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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 MARCH 31, 2000



                        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 40,841,821 and 10,283,513  shares Class A of common stock and Class B
common stock outstanding, respectively as of May 10, 2000

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<PAGE>

                        RECKSON ASSOCIATES REALTY CORP.
                                QUARTERLY REPORT
                   FOR THE THREE MONTHS ENDED MARCH 31, 2000

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

 INDEX                                                                                  PAGE
-------                                                                                -----
<S>       <C>                                                                          <C>
PART I. FINANCIAL INFORMATION
Item 1.   Financial Statements
          Consolidated Balance Sheets as of March 31, 2000 (unaudited) and
          December 31, 1999 ........................................................     3
          Consolidated Statements of Income for the three months ended
          March 31, 2000 and 1999 (unaudited) ......................................     4
          Consolidated Statements of Cash Flows for the three months ended
          March 31, 2000 and 1999 (unaudited) ......................................     5
          Notes to the Consolidated Financial Statements (unaudited) ...............     6
Item 2.   Management's Discussion and Analysis of Financial Condition and Results of
          Operations ...............................................................    13
Item 3.   Quantitative and Qualitative Disclosures about Market Risk ...............    23
PART II. OTHER INFORMATION
Item 1.   Legal Proceedings ........................................................    24
Item 2.   Changes in Securities and Use of Proceeds ................................    24
Item 3.   Defaults Upon Senior Securities ..........................................    24
Item 4.   Submission of Matters to a Vote of Securities Holders ....................    24
Item 5.   Other Information ........................................................    24
Item 6.   Exhibits and Reports on Form 8-K .........................................    24
SIGNATURES .......................................................................      24
</TABLE>

                                        2

<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>

                                                                                     MARCH 31, 2000   DECEMBER 31,
                                                                                       (UNAUDITED)        1999
                                                                                    ---------------- -------------
<S>                                                                                 <C>              <C>
ASSETS:
Commercial real estate properties, at cost:
 Land .............................................................................    $  296,058     $  276,204
 Building and improvements ........................................................     1,938,600      1,802,611
Developments in progress:
 Land .............................................................................        61,904         60,894
 Development costs ................................................................        75,588         68,690
Furniture, fixtures and equipment .................................................         6,803          6,473
                                                                                       ----------     ----------
                                                                                        2,378,953      2,214,872
Less accumulated depreciation .....................................................      (237,028)      (218,385)
                                                                                       ----------     ----------
                                                                                        2,141,925      1,996,487
Investment in real estate joint ventures ..........................................        32,219         31,531
Investment in mortgage notes and notes receivable .................................       352,863        352,466
Cash and cash equivalents .........................................................        31,142         21,368
Tenants receivables ...............................................................         3,998          5,117
Investments in and advances to affiliates .........................................       197,071        178,695
Deferred rent receivable ..........................................................        36,597         32,132
Prepaid expenses and other assets .................................................        60,309         66,977
Contract and land deposits and pre-acquisition costs ..............................         4,752          9,585
Deferred leasing and loan costs ...................................................        43,457         39,520
                                                                                       ----------     ----------
TOTAL ASSETS ......................................................................    $2,904,333     $2,733,878
                                                                                       ==========     ==========
LIABILITIES:
Mortgage notes payable ............................................................    $  527,508     $  459,174
Unsecured credit facility .........................................................       407,600        297,600
Unsecured term loan ...............................................................        75,000         75,000
Senior unsecured notes ............................................................       449,330        449,313
Accrued expenses and other liabilities ............................................        79,374         82,079
Dividends and distributions payable ...............................................        27,169         27,166
                                                                                       ----------     ----------
TOTAL LIABILITIES .................................................................     1,565,981      1,390,332
                                                                                       ----------     ----------
Commitments and other comments ....................................................            --             --
Minority interests' in consolidated partnerships ..................................        93,001         93,086
Preferred unit interest in the operating partnership ..............................        42,518         42,518
Limited partners' minority interest in the operating partnership ..................        90,332         90,986
                                                                                       ----------     ----------
                                                                                          225,851        226,590
                                                                                       ----------     ----------
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, 6,000,000 shares issued and outstanding ................            60             60
Common Stock, $01 par value, 100,000,000 shares authorized
 Class A Common Stock, 40,386,721 and 40,375,506 shares issued and outstanding,
   respectively ...................................................................           404            401
 Class B Common Stock, 10,283,513 and 10,283,763 shares issued and outstanding,
   respectively ...................................................................           103            103
Additional paid in capital ........................................................     1,111,842      1,116,300
                                                                                       ----------     ----------
Total Stockholders' Equity ........................................................     1,112,501      1,116,956
                                                                                       ----------     ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........................................    $2,904,333     $2,733,878
                                                                                       ==========     ==========
</TABLE>

                (see accompanying notes to financial statements)

                                        3

<PAGE>

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





<TABLE>
<CAPTION>

                                                                                       THREE MONTHS ENDED
                                                                                            MARCH 31,
                                                                                  -----------------------------
                                                                                       2000           1999
                                                                                  -------------- --------------
<S>                                                                               <C>            <C>
REVENUES:
Base rents ......................................................................  $    94,400    $    62,093
Tenant escalations and reimbursements ...........................................       12,847          8,542
Equity in earnings of real estate joint ventures and service companies ..........        1,413            377
Interest income on mortgage notes and notes receivable ..........................        2,285          2,808
Other ...........................................................................        6,714          2,288
                                                                                   -----------    -----------
 Total Revenues .................................................................      117,659         76,108
                                                                                   -----------    -----------
EXPENSES:
Property operating expenses .....................................................       38,156         22,908
Marketing, general and administrative ...........................................        6,571          4,392
Interest ........................................................................       23,840         13,943
Depreciation and amortization ...................................................       21,012         15,091
                                                                                   -----------    -----------
 Total Expenses .................................................................       89,579         56,334
                                                                                   -----------    -----------
Income before preferred dividends and distributions and minority interests .            28,080         19,774
Minority partners' interests in consolidated partnerships .......................       (1,975)        (1,168)
Distributions to preferred unit holders .........................................         (660)          (660)
Limited partners' minority interest in the operating partnership ................       (2,278)        (2,241)
                                                                                   -----------    -----------
Income before dividends to preferred shareholders ...............................       23,167         15,705
Dividends to preferred shareholders .............................................       (7,325)        (4,381)
                                                                                   -----------    -----------
Net income available to common shareholders .....................................  $    15,842    $    11,324
                                                                                   ===========    ===========
Net Income available to:
 Class A common shareholders ....................................................  $    11,446    $    11,324
 Class B common shareholders ....................................................        4,396             --
                                                                                   -----------    -----------
Total ...........................................................................  $    15,842    $    11,324
                                                                                   ===========    ===========
Basic net income per weighted average common share:
 Class A common shareholders ....................................................  $       .28    $       .28
                                                                                   ===========    ===========
 Class B common shareholders ....................................................  $       .43    $        --
                                                                                   ===========    ===========
Basic weighted average common shares outstanding:
 Class A common shareholders ....................................................   40,382,182     40,049,079
 Class B common shareholders ....................................................   10,283,598             --

Diluted net income per weighted average common share:
 Class A common shareholders ....................................................  $       .28    $       .28
                                                                                   ===========    ===========
 Class B common shareholders ....................................................  $       .31    $        --
                                                                                   ===========    ===========
Diluted weighted average common shares outstanding:
 Class A common shareholders ....................................................   40,709,045     40,450,296
 Class B common shareholders ....................................................   10,283,598             --

</TABLE>

                (see accompanying notes to financial statements)

                                        4

<PAGE>

                        RECKSON ASSOCIATES REALTY CORP.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                         (UNAUDITED AND IN THOUSANDS)





<TABLE>
<CAPTION>

                                                                                      THREE MONTHS ENDED
                                                                                          MARCH 31,
                                                                                 ----------------------------
                                                                                      2000           1999
                                                                                 -------------   ------------
<S>                                                                              <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income before dividends to preferred shareholders ............................    $   23,167      $   15,705
Adjustments to reconcile income before dividends to preferred shareholders
 to net cash provided by operating activities:
 Depreciation and amortization ...............................................        21,012          15,091
 Minority partners' interests in consolidated partnerships ...................         1,975           1,168
 Limited partners' minority interest in the operating partnership ............         2,278           2,241
 Equity in earnings of real estate joint ventures and service companies ......        (1,413)           (377)
Changes in operating assets and liabilities:

 Tenant receivables ..........................................................         1,120           2,905
 Real estate tax escrow ......................................................           926            (901)
 Prepaid expenses and other assets ...........................................         5,714          (8,556)
 Deferred rents receivable ...................................................        (4,465)         (1,369)
 Accrued expenses and other liabilities ......................................        (5,122)        (13,073)
                                                                                  ----------      ----------
 Net cash provided by operating activities ...................................        45,192          12,834
                                                                                  ----------      ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Increase in deposits and pre-acquisition costs ..............................          (928)         (6,472)
 Increase in developments in progress ........................................        (9,642)         (6,098)
 Purchase of commercial real estate properties ...............................      (139,426)         (6,610)
 Proceeds from repayment of mortgage note receivable .........................           685              --
 Investment in mortgage notes and notes receivable ...........................            --          (6,170)
 Investments in real estate joint ventures ...................................           (83)         (3,263)
 Distribution from a real estate joint venture ...............................           140              86
 Additions to commercial real estate properties ..............................        (8,655)         (4,520)
 Purchase of furniture, fixtures and equipment ...............................          (359)            (85)
 Payment of leasing costs ....................................................        (2,642)         (4,226)
                                                                                  ----------      ----------
 Net cash used in investing activities .......................................      (160,910)        (37,358)
                                                                                  ----------      ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from issuance of common stock net of issuance costs ................           195             471
 Principal payments on secured borrowings ....................................        (1,666)           (867)
 Payment of loan and equity issuance costs ...................................        (1,617)         (2,606)
 Investments in and advances to affiliates ...................................       (17,768)         (7,828)
 Proceeds from issuance of senior unsecured notes net of issuance costs ......            --         299,262
 Proceeds from secured borrowings ............................................        70,000              --
 Proceeds from unsecured term loan ...........................................            --          55,000
 Proceeds from unsecured credit facility .....................................       110,000              --
 Repayment of unsecured credit facility ......................................            --        (285,750)
 Distributions to minority partners' in consolidated partnerships ............        (2,060)           (684)
 Distributions to limited partners' in the operating partnership .............        (2,859)         (2,620)
 Distributions to preferred unit holders .....................................          (660)           (660)
 Dividends to common shareholders ............................................       (20,748)        (13,512)
 Dividends to preferred shareholders .........................................        (7,325)         (4,381)
                                                                                  ----------      ----------
Net cash provided by financing activities ....................................       125,492          35,825
                                                                                  ----------      ----------
Net increase in cash and cash equivalents ....................................         9,774          11,301
Cash and cash equivalents at beginning of period .............................        21,368           2,349
                                                                                  ----------      ----------
Cash and cash equivalents at end of period ...................................    $   31,142      $   13,650
                                                                                  ==========      ==========
</TABLE>

                (see accompanying notes to financial statements)

                                        5

<PAGE>

                        RECKSON ASSOCIATES REALTY CORP.
                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000
                                   (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") which was  incorporated in
Maryland in  September  1994.  In June,  1995 the Company  completed  an initial
public offering (the "IPO") and commenced operations.  The aggregate proceeds to
the Company,  net of  underwriting  discount,  advisory  fee and other  offering
expenses, were approximately $162 million.

     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.

     As of March 31, 2000,  the Company owned and operated 78 office  properties
comprising  approximately  13.7 million square feet,  110 industrial  properties
comprising  approximately  8.3  million  square  feet and two retail  properties
comprising  approximately  20,000 square feet, located in the New York tri-state
area (the "Tri-State  Area"). The Company also owns a 357,000 square foot office
building located in Orlando,  Florida and  approximately 346 acres of land in 16
separate  parcels of which the  Company can  develop  approximately  1.9 million
square feet of office space and approximately  300,000 square feet of industrial
space.  The Company also has invested  approximately  $314.8 million in mortgage
notes encumbering two Class A office properties  encompassing  approximately 1.6
million square feet,  approximately  472 acres of land located in New Jersey and
in a note receivable secured by a partnership interest in Omni Partner's,  L.P.,
owner of the Omni,  a 575,000  square  foot Class A office  property  located in
Uniondale,  New York.  In  addition,  the Company  also holds  $41.5  million of
preferred and common stock of Keystone Property Trust ("KTR") (see note 6).

     On January 6, 1998, the Company made an investment in the Morris Companies,
a New  Jersey  developer  and  owner  of  "Big  Box"  warehouse  facilities.  In
connection with the transaction the Morris  Companies  contributed 100% of their
interests  in  certain   industrial   properties  to  Reckson  Morris  Operating
Partnership,  L. P. ("RMI") in exchange for operating  partnership units in RMI.
On September 27, 1999, the Company sold its interest in RMI to KTR.

     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 (see note 6).

2. BASIS OF PRESENTATION

     The   accompanying   consolidated   financial   statements   include   the
consolidated  financial position of the Company and the Operating Partnership at
March  31,  2000  and  December 31, 1999 and the results of their operations for
the  three  months  ended  March 31, 2000 and 1999 respectively, and, their cash
flows  for  the  three  months  ended March 31, 2000 and 1999, respectively. The
Operating Partnership's


                                        6

<PAGE>

investments in Metropolitan and Omni Partner's,  L. P. ("Omni") are reflected in
the accompanying  financial  statements on a consolidated basis with a reduction
for minority partners' interest. The Operating  Partnership's  investment in RMI
was reflected in the accompanying  financial  statements on a consolidated basis
with a reduction for minority  partner's interest through September 26, 1999. On
September 27, 1999, the Operating  Partnership  sold its interest in RMI to KTR.
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 merger with Tower was accounted  for as a purchase in  accordance  with
Accounting  Principles Board Opinion No. 16. Accordingly,  the fair value of the
consideration  given by the  Company,  in  accordance  with  generally  accepted
accounting principles ("GAAP"),  was used as the valuation basis for the merger.
The assets acquired and liabilities  assumed by the Company were recorded at the
fair value as of the closing  date of the merger and the excess of the  purchase
price  over  the  historical  basis of the net  assets  acquired  was  allocated
primarily to operating real estate  properties and real estate  properties which
have been sold.

     The minority  interests  at March 31, 2000  represent  an  approximate  13%
limited partnership  interest in the Operating  Partnership,  an approximate 28%
interest in certain industrial joint venture properties formerly owned by RMI, a
convertible preferred interest in Metropolitan and a 40% interest in Omni.

     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 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
March 31,  2000 and for the three  month  periods  ended March 31, 2000 and 1999
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, 2000. 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, 1999.

     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.

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

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

3. MORTGAGE NOTES PAYABLE

     As of March 31, 2000, the Company had approximately $527.5 million of fixed
rate mortgage notes which mature at various times between June 2000 and November
2027.  The  notes are  secured  by 23  properties  and have a  weighted  average
interest rate of approximately 7.57%.

                                        7

<PAGE>

4. SENIOR UNSECURED NOTES

     As  of  March  31,  2000,  the  Operating   Partnership   had   outstanding
approximately  $449.3  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
      ISSUANCE           AMOUNT      COUPON 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.

     Net proceeds of approximately  $297.4 million received from the issuance of
the  March 26,  1999  Senior  Unsecured  Notes  were  used to repay  outstanding
borrowings under the Company's unsecured credit facility.

5. UNSECURED CREDIT FACILITY AND UNSECURED TERM LOAN

     As of March 31, 2000,  the Company had a three year $500 million  unsecured
revolving  credit  facility (the "Credit  Facility")  from Chase Manhattan Bank,
Union Bank of Switzerland  and PNC Bank as  co-managers  of the Credit  Facility
bank group which matures in July,  2001.  Interest rates on borrowings under the
Credit  Facility  are priced off of LIBOR plus a sliding  scale  ranging from 65
basis points to 90 basis points based on the Company's  investment  grade rating
on its senior  unsecured  debt.  On March 16,  1999,  the Company  received  its
investment grade rating on its senior  unsecured debt. As a result,  the pricing
under the Credit Facility was adjusted to LIBOR plus 90 basis points.

     The  Company  utilizes  the  Credit  Facility   primarily  to  finance  the
acquisitions  of  properties  and  other  real  estate  investments,   fund  its
development  activities and for working capital purposes. At March 31, 2000, the
Company had availability under the Credit Facility to borrow an additional $51.3
million (net of $41.1 million of outstanding undrawn letters of credit).

     As of March 31, 2000, the Company had outstanding an 18 month,  $75 million
unsecured term loan (the "Term Loan") from Chase Manhattan Bank which matures in
June,  2001.  Interest rates on borrowings under the Term Loan are priced off of
LIBOR plus 150 basis points.  The Term Loan replaced the Company's previous term
loan, which matured on December 17, 1999.

6. COMMERCIAL REAL ESTATE INVESTMENTS

     On January 13, 2000,  the Company  acquired 1350 Avenue of the Americas,  a
540,000  square foot,  35 story,  Class A office  property,  located in New York
City, for a purchase price of approximately $126.5 million. This acquisition was
financed  through a $70  million  secured  debt  financing  and a draw under the
Credit Facility.

     On June 15, 1999, the Company acquired the first mortgage note secured by a
47 story,  1.4 million square foot Class A office property  located at 919 Third
Avenue in New York City for  approximately  $277.5  million.  The first mortgage
note  entitles  the  Company  to all the net cash  flow of the  property  and to
substantial  rights  regarding the operations of the property,  with the Company
anticipating to ultimately  obtain title to the property.  This  acquisition was
financed  with  proceeds  from the  issuance of six  million  shares of Series B
Convertible  Cumulative  Preferred  Stock and  through  draws  under the  Credit
Facility.  Current financial  accounting  guidelines provide that where a lender
has  virtually  the same risks and  potential  rewards as those of a real estate
owner it should  recognize the full economics  associated with the operations of
the property.  As such, the Company has recognized the real estate operations of
the 919 Third Avenue in the accompanying  consolidated statements of income from
the date of acquisition.

                                        8

<PAGE>

     On August 9, 1999, the Company executed a contract for the sale, which will
take place in three  stages,  of its  interest  in RMI,  which  consisted  of 28
properties, comprising approximately 6.1 million square feet and three other big
box industrial  properties to KTR. In addition,  the Company also entered into a
sale  agreement  with  Matrix  relating  to a first  mortgage  note and  certain
industrial land holdings (the "Matrix  Sale").  The combined total sale price is
$310  million  (approximately  $42  million  of which is  payable  to the Morris
Companies and its  affiliates)  and consists of a combination of (i) cash,  (ii)
convertible  preferred and common stock of KTR, (iii)  preferred  units of KTR's
operating  partnership,  (iv) relief of debt and (v) a purchase  money  mortgage
note secured by certain land that is being sold to Matrix.

     During  September  1999,  the  Matrix  Sale and the first  stage of the RMI
closing  occurred  whereby  the  Company  sold its  interest in RMI to KTR for a
combined sales price of approximately  $164.7 million (net of minority partner's
interest).  The  combined  consideration  consisted of  approximately  (i) $86.3
million in cash,  (ii) $40 million of preferred stock of KTR, (iii) $1.5 million
in common stock of KTR, (iv) approximately  $26.7 million of debt relief and (v)
approximately  $10.2  million in  purchase  money  mortgages.  As a result,  the
Company  incurred a gain of  approximately  $10.1 million.  The $41.5 million of
common and  preferred  stock of KTR has been  included in prepaid  expenses  and
other assets on the accompanying  consolidated balance sheet. Cash proceeds from
the sales were used primarily to repay borrowings under the Credit Facility.

     During  April and May 2000,  the second and third stages of the RMI closing
occurred  whereby  the  Company  sold  six  industrial   buildings.   The  total
consideration   received  in  connection  with  stages  two  and  three  totaled
approximately  $98 million  (approximately $6 million of which is payable to the
Morris Companies and its affiliates) and consisted of approximately  $26 million
of preferred operating partnership units of KTR and approximately $72 million in
cash. Cash proceeds from the sales were used primarily to repay borrowings under
the Credit Facility.

     In July 1998,  the Company formed a joint  venture,  Metropolitan  Partners
LLC, a Delaware limited liability company  ("Metropolitan"),  with Crescent Real
Estate Equities Company, a Texas real estate investment trust ("Crescent").

     On December 8, 1998, the Company, Metropolitan and Tower Realty Trust, Inc.
("Tower")  executed a merger agreement and on May 24, 1999 Tower was merged (the
"Merger")   into   Metropolitan,   with   Metropolitan   surviving  the  Merger.
Concurrently  with the Merger,  Tower  Realty  Operating  Partnership,  L.P. was
merged with and into a subsidiary of Metropolitan.  The consideration  issued in
the mergers was  comprised of (i) 25% cash  (approximately  $107.2  million) and
(ii) 75% of shares of Class B  Exchangeable  Common  Stock,  par value  $.01 per
share,  of the Company (the "Class B common stock") (valued for GAAP purposes at
approximately $304.1 million).

     The  Company  controls  Metropolitan  and owns 100% of the  common  equity;
Crescent  owns  a $85  million  preferred  equity  investment  in  Metropolitan.
Crescent's  investment  accrues  distributions at a rate of 7.5% per annum for a
two-year  period  (May 24,  1999  through  May 24,  2001) and may be redeemed by
Metropolitan  at any time  during that  period for $85  million,  plus an amount
sufficient to provide a 9.5% internal rate of return.  If Metropolitan  does not
redeem the  preferred  interest,  upon the  expiration  of the two-year  period,
Crescent  must  convert its $85  million  preferred  interest  into either (i) a
common membership interest in Metropolitan or (ii) shares of the Company's Class
A common stock at a conversion price of $24.61 per share.

     The  Tower  portfolio  acquired  in the  Merger  consists  of three  office
properties comprising  approximately 1.6 million square feet located in New York
City, one office property  located on Long Island and certain office  properties
and other real estate  assets  located  outside the Tri-State  Area.  All of the
assets acquired in the Merger, located outside of the Tri-State Area, other than
an office property located in Orlando, Florida, have been sold.

7. STOCKHOLDERS' EQUITY

     On May 24,  1999,  in  conjunction  with the  Merger,  the  Company  issued
11,694,567  shares of 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 are entitled to receive an initial

                                        9

<PAGE>
annual  dividend of $2.24 per share,  which  dividend  is subject to  adjustment
annually.  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 the four year,  six-month
anniversary of the issuance of the Class B common stock.

     On March 8,  2000,  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           $ 0.37125      April  3, 2000     April 14, 2000     March 31, 2000        $ 1.485
Class B common stock           $ 0.56000      April 14, 2000     May 1, 2000        April 30, 2000        $ 2.240
Series A preferred stock       $ 0.47660      April 14, 2000     May 1, 2000        April 30, 2000        $ 1.906
Series B preferred stock       $ 0.49063      April 14, 2000     May 1, 2000        April 30, 2000        $ 1.963
</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 March 31, 2000, the Company had purchased and retired
1,410,804 shares of Class B common stock for approximately $30.3 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 40,382,182
and 40,049,079 for the three months ended March 31, 2000 and 1999, respectively.

     Basic  net  income  per  share on the  Company's  Class B common  stock was
calculated using the weighted average number of shares outstanding of 10,283,598
for the three months ended March 31, 2000.

     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 share for the
Company's  Class A common  stock (in  thousands  except for  earnings  per share
data):
<TABLE>
<CAPTION>
                                                                        THREE MONTHS ENDED
                                                                             MARCH 31,
                                                                      -----------------------
                                                                         2000         1999
                                                                      ----------   ----------
<S>                                                                   <C>          <C>
     Numerator:
       Income before dividends to preferred shareholders and income
        allocated to Class B shareholders .........................    $ 23,167     $ 15,705
       Dividends to preferred shareholders ........................      (7,325)      (4,381)
       Income allocated to Class B shareholders ...................      (4,396)          --
                                                                       --------     --------
       Numerator for basic and diluted earnings per Class A common
        share .....................................................    $ 11,446     $ 11,324
                                                                       ========     ========
     Denominator:
       Denominator for basic earnings per share- weighted-average
        Class A common shares .....................................      40,382       40,049
       Effect of dilutive securities:
        Employee stock options ....................................         327          402
                                                                       --------     --------
       Denominator for diluted earnings per Class A common
        share-adjusted weighted-average shares and assumed
        conversions ...............................................      40,709       40,451
                                                                       ========     ========
     Basic earnings per Class A common share:
       Net income per Class A common share ........................    $    .28     $    .28
                                                                       ========     ========
     Diluted earnings per Class A common share:
       Diluted net income per Class A common share ................    $    .28     $    .28
                                                                       ========     ========
</TABLE>
                                       10
<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 share for the
Company's  Class B common  stock (in  thousands  except for  earnings  per share
data):

<TABLE>
<CAPTION>

                                                                                   THREE MONTHS ENDED
                                                                                     MARCH 31, 2000
                                                                                  -------------------
<S>                                                                               <C>
   Numerator:
    Income before dividends to preferred shareholders and income allocated to
      Class A common shareholders ...............................................      $  23,167
    Dividends to preferred shareholders .........................................         (7,325)
    Income allocated to Class A common shareholders .............................        (11,446)
                                                                                       ---------
    Numerator for basic earnings per Class B common share .......................          4,396
   Add back:
    Income allocated to Class A common shareholders .............................         11,446
    Limited partners' minority interest in the operating partnership ............          2,278
                                                                                       ---------
    Numerator for diluted earnings per Class B common share .....................      $  18,120
                                                                                       =========
   Denominator:
    Denominator for basic earnings per share-weighted-average Class B
      common Shares .............................................................         10,284
    Effect of dilutive securities:
      Weighted average Class A common shares outstanding ........................         40,382
      Weighted average OP Units outstanding .....................................          7,700
      Employee stock options ....................................................            327
                                                                                       ---------
   Denominator for diluted earnings per Class B common share-adjusted
    weighted- average shares and assumed conversions ............................         58,693
                                                                                       =========
   Basic earnings per Class B common share:
    Net income per Class B common share .........................................      $     .43
                                                                                       =========
   Diluted earnings per Class B common share:
    Diluted net income per Class B common share .................................      $     .31
                                                                                       =========
</TABLE>

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



<TABLE>
<CAPTION>

                                                              THREE MONTHS ENDED
                                                                   MARCH 31,
                                                             ---------------------
                                                                2000       1999
                                                             ---------- ----------
<S>                                                          <C>        <C>
          Cash paid during the period for interest .........  $33,306    $18,729
                                                              =======    =======
          Interest capitalized during the period ...........  $ 2,362    $ 2,311
                                                              =======    =======
</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,  certain  industrial joint venture
properties  formerly owned by RMI and for the period commencing  January 6, 1998
and ending September 26, 1999, industrial properties which were owned by RMI and
subsequently sold to KTR. The Company has managing directors who report directly
to the  Chief  Operating  Officer  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.

     In  addition,  as the  Company  expects  to meet its  short-term  liquidity
requirements  in part  through  the  Credit  Facility  and Term  Loan,  interest
incurred on borrowings under the Credit Facility and Term Loan is not considered
as part of  property  operating  performance.  Further,  the  Company  does  not
consider the property  operating  performance of the office property  located in
Orlando,  Florida  as a part of its  Core  Portfolio.  Additionally,  commencing
January 1, 2000, the Company does not consider the operating  performance of the
industrial joint venture properties formerly owned by RMI a reportable segment.

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

                                       11

<PAGE>

     The following tables set forth the components of the Company's revenues and
expenses and other related disclosures for the three months ended March 31, 2000
and 1999 (in thousands):

<TABLE>
<CAPTION>

                                                    THREE MONTHS ENDED
                                       --------------------------------------------
                                                      MARCH 31, 2000
                                       --------------------------------------------
                                                                      CONSOLIDATED
                                        CORE PORTFOLIO      OTHER        TOTALS
                                       ---------------- ------------ --------------
<S>                                    <C>              <C>          <C>
REVENUES:
Base rents, tenant escalations and
 reimbursements ......................    $  104,821      $  2,426     $  107,247
Equity in earnings of real estate
 joint ventures and service
 companies ...........................            --         1,413          1,413
Interest and other income ............           406         8,593          8,999
                                          ----------      --------     ----------
Total Revenues .......................       105,227        12,432        117,659
                                          ----------      --------     ----------
EXPENSES:
Property operating expenses ..........        37,488           668         38,156
Marketing, general and
 administrative ......................         5,100         1,471          6,571
Interest .............................         9,192        14,648         23,840
Depreciation and amortization ........        19,334         1,678         21,012
                                          ----------      --------     ----------
Total Expenses .......................        71,114        18,465         89,579
                                          ----------      --------     ----------
Income (loss) before preferred
 Dividends and distributions and
 minority interests ..................    $   34,113      $ (6,033)    $   28,080
                                          ==========      ========     ==========
Total assets .........................    $2,069,161      $835,172     $2,904,333
                                          ==========      ========     ==========



<CAPTION>
                                                         THREE MONTHS ENDED
                                       -------------------------------------------------------
                                                           MARCH 31, 1999
                                       -------------------------------------------------------
                                                                                  CONSOLIDATED
                                        CORE PORTFOLIO      RMI         OTHER        TOTALS
                                       ---------------- ----------- ------------ -------------
<S>                                    <C>              <C>         <C>          <C>
REVENUES:
Base rents, tenant escalations and
 reimbursements ......................    $   66,022     $  4,613     $     --    $   70,635
Equity in earnings of real estate
 joint ventures and service
 companies ...........................            --           --          377           377
Interest and other income ............            69            2        5,025         5,096
                                          ----------     --------     --------    ----------
Total Revenues .......................        66,091        4,615        5,402        76,108
                                          ----------     --------     --------    ----------
EXPENSES:
Property operating expenses ..........        22,157          751           --        22,908
Marketing, general and
 administrative ......................         3,942          131          319         4,392
Interest .............................         4,559          277        9,107        13,943
Depreciation and amortization ........        12,781        1,080        1,230        15,091
                                          ----------     --------     --------    ----------
Total Expenses .......................        43,439        2,239       10,656        56,334
                                          ----------     --------     --------    ----------
Income (loss) before preferred
 Dividends and distributions and
 minority interests ..................    $   22,652     $  2,376     $ (5,254)   $   19,774
                                          ==========     ========     ========    ==========
Total assets .........................    $1,435,086     $159,873     $316,065    $1,911,024
                                          ==========     ========     ========    ==========
</TABLE>

10. OTHER INVESTMENTS AND ADVANCES

     During 1997,  the Company  formed  FrontLine  Capital  Group  ("FrontLine")
(formerly  Reckson  Service  Industries,  Inc.) and  Reckson  Strategic  Venture
Partners,  LLC  ("RSVP").  In connection  with the  formation of FrontLine,  the
Operating  Partnership   established  a  credit  facility  with  FrontLine  (the
"FrontLine  Facility") in the amount of $100 million for FrontLine's  e-commerce
and e-services  operations and other general corporate purposes. As of March 31,
2000, the Company had advanced  approximately  $92.7 million under the FrontLine
Facility.  In addition,  the Operating  Partnership  has approved the funding of
investments  of up to $100  million  with or in RSVP  (the  "RSVP  Commitment"),
through  RSVP-controlled  joint venture  REIT-qualified  investments or advances
made to FrontLine under terms similar to the FrontLine Facility. As of March 31,
2000, approximately $60.9 million had been invested through the RSVP Commitment,
of which $24.8 million represents  RSVP-controlled joint venture  REIT-qualified
investments  and $36.1 million  represents  advances to FrontLine under the RSVP
Commitment.

     During  November  1999,  the Board of Directors of the Company  approved an
amendment to the FrontLine  Facility and the RSVP Commitment to permit FrontLine
to incur  secured  debt and to pay interest  thereon.  In  consideration  of the
amendments, FrontLine paid the Operating Partnership a fee of approximately $3.6
million  in the form of  shares of  FrontLine  common  stock.  Such fee is being
recognized in income over an estimated nine month benefit period.

     FrontLine  identifies,  acquires  interests  in and  develops  a network of
e-commerce  and  e-services   companies  that  service  small  to  medium  sized
enterprises,   independent   professionals  and  entrepreneurs  and  the  mobile
workforce of larger companies.  FrontLine serves as the managing member of RSVP.
RSVP was formed to provide the Company with a research and  development  vehicle
to invest in alternative  real estate  sectors.  RSVP invests  primarily in real
estate and real estate  related  operating  companies  generally  outside of the
Company's core office and industrial  focus.  RSVP's strategy is to identify and
acquire  interests in established  entrepreneurial  enterprises with experienced
management teams in market sectors which are in the early stages of their growth
cycle or offer unique  circumstances  for  attractive  investments  as well as a
platform for future growth.

                                       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 or 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,  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 certain 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.  Certain factors that might cause the results of the Company to differ
materially  from those  indicated by such  forward-looking  statements  include,
among other factors,  general economic conditions,  general real estate industry
risks,  tenant default and  bankruptcies,  loss of major tenants,  the impact of
competition and acquisition, redevelopment and development risks, the ability to
finance business opportunities and local real estate risks such as an oversupply
of space or a reduction in demand for real estate in the  Company's  real estate
markets. 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 March
31,  2000,  the  Company  owned and  operated  78 office  properties  comprising
approximately  13.7 million square feet, 110  industrial  properties  comprising
approximately  8.3  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  346 acres of land in 16 separate parcels of which the Company can
develop  approximately 1.9 million square feet of office space and approximately
300,000  square  feet  of  industrial  space.  The  Company  also  has  invested
approximately  $314.8 million in mortgage notes  encumbering  two Class A office
properties encompassing approximately 1.6 million square feet, approximately 472
acres of land  located  in New  Jersey  and in a note  receivable  secured  by a
partnership  interest  in Omni  Partner's,  L.P.,  owner of the Omni,  a 575,000
square foot Class A office property located in Uniondale, New York. In addition,
the Company also holds $41.5  million of preferred  and common stock of Keystone
Property Trust ("KTR"), as discussed below.

     During 1997,  the Company  formed  FrontLine  Capital  Group  ("FrontLine")
(formerly  Reckson  Service  Industries,  Inc.) and  Reckson  Strategic  Venture
Partners,  LLC  ("RSVP").  In connection  with the  formation of FrontLine,  the
Operating  Partnership   established  a  credit  facility  with  FrontLine  (the
"FrontLine  Facility") in the amount of $100 million for FrontLine's  e-commerce
and e-services  operations and other general corporate purposes. As of March 31,
2000, the Company had advanced  approximately  $92.7 million under the FrontLine
Facility.  In addition,  the Operating  Partnership  has approved the funding of
investments  of up to $100  million  with or in RSVP  (the  "RSVP  Commitment"),
through  RSVP-controlled  joint venture  REIT-qualified  investments or advances
made to FrontLine under terms similar to the FrontLine Facility. As of March 31,
2000, approximately $60.9 million had been invested through the RSVP Commitment,
of which $24.8 million represents  RSVP-controlled joint venture  REIT-qualified
investments  and $36.1 million  represents  advances to FrontLine under the RSVP
Commitment.

     During  November  1999,  the Board of Directors of the Company  approved an
amendment to the FrontLine  Facility and the RSVP Commitment to permit FrontLine
to incur secured debt and to pay

                                       13

<PAGE>

interest  thereon.  In  consideration  of the  amendments,  FrontLine  paid  the
Operating  Partnership a fee of approximately $3.6 million in the form of shares
of  FrontLine  common  stock.  Such fee is being  recognized  in income  over an
estimated nine month benefit period.

     FrontLine  identifies,  acquires  interests  in and  develops  a network of
e-commerce  and  e-services   companies  that  service  small  to  medium  sized
enterprises,   independent   professionals  and  entrepreneurs  and  the  mobile
workforce of larger companies.  FrontLine serves as the managing member of RSVP.
RSVP was formed to provide the Company with a research and  development  vehicle
to invest in alternative  real estate  sectors.  RSVP invests  primarily in real
estate and real estate  related  operating  companies  generally  outside of the
Company's core office and industrial  focus.  RSVP's strategy is to identify and
acquire  interests in established  entrepreneurial  enterprises with experienced
management teams in market sectors which are in the early stages of their growth
cycle or offer unique  circumstances  for  attractive  investments  as well as a
platform for future growth.

     On January 6, 1998, the Company made an investment in the Morris Companies,
a New  Jersey  developer  and  owner  of  "Big  Box"  warehouse  facilities.  In
connection with the transaction the Morris  Companies  contributed 100% of their
interests  in  certain   industrial   properties  to  Reckson  Morris  Operating
Partnership,  L. P. ("RMI") in exchange for operating  partnership units in RMI.
On September 27, 1999, the Company sold its interest in RMI to KTR.

     On August 9, 1999, the Company executed a contract for the sale, which will
take place in three  stages,  of its  interest  in RMI,  which  consisted  of 28
properties, comprising approximately 6.1 million square feet and three other big
box industrial  properties to KTR. In addition,  the Company also entered into a
sale  agreement  with  Matrix  relating  to a first  mortgage  note and  certain
industrial land holdings (the "Matrix  Sale").  The combined total sale price is
$310  million  (approximately  $42  million  of which is  payable  to the Morris
Companies and its  affiliates)  and consists of a combination of (i) cash,  (ii)
convertible  preferred and common stock of KTR, (iii)  preferred  units of KTR's
operating  partnership,  (iv) relief of debt and (v) a purchase  money  mortgage
note secured by certain land that is being sold to Matrix.

     During  September  1999,  the  Matrix  Sale and the first  stage of the RMI
closing  occurred  whereby  the  Company  sold its  interest in RMI to KTR for a
combined sales price of approximately  $164.7 million (net of minority partner's
interest).  The  combined  consideration  consisted of  approximately  (i) $86.3
million in cash,  (ii) $40 million of preferred stock of KTR, (iii) $1.5 million
in common stock of KTR, (iv) approximately  $26.7 million of debt relief and (v)
approximately  $10.2  million in  purchase  money  mortgages.  As a result,  the
Company  incurred a gain of  approximately  $10.1 million.  The $41.5 million of
common and  preferred  stock of KTR has been  included in prepaid  expenses  and
other assets on the Company's consolidated balance sheet. Cash proceeds from the
sales were used primarily to repay borrowings under the Credit Facility.

     During  April and May 2000,  the second and third stages of the RMI closing
occurred  whereby  the  Company  sold  six  industrial   buildings.   The  total
consideration   received  in  connection  with  stages  two  and  three  totaled
approximately  $98 million  (approximately $6 million of which is payable to the
Morris Companies and its affiliates) and consisted of approximately  $26 million
of preferred operating partnership units of KTR and approximately $72 million in
cash. Cash proceeds from the sales were used primarily to repay borrowings under
the Company's unsecured credit facility.

     In July 1998,  the Company formed a joint  venture,  Metropolitan  Partners
LLC, a Delaware limited liability company  ("Metropolitan"),  with Crescent Real
Estate Equities Company, a Texas real estate investment trust ("Crescent").

     On December 8, 1998, the Company, Metropolitan and Tower Realty Trust, Inc.
("Tower")  executed a merger agreement and on May 24, 1999 Tower was merged (the
"Merger")   into   Metropolitan,   with   Metropolitan   surviving  the  Merger.
Concurrently  with the Merger,  Tower  Realty  Operating  Partnership,  L.P. was
merged with and into a subsidiary of Metropolitan.  The consideration  issued in
the mergers was  comprised of (i) 25% cash  (approximately  $107.2  million) and
(ii) 75% of shares of Class B  Exchangeable  Common  Stock,  par value  $.01 per
share, of the Company (the "Class B common stock") (valued for general  accepted
accounting principles ("GAAP") purposes at approximately $304.1 million).

     The  Company  controls  Metropolitan  and owns 100% of the  common  equity;
Crescent  owns  a $85  million  preferred  equity  investment  in  Metropolitan.
Crescent's  investment  accrues  distributions at a rate of 7.5% per annum for a
two-year period (May 24, 1999 through May 24, 2001) and may be redeemed

                                       14

<PAGE>

by Metropolitan  at any time during that period for $85 million,  plus an amount
sufficient to provide a 9.5% internal rate of return.  If Metropolitan  does not
redeem the  preferred  interest,  upon the  expiration  of the two-year  period,
Crescent  must  convert its $85  million  preferred  interest  into either (i) a
common membership interest in Metropolitan or (ii) shares of the Company's Class
A common stock at a conversion price of $24.61 per share.

     The Tower  portfolio  acquired  in the  Merger  consisted  of three  office
properties comprising  approximately 1.6 million square feet located in New York
City, one office property  located on Long Island and certain office  properties
and other real estate  assets  located  outside the Tri-State  Area.  All of the
assets acquired in the Merger located outside of the Tri-State Area,  other than
an office property located in Orlando, Florida, have been sold.

     The  market   capitalization   of  the   Company  at  March  31,  2000  was
approximately $3.06 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 $18.75 per  share/unit  (based on the closing price of
the Company's Class A common stock on March 31, 2000),  (ii) the market value of
the  Company's  Class B common  stock of $20.50 per share  (based on the closing
price of the  Company's  Class B common  stock on March  31,  2000),  (iii)  the
liquidation  preference  value of the Company's  Series A preferred 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, (v) the contributed
value  of  Metropolitan's  preferred  interest  of  $85  million  and  (vi)  the
approximately  $1.45 billion  (including its share of joint venture debt and net
of minority  partners'  interests) of debt  outstanding  at March 31, 2000. As a
result, the Company's total debt to total market  capitalization  ratio at March
31, 2000 equaled approximately 47.2%

RESULTS OF OPERATIONS

     The Company's  total  revenues  increased by $41.6 million or 54.6% for the
three  months  ended March 31, 2000 as  compared  to the 1999  period.  Property
operating  revenues,  which  include  base  rents  and  tenant  escalations  and
reimbursements  ("Property  Operating  Revenues")  increased by $36.6 million or
51.8% for the three  months ended March 31, 2000 as compared to the 1999 period.
The increase in Property Operating Revenues is substantially attributable to the
Tower  portfolio  acquisition in May 1999, the acquisition of the first mortgage
note  secured by 919 Third  Avenue  (which  revenue  was  reflected  in Property
Operating  Revenues)  in June  1999 and the  acquisition  of 1350  Avenue of the
Americas in January 2000.  In addition,  Property  Operating  Revenues were also
positively  impacted by approximately $3.1 million from increases in occupancies
and  rental  rates in our  "same  store"  properties.  The  Company's  base rent
reflects  the  positive  impact of the  straight-line  rent  adjustment  of $4.5
million for the three  months  ended March 31, 2000 as compared to $1.4  million
for the 1999 period.  The remaining balance of the increase in total revenues is
primarily  attributable  to interest  income and fees  relating to the FrontLine
Facility and the RSVP Commitment.

     Property operating expenses,  real estate taxes and ground rents ("Property
Expenses")  increased by $15.2 million or 66.6% for the three months ended March
31, 2000 as compared to the 1999 period.  These  increases  are primarily due to
the acquisition of the Tower portfolio in May 1999, the acquisition of the first
mortgage note secured by 919 Third Avenue in June 1999,  (which  operations were
reflected  in  Property  Expenses)  and the  acquisition  of 1350  Avenue of the
Americas in January 2000. Gross operating margins (defined as Property Operating
Revenues less  Property  Expenses,  taken as a percentage of Property  Operating
Revenues)  for the three  months  ended  March 31,  2000 and 1999 were 64.4% and
67.6%  respectively.  The  decrease  in gross  operating  margins  is  primarily
attributable to a larger  proportionate  share of gross operating margin derived
from office  properties,  which has a lower  gross  margin  percentage,  in 2000
compared to 1999. The higher  proportionate share of the gross operating margins
is  attributable  to the office  properties  acquired during the period May 1999
through January 2000 and the disposition of net leased industrial  properties in
September  1999.  This shift in the  composition  of the portfolio was offset by
increases in rental rates and operating efficiencies realized.

     Marketing,  general and  administrative  expenses increased by $2.2 million
for the three months  ended March 31, 2000 as compared to the 1999  period.  The
increase is due to the increased  costs of managing the  acquisition  properties
and the increase in corporate management and administrative costs associated

                                       15

<PAGE>

with the  growth  of the  Company  including  the  opening  of its New York City
division.  Marketing,  general and  administrative  expenses as a percentage  of
total  revenues  were 5.6% for the three months ended March 31, 2000 as compared
to 5.8% for the 1999 period.

     Interest expense increased by $9.9 million for the three months ended March
31, 2000 as compared  to the 1999  period.  The  increase  is  primarily  due to
secured borrowings assumed in the Tower acquisition as well as new debt incurred
with the Tower and 1350 Avenue of the Americas acquisitions.  Additionally,  the
increase is also due to $300 million of Senior  Unsecured  Notes issued on March
26, 1999.

LIQUIDITY AND CAPITAL RESOURCES

     As of March 31, 2000 the Company  had a three year $500  million  unsecured
revolving  credit  facility (the "Credit  Facility")  with Chase Manhattan Bank,
Union Bank of Switzerland  and PNC Bank as  co-managers  of the Credit  Facility
bank group which matures in July,  2001.  Interest rates on borrowings under the
Credit  Facility  are priced off of LIBOR plus a sliding  scale  ranging from 65
basis points to 90 basis points based on the Company's  investment  grade rating
on its senior  unsecured  debt.  On March 16,  1999,  the Company  received  its
investment grade rating on its senior  unsecured debt. As a result,  the pricing
under the Credit Facility was adjusted to LIBOR plus 90 basis points.

     The  Company  utilizes  the  Credit  Facility   primarily  to  finance  the
acquisitions  of  properties  and  other  real  estate  investments,   fund  its
development  activities and for working capital purposes. At March 31, 2000, the
Company had availability under the Credit Facility to borrow an additional $51.3
million (net of $41.1 million of outstanding undrawn letters of credit).

     As of March 31, 2000,  the Company had an 18 month,  $75 million  unsecured
term loan (the "Term  Loan") from Chase  Manhattan  Bank which  matures in June,
2001.  Interest rates on borrowings  under the Term Loan are priced off of LIBOR
plus 150 basis points.  The Term Loan replaced the Company's  previous term loan
which matured on December 17, 1999.

     On May 24,  1999,  in  conjunction  with the  Merger,  the  Company  issued
11,694,567  shares of 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 are  entitled  to  receive  an  initial  annual
dividend of $2.24 per share,  which dividend is subject to adjustment  annually.
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 the four year,  six-month  anniversary of the issuance of the
Class B common stock.

     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 March 31, 2000, the Company had purchased and retired
1,410,804 shares of Class B Common Stock for approximately $30.3 million.

     The Company's  indebtedness at March 31, 2000 totaled  approximately  $1.45
billion (including its share of joint venture debt and net of minority partners'
interests)  and was  comprised of $407.6  million  outstanding  under the Credit
Facility,  $75 million  outstanding  under the Term Loan,  approximately  $449.3
million of senior unsecured notes and  approximately  $527.5 million of mortgage
indebtedness.   Based  on  the   Company's   total  market   capitalization   of
approximately  $3.06 billion at March 31, 2000  (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, (v) the contributed value of Metropolitan's  preferred  interest and (vi)
the $1.45 billion of debt), the Company's debt represented  approximately  47.2%
of its total market capitalization.

                                       16

<PAGE>

     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  securities  and
additional equity securities of the Company. 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 95% 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  provided  for fixed base rent  increases  or
indexed  escalations.  In  addition,  the office  leases  provide  for  separate
escalations  of real estate  taxes 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 Term Loan bear interest at a variable rate,  which
will be influenced by changes in short-term  interest rates, and is sensitive to
inflation.

IMPACT OF YEAR 2000

     During 1999, the Company  discussed the nature and progress of its plans to
become  Year  2000  ready.  In  that  regard,  the  Company  has  completed  its
assessment, remediation and testing of its systems in order for those systems to
function  properly  with  respect  to  date  occurring  in  the  Year  2000  and
thereafter. As a result of those efforts, the Company experienced no significant
disruptions in connection with its building management,  mechanical and computer
systems and believes that those systems successfully  responded to the Year 2000
date change.  The Company has expended  approximately  one million  dollars with
upgrading, replacing or remediating its systems and is not aware of any material
problems resulting form Year 2000 issues.  Further, the Company will continue to
monitor its  critical  building  management,  mechanical  and  computer  systems
throughout  the Year 2000 to ensure that any latent Year 2000  matters  that may
arise are addressed promptly.

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 generally accepted accounting principles
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.

                                       17

<PAGE>
     The following table presents the Company's FFO  calculation  (unaudited and
in thousands, except per share/unit data):
<TABLE>
<CAPTION>
                                                                                           THREE MONTHS ENDED
                                                                                                MARCH 31,
                                                                                        -------------------------
                                                                                            2000         1999
                                                                                        ------------ ------------
<S>                                                                                     <C>          <C>
    Net income available to common shareholders .......................................   $ 15,842     $ 11,324
    Add:
      Real estate depreciation and amortization .......................................     20,616       14,689
      Minority partners' interests in consolidated partnerships .......................      1,975        1,168
      Limited partners' minority interest in the operating partnership ................      2,278        2,241
    Less:
      Amounts distributable to minority partners' in consolidated partnerships ........      2,381        1,444
                                                                                          --------     --------
    Funds From Operations (FFO) -- basic ..............................................     38,330       27,978
    Less:
      Straight line rents .............................................................      4,538        1,336
      Non-Incremental capitalized tenant improvements and leasing commissions .........      2,870          818
      Non-Incremental capitalized improvements ........................................      1,251          642
                                                                                          --------     --------
    Cash available for distribution ("CAD") -- basic ..................................   $ 29,671     $ 25,182
                                                                                          ========     ========
    Computation of diluted FFO and CAD:
    Basic FFO .........................................................................   $ 38,330     $ 27,978
    Add:
      Dividends and distributions on dilutive shares and units ........................      9,579        5,041
                                                                                          --------     --------
    FFO -- diluted ....................................................................     47,909       33,019
    Less:
      Straight line rents, non incremental capitalized improvements, tenant
       improvements and leasing commissions ...........................................      8,659        2,796
                                                                                          --------     --------
    CAD -- diluted ....................................................................   $ 39,250     $ 30,223
                                                                                          ========     ========
    Basic FFO and CAD calculations:
      Weighted average shares outstanding .............................................     50,666       40,049
      Weighted average units of limited partnership interest outstanding ..............      7,700        7,710
                                                                                          --------     --------
      Weighted average shares and units outstanding ...................................     58,366       47,759
                                                                                          ========     ========
      FFO per weighted average share or unit ..........................................   $   .66      $   .59
                                                                                          ========     ========
      CAD per weighted average share or unit ..........................................   $   .51      $   .53
                                                                                          ========     ========
      Weighted average dividends or distributions per share or unit ...................   $   .40      $   .34
                                                                                          ========     ========
      FFO payout ratio ................................................................      61.6 %      57.6  %
                                                                                          ========     ========
      CAD payout ratio ................................................................      79.6 %      64.0  %
                                                                                          ========     ========
    Diluted FFO and CAD calculations:
      Basic GAAP weighted average shares and units outstanding ........................     58,366       47,759
      Add GAAP weighted average dilutive securities ...................................        327          402
                                                                                          --------     --------
      Dilutive GAAP weighted average shares and units .................................     58,693       48,161
      Adjustments for dilutive FFO and CAD weighted average shares and units:
       Add:
       Weighted average shares of Series A Preferred Stock ............................      8,060        8,060
       Weighted average shares of Series B Preferred Stock ............................      5,758           --
       Weighted average shares of minority partner's preferred interest ...............      3,454           --
       Weighed average shares of preferred units of limited partnership interest ......      1,367        1,367
                                                                                          --------     --------
    Dilutive FFO and CAD weighted average shares and units outstanding ................     77,332       57,588
                                                                                          ========     ========
    FFO per weighted average share or unit ............................................   $   .62      $   .57
                                                                                          ========     ========
    CAD per weighted average share or unit ............................................   $   .51      $   .52
                                                                                          ========     ========
    Weighted average dividends or distributions per share or unit .....................   $   .40      $   .34
                                                                                          ========     ========
    FFO payout ratio ..................................................................      64.0 %      58.9  %
                                                                                          ========     ========
    CAD payout ratio ..................................................................      78.1 %      64.3  %
                                                                                          ========     ========
</TABLE>
                                       18
<PAGE>


<PAGE>

SUPPLEMENTAL  INFORMATION  ON  CAPITAL  EXPENDITURES,  TENANT  IMPROVEMENTS  AND
                               LEASING COMMISSIONS

     The   following   table   summarizes   the   expenditures    incurred   for
non-incremental   capital   expenditures,   tenant   improvements   and  leasing
commissions  for the Company's  office and  industrial  properties for the three
month  period  ended  March  31,  2000  and  the  historical   average  of  such
non-incremental   capital   expenditures,   tenant   improvements   and  leasing
commissions for the years 1996 through 1999.

            NON-INCREMENTAL REVENUE GENERATING CAPITAL EXPENDITURES



<TABLE>
<CAPTION>

                                                                                                           THREE MONTHS
                                                                                            1996-1999         ENDED
                                1996           1997            1998            1999          AVERAGE      MARCH 31, 2000
                           ------------- --------------- --------------- --------------- --------------- ---------------
<S>                        <C>           <C>             <C>             <C>             <C>             <C>
SUBURBAN OFFICE PROPERTIES
 Total ...................   $ 375,026     $ 1,108,675     $ 2,004,976     $ 2,298,899     $ 1,446,894      $ 770,138
 Per Square Foot .........        0.13            0.22            0.23            0.23            0.20           0.08
CBD OFFICE PROPERTIES
 Total ...................      N/A            N/A             N/A             N/A             N/A          $ 362,774
 Per Square Foot .........      N/A            N/A             N/A             N/A             N/A               0.17
INDUSTRIAL PROPERTIES
 Total ...................   $ 670,751     $   733,233     $ 1,205,266     $ 1,048,688     $   914,485      $ 118,494
 Per Square Foot .........        0.18            0.15            0.12            0.11            0.14           0.01
</TABLE>

NON-INCREMENTAL REVENUE GENERATING TENANT IMPROVEMENTS AND LEASING COMMISSIONS



<TABLE>
<CAPTION>

                                                                                                                  THREE MONTHS
                                                                                                    1996-1999        ENDED
                                         1996          1997            1998            1999          AVERAGE     MARCH 31, 2000
                                    ------------- -------------- --------------- --------------- -------------- ---------------
<S>                                 <C>           <C>            <C>             <C>             <C>            <C>
LONG ISLAND OFFICE PROPERTIES
 Tenant Improvements ..............   $ 523,574     $  784,044     $ 1,140,251     $ 1,009,357     $  864,307      $ 587,337
 Per Square Foot Improved .........        4.28           7.00            3.98            4.73           5.00           5.02
 Leasing Commissions ..............   $ 119,047     $  415,822     $   418,191     $   551,762     $  376,206      $ 834,492
 Per Square Foot Leased ...........        0.97           4.83            1.46            2.59           2.46           7.13
                                      ---------     ----------     -----------     -----------     ----------      ---------
 Total Per Square Foot ............   $    5.25     $    11.83     $      5.44     $      7.32     $     7.46      $   12.15
                                      =========     ==========     ===========     ===========     ==========      =========
WESTCHESTER OFFICE PROPERTIES
 Tenant Improvements ..............   $ 834,764     $1,211,665     $   711,160     $ 1,316,611     $1,018,550      $ 643,796
 Per Square Foot Improved .........        6.33           8.90            4.45            5.62           6.33          14.71
 Leasing Commissions ..............   $ 264,388     $  366,257     $   286,150     $   457,730     $  343,631      $ 131,402
 Per Square Foot Leased ...........        2.00           2.69            1.79            1.96           2.11           3.00
                                      ---------     ----------     -----------     -----------     ----------      ---------
 Total Per Square Foot ............   $    8.33     $    11.59     $      6.24     $      7.58     $     8.44      $   17.71
                                      =========     ==========     ===========     ===========     ==========      =========
CONNECTICUT OFFICE PROPERTIES (A)
 Tenant Improvements ..............   $  58,000     $1,022,421     $   202,880     $   179,043     $  449,952      $ 129,380
 Per Square Foot Improved .........       12.45          13.39            5.92            4.88           9.16           4.22
 Leasing Commissions ..............   $       0     $  256,615     $   151,063     $   110,252     $  159,363      $  96,388
 Per Square Foot Leased ...........        0.00           3.36            4.41            3.00           2.69           3.14
                                      ---------     ----------     -----------     -----------     ----------      ---------
 Total Per Square Foot ............   $   12.45     $    16.75     $     10.33     $      7.88     $    11.85      $    7.36
                                      =========     ==========     ===========     ===========     ==========      =========
NEW JERSEY OFFICE PROPERTIES
 Tenant Improvements ..............      N/A           N/A         $   654,877     $   454,054     $  554,466      $ 316,187
 Per Square Foot Improved .........      N/A           N/A                3.78            2.29           3.04           6.81
 Leasing Commissions ..............      N/A           N/A         $   396,127     $   787,065     $  591,596      $ 254,045
 Per Square Foot Leased ...........      N/A           N/A                2.08            3.96           3.02           5.89
                                      ---------     ----------     -----------     -----------     ----------      ---------
 Total Per Square Foot ............      N/A           N/A         $      5.86     $      6.25     $     6.06      $   12.70
                                      =========     ==========     ===========     ===========     ==========      =========
NEW YORK OFFICE PROPERTIES
 Tenant Improvements ..............      N/A           N/A             N/A             N/A            N/A             N/A
 Per Square Foot Improved .........      N/A           N/A             N/A             N/A            N/A             N/A
 Leasing Commissions ..............      N/A           N/A             N/A             N/A            N/A             N/A
 Per Square Foot Leased ...........      N/A           N/A             N/A             N/A            N/A             N/A
                                      ---------     ----------     -----------     -----------     ----------      ---------
 Total Per Square Foot ............      N/A           N/A             N/A             N/A            N/A             N/A
                                      =========     ==========     ===========     ===========     ==========      =========
INDUSTRIAL PROPERTIES
 Tenant Improvements ..............   $ 380,334     $  230,466     $   283,842     $   375,646     $  317,572      $  66,483
 Per Square Foot Improved .........        0.72           0.55            0.76            0.25           0.57           0.25
 Leasing Commissions ..............   $ 436,213     $   81,013     $   200,154     $   835,108     $  388,122      $  86,439
 Per Square Foot Leased ...........        0.82           0.19            0.44            0.56           0.50           0.33
                                      ---------     ----------     -----------     -----------     ----------      ---------
 Total Per Square Foot ............   $    1.54     $     0.74     $      1.20     $      0.81     $     1.07      $    0.58
                                      =========     ==========     ===========     ===========     ==========      =========

</TABLE>

----------
(A)  1996 -- 1999 average weighted to reflect October 1996 acquisition date

                                       19

<PAGE>

                                LEASE EXPIRATIONS

     The following  table sets forth  scheduled  lease  expirations for executed
leases as of March 31, 2000:

LONG ISLAND OFFICE PROPERTIES (EXCLUDING OMNI):


<TABLE>
<CAPTION>

           YEAR OF                             TOTAL RENTABLE       % OF TOTAL           PER             PER
            LEASE                  NUMBER        SQUARE FEET      RENTAL SQUARE      SQUARE FOOT     SQUARE FOOT
          EXPIRATION             OF LEASES        EXPIRING        FEET EXPIRING     S/L RENT (1)      RENT (2)
-----------------------------   -----------   ----------------   ---------------   --------------   ------------
<S>                             <C>           <C>                <C>               <C>              <C>
2000 ........................        32             138,314             4.5%          $ 21.24         $ 22.66
2001 ........................        41             188,697             6.2%          $ 22.29         $ 24.45
2002 ........................        32             261,102             8.5%          $ 22.29         $ 24.53
2003 ........................        52             340,359            11.2%          $ 21.90         $ 24.85
2004 ........................        45             275,654             9.0%          $ 23.04         $ 25.73
2005 ........................        53             529,651            17.3%          $ 22.74         $ 26.08
2006 AND THEREAFTER .........        71           1,322,630            43.3%               --              --
                                     --           ---------           -----
TOTAL .......................       326           3,056,407           100.0%
                                    ===           =========           =====
</TABLE>

OMNI:

<TABLE>
<CAPTION>

           YEAR OF                             TOTAL RENTABLE       % OF TOTAL           PER             PER
            LEASE                  NUMBER        SQUARE FEET      RENTAL SQUARE      SQUARE FOOT     SQUARE FOOT
          EXPIRATION             OF LEASES        EXPIRING        FEET EXPIRING     S/L RENT (1)      RENT (2)
-----------------------------   -----------   ----------------   ---------------   --------------   ------------
<S>                             <C>           <C>                <C>               <C>              <C>
2000 ........................        --                 --               --                --              --
2001 ........................         4             32,680              6.2%          $ 27.39         $ 32.74
2002 ........................         3            129,351             24.3%          $ 30.00         $ 33.52
2003 ........................         6             81,809             15.4%          $ 29.60         $ 33.60
2004 ........................         4            112,414             21.1%          $ 26.04         $ 33.40
2005 ........................         6             59,115             11.1%          $ 27.91         $ 34.66
2006 AND THEREAFTER .........         5            116,605             21.9%               --              --
                                     --            -------            -----
TOTAL .......................        28            531,974            100.0%
                                     ==            =======            =====
</TABLE>

INDUSTRIAL PROPERTIES:


<TABLE>
<CAPTION>

           YEAR OF                             TOTAL RENTABLE       % OF TOTAL           PER             PER
            LEASE                  NUMBER        SQUARE FEET      RENTAL SQUARE      SQUARE FOOT     SQUARE FOOT
          EXPIRATION             OF LEASES        EXPIRING        FEET EXPIRING     S/L RENT (1)      RENT (2)
-----------------------------   -----------   ----------------   ---------------   --------------   ------------
<S>                             <C>           <C>                <C>               <C>              <C>
2000 ........................        27             402,203             8.4%           $ 5.49          $ 6.19
2001 ........................        31             652,359            13.7%           $ 5.84          $ 7.06
2002 ........................        25             212,744             4.5%           $ 6.26          $ 6.97
2003 ........................        30             724,434            15.2%           $ 5.26          $ 6.08
2004 ........................        34             622,185            13.1%           $ 6.36          $ 7.16
2005 ........................        12             351,234             7.4%           $ 5.48          $ 7.79
2006 AND THEREAFTER .........        40           1,794,543            37.7%               --              --
                                     --           ---------           -----
TOTAL .......................       199           4,759,702           100.0%
                                    ===           =========           =====
</TABLE>

                                       20

<PAGE>

                       LEASE EXPIRATIONS -- (CONTINUED)


RESEARCH AND DEVELOPMENT PROPERTIES:


<TABLE>
<CAPTION>

           YEAR OF                             TOTAL RENTABLE       % OF TOTAL           PER             PER
            LEASE                  NUMBER        SQUARE FEET      RENTAL SQUARE      SQUARE FOOT     SQUARE FOOT
          EXPIRATION             OF LEASES        EXPIRING        FEET EXPIRING     S/L RENT (1)      RENT (2)
-----------------------------   -----------   ----------------   ---------------   --------------   ------------
<S>                             <C>           <C>                <C>               <C>              <C>
2000 ........................         6              62,492             4.9%          $  9.43         $  9.31
2001 ........................         8             150,120            11.7%          $ 10.75         $ 11.80
2002 ........................         2              64,620             5.0%          $ 10.10         $ 12.70
2003 ........................         5             291,034            22.8%          $  5.62         $  6.62
2004 ........................        10             129,218            10.1%          $ 12.17         $ 13.43
2005 ........................         2             269,704            21.1%          $  8.24         $  9.03
2006 AND THEREAFTER .........        12             311,496            24.4%               --              --
                                     --             -------           -----
TOTAL .......................        45           1,278,684           100.0%
                                     ==           =========           =====
</TABLE>

WESTCHESTER OFFICE PROPERTIES:


<TABLE>
<CAPTION>

           YEAR OF                             TOTAL RENTABLE       % OF TOTAL           PER             PER
            LEASE                  NUMBER        SQUARE FEET      RENTAL SQUARE      SQUARE FOOT     SQUARE FOOT
          EXPIRATION             OF LEASES        EXPIRING        FEET EXPIRING     S/L RENT (1)      RENT (2)
-----------------------------   -----------   ----------------   ---------------   --------------   ------------
<S>                             <C>           <C>                <C>               <C>              <C>
2000 ........................        38             280,179             9.6%          $ 22.44         $ 22.44
2001 ........................        43             228,679             7.8%          $ 20.77         $ 21.16
2002 ........................        51             461,797            15.8%          $ 19.99         $ 20.24
2003 ........................        39             252,385             8.7%          $ 21.88         $ 23.13
2004 ........................        27             164,609             5.6%          $ 21.60         $ 22.01
2005 ........................        21             279,077             9.6%          $ 24.50         $ 24.99
2006 AND THEREAFTER .........        35           1,246,721            42.9%               --              --
                                     --           ---------           -----
TOTAL .......................       254           2,913,447           100.0%
                                    ===           =========           =====
</TABLE>

STAMFORD OFFICE PROPERTIES:


<TABLE>
<CAPTION>

           YEAR OF                             TOTAL RENTABLE       % OF TOTAL           PER             PER
            LEASE                  NUMBER        SQUARE FEET      RENTAL SQUARE      SQUARE FOOT     SQUARE FOOT
          EXPIRATION             OF LEASES        EXPIRING        FEET EXPIRING     S/L RENT (1)      RENT (2)
-----------------------------   -----------   ----------------   ---------------   --------------   ------------
<S>                             <C>           <C>                <C>               <C>              <C>
2000 ........................        25             101,334             9.6%          $ 21.14         $ 21.90
2001 ........................        24             110,180            10.4%          $ 24.52         $ 25.56
2002 ........................        18              95,920             9.1%          $ 27.07         $ 28.29
2003 ........................        15              94,448             9.0%          $ 31.61         $ 32.39
2004 ........................        22             225,924            21.4%          $ 22.86         $ 23.74
2005 ........................        10              71,830             6.8%          $ 26.80         $ 28.51
2006 AND THEREAFTER .........        19             355,295            33.7%               --              --
                                     --             -------           -----
TOTAL .......................       133           1,054,931           100.0%
                                    ===           =========           =====
</TABLE>

                                       21

<PAGE>

                       LEASE EXPIRATIONS -- (CONTINUED)


NEW JERSEY OFFICE PROPERTIES:


<TABLE>
<CAPTION>

           YEAR OF                             TOTAL RENTABLE       % OF TOTAL           PER             PER
            LEASE                  NUMBER        SQUARE FEET      RENTAL SQUARE      SQUARE FOOT     SQUARE FOOT
          EXPIRATION             OF LEASES        EXPIRING        FEET EXPIRING     S/L RENT (1)      RENT (2)
-----------------------------   -----------   ----------------   ---------------   --------------   ------------
<S>                             <C>           <C>                <C>               <C>              <C>
2000 ........................        17              99,045             5.1%          $ 17.49         $ 18.39
2001 ........................        22             260,124            13.4%          $ 17.89         $ 18.10
2002 ........................        21             182,636             9.4%          $ 19.83         $ 20.08
2003 ........................        20             336,393            17.4%          $ 19.83         $ 19.92
2004 ........................        33             228,731            11.8%          $ 22.60         $ 23.11
2005 ........................        23             317,732            16.4%          $ 22.50         $ 23.25
2006 AND THEREAFTER .........        16             512,495            26.5%               --              --
                                     --             -------           -----
TOTAL .......................       152           1,937,156           100.0%
                                    ===           =========           =====
</TABLE>

NEW YORK CITY OFFICE


<TABLE>
<CAPTION>

           YEAR OF                             TOTAL RENTABLE       % OF TOTAL           PER             PER
            LEASE                  NUMBER        SQUARE FEET      RENTAL SQUARE     SQUARE FOOT     SQUARE FOOT
          EXPIRATION             OF LEASES        EXPIRING        FEET EXPIRING     S/L RENT (1)      RENT (2)
-----------------------------   -----------   ----------------   ---------------   --------------   ------------
<S>                             <C>           <C>                <C>               <C>              <C>
2000 ........................        15             153,333             4.6%          $ 29.37         $ 30.09
2001 ........................        23             176,179             5.3%          $ 37.19         $ 34.55
2002 ........................        17             183,333             5.5%          $ 31.82         $ 31.86
2003 ........................         7             115,726             3.5%          $ 31.89         $ 32.22
2004 ........................        17             178,012             5.3%          $ 33.01         $ 31.65
2005 ........................        27             431,088            12.9%          $ 34.56         $ 34.62
2006 AND THEREAFTER .........       105           2,098,488            62.9%               --              --
                                    ---           ---------           -----
TOTAL .......................       211           3,336,159           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.

                                       22
<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 does not hedge
interest rate risk using  financial  instruments  nor is the Company  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 or
Term Loan until such time as it is able to retire the  short-term  variable rate
debt with a long-term  fixed rate debt  offering or an equity  offering  through
accessing the capital markets on terms that are advantageous to the Company.

     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  fair  market  value  ("FMV")  at March 31,  2000
(dollars in thousands):

<TABLE>
<CAPTION>

                                                  FOR THE YEAR ENDED DECEMBER 31,
                                  ---------------------------------------------------------------
                                      2000         2001         2002         2003        2004
                                  ------------ ------------ ------------ ----------- ------------
<S>                               <C>          <C>          <C>          <C>         <C>
Long term debt:
 Fixed rate .....................   $ 33,479     $ 92,751     $ 16,499     $ 8,350     $ 11,769
 Weighted average interest rate .       7.36%        7.50%        7.79%       7.77%        8.30%
 Variable rate ..................   $     --     $482,600     $     --     $    --     $     --
 Weighted average interest rate .         --         7.01%          --          --           --



<CAPTION>
                                   THEREAFTER     TOTAL(1)       FMV
                                  ------------ ------------- -----------
<S>                               <C>          <C>           <C>
Long term debt:
 Fixed rate .....................  $ 814,660     $ 977,508    $977,508
 Weighted average interest rate .       7.53%         7.46%
 Variable rate ..................  $      --     $ 482,600    $482,600
 Weighted average interest rate .         --          7.01%
</TABLE>

----------------
(1) Includes  unamortized  issuance  discounts  of $670,000 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  $4.8 million  annual  increase in interest
expense based on approximately $482.6 million outstanding at March 31, 2000.

     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 March 31, 2000 (dollars in thousands):

<TABLE>
<CAPTION>

                                                      FOR THE YEAR ENDED DECEMBER 31,
                                                -------------------------------------------
                                       2000        2001        2002      2003      2004
                                  ------------- ---------- ------------ ------ ------------
<S>                               <C>           <C>        <C>          <C>    <C>
Mortgage notes and Notes
 receivable:
 Fixed rate .....................   $ 282,983    $     15    $ 11,055    $--     $ 36,500
 Weighted average Interest rate .        9.42%       9.00%      10.34%    --        10.23%



<CAPTION>
                                   THEREAFTER    TOTAL (2)       FMV
                                  ------------ ------------- -----------
<S>                               <C>          <C>           <C>
Mortgage notes and Notes
 receivable:
 Fixed rate .....................   $ 16,990     $ 347,543    $347,543
 Weighted average Interest rate .      11.65%         9.64%
</TABLE>

     The fair value 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.

----------------
(2)      Excludes  mortgage  note  receivable  acquisition  costs  and  interest
         receivables aggregating approximately $5.3 million.

                                       23
<PAGE>

                          PART II -- OTHER INFORMATION

Item 1. Legal Proceedings -- None

Item 2. Changes in Securities and use of proceeds -- None
Item 3. Defaults Upon Senior Securities -- None
Item 4. Submission of Matters to a Vote of Securities Holders -- None
Item 5. Other information -- None
Item 6. Exhibits and Reports on Form 8-K

     a) Exhibits

<TABLE>
<CAPTION>

   NUMBER

-----------
<S>         <C>
  10.1      Amended and Restated Letter Agreement, dated as of November 30, 1999, amending the
            RSVP Credit Agreement and the FrontLine Facility
  27.0      Financial Data Schedule

</TABLE>

b) During the three  months  ended  March 31,  2000,  the  Registrant  filed the
 following reports:

       On January  14,  2000,  the  Company  filed a Form 8-K to refile  certain
   exhibits  previously  filed as exhibits to Forms 8-K which were filed on June
   25, 1999 and October 25, 1999.

       On February 8, 2000,  the  Company  filed a Form 8-K  relating to the $75
   million Term Loan entered into with, among others, The Chase Manhattan Bank.

                                   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.

RECKSON ASSOCIATES REALTY CORP.



<TABLE>

<S>                                      <C>


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
</TABLE>

DATE: May 10, 2000

                                       24