                 <C>
  Rental income                                     $126,434             $134,754              $129,617             $28,141
  Lease termination income                            26,455                 -                     -                   -
  Miscellaneous income                                 4,669                4,889                 1,190               1,965
                                                 -----------           ----------            ----------          ----------
     Total revenues                                  157,558              139,643               130,807              30,106
                                                 -----------           ----------            ----------          ----------

OPERATING EXPENSES
  Real estate taxes                                   27,414               27,733                26,813               6,208
  Operating and maintenance                            6,756                7,119                 7,553               1,774
  Utilities                                            6,991                6,674                 6,870               1,195
  Payroll                                              4,323                4,430                 4,332               1,170
  Management fees                                      2,198                2,298                 2,121                 426
  Professional fees                                    1,960                3,451                 2,055                 384
  General and administrative                           1,565                  562                 1,032                 204
  Depreciation and amortization                       17,440               16,651                15,532               3,457
                                                 -----------           ----------            ----------          ----------
    Total operating expenses                          68,647               68,918                66,308              14,818
                                                 -----------           ----------            ----------          ----------

OTHER ITEMS
  Interest income                                      3,759                3,293                 3,676                 779
  Interest expense                                   (32,387)             (33,615)              (34,048)             (7,484)
  Write-off of note receivable                        (1,088)                  -                     -                   -
  Write off of deferred financing costs               (2,307)                  -                     -                   -
                                                 ------------          ----------            ----------          ----------
    Total other items                                (32,023)             (30,322)              (30,372)             (6,705)
                                                 ------------          ----------            ----------          ----------

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

NET INCOME                                         $  107,333          $   40,403           $   34,127           $    8,583
                                                 ============          ==========           ===========          ==========

Net Income Per Common Share:
Net income                                       $       8.27          $     3.12           $     2.63           $     0.66
                                                 ------------          ----------           -----------          ----------
Weighted average common shares
outstanding                                        12,971,262          12,967,153           12,963,963           12,963,046
                                                 ------------          ----------           -----------          ----------

Net Income Per Common Share
(assuming dilution):
Net income                                       $       8.26          $     3.11           $     2.63           $     0.66
                                                 ------------          ----------           -----------          ----------
Weighted average common shares
outstanding (assuming dilution):                   12,998,646          12,993,666           12,988,963           12,990,046
                                                 ------------          ----------           -----------          ----------

Total assets as of year end                      $    475,276          $  767,771           $  757,932           $  766,219
                                                 ------------          ----------           -----------          ----------
Long-term debt as of year end                    $    425,000          $  410,625           $  418,125           $  420,000
                                                 ------------          ----------           -----------          ----------
Cash dividends declared per common share         $      31.50          $     1.50           $     2.75           $     0.50
                                                 ------------          ----------           -----------          ----------
</TABLE>


                                       12
<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,  upon  acquisition  of the 237 Property and the 1290  Property
pursuant to the Plan. 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 to the 237 Buyer. 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 1,970,000 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 The


                                       13

<PAGE>



Equitable  Life  Assurance  Society  of the  United  States,  and  is  currently
approximately  99% leased.  Over the next five years,  approximately  21% of the
total rentable area of the building is subject to expiring leases.

             The Company,  through 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 970  Management,  LLC, an affiliate of Victor Capital Group,
L.P.,  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.

             As of December 31, 1999,  12,995,646  shares of Class A and Class B
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, 1999

             Rental  income for the year ended  December  31, 1999  decreased by
approximately  $8,320, a decrease of 6.2% from the year ended December 31, 1998.
This  decrease  was the result of the sale of the 237  Property on November  22,
1999, a decrease in rents and  escalations  at the 237 Property due to the early
termination of the Swiss  Reinsurance  Company ("Swiss Re") lease, the write off
of deferred  rent  receivable  related to the early partial  termination  of the
lease with Warburg Pincus at the 237 Property and the write off of deferred rent
receivable  related to the early  termination  of B.T. Alex Brown's lease at the
1290  Property.  This decrease is partially  offset by an increase in base rents
associated  with the Credit Suisse Asset  Management  ("CSAM")  lease at the 237
Property in comparison to the base rents associated with the Swiss Re lease.

             The Company  received lease  termination  income of $26,455 for the
year ended December 31, 1999.  The  termination of the Swiss Re lease at the 237
Property  resulted  in the  payment  by  Swiss  Re to  the  Company  of a  lease
termination  fee of $25,855 in July 1999. The Company also received a $600 lease
buyout  payment  in May 1999  from EMI  Entertainment  World,  Inc.  at the 1290
Property.

             Miscellaneous  income  in  1998  includes  $3,309  related  to  the
settlement of tax  certiorari  proceedings  for all tax years up to December 31,
1995 with  respect to the property  located at 2 Broadway  that was owned by the
Predecessors. Miscellaneous income in 1999 includes approximately $2,900 related
to the reversal of a reserve for utility tax claims settled during 1999.

             Operating  expenses  for the year  ended  December  31,  1999  were
$68,647,  a decrease of .4% from the year ended December 31, 1998. This decrease
was the result of the discontinuance of recording  depreciation and amortization
with respect to the 237 Property in July 1999 in  connection  with the Company's
decision to sell the property, the sale of the 237 Property on November 22, 1999
and a decrease in professional fees as a result of the settlement of certain tax
certiorari  proceedings  in 1998.  These  decreases  were  partially  offset  by
increases in utilities, repairs and maintenance,  professional fees, real estate
taxes, and an increase in the reserve for doubtful accounts at the 1290 Property
and an  increase  in  depreciation  and  amortization  related to  additions  to
building  and tenant  improvements  in 1998 and 1999.  Operating  expenses  as a
percentage of base rental income and  escalation  income is 54.3% in 1999 versus
51.1% in 1998.

             Write off of note receivable  represents the difference between the
carrying amount of a tenant note receivable of $5,088 and the settlement  amount
of $4,000.

             The  Company  wrote off $2,307 of  unamortized  deferred  financing
costs in 1999 in connection with the refinancing of mortgage indebtedness at the
1290 Property.



                                       14
<PAGE>



             Gain on sale of property represents the gain on the sale of the 237
Property  on  November  22,  1999.  The Company  sold its  interests  in the 237
Property for $372,000,  subject to customary  prorations and certain adjustments
which resulted in a net gain of $50,445.

             Historical  Consolidated  Statement of Income,  year ended December
31, 1998

             Rental income increased by approximately  $5,137 for the year ended
December  31,  1998 as  compared  to the prior  year.  This  increase of 4.0% is
attributable  to  an  overall  increase  in  occupancy  at  the  1290  Property.
Miscellaneous  income  increased  by  approximately  $3,699  for the year  ended
December 31, 1998 as compared to the prior year primarily as a result of receipt
of net proceeds in excess of accrued  amounts  related to the  settlement of tax
certiorari  proceedings with respect to 2 Broadway,  a property previously owned
by the Predecessors.

             Operating  expenses  for the year  ended  December  31,  1998  were
$68,918,  an  increase  of 3.9% from the year  ended  December  31,  1997.  This
increase is primarily attributable to professional fees and expenses incurred in
connection  with the  settlement  of tax  certiorari  proceedings  related  to 2
Broadway,  totaling $2,238 and an increase in depreciation  and  amortization of
$1,119,  which is primarily the result of building and tenant  improvements made
in 1997 and 1998. Operating expenses as a percentage of rental income is 51.1%.

             Historical  Consolidated  Statement of Income,  year ended December
31, 1997

             The Company's  revenues of $130,807 for the year  consisted of base
rental income of $114,183  (87.3%),  escalation  income of $15,434 (11.8%),  and
miscellaneous  income of $1,190 (.9%). This revenue is achieved based on the 237
Property  and  the  1290  Property  being  approximately  98%  and  97%  leased,
respectively, during the year.

             Liquidity and Capital Resources

             During 1999, the Company  generated  cash flows from  operations of
approximately  $72,431.  In  addition,  net  proceeds  from  the sale of the 237
Property  were  $344,259  and net  proceeds  from  the  refinancing  of the 1290
Property were  $412,177.  The Company used this cash to repay  mortgage loans of
$410,625,  pay dividends in the amount of $408,950,  pay leasing  commissions of
approximately $21,250 and fund building and tenant improvements of approximately
$12,308.

             At December 31, 1999, the Company had unrestricted  cash on hand of
approximately $9,113. At December 31, 1998, the Company had unrestricted cash on
hand of approximately $25,357.

             On November  22,  1999,  the Company  consummated  the 237 Property
Sale. After repayment of the mortgage indebtedness  encumbering the 237 Property
of  approximately  $162,708,  the net  proceeds  of the 237  Property  Sale were
distributed to the Company's  stockholders as part of the dividend of $15.00 per
share of the Company's Common Stock on December 10, 1999.

                  On December 13, 1999,  the 1290  Property  Owning  Partnership
repaid  mortgage  indebtedness  secured by the 1290  Property  of  approximately
$224,900,  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 at its option to extend the maturity for
a period of 12 months (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).  The 1290  Mortgage  Loan may not be prepaid  prior to June 30,
2000. If prepaid  between July 1, 2000 and December 31, 2000,  the 1290 Mortgage
Loan can be repaid with a  prepayment  premium  equal to one-half of one percent
(.5%) of the outstanding principal balance. The 1290 Mortgage Loan may be repaid
in whole after December 31, 2000,  without  penalty.  The costs  associated with
securing  the 1290  Mortgage  Loan of  approximately  $12,823  are  included  in
deferred  financing  costs and are amortized  over the term of the 1290 Mortgage
Loan.  Unamortized  costs  associated  with the prior mortgage  indebtedness  of
approximately $2,307 were written off.


                                       15

<PAGE>



             Year 2000 Compliance

             The inability of computers,  software and other equipment utilizing
microprocessors  to  recognize  and properly  process  data fields  containing a
two-digit year was commonly  referred to as the Year 2000 Compliance  issue. The
Company  encountered no problems related to the Year 2000 Compliance  issue. The
Company is continuing to monitor the situation, but does not expect to encounter
Year 2000 Compliance issues.

ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

             The Property Owning Partnerships and the lead lender under the Loan
entered into an Interest Rate Exchange Agreement effective October 10, 1996 (the
"Swap  Agreement").  The Swap  Agreement had a term of 5 years and provided that
the Property  Owning  Partnerships  would pay  interest at an effective  rate of
7.987% per annum on the notional amount of $420,000,000.  The Company terminated
the Swap Agreement on December 13, 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 $425,000,000. Management believes
that the risk of incurring  losses related to the credit risk is remote and that
any losses would be immaterial.

             Management  believes that the fair value of the 1290 Swap Agreement
generally  offsets  gains or losses on the 1290  Mortgage  Loan being hedged and
changes  the  nature  of such  underlying  financial  instruments.  Because  the
maturity  date of the 1290 Mortgage  Loan and the  termination  date of the 1290
Swap  Agreement are identical,  the fair value of the 1290 Swap Agreement  which
approximates $2,251,000 at December 31, 1999 is of limited usefulness.





                                       16

<PAGE>



ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                          METROPOLIS REALTY TRUST, INC.
                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                          Page

HISTORICAL FINANCIAL STATEMENTS

         <S>                                                                                               <C>
         Independent Auditors' Report....................................................................  18

         Consolidated Balance Sheets as of December 31, 1999 and 1998....................................  19

         Consolidated Statements of Income for the years ended December 31, 1999, 1998 and 1997..........  20

         Consolidated Statements of Stockholders' Equity for years ended December 31, 1999, 1998
          and 1997.......................................................................................  21

         Consolidated Statements of Cash Flows for years ended December 31, 1999, 1998
         and 1997........................................................................................  22

         Notes to Consolidated Financial Statements......................................................  24
</TABLE>





                                       17

<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, 1999 and 1998 and the
related consolidated  statements of income,  stockholders' equity and cash flows
for each of the  three  years in the  period  ended  December  31,  1999.  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  generally   accepted  auditing
standards.  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,  1999  and  1998  and the  results  of  their
operations  and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with generally accepted accounting principles.

Deloitte & Touche LLP
New York, New York
January 21, 2000



                                       18

<PAGE>


METROPOLIS REALTY TRUST, INC.
AND SUBSIDIARIES

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


<TABLE>
<CAPTION>
ASSETS
                                                                                                 December 31,
                                                                                              1999          1998
                                                                                              ----          ----
<S>                                                                                        <C>            <C>
Rental property - net of accumulated depreciation of $27,316 and $30,172,                  $374,282       $ 651,003
   respectively
Cash and cash equivalents                                                                     9,113          25,357
Escrow deposits                                                                               3,179           3,084
Tenant security deposits                                                                        226             644
Due from tenants - net of doubtful accounts of $3,651 and $2,696, respectively                2,446           4,088
Deferred financing costs - net of amortization of $207 and $4,863, respectively              12,616           6,062
Real estate tax refunds                                                                       3,175           3,175
Notes receivable - net of unamortized discount of $0 and $187, respectively                       -           9,307
Deferred rent receivable                                                                     46,110          39,831
Prepaid real estate taxes                                                                     8,658          14,138
Deferred leasing costs, net of amortization of $1,232 and $538, respectively                 14,864          10,628
Other assets                                                                                    607             454
                                                                                           --------       ---------

TOTAL ASSETS                                                                               $475,276       $ 767,771
                                                                                           ========       =========

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities
  Secured notes                                                                           $ 425,000      $  410,625
  Accounts payable and accrued expenses                                                       8,700          11,927
  Tenants' security deposits and unearned revenue                                             1,462           3,292
                                                                                        -----------    ------------

Total Liabilities                                                                           435,162         425,844
                                                                                         ----------     -----------

Subordinated Minority Interest                                                               14,409          14,855
                                                                                         ----------     -----------

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, (Class A -
  outstanding - 8,059,586 and 8,034,586 shares, respectively;
   Class B - outstanding - 4,936,060 and 4,936,060 shares, respectively)                    129,956         129,706
  Paid-in capital                                                                           175,844         175,844
  Retained earnings (deficit)                                                              (280,095)         21,522
                                                                                         ----------      ----------

Total Stockholders' Equity                                                                   25,705         327,072
                                                                                         ----------      ----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                $ 475,276       $ 767,771
                                                                                          =========       =========
</TABLE>

See notes to consolidated financial statements.



                                       19

<PAGE>


METROPOLIS REALTY TRUST, INC.
AND SUBSIDIARIES

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

<TABLE>
<CAPTION>

                                                                       Years ended December 31,
                                                               1999               1998               1997
                                                               ----               ----               ----
REVENUES:
<S>                                                            <C>                <C>                <C>
     Base rental income                                        $114,983           $119,275           $114,183
     Lease termination income                                    26,455              -                  -
     Operating escalation income                                 11,451             15,479             15,434
     Miscellaneous income                                         4,669              4,889              1,190
                                                             ----------         ----------        -----------
     Total revenues                                             157,558            139,643            130,807
                                                             ----------         ----------        -----------

OPERATING EXPENSES:
     Real estate taxes                                           27,414             27,733             26,813
     Operating and maintenance                                    6,756              7,119              7,553
     Utilities                                                    6,991              6,674              6,870
     Payroll                                                      4,323              4,430              4,332
     Management fees                                              2,198              2,298              2,121
     Professional fees                                            1,960              3,451              2,055
     General and administrative                                   1,565                562              1,032
     Depreciation and amortization                               17,440             16,651             15,532
                                                             ----------         ----------        -----------
     Total operating expenses                                    68,647             68,918             66,308
                                                             ----------         ----------        -----------

OTHER ITEMS:
     Interest income                                              3,759              3,293              3,676
     Interest expense                                           (32,387)           (33,615)           (34,048)
     Write-off of note receivable                                (1,088)             -                   -
     Write off of deferred financing costs                       (2,307)             -                   -
                                                             ----------         ----------        -----------
     Total other items                                          (32,023)           (30,322)           (30,372)
                                                             ----------         ----------        -----------

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

NET INCOME                                                   $  107,333         $   40,403         $   34,127
                                                             ==========         ==========         ==========

NET INCOME PER COMMON SHARE:
Net income                                                         8.27         $     3.12         $     2.63
                                                             ----------         ----------         ----------
Weighted average common shares outstanding                   12,971,262         12,967,153         12,963,963
                                                             ----------         ----------         ----------

NET INCOME PER COMMON SHARE
(assuming dilution):
  Net income                                                      $8.26              $3.11              $2.63
                                                                  -----              -----              -----
  Weighted average common shares outstanding
  (including 3,000, 28,000, and 25,000 shares of
  common stock issuable upon the exercise of
  outstanding options as of December 31, 1999, 1998 and
 1997, respectively).                                        12,998,646         12,993,666         12,988,963
                                                             ----------         ----------         ----------
</TABLE>

See notes to consolidated financial statements.



                                       20

<PAGE>


METROPOLIS REALTY TRUST, INC.

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
-------------------------------------------------------------------------------------------------------------------
                                                             Common
                                                            Stock at                      Retained         Total
                                                               Par         Paid-in        Earnings     Stockholders'
                                                              Value        Capital        (Deficit)        Equity
                                                          ------------- -------------- -------------------------------

<S>                                                            <C>            <C>             <C>             <C>
BALANCE, JANUARY 1, 1997                                       $129,630       $175,615        $  2,102        $307,347
Shares issued under Directors' Stock Plan                            36            121            -                157
Net income                                                        -              -              34,127          34,127
Dividends declared                                                -              -             (35,656)        (35,656)
                                                               --------       --------        -----------   -----------
BALANCE, DECEMBER 31, 1997                                      129,666        175,736             573         305,975
Shares issued under Directors' Stock Plan                            40            108            -                148
Net income                                                        -              -              40,403          40,403
Dividends declared                                                -              -             (19,454)        (19,454)
                                                               --------       --------      -----------     -----------
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
                                                               ========       ========       ==========      =========
</TABLE>

See notes to consolidated financial statements.





                                       21

<PAGE>

<TABLE>
<CAPTION>
METROPOLIS REALTY TRUST, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
----------------------------------------------------------------------------------------------------------------------------
                                                                                         Years Ended December 31,
                                                                                  1999              1998              1997
                                                                                  ----              ----              ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                             <C>                <C>               <C>
Net income                                                                      $107,333           $40,403           $34,127
Adjustments to reconcile net income to net cash
provided by operating activities:
   Gain on sale of property                                                      (50,445)              -                 -
   Write-off of deferred financing costs                                           2,307               -                 -
   Depreciation and amortization                                                  17,440            16,651            15,532
   Amortization of discount - notes receivable                                       -                (545)             (504)
   Bad debt expense                                                                  585               -                 -
   Write-off of note receivable                                                    1,088               -                 -
   Change in:
      (Increase)/Decrease in escrow deposits                                      (2,516)             (175)           10,848
      Decrease/(Increase) in due from tenants                                      1,057            (1,084)              947
      Decrease in tenant security deposits                                           416               -                 -
      Decrease/(Increase) in prepaid expenses and other assets                     5,345              (535)              199
      Decrease in real estate tax refunds                                          2,421            10,913               -
      Increase in deferred rent receivable                                       (15,229)          (12,976)          (20,279)
      Increase/(Decrease) in accounts payable and accrued expenses                 3,619            (5,041)              547
      (Decrease)/Increase in unearned revenue                                       (990)            1,279               848
                                                                                ---------        ---------          --------
         Net cash provided by operating activities                                72,431            48,890            42,265
                                                                                --------         ---------          --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property                                                   344,259               -                 -
Additions to building and equipment                                              (12,308)          (15,903)           (6,559)
Leasing costs                                                                    (21,250)           (5,790)           (5,206)
Collections on notes receivable                                                    8,218               339               307
                                                                                --------         ---------          --------
         Net cash provided (used) in investing activities                        318,919           (21,354)          (11,458)
                                                                                --------         ----------         ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from mortgage note payable                                              425,000               -                 -
Financing costs                                                                  (12,823)              -                 -
Payments on secured notes                                                       (410,625)           (7,500)           (1,875)
Dividends paid                                                                  (408,950)          (19,454)          (42,137)
Distribution to subordinated minority interest                                      (446)              -                 -
Issuance of shares of common stock                                                   250               148               157
                                                                                --------         ---------          --------
         Net cash used in financing activities                                  (407,594)          (26,806)          (43,855)
                                                                                --------         ---------          --------

(DECREASE)/INCREASE IN CASH AND CASH                                             (16,244)              730           (13,048)
EQUIVALENTS

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                    25,357            24,627            37,675
                                                                                --------          --------          --------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                        $  9,113          $ 25,357          $ 24,627
                                                                                ========          ========          ========

</TABLE>



                                       22

<PAGE>


METROPOLIS REALTY TRUST, INC.
AND SUBSIDIARIES
<TABLE>
<CAPTION>
                                                                             Years Ended December 31,
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
<S>                                                                    <C>            <C>            <C>
 Interest paid                                                         $  32,387      $ 33,489       $ 33,905
                                                                       =========      ========       ========
 Dividends declared                                                     $408,950      $ 19,454       $ 35,656
                                                                        ========      ========       ========

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



See notes to consolidated financial statements.



                                       23

<PAGE>


METROPOLIS REALTY TRUST, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(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, 1999, the Company owns
   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 is owned by 237/1290 Upper
   Tier Associates,  L.P., a Delaware limited partnership (the "Upper Tier LP").
   The 4.95% interest is subordinated to the 94.05% partnership  interest of the
   Company with respect to certain priority distributions from the 1290 Property
   Owning  Partnership.   The  Upper  Tier  LP  and  the  1290  Property  Owning
   Partnership are hereinafter referred to, collectively, as the "Partnerships."


   Basis  of  Presentation  -  The  consolidated  financial  statements  include
   Metropolis and each of the entities through which Metropolis  indirectly owns
   the Properties.  The  presentation of the consolidated  financial  statements
   requires estimates and assumptions that affect the reported amounts of assets
   and  liabilities at the balance sheet date.  Actual results could differ from
   those  estimates.  Certain 1997 and 1998 amounts  have been  reclassified  to
   conform with the 1999 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  and
   $134,518, as of December 31, 1999 and 1998,  respectively.  Building,  tenant
   improvements  and building  improvements are carried at $338,098 and $546,656
   as of December 31, 1999 and December 31, 1998, 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.


   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 life of 40 years.  Furniture  and fixtures are
   depreciated  over  their  useful  life,  ranging  from 5 to 7  years.  Tenant
   improvements  are  amortized on a  straight-line  basis over the terms of the
   respective leases.


   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.


                                       24

<PAGE>



   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 - Escrow deposits include reserves for certain claims made in
   conjunction  with the Plan  and  escrow  deposits  for  tenant  improvements,
   leasing commissions, insurance and real estate taxes.


   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 95% of its REIT taxable income.


2.    SALE OF PROPERTY


   On  September  23,  1999,  the  Company  entered  into an  Interest  Purchase
   Agreement (the "Purchase  Agreement")  with 237 Park Investors,  L.L.C.  (the
   "237  Buyer"),  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 condensed  results of operations for
   the 237 Property for the period January 1, 1999 through November 21, 1999:


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
                                                                  =========



                                       25
<PAGE>


3.    REAL ESTATE TAX REFUNDS


   2 Broadway  Associates,  L.P.  ("2 Broadway  LP")  commenced  tax  certiorari
   proceedings  against  the City of New York for  over-assessment  of  property
   taxes  for the tax years  ended  June 30,  1988  through  June 30,  1995 with
   respect  to the 2 Broadway  Property.  The  rights to the  proceeds  of the 2
   Broadway  Property tax  certiorari  proceedings  were assigned to the Company
   pursuant to the Plan. The Company settled such  proceedings  with the City of
   New York on July 14, 1998 and received net proceeds of  approximately  $8,342
   after  reimbursements  to tenants and $2,238 of fees and expenses incurred in
   connection with such proceedings. Such net proceeds were approximately $3,280
   in excess of estimated  net proceeds  and are  included in  miscellaneous  in
   income in 1998. 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,  1995  through  June 30,  1998 with
   respect  to the 237  Property  and for the tax  years  ending  June 30,  1991
   through  June 30,  2001  with  respect  to the  1290  Property.  The  Company
   transferred to the 237 Buyer the right to pursue, and receive the proceeds of
   such actions with respect to the 237 Property. The Company has reflected real
   estate tax  refunds of $3,175 and the  corresponding  tenant  reimbursements,
   fees and expenses of $2,800 related to the 1290 Property in the balance sheet
   as of December 31, 1999.


4.    NOTES RECEIVABLE


   Included in Notes  Receivable  as of December  31, 1998 are two tenant  notes
   aggregating  approximately  $9,307.  On October 1, 1999, the Company  entered
   into a Settlement  Agreement  regarding  the first note,  dated April 1, 1999
   with a face amount of $6,500 and a maturity date of September 1, 1999.  Under
   the Settlement  Agreement $4,000 was paid to the Company in full satisfaction
   of the note,  which had a carrying value of $5,088 at the date of settlement.
   The  uncollected  balance of $1,088 was written off.  The second note,  dated
   August 20,  1985,  with a face  value of  $4,355,  is carried at $4,075 as of
   December 31, 1998 net of unamortized discount.  The second note does not bear
   interest and was payable on October 31, 1999. The Company received payment in
   full of such note on October 29, 1999.


5.    MORTGAGE NOTES


   Secured  Notes as of December 31, 1998 consist of promissory  notes  ("Loan")
   issued by the Property Owning  Partnerships in the original  principal amount
   of $420,000 pursuant to a Credit Agreement  ("Agreement")  among the Property
   Owning Partnerships,  the lenders as signatories thereto in the Agreement and
   the lead lender. The Loan had a balance at December 31, 1998 of $410,625.


   Subsequent  to the  sale  of the  237  Property,  the  1290  Property  Owning
   Partnership  refinanced mortgage indebtedness secured by the 1290 Property of
   approximately  $224,900,  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
   not be prepaid  prior to July 1, 2000.  If prepaid  between  July 1, 2000 and
   December 31,  2000,  the 1290  Mortgage  Loan can be repaid with a prepayment
   premium  equal  to  one-half  of one  percent  of the  outstanding  principal
   balance.  The 1290  Mortgage  Loan may be repaid in whole after  December 31,
   2000,  without penalty.  The costs associated with securing the 1290 Mortgage
   Loan of  approximately  $12,283 are included in deferred  financing costs and
   are amortized  over the term of the 1290  Mortgage  Loan.  Unamortized  costs
   associated with the prior mortgage  indebtedness of approximately $2,307 were
   written off.


   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 of 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.


                                       26

<PAGE>



   Management  believes that the fair value of the 1290 Swap Agreement generally
   offsets  gains or losses on the 1290  Mortgage  Loan being hedged and changes
   the nature of such  underlying  financial  instruments.  Because the maturity
   date of the 1290  Mortgage  Loan and the  termination  date of the 1290  Swap
   Agreement  are  identical,  the fair value of the 1290 Swap  Agreement  which
   approximates $2,251 at December 31, 1999 is of limited usefulness.


6.    ACCOUNTS PAYABLE AND ACCRUED EXPENSES


   Accounts payable and accrued expenses  include  property  operating  expenses
   payable,  funded  reserves  held by the Company  for utility tax claims,  and
   tenant claims against real estate tax proceeds.


7.    SUBORDINATED MINORITY INTEREST


   The Subordinated  Minority  Interest  represents the 99% limited  partnership
   interest of JMB/NYC  Office  Building  Associates,  L.P.  ("JMB/NYC")  in the
   limited  partnership  (the "Upper  Tier  Limited  Partnership")  which owns a
   subordinated  5% limited  partnership  interest in the 1290  Property  Owning
   Partnership  (the  "Subordinated  Minority  Interest").  Pursuant to the 1290
   Property  Owning  Partnership's  Amended and  Restated  Agreement  of Limited
   Partnership (the "1290 Partnership Agreement"),  (A) if JMB/NYC exercises its
   right  (the  "JMB Put  Right"),  which  right is  exercisable  commencing  in
   September  2001,  to cause the Company to acquire the interest  held by Upper
   Tier  LP in  the  1290  Property  Owning  Partnership  (the  "Upper  Tier  LP
   Interest"),  the  Company  would be required to pay to JMB/NYC the greater of
   (x)  $1,000 and (y) the Put Amount (as  defined  below),  (B) if the  Company
   exercises its right (the "Company  Call Right"),  which right is  exercisable
   commencing in March 2001, to acquire the Upper Tier LP Interest,  the Company
   would be  required  to pay to JMB/NYC  the  greater of (x) $1,400 and (y) the
   Call  Amount  (as  defined  below),  and (C) the  Company  may  sell the 1290
   Property, its partnership interest in the 1290 Property Owning Partnership or
   greater than a 51% interest in the Company  itself at any time after  January
   1, 2000;  provided that in connection  with such sale the Company pays $4,500
   to  JMB/NYC.  "Put  Amount"  means the price based upon a multiple of the net
   operating income of the 1290 Property for the immediately  preceding calendar
   year  reduced by the debt  encumbering  the 1290  Property  and any  priority
   distributions  to which the  Company is  entitled  as general  partner of the
   Lower Tier  Limited  Partnership. "Call  Amount" means the price based upon a
   multiple  of twice  the net  operating  income of the 1290  Property  for the
   period  of  January  1,  2000  through  June  30,  2000  reduced  by the debt
   encumbering  the 1290  Property and any priority  distributions  to which the
   Company is entitled as general partner of the Lower Tier Limited Partnership.


   The Company does not intend to sell the 1290 Property prior to March 2001 and
   intends to  exercise  the Company  Call Right in March  2001.  If the Company
   exercises the Company Call Right in March 2001,  the Company  expects that it
   would be required to pay $1,400 to JMB/NYC.  Pursuant to the agreements  that
   existed  prior to  their  amendment  in  accordance  with  the  Restructuring
   Agreement,  the  Company  estimates  that it would have been  required to pay
   JMB/NYC significantly less than $1,000 upon the exercise of the JMB Put Right
   or $1,400 upon the exercise of the Company Call Right.


   Management believes,  however,  that no economic obligation exists to JMB/NYC
   as of December 31, 1999 and that JMB/NYC would not be entitled to receive any
   distributions  in excess  of  amounts  under the Put Right and Call  Right in
   respect of the Subordinated Minority Interest. Management believes that, upon
   exercise  by the Company of the Company  Call  Right,  JMB/NYC  would only be
   entitled to receive $1,400 in respect of the Subordinated  Minority Interest.
   Pursuant  to the 1290  Partnership  Agreement,  JMB/NYC  would be entitled to
   distributions   only  after  the  Company  has  received   certain   priority
   distributions as more fully described below.


   The 1290 Partnership Agreement provides that the aggregate Available Cash (as
   defined  in the  1290  Partnership  Agreement)  will be  distributed  no less
   frequently  than  quarterly  to the  partners  of the  1290  Property  Owning
   Partnership as follows:


      (i) 100% to the Company, until it has received, aggregate distributions on
      or after November 22, 1999 (the "Closing  Date") equal to an amount which,
      when  added to all  prior  distributions  to the  Company  on or after the
      Closing  Date  pursuant  to this  clause and  clauses  (i) and (iv) of the
      succeeding paragraph, aggregate distributions


                                       27

<PAGE>


      equal to a cumulative  compounded  return,  of 12% per annum on the sum of
      (x) approximately  $274,375 and (y) any additional  capital  contributions
      made by the  Company,  as general  partner,  to the 1290  Property  Owning
      Partnership  (the amounts in (x) and (y), as reduced by  distributions  in
      respect  of  such  amounts   referred  to  herein  as  the   "Adjusted  GP
      Contribution");


      (ii) 100% to the Company, until it has received aggregate distributions on
      or after the  Closing  Date  pursuant  to this  clause  equal to an amount
      which,  when added to all prior  distributions  to the Company on or after
      the  Closing  Date  pursuant  to clauses  (ii) and (v)  below,  equals the
      Adjusted GP Contribution; and


      (iii) the balance, 94.05% to the Company, 1% to 1290 GP Corp. and 4.95% to
      the Upper Tier Limited Partnership.


   The Amended and Restated  Partnership  Agreement of the 1290 Property  Owning
   Partnership  provides  that  distributions  from  the  1290  Property  Owning
   Partnership  after  the  Closing  Date  related  to  any  sale,  refinancing,
   condemnation  or insurance  recovery of the 1290 Property or any loan made to
   the 1290 Property Owning Partnership will be distributed by the 1290 Property
   Owning Partnership to its partners as follows:


      (i) 100% to the Company,  until it has  received,  together with all prior
      distributions   pursuant  to  this  clause  (i)  and  clause  (i)  of  the
      immediately  preceding  paragraph,  aggregate  distributions  equal to the
      product of (x) 0.5 and (y) a 12% per annum cumulative compounded return on
      the Adjusted GP Contribution;


      (ii) 100% to the Company,  until it has received,  together with all prior
      distributions  pursuant  to  this  clause  (ii)  and  clause  (ii)  of the
      immediately  preceding  paragraph,  aggregate  distributions  equal to the
      approximately $107,172;


      (iii)  of the next  $500,  90%  (i.e.,  $450) to the  Upper  Tier  Limited
      Partnership and 10% to the Company;


      (iv) 100% to the Company,  until it has received,  together with all prior
      distributions  pursuant to this clause (iv),  clause (i) of this paragraph
      and clause (i) of the  immediately  preceding  paragraph,  a 12% per annum
      cumulative compounded return on the Adjusted GP Contribution;


      (v) 100% to the Company,  until it has  received,  together with all prior
      distributions  pursuant to this clause (v),  clause (ii) of this paragraph
      and  clause  (ii)  of  the  immediately  preceding  paragraph,   aggregate
      distributions equal to the Adjusted GP Contribution; and


      (vi) the balance  94.05% to the Company,  1% to 1290 GP Corp. and 4.95% to
      the Upper Tier Limited Partnership.


   As a result of the  distribution of the net proceeds from the sale of the 237
   Property and the refinancing of the 1290 Property $446 was paid to JMB/NYC in
   1999.


8.  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.  As of  December  31,  1999,  there  were
   12,995,646  shares of the  Company's  Common  Stock  issued and  outstanding,
   8,059,586  of which were  Class A Common  Stock and  4,936,060  of which were
   Class B Common  Stock.  The Class A Common Stock and the Class B Common Stock
   have identical rights and privileges, and are treated as a single class, with
   respect to all matters (other than certain voting rights) including,  without
   limitation, the payment of distributions and upon liquidation.


                                       28

<PAGE>


9.  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
   in  September  1997 in  consideration  for  services  rendered to the Company
   during the  Company's  first  fiscal  year of  operations.  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.  Each Director received an additional 400 shares of Common
   Stock at the 1998  annual  meeting  of the  Company's  stockholders  and will
   receive shares at each subsequent annual meeting.


   In March 1998,  a new  director  was  granted 400 shares of Common  Stock and
   options  entitling  him to purchase an  aggregate  of 3,000  shares of Common
   Stock at an exercise price of $42.50 per share.  Such shares and options were
   issued in July 1998. Of such  options,  1,000 were  immediately  exercisable,
   1,000 became  exercisable on October 10, 1998 and 1,000 became exercisable on
   October 10, 1999.  25,000 options were exercised in 1999.  Total  outstanding
   options  at  December  31,  1999  and  1998  aggregated   3,000  and  28,000,
   respectively.


   The Company has entered  into a  Registration  Rights  Agreement  between the
   Company and the holders of Common Stock.  The  Registration  Rights Agreement
   permits certain of the Company's  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.


10.      RELATED PARTY TRANSACTIONS


   Asset Management - The Company has entered into an Asset Management Agreement
   with a company  ("Asset  Manager")  that is directly  affiliated  with two of
   Metropolis'  shareholders.  One of these  shareholders 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,  on a monthly  basis of $25.  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,  1999,  1998  and  1997  were
   approximately $300 each year.


   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  shareholder.  The  Property  Manager/Leasing  Agent is to
   manage and operate the property and provide all  supervisory,  management and
   leasing services.  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 under  Management and
   Leasing  Agreement for the years ended December 31, 1999,  1998 and 1997 were
   approximately $5,528, $3,451 and $3,333 respectively.


   An  affiliate  of the Property  Manager/Leasing  Agent  provides the cleaning
   services for the 1290 Property. Fees paid for cleaning services for the years
   ended  December 31, 1999,  1998 and 1997  totaled  $4,569,  $4,248 and $4,226
   respectively.


   REIT  Management - The Company has entered into a REIT  Management  Agreement
   with the Property Manager/Leasing Agent ("REIT Manager"). The REIT Manager is
   to perform 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 and
   reimbursable expenses incurred


                                       29

<PAGE>



   under the REIT  Management  Agreement for the years ended  December 31, 1999,
   1998 and 1997 aggregate $141, $141 and $140 respectively.


11. FAIR VALUE OF FINANCIAL INSTRUMENTS


   The carrying amount of cash and cash  equivalents,  escrow  deposits,  tenant
   security  deposits,  tax refunds  receivable,  and accounts  receivable are a
   reasonable  estimate of their fair value due to their short-term  nature. The
   Company believes the fair value of the 1290 Swap Agreement  generally offsets
   gains or losses on the being hedged and changes the nature of such underlying
   financial  instruments.  Because the maturity  date of the 1290 Mortgage Loan
   and the termination  date of the 1290 Swap Agreement are identical,  the fair
   value of the 1290 Swap Agreement,  which  approximates  $2,251 as of December
   31, 1999 is of limited usefulness.


   Management  believes  the  fair  market  value  of  the  1290  Mortgage  Loan
   approximates the carrying value at December 31, 1999.


   The fair value estimates presented herein are based on pertinent  information
   available to management as of December 31, 1999.


12. LEASES


   Minimum future rents (excluding  escalation rentals) due to the Company under
   noncancellable leases as of December 31, 1999 are as follows:


                              2000                     $77,970
                              2001                      77,503
                              2002                      75,552
                              2003                      73,353
                              2004                      69,949
                              Thereafter               439,509
                                                       -------
                                                      $813,836
                                                       =======



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


         None.


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<PAGE>


                                    PART III


ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


The directors and executive officers of the Company as of December 31, 1999 are
as follows:



Name                               Age                           Position

William L. Mack................... 60         Director and Chairman of the Board
Lee S. Neibart.................... 49         Director and President
Bruce H. Spector.................. 57         Director
John R.S. Jacobsson............... 31         Director and Secretary
John R. Klopp..................... 46         Director and Vice President
Russel S. Bernard................. 42         Director
Ralph F. Rosenberg................ 35         Director
David A. Strumwasser.............. 48         Director
David Roberts..................... 38         Director



         Each of the officers and  directors  listed  above,  other than John R.
Klopp and John  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 is the managing partner of Apollo Real Estate Advisors,
L.P., the manager of four  opportunistic  real estate investment funds, which he
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. Mr. Mack is also a director of The Bear Stearns
Companies,  Inc., an investment  banking firm, Koger Equity,  Inc., a REIT which
owns and operates suburban office parks in the Southeast and the Southwest, Vail
Resorts,  Inc.,  an owner and  operator  of  Colorado  ski  resorts  and Wyndham
International,  Inc.,  a  hotel  company.  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 Apollo Real Estate Advisors,  L.P., 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,  Koger Equity, Inc.,  NextHealth,
Inc., an owner and operator of spa and wellness facilities, 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 Apollo  Real Estate  Advisors,  L.P.,
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


                                       31

<PAGE>



partner and head of the firm's executive committee. Mr. Spector is a director of
Telemundo Group, Inc., a national Spanish-language oriented television producer,
Pacer International, Inc., a national intermodal and logistics company, and Vail
Resorts,  Inc.  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 Apollo Real Estate Advisors,  L.P.
with which he has been associated since 1993 and is responsible for investments.
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. Mr. Jacobsson received a B.A. from Harvard College in 1990.


         John R. Klopp is a  Director,  the Chief  Executive  Officer and a Vice
Chairman of Capital  Trust,  Inc., a specialty  finance  company  focused on the
commercial real estate industry.  Mr. Klopp is a founder and has been a Managing
Partner of Victor Capital Group L.P. (a subsidiary of Capital Trust) since 1989.
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,  he held various
positions  in Chemical  Bank's  Real Estate  Division  and 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 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 involved  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.


         Ralph F. Rosenberg has been a Managing Director in the Merchant Banking
Division at Goldman Sachs & Co. ("Goldman Sachs"), since November 1998. Prior to
that he was a Vice President in the Investment Banking Division at Goldman Sachs
since 1994. Mr. Rosenberg joined the Real Estate  Department of Goldman Sachs as
an Associate in 1990, transferred to their Real Estate Principal Investment Area
at its  inception in 1992 and became a  Vice-President  in 1994.  Mr.  Rosenberg
serves on the Whitehall  Investment  Committee  and the Goldman  Sachs  Emerging
Market Real Estate Investment Committee. Additionally, he serves on the Board of
Directors of Rockefeller Center Properties.   He  received  a  B.A.  from  Brown
University in 1986, and an M.B.A.  from the Stanford Graduate School of Business
in 1990.


         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.


                                       32

<PAGE>


         Pursuant to the Charter, until the occurrence of a Simplification Event
(as  hereinafter  defined),  the  Company's  nine-member  Board of  Directors is
divided into five classes. The Class I Director,  Lee S. Neibart, was elected by
the holder of the Class B Common Stock; the Class II Directors  consist of Bruce
H. Spector and David Roberts,  both elected by the holders of the Class A Common
Stock  and  Class B Common  Stock;  the  Class  III  Directors  consist  of John
Jacobsson,  a director  designated by the holder of the Class B Common Stock and
David A.  Strumwasser,  a director  designated  by the holders of Class A Common
Stock; the Class IV Directors consist of William L. Mack, a director  designated
by the  holder of the Class B Common  Stock and Ralph F.  Rosenberg,  a director
designated  by  Whitehall  Street  Real  Estate,   Limited  Partnership  V  (the
"Whitehall"); and the Class V Directors consist of Russel S. Bernard, a director
designated by Oaktree and John R. Klopp, a director  designated by the Company's
stockholders (other than Apollo, Whitehall and Oaktree).


         The initial  terms of Class I, Class II and Class III  directors of the
Company  expired in 1997, 1998 and 1999,  respectively  and the initial terms of
the Class IV and Class V directors expire in 2000 and 2001, respectively. As the
term of each  class  expires,  directors  in that  class  will be elected by the
stockholders of the Company for a term of years which will expire in 2001, after
which time all five classes of directors will be elected for one year terms. The
Charter  provides 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.


         "Simplification  Event"  means the earliest to occur of (i) the date on
which  Apollo and its  affiliates  (taken  together) or any  transferee  and its
affiliates  (taken  together)  no longer hold a number of shares of Common Stock
representing at least 30% of the combined voting power of all outstanding shares
of stock of the Company; (ii) the date on which Apollo and its affiliates (taken
together) or any  transferee and its  affiliates  (taken  together) or any other
person or entity and its affiliates (taken together) holds a number of shares of
Common  Stock  representing  at least 75% of the  combined  voting  power of all
outstanding  shares of stock of the Company;  (iii) the fifth anniversary of the
Effective Date; and (iv) the date of the annual meeting of stockholders in 2001.


ITEM 11.     EXECUTIVE COMPENSATION


         The  Company  has no  employees.  In 1999,  each member of the Board of
Directors  earned (i) $20,000 as an annual retainer and (ii) $750.00 per meeting
of the Board of Directors  attended by such member.  In 2000, the members of the
Board of Directors will receive (i) $15,000 in cash as an annual retainer,  (ii)
400 shares of Common  Stock to be issued  under the  Company's  1996  Directors'
Stock Option Plan (as amended,  the "Stock  Plan").  Such stock and cash will be
paid to the then  current  members of the Board of Directors at the time of 2000
stockholder  meeting 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 November 29, 1999, the Board of Directors  authorized a distribution
by the Company of $15.00 per share of the Company's  Common  Stock,  on December
10, 1999 to the holders of record of the  Company's  Common Stock on December 9,
1999.  In response to the payment of such  dividend,  on December 13, 1999,  the
Board of Directors  decreased the exercise price of all  outstanding  Options by
$15.00 per share.  On December 23,  1999,  each member of the Board of Directors
(except Mr. Jacobsson) exercised his Options.


         On December 13, 1999, the Board of Directors  authorized a distribution
by the Company of $15.00 per share of the Company's Common Stock on December 27,
1999 to the holders of record of the Company's  Class A and Class B Common Stock
on December 23, 1999. In response to the payment of such  dividend,  on December
28, 1999, the Board of Directors decreased the exercise price of Mr. Jacobsson's
Options by $15.00 per share,  to $12.50 per share.  See  "SECURITY  OWNERSHIP OF
CERTAIN  BENEFICIAL  OWNERS AND MANAGEMENT -- Description of the Company's Stock
Plan."


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


                                       33

<PAGE>


         The directors of the Company and the Upper Tier GP Corp. are identical.
John R. S. Jacobsson, Lee S. Neibart and John R. Klopp are the directors of 1290
GP Corp. The officers of the Company,  the 237/1290 Upper Tier GP Corp. 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 the Upper Tier GP Corp.  and 1290 GP
Corp will not receive any  compensation  from the Upper Tier GP Corp. or 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 Apollo Real
Estate  Advisors,  L.P.,  which is the  general  partner of Apollo  Real  Estate
Investment Fund, L.P., a significant  stockholder of the Company. Mr. Klopp is a
Managing  Partner of VCG, 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 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.


ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


         The  information  set forth in the  following  table is furnished as of
March 29, 2000, with respect to any person (including, any "group," as that term
is used in Section  13(d)(3) of the Securities  Exchange Act of 1934, as amended
(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 December 31, 1999,  there were 12,995,646  shares of
Common Stock outstanding.


                                       34

<PAGE>


<TABLE>
<CAPTION>
                                                                  Number of Shares       Percent of Common
                                                                 Beneficially Owned            Stock
                                                                 ------------------            -----

Principal Stockholders

<S>                                                                  <C>                   <C>
Apollo Real Estate Investment Fund, L.P. (1)                         4,936,060             38.0%
The TCW Group, Inc.(2)                                               2,254,341             17.3%
Oaktree Capital Management, LLC (3)                                  1,916,663             14.7%
Whitehall Street Real Estate, Limited Partnership V (4)              1,125,821              8.6%
Angelo, Gordon & Co., L.P. (5)                                         818,739              6.3%
Intermarket Corp. (6)                                                  890,862              6.9%


Directors and Executive Officers


William L. Mack (7)                                                      3,800              *
Lee S. Neibart (8)                                                       3,800              *
John R.S. Jacobsson (9)                                                  3,800              *
Bruce H. Spector (10)                                                    3,800              *
John R. Klopp (11)                                                      23,800              *
Russel S. Bernard (12)                                                       0              *
Ralph F. Rosenberg (13)                                                      0              *
David A. Strumwasser (14)                                                3,800              *
David Roberts (15)                                                           0              *
                                                                     ---------
Directors and Executive Officers as a group (9 persons) (16)            42,800              *
                                                                     =========
</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,  L.P. is the
    managing general partner of Apollo Real Estate Investment,  L.P.  ("AREIF"),
    and a joint reporting  person with respect to beneficial  ownership of these
    shares of Common Stock,  pursuant to AREIF's  Schedule  13G,  filed with the
    Securities and Exchange Commission on February 13, 1998.


(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  acts as general  partner or  investment  manager.  According to the
    Schedule 13G filed with the Securities  and Exchange  Commission on February
    12, 1998, Robert Day, Chairman and Chief Executive Officer of the TCW Group,
    Inc. ("TCW"),  may be deemed to be a control person of TCW and certain other
    holders of the Company's Common Stock.  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.  The shares
    shown are held of  record by (i)  Taylor & Co.,  c/o Sanwa  Bank  California
    Trust  Operations,  1977 Saturn Street,  Monterey Park, CA 91754  (1,848,248
    shares),  and (ii) Cede & Co., c/o Sanwa Bank California  Trust  Operations,
    1977 Saturn Street, Montrerey Park, CA 91754 (406,093 shares). To the extent
    permitted  by  applicable  law,  The TCW Group,  Inc.  and Robert Day hereby
    disclaim beneficial ownership of such shares.


(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 Cun & Co., c/o The Bank of New York, One Wall Street,  New
    York, NY 10005. Also includes 3,800 shares held directly by Oaktree.  To the
    extent  permitted by applicable  law,  Oaktree hereby  disclaims  beneficial
    ownership of such shares.


(4) Held of record by WSB Realty LLC,  (1,125,421  shares) and The Goldman Sachs
    Group,  L.P. (400 shares) 85 Broad Street,  New York, NY 10004.  Pursuant to
    Schedule 13G/A,  filed by The Goldman Sachs Group,  L.P. with the Securities
    and  Exchange  Commission  on February 16, 1999 these shares are reported as
    beneficially  owned by: (i)  Goldman,  Sachs & Co.  (ii) The  Goldman  Sachs
    Group,  L.P.,  (iii) WSB Realty,  L.L.C.,  (iv) Whitehall Street Real Estate
    Limited Partnership V and (v) WH Advisors, L.P. V.


(5) Angelo, Gordon & Co., L.P.'s address is 245 Park Avenue, New York, NY 10167.
    Pursuant to  Schedule  13G,  filed by Angelo,  Gordon & Co.,  L.P.  with the
    Securities  and  Exchange  Commission  on February 13, 1998 these shares are
    reported as beneficially owned by: (i) Angelo,  Gordon & Co., L.P. ("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.,  the sole
    general  partner  of  Angelo,  Gordon,  and the chief  operating  officer of
    Angelo, Gordon.


                                       35

<PAGE>



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


(7) Does not include shares owned by Apollo. Includes 800 shares of Common Stock
    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 is a the  managing
    partner of Apollo Real Estate Advisors, L.P., the general partner of Apollo,
    and the  President of its  corporate  general  partner.  Mr. Mack  disclaims
    beneficial ownership of the shares of Common Stock owned by Apollo.


(8) Does not include shares owned by Apollo. Includes 800 shares of Common Stock
    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 is a partner of
    Apollo Real Estate Advisors, L.P. Mr. Neibart disclaims beneficial ownership
    of the shares of Common Stock owned by Apollo.


(9) Does not include shares owned by Apollo. Includes 800 shares of Common Stock
    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 is a
    partner  of Apollo  Real  Estate  Advisors,  L.P.  Mr.  Jacobsson  disclaims
    beneficial ownership of the Common Stock owned by Apollo.


(10) Does not  include  shares  owned by Apollo.  Includes  800 shares of Common
     Stock 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 is a
     partner  of  Apollo  Real  Estate  Advisors,  L.P.  Mr.  Spector  disclaims
     beneficial ownership of the shares of Common Stock owned by Apollo.


(11) Includes  20,800  shares of Common  Stock and 3,000  shares of Common Stock
     issued  upon the  exercise  of  options  granted  to Mr.  Klopp  under  the
     Company's Stock Plan.



(12) Does not include shares owned by funds and accounts  managed by Oaktree and
     does not include  3,000  shares of Common Stock issued upon the exercise of
     options  granted to Mr. Bernard under the Company's Stock Plan. 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.
     Mr.  Bernard is required to transfer to funds managed by Oaktree any shares
     of Common Stock he either receives  directly under the Company's Stock Plan
     or purchases upon an exercise of options  granted under the Company's Stock
     Plan.


(13) Does not include  shares  owned by  Whitehall  and does not  include  3,000
     shares of Common Stock  issued upon the exercise of options  granted to Mr.
     Rosenberg  under  the  Company's  Stock  Plan.  Mr.   Rosenberg   disclaims
     beneficial ownership of the shares of Common Stock owned by Whitehall.  Mr.
     Rosenberg  is a Managing Director of Goldman,  Sachs & Co.  Pursuant to Mr.
     Rosenberg's  employment  arrangements  with Goldman Sachs, Mr. Rosenberg is
     required  to  transfer  to  Goldman  Sachs any  shares  of Common  Stock he
     receives  either  directly under the Company's Stock Plan or purchases upon
     an exercise of options granted under the Company's Stock Plan.


(14) Does not include  289,503 shares held by various  limited  partnerships,  a
     trust and third party accounts for which Whippoorwill Associates,  Inc. has
     discretionary  authority and acts as general partner or investment manager.
     Includes 800 shares of Common Stock and 3,000 shares of Common Stock issued
     upon the exercise of options granted to Mr. Strumwasser under the Company's
     Stock Plan.  Mr.  Strumwasser  is a principal of and Managing  Director and
     General  Counsel of  Whippoorwill  Associates.  Mr.  Strumwasser  disclaims
     beneficial  ownership of the shares of Common Stock owned by  discretionary
     accounts managed by Whippoorwill Associates as set forth above.


(15) Does not include shares owned by Angelo,  Gordon.  Includes 3,000 shares of
     Common Stock  issued upon  the  exercise of options  granted to Mr. Roberts
     under the  Company's  Stock  Plan.  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 1 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 is attached as Exhibit
10.5 hereto.

         The Board of Directors  adopted the Stock Plan on 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 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 Common Stock at an exercise  price of $42.50 per share.  Such
options were issued in July 1998, and became fully exercisable on


                                       36

<PAGE>



October 10, 1999. 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 970  Management,  LLC, an affiliate of Victor
Capital Group, L.P., ("VCG") to serve as the Company's Asset Manager pursuant to
an Asset  Management  Agreement,  dated as of the  Effective  Date  (the  "Asset
Management  Agreement").  John R. Klopp,  one of the Company's  Directors and an
officer and a stockholder of the Company, is a Managing Partner of VCG. Pursuant
to the Asset Management  Agreement,  the Asset Manager will act 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 has a term of one year, which term will
be 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
Properties are 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 failure  continues for 30 days after the Asset Manager's  written notice of
such  failure.  Either party may  terminate  the Asset  Management  Agreement by
giving notice to the other upon the occurrence of certain events relating to the
bankruptcy or insolvency of the other party.


         The Company  will pay 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,  1999,  1998  and  1997  aggregated
approximately  $300,000. In addition to the payment of the Asset Management Fee,
the Company  will  reimburse  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.


                                       37

<PAGE>


         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
Agreements") 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 Agreements,  the Property  Manager/Leasing Agent will
perform  all   supervisory,   management  and  leasing  services  and  functions
reasonably necessary or incidental to the leasing,  management and operations of
the  Properties.  Fees under the Property  Management  Agreements  for the years
ended December 31, 1999, 1998 and 1997 were approximately $5,528,000, $3,451,000
and $3,333,000, respectively.


         An  affiliate  of  the  Property  Manager/Leasing  Agent  provides  the
cleaning  services for the Properties.  Fees paid for cleaning  services for the
years ended December 31, 1999, 1998 and 1997 totaled $4,569,000,  $4,248,000 and
$4,226,000, respectively.


         The Property  Management  Agreements have an initial term of two years,
which term will be  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 a 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. The 1290 Property
Owning Partnerships 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
1290  Property  Owning  Partnership  or commits  fraud against the 1290 Property
Owning  Partnership  or  if  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 Property Owning  Partnership if the 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 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 in the event that a petition in  bankruptcy  is filed
against  the other  party and is not  dismissed  within 60 days,  or a  trustee,
receiver or other  custodian is appointed  for a  substantial  part of the other
party's  assets and is not  vacated  within 60 days or the other  party makes an
assignment for the benefit of its creditors.


         The  1290  Property  Owning  Partnership  will  (i)  pay  the  Property
Manager/Leasing  Agent a fee in an amount equal to 1.5% of gross  revenues  from
the 1290  Property,  which  fee will be paid  monthly,  and (ii)  reimburse  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 will
be entitled to receive  commissions  in connection  with the leasing of space at
the 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 is to perform
certain accounting,  administrative and monitoring services. The REIT Management
Agreement  provides  for  compensation  to the  REIT  Manager  of  monthly  fees
aggregating  approximately  $125,000 per annum, and  reimbursement of documented
out-of-pocket   expenses.   Fees  and  reimbursables  incurred  under  the  REIT
Management  Agreement  for the years  ended  December  31,  1999,  1998 and 1997
aggregated $141,000, $141,000 and $140,000.


                                       38

<PAGE>



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.*

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


                                   39

<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.**

27.1         Financial Data Schedule as of, and for the year ended, December 31,
             1999.

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

             (i)      Report on Form 8-K filed with the Securities and
                      Exchange Commission on October 1, 1999 with respect to
                      Metropolis Realty Trust, Inc.'s announcement that it
                      entered into an agreement to sell 237 Park Avenue.
             (ii)     Report on Form 8-K filed with the Securities and
                      Exchange Commission on November 30, 1999 with respect
                      to the consummation of the sale of 237 Park Avenue.
             (iii)    Report on Form 8-K filed with the Securities and
                      Exchange Commission on December 14, 1999 with
                      respect to refinancing of 1290 Avenue of the
                      Americas.

--------
      *   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.


                                       40

<PAGE>


(c)              Exhibits.


                 Refer to paragraph (a)(3) under this Item 14.
(d)              Not applicable.






                                       41

<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:  March __, 2000



                  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            March 30, 2000
----------------------------
Lee S. Neibart



 /s/ William L. Mack           Chairman of the Board and          March 30, 2000
---------------------------
William L. Mack                       Director



 /s/  John R. S. Jacobsson      Secretary and Director            March 30, 2000
---------------------------
John R. S. Jacobsson



 /s/  John R. Klopp           Vice President and Director         March 30, 2000
---------------------------
John R. Klopp



 /s/ Bruce H. Spector                  Director                   March 30, 2000
---------------------------
Bruce H. Spector



                                       S-1


<PAGE>


           Signature                   Title                           Date

 /s/ Russel S. Bernard                Director                   March 30, 2000
---------------------------
Russel S. Bernard



 /s/ Ralph F. Rosenberg               Director                   March 30, 2000
---------------------------
Ralph F. Rosenberg



 /s/ David A. Strumwasser             Director                   March 30, 2000
---------------------------
David A. Strumwasser



 /s/ David Roberts                    Director                   March 30, 2000
---------------------------
David Roberts




                                       S-2