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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC 20549

                               ----------------
                                    FORM 10-Q


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


                 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001


                        COMMISSION FILE NUMBER: 1-13762


                               ----------------
                        RECKSON ASSOCIATES REALTY CORP.
            (Exact name of registrant as specified in its charter)



<TABLE>
<S>                                            <C>
                      MARYLAND                               11-3233650
(State other jurisdiction of incorporation     (IRS. Employer Identification Number)
                  of organization)

     225 BROADHOLLOW ROAD, MELVILLE, NY                        11747
 (Address of principal executive office)                    (zip code)

</TABLE>

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


                               ----------------
     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) Yes X No__, and (2) has been
subject to such filing requirements for the past 90 days. Yes X No__.


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

     The company has two classes of common stock, issued at $.01 par value per
share with 49,627,051 and 10,283,513 shares of Class A common stock and Class B
common stock outstanding, respectively as of August 10, 2001
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

                        RECKSON ASSOCIATES REALTY CORP.
                                QUARTERLY REPORT
                   FOR THE THREE MONTHS ENDED JUNE 30, 2001


                                TABLE OF CONTENTS





<TABLE>
<CAPTION>
  INDEX                                                                                           PAGE
--------                                                                                        --------
<S>      <C>                                                                                    <C>
PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements
         Consolidated Balance Sheets as of June 30, 2001 (unaudited) and
         December 31, 2000 ....................................................................      2
         Consolidated Statements of Income for the three and six months ended June 30, 2001 and
         2000 (unaudited) .....................................................................      3
         Consolidated Statements of Cash Flows for the six months ended June 30, 2001
         and 2000 (unaudited) .................................................................      4
         Notes to the Consolidated Financial Statements (unaudited) ...........................      5
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations      13
Item 3.  Quantitative and Qualitative Disclosures about Market Risk ...........................     21
PART II. OTHER INFORMATION
Item 1.  Legal Proceedings ....................................................................     26
Item 2.  Changes in Securities and Use of Proceeds ............................................     26
Item 3.  Defaults Upon Senior Securities ......................................................     26
Item 4.  Submission of Matters to a Vote of Securities Holders ................................     26
Item 5.  Other Information ....................................................................     26
Item 6.  Exhibits and Reports on Form 8-K .....................................................     26
SIGNATURES ....................................................................................     27
</TABLE>

                                        1
<PAGE>

                         PART I -- FINANCIAL INFORMATION

ITEM 1 -- FINANCIAL STATEMENTS


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





<TABLE>
<CAPTION>
                                                                              JUNE 30, 2001      DECEMBER 31,
                                                                               (UNAUDITED)           2000
                                                                             ---------------   ---------------
<S>                                                                          <C>               <C>
ASSETS:
Commercial real estate properties, at cost:
 Land ....................................................................     $   396,103       $   396,482
 Building and improvements ...............................................       2,308,001         2,219,448
Developments in progress:
 Land ....................................................................          69,183            60,918
 Development costs .......................................................          87,204            93,759
Furniture, fixtures and equipment ........................................           7,414             7,138
                                                                               -----------       -----------
                                                                                 2,867,905         2,777,745
Less accumulated depreciation ............................................        (332,649)         (288,479)
                                                                               -----------       -----------
                                                                                 2,535,256         2,489,266
Investment in real estate joint ventures .................................          69,026            43,534
Investment in mortgage notes and notes receivable ........................          55,223            58,220
Cash and cash equivalents ................................................          26,395            17,843
Tenant receivables .......................................................           9,829            11,511
Investments in and advances to affiliates ................................         180,759           177,474
Deferred rents receivable ................................................          90,080            67,930
Prepaid expenses and other assets ........................................          77,378            68,895
Contract and land deposits and pre-acquisition costs .....................           3,026             1,676
Deferred leasing and loan costs. .........................................          65,270            61,681
                                                                               -----------       -----------
TOTAL ASSETS .............................................................     $ 3,112,242       $ 2,998,030
                                                                               ===========       ===========
LIABILITIES:
Mortgage notes payable ...................................................     $   730,170       $   728,971
Unsecured credit facility ................................................         334,600           216,600
Senior unsecured notes ...................................................         449,424           449,385
Accrued expenses and other liabilities. ..................................          91,788            95,393
Dividends and distributions payable ......................................          33,113            28,801
                                                                               -----------       -----------
TOTAL LIABILITIES ........................................................       1,639,095         1,519,150
                                                                               -----------       -----------
Minority partners' interests in consolidated partnerships ................         140,442           226,350
Preferred unit interest in the operating partnership .....................          34,733            42,518
Limited partners' minority interest in the operating partnership .........         107,021            97,353
                                                                               -----------       -----------
                                                                                   282,196           366,221
                                                                               -----------       -----------
Commitments and other comments ...........................................              --                --
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value, 25,000,000 shares authorized
 Series A preferred stock, 9,192,000 shares issued and outstanding .......              92                92
 Series B preferred stock, 2,000,000 shares issued and outstanding .......              20                20
Common Stock, $.01 par value, 100,000,000 shares authorized ..............
 Class A common stock, 49,619,419 and 45,352,286 shares issued and
   outstanding, respectively .............................................             496               454
 Class B common stock, 10,283,513 shares issued and outstanding ..........             103               103
Additional paid in capital ...............................................       1,186,537         1,111,990
Accumulated other comprehensive income ...................................           3,703                --
                                                                               -----------       -----------
Total Stockholders' Equity ...............................................       1,190,951         1,112,659
                                                                               -----------       -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...............................     $ 3,112,242       $ 2,998,030
                                                                               ===========       ===========
</TABLE>

                (see accompanying notes to financial statements)

                                        2
<PAGE>

                        RECKSON ASSOCIATES REALTY CORP.
                       CONSOLIDATED STATEMENTS OF INCOME
       (UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)





<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED             SIX MONTHS ENDED
                                                                           JUNE 30,                      JUNE 30,
                                                                 ----------------------------- -----------------------------
                                                                      2001           2000           2001           2000
                                                                 -------------- -------------- -------------- --------------
<S>                                                              <C>            <C>            <C>            <C>
REVENUES:
Base rents .....................................................  $   111,184    $    96,099    $   218,678    $   190,499
Tenant escalations and reimbursements ..........................       14,165         12,984         30,110         25,830
Equity in earnings of real estate joint ventures and service
 companies .....................................................          801          1,775          1,199          3,187
Interest income on mortgage notes and notes receivable .........        1,559          2,190          3,067          4,476
Gain on sales of real estate ...................................           --          6,662             --          6,662
Investment and other income ....................................        4,678          5,745         10,219         12,459
                                                                  -----------    -----------    -----------    -----------
 Total Revenues ................................................      132,387        125,455        263,273        243,113
                                                                  -----------    -----------    -----------    -----------
EXPENSES:
Property operating expenses ....................................       40,874         36,508         81,868         74,797
Marketing, general and administrative ..........................        8,411          6,509         15,908         12,947
Interest .......................................................       23,562         24,176         47,193         48,016
Depreciation and amortization ..................................       27,172         22,426         50,693         43,437
                                                                  -----------    -----------    -----------    -----------
 Total Expenses ................................................      100,019         89,619        195,662        179,197
                                                                  -----------    -----------    -----------    -----------
Income before minority interests and preferred dividends
 and distributions .............................................       32,368         35,836         67,611         63,916
Minority partners' interests in consolidated partnerships ......       (4,065)        (1,925)        (9,820)        (3,899)
Distributions to preferred unit holders ........................         (461)          (660)        (1,121)        (1,321)
Limited partners' minority interest in the operating
 partnership ...................................................       (2,616)        (3,083)        (5,331)        (5,361)
                                                                  -----------    -----------    -----------    -----------
Net Income .....................................................       25,226         30,168         51,339         53,335
Dividends to preferred shareholders ............................       (5,467)        (7,197)       (10,892)       (14,521)
                                                                  -----------    -----------    -----------    -----------
Net income available to common shareholders ....................  $    19,759    $    22,971    $    40,447    $    38,814
                                                                  ===========    ===========    ===========    ===========
Net Income available to:
 Class A common shareholders ...................................  $    15,109    $    16,655    $    30,417    $    28,101
 Class B common shareholders ...................................        4,650          6,316         10,030         10,713
                                                                  -----------    -----------    -----------    -----------
Total ..........................................................  $    19,759    $    22,971    $    40,447    $    38,814
                                                                  ===========    ===========    ===========    ===========
Basic net income per weighted average common share:
 Class A common shareholders ...................................  $       .32    $       .40    $       .66    $       .69
                                                                  ===========    ===========    ===========    ===========
 Class B common shareholders ...................................  $       .45    $       .61    $       .98    $      1.04
                                                                  ===========    ===========    ===========    ===========
Basic weighted average common shares outstanding:
 Class A common shareholders ...................................   47,221,917     41,343,118     46,357,533     40,862,650
 Class B common shareholders ...................................   10,283,513     10,283,513     10,283,513     10,283,556
Diluted net income per weighted average common share:
 Class A common shareholders ...................................  $       .32    $       .40    $       .65    $       .68
                                                                  ===========    ===========    ===========    ===========
 Class B common shareholders ...................................  $       .34    $       .44    $       .71    $       .75
                                                                  ===========    ===========    ===========    ===========
Diluted weighted average common shares outstanding:
 Class A common shareholders ...................................   47,600,390     41,700,478     46,779,905     41,204,762
 Class A common shareholders ...................................   10,283,513     10,283,513     10,283,513     10,283,556
</TABLE>

                (see accompanying notes to financial statements)

                                        3
<PAGE>

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





<TABLE>
<CAPTION>
                                                                                              SIX MONTHS ENDED
                                                                                                  JUNE 30,
                                                                                        -----------------------------
                                                                                             2001            2000
                                                                                        -------------   -------------
<S>                                                                                     <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ..........................................................................    $   51,339      $   53,335
Adjustments to reconcile net income to net cash provided by operating activities:
 Depreciation and amortization ......................................................        50,693          43,437
 Gain on sales of real estate .......................................................            --          (6,662)
 Minority partners' interests in consolidated partnerships ..........................         9,820           3,899
 Limited partners' minority interest in the operating partnership ...................         5,331           5,361
 Equity in earnings of real estate joint ventures and service companies .............        (1,199)         (3,187)
Changes in operating assets and liabilities:
 Tenant receivables .................................................................         1,682           1,777
 Real estate tax escrows ............................................................        (1,266)          3,387
 Prepaid expenses and other assets ..................................................        (1,765)         (3,857)
 Deferred rents receivable ..........................................................       (22,150)        (12,534)
 Accrued expenses and other liabilities .............................................          (437)          8,552
                                                                                         ----------      ----------
 Net cash provided by operating activities ..........................................        92,048          93,508
                                                                                         ----------      ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Increase in contract deposits and pre-acquisition costs ............................        (1,343)         (6,079)
 Additions to developments in progress ..............................................        (5,252)        (15,923)
 Purchases of commercial real estate properties .....................................            --        (154,573)
 Proceeds from mortgage note receivable repayments ..................................         2,945           2,157
 Investments in real estate joint ventures ..........................................       (24,966)         (4,770)
 Distribution from a real estate joint venture ......................................            --             226
 Additions to commercial real estate properties .....................................       (87,982)        (22,108)
 Additions to furniture, fixtures and equipment .....................................          (244)           (676)
 Payment of leasing costs ...........................................................        (5,998)         (9,379)
 Proceeds from sales of properties and mortgage redemption ..........................            --          42,595
                                                                                         ----------      ----------
 Net cash used in investing activities ..............................................      (122,840)       (168,530)
                                                                                         ----------      ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from issuance of common stock net of issuance costs .......................         1,331           1,486
 Principal payments on secured borrowings ...........................................       (73,801)        (23,708)
 Payment of loan and equity issuance costs ..........................................          (789)         (2,399)
 (Increase) decrease in investments in and advances to affiliates ...................        (4,160)          5,646
 Proceeds from secured borrowings ...................................................        75,000          92,000
 Proceeds from unsecured credit facility ............................................       118,000         125,000
 Repayment of unsecured credit facility .............................................            --         (49,000)
 Distributions to minority partners in consolidated partnerships ....................       (10,727)         (4,914)
 Distributions to limited partners in the operating partnership .....................        (5,935)         (5,714)
 Distributions to preferred unit holders ............................................        (1,195)         (1,321)
 Dividends to common shareholders ...................................................       (47,530)        (41,638)
 Dividends to preferred shareholders ................................................       (10,850)        (14,649)
                                                                                         ----------      ----------
 Net cash provided by financing activities ..........................................        39,344          80,789
                                                                                         ----------      ----------
 Net increase in cash and cash equivalents ..........................................         8,552           5,767
 Cash and cash equivalents at beginning of period ...................................        17,843          21,368
                                                                                         ----------      ----------
 Cash and cash equivalents at end of period .........................................    $   26,395      $   27,135
                                                                                         ==========      ==========
</TABLE>

                (see accompanying notes to financial statements)

                                        4
<PAGE>

                        RECKSON ASSOCIATES REALTY CORP.
                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2001
                                   (UNAUDITED)


1. ORGANIZATION AND FORMATION OF THE COMPANY

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

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

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

     During July 1998, the Company formed Metropolitan Partners, LLC
("Metropolitan") for the purpose of acquiring Tower Realty Trust, Inc.
("Tower"). On May 24, 1999 the Company completed the merger with Tower and
acquired three Class A office properties located in New York City totaling 1.6
million square feet and one office property located on Long Island totaling
approximately 101,000 square feet. In addition, pursuant to the merger, the
Company also acquired certain office properties, a property under development
and land located outside of the Tri-State Area. All of the assets acquired in
the merger located outside of the Tri-State Area, other than a 357,000 square
foot office property located in Orlando, Florida, have been sold.

     On September 28, 2000, the Company formed a joint venture (the "Tri-State
JV") with Teachers Insurance and Annuity Association ("TIAA") and contributed
eight Class A suburban office properties to the Tri-State JV in exchange for
approximately $136 million and a 51% majority ownership interest in the
Tri-State JV.


2. BASIS OF PRESENTATION

     The accompanying consolidated financial statements include the consolidated
financial position of the Company and the Operating Partnership at June 30, 2001
and December 31, 2000 and the results of their operations for the three and six
months ended June 30, 2001 and 2000, respectively, and, their cash flows for the
six months ended June 30, 2001 and 2000, respectively. The Operating
Partnership's investments in Omni Partners, L. P. ("Omni"), the Tri-State JV and
certain joint venture properties are reflected in the accompanying financial
statements on a consolidated basis with a reduction for the minority partners'
interest. The operating results of the service businesses currently conducted by
Reckson Management Group, Inc. and Reckson Construction Group, Inc. are
reflected in the accompanying financial statements on the equity method of
accounting. The Operating Partnership also invests in real estate joint ventures
where it may own less than a controlling interest. Such investments are also
reflected in the accompanying financial statements on the equity method of
accounting. All significant intercompany balances and transactions have been
eliminated in the consolidated financial statements.

     The minority interests at June 30, 2001 represent an approximate 11.3%
limited partnership interest in the Operating Partnership, a 49% interest in the
Tri-State JV and a 40% interest in Omni.


                                        5
<PAGE>

     The accompanying interim unaudited financial statements have been prepared
by the Company's management pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosure
normally included in the financial statements prepared in accordance with
accounting principles generally accepted in the United States ("GAAP") may have
been condensed or omitted pursuant to such rules and regulations, although
management believes that the disclosures are adequate to make the information
presented not misleading. The unaudited financial statements as of June 30, 2001
and for the three and six month periods ended June 30, 2001 and 2000 include, in
the opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary to present fairly the financial information set forth
herein. The results of operations for the interim periods are not necessarily
indicative of the results that may be expected for the year ending December 31,
2001. These financial statements should be read in conjunction with the
Company's audited financial statements and the notes thereto included in the
Company's Form 10K for the year ended December 31, 2000.

     The Company intends to qualify as a REIT under Section 856 through 869 of
the Internal Revenue Code of 1986, as amended (the "Code"). As a REIT, the
Company will not generally be subject to corporate Federal income taxes as long
as it satisfies certain technical requirements of the Code relating to
composition of its income and assets and requirements relating to distributions
of taxable income to shareholders.

     Financial Accounting Standards Board's ("FASB") Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities," ("SFAS 133")
which became effective January 1, 2001 requires the Company to recognize all
derivatives on the balance sheet at fair value. Derivatives that are not hedges
must be adjusted to fair value through income. If a derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of the
derivative will either be offset against the change in fair value of the hedged
asset, liability, or firm commitment through earnings, or recognized in
accumulated other comprehensive income ("OCI") until the hedged item is
recognized in earnings. The ineffective portion of a derivative's change in fair
value will be immediately recognized in earnings. As of January 1, 2001, the
carrying value of the Company's derivatives equaled their fair value and as a
result no cumulative effect changes were recorded. Additionally, as of June 30,
2001, the fair value of the Company's derivatives equaled approximately $3.7
million and has been reflected in other assets and OCI on the accompanying
balance sheet. On July 18, 2001, the mortgage note payable which these
derivatives relate to was funded (see Note 3) and their fair value at that time
was approximately $676,000 less than their carrying value. This amount will be
amortized to interest expense over the term of the mortgage note to which it
relates.



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

3. MORTGAGE NOTES PAYABLE

     As of June 30, 2001, the Company had approximately $530.2 million of fixed
rate mortgage notes which mature at various times between 2001 and 2027. The
notes are secured by 23 properties and have a weighted average interest rate of
approximately 7.5%.

     In addition, as of June 30, 2001, the Company had a $200 million variable
rate mortgage note, which matures in 2003. The note is secured by the property
located at 919 Third Avenue, NY, NY. On July 18, 2001, the Company refinanced
this mortgage note with a ten year, $250 million fixed rate mortgage note which
bears interest at 6.867% per annum. Net proceeds of approximately $47 million
were used primarily to repay maturing fixed rate debt and the Company's
unsecured credit facility.

     On June 1, 2001, the Company refinanced the $70 million variable rate
mortgage note, which secured the property located at 1350 Avenue of the
Americas, with a five year, $75 million fixed rate mortgage note which bears
interest at 6.52% per annum. Net proceeds of approximately $3.4 million were
used for working capital purposes.

     On July 24, 2001, the Company repaid a mortgage note in the amount of
approximately $15.5 million, which was secured by the property located at 50
Charles Lindbergh Blvd., Mitchel Field, NY.


                                        6
<PAGE>

4. SENIOR UNSECURED NOTES

     As of June 30, 2001, the Operating Partnership had outstanding
approximately $449.4 million (net of issuance discounts) of senior unsecured
notes (the "Senior Unsecured Notes"). The following table sets forth the
Operating Partnership's Senior Unsecured Notes and other related disclosures
(dollars in thousands):





<TABLE>
<CAPTION>
                        FACE        COUPON
     ISSUANCE          AMOUNT        RATE         TERM          MATURITY
-----------------   -----------   ----------   ----------   ----------------
<S>                 <C>           <C>          <C>          <C>
August 27, 1997      $150,000         7.20%    10 years     August 28, 2007
March 26, 1999       $100,000         7.40%     5 years      March 15, 2004
March 26, 1999       $200,000         7.75%    10 years      March 15, 2009
</TABLE>

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

5. UNSECURED CREDIT FACILITY

     As of June 30, 2001, the Company had a three year $575 million unsecured
revolving credit facility (the "Credit Facility") from The Chase Manhattan Bank,
as administrative agent, UBS Warburg LLC as syndication agent and Deutsche Bank
as documentation agent. The Credit Facility matures in September 2003 and
borrowings under the Credit Facility are currently priced off of LIBOR plus 105
basis points.

     The Company utilizes the Credit Facility primarily to finance real estate
investments, fund its real estate development activities and for working capital
purposes. At June 30, 2001, the Company had availability under the Credit
Facility to borrow an additional $240.4 million (of which, approximately $34.1
million has been allocated for outstanding undrawn letters of credit).

6. COMMERCIAL REAL ESTATE INVESTMENTS

     As of June 30, 2001, the Company owned and operated 82 office properties
(inclusive of ten office properties owned through joint ventures) comprising
approximately 14.4 million square feet, 104 industrial properties comprising
approximately 6.8 million square feet and two retail properties comprising
approximately 20,000 square feet located in the Tri-State Area. The Company also
owns a 357,000 square foot office building located in Orlando, Florida and
approximately 290 acres of land in 13 separate parcels of which the Company can
develop approximately 1.4 million square feet of office space and approximately
224,000 square feet of industrial space. The Company also has invested
approximately $17.0 million in a note receivable secured by a partnership
interest in Omni Partners, L.P., owner of the Omni, a 575,000 square foot Class
A office property located in Uniondale, New York and $36.5 million under three
notes which are secured by a minority partners' preferred interest in the
Operating Partnership.

     In July 1998, the Company formed a joint venture, Metropolitan Partners LLC
("Metropolitan"), with Crescent Real Estate Equities Company, a Texas REIT
("Crescent") for the purpose of acquiring Tower Realty Trust, Inc. ("Tower"). On
May 24, 1999 the Company completed the merger with Tower and acquired three
Class A office properties located in New York City totaling 1.6 million square
feet and one office property located on Long Island totaling approximately
101,000 square feet. In addition, pursuant to the merger, the Company also
acquired certain office properties, a property under development and land
located outside of the Tri-State Area. All of the assets acquired in the merger
located outside of the Tri-State Area, other than a 357,000 square foot office
property located in Orlando, Florida, have been sold.

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


                                        7
<PAGE>

     On September 28, 2000, the Company formed the Tri-State JV with TIAA and
contributed eight Class A suburban office properties aggregating approximately
1.5 million square feet to the Tri-State JV in exchange for approximately $136
million and a 51% majority ownership interest in the Tri-State JV.

7. STOCKHOLDERS' EQUITY

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

     On April 2, 2001, approximately 7,785 preferred units of the Operating
Partnership, with a liquidation preference value of approximately $7.8 million,
were exchanged for 305,706 OP Units at an average price of $25.47 per OP Unit.
In addition, during the three months ended June 30, 2001, 352,878 OP Units were
exchanged for an equal number of shares of the Company's Class A common stock.

     On May 24, 1999, the Company issued 11,694,567 shares of Class B
Exchangeable Common Stock, par value $.01 per share, of the Company (the "Class
B common stock"), which were valued for GAAP purposes at $26 per share for total
consideration of approximately $304.1 million. The shares of Class B common
stock were entitled to receive an initial annual dividend of $2.24 per share,
which dividend is subject to adjustment annually. On July 31, 2001, the annual
dividend on the Class B Common Stock was increased to $2.5968 per share.


     The shares of Class B common stock are exchangeable at any time, at the
option of the holder, into an equal number of shares of Class A common stock,
par value $.01 per share, of the Company subject to customary antidilution
adjustments. The Company, at its option, may redeem any or all of the Class B
common stock in exchange for an equal number of shares of the Company's Class A
common stock at any time following November 23, 2003.

     On May 31, 2001, in connection with Crescent's conversion of its $85
million preferred equity investment in Metropolitan, the Company issued
3,453,881 shares of Class A common stock.

     During June 2001, the Board of Directors of the Company declared the
following dividends on the Company's securities:





<TABLE>
<CAPTION>
                                                                                                      ANNUALIZED
                               DIVIDEND /          RECORD           PAYMENT         THREE MONTHS      DIVIDEND /
         SECURITY             DISTRIBUTION          DATE              DATE             ENDED         DISTRIBUTION
--------------------------   --------------   ---------------   ---------------   ---------------   -------------
<S>                          <C>              <C>               <C>               <C>               <C>
Class A common stock         $ .4246           July 6, 2001     July 17, 2001     June 30, 2001       $ 1.6984
Class B common stock         $ .6492          July 13, 2001     July 31, 2001     July 31, 2001       $ 2.5968
Series A preferred stock     $ .4766          July 13, 2001     July 31, 2001     July 31, 2001       $ 1.9063
Series B preferred stock     $ .553125        July 13, 2001     July 31, 2001     July 31, 2001       $ 2.2125
</TABLE>

     The Board of Directors of the Company has authorized the purchase of up to
three million shares of the Company's Class B common stock. In addition, the
Board of Directors has also authorized the purchase of up to an additional three
million shares of the Company's Class B common stock and/or its Class A common
stock. The buy-back program will be effected in accordance with the safe harbor
provisions of the Securities Exchange Act of 1934 and may be terminated by the
Company at any time. As of June 30, 2001, the Company had purchased and retired
1,410,804 shares of Class B common stock at an average price of $21.48 per Class
B share and 4,204 shares of Class A common stock at an average price of $22.03
per Class A share for an aggregate purchase price of approximately $30.4
million.

     Basic net income per share on the Company's Class A common stock was
calculated using the weighted average number of shares outstanding of 47,221,917
and 41,343,118 for the three months ended June 30, 2001 and 2000, respectively,
and 46,357,533 and 40,862,650 for the six months ended June 30, 2001 and 2000,
respectively.


                                        8
<PAGE>

     Basic net income per share on the Company's Class B common stock was
calculated using the weighted average number of shares outstanding of 10,283,513
for the three months ended June 30, 2001 and 2000, respectively, and 10,283,513
and 10,283,556 for the six months ended June 30, 2001 and 2000, respectively.

     The following table sets forth the Company's reconciliation of numerators
and denominators of the basic and diluted earnings per weighted average common
share and the computation of basic and diluted earnings per weighted average
share for the Company's Class A common stock (in thousands except for earnings
per share data):





<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED           SIX MONTHS ENDED
                                                                     JUNE 30,                    JUNE 30,
                                                             -------------------------   -------------------------
                                                                 2001          2000          2001          2000
                                                             -----------   -----------   -----------   -----------
<S>                                                          <C>           <C>           <C>           <C>
Numerator:
 Net Income ..............................................    $ 25,226      $ 30,168      $  51,339     $  53,335
 Dividends to preferred shareholders .....................      (5,467)       (7,197)       (10,892)      (14,521)
 Income allocated to Class B common shareholders .........      (4,650)       (6,316)       (10,030)      (10,713)
                                                              --------      --------      ---------     ---------
 Numerator for basic and diluted earnings per Class A
   common share ..........................................    $ 15,109      $ 16,655      $  30,417     $  28,101
                                                              ========      ========      =========     =========
Denominator:
 Denominator for basic earnings per share-weighted
   average Class A common shares .........................      47,222        41,343         46,358        40,863
Effect of dilutive securities:
 Employee stock options ..................................         378           357            422           342
                                                              --------      --------      ---------     ---------
Denominator for diluted earnings per Class A common
 share -- adjusted weighted average shares and
 assumed conversions .....................................      47,600        41,700         46,780        41,205
                                                              ========      ========      =========     =========
Basic earnings per Class A common share:
 Net income per Class A common share .....................    $    .32      $    .40      $     .66     $     .69
                                                              ========      ========      =========     =========
Diluted earnings per Class A common share:
 Diluted net income per Class A common share .............    $    .32      $    .40      $     .65     $     .68
                                                              ========      ========      =========     =========

</TABLE>


                                        9
<PAGE>

     The following table sets forth the Company's reconciliation of numerators
and denominators of the basic and diluted earnings per weighted average common
share and the computation of basic and diluted earnings per weighted average
share for the Company's Class B common stock (in thousands except for earnings
per share data):





<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED           SIX MONTHS ENDED
                                                                     JUNE 30,                    JUNE 30,
                                                             -------------------------   -------------------------
                                                                 2001          2000          2001          2000
                                                             -----------   -----------   -----------   -----------
<S>                                                          <C>           <C>           <C>           <C>
Numerator:
 Net Income ..............................................    $  25,226     $  30,168     $  51,339     $  53,335
 Dividends to preferred shareholders .....................       (5,467)       (7,197)      (10,892)      (14,521)
 Income allocated to Class A common shareholders .........      (15,109)      (16,655)      (30,417)      (28,101)
                                                              ---------     ---------     ---------     ---------
 Numerator for basic earnings per Class B common
   share .................................................        4,650         6,316        10,030        10,713
Add back:
 Income allocated to Class A common shareholders .........       15,109        16,655        30,417        28,101
 Limited partners' minority interest in the operating
   partnership ...........................................        2,616         3,083         5,331         5,361
                                                              ---------     ---------     ---------     ---------
 Numerator for diluted earnings per Class B common
   share .................................................    $  22,375     $  26,054     $  45,778     $  44,175
                                                              =========     =========     =========     =========
Denominator:
 Denominator for basic earnings per share- weighted
   average Class B common shares .........................       10,284        10,284        10,284        10,284
 Effect of dilutive securities:
   Weighted average Class A common shares
    outstanding ..........................................       47,222        41,343        46,358        40,863
   Weighted average OP Units outstanding .................        7,763         7,695         7,728         7,697
   Employee stock options ................................          378           357           422           342
                                                              ---------     ---------     ---------     ---------
Denominator for diluted earnings per Class B common
 share-adjusted weighted average shares and assumed
 conversions .............................................       65,647        59,679        64,792        59,186
                                                              =========     =========     =========     =========
Basic earnings per Class B common share:
 Net income per Class B common share .....................    $     .45     $     .61     $     .98     $    1.04
                                                              =========     =========     =========     =========
Diluted earnings per Class B common share:
 Diluted net income per Class B common share .............    $     .34     $     .44     $     .71     $     .75
                                                              =========     =========     =========     =========
</TABLE>

8. SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION (in thousands)



<TABLE>
<CAPTION>
                                                        SIX MONTHS ENDED
                                                            JUNE 30,
                                                     -----------------------
                                                        2001         2000
                                                     ----------   ----------
<S>                                                  <C>          <C>
Cash paid during the period for interest .........    $52,766      $52,135
                                                      =======      =======
Interest capitalized during the period ...........    $ 5,137      $ 5,173
                                                      =======      =======
</TABLE>

9. SEGMENT DISCLOSURE

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


                                       10
<PAGE>

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

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

     The following table sets forth the components of the Company's revenues and
expenses and other related disclosures for the three months ended June 30, 2001
and 2000 (in thousands):




<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED
                                       ----------------------------------------------------------------------------------------
                                                       JUNE 30, 2001                               JUNE 30, 2000
                                       --------------------------------------------- ------------------------------------------
                                                                       CONSOLIDATED       CORE                     CONSOLIDATED
                                        CORE PORTFOLIO      OTHER         TOTALS        PORTFOLIO       OTHER         TOTALS
                                       ---------------- ------------- -------------- -------------- ------------- -------------
<S>                                    <C>              <C>           <C>            <C>            <C>           <C>
REVENUES:
Base rents, tenant escalations and
 reimbursements ......................    $   123,030     $   2,319    $   125,349    $   106,852     $   2,231    $   109,083
Equity in earnings of real estate
 joint ventures and service
 companies ...........................             --           801            801             --         1,775          1,775
Other income .........................          1,929         4,308          6,237            257        14,340         14,597
                                          -----------     ---------    -----------    -----------     ---------    -----------
Total Revenues .......................        124,959         7,428        132,387        107,109        18,346        125,455
                                          -----------     ---------    -----------    -----------     ---------    -----------
EXPENSES:
Property operating expenses ..........         40,080           794         40,874         35,950           558         36,508
Marketing, general and
 administrative ......................          5,446         2,965          8,411          4,788         1,721          6,509
Interest .............................         12,149        11,413         23,562          9,403        14,773         24,176
Depreciation and amortization ........         25,096         2,076         27,172         20,055         2,371         22,426
                                          -----------     ---------    -----------    -----------     ---------    -----------
Total Expenses .......................         82,771        17,248        100,019         70,196        19,423         89,619
                                          ===========     =========    ===========    ===========     =========    ===========
Income (loss) before minority
 interests and preferred dividends
 and distributions ...................    $    42,188     $  (9,820)   $    32,368    $    36,913     $  (1,077)   $    35,836
                                          ===========     =========    ===========    ===========     =========    ===========
Total assets .........................    $ 2,475,072     $ 637,170    $ 3,112,242    $ 2,054,183     $ 830,484    $ 2,884,667
                                          ===========     =========    ===========    ===========     =========    ===========
</TABLE>

     The following table sets forth the components of the Company's revenues and
expenses and other related disclosures for the six months ended June 30, 2001
and 2000 (in thousands):





<TABLE>
<CAPTION>
                                                                         THREE MONTHS ENDED
                                        -------------------------------------------------------------------------------------
                                                        JUNE 30, 2001                              JUNE 30, 2000
                                        --------------------------------------------- ---------------------------------------
                                                                        CONSOLIDATED      CORE                   CONSOLIDATED
                                         CORE PORTFOLIO      OTHER         TOTALS      PORTFOLIO      OTHER         TOTALS
                                        ---------------- ------------- -------------- ----------- ------------- -------------
<S>                                     <C>              <C>           <C>            <C>         <C>           <C>
REVENUES:
Base rents, tenant escalations and
 reimbursements .......................     $ 243,752      $   5,036      $ 248,788    $ 211,672    $   4,657     $ 216,329
Equity in earnings of real estate
 joint ventures and service
 companies ............................            --          1,199          1,199           --        3,187         3,187
Other income ..........................         2,478         10,808         13,286          664       22,933        23,597
                                            ---------      ---------      ---------    ---------    ---------     ---------
Total Revenues ........................       246,230         17,043        263,273      212,336       30,777       243,113
                                            ---------      ---------      ---------    ---------    ---------     ---------
EXPENSES:
Property operating expenses ...........        80,434          1,434         81,868       73,571        1,226        74,797
Marketing, general and
 administrative .......................        10,070          5,838         15,908        9,755        3,192        12,947
Interest ..............................        25,055         22,138         47,193       18,595       29,421        48,016
Depreciation and amortization .........        46,631          4,062         50,693       39,388        4,049        43,437
                                            ---------      ---------      ---------    ---------    ---------     ---------
Total Expenses ........................       162,190         33,472        195,662      141,309       37,888       179,197
                                            =========      =========      =========    =========    =========     =========
Income (loss) before minority
 interests and preferred dividends
 and distributions ....................     $  84,040      $ (16,429)     $  67,611    $  71,027    $  (7,111)    $  63,916
                                            =========      =========      =========    =========    =========     =========
</TABLE>

                                       11
<PAGE>

10. OTHER INVESTMENTS AND ADVANCES

    During 1997, the Company formed FrontLine Capital Group, formerly
Reckson Service Industries, Inc., ("FrontLine") and Reckson Strategic Venture
Partners, LLC ("RSVP"). In connection with the formation of FrontLine, the
Operating Partnership established an unsecured credit facility with FrontLine
(the "FrontLine Facility") in the amount of $100 million for FrontLine to use in
its investment activities, operations and other general corporate purposes. As
of June 30, 2001, the Company had advanced approximately $93.4 million under the
FrontLine Facility. The Operating Partnership also approved the funding of
investments of up to $100 million relating to RSVP (the "RSVP Commitment"),
through RSVP-controlled joint ventures (for REIT-qualified investments) or
advances made to FrontLine under an unsecured loan facility on terms similar to
the FrontLine Facility. During March 2001, the Company increased the RSVP
Commitment to $110 million and as of June 30, 2001, approximately $109.1 million
had been funded through the RSVP Commitment, of which $59.8 million represents
investments in RSVP-controlled (REIT-qualified) joint ventures and $49.3 million
represents advances loaned to FrontLine. In addition, as of June 30, 2001, the
Company, through its Credit Facility, has allocated approximately $200,000 in
outstanding undrawn letters of credit for the benefit of FrontLine. As of June
30, 2001, interest accrued under the FrontLine Facility and RSVP Commitment was
approximately $19.6 million, of which approximately $5 million was accrued for
the three month period ended June 30, 2001.

     FrontLine's primary business, HQ Global Holdings, Inc. ("HQ"), one of the
largest providers of flexible officing solutions in the world, recently
announced that the termination of the merger discussions between HQ and another
officing solutions provider and the decline in the overall economic environment
have negatively impacted its operating results. FrontLine also announced that it
obtained relief for the second and third quarters of 2001 from both HQ's lenders
and from the lender on its $25 million secured credit facility. FrontLine is in
discussions with this secured lender concerning the extension of the secured
credit facility beyond its current maturity during the third quarter 2001.
FrontLine and HQ are currently in discussions with their lenders concerning the
potential need for amendments to financial covenants for future periods. In
addition, FrontLine has announced that it is considering seeking stockholder
approval, if necessary, to issue shares of its common stock in lieu of cash, in
the event certain put rights of holders of HQ common stock are exercised. The
Company has formed a committee of its Board of Directors, comprised solely of
independent directors, to consider any actions to be taken by the Company in
connection with its loans to FrontLine through the FrontLine Facility or the
RSVP Commitment. As a result of these circumstances, the Company has taken a
reserve against interest income accrued for the second quarter 2001 the loans
under the FrontLine Facility and RSVP Commitment in the amount of approximately
$3.5 million based on its assessment of the amounts expected to be received on
these loans. In addition, based on current conditions, the Company expects to
record a similar reserve in future periods. FrontLine's ability to meet its
obligations as they come due, or repay the Company will depend upon, amongst
other things, the outcome of certain events described above.

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

     In addition to its interest in HQ, FrontLine also owns an interest in
RSVP which invests primarily in real estate and real estate related
operating companies generally outside of the Company's core office and
industrial focus.


                                       12
<PAGE>

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

     The following discussion should be read in conjunction with the
accompanying Consolidated Financial Statements of Reckson Associates Realty
Corp. (the "Company") and related notes thereto.

     The Company considers certain statements set forth herein to be
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, with respect to the Company's expectations for future periods.
Certain forward-looking statements, including, without limitation, statements
relating to the timing and success of acquisitions and the completion of
development or redevelopment of properties, the financing of the Company's
operations, the ability to lease vacant space and the ability to renew or relet
space under expiring leases, involve risks and uncertainties. Although the
Company believes that the expectations reflected in such forward-looking
statements are based on reasonable assumptions, the actual results may differ
materially from those set forth in the forward-looking statements and the
Company can give no assurance that its expectation will be achieved. Among those
risks, trends and uncertainties are the general economic climate, including the
conditions affecting industries in which our principal tenants compete; changes
in the supply of and demand for office and industrial properties in the New York
Tri-State area; changes in interest rate levels; downturns in rental rate levels
in our markets and our ability to lease or release space in a timely manner at
current or anticipated rental rate levels; the availability of financing to us
or our tenants; changes in operating costs, including utility costs; repayment
of debt owed to the Company by third parties (including FrontLine Capital
Group); risks associated with joint ventures; and other risks associated with
the development and acquisition of properties, including risks that development
may not be completed on schedule, that the tenants will not take occupancy or
pay rent, or that development or operating costs may be greater than
anticipated. Consequently, such forward-looking statements should be regarded
solely as reflections of the Company's current operating and development plans
and estimates. These plans and estimates are subject to revisions from time to
time as additional information becomes available, and actual results may differ
from those indicated in the referenced statements.


OVERVIEW AND BACKGROUND

     The Company is a self-administered and self-managed real estate investment
trust ("REIT") specializing in the acquisition, leasing, financing, management
and development of office and industrial properties. The Company's growth
strategy is focused on the real estate markets in and around the New York
tri-state area (the "Tri-State Area").

     The Company owns all of the interests in its real properties through
Reckson Operating Partnership, L.P. (the "Operating Partnership"). As of June
30, 2001, the Company owned and operated 82 office properties (inclusive of ten
office properties which are owned through joint ventures) comprising
approximately 14.4 million square feet, 104 industrial properties comprising
approximately 6.8 million square feet and two retail properties comprising
approximately 20,000 square feet located in the Tri-State Area. The Company also
owns a 357,000 square foot office building located in Orlando, Florida and
approximately 290 acres of land in 13 separate parcels of which the Company can
develop approximately 1.4 million square feet of office space and approximately
224,000 square feet of industrial space. The Company also has invested
approximately $17.0 million in a note receivable secured by a partnership
interest in Omni Partners, L.P., owner of the Omni, a 575,000 square foot Class
A office property located in Uniondale, New York and $36.5 million under three
notes which are secured by a minority partners' preferred interest in the
Operating Partnership.

     During 1997, the Company formed FrontLine Capital Group, formerly Reckson
Service Industries, Inc., ("FrontLine") and Reckson Strategic Venture Partners,
LLC ("RSVP"). In connection with the formation of FrontLine, the Operating
Partnership established an unsecured credit facility with FrontLine (the
"FrontLine Facility") in the amount of $100 million for FrontLine to use in its
investment activities, operations and other general corporate purposes. As of
June 30, 2001, the Company had advanced approximately $93.4 million under the
FrontLine Facility. The Operating Partnership also approved the funding of
investments of up to $100 million relating to RSVP (the "RSVP Commitment"),
through RSVP-controlled joint ventures (for REIT-qualified investments) or
advances made to FrontLine under an unsecured loan facility on


                                       13
<PAGE>
terms similar to the FrontLine Facility. During March 2001, the Company
increased the RSVP Commitment to $110 million and as of June 30, 2001,
approximately $109.1 million had been funded through the RSVP Commitment, of
which $59.8 million represents investments in RSVP-controlled (REIT-qualified)
joint ventures and $49.3 million represents advances loaned to FrontLine. In
addition, as of June 30, 2001, the Company, through its unsecured credit
facility, has allocated approximately $200,000 in outstanding undrawn letters of
credit for the benefit of FrontLine. As of June 30, 2001, interest accrued under
the FrontLine Facility and RSVP Commitment was approximately $19.6 million, of
which approximately $5 million was accrued for the three month period ended June
30, 2001.

     FrontLine's primary business, HQ Global Holdings, Inc. ("HQ"), one of the
largest providers of flexible officing solutions in the world, recently
announced that the termination of the merger discussions between HQ and another
officing solutions provider and the decline in the overall economic environment
have negatively impacted its operating results. FrontLine also announced that it
obtained relief for the second and third quarters of 2001 from both HQ's lenders
and from the lender on its $25 million secured credit facility. FrontLine is in
discussions with this secured lender concerning the extension of the secured
credit facility beyond its current maturity during the third quarter 2001.
FrontLine and HQ are currently in discussions with their lenders concerning the
potential need for amendments to financial covenants for future periods. In
addition, FrontLine has announced that it is considering seeking stockholder
approval, if necessary, to issue shares of its common stock in lieu of cash, in
the event certain put rights of holders of HQ common stock are exercised. The
Company has formed a committee of its Board of Directors, comprised solely of
independent directors, to consider any actions to be taken by the Company in
connection with its loans to FrontLine through the FrontLine Facility or the
RSVP Commitment. As a result of these circumstances, the Company has taken a
reserve against interest income accrued for the second quarter 2001 on the loans
under the FrontLine Facility and RSVP Commitment in the amount of approximately
$3.5 million based on its assessment of the amounts expected to be received on
those loans. In addition, based on current conditions, the Company expects to
record a similar reserve in future periods. FrontLine's ability to meet its
obligations as they come due, or repay the Company will depend upon, amongst
other things, the outcome of certain events described above.

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

     In addition to its interest in HQ, FrontLine also owns an interest in
RSVP which invests primarily in real estate and real estate related operating
companies generally outside of the Company's core office and industrial focus.

     In July 1998, the Company formed a joint venture, Metropolitan Partners LLC
("Metropolitan"), with Crescent Real Estate Equities Company, a Texas REIT
("Crescent") for the purpose of acquiring Tower Realty Trust, Inc. ("Tower"). On
May 24, 1999 the Company completed the merger with Tower and acquired three
Class A office properties located in New York City totaling 1.6 million square
feet and one office property located on Long Island totaling approximately
101,000 square feet. In addition, pursuant to the merger, the Company also
acquired certain office properties, a property under development and land
located outside of the Tri-State Area. All of the assets acquired in the merger
located outside of the Tri-State Area, other than a 357,000 square foot office
property located in Orlando, Florida, have been sold.

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

     On September 28, 2000, the Company formed a joint venture (the "Tri-State
JV") with Teachers Insurance and Annuity Association and contributed eight Class
A suburban office properties aggregating approximately 1.5 million square feet
to the Tri-State JV in exchange for approximately $136 million and a 51%
majority ownership interest in the Tri-State JV.

     The market capitalization of the Company at June 30, 2001 was approximately
$3.4 billion. The Company's market capitalization is based on the sum of (i) the
market value of the Company's Class A common stock and common units of limited
partnership interest in the Operating Partnership ("OP Units") (assuming
conversion) of $23.00 per share/unit (based on the closing price of the
Company's Class A common stock on June 29, 2001), (ii) the market value of the
Company's Class B common stock of $24.61 per share (based on the closing price
of the Company's Class B common stock on June 29, 2001), (iii) the liquidation
preference value of the Company's Series A preferred

                                       14
<PAGE>

and Series B preferred stock of $25 per share, (iv) the liquidation preference
value of the Operating Partnership's preferred units of $1,000 per unit and (v)
the approximately $1.5 billion (including its share of joint venture debt and
net of minority partners' interests share of joint venture debt) of debt
outstanding at June 30, 2001. As a result, the Company's total debt to total
market capitalization ratio at June 30, 2001 equaled approximately 44.3%.


RESULTS OF OPERATIONS

     The Company's total revenues increased by $6.9 million or 5.5% for the
three months ended June 30, 2001 as compared to the 2000 period. Property
operating revenues, which include base rents and tenant escalations and
reimbursements ("Property Operating Revenues") increased by $16.3 million or
14.9% for the three months ended June 30, 2001 as compared to the 2000 period.
The increase in Property Operating Revenues is primarily attributable to $7.7
million from increases in occupancies and rental rates in our "same store"
properties. In addition, $3.6 million of the increase was generated by developed
and redeveloped properties. The Company's base rent reflects the positive impact
of the straight-line rent adjustment of $10.9 million for the three months ended
June 30, 2001 as compared to $8.3 million for the 2000 period. Included in the
$10.9 million straight-line rent adjustment is $6.9 million attributable to 919
Third Avenue as compared to $4.3 million for the 2000 period. This amount is
primarily attributable to the free rent period contained in the lease of the
largest tenant in the building. The free rent period is effective through
February 28, 2002. Other revenues (excluding Property Operating Revenues),
decreased by $9.3 million or 57% for the three months ended June 30, 2001 as
compared to the 2000 period. This decrease is primarily attributable to $6.7
million in gain on sales of real estate in the 2000 period with no asset sales
in the 2001 period. In addition, this decrease was also attributable to the $3.5
million reserve against interest income accrued for the second quarter of 2001,
relating to the FrontLine Facility and loans under the RSVP Commitment.

     Property operating expenses, real estate taxes and ground rents ("Property
Expenses") increased by $4.4 million or 12% for the three months ended June 30,
2001 as compared to the 2000 period. This increase is primarily due to an
increase of $2.6 million in our "same-store" properties

     Gross Operating Margins (defined as Property Operating Revenues less
Property Expenses, taken as a percentage of Property Operating Revenues) for the
three months ended June 30, 2001 and 2000 were 67.4% and 66.5%, respectively.
The increase in Gross Operating Margins is primarily attributable to the
increase in rental rates and occupancy levels.

     Marketing, general and administrative expenses increased by approximately
$1.9 million for the three months ended June 30, 2001 as compared to the 2000
period. The increase was primarily attributable to legal and professional fees
incurred in connection with certain c ancelled acquisition transactions.
Marketing, general and administrative expenses, as a percentage of total
revenues, were 6.4% for the three months ended June 30, 2001 as compared to 5.2%
for the 2000 period.

     Interest expense decreased by approximately $614,000 for the three months
ended June 30, 2001 as compared to the 2000 period. The decrease was primarily
attributable to a decrease in interest expense on the Company's variable rate
debt due to lower interest rates.

     The Company's total revenues increased by $20.2 million or 8.3% for the six
moths ended June 30, 2001 as compared to the 2000 period. Property Operating
Revenues increased by $32.5 million or 15% for the six months ended June 30,
2001 as compared to the 2000 period. The increase in Property Operating Revenues
is primarily attributable to $13.9 million from increases in occupancies and
rental rates in our "same store" properties. In addition, $6.4 million of the
increase was generated by developed and redeveloped properties. The Company's
base rent reflects the positive impact of the straight-line rent adjustment of
$22.1 million for the six months ended June 30, 2001 as compared to $12.8
million for the 2000 period. Included in the $22.1 million straight-line rent
adjustment is $14.4 million attributable to 919 Third Avenue, as compared to
$5.4 million for the 2000 period. This amount is primarily attributable to the
free rent contained in the lease of the largest tenant in the building. The free
rent period is effective through February 28, 2002. Other revenues (excluding
Property Operating Revenues), decreased by $12.3 million or 45.9% for the six
months ended June 30, 2001 as compared to the 2000 period. This decrease is


                                       15
<PAGE>

primarily attributable to $6.7 million in gain on sales of real estate in the
2000 period with no asset sales in the 2001 period. In addition, this decrease
was also attributable to the $3.5 million reserve against interest income
accrued for the second quarter of 2001, relating to the FrontLine Facility and
loans under the RSVP Commitment.

     Property Expenses increased by $7.1 million or 9.5% for the six months
ended June 30, 2001 as compared to the 2000 period. This increase is primarily
due to an increase of $4.6 million in our "same-store" properties.

     Marketing general and administrative expenses increased by $3.0 million for
the six months ended June 30, 2001 as compared to the 2000 period. The increase
was primarily attributable to legal and professional fees incurred in connection
with certain cancelled acquisition transactions, increases in certain tenant and
community relation costs and increases in compensation and related employee
benefits. Marketing general and administrative expenses, as a percentage of
total revenues, were 6.0% for the six months ended June 30, 2001 as compared to
5.3% for the 2000 period.

     Interest expense decreased by approximately $823,000 for the six months
ended June 30, 2001 as compared to the 2000 period. The decrease was primarily
attributable to a decrease in interest expense on the Company's variable rate
debt due to lower interest rates.

LIQUIDITY AND CAPITAL RESOURCES

     As of June 30, 2001, the Company had a three year $575 million unsecured
revolving credit facility (the "Credit Facility") from The Chase Manhattan Bank,
as administrative agent, UBS Warburg LLC as syndication agent and Deutsche Bank
as documentation agent. The Credit Facility matures in September 2003 and
borrowings under the Credit Facility are currently priced off of LIBOR plus 105
basis points.

     The Company utilizes the Credit Facility primarily to finance real estate
investments, fund its real estate development activities and for working capital
purposes. At June 30, 2001, the Company had availability under the Credit
Facility to borrow an additional $240.4 million (of which, approximately $34.1
million has been allocated for outstanding undrawn letters of credit).

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

     On April 2, 2001, approximately 7,785 preferred units of limited
partnership interest in the Operating Partnership, with a liquidation preference
value of approximately $7.8 million, were exchanged for 305,706 OP Units at an
average price of $25.47 per OP Unit. In addition, during the three months ended
June 30, 2001, 352,878 OP Units were exchanged for an equal number of shares of
the Company's Class A common stock.

     On May 31, 2001, in connection with Crescent's conversion of its $85
million preferred equity investment in Metropolitan, the Company issued
3,453,881 shares of Class A common stock.

     On May 24, 1999, the Company issued 11,694,567 shares of Class B
Exchangeable Common Stock, par value $.01 per share, of the Company (the "Class
B common stock"), which were valued for accounting principles generally accepted
in the United States ("GAAP") purposes at $26 per share for total consideration
of approximately $304.1 million. The shares of Class B common stock were
entitled to receive an initial annual dividend of $2.24 per share, which
dividend is subject to adjustment annually. On July 31, 2000, the annual
dividend on the Class B Common Stock was increased to $2.5968 per share.

     The shares of Class B common stock are exchangeable at any time, at the
option of the holder, into an equal number of shares of Class A common stock,
par value $.01 per share, of the Company subject to customary antidilution
adjustments. The Company, at its option, may redeem any or all of the Class B
common stock in exchange for an equal number of shares of the Company's Class A
common stock at any time following November 23, 2003.


                                       16
<PAGE>

     The Board of Directors of the Company has authorized the purchase of up to
three million shares of the Company's Class B common stock. In addition, the
Board of Directors has also authorized the purchase of up to an additional three
million shares of the Company's Class B common stock and/or its Class A common
stock. The buy-back program will be effected in accordance with the safe harbor
provisions of the Securities Exchange Act of 1934 and may be terminated by the
Company at any time. As of June 30, 2001, the Company had purchased and retired
1,410,804 shares of Class B common stock at an average price of $21.48 per Class
B share and 4,204 shares of Class A common stock at an average price of $22.03
per Class A share for an aggregate purchase price of approximately $30.4
million.

     The Company's indebtedness at June 30, 2001 totaled approximately $1.5
billion (including its share of joint venture debt and net of minority partners'
interests share of joint venture debt) and was comprised of $334.6 million
outstanding under the Credit Facility, approximately $449.4 million of senior
unsecured notes and approximately $717 million of mortgage indebtedness. Based
on the Company's total market capitalization of approximately $3.4 billion at
June 30, 2001 (calculated based on the sum of (i) the market value of the
Company's Class A common stock and OP Units, assuming conversion, (ii) the
market value of the Company's Class B common stock, (iii) the liquidation
preference value of the Company's preferred stock, (iv) the liquidation
preference value of the Operating Partnership's preferred units and (v) the $1.5
billion of debt), the Company's debt represented approximately 44.3% of its
total market capitalization.

     Historically, rental revenue has been the principal source of funds to pay
operating expenses, debt service and capital expenditures, excluding
non-recurring capital expenditures of the Company. The Company expects to meet
its short-term liquidity requirements generally through its net cash provided by
operating activities along with the Credit Facility previously discussed. The
Company expects to meet certain of its financing requirements through long-term
secured and unsecured borrowings and the issuance of debt and equity securities
of the Company. In addition, the Company also believes that it will, from time
to time, generate funds from the disposition of certain of its real estate
properties or interests therein. The Company will refinance existing mortgage
indebtedness or indebtedness under the Credit Facility at maturity or retire
such debt through the issuance of additional debt securities or additional
equity securities. The Company anticipates that the current balance of cash and
cash equivalents and cash flows from operating activities, together with cash
available from borrowings and equity offerings, will be adequate to meet the
capital and liquidity requirements of the Company in both the short and
long-term.

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


INFLATION

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

     The Credit Facility and a certain mortgage note payable bear interest at a
variable rate, which will be influenced by changes in short-term interest rates,
and are sensitive to inflation.

                                       17
<PAGE>


FUNDS FROM OPERATIONS

     Management believes that funds from operations ("FFO") is an appropriate
measure of performance of an equity REIT. FFO is defined by the National
Association of Real Estate Investment Trusts ("NAREIT") as net income or loss,
excluding gains or losses from debt restructuring and sales of properties plus
depreciation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures. FFO does not represent cash generated from
operating activities in accordance with accounting principles generally accepted
in the United States ("GAAP") and is not indicative of cash available to fund
cash needs. FFO should not be considered as an alternative to net income as an
indicator of the Company's operating performance or as an alternative to cash
flow as a measure of liquidity. In November 1999, NAREIT issued a "White Paper"
analysis to address certain interpretive issues under its definition of FFO. The
White Paper provides that FFO should include both recurring and non-recurring
operating results, except those results defined as "extraordinary items" under
GAAP. This revised definition is effective for all periods beginning on or after
January 1, 2000.


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


                                       18
<PAGE>

     The following table presents the Company's FFO calculation (unaudited and
in thousands, except per share/unit data):





<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED               SIX MONTHS ENDED
                                                                       JUNE 30,                        JUNE 30,
                                                             -----------------------------   -----------------------------
                                                                  2001            2000            2001            2000
                                                             -------------   -------------   -------------   -------------
<S>                                                          <C>             <C>             <C>             <C>
Net income available to common shareholders ..............     $ 19,759        $ 22,971        $ 40,447        $ 38,814
Adjustments for basic funds from operations:
 Add:
   Limited partners' minority interest in the operating
    partnership ..........................................        2,616           3,083           5,331           5,361
   Real estate depreciation and amortization .............       26,727          21,937          49,715          42,552
   Minority partners' interests in consolidated
    partnerships .........................................        4,065           1,925           9,820           3,899
 Less:
   Gain on sales of real estate ..........................           --           6,662              --           6,662
   Amounts distributable to minority partners in
    consolidated partnerships ............................        5,104           2,136          10,805           4,517
                                                               --------        --------        --------        --------
Basic Funds From Operations ("FFO") ......................       48,063          41,118          94,508          79,447
 Add:
   Dividends and distributions on dilutive shares and
    units ................................................        6,958           9,451          14,637          19,029
                                                               --------        --------        --------        --------
 Diluted FFO .............................................     $ 55,021        $ 50,569        $109,145        $ 98,476
                                                               ========        ========        ========        ========
Basic FFO calculations:
 Weighted average common shares outstanding ..............       57,505          51,627          56,641          51,146
 Weighted average units of limited partnership interest
   outstanding ...........................................        7,763           7,695           7,728           7,697
                                                               --------        --------        --------        --------
 Basic weighted average common shares and units
   outstanding ...........................................       65,268          59,322          64,369          58,843
                                                               ========        ========        ========        ========
 Basic FFO per weighted average common share or unit .....     $    .74        $    .69        $   1.47        $   1.35
 Basic weighted average dividends or distributions per
   share or unit .........................................     $    .46        $    .42        $    .88        $    .83
 Basic FFO payout ratio ..................................         62.1%           60.8%           59.8%           61.2%
Diluted FFO calculations:
 Basic weighted average common shares and units
   outstanding ...........................................       65,268          59,322          64,369          58,843
 Adjustments for dilutive FFO weighted average shares
   and units outstanding:
   Add:
    Weighted average common stock equivalents ............          378             357             422             342
    Weighted average shares of Series A Preferred
      Stock ..............................................        8,060           8,060           8,060           8,060
    Weighted average shares of Series B Preferred
      Stock ..............................................        1,919           5,294           1,919           5,526
    Weighted average shares of minority partners
      preferred interest .................................        2,277           3,454           2,862           3,454
    Weighted average units of preferred limited
      partnership interest ...............................        1,127           1,367           1,246           1,367
                                                               --------        --------        --------        --------
 Dilutive FFO weighted average shares and units
   outstanding ...........................................       79,029          77,854          78,878          77,592
                                                               ========        ========        ========        ========
 Diluted FFO per weighted average share or unit ..........     $    .70        $    .65        $   1.38        $   1.27
 Diluted weighted average dividends or distributions per
   share or unit .........................................     $    .45        $    .41        $    .87        $    .81
 Diluted FFO payout ratio ................................         64.9%           63.6%           62.6%           63.8%
</TABLE>

                                       19
<PAGE>

     The following table presents the Company's CAD calculation (unaudited and
in thousands, except per share/unit data):



<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED                SIX MONTHS ENDED
                                                                           JUNE 30,                         JUNE 30,
                                                                 -----------------------------   ------------------------------
                                                                      2001            2000            2001            2000
                                                                 -------------   -------------   -------------   -------------
<S>                                                              <C>             <C>             <C>             <C>
Basic Funds From Operations ..................................     $ 48,063        $ 41,118        $ 94,508        $ 79,447
Adjustments for basic cash available for distribution:
 Less:
   Straight line rents (Note a) ..............................       10,854           8,300          22,013          12,838
   Non-incremental capitalized tenant improvements and
    leasing commissions ......................................        4,098           1,873           6,744           4,743
   Non-incremental capitalized improvements ..................        1,629           1,446           2,264           2,697
                                                                   --------        --------        --------        --------
Basic Cash Available for Distribution ("CAD") ................       31,482          29,499          63,487          59,169
 Add:
   Dividends and distributions on dilutive shares and units           1,491           9,451           3,745          19,029
                                                                   --------        --------        --------        --------
 Diluted CAD .................................................     $ 32,973        $ 38,950        $ 67,232        $ 78,198
                                                                   ========        ========        ========        ========
Basic CAD calculations:
 Weighted average common shares outstanding ..................       57,505          51,627          56,641          51,146
 Weighted average units of limited partnership interest
   outstanding ...............................................        7,763           7,695           7,728           7,697
                                                                   --------        --------        --------        --------
 Basic weighted average common shares and units
   outstanding ...............................................       65,268          59,322          64,369          58,843
                                                                   ========        ========        ========        ========
 Basic CAD per weighted average common share or unit .........     $    .48        $    .50        $    .99        $   1.01
 Basic weighted average dividends or distributions per
   share or unit .............................................     $    .46        $    .42        $    .88        $    .83
 Basic CAD payout ratio ......................................         94.8%           84.7%           89.0%           82.1%
Diluted CAD calculations:
 Basic weighted average common shares and units
   outstanding ...............................................       65,268          59,322          64,369          58,843
 Adjustments for dilutive CAD weighted average shares
   and units outstanding:
   Add:
    Weighted average common stock equivalents ................          378             357             422             342
    Weighted average shares of Series A Preferred Stock                  --           8,060              --           8,060
    Weighted average shares of Series B Preferred Stock                  --           5,294              --           5,526
    Weighted average shares of minority
      partners'preferred interest ............................        2,277           3,454           2,862           3,454
    Weighted average units of preferred limited
      partnership interest ...................................        1,127           1,367           1,246           1,367
                                                                   --------        --------        --------        --------
 Dilutive CAD weighted average shares and units
   outstanding ...............................................       69,050          77,854          68,899          77,592
                                                                   ========        ========        ========        ========
 Diluted CAD per weighted average share or unit ..............     $    .48        $    .50        $    .98        $   1.01
 Diluted weighted average dividends or distributions per
   share or unit .............................................     $    .46        $    .41        $    .87        $    .81
 Diluted CAD payout ratio ....................................         95.4%           82.5%           89.5%           80.3%
</TABLE>

----------
Notes:

(a) Includes  straight-line  rental  income attributable to the property located
    at  919  Third Avenue, New York, N.Y. of $6,880, $4,309, $14,384 and $5,384,
    respectively.


                                       20
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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

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

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

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

     The following table sets forth the Company's long term debt obligations by
scheduled principal cash flow payments and maturity date, weighted average
interest rates and estimated FMV at June 30, 2001 (dollars in thousands):





<TABLE>
<CAPTION>
                                          FOR THE YEAR ENDED DECEMBER 31,
                       ----------------------------------------------------------------------
                            2001          2002          2003          2004           2005
                       ------------- ------------- ------------- -------------- -------------
<S>                    <C>           <C>           <C>           <C>            <C>
Long term debt:
 Fixed rate ..........   $  19,424     $  17,381     $   9,696     $  113,107     $  11,361
 Weighted average
   interest rate .....        7.55%         7.77%         7.68%          7.49%         7.70%
 Variable rate .......   $      --     $      --     $ 534,600     $       --     $      --
 Weighted average
   interest rate .....          --            --          5.38%            --            --




<CAPTION>
                         THEREAFTER      TOTAL(1)         FMV
                       -------------- -------------- ------------
<S>                    <C>            <C>            <C>
Long term debt:
 Fixed rate ..........   $  809,201     $  980,170    $ 982,950
 Weighted average
   interest rate .....         7.47%          7.48%
 Variable rate .......   $       --     $  534,600    $ 534,600
 Weighted average
   interest rate .....           --           5.38%

</TABLE>

----------
(1) Includes unamortized issuance discounts of $576,000 on the 5 and 10 year
    senior unsecured notes issued on March 26, 1999 which are due at maturity.


     In addition, the Company has assessed the market risk for its variable rate
debt, which is based upon LIBOR, and believes that a one percent increase in the
LIBOR rate would have an approximate $5.3 million annual increase in interest
expense based on approximately $534.6 million of variable rate debt outstanding
at June 30, 2001.

     The following table sets forth the Company's mortgage notes and note
receivables by scheduled maturity date, weighted average interest rates and
estimated FMV at June 30, 2001 (dollars in thousands):

<TABLE>
<CAPTION>
                                     FOR THE YEAR ENDED DECEMBER 31,
                           ---------------------------------------------------
                              2001        2002      2003       2004      2005   THEREAFTER    TOTAL (2)       FMV
                           ---------- ------------ ------ ------------- ------ ------------ ------------- -----------
<S>                        <C>        <C>          <C>    <C>           <C>    <C>          <C>           <C>
Mortgage notes and notes
 receivable:
 Fixed rate ..............  $     8     $  1,165    $ --    $  36,500    $ --  $  16,990     $  54,663    $ 56,009
 Weighted average
   Interest rate .........     9.00%        9.00%     --        10.23%     --       11.65%        10.64%
</TABLE>

----------
(2) Excludes interest receivables aggregating approximately $560,000.

                                       21
<PAGE>

NON-INCREMENTAL  REVENUE  GENERATING  CAPITAL  EXPENDITURES,  TENANT IMPROVEMENT
                          COSTS AND LEASING COMMISSIONS
The following table summarizes the expenditures incurred for capital
expenditures for the entire portfolio and tenant improvements and leasing
commissions for space leased at the Company's office and industrial properties
for the six month period ended June 30, 2001 and the historical of such capital
expenditures, tenant improvements and leasing commissions for the years 1997
through 2000.


            NON-INCREMENTAL REVENUE GENERATING CAPITAL EXPENDITURES

<TABLE>
<CAPTION>
                                                                                                              SIX MONTHS
                                                                                              1997-2000         ENDED
                                 1997            1998            1999            2000          AVERAGE        30-JUN-01
                           --------------- --------------- --------------- --------------- --------------- ---------------
<S>                        <C>             <C>             <C>             <C>             <C>             <C>
SUBURBAN OFFICE PROPERTIES
 Total ...................   $ 1,108,675     $ 2,004,976     $ 2,298,899     $ 3,289,116     $ 2,175,417     $ 1,443,882
 Per Square Foot .........          0.22            0.23            0.23            0.33            0.25            0.14

CBD OFFICE PROPERTIES
 Total ...................           N/A             N/A             N/A     $   946,718     $   946,718     $   641,809
 Per Square Foot .........           N/A             N/A             N/A            0.38            0.38            0.18

INDUSTRIAL PROPERTIES
 Total ...................   $   733,233     $ 1,205,266     $ 1,048,688     $   813,431     $   950,155     $   309,398
 Per Square Foot .........          0.15            0.12            0.11            0.11            0.12     $      0.05

</TABLE>

NON-INCREMENTAL REVENUE GENERATING TENANT IMPROVEMENTS AND LEASING COMMISSIONS




<TABLE>
<CAPTION>
                                                                                                                     SIX MONTHS
                                                                                                      1997-2000        ENDED
                                         1997            1998            1999            2000          AVERAGE       30-JUN-01
                                    -------------- --------------- --------------- --------------- --------------- -------------
<S>                                 <C>            <C>             <C>             <C>             <C>             <C>
LONG ISLAND OFFICE PROPERTIES
 Tenant Improvements ..............   $  784,044     $ 1,140,251     $ 1,009,357     $ 2,853,706     $ 1,466,840    $  702,596
 Per Square Foot Improved .........         7.00            3.98            4.73            6.99            5.68          9.50
 Leasing Commissions ..............   $  415,822     $   418,191     $   551,762     $ 2,208,604     $   898,595    $  333,643
 Per Square Foot Leased ...........         4.83            1.46            2.59            4.96            3.46          4.51
                                      ----------     -----------     -----------     -----------     -----------    ----------
 Total Per Square Foot ............   $    11.83     $      5.44     $      7.32     $     11.95     $      9.14    $    14.01
                                      ==========     ===========     ===========     ===========     ===========    ==========
WESTCHESTER OFFICE PROPERTIES
 Tenant Improvements ..............   $1,211,665     $   711,160     $ 1,316,611     $ 1,860,027     $ 1,274,866    $1,358,938
 Per Square Foot Improved .........         8.90            4.45            5.62            5.72            6.17          6.06
 Leasing Commissions ..............   $  366,257     $   286,150     $   457,730     $   412,226     $   380,591    $   39,295
 Per Square Foot Leased ...........         2.69            1.79            1.96            3.00            2.36          0.17
                                      ----------     -----------     -----------     -----------     -----------    ----------
 Total Per Square Foot ............   $    11.59     $      6.24     $      7.58     $      8.72     $      8.53    $     6.23
                                      ==========     ===========     ===========     ===========     ===========    ==========
CONNECTICUT OFFICE PROPERTIES
 Tenant Improvements ..............   $1,022,421     $   202,880     $   179,043     $   385,531     $   447,469    $  175,648
 Per Square Foot Improved .........        13.39            5.92            4.88            4.19            7.10          2.14
 Leasing Commissions ..............   $  256,615     $   151,063     $   110,252     $   453,435     $   242,841    $  182,516
 Per Square Foot Leased ...........         3.36            4.41            3.00            4.92            3.92          2.22
                                      ----------     -----------     -----------     -----------     -----------    ----------
 Total Per Square Foot ............   $    16.75     $     10.33     $      7.88     $      9.11     $     11.02    $     4.36
                                      ==========     ===========     ===========     ===========     ===========    ==========
NEW JERSEY OFFICE PROPERTIES
 Tenant Improvements ..............          N/A     $   654,877     $   454,054     $ 1,580,323     $   896,418    $  737,260
 Per Square Foot Improved .........          N/A            3.78            2.29            6.71            4.26          5.30
 Leasing Commissions ..............          N/A     $   396,127     $   787,065     $ 1,031,950     $   738,381    $  904,348
 Per Square Foot Leased ...........          N/A            2.08            3.96            4.44            3.49          6.51
                                      ----------     -----------     -----------     -----------     -----------    ----------
 Total Per Square Foot ............          N/A     $      5.86     $      6.25     $     11.15     $      7.75    $    11.81
                                      ==========     ===========     ===========     ===========     ===========    ==========
NEW YORK CITY OFFICE
 PROPERTIES
 Tenant Improvements ..............          N/A             N/A             N/A     $    65,267     $    65,267    $  738,800
 Per Square Foot Improved .........          N/A             N/A             N/A            1.79            1.79         17.20
 Leasing Commissions ..............          N/A             N/A             N/A     $   418,185     $   418,185    $1,025,394
 Per Square Foot Leased ...........          N/A             N/A             N/A           11.50           11.50         23.87
                                      ----------     -----------     -----------     -----------     -----------    ----------
 Total Per Square Foot ............          N/A             N/A             N/A     $     13.29     $     13.29    $    41.07
                                      ==========     ===========     ===========     ===========     ===========    ==========
INDUSTRIAL PROPERTIES
 Tenant Improvements ..............   $  230,466     $   283,842     $   375,646     $   650,216     $   385,043    $   34,650
 Per Square Foot Improved .........         0.55            0.76            0.25            0.95            0.63          0.17
 Leasing Commissions ..............   $   81,013     $   200,154     $   835,108     $   436,506     $   388,195    $   50,055
 Per Square Foot Leased ...........         0.19            0.44            0.56            0.64            0.46          0.25
                                      ----------     -----------     -----------     -----------     -----------    ----------
 Total Per Square Foot ............   $     0.75     $      1.20     $      0.81    $      1.59     $      1.09    $     0.42
                                      ==========     ===========     ===========     ===========     ===========    ==========
</TABLE>

                                       22
<PAGE>

                                LEASE EXPIRATIONS
     The following table sets forth scheduled lease expirations for executed
leases as of June 30, 2001:


LONG ISLAND OFFICE PROPERTIES (EXCLUDING OMNI):





<TABLE>
<CAPTION>
           YEAR OF                             TOTAL RENTABLE        % OF TOTAL            PER             PER
            LEASE                  NUMBER        SQUARE FEET      RENTABLE SQUARE      SQUARE FOOT     SQUARE FOOT
          EXPIRATION             OF LEASES        EXPIRING         FEET EXPIRING      S/L RENT (1)      RENT (2)
-----------------------------   -----------   ----------------   -----------------   --------------   ------------
<S>                             <C>           <C>                <C>                 <C>              <C>
2001 ........................        28             131,751              3.8%           $ 22.25         $ 24.34
2002 ........................        34             165,933              4.8%           $ 21.91         $ 24.68
2003 ........................        52             375,400             10.9%           $ 22.95         $ 25.36
2004 ........................        49             286,257              8.3%           $ 23.24         $ 26.15
2005 ........................        70             604,700             17.5%           $ 23.30         $ 26.18
2006 ........................        19             106,482              3.1%           $ 26.62         $ 30.38
2007 AND THEREAFTER .........        88           1,787,057             51.6%                --              --
                                     --           ---------            -----
TOTAL .......................       340           3,457,580            100.0%
                                    ===           =========            =====
</TABLE>

OMNI:




<TABLE>
<CAPTION>
           YEAR OF                             TOTAL RENTABLE        % OF TOTAL            PER             PER
            LEASE                  NUMBER        SQUARE FEET      RENTABLE SQUARE      SQUARE FOOT     SQUARE FOOT
          EXPIRATION             OF LEASES        EXPIRING         FEET EXPIRING      S/L RENT (1)      RENT (2)
-----------------------------   -----------   ----------------   -----------------   --------------   ------------
<S>                             <C>           <C>                <C>                 <C>              <C>
2001 ........................         2              8,663               1.5%           $ 30.48         $ 33.48
2002 ........................         4             53,127               9.2%           $ 34.55         $ 37.91
2003 ........................         4             58,018              10.0%           $ 30.22         $ 34.97
2004 ........................         4            112,414              19.5%           $ 26.14         $ 34.15
2005 ........................         7             59,166              10.2%           $ 27.99         $ 35.26
2006 ........................         1              9,749               1.7%           $ 35.21         $ 38.02
2007 AND THEREAFTER .........        10            276,259              47.9%                --              --
                                     --            -------             -----
TOTAL .......................        32            577,396             100.0%
                                     ==            =======             =====
</TABLE>

INDUSTRIAL PROPERTIES:




<TABLE>
<CAPTION>
           YEAR OF                             TOTAL RENTABLE        % OF TOTAL            PER             PER
            LEASE                  NUMBER        SQUARE FEET      RENTABLE SQUARE      SQUARE FOOT     SQUARE FOOT
          EXPIRATION             OF LEASES        EXPIRING         FEET EXPIRING      S/L RENT (1)      RENT (2)
-----------------------------   -----------   ----------------   -----------------   --------------   ------------
<S>                             <C>           <C>                <C>                 <C>              <C>
2001 ........................        15             307,259              6.3%            $ 5.89          $ 7.36
2002 ........................        28             246,504              5.0%            $ 6.47          $ 7.32
2003 ........................        28             733,434             14.9%            $ 5.35          $ 6.26
2004 ........................        33             623,753             12.7%            $ 6.25          $ 7.32
2005 ........................        22             427,994              8.7%            $ 5.93          $ 7.97
2006 ........................        33             888,693             18.1%            $ 6.36          $ 7.81
2007 AND THEREAFTER .........        38           1,680,440             34.3%                --              --
                                     --          ----------            -----
TOTAL .......................       197           4,908,077            100.0%
                                    ===          ==========            =====
</TABLE>



                                       23
<PAGE>

                        LEASE EXPIRATIONS - (CONTINUED)

RESEARCH AND DEVELOPMENT PROPERTIES:




<TABLE>
<CAPTION>
           YEAR OF                             TOTAL RENTABLE        % OF TOTAL            PER             PER
            LEASE                  NUMBER        SQUARE FEET      RENTABLE SQUARE      SQUARE FOOT     SQUARE FOOT
          EXPIRATION             OF LEASES        EXPIRING         FEET EXPIRING      S/L RENT (1)      RENT (2)
-----------------------------   -----------   ----------------   -----------------   --------------   ------------
<S>                             <C>           <C>                <C>                 <C>              <C>
2001 ........................         6             286,946             22.0%           $  5.53         $  6.94
2002 ........................         3             118,620              9.1%           $ 10.19         $ 11.82
2003 ........................         4              37,938              2.9%           $  9.20         $ 10.15
2004 ........................         9              99,218              7.6%           $ 13.86         $ 15.02
2005 ........................         4             357,440             27.4%           $  8.24         $ 10.76
2006 ........................         6              90,217              6.9%           $ 17.36         $ 20.07
2007 AND THEREAFTER .........        14             314,417             24.1%                --              --
                                     --             -------            -----
TOTAL .......................        46           1,304,796            100.0%
                                     ==           =========            =====
</TABLE>

WESTCHESTER OFFICE PROPERTIES:




<TABLE>
<CAPTION>
           YEAR OF                             TOTAL RENTABLE        % OF TOTAL            PER             PER
            LEASE                  NUMBER        SQUARE FEET      RENTABLE SQUARE      SQUARE FOOT     SQUARE FOOT
          EXPIRATION             OF LEASES        EXPIRING         FEET EXPIRING      S/L RENT (1)      RENT (2)
-----------------------------   -----------   ----------------   -----------------   --------------   ------------
<S>                             <C>           <C>                <C>                 <C>              <C>
2001 ........................        16              56,421              1.8%           $ 21.55         $ 24.01
2002 ........................        48             419,902             13.7%           $ 21.18         $ 21.51
2003 ........................        44             246,101              8.0%           $ 21.76         $ 22.80
2004 ........................        31             172,746              5.6%           $ 21.12         $ 22.06
2005 ........................        50             389,628             12.7%           $ 24.98         $ 25.29
2006 ........................        31             692,851             22.6%           $ 22.76         $ 24.70
2007 AND THEREAFTER .........        41           1,086,508             35.6%                --              --
                                     --           ---------            -----
TOTAL .......................       261           3,064,157            100.0%
                                    ===           =========            =====
</TABLE>

STAMFORD OFFICE PROPERTIES:




<TABLE>
<CAPTION>
           YEAR OF                             TOTAL RENTABLE        % OF TOTAL            PER             PER
            LEASE                  NUMBER        SQUARE FEET      RENTABLE SQUARE      SQUARE FOOT     SQUARE FOOT
          EXPIRATION             OF LEASES        EXPIRING         FEET EXPIRING      S/L RENT (1)      RENT (2)
-----------------------------   -----------   ----------------   -----------------   --------------   ------------
<S>                             <C>           <C>                <C>                 <C>              <C>
2001 ........................        19              44,758              4.2%           $ 19.99         $ 22.03
2002 ........................        18              84,104              8.0%           $ 27.53         $ 28.30
2003 ........................        17             120,969             11.4%           $ 31.07         $ 31.75
2004 ........................        21             228,220             21.6%           $ 22.01         $ 22.81
2005 ........................        26             122,242             11.6%           $ 26.66         $ 28.62
2006 ........................        19             273,947             25.9%           $ 25.53         $ 25.15
2007 AND THEREAFTER .........        16             182,285             17.3%                --              --
                                     --             -------            -----
TOTAL .......................       136           1,056,525            100.0%
                                    ===           =========            =====
</TABLE>


                                       24
<PAGE>

                        LEASE EXPIRATIONS - (CONTINUED)

NEW JERSEY OFFICE PROPERTIES:




<TABLE>
<CAPTION>
           YEAR OF                             TOTAL RENTABLE        % OF TOTAL            PER             PER
            LEASE                  NUMBER        SQUARE FEET      RENTABLE SQUARE      SQUARE FOOT     SQUARE FOOT
          EXPIRATION             OF LEASES        EXPIRING         FEET EXPIRING      S/L RENT (1)      RENT (2)
-----------------------------   -----------   ----------------   -----------------   --------------   ------------
<S>                             <C>           <C>                <C>                 <C>              <C>
2001 ........................        10             158,351              8.2%           $ 17.36         $ 17.63
2002 ........................        19             144,155              7.4%           $ 20.20         $ 20.99
2003 ........................        17             307,840             15.8%           $ 18.86         $ 18.94
2004 ........................        29             227,106             11.7%           $ 22.59         $ 23.44
2005 ........................        24             279,093             14.4%           $ 23.09         $ 23.79
2006 ........................        14             150,607              7.8%           $ 24.52         $ 25.75
2007 AND THEREAFTER .........        18             675,409             34.7%                --              --
                                     --             -------            -----
TOTAL .......................       131           1,942,561            100.0%
                                    ===           =========            =====
</TABLE>

NEW YORK CITY OFFICE




<TABLE>
<CAPTION>
           YEAR OF                             TOTAL RENTABLE        % OF TOTAL            PER             PER
            LEASE                  NUMBER        SQUARE FEET      RENTABLE SQUARE      SQUARE FOOT     SQUARE FOOT
          EXPIRATION             OF LEASES        EXPIRING         FEET EXPIRING      S/L RENT (1)      RENT (2)
-----------------------------   -----------   ----------------   -----------------   --------------   ------------
<S>                             <C>           <C>                <C>                 <C>              <C>
2001 ........................         9              60,261              1.8%           $ 32.00         $ 32.91
2002 ........................        20             189,578              5.6%           $ 32.57         $ 33.52
2003 ........................         7             115,726              3.4%           $ 31.89         $ 32.68
2004 ........................        19             218,239              6.4%           $ 36.46         $ 39.35
2005 ........................        38             446,810             13.2%           $ 36.04         $ 37.80
2006 ........................        48             343,182             10.1%           $ 30.00         $ 31.17
2007 AND THEREAFTER .........        71           2,014,494             59.5%                --              --
                                     --           ---------            -----
TOTAL .......................       212           3,388,290            100.0%
                                    ===           =========            =====
</TABLE>

----------------
(1) Per square foot rental rate represents annualized straight line rent as of
 the lease expiration date.
(2) Per square foot rental rate represents annualized base rent as of the lease
    expiration date plus non-recoverable operating expense pass-throughs.


                                       25
<PAGE>

                          PART II -- OTHER INFORMATION

Item 1. Legal Proceedings -- None
Item 2. Changes in Securities and use of proceeds

     On May 31, 2001, the Registrant issued 3,453,881 shares of its Class A
common stock to Crescent in connection with Crescent's conversion of its $85
million preferred equity interest in Metropolitan Partners LLC, based on a
conversion price of $24.61 per share. This transaction was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.

     During the three months ended June 30, 2001, the Registrant issued 352,878
shares of its Class A common stock, par value $0.01 per share, in exchange for
an equal number of units of general partnership interest of the Operating
Partnership. These transactions were exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933.

Item 3. Defaults Upon Senior Securities -- None
Item 4. Submission of Matters to a Vote of Securities Holders


     On May 24, 2001, the Company held its annual meeting of stockholders. The
matters on which the stockholders voted, in person or by proxy, were (1) the
election of three nominees as Class III directors to serve until the 2004 annual
meeting of stockholders and until their respective successors are duly elected
and qualified and (2) to ratify the selection of the independent auditors of the
Company. The three nominees were elected and the auditors were ratified. The
results of the voting are set forth below:





<TABLE>
<CAPTION>
      ELECTION OF DIRECTORS          VOTES CAST FOR     VOTES CAST AGAINST
---------------------------------   ----------------   -------------------
<S>                                 <C>                <C>
          Roger Rechler               29,351,625               N/A
           Harvey Blau                35,384,369               N/A
         John V.N. Klein              35,383,591               N/A

       RATIFICATION OF AUDITORS       38,198,639             147,295
---------------------------------
</TABLE>

Item 5. Other information -- None
Item 6. Exhibits and Reports on Form 8-K


     a) Exhibits


       10.1 - Loan agreement dated as of June 1, 2001, between 1350 LLC, as
            Borrower, and Secore Financial Corporation, as Lender.


       10.2 - Loan agreement dated as of July 18, 2001, between Metropolitan 919
            3rd Avenue, LLC, as Borrower, and Secore Financial Corporation, as
            Lender.


     b) During the three months ended June 30, 2001, the Registrant filed the
following reports on Form 8-K:


     On May 3, 2001, the Registrant submitted a report on Form 8-K under Item 9
thereof in order to submit its first quarter presentation in satisfaction of the
requirements of Regulation FD.


     On May 4, 2001, the Registrant submitted a report on Form 8-K under Item 9
thereof in order to submit supplemental operating and financial data for the
quarter ended March 31, 2001 in satisfaction of the requirements of Regulation
FD.


                                       26
<PAGE>

                                   SIGNATURES

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



<TABLE>
<S>                                       <C>
RECKSON ASSOCIATES REALTY CORP.
By:   \s\ Scott H. Rechler                /s/ Michael Maturo
   ----------------------------------     -------------------------------------
   Scott H. Rechler, Co-Chief Executive   Michael Maturo, Executive Vice President,
    Officer and President                  Treasurer and Chief Financial Officer
DATE: August 13, 2001
</TABLE>

                                       27