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


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


                                    FORM 10-Q


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

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003

                         COMMISSION FILE NUMBER: 1-13762

                         RECKSON ASSOCIATES REALTY CORP.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

MARYLAND                                                           11-3233650
--------                                                           ----------
(STATE OR OTHER JURISDICTION OF          (IRS EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)

225 BROADHOLLOW ROAD, MELVILLE, NY                                   11747
----------------------------------                                   -----
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)                         (ZIP CODE)


                                 (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    .
                                                              ---     ---
      INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS
DEFINED IN RULE 12B-2 OF THE EXCHANGE ACT).
                                   YES X   NO    .
                                      ---    ---

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

      THE COMPANY HAS TWO CLASSES OF COMMON STOCK, PAR VALUE $.01 PAR VALUE PER
SHARE, WITH 48,006,791 AND 9,915,313 SHARES OF CLASS A COMMON STOCK AND CLASS B
COMMON STOCK OUTSTANDING, RESPECTIVELY AS OF AUGUST 11, 2003

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


<PAGE>


                         RECKSON ASSOCIATES REALTY CORP.
                                QUARTERLY REPORT
                    FOR THE THREE MONTHS ENDED JUNE 30, 2003

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

       INDEX                                                                                                   PAGE
-------------------------------------------------------------------------------------------------------------------------
       PART I.          FINANCIAL INFORMATION
-------------------------------------------------------------------------------------------------------------------------
       <S>               <C>                                                                                    <C>
       Item 1.           Financial Statements

                         Consolidated Balance Sheets as of June 30, 2003
                              (unaudited) and December 31, 2002.......................................          2

                         Consolidated Statements of Income for the three and six months ended
                              June 30, 2003 and 2002 (unaudited)......................................          3

                         Consolidated Statements of Cash Flows for the six months ended
                              June 30, 2003 and 2002 (unaudited)......................................          4

                         Notes to the Consolidated Financial Statements (unaudited)...................          5

       Item 2.           Management's Discussion and Analysis of Financial Condition and Results of
                         Operations...................................................................         20
       Item 3.           Quantitative and Qualitative Disclosures about Market Risk ..................         35
       Item 4.           Controls and Procedures......................................................         36
-------------------------------------------------------------------------------------------------------------------------
       PART II.         OTHER INFORMATION
-------------------------------------------------------------------------------------------------------------------------
       Item 1.           Legal Proceedings............................................................         41
       Item 2.           Changes in Securities and Use of Proceeds....................................         41
       Item 3.           Defaults Upon Senior Securities..............................................         41
       Item 4.           Submission of Matters to a Vote of Securities Holders........................         41
       Item 5.           Other Information............................................................         41
       Item 6.           Exhibits and Reports on Form 8-K.............................................         41
-------------------------------------------------------------------------------------------------------------------------
       SIGNATURES.....................................................................................         42
-------------------------------------------------------------------------------------------------------------------------


</TABLE>


                                       1
<PAGE>


PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS

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


<TABLE>
<CAPTION>
                                                                                         JUNE 30,        DECEMBER 31,
                                                                                           2003              2002
                                                                                       ------------      -----------
                                                                                        (Unaudited)
<S>                                                                                    <C>               <C>
ASSETS:
Commercial real estate properties, at cost:
    Land ........................................................................      $   423,036       $   418,040
    Building and improvements ...................................................        2,448,379         2,415,252
Developments in progress:
    Land ........................................................................           88,388            92,924
    Development costs ...........................................................           23,743            28,311
Furniture, fixtures and equipment ...............................................           12,572            13,595
                                                                                       -----------       -----------
                                                                                         2,996,118         2,968,122
Less accumulated depreciation ...................................................         (501,122)         (454,018)
                                                                                       -----------       -----------
                                                                                         2,494,996         2,514,104
Investments in real estate joint ventures .......................................            5,709             6,116
Investments in mortgage notes and notes receivable ..............................           54,600            54,547
Investments in service companies and affiliate loans and joint ventures .........           72,440            73,332
Cash and cash equivalents .......................................................           23,996            30,827
Tenant receivables ..............................................................            7,724            14,050
Deferred rents receivable .......................................................          116,573           107,366
Prepaid expenses and other assets ...............................................           56,021            37,235
Contract and land deposits and pre-acquisition costs ............................              208               240
Deferred leasing and loan costs .................................................           68,727            70,103
                                                                                       -----------       -----------
TOTAL ASSETS ....................................................................      $ 2,900,994       $ 2,907,920
                                                                                       ===========       ===========
LIABILITIES:
Mortgage notes payable ..........................................................      $   734,134       $   740,012
Unsecured credit facility .......................................................          322,000           267,000
Senior unsecured notes ..........................................................          499,374           499,305
Accrued expenses and other liabilities ..........................................           82,357            93,783
Dividends and distributions payable .............................................           31,471            31,575
                                                                                       -----------       -----------
TOTAL LIABILITIES ...............................................................        1,669,336         1,631,675
                                                                                       -----------       -----------
Minority partners' interests in consolidated partnerships .......................          240,452           242,934
Preferred unit interest in the operating partnership ............................           19,662            19,662
Limited partners' minority interest in the operating partnership ................           66,261            71,420
                                                                                       -----------       -----------
                                                                                           326,375           334,016
                                                                                       -----------       -----------
Commitments and contingencies ...................................................               --                --

STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value, 25,000,000 shares authorized
    Series A preferred stock, 8,834,500 shares issued and outstanding ...........               88                88
    Series B preferred stock, 2,000,000 shares issued and outstanding ...........               20                20
Common Stock, $.01 par value, 100,000,000 shares authorized
    Class A common stock, 48,000,995 and 48,246,083 shares issued
            and outstanding, respectively .......................................              480               482
    Class B common stock, 9,915,313 shares issued and outstanding ...............               99                99
Additional paid in capital ......................................................          973,089         1,005,494
    Treasury stock - Class A common, 2,950,400 and 2,698,400 shares, respectively
            and Class B common, 368,200 shares ..................................          (68,493)          (63,954)
                                                                                       -----------       -----------
Total Stockholders' Equity ......................................................          905,283           942,229
                                                                                       -----------       -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......................................      $ 2,900,994       $ 2,907,920
                                                                                       ===========       ===========

</TABLE>

                (see accompanying notes to financial statements)



                                       2
<PAGE>


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

<TABLE>
<CAPTION>
                                                                    THREE MONTHS ENDED                 SIX MONTHS ENDED
                                                                         JUNE 30,                          JUNE 30,
                                                              -----------------------------     -----------------------------
                                                                  2003             2002             2003             2002
                                                              ------------     ------------     ------------     ------------
<S>                                                           <C>              <C>              <C>              <C>
REVENUES:
Property operating revenues:
     Base rents ..........................................    $    107,127     $    108,867     $    214,605     $    215,250
     Tenant escalations and reimbursements ...............          15,377           14,062           31,340           29,383
                                                              ------------     ------------     ------------     ------------
Total property operating revenues ........................         122,504          122,929          245,945          244,633
Interest income on mortgage notes and notes receivable
     (including $1,045, $1,071, $2,078 and $2,130,
     respectively from related parties) ..................           1,559            1,565            3,090            3,121
Investment and other income ..............................           3,349              284            9,137              818
                                                              ------------     ------------     ------------     ------------
    TOTAL REVENUES .......................................         127,412          124,778          258,172          248,572
                                                              ------------     ------------     ------------     ------------
EXPENSES:
Property operating expenses ..............................          46,568           41,431           94,402           83,326
Marketing, general and administrative ....................           9,390            7,650           17,649           14,745
Interest .................................................          22,896           22,124           45,746           43,120
Depreciation and amortization ............................          29,903           27,836           61,887           53,766
                                                              ------------     ------------     ------------     ------------
     TOTAL EXPENSES ......................................         108,757           99,041          219,684          194,957
                                                              ------------     ------------     ------------     ------------
Income before minority interests, preferred dividends and
     distributions, equity (loss) in earnings of real
     estate joint ventures and service companies, gain
     on sales of depreciable real estate assets and
     discontinued operations .............................          18,655           25,737           38,488           53,615
Minority partners' interests in consolidated partnerships           (4,335)          (4,813)          (9,025)          (9,933)
Distributions to preferred unit holders ..................            (274)            (280)            (547)            (741)
Limited partners' minority interest in the operating
partnership ..............................................            (874)          (1,643)          (1,870)          (3,547)
Equity (loss) in earnings of real estate joint ventures
     and service companies (including $0, $58, $0 and
     $465, respectively from related parties) ............            (270)             159             (164)             494
Gain on sales of depreciable real estate assets ..........              --               --               --              537
                                                              ------------     ------------     ------------     ------------
Income before discontinued operations and preferred
dividends ................................................          12,902           19,160           26,882           40,425
Discontinued operations (net of limited partners'
     minority interest):
    Income from discontinued operations ..................              --              132               --              336
                                                              ------------     ------------     ------------     ------------
Net Income ...............................................          12,902           19,292           26,882           40,761
Dividends to preferred shareholders ......................          (5,317)          (5,487)         (10,634)         (10,974)
                                                              ------------     ------------     ------------     ------------
Net income allocable to common shareholders ..............    $      7,585     $     13,805     $     16,248     $     29,787
                                                              ============     ============     ============     ============
Net income allocable to:
    Class A common .......................................    $      5,769     $     10,548     $     12,364     $     22,707
    Class B common .......................................           1,816            3,257            3,884            7,080
                                                              ------------     ------------     ------------     ------------
Total ....................................................    $      7,585     $     13,805     $     16,248     $     29,787
                                                              ============     ============     ============     ============
Basic net income per weighted average common share:
    Class A common .......................................    $        .12     $        .21     $        .26     $        .44
    Gain on sales of depreciable real estate assets ......              --               --               --              .01
    Discontinued operations ..............................              --               --               --               --
                                                              ------------     ------------     ------------     ------------
    Basic net income per Class A common ..................    $        .12     $        .21     $        .26     $        .45
                                                              ============     ============     ============     ============
    Class B common .......................................    $        .18     $        .32     $        .39     $        .67
    Gain on sales of depreciable real estate assets ......              --               --               --              .01
    Discontinued operations ..............................              --               --               --              .01
                                                              ------------     ------------     ------------     ------------
    Basic net income per Class B common ..................    $        .18     $        .32     $        .39     $        .69
                                                              ============     ============     ============     ============
Basic weighted average common shares outstanding:
    Class A common .......................................      48,000,995       50,775,300       48,100,418       50,396,326
    Class B common .......................................       9,915,313       10,283,513        9,915,313       10,283,513
Diluted net income per weighted average common share:
    Class A common .......................................    $        .12     $        .21     $        .26     $        .45
                                                              ============     ============     ============     ============
    Class B common .......................................    $        .13     $        .22     $        .28     $        .49
                                                              ============     ============     ============     ============
Diluted weighted average common shares outstanding:
    Class A common .......................................      48,118,172       51,164,788       48,218,598       50,759,594
    Class B common .......................................       9,915,313       10,283,513        9,915,313       10,283,513

</TABLE>

                (see accompanying notes to financial statements)


                                       3
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                            SIX MONTHS ENDED
                                                                                               JUNE 30,
                                                                                       -----------------------
                                                                                           2003          2002
                                                                                       ---------     ---------
<S>                                                                                    <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME ........................................................................    $  26,882     $  40,761
Adjustments to reconcile net income to net cash provided by operating
      activities:
      Depreciation and amortization ...............................................       61,887        54,167
      Gain on sales of depreciable real estate assets .............................           --          (537)
      Minority partners' interests in consolidated partnerships ...................        9,025         9,933
      Limited partners' minority interest in the operating partnership ............        1,870         3,597
      (Equity) loss in earnings of real estate joint ventures and service companies          164          (494)
 Changes in operating assets and liabilities:
      Tenant receivables ..........................................................        6,326        (1,878)
      Prepaid expenses and other assets ...........................................       (6,710)       20,677
      Deferred rents receivable ...................................................       (9,207)      (13,175)
      Accrued expenses and other liabilities ......................................       (9,057)       (9,077)
                                                                                       ---------     ---------
      Net cash provided by operating activities ...................................       81,180       103,974
                                                                                       ---------     ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
      Additions to developments in progress .......................................       (9,732)      (31,809)
      Proceeds from mortgage note receivable repayments ...........................           --             8
      Purchase of commercial real estate ..........................................       (6,505)           --
      Additions to commercial real estate properties ..............................      (25,149)      (20,810)
      Additions to furniture, fixtures and equipment ..............................          (94)          (64)
      Payment of leasing costs ....................................................       (8,765)       (6,169)
      Distributions from investments in real estate joint ventures ................          243            --
      Proceeds from sales of real estate ..........................................           --         2,128
                                                                                       ---------     ---------
      Net cash used in investing activities .......................................      (50,002)      (56,716)
                                                                                       ---------     ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
      Proceeds from issuance of common stock net of issuance costs ................           --         6,014
      Repurchases of common stock .................................................       (4,538)           --
      Principal payments on secured borrowings ....................................       (5,878)       (5,094)
      Payment of loan and equity issuance costs ...................................          (29)         (990)
      Proceeds from issuance of senior unsecured notes ............................           --        49,432
      Proceeds from unsecured credit facility .....................................       55,000        45,000
      Repayment of unsecured credit facility ......................................           --      (140,600)
      Distributions to minority partners in consolidated partnerships .............      (11,507)       (9,559)
      Distributions to limited partners in the operating partnership ..............       (6,177)       (6,364)
      Distributions to preferred unit holders .....................................         (547)         (774)
      Dividends to common shareholders ............................................      (53,699)      (55,935)
      Dividends to preferred shareholders .........................................      (10,634)      (10,974)
                                                                                       ---------     ---------
      Net cash used in financing activities .......................................      (38,009)     (129,844)
                                                                                       ---------     ---------
      Net (decrease) in cash and cash equivalents .................................       (6,831)      (82,586)
      Cash and cash equivalents at beginning of period ............................       30,827       121,975
                                                                                       ---------     ---------
      Cash and cash equivalents at end of period ..................................    $  23,996     $  39,389
                                                                                       =========     =========


</TABLE>

                (see accompanying notes to financial statements)



                                       4
<PAGE>

                         RECKSON ASSOCIATES REALTY CORP.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2003
                                   (UNAUDITED)

1.       ORGANIZATION AND FORMATION OF THE COMPANY

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

The Company was incorporated in Maryland in September 1994. In June 1995, the
Company completed an initial public offering (the "IPO") and commenced
operations.

The Company became the sole general partner of Reckson Operating Partnership,
L.P. (the "Operating Partnership") by contributing substantially all of the net
proceeds of the IPO in exchange for an approximate 73% interest in the Operating
Partnership. All Properties acquired by the Company are held by or through the
Operating Partnership. In conjunction with the IPO, the Operating Partnership
executed various option and purchase agreements whereby it issued common units
of limited partnership interest in the Operating Partnership ("OP Units") to
certain continuing investors in exchange for (i) interests in certain property
partnerships, (ii) fee simple and leasehold interests in properties and
development land, (iii) certain other business assets and (iv) 100% of the
non-voting preferred stock of the management and construction companies. At June
30, 2003, the Company's ownership percentage in the Operating Partnership was
approximately 89.5%.

2.       BASIS OF PRESENTATION

The accompanying consolidated financial statements include the consolidated
financial position of the Company and the Operating Partnership at June 30, 2003
and December 31, 2002 and the results of their operations for the three and six
months ended June 30, 2003 and 2002, respectively, and, their cash flows for the
six months ended June 30, 2003 and 2002, respectively. The Operating
Partnership's investments in majority owned and controlled real estate joint
ventures are reflected in the accompanying financial statements on a
consolidated basis with a reduction for the minority partners' interest. The
Operating Partnership also invests in real estate joint ventures where it may
own less than a controlling interest. Such investments are reflected in the
accompanying financial statements on the equity method of accounting. For the
periods presented prior to October 1, 2002, the operating results of Reckson
Management Group, Inc., RANY Management Group, Inc., Reckson Construction Group
New York, Inc. and Reckson Construction Group, Inc. (the "Service Companies"),
in which the Operating Partnership owned a 97% non-controlling interest were
reflected in the accompanying financial statements on the equity method of
accounting. On October 1, 2002, the Operating Partnership acquired the remaining
3% interests in the Service Companies for an aggregate purchase price of
approximately $122,000. As a result, the Operating Partnership commenced
consolidating the operations of the Service Companies (see Note 10). All
significant intercompany balances and transactions have been eliminated in the
consolidated financial statements.

Reckson Construction Group, Inc. and Reckson Construction Group New York, Inc.
use the percentage-of-completion method for recording amounts earned on its
contracts. This method records amounts earned as revenue in the proportion that
actual costs incurred to date bear to the estimate of total costs at contract
completion.

Minority partners' interests in consolidated partnerships represent a 49%
non-affiliated interest in RT Tri-State LLC, owner of a nine property suburban
office portfolio, a 40% non-affiliated interest in Omni Partners, L.P., owner of
a 579,000 square foot suburban office property and a 49% non-affiliated interest
in Metropolitan 919 Third Avenue, LLC, owner of the property located at 919
Third Avenue, New York, NY. Limited partners' minority interest in the Operating
Partnership was approximately 10.5% and 10.0% at June 30, 2003 and 2002,
respectively.

The Company follows the guidance provided for under the Financing Accounting
Standards Board ("FASB") Statement No. 66 "Accounting for Sales of Real Estate"
("Statement No. 66"), which provides guidance on sales contracts that are
accompanied by agreements which require the seller to develop the property in
the future. Under Statement No. 66 profit is recognized and allocated to the
sale of the land and the later development or construction work on the basis of
estimated costs of each activity; the same rate of profit is attributed to each
activity. As a result, profits are recognized and reflected over the improvement
period on the basis of costs incurred (including land) as a percentage of total
costs estimated to be incurred. The Company uses the percentage of completion
method, as the future costs of development and profit were reliably estimated
(see Note 6).


                                       5
<PAGE>


The accompanying interim unaudited financial statements have been prepared by
the Company's management pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosure normally
included in the financial statements prepared in accordance with accounting
principles generally accepted in the United States ("GAAP") may have been
condensed or omitted pursuant to such rules and regulations, although management
believes that the disclosures are adequate to make the information presented not
misleading. The unaudited financial statements as of June 30, 2003 and for the
three and six month periods ended June 30, 2003 and 2002 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, 2003. 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 10-K
for the year ended December 31, 2002.

The Company intends to qualify as a REIT under Sections 856 through 860 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.

Recent Accounting Pronouncements

In October 2001, the FASB issued Statement No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". Statement No. 144 provides
accounting guidance for financial accounting and reporting for the impairment or
disposal of long-lived assets. Statement No. 144 supersedes Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of". It also supersedes the accounting and reporting provisions of
Accounting Principles Board Opinion No. 30, Reporting the Results of
Operations--Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions
related to the disposal of a segment of a business. The Company adopted
Statement No. 144 on January 1, 2002. The adoption of this statement did not
have a material effect on the results of operations or the financial position of
the Company. The adoption of Statement No. 144 does not have an impact on net
income allocable to common shareholders. Statement No. 144 only impacts the
presentation of the results of operations and gain on sales of depreciable real
estate assets for those properties sold during the period within the
consolidated statements of income.

Effective January 1, 2002 the Company has elected to follow FASB Statement No.
123, "Accounting for Stock Based Compensation". Statement No.123 requires the
use of option valuation models which determine the fair value of the option on
the date of the grant. All future employee stock option grants will be expensed
over the options' vesting periods based on the fair value at the date of the
grant in accordance with Statement No. 123. The Company expects minimal
financial impact from the adoption of Statement No. 123. To determine the fair
value of the stock options granted, the Company uses a Black-Scholes option
pricing model. Historically, the Company had applied Accounting Principles Board
Opinion No. 25 and related interpretations in accounting for its stock option
plans and reported pro forma disclosures in its Form 10-K filings by estimating
the fair value of options issued and the related expense in accordance with
Statement No. 123.

In December 2002, the FASB issued Statement No. 148, "Accounting for Stock-Based
Compensation--Transition and Disclosure" ("Statement No. 148"). Statement No.
148 amends Statement No. 123 to provide alternative methods of transition for an
entity that voluntarily adopts the fair value recognition method of recording
stock option expense. Statement No. 148 also amends the disclosure provisions of
Statement 123 and APB Opinion No. 28. "Interim Financial Reporting" to require
disclosure in the summary of significant accounting policies of the effects of
an entity's accounting policy with respect to stock options on reported net
income and earnings per share in annual and interim financial statements.



                                       6
<PAGE>


The following table sets forth the Company's pro forma information for its Class
A common stockholders for the three and six months ended June 30, 2003 and 2002
(in thousands except earnings per share data):

<TABLE>
<CAPTION>

                                                        THREE MONTHS ENDED       SIX MONTHS ENDED
                                                              JUNE 30,                JUNE 30,
                                                        --------------------    --------------------
                                                         2003         2002        2003        2002
                                                        -------     --------    --------    --------
<S>                                                     <C>         <C>         <C>         <C>
Net income as reported .............................    $ 5,769     $ 10,548    $ 12,364    $ 22,707
Add:  Stock option expense included in net
      income .......................................          1           --           3          --
Less:  Stock option expense determined under
      fair value recognition method for all awards .        (54)        (113)       (144)       (230)
                                                        -------     --------    --------    --------
Pro forma net income ...............................    $ 5,716     $ 10,435    $ 12,223    $ 22,477
                                                        =======     ========    ========    ========
Net income per share as reported:
     Basic .........................................    $   .12     $    .21    $    .26    $    .45
                                                        =======     ========    ========    ========
     Diluted .......................................    $   .12     $    .21    $    .26    $    .45
                                                        =======     ========    ========    ========
Pro forma net income per share:
     Basic .........................................    $    12     $    .21    $    .25    $    .45
                                                        =======     ========    ========    ========
     Diluted .......................................    $   .12     $    .20    $    .25    $    .44
                                                        =======     ========    ========    ========
</TABLE>

The fair value for those options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for the three and six month periods ended June 30, 2003 and 2002:

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED       SIX MONTHS ENDED
                                                              JUNE 30,                 JUNE 30,
                                                        --------------------    ---------------------
                                                         2003         2002        2003         2002
                                                        -------     --------    --------    ---------
<S>                                                       <C>          <C>         <C>          <C>
Risk free interest rate.............................      3.00%        3.00%       3.00%        3.00%
Dividend yield .....................................      7.39%        7.46%       7.39%        7.46%
Volatility factor of the expected market price
   of the Company's Class A common stock............      .196         .196        .196         .196
Weighted average expected option life (in years)....       5.3          6.3         5.3          6.3

</TABLE>

For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("FIN 45"). FIN 45 significantly changes the current
practice in the accounting for, and disclosure of, guarantees. Guarantees and
indemnification agreements meeting the characteristics described in FIN 45 are
required to be initially recorded as a liability at fair value. FIN 45 also
requires a guarantor to make significant new disclosures for virtually all
guarantees even if the likelihood of the guarantor having to make payment under
the guarantee is remote. The disclosure requirements within FIN 45 are effective
for financial statements for annual or interim periods ending after December 15,
2002. The initial recognition and initial measurement provisions are applicable
on a prospective basis to guarantees issued or modified after December 31, 2002.
The Company adopted FIN 45 on January 1, 2003. The adoption of this
interpretation did not have a material effect on the results of operations or
the financial position of the Company.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN 46"), which explains how to identify variable
interest entities ("VIE") and how to assess whether to consolidate such
entities. The provisions of this interpretation are immediately effective for
VIE's formed after January 31, 2003. For VIE's formed prior to January 31, 2003,
the provisions of this interpretation apply to the first fiscal year or interim
period beginning after June 15, 2003. Management has not yet determined whether
any of its consolidated or unconsolidated subsidiaries represent VIE's pursuant
to such interpretation. Such determination could result in a change in the
Company's consolidation policy related to such entities.

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



                                       7
<PAGE>


3.       MORTGAGE NOTES PAYABLE

As of June 30, 2003, the Company had approximately $734.1 million of fixed rate
mortgage notes, which mature at various times between 2004 and 2027. The notes
are secured by 21 properties with an aggregate carrying value of approximately
$1.5 billion which are pledged as collateral against the mortgage notes payable.
In addition, approximately $44.6 million of the $734.1 million is recourse to
the Company and certain of the mortgage notes payable are guaranteed by certain
limited partners in the Operating Partnership and / or the Company.

The following table sets forth the Company's mortgage notes payable as of June
30, 2003, by scheduled maturity date (dollars in thousands):

<TABLE>
<CAPTION>
                                                     Principal         Interest         Maturity         Amortization
Property                                            Outstanding          Rate             Date           Term (Years)
-----------------------------------------------    --------------     -----------    ---------------     --------------
<S>                                                  <C>                  <C>       <C>                  <C>
80 Orville Dr, Islip, NY                                   2,616          10.10%     February, 2004      Interest only
395 North Service Road, Melville, NY                      19,505           6.45%      October, 2005      $34 per month
200 Summit Lake Drive, Valhalla, NY                       19,160           9.25%      January, 2006           25
1350 Avenue of the Americas, NY, NY                       74,235           6.52%         June, 2006           30
Landmark Square, Stamford, CT (a)                         44,570           8.02%      October, 2006           25
100 Summit Lake Drive, Valhalla, NY                       18,424           8.50%        April, 2007           15
333 Earle Ovington Blvd, Mitchel Field, NY (b)            53,376           7.72%       August, 2007           25
810 Seventh Avenue, NY, NY                                82,100           7.73%       August, 2009           25
100 Wall Street, NY, NY                                   35,577           7.73%       August, 2009           25
6900 Jericho Turnpike, Syosset, NY                         7,289           8.07%         July, 2010           25
6800 Jericho Turnpike, Syosset, NY                        13,811           8.07%         July, 2010           25
580 White Plains Road, Tarrytown, NY                      12,583           7.86%    September, 2010           25
919 Third Ave, NY, NY (c)                                245,537          6.867%       August, 2011           30
110 Bi-County Blvd., Farmingdale, NY                       3,521          9.125%     November, 2012           20
One Orlando Center, Orlando, FL (d)                       38,067           6.82%     November, 2027           28
120 West 45th Street, NY, NY (d)                          63,763           6.82%     November, 2027           28
                                                     -----------
Total/Weighted Average                               $   734,134           7.26%
                                                     ===========
</TABLE>

------------------------
     (a) Encompasses six Class A office properties
     (b) The Company has a 60% general partnership interest in this property and
         its proportionate share of the aggregate principal amount is
         approximately $32.0 million
     (c) The Company has a 51% membership interest in this property and its
         proportionate share of the aggregate principal amount is approximately
         $125.2 million
     (d) Subject to interest rate adjustment on November 1, 2004 to the greater
         of 8.82% per annum or the yield on non-callable U.S. treasury
         obligations with a term of fifteen years plus 2% per annum.

In addition, the Company has a 60% interest in an unconsolidated joint venture
property. The Company's share of the mortgage debt at June 30, 2003 is
approximately $8.2 million. This mortgage note payable bears interest at 8.85%
per annum and matures on September 1, 2005 at which time the Company's share of
the mortgage debt will be approximately $6.9 million.

4.       SENIOR UNSECURED NOTES

As of June 30, 2003, the Operating Partnership had outstanding approximately
$499.4 million (net of issuance discounts) of senior unsecured notes (the
"Senior Unsecured Notes"). The following table sets forth the Operating
Partnership's Senior Unsecured Notes and other related disclosures by scheduled
maturity date (dollars in thousands):

<TABLE>
<CAPTION>
                                      FACE
                  ISSUANCE           AMOUNT     COUPON RATE      TERM         MATURITY
               --------------      ---------    -----------    --------    --------------
               <S>                 <C>             <C>         <C>         <C>
               March 26, 1999      $ 100,000       7.40%        5 years    March 15, 2004
                June 17, 2002      $  50,000       6.00%        5 years    June 15, 2007
               August 27, 1997     $ 150,000       7.20%       10 years    August 28, 2007
               March 26, 1999      $ 200,000       7.75%       10 years    March 15, 2009
</TABLE>

Interest on the Senior Unsecured Notes is payable semi-annually with principal
and unpaid interest due on the scheduled maturity dates. In addition, the Senior
Unsecured Notes issued on March 26, 1999 and June 17, 2002 were issued at
aggregate discounts of $738,000 and $267,500, respectively. Such discounts are
being amortized over the term of the Senior Unsecured Notes to which they
relate.


                                       8
<PAGE>

5.       UNSECURED CREDIT FACILITY

The Company currently has a three year $500 million unsecured revolving credit
facility (the "Credit Facility") from JPMorgan Chase Bank, as administrative
agent, Wells Fargo Bank, National Association, as syndication agent, and
Citicorp North America, Inc. and Wachovia Bank, National Association, as
co-documentation agents. The Credit Facility matures in December 2005, contains
options for a one-year extension subject to a fee of 25 basis points and, upon
receiving additional lender commitments, increasing the maximum revolving credit
amount to $750 million. In addition, borrowings under the Credit Facility are
currently priced off LIBOR plus 90 basis points and the Credit Facility carries
a facility fee of 20 basis points per annum. In the event of a change in the
Operating Partnership's unsecured credit rating the interest rates and facility
fee are subject to change. The outstanding borrowings under the Credit Facility
were $322.0 million at June 30, 2003.

The Company utilizes the Credit Facility primarily to finance real estate
investments, fund its real estate development activities and for working capital
purposes. At June 30, 2003, the Company had availability under the Credit
Facility to borrow approximately an additional $178.0 million, subject to
compliance with certain financial covenants.

6.       COMMERCIAL REAL ESTATE INVESTMENTS

As of June 30, 2003, the Company owned and operated 75 office properties
(inclusive of eleven office properties owned through joint ventures) comprising
approximately 13.6 million square feet, 104 industrial / R&D properties
comprising approximately 6.9 million square feet and two retail properties
comprising approximately 20,000 square feet located in the Tri-State Area.

The Company also owns approximately 313 acres of land in 12 separate parcels of
which the Company can develop approximately 3.0 million square feet of office
space and approximately 400,000 square feet of industrial / R&D space. The
Company is currently evaluating alternative land uses for certain of the land
holdings to realize the highest economic value. These alternatives may include
rezoning certain land parcels from commercial to residential for potential
disposition. As of June 30, 2003, the Company had invested approximately $112.1
million in these development projects. Management has made subjective
assessments as to the value and recoverability of these investments based on
current and proposed development plans, market comparable land values and
alternative use values. As of June 30, 2003, the Company has capitalized
approximately $4.4 million related to real estate taxes, interest and other
carrying costs related to these development projects.

During February 2003, the Company, through Reckson Construction Group, Inc.,
entered into a contract with an affiliate of First Data Corp. to sell a
19.3-acre parcel of land located in Melville, New York and has been retained by
the purchaser to develop a build-to-suit 195,000 square foot office building for
aggregate consideration of approximately $47 million. This transaction closed on
March 11, 2003 and development of the aforementioned office building has
commenced. Net proceeds from the land sale of approximately $18.3 million were
used to establish an escrow account with a qualified intermediary for a future
exchange of real property pursuant to Section 1031 of the Code and is included
in prepaid expenses and other assets on the accompanying balance sheet. The Code
allows for the deferral of taxes related to the gain attributable to the sale of
property if such qualified identified replacement property is identified within
45 days and acquired within 180 days from the initial sale. The Company has
identified certain properties and interests in properties for purposes of this
exchange. In accordance with Statement No. 66, the Company has estimated its
pre-tax gain on this land sale and build-to-suit transaction to be approximately
$20.6 million of which $4.3 million and $10.1 million has been recognized during
the three and six months ended June 30, 2003, respectively and is included in
investment and other income on the accompanying statements of income.
Approximately $10.5 million is estimated to be earned in future periods as the
development progresses.

On May 22, 2003, the Company, through Reckson Construction Group, Inc., acquired
two industrial redevelopment properties in Hauppauge, Long Island encompassing
approximately 100,000 square feet for total consideration of approximately $6.5
million. This acquisition was financed from the sales proceeds being held by the
previously referenced qualified intermediary and the properties acquired were
identified, qualified replacement properties. If Reckson Construction Group,
Inc. is unable to acquire additional qualified replacement properties or
interests therein by September 7, 2003, a tax liability of approximately $5.2
million will result from the gain recognized on the sale proceeds received from
the land sale to First Data.

On August 7, 2003, the Company acquired a ten story, 181,800 square foot Class A
office property located in Stamford, Connecticut. This acquisition was financed,
in part, through an advance under the Credit Facility of $21.6 million and the
issuance of 465,845 Class C common units of limited partnership interest valued
at $24.00 per unit.


                                       9
<PAGE>


The Company holds a $17.0 million interest in a note receivable which bears
interest at 12% per annum and is secured by a minority partnership interest in
Omni Partners, L.P., owner of the Omni, a 579,000 square foot Class A office
property located in Uniondale, NY (the "Omni Note"). The Company currently owns
a 60% majority partnership interest in Omni Partnership, L.P. and on March 14,
2007 may exercise an option to acquire the remaining 40% interest for a price
based on 90% of the fair market value of the property. The Company also holds
three other notes receivable aggregating $36.5 million which bear interest at
rates ranging from 10.5% to 12% per annum and are secured in part by a minority
partner's preferred unit interest in the Operating Partnership, certain interest
in real property and a personal guarantee (the "Other Notes" and collectively
with the Omni Note, the "Note Receivable Investments"). As of June 30, 2003,
management has made subjective assessments as to the underlying security value
on the Company's Note Receivable Investments. These assessments indicated an
excess of market value over carrying value related to the Company's Note
Receivable Investments. Based on these assessments, the Company's management
believes there is no impairment to the carrying value related to the Company's
Note Receivable Investments. The Company also owns a 355,000 square foot office
building in Orlando, Florida. This non-core real estate holding was acquired in
May 1999 in connection with the Company's initial New York City portfolio
acquisition. This property is cross collateralized under a $102 million mortgage
note along with one of the Company's New York City buildings.

The Company also owns a 60% non-controlling interest in a 172,000 square foot
office building located at 520 White Plains Road in White Plains, New York (the
"520JV"), which it manages. The remaining 40% interest is owned by JAH Realties,
L.P. Jon Halpern, the CEO and a director of HQ Global Workplaces, is a partner
in JAH Realties, L.P. As of June 30, 2003, the 520JV had total assets of $20.1
million, a mortgage note payable of $12.3 million and other liabilities of
$503,000. The Company's allocable share of the 520JV mortgage note payable is
approximately $8.2 million. This mortgage note payable bears interest at 8.85%
per annum and matures on September 1, 2005. During the three months ended June
30, 2003, HQ Global Workplaces, a tenant of the 520JV surrendered approximately
one-third of their premises. As a result, the 520JV incurred a write-off of
$633,000 relating to its deferred rents receivable and incurred a net loss of
approximately $497,000 and $362,000 for the three and six months ended June 30,
2003, respectively. The operating agreement of the 520JV requires joint
decisions from all members on all significant operating and capital decisions
including sale of the property, refinancing of the property's mortgage debt,
development and approval of leasing strategy and leasing of rentable space. As a
result of the decision-making participation relative to the operations of the
property, the Company accounts for the 520JV under the equity method of
accounting. In accordance with the equity method of accounting the Company's
proportionate share of the 520JV loss was approximately $270,000 and $164,000
for the three and six months ended June 30, 2003, respectively.

During September 2000, the Company formed a joint venture (the "Tri-State JV")
with Teachers Insurance and Annuity Association ("TIAA") and contributed nine
Class A suburban office properties aggregating approximately 1.5 million square
feet to the Tri-State JV for a 51% majority ownership interest. TIAA contributed
approximately $136 million for a 49% interest in the Tri-State JV which was then
distributed to the Company. The Company is responsible for managing the
day-to-day operations and business affairs of the Tri-State JV and has
substantial rights in making decisions affecting the properties such as leasing,
marketing and financing. The minority member has certain rights primarily
intended to protect its investment. For purposes of its financial statements the
Company consolidates the Tri-State JV.

On December 21, 2001, the Company formed a joint venture with the New York State
Teachers' Retirement Systems ("NYSTRS") (the "919JV") whereby NYSTRS acquired a
49% indirect interest in the property located at 919 Third Avenue, New York, NY
for $220.5 million which included $122.1 million of its proportionate share of
secured mortgage debt and approximately $98.4 million of cash which was then
distributed to the Company. The Company is responsible for managing the
day-to-day operations and business affairs of the 919JV and has substantial
rights in making decisions affecting the property such as developing a budget,
leasing and marketing. The minority member has certain rights primarily intended
to protect its investment. For purposes of its financial statements the Company
consolidates the 919JV.

7.       STOCKHOLDERS' EQUITY

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

During June 2003, the Board of Directors of the Company declared the following
dividends on the Company's securities:
<PAGE>

<TABLE>
<CAPTION>
                                                                                                         ANNUALIZED
                             DIVIDEND /        RECORD               PAYMENT            THREE MONTHS      DIVIDEND /
      SECURITY             DISTRIBUTION         DATE                 DATE                  ENDED         DISTRIBUTION
      --------             ------------         ----                 ----                  -----         ------------
<S>                           <C>           <C>                  <C>                  <C>                  <C>
Class A common stock          $ .4246        July 7, 2003        July 18, 2003        June 30, 2003        $1.6984
Class B common stock          $ .6471       July 15, 2003        July 31, 2003        July 31, 2003        $2.5884
Series A preferred stock      $.476563      July 15, 2003        July 31, 2003        July 31, 2003        $1.9063
Series B preferred stock      $.553125      July 15, 2003        July 31, 2003        July 31, 2003        $2.2125

</TABLE>

On June 30, 2003, the Company had issued and outstanding 9,915,313 shares of
Class B Exchangeable Common Stock, par value $.01 per share (the "Class B common
stock"). The dividend on the shares of Class B common stock is subject to
adjustment annually based on a formula which measures increases or decreases in
the Company's Funds From Operations, as defined, over a base year.



                                       10
<PAGE>

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, subject
to customary antidilution adjustments. The Company, at its option, may redeem
any or all of the Class B common stock in exchange for an equal number of shares
of the Company's Class A common stock at any time following November 23, 2003 at
which time the Company anticipates that it will exercise its option to redeem
all of its Class B common stock outstanding.

The Board of Directors of the Company has authorized the purchase of up to five
million shares of the Company's Class A common stock and / or its Class B common
stock. Transactions conducted on the New York Stock Exchange 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. During the six months
ended June 30, 2003, under this buy-back program, the Company purchased 252,000
shares of Class A common stock at an average price of $18.01 per Class A share
for an aggregate purchase price of approximately $4.5 million.

The following table sets forth the Company's historical activity under its
current common stock buy-back program (dollars in thousands except per share
data):

<TABLE>
<CAPTION>
                                         SHARES              AVERAGE                AGGREGATE
                                        PURCHASED         PRICE PER SHARE        PURCHASE PRICE
                                        ---------         ---------------        --------------
<S>                                     <C>                  <C>                    <C>
     Current program:
          Class A common                2,950,400            $ 21.30                $  62,830
          Class B Common                  368,200            $ 22.90                    8,432
                                        ---------                                   ---------
                                        3,318,600                                   $  71,262
                                        =========                                   =========
</TABLE>

The Board of Directors of the Company has formed a pricing committee to consider
purchases of up to $75 million of the Company's outstanding preferred
securities.

On June 30, 2003, the Company had issued and outstanding 8,834,500 shares of
7.625% Series A Convertible Cumulative Preferred Stock (the "Series A preferred
stock"). The Series A preferred stock is redeemable by the Company on or after
April 13, 2003 at a price of approximately $25.95 per share with such price
decreasing, at annual intervals, to $25.00 per share over a five year period. In
addition, the Series A preferred stock, at the option of the holder, is
convertible at any time into the Company's Class A common stock at a price of
$28.51 per share.

The Company currently has issued and outstanding two million shares of Series B
Convertible Cumulative Preferred Stock (the "Series B preferred stock"). The
Series B preferred stock is redeemable by the Company as follows: (i) on or
after June 3, 2003 to and including June 2, 2004, at $25.50 per share and (ii)
on or after June 3, 2004 and thereafter, at $25.00 per share. In addition, the
Series B preferred stock, at the option of the holder, is convertible at any
time into the Company's Class A common stock at a price of $26.05 per share. The
Series B preferred stock currently accumulates dividends at a rate of 8.85% per
annum.

On August 7, 2003, in conjunction with the Company's acquisition of a Class A
office property located in Stamford, Connecticut (see Note 6), the Company
issued 465,845 Class C common units of limited partnership interest. The Class C
units will receive an annual distribution of $1.87 per unit, which amount will
increase or decrease pro-rata based upon changes in the dividend paid on the
Company's Class A common stock.

The Company had historically structured long term incentive programs ("LTIP")
using restricted stock and stock loans. In July 2002, as a result of certain
provisions of the Sarbanes Oxley legislation, the Company discontinued the use
of stock loans in its LTIP. In connection with LTIP grants made prior to the
enactment of the Sarbanes Oxley legislation the Company made stock loans to
certain executive and senior officers to purchase 1,372,393 shares of its Class
A common stock at market prices ranging from $18.44 per share to $27.13 per
share. The stock loans were set to bear interest at the mid-term Applicable
Federal Rate and were secured by the shares purchased. Such stock loans
(including accrued interest) vest and are ratably forgiven each year on the
anniversary of the grant date based upon vesting periods ranging from four to
ten years based on continued service and in part on attaining certain annual
performance measures. These stock loans had an initial aggregate weighted
average vesting period of approximately nine years. Approximately $2.2 million
of compensation expense was recorded for each of the six month periods ended
June 30, 2003 and 2002, respectively, related to these LTIP. Such amounts have
been included in marketing, general and administrative expenses on the
accompanying consolidated statements of income.


                                       11
<PAGE>


The outstanding stock loan balances due from executive and senior officers
aggregated approximately $13.0 million and $17.0 million at June 30, 2003 and
December 31, 2002, respectively, and have been included as a reduction of
additional paid in capital on the accompanying consolidated balance sheets.
Other outstanding loans to executive and senior officers at June 30, 2003
amounted to approximately $1.0 million related to life insurance contracts and
approximately $2.0 million primarily related to tax payment advances on stock
compensation awards made to non-executive officers.

In November 2002 and March 2003 an award of rights was granted to certain
executive officers of the Company (the "2002 Rights" and "2003 Rights",
respectively and collectively, the "Rights"). Each Right represents the right to
receive, upon vesting, one share of Class A common stock if shares are then
available for grant under one of the Company's stock option plans or, if shares
are not so available, an amount of cash equivalent to the value of such stock on
the vesting date. The 2002 Rights will vest in four equal annual installments
beginning on November 14, 2003 (and shall be fully vested on November 14, 2006).
The 2003 Rights will be earned as of March 13, 2005 and will vest in three equal
annual installments beginning on March 13, 2005 (and shall be fully vested on
March 13, 2007). Dividends on the shares will be held by the Company until such
shares become vested, and will be distributed thereafter to the applicable
officer. The 2002 Rights also entitle the holder thereof to cash payments in
respect of taxes payable by the holder resulting from the Rights. The 2002
Rights aggregate 190,524 shares of the Company's Class A common stock and the
2003 Rights aggregate 60,760 shares of Class A common stock. During the three
and six months ended June 30, 2003, the Company recorded approximately $209,000
and $425,000 of compensation expense, respectively, related to the Rights. Such
amounts have been included in marketing, general and administrative expenses on
the accompanying consolidated statements of income.

In March 2003, the Company established a new LTIP for its executive and senior
officers. The four-year plan has a core award which provides for annual stock
based compensation based upon continued service and in part based on attaining
certain annual performance measures. The plan also has a special outperformance
award which provides for compensation to be earned at the end of a four year
period if the Company attains certain four year cumulative performance measures.
Amounts earned under the special outperformance award may be paid in cash or
stock at the discretion of the Compensation Committee of the Board. Performance
measures are based on total shareholder returns on a relative and absolute
basis. On March 13, 2003, the Company made available 1,384,102 shares of its
Class A common stock under its existing stock option plans in connection with
the core award of this LTIP for twelve of its executive and senior officers.
During May 2003, two of the Company's executive officers waived these awards
under this LTIP in their entirety, which aggregated 277,778 shares or 20% of the
core awards granted. In addition, the special outperformance awards of the LTIP
were amended to increase the per share base price above which the four year
cumulative return is measured from $18.00 to $22.40. With respect to the core
award of this LTIP, the Company recorded approximately $1.3 million and $1.5
million of compensation expense for the three and six months ended June 30,
2003, respectively. Such amounts have been included in marketing, general and
administrative expenses on the accompanying consolidated statements of income.
Further, no provision will be made for the special outperformance award of this
LTIP until such time as achieving the requisite performance measures is
determined to be probable.

Basic net income per share on the Company's Class A common stock was calculated
using the weighted average number of shares outstanding of 48,000,995 and
50,775,300 for the three months ended June 30, 2003 and 2002, respectively, and
48,100,418 and 50,396,326 for the six months ended June 30, 2003 and 2002,
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 9,915,313 and
10,283,513 for the three and six months ended June 30, 2003 and 2002,
respectively.

On May 29, 2003, the Board of Directors appointed Mr. Peter Quick as Lead
Director and Chairman of the Nominating/Governance Committee. The
Nominating/Governance Committee as well as the Audit Committee and Compensation
Committee are comprised solely of independent directors.

In addition, in May 2003, the Company revised its policy with respect to
compensation of its independent directors to provide that a substantial portion
of the independent director's compensation shall be in the form of Class A
common stock of the Company. Such common stock may not be sold until such time
as the director is no longer a member of the Company's Board.



                                       12
<PAGE>



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

<TABLE>
<CAPTION>
                                                                         Three Months Ended         Six Months Ended
                                                                             June 30,                  June 30,
                                                                       ---------------------     ---------------------
                                                                         2003         2002         2003         2002
                                                                       --------     --------     --------     --------
<S>                                                                    <C>          <C>          <C>          <C>
Numerator:
     Income before discontinued operations,  dividends to preferred
       shareholders and (income) allocated to Class B shareholders     $ 12,902     $ 19,160     $ 26,882     $ 40,425
     Discontinued  operations  (net of share  applicable to limited
       partners and Class B shareholders) .........................          --          101           --          256
     Dividends to preferred shareholders ..........................      (5,317)      (5,487)     (10,634)     (10,974)
     (Income) allocated to Class B common shareholders ............      (1,816)      (3,226)      (3,884)      (7,000)
                                                                       --------     --------     --------     --------
Numerator for basic and diluted earnings per Class A common share .    $  5,769     $ 10,548     $ 12,364     $ 22,707
                                                                       ========     ========     ========     ========
Denominator:
     Denominator for basic earnings per share - weighted average
                  Class A common shares ...........................      48,001       50,775       48,100       50,396
     Effect of dilutive securities:
            Common stock equivalents ..............................         117          390          118          363
                                                                       --------     --------     --------     --------
Denominator for diluted earnings per Class A common share -
     adjusted weighted average shares and assumed conversions .....      48,118       51,165       48,218       50,759
                                                                       ========     ========     ========     ========
Basic earnings per weighted average common share:
     Class A common ...............................................    $    .12     $    .21     $    .26     $    .44
     Gain on sales of depreciable real estate assets ..............          --           --           --          .01
     Discontinued operations ......................................          --           --           --           --
                                                                       --------     --------     --------     --------
     Net income per Class A common share ..........................    $    .12     $    .21     $    .26     $    .45
                                                                       ========     ========     ========     ========
Diluted earnings per weighted average common share:
     Class A common ...............................................    $    .12     $    .21     $    .26     $    .44
     Gain on sales of depreciable real estate assets ..............          --           --           --          .01
     Discontinued operations ......................................          --           --           --           --
                                                                       --------     --------     --------     --------
     Diluted net income per Class A common share ..................    $    .12     $    .21     $    .26     $    .45
                                                                       ========     ========     ========     ========

</TABLE>



                                       13
<PAGE>



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

<TABLE>
<CAPTION>
                                                                Three Months Ended       Six Months Ended
                                                                      June 30,                June 30,
                                                                --------------------    --------------------
                                                                  2003        2002        2003        2002
                                                                --------    --------    --------   ---------
<S>                                                             <C>         <C>         <C>         <C>
Numerator:
     Income before discontinued operations, dividends to
       preferred  shareholders and (income) allocated to
       Class A shareholders .................................   $ 12,902    $ 19,160    $ 26,882    $ 40,425
     Discontinued  operations (net of share  applicable to
       limited partners and Class A shareholders) ...........         --          31          --          80
     Dividends to preferred shareholders ....................     (5,317)     (5,487)    (10,634)    (10,974)
     (Income) allocated to Class A common shareholders ......     (5,769)    (10,447)    (12,364)    (22,451)
                                                                --------    --------    --------    --------
Numerator for basic earnings per Class B common share .......      1,816       3,257       3,884       7,080
Add back:
     Income allocated to Class A common shareholders ........      5,769      10,548      12,364      22,707
     Limited partner's  minority interest in the operating
       partnership ..........................................        874       1,663       1,870       3,597
                                                                --------    --------    --------    --------
Numerator for diluted earnings per Class B common share .....   $  8,459    $ 15,468    $ 18,118    $ 33,384
                                                                ========    ========    ========    ========
Denominator:
     Denominator for basic earnings per share-weighted
       average Class B common shares ........................      9,915      10,284       9,915      10,284
     Effect of dilutive securities:
       Weighted average Class A common shares outstanding ...     48,001      50,775      48,100      50,396
       Weighted average OP Units outstanding ................      7,276       7,500       7,276       7,504
       Common stock equivalents .............................        117         390         118         363
                                                                --------    --------    --------    --------
Denominator for diluted earnings per Class B common share-
   adjusted weighted average shares and assumed conversions .     65,309      68,949      65,409      68,547
                                                                ========    ========    ========    ========
Basic earnings per weighted average common share:
     Class B common .........................................   $    .18    $    .32    $    .39    $    .67
     Gain on sales of depreciable real estate assets ........         --          --          --         .01
     Discontinued operations ................................         --          --          --         .01
                                                                --------    --------    --------    --------
     Net income per Class B common share ....................   $    .18    $    .32    $    .39    $    .69
                                                                ========    ========    ========    ========
Diluted earnings per weighted average common share:
     Class B common .........................................   $    .13    $    .22    $    .28    $    .49
     Gain on sales of depreciable real estate assets ........         --          --          --          --
     Discontinued operations ................................         --          --          --          --
                                                                --------    --------    --------    --------
     Diluted net income per Class B common share ............   $    .13    $    .22    $    .28    $    .49
                                                                ========    ========    ========    ========
</TABLE>

8. SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION (IN THOUSANDs)

<TABLE>
<CAPTION>
                                                                           SIX MONTHS ENDED
                                                                                JUNE 30,
                                                                        ---------------------
                                                                          2003          2002
                                                                        -------       -------
      <S>                                                               <C>           <C>
      Cash paid during the period for interest.....................     $47,304       $45,817
                                                                        =======       =======
      Interest capitalized during the period.......................     $ 3,675       $ 4,406
                                                                        =======       =======
</TABLE>


                                       14
<PAGE>

9.       SEGMENT DISCLOSURE

The Company owns all of the interests in its real estate properties directly or
indirectly 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 / R&D properties located and operated
within the Tri-State Area (the "Core Portfolio"). The Company's portfolio also
includes one office property located in Orlando, Florida. The Company has
Managing Directors who report directly to the Co-Presidents and Chief Financial
Officer who have been identified as the Chief Operating Decision Makers due to
their final authority over resource allocation, decisions and performance
assessment.

The Company does not consider (i) interest incurred on its Credit Facility and
Senior Unsecured Notes (ii) the operating performance of the office property
located in Orlando, Florida (iii) the operating performance of those properties
reflected as discontinued operations in the Company's consolidated statements of
income and (iv) the operating results of the Service Companies as part of its
Core Portfolio's property operating performance for purposes of its component
disclosure set forth below.

The following table sets forth the components of the Company's revenues and
expenses and other related disclosures for the three months ended June 30, 2003
and 2002 (in thousands):

<TABLE>
<CAPTION>
                                                                            Three months ended
                                             --------------------------------------------------------------------------------
                                                         June 30, 2003                                June 30, 2002
                                             ---------------------------------------   --------------------------------------
                                               Core                     CONSOLIDATED     Core                    CONSOLIDATED
                                             Portfolio      Other          TOTALS      Portfolio      Other         TOTALS
                                             ----------   ----------    ----------     ----------   ----------    ----------
<S>                                          <C>          <C>           <C>            <C>          <C>           <C>
REVENUES:

Base rents, tenant
  escalations and reimbursements .........   $  120,497   $    2,007    $  122,504     $  120,819   $    2,110    $  122,929
Other income (loss) ......................        1,117        3,791         4,908            141        1,708         1,849
                                             ----------   ----------    ----------     ----------   ----------    ----------
Total Revenues ...........................      121,614        5,798       127,412        120,960        3,818       124,778
                                             ----------   ----------    ----------     ----------   ----------    ----------
EXPENSES:
Property operating expenses ..............       45,556        1,012        46,568         39,882        1,549        41,431
Marketing, general and administrative ....        4,582        4,808         9,390          4,628        3,022         7,650
Interest .................................       12,805       10,091        22,896         12,990        9,134        22,124
Depreciation and amortization ............       28,373        1,530        29,903         25,636        2,200        27,836
                                             ----------   ----------    ----------     ----------   ----------    ----------
Total Expenses ...........................       91,316       17,441       108,757         83,136       15,905        99,041
                                             ----------   ----------    ----------     ----------   ----------    ----------
Income (loss) before minority
  interests, preferred dividends and
  distributions, equity (loss) in
  earnings of real estate joint
  ventures and service companies,
  gain on sales of depreciable real estate
  assets and discontinued operations .....   $   30,298   $  (11,643)   $   18,655     $   37,824   $  (12,087)   $   25,737
                                             ==========   ==========    ==========     ==========   ==========    ==========
Total Assets .............................   $2,673,194   $  227,800    $2,900,994     $2,693,174   $  220,826    $2,914,000
                                             ==========   ==========    ==========     ==========   ==========    ==========

</TABLE>



                                       15
<PAGE>



The following table sets forth the components of the Company's revenues and
expenses and other related disclosures for the six months ended June 30, 2003
and 2002 (in thousands):

<TABLE>
<CAPTION>
                                                                              Six months ended
                                             --------------------------------------------------------------------------------
                                                         June 30, 2003                                June 30, 2002
                                             ---------------------------------------   --------------------------------------
                                               Core                     CONSOLIDATED     Core                    CONSOLIDATED
                                             Portfolio      Other          TOTALS      Portfolio      Other         TOTALS
                                             ----------   ----------    ----------     ----------   ----------    ----------
<S>                                          <C>          <C>           <C>            <C>          <C>           <C>
REVENUES:
Base rents, tenant
  escalations and reimbursements ....        $242,338     $  3,607      $245,945       $240,216     $  4,417      $244,633
Other income (loss) .................           1,877       10,350        12,227            556        3,383         3,939
                                             --------     --------      --------       --------     --------      --------
Total Revenues ......................         244,215       13,957       258,172        240,772        7,800       248,572
                                             --------     --------      --------       --------     --------      --------
EXPENSES:
Property operating expenses .........          92,546        1,856        94,402         80,985        2,341        83,326
Marketing, general and administrative           9,248        8,401        17,649          9,188        5,557        14,745
Interest ............................          25,564       20,182        45,746         25,954       17,166        43,120
Depreciation and amortization .......          58,758        3,129        61,887         50,027        3,739        53,766
                                             --------     --------      --------       --------     --------      --------
Total Expenses ......................         186,116       33,568       219,684        166,154       28,803       194,957
                                             --------     --------      --------       --------     --------      --------
Income (loss) before minority
  interests, preferred dividends
  and distributions, equity (loss)
  in earnings of real estate joint
  ventures and service companies,
  gain on sales of depreciable real
  estate assets and discontinued
  operations ........................        $ 58,099     $(19,611)     $ 38,488       $ 74,618     $(21,003)     $ 53,615
                                             ========     ========      ========       ========     ========      ========

</TABLE>

10.      RELATED PARTY TRANSACTIONS

In connection with the IPO, the Company was granted ten year options to acquire
ten properties (the "Option Properties") which are either owned by certain
Rechler family members who are also executive officers of the Company, or in
which the Rechler family members own a non-controlling minority interest at a
price based upon an agreed upon formula. In years prior to 2001, one Option
Property was sold by the Rechler family members to a third party and four of the
Option Properties were acquired by the Company for an aggregate purchase price
of approximately $35 million, which included the issuance of approximately
475,000 OP Units valued at approximately $8.8 million. Currently, certain
Rechler family members retain their equity interests in the five remaining
Option Properties (the "Remaining Option Properties") which were not contributed
to the Company as part of the IPO. Such options provide the Company the right to
acquire fee interest in two of the Remaining Option Properties and the Rechler's
minority interests in three Remaining Option Properties. During May 2003, the
Independent Directors approved the exercise by the Company of its option to
acquire the Rechler's fee interest in two of the Remaining Option Properties
(225 Broad Hollow Road and 593 Acorn Street) and to provide customary tax
protection from the sale or disposition of these properties by the Company for a
five-year period. In addition, the Rechler family members agreed to extend the
term of the three remaining unexercised options for an additional two years.
Both of the properties are located on Long Island and aggregate approximately
228,000 square feet. Aggregate consideration to acquire the two Remaining Option
Properties is approximately $22.1 million which includes the assumption of
approximately $19.0 million of mortgage notes payable, of which the Company
anticipates to prepay or retire approximately $6.1 million, and the issuance of
approximately 145,000 OP Units. The Company anticipated acquiring these two
Remaining Option Properties in July 2003 but has since determined to defer such
purchases while it evaluates the effect on the Company of exercising these
options in relation to certain other acquisition and disposition opportunities
that have arisen.



                                       16
<PAGE>


As part of the Company's REIT structure it is provided management, leasing and
construction related services through taxable REIT subsidiaries as defined by
the Code. These services are currently provided by the Service Companies in
which, as of September 30, 2002, the Operating Partnership owned a 97%
non-controlling interest. An entity which is substantially owned by certain
Rechler family members who are also executive officers of the Company owned a 3%
controlling interest in the Service Companies. In order to minimize the
potential for corporate conflicts of interests which became possible as a result
of changes to the Code that permit REITs to own 100% of taxable REIT
subsidiaries, the Independent Directors of the Company approved the purchase by
the Operating Partnership of the remaining 3% interests in the Service
Companies. On October 1, 2002, the Operating Partnership acquired such 3%
interests in the Service Companies for an aggregate purchase price of
approximately $122,000. Such amount was less than the total amount of capital
contributed by the Rechler family members. As a result of the acquisition of the
remaining interests in the Service Companies, the Operating Partnership
commenced consolidating the operations of the Service Companies. During the six
months ended June 30, 2003, Reckson Construction Group, Inc. billed
approximately $231,000, of market rate services and Reckson Management Group,
Inc. billed approximately $140,000 of market rate management fees to the
Remaining Option Properties. In addition, for the six months ended June 30,
2003, Reckson Construction Group, Inc. performed market rate services,
aggregating approximately $124,000, for a property in which certain executive
officers of the Company maintain an equity interest.

Reckson Management Group, Inc. leases 43,713 square feet of office and storage
space at a Remaining Option Property located at 225 Broad Hollow Road, Melville,
New York for its corporate offices at an annual base rent of approximately $1.2
million. Reckson Management Group, Inc. also leases 10,722 square feet of
warehouse space used for equipment, materials and inventory storage at a
Remaining Option Property located at 593 Acorn Street, Deer Park, New York at an
annual base rent of approximately $72,000.

A company affiliated with an Independent Director of the Company leases 15,566
square feet in a property owned by the Company at an annual base rent of
approximately $431,500. Reckson Strategic Venture Partners, LLC ("RSVP") leased
5,144 square feet in one of the Company's joint venture properties at an annual
base rent of approximately $176,000. On June 15, 2003, this lease was mutually
terminated and RSVP vacated the premises.

During 1997, the Company formed FrontLine Capital Group, formerly Reckson
Service Industries, Inc. ("FrontLine") and RSVP. RSVP is a real estate venture
capital fund which invests primarily in real estate and real estate operating
companies outside the Company's core office and industrial / R&D focus and whose
common equity is held indirectly by FrontLine. In connection with the formation
and spin-off of FrontLine, the Operating Partnership established an unsecured
credit facility with FrontLine (the "FrontLine Facility") in the amount of $100
million for FrontLine to use in its investment activities, operations and other
general corporate purposes. The Company has advanced approximately $93.4 million
under the FrontLine Facility. The Operating Partnership also approved the
funding of investments of up to $100 million relating to RSVP (the "RSVP
Commitment"), through RSVP-controlled joint ventures (for REIT-qualified
investments) or advances made to FrontLine under an unsecured loan facility (the
"RSVP Facility") having terms similar to the FrontLine Facility (advances made
under the RSVP Facility and the FrontLine Facility hereafter, the "FrontLine
Loans"). During March 2001, the Company increased the RSVP Commitment to $110
million and as of June 30, 2003 approximately $109.1 million had been funded
through the RSVP Commitment, of which $59.8 million represents investments by
the Company in RSVP-controlled (REIT-qualified) joint ventures and $49.3 million
represents loans made to FrontLine under the RSVP Facility. As of June 30, 2003
interest accrued (net of reserves) under the FrontLine Facility and the RSVP
Facility was approximately $19.6 million. RSVP retained the services of two
managing directors to manage RSVP's day-to-day operations. Prior to the spin off
of FrontLine, the Company guaranteed certain salary provisions of their
employment agreements with RSVP Holdings, LLC, RSVP's common member. The term of
these employment agreements is seven years commencing March 5, 1998 provided
however, the term may be earlier terminated after five years upon certain
circumstances. The salary for each managing director is $1 million in the first
five years and $1.6 million in years six and seven.

At June 30, 2001, the Company assessed the recoverability of the FrontLine Loans
and reserved approximately $3.5 million of the interest accrued during the
three-month period then ended. In addition, the Company formed a committee of
its Board of Directors, comprised solely of independent directors, to consider
any actions to be taken by the Company in connection with the FrontLine Loans
and its investments in joint ventures with RSVP. During the third quarter of
2001, the Company noted a significant deterioration in FrontLine's operations
and financial condition and, based on its assessment of value and recoverability
and considering the findings and recommendations of the committee and its
financial advisor, the Company recorded a $163 million valuation reserve charge,
inclusive of anticipated costs, in its consolidated statements of operations
relating to its investments in the FrontLine Loans and joint ventures with RSVP.
The Company has discontinued the accrual of interest income with respect to the
FrontLine Loans. The Company has also reserved against its share of GAAP equity
in earnings from the RSVP controlled joint ventures funded through the RSVP
Commitment until such income is realized through cash distributions.

At December 31, 2001, the Company, pursuant to Section 166 of the Code charged
off for tax purposes $70 million of the aforementioned reserve directly related
to the FrontLine Facility, including accrued interest. On February 14, 2002, the
Company charged off for tax purposes an additional $38 million of the reserve
directly related to the FrontLine Facility, including accrued interest and $47
million of the reserve directly related to the RSVP Facility, including accrued
interest.



                                    17

<PAGE>


FrontLine is in default under the FrontLine Loans from the Operating Partnership
and on June 12, 2002, filed a voluntary petition for relief under Chapter 11 of
the United States Bankruptcy Code.

As a result of the foregoing, the net carrying value of the Company's
investments in the FrontLine Loans and joint venture investments with RSVP,
inclusive of the Company's share of previously accrued GAAP equity in earnings
on those investments, is approximately $65 million which was reassessed with no
change by management as of June 30, 2003. Such amount has been reflected in
investments in service companies and affiliate loans and joint ventures on the
Company's consolidated balance sheet.

On or about April 29, 2003, RSVP entered into agreements regarding the
restructuring of its capital structure and arrangements with its management. In
connection with such restructuring, RSVP transferred $41 million in cash which
comprised certain un-invested capital and proceeds from the sale of certain of
the privatization assets and the assets that comprised its parking investments
valued at approximately $28.5 million to the preferred equity holders in RSVP.
In addition, RSVP agreed to redeem the preferred equity holders' interests for
an additional $95.8 million in cash, subject to a financing contingency. Funds
required for RSVP to complete the redemption transaction are anticipated to be
available from sales of the remaining privatization assets, sales of the medical
office assets and proceeds from a third party financing. RSVP also agreed to
restructure its relationship with its current managing directors, conditioned
upon the redemption of the preferred equity interests, whereby a management
company formed by the managing directors will be retained to manage RSVP. RSVP
will enter into a management agreement that will provide for an annual base
management fee, and disposition fees equal to 2% of the net proceeds received by
RSVP on asset sales. (The base fee and disposition fees together being subject
to a maximum amount over the term of the agreement of $7.5 million.) In
addition, the managing directors will retain a subordinate residual interest in
RSVP's assets. The management agreement will have a three-year term, subject to
early termination in the event of the disposition of all of the assets of RSVP.
As a result of this new arrangement, the employment contracts of the managing
directors will be terminated. RSVP is currently negotiating with a lender to
provide a portion of the proceeds needed to complete the restructuring
transaction. There can be no assurance that any of the foregoing pending
transactions will be completed. In the event that the redemption of the
preferred does not close, all parties rights shall remain unaffected, including
the rights relating to a dispute between common and preferred members over
certain provisions of the RSVP operating agreement.

Both the FrontLine Facility and the RSVP Facility terminated on June 15, 2003,
are unsecured and advances thereunder are recourse obligations of FrontLine.
Notwithstanding the valuation reserve, under the terms of the credit facilities,
interest accrues on the FrontLine Loans at a rate equal to the greater of (a)
the prime rate plus two percent and (b) 12% per annum, with the rate on amounts
that are outstanding for more than one year increasing annually at a rate of
four percent of the prior year's rate. In March 2001, the credit facilities were
amended to provide that (i) interest is payable only at maturity and (ii) the
Company may transfer all or any portion of its rights or obligations under the
credit facilities to its affiliates. The Company requested these changes as a
result of changes in REIT tax laws. As a result of FrontLine's default under the
FrontLine Loans, interest on borrowings thereunder accrue at default rates
ranging between 13% and 14.5% per annum.

Scott H. Rechler, who serves as Co-Chief Executive Officer and a director of the
Company, serves as CEO and Chairman of the Board of Directors of FrontLine and
is its sole board member. Scott H. Rechler also serves as a member of the
management committee of RSVP.

11.      COMMITMENTS AND CONTINGENCIES

HQ Global Workplaces, Inc. ("HQ"), one of the largest providers of flexible
officing solutions in the world and which is controlled by FrontLine, currently
operates eight (formerly eleven) executive office centers in the Company's
properties, two of which are held through joint ventures. The leases under which
these office centers operate expire between 2008 and 2011, encompass
approximately 160,600 square feet and have current contractual annual base rents
of approximately $3.8 million. On March 13, 2002, as a result of experiencing
financial difficulties, HQ voluntarily filed a petition for relief under Chapter
11 of the U.S. Bankruptcy Code. As of June 30, 2002, HQ's leases with the
Company were in default. Further, the Bankruptcy Court has (i) granted HQ's
petition to reject three of its leases with the Company, one of which is held
through the 919JV and (ii) modify the terms of the lease, which is held through
the 520JV. Two of the three rejected leases were held through wholly owned
entities, aggregated approximately 23,900 square feet and were rejected in March
2002. The Company has since re-leased 100% of the space related to these two
rejected leases. The third rejected lease held through the 919JV aggregated
approximately 31,000 square feet and was to provide for contractual base rents
of approximately $1.9 million for the 2003 calendar year. With respect to the
lease held through the 520JV, HQ surrendered approximately 10,500 square feet,
or one-third of the total leased premises, to the Company. The restructured
lease provides for initial base rent of $23.25 per foot and is scheduled to
expire in 2011. Of the surrendered space, approximately 6,500 square feet has
been released at $18.50 per foot to an existing tenant in the 520JV and is
scheduled to expire in 2010. Pursuant to the bankruptcy filing, HQ has been
paying current rental charges under its leases with the Company, other than
under the three rejected leases. The Company is in negotiation to restructure
two of the leases and leave the terms of the remaining five leases unchanged.
All negotiations with HQ are conducted by a committee designated by the Board
and chaired by an independent director. There can be no assurance as to whether
any deal will be consummated with HQ or if HQ will affirm or reject any or all
of its remaining leases with the Company. As a result of the foregoing, the
Company has currently established reserves of approximately $428,000 (net of
minority partners' interests and including the Company's share of unconsolidated
joint venture interest), or 85%, of the amounts due from HQ as of June 30, 2003.



                                       18
<PAGE>


WorldCom/MCI and its affiliates ("WorldCom"), a telecommunications company,
which leased approximately 527,000 square feet in thirteen of the Company's
properties located throughout the Tri-State Area voluntarily filed a petition
for relief under Chapter 11 of the U.S. Bankruptcy Code on July 21, 2002. The
Bankruptcy Court granted WorldCom's petition to reject four of its leases with
the Company. The four rejected leases aggregated approximately 282,000 square
feet and were to provide for contractual base rents of approximately $7.2
million for the 2003 calendar year. All of WorldCom's leases are current on base
rental charges through August 31, 2003, other than under the four rejected
leases and the Company currently holds approximately $300,000 in security
deposits relating to the non-rejected leases. The Company has reached an
agreement with WorldCom to restructure the remaining WorldCom leases, which is
subject to approval of the Bankruptcy Court. There can be no assurance as to
whether any deal will be consummated with WorldCom or if WorldCom will affirm or
reject any or all of its remaining leases with the Company.

As of June 30, 2003, WorldCom occupied approximately 245,000 square feet of
office space with aggregate annual base rental revenues of approximately $4.1
million, or 1.1% of the Company's total 2003 annualized rental revenue based on
base rental revenue earned on a consolidated basis.











                                       19
<PAGE>



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

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

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

CRITICAL ACCOUNTING POLICIES

The consolidated financial statements of the Company include accounts of the
Company and all majority-owned subsidiaries. The preparation of financial
statements in conformity with accounting principles generally accepted in the
United States ("GAAP") requires management to make estimates and assumptions in
certain circumstances that affect amounts reported in the Company's consolidated
financial statements and related notes. In preparing these financial statements,
management has utilized information available including its past history,
industry standards and the current economic environment among other factors in
forming its estimates and judgments of certain amounts included in the
consolidated financial statements, giving due consideration to materiality. It
is possible that the ultimate outcome as anticipated by management in
formulating its estimates inherent in these financial statements may not
materialize. However, application of the critical accounting policies below
involves the exercise of judgment and use of assumptions as to future
uncertainties and, as a result, actual results could differ from these
estimates. In addition, other companies may utilize different estimates, which
may impact comparability of the Company's results of operations to those of
companies in similar businesses.

Revenue Recognition and Accounts Receivable

Rental revenue is recognized on a straight line basis, which averages minimum
rents over the terms of the leases. The excess of rents recognized over amounts
contractually due are included in deferred rents receivable on the Company's
balance sheets. The leases also typically provide for tenant reimbursements of
common area maintenance and other operating expenses and real estate taxes.
Ancillary and other property related income is recognized in the period earned.

The Company makes estimates of the collectibility of its tenant accounts
receivables related to base rents, tenant escalations and reimbursements and
other revenue or income. The Company specifically analyzes tenant receivables
and analyzes historical bad debts, customer credit worthiness, current economic
trends, changes in customer payment terms, publicly available information and to
the extent available, guidance provided by the tenant when evaluating the
adequacy of its allowance for doubtful accounts. In addition, when tenants are
in bankruptcy the Company makes estimates of the expected recovery of
pre-petition administrative and damage claims. In some cases, the ultimate
resolution of those claims can exceed a year. These estimates have a direct
impact on the Company's net income because a higher bad debt reserve results in
less net income.

During the three and six months ended June 30, 2003, the Company incurred
approximately $1.6 million and $3.6 million of bad debt expense, respectively,
related to tenant receivables and deferred rents receivable which accordingly
reduced total revenues and reported net income during the period.



                                       20
<PAGE>

The Company records interest income on investments in mortgage notes and notes
receivable on an accrual basis of accounting. The Company does not accrue
interest on impaired loans where, in the judgment of management, collection of
interest according to the contractual terms is considered doubtful. Among the
factors the Company considers in making an evaluation of the collectibility of
interest are: (i) the status of the loan, (ii) the value of the underlying
collateral, (iii) the financial condition of the borrower and (iv)anticipated
future events.

Reckson Construction Group, Inc. and Reckson Construction Group New York, Inc.
use the percentage-of-completion method for recording amounts earned on its
contracts. This method records amounts earned as revenue in the proportion that
actual costs incurred to date bear to the estimate of total costs at contract
completion.

Gain on sales of real estate are recorded when title is conveyed to the buyer,
subject to the buyer's financial commitment being sufficient to provide economic
substance to the sale and the Company having no substantial continuing
involvement with the buyer.

The Company follows the guidance provided for under the Financing Accounting
Standards Board ("FASB") Statement No. 66 "Accounting for Sales of Real Estate"
("Statement No. 66"), which provides guidance on sales contracts that are
accompanied by agreements which require the seller to develop the property in
the future. Under Statement No. 66 profit is recognized and allocated to the
sale of the land and the later development or construction work on the basis of
estimated costs of each activity; the same rate of profit is attributed to each
activity. As a result, profits are recognized and reflected over the improvement
period on the basis of costs incurred (including land) as a percentage of total
costs estimated to be incurred. The Company uses the percentage of completion
method, as the future costs of development and profit were reliably estimated.

Real Estate

Land, buildings and improvements, furniture, fixtures and equipment are recorded
at cost. Tenant improvements, which are included in buildings and improvements,
are also stated at cost. Expenditures for ordinary maintenance and repairs are
expensed to operations as incurred. Renovations and / or replacements, which
improve or extend the life of the asset, are capitalized and depreciated over
their estimated useful lives.

Depreciation is computed utilizing the straight-line method over the estimated
useful lives of ten to thirty years for buildings and improvements and five to
ten years for furniture, fixtures and equipment. Tenant improvements are
amortized on a straight-line basis over the term of the related leases.

The Company is required to make subjective assessments as to the useful lives of
its properties for purposes of determining the amount of depreciation to reflect
on an annual basis with respect to those properties. These assessments have a
direct impact on the Company's net income. Should the Company lengthen the
expected useful life of a particular asset, it would be depreciated over more
years and result in less depreciation expense and higher annual net income.

Assessment by the Company of certain other lease related costs must be made when
the Company has a reason to believe that the tenant will not be able to execute
under the term of the lease as originally expected.

Long Lived Assets

On a periodic basis, management assesses whether there are any indicators that
the value of the real estate properties may be impaired. A property's value is
impaired only if management's estimate of the aggregate future cash flows
(undiscounted and without interest charges) to be generated by the property are
less than the carrying value of the property. Such cash flows consider factors
such as expected future operating income, trends and prospects, as well as the
effects of demand, competition and other factors. To the extent impairment has
occurred, the loss will be measured as the excess of the carrying amount of the
property over the fair value of the property.

The Company is required to make subjective assessments as to whether there are
impairments in the value of its real estate properties and other investments.
These assessments have a direct impact on the Company's net income because
recognizing an impairment results in an immediate negative adjustment to net
income. In determining impairment, if any, the Company has adopted FASB
Statement No. 144, "Accounting for the Impairment or Disposal of Long Lived
Assets."



                                       21
<PAGE>


OVERVIEW AND BACKGROUND

The Company is a self-administered and self-managed real estate investment trust
("REIT") specializing in the ownership, operation, acquisition, leasing,
financing, management and development of office and industrial / R&D 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").

As of June 30, 2003, the Company owned and operated 75 office properties
(inclusive of eleven office properties owned through joint ventures) comprising
approximately 13.6 million square feet, 104 industrial / R&D properties
comprising approximately 6.9 million square feet and two retail properties
comprising approximately 20,000 square feet located in the Tri-State Area.

The Company also owns approximately 313 acres of land in 12 separate parcels of
which the Company can develop approximately 3.0 million square feet of office
space and approximately 400,000 square feet of industrial / R&D space. The
Company is currently evaluating alternative land uses for certain of the land
holdings to realize the highest economic value. These alternatives may include
rezoning certain land parcels from commercial to residential for potential
disposition. As of June 30, 2003, the Company had invested approximately $112.1
million in these development projects. Management has made subjective
assessments as to the value and recoverability of these investments based on
current and proposed development plans, market comparable land values and
alternative use values. As of June 30, 2003, the Company has capitalized
approximately $2.4 million related to real estate taxes, interest and other
carrying costs related to these development projects.

During February 2003, the Company, through Reckson Construction Group, Inc.,
entered into a contract with an affiliate of First Data Corp. to sell a
19.3-acre parcel of land located in Melville, New York and has been retained by
the purchaser to develop a build-to-suit 195,000 square foot office building for
aggregate consideration of approximately $47 million. This transaction closed on
March 11, 2003 and development of the aforementioned office building has
commenced. Net proceeds from the land sale of approximately $18.3 million were
used to establish an escrow account with a qualified intermediary for a future
exchange of real property pursuant to Section 1031 of the Internal Revenue Code
of 1986, as amended (the "Code") and is included in prepaid expenses and other
assets on the Company's balance sheet. The Code allows for the deferral of taxes
related to the gain attributable to the sale of property if such qualified
identified replacement property is identified within 45 days and acquired within
180 days from the initial sale. The Company has identified certain properties
and interests in properties for purposes of this exchange. In accordance with
Statement No. 66, the Company has estimated its pre-tax gain on this land sale
and build-to-suit transaction to be approximately $20.6 million of which $4.3
million and $10.1million has been recognized during the three and six months
ended June 30, 2003, respectively and is included in investment and other income
on the Company's statements of income. Approximately $10.5 million is estimated
to be earned in future periods as the development progresses.

On May 22, 2003, the Company, through Reckson Construction Group, Inc., acquired
two industrial redevelopment properties in Hauppauge, Long Island and the
properties acquired were identified qualified replace encompassing approximately
100,000 square feet for total consideration of approximately $6.5 million. This
acquisition was financed from the sales proceeds being held by the previously
referenced qualified intermediary and the properties acquired were identified,
qualified replacement properties. If Reckson Construction Group, Inc. is unable
to acquire additional qualified replacement properties or interests therein by
September 7, 2003, a tax liability of approximately $5.2 million will result
from the gain recognized on the sale proceeds received from the land sale to
First Data.

On August 7, 2003, the Company acquired a ten story, 181,800 square foot Class A
office property located in Stamford, Connecticut. This acquisition was financed,
in part, through an advance under the Credit Facility of $21.6 million and the
issuance of 465,845 Class C common units of limited partnership interest valued
at $24.00 per unit.

The Company holds a $17.0 million interest in a note receivable, which bears
interest at 12% per annum and is secured by a minority partnership interest in
Omni Partners, L.P., owner of the Omni, a 579,000 square foot Class A office
property located in Uniondale, NY (the "Omni Note"). The Company currently owns
a 60% majority partnership interest in Omni Partnership, L.P. and on March 14,
2007 may exercise an option to acquire the remaining 40% interest for a price
based on 90% of the fair market value of the property. The Company also holds
three other notes receivable aggregating $36.5 million which bear interest at
rates ranging from 10.5% to 12% per annum and are secured in part by a minority
partner's preferred unit interest in the Operating Partnership, certain interest
in real property and a personal guarantee (the "Other Notes" and collectively
with the Omni Note, the "Note Receivable Investments"). As of June 30, 2003,
management has made subjective assessments as to the underlying security value
on the Company's Note Receivable Investments. These assessments indicated an
excess of market value over carrying value related to the Company's Note
Receivable Investments. Based on these assessments, the Company's management
believes there is no impairment to the carrying value related to the Company's
Note Receivable Investments. The Company also owns a 355,000 square foot office
building in Orlando, Florida. This non-core real estate holding was acquired in
May 1999 in connection with the Company's initial New York City portfolio
acquisition. This property is cross collateralized under a $102 million mortgage
note along with one of the Company's New York City buildings.



                                       22
<PAGE>


The Company also owns a 60% non-controlling interest in a 172,000 square foot
office building located at 520 White Plains Road in White Plains, New York (the
"520JV"), which it manages - the remaining 40% interest is owned by JAH Realties
L.P. Jon Halpern, the CEO and a director of HQ Global Workplaces, is a partner
in JAH Realties, L.P. As of June 30, 2003, the 520JV had total assets of $20.1
million, a mortgage note payable of $12.3 million and other liabilities of
$503,000. The Company's allocable share of the 520JV mortgage note payable is
approximately $8.2 million. This mortgage note payable bears interest at 8.85%
per annum and matures on September 1, 2005. During the three months ended June
30, 2003, HQ Global Workplaces, a tenant of the 520JV surrendered approximately
one-third of their premises. As a result, the 520JV incurred a write-off of
$633,000 relating to its deferred rents receivable and incurred a net loss of
approximately $497,000 and $362,000 for the three and six months ended June 30,
2003, respectively. The operating agreement of the 520JV requires joint
decisions from all members on all significant operating and capital decisions
including sale of the property, refinancing of the property's mortgage debt,
development and approval of leasing strategy and leasing of rentable space. As a
result of the decision-making participation relative to the operations of the
property, the Company accounts for the 520JV under the equity method of
accounting. In accordance with the equity method of accounting the Company's
proportionate share of the 520JV loss was approximately $270,000 and $164,000
for the three and six months ended June 30, 2003, respectively.

In connection with the IPO, the Company was granted ten year options to acquire
ten properties (the "Option Properties") which are either owned by certain
Rechler family members who are also executive officers of the Company, or in
which the Rechler family members own a non-controlling minority interest at a
price based upon an agreed upon formula. In years prior to 2001, one Option
Property was sold by the Rechler family members to a third party and four of the
Option Properties were acquired by the Company for an aggregate purchase price
of approximately $35 million, which included the issuance of approximately
475,000 OP Units valued at approximately $8.8 million. Currently, certain
Rechler family members retain their equity interests in the five remaining
Option Properties (the "Remaining Option Properties") which were not contributed
to the Company as part of the IPO. Such options provide the Company the right to
acquire fee interest in two of the Remaining Option Properties and the Rechler's
minority interests in three Remaining Option Properties. During May 2003, the
Independent Directors approved the exercise by the Company of its option to
acquire the Rechler's fee interest in two of the Remaining Option Properties
(225 Broad Hollow Road and 593 Acorn Street) and to provide customary tax
protection from the sale or disposition of these properties by the Company for a
five-year period. In addition, the Rechler family members agreed to extend the
term of the three remaining unexercised options for an additional two years.
Both of the properties are located on Long Island and aggregate approximately
228,000 square feet. Aggregate consideration to acquire the two Remaining Option
Properties is approximately $22.1 million which includes the assumption of
approximately $19.0 million of mortgage notes payable, of which the Company
anticipates to prepay or retire approximately $6.1 million, and the issuance of
approximately 145,000 OP Units. The Company anticipated acquiring these two
Remaining Option Properties in July 2003 but has since determined to defer such
purchases while it evaluates the effect on the Company of exercising these
options in relation to certain other acquisition and disposition opportunities
that have arisen.

As part of the Company's REIT structure it is provided management, leasing and
construction related services through taxable REIT subsidiaries as defined by
the Code. These services are currently provided by the Service Companies in
which, as of September 30, 2002 the Operating Partnership owned a 97%
non-controlling interest. An entity which is substantially owned by certain
Rechler family members who are also executive officers of the Company owned a 3%
controlling interest in the Service Companies. In order to minimize the
potential for corporate conflicts of interests which became possible as a result
of changes to the Code that permit REITs to own 100% of taxable REIT
subsidiaries, the Independent Directors of the Company approved the purchase by
the Operating Partnership of the remaining 3% interests in the Service
Companies. On October 1, 2002, the Operating Partnership acquired such 3%
interests in the Service Companies for an aggregate purchase price of
approximately $122,000. Such amount was less than the total amount of capital
contributed by the Rechler family members. As a result of the acquisition of the
remaining interests in the Service Companies, the Operating Partnership
commenced consolidating the operations of the Service Companies. During the six
months ended June 30, 2003, Reckson Construction Group, Inc. billed
approximately $231,000 of market rate services and Reckson Management Group,
Inc. billed approximately $140,000 of market rate management fees to the
Remaining Option Properties. In addition, for the six months ended June 30,
2003, Reckson Construction Group, Inc. performed market rate services,
aggregating approximately $124,000, for a property in which certain executive
officers of the Company maintain an equity interest.

Reckson Management Group, Inc. leases 43,713 square feet of office and storage
space at a Remaining Option Property located at 225 Broad Hollow Road, Melville,
New York for its corporate offices at an annual base rent of approximately $1.2
million. Reckson Management Group, Inc. also leases 10,722 square feet of
warehouse space used for equipment, materials and inventory storage at a
Remaining Option Property located at 593 Acorn Street, Deer Park, New York at an
annual base rent of approximately $72,000.

A company affiliated with an Independent Director of the Company leases 15,566
square feet in a property owned by the Company at an annual base rent of
approximately $431,500. Reckson Strategic Venture Partners, LLC ("RSVP") leased
5,144 square feet in one of the Company's joint venture properties at an annual
base rent of approximately $176,000. On June 15, 2003, this lease was mutually
terminated and RSVP vacated the premises.

During July 1998, the Company formed Metropolitan Partners, LLC ("Metropolitan")
for the purpose of acquiring Class A office properties in New York City.
Currently the Company owns, through Metropolitan, five Class A office properties
aggregating approximately 3.5 million square feet.



                                       23
<PAGE>


During September 2000, the Company formed a joint venture (the "Tri-State JV")
with Teachers Insurance and Annuity Association ("TIAA") and contributed nine
Class A suburban office properties aggregating approximately 1.5 million square
feet to the Tri-State JV for a 51% majority ownership interest. TIAA contributed
approximately $136 million for a 49% interest in the Tri-State JV which was then
distributed to the Company. The Company is responsible for managing the
day-to-day operations and business affairs of the Tri-State JV and has
substantial rights in making decisions affecting the properties such as leasing,
marketing and financing. The minority member has certain rights primarily
intended to protect its investment. For purposes of its financial statements the
Company consolidates the Tri-State JV.

On December 21, 2001, the Company formed a joint venture with the New York State
Teachers' Retirement Systems ("NYSTRS") (the "919JV") whereby NYSTRS acquired a
49% indirect interest in the property located at 919 Third Avenue, New York, NY
for $220.5 million which included $122.1 million of its proportionate share of
secured mortgage debt and approximately $98.4 million of cash which was then
distributed to the Company. The Company is responsible for managing the
day-to-day operations and business affairs of the 919JV and has substantial
rights in making decisions affecting the property such as developing a budget,
leasing and marketing. The minority member has certain rights primarily intended
to protect its investment. For purposes of its financial statements the Company
consolidates the 919JV.

The total market capitalization of the Company at June 30, 2003 was
approximately $3.1billion. The Company's total 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 $20.86 per share/unit (based on the closing price of
the Company's Class A common stock on June 30, 2003), (ii) the market value of
the Company's Class B common stock of $21.30 per share (based on the closing
price of the Company's Class B common stock on June 30, 2003), (iii) the
liquidation preference value of the Company's Series A preferred stock and
Series B preferred stock of $25 per share, (iv) the liquidation preference value
of the Operating Partnership's preferred units of $1,000 per unit and (v) the
approximately $1.4 billion (including its share of joint venture debt and net of
minority partners' interests share of joint venture debt) of debt outstanding at
June 30, 2003. As a result, the Company's total debt to total market
capitalization ratio at June 30, 2003 equaled approximately 46.2%.

During 1997, the Company formed FrontLine Capital Group, formerly Reckson
Service Industries, Inc. ("FrontLine") and RSVP. RSVP is a real estate venture
capital fund, which invests primarily in real estate and real estate, operating
companies outside the Company's core office and industrial / R&D focus and whose
common equity is held indirectly by FrontLine. In connection with the formation
and spin-off of FrontLine, the Operating Partnership established an unsecured
credit facility with FrontLine (the "FrontLine Facility") in the amount of $100
million for FrontLine to use in its investment activities, operations and other
general corporate purposes. The Company has advanced approximately $93.4 million
under the FrontLine Facility. The Operating Partnership also approved the
funding of investments of up to $100 million relating to RSVP (the "RSVP
Commitment"), through RSVP-controlled joint ventures (for REIT-qualified
investments) or advances made to FrontLine under an unsecured loan facility (the
"RSVP Facility") having terms similar to the FrontLine Facility (advances made
under the RSVP Facility and the FrontLine Facility hereafter, the "FrontLine
Loans"). During March 2001, the Company increased the RSVP Commitment to $110
million and as of June 30, 2003, approximately $109.1 million had been funded
through the RSVP Commitment, of which $59.8 million represents investments by
the Company in RSVP-controlled (REIT-qualified) joint ventures and $49.3 million
represents loans made to FrontLine under the RSVP Facility. As of June 30, 2003,
interest accrued (net of reserves) under the FrontLine Facility and the RSVP
Facility was approximately $19.6 million. RSVP retained the services of two
managing directors to manage RSVP's day to day operations. Prior to the spin off
of FrontLine, the Company guaranteed certain salary provisions of their
employment agreements with RSVP Holdings, LLC, RSVP's common member. The term of
these employment agreements is seven years commencing March 5, 1998 provided
however, the term may be earlier terminated after five years upon certain
circumstances. The salary for each managing director is $1 million in the first
five years and $1.6 million in years six and seven.

The following table sets forth the Company's invested capital (before valuation
reserves) in RSVP controlled (REIT-qualified) joint ventures and amounts, which
were advanced under the RSVP Commitment to FrontLine, for its investment in RSVP
controlled investments (in thousands):

                                  RSVP controlled       Amounts
                                  joint ventures       advanced       Total
                                 ----------------   -------------  -----------
      Privatization                  $ 21,480         $  3,520      $ 25,000
      Student Housing                  18,086            3,935        22,021
      Medical Offices                  20,185               --        20,185
      Parking                              --            9,091         9,091
      Resorts                              --            8,057         8,057
      Net leased retail                    --            3,180         3,180
      Other assets and overhead            --           21,598        21,598
                                     --------         --------      --------
                                     $ 59,751         $ 49,381      $109,132
                                     ========         ========      ========



                                       24
<PAGE>


Included in these investments is approximately $9.6 million of cash that has
been contributed to the respective RSVP controlled joint ventures or advanced
under the RSVP Commitment to FrontLine and is being held, along with cash from
the preferred investors.

In connection with the proposed restructuring of RSVP, the Company and the
second largest creditor of FrontLine, have agreed to adjust certain allocations
to account for the overhead expenses incurred by RSVP. Such adjustment is not
expected to have a material effect on the Company's potential recovery as a
creditor of FrontLine.

At June 30, 2001, the Company assessed the recoverability of the FrontLine Loans
and reserved approximately $3.5 million of the interest accrued during the
three-month period then ended. In addition, the Company formed a committee of
its Board of Directors, comprised solely of independent directors, to consider
any actions to be taken by the Company in connection with the FrontLine Loans
and its investments in joint ventures with RSVP. During the third quarter of
2001, the Company noted a significant deterioration in FrontLine's operations
and financial condition and, based on its assessment of value and recoverability
and considering the findings and recommendations of the committee and its
financial advisor, the Company recorded a $163 million valuation reserve charge,
inclusive of anticipated costs, in its consolidated statements of operations
relating to its investments in the FrontLine Loans and joint ventures with RSVP.
The Company has discontinued the accrual of interest income with respect to the
FrontLine Loans. The Company has also reserved against its share of GAAP equity
in earnings from the RSVP controlled joint ventures funded through the RSVP
Commitment until such income is realized through cash distributions.

At December 31, 2001, the Company, pursuant to Section 166 of the Code charged
off for tax purposes $70 million of the aforementioned reserve directly related
to the FrontLine Facility, including accrued interest. On February 14, 2002, the
Company charged off for tax purposes an additional $38 million of the reserve
directly related to the FrontLine Facility, including accrued interest and $47
million of the reserve directly related to the RSVP Facility, including accrued
interest.

FrontLine is in default under the FrontLine Loans from the Operating Partnership
and on June 12, 2002, filed a voluntary petition for relief under Chapter 11 of
the United States Bankruptcy Code.

As a result of the foregoing, the net carrying value of the Company's
investments in the FrontLine Loans and joint venture investments with RSVP,
inclusive of the Company's share of previously accrued GAAP equity in earnings
on those investments, is approximately $65 million, which was reassessed with no
change by management as of June 30, 2003. Such amount has been reflected in
investments in service companies and affiliate loans and joint ventures on the
Company's consolidated balance sheet.

On or about April 29, 2003, RSVP entered into agreements regarding the
restructuring of its capital structure and arrangements with its management. In
connection with such restructuring, RSVP transferred $41 million in cash which
comprised certain un-invested capital and proceeds from the sale of certain of
the privatization assets and the assets that comprised its parking investments
valued at approximately $28.5 million to the preferred equity holders in RSVP.
In addition, RSVP agreed to redeem the preferred equity holders' interests for
an additional $95.8 million in cash, subject to a financing contingency. Funds
required for RSVP to complete the redemption transaction are anticipated to be
available from sales of the remaining privatization assets, sales of the medical
office assets and proceeds from a third party financing. RSVP also agreed to
restructure its relationship with its current managing directors, conditioned
upon the redemption of the preferred equity interests, whereby a management
company formed by the managing directors will be retained to manage RSVP. RSVP
will enter into a management agreement that will provide for an annual base
management fee, and disposition fees equal to 2% of the net proceeds received by
RSVP on asset sales. (The base fee and disposition fees together being subject
to a maximum amount over the term of the agreement of $7.5 million.) In
addition, the managing directors will retain a subordinate residual interest in
RSVP's assets. The management agreement will have a three-year term, subject to
early termination in the event of the disposition of all of the assets of RSVP.
As a result of this new arrangement, the employment contracts of the managing
directors will be terminated. RSVP is currently negotiating with a lender to
provide a portion of the proceeds needed to complete the restructuring
transaction. There can be no assurance that any of the foregoing pending
transactions will be completed. In the event that the redemption of the
preferred does not close, all parties rights shall remain unaffected, including
the rights relating to a dispute between common and preferred members over
certain provisions of the RSVP operating agreement.

Both the FrontLine Facility and the RSVP Facility terminated on June 15, 2003,
are unsecured and advances thereunder are recourse obligations of FrontLine.
Notwithstanding the valuation reserve, under the terms of the credit facilities,
interest accrues on the FrontLine Loans at a rate equal to the greater of (a)
the prime rate plus two percent and (b) 12% per annum, with the rate on amounts
that are outstanding for more than one year increasing annually at a rate of
four percent of the prior year's rate. In March 2001, the credit facilities were
amended to provide that (i) interest is payable only at maturity and (ii) the
Company may transfer all or any portion of its rights or obligations under the
credit facilities to its affiliates. The Company requested these changes as a
result of changes in REIT tax laws. As a result of FrontLine's default under the
FrontLine Loans, interest on borrowings thereunder accrue at default rates
ranging between 13% and 14.5% per annum.

Scott H. Rechler, who serves as Co-Chief Executive Officer and a director of the
Company, serves as CEO and Chairman of the Board of Directors of FrontLine and
is its sole board member. Scott H. Rechler also serves as a member of the
management committee of RSVP.



                                       25
<PAGE>


RESULTS  OF OPERATIONS

Three months ended June 30, 2003 as compared to the three months ended June 30,
2002:

Property operating revenues which include base rents and tenant escalations and
reimbursements ("Property Operating Revenues") decreased by approximately
$425,000 for the three months ended June 30, 2003 as compared to the 2002
period. The change in Property Operating Revenues is attributable to a decrease
in certain property occupancy rates and decreases in rental rates in certain
"same store" properties amounting to approximately $3.0 million. These decreases
were offset by built-in rent increases and escalation increases in certain of
our leases of approximately $2.6 million.

Investment and other income increased by $3.1 million. This increase is
primarily attributable to the gain recognized on the First Data land sale and
build-to-suit transaction of approximately $4.3 million. This increase in
investment and other income was offset by decreases in income generated by the
Service Companies.

Property operating expenses, real estate taxes and ground rents ("Property
Expenses") increased by $5.1 million or 12.4% for the three months ended June
30, 2003 as compared to the 2002 period. This increase includes a $3.2 million
increase in property operating expenses and a $1.9 million increase in real
estate taxes. Included in the $3.2 million of property operating expense
increase is $1.0 million attributable to increases in insurance costs. The
insurance cost increase is primarily attributable to the added cost of terrorism
insurance for our properties and a significant increase in our liability
insurance costs. The increase in insurance costs were caused by implications of
the events which occurred on September 11, 2001. The increase in real estate
taxes are attributable to the significant increase levied by certain
municipalities, particularly in New York City and Nassau County, New York which
are experiencing severe fiscal budget issues. Also included in the property
operating expense increase is approximately 892,000 of increased utility and
snow removal costs which resulted in part to energy rate increases and continued
inclement weather in the Northeast during the Spring months.

Gross Operating Margins (defined as Property Operating Revenues less Property
Expenses, taken as a percentage of Property Operating Revenues) for the three
months ended June 30, 2003 and 2002 were 62.0% and 66.3%, respectively. The
decrease in Gross Operating Margins is primarily attributable to decreases in
average occupancy of the portfolio and also as a result of increased Property
Expenses specifically relating to insurance costs, real estate taxes and
utilities and snow removal costs.

Marketing, general and administrative expenses increased by approximately $1.7
million for the three months ended June 30, 2003 as compared to the 2002 period.
The increase is in part attributable to increased compensation costs including
compensation costs associated with the Company's long term incentive programs
which commenced in March 2003 and amounted to approximately $1.3 million for the
three months ended June 30, 2003. The Company also incurred an increase of
property related marketing costs to lease space which amounted to approximately
$300,000 and increased costs related to director and officer's insurance and
director fees of $347,000 for the three months ended June 30, 2003. Marketing,
general and administrative expenses, as a percentage of total revenues were,
7.4% for the three months ended June 30, 2003 as compared to 6.1% for the 2002
period. The Company capitalized approximately $1.3 million of marketing, general
and administrative expenses for each of the three-month periods ended June 30,
2003 and 2002. These costs relate to leasing, construction and development
activities, which are performed by the Company and its subsidiaries.

Interest expense increased by approximately $772,000 for the three months ended
June 30, 2003 as compared to the 2002 period. The increase includes $637,000 of
interest on the Operating Partnership's $50 million, five-year senior unsecured
notes issued on June 17, 2002. In addition, the increase includes approximately
$346,000, which is attributable to an increase in the weighted average balance
outstanding on the Company's unsecured credit facility. The weighted average
balance outstanding was $319.9 million for the three months ended June 30, 2003
as compared to $218.1 million for the three months ended June 30, 2002. These
increases were offset by a decrease of approximately $221,000 in mortgage note
payable interest expense.

Six months ended June 30, 2003 as compared to the six months ended June 30,
2002:

Property Operating Revenues increased by approximately $1.3 million for the six
months ended June 30, 2003 as compared to the 2002 period. The change in
Property Operating Revenues is attributable to built-in rent increases and
escalation increases in certain of our leases of approximately $6.3 million and
$3.4 million attributable to lease up of newly developed and redeveloped
properties. These increases were offset by approximately $8.4 million related to
decreases in certain property occupancy rates, decreases in rental rates and
increases in bad debts related to tenant receivables and deferred rents
receivable.

Investment and other income increased by $8.3 million. This increase is
primarily attributable to the gain recognized on the First Data land sale and
build-to-suit transaction of approximately $10.1 million. This increase in
investment and other income was offset by decreases in income generated by the
Service Companies.



                                       26
<PAGE>


Property Operating Expenses increased by $11.1 million or 13.3% for the six
months ended June 30, 2003 as compared to the 2002 period. This increase
includes a $7.5 million increase in property operating expenses and a $3.6
million increase in real estate taxes. Included in the $7.5 million of property
operating expense increase is $2.4 million attributable to increases in
insurance costs. The insurance cost increase is primarily attributable to the
added cost of terrorism insurance for our properties and a significant increase
in our liability insurance costs. The increase in insurance costs were caused by
implications of the events which occurred on September 11, 2001. The increase in
real estate taxes are attributable to the significant increase levied by certain
municipalities, particularly in New York City and Nassau County, New York which
are experiencing severe fiscal budget issues. Also included in the property
operating expense increase is approximately $3.3 million of increased utility
and snow removal costs which resulted in part to rate increases and continued
inclement weather in Northeast during the Spring months. To a lesser extent,
cleaning costs increased by approximately $550,000 due to
inflationary/contractual increases and property related marketing costs
increased by approximately $334,000 resulting from a decrease in overall
occupancy.

Gross Operating Margins (defined as Property Operating Revenues less Property
Expenses, taken as a percentage of Property Operating Revenues) for the six
months ended June 30, 2003 and 2002 were 61.6% and 65.9%, respectively. The
decrease in Gross Operating Margins is primarily attributable to decreases in
average occupancy of the portfolio and also as a result of increased Property
Expenses specifically relating to insurance costs, real estate taxes and
utilities and snow removal costs.

Marketing, general and administrative expenses increased by approximately $2.9
million for the six months ended June 30, 2003 as compared to the 2002 period.
The increase is in part attributable to increased compensation costs including
compensation costs associated with the Company's long term incentive programs
which commenced in March 2003 and amounted to approximately $1.5 million for the
six months ended June 30, 2003. Marketing, general and administrative expenses,
as a percentage of total revenues were, 6.8% for the six months ended June 30,
2003 as compared to 5.9% for the 2002 period. The Company capitalized
approximately $2.4 million of marketing, general and administrative expenses for
the six months ended June 30, 2003 as compared to $2.6 million for the 2002
period. These costs relate to leasing, construction and development activities,
which are performed by the Company and its subsidiaries.

Interest expense increased by approximately $2.6 million for the six months
ended June 30, 2003 as compared to the 2002 period. The increase includes $1.4
million of interest on the Operating Partnership's $50 million, five-year senior
unsecured notes issued on June 17, 2002. The increase is also affected by the
reduction in capitalized interest expense of $731,000 attributable to a decrease
in the level of development projects. In addition, the increase includes
approximately $879,000 which is attributable to an increase in the weighted
average balance outstanding on the Company's unsecured credit facility. The
weighted average balance outstanding was $303.0 million for the six months ended
June 30, 2003 as compared to $211.8 million for the six months ended June 30,
2002. These increases were offset by a decrease of approximately $431,000 in
mortgage note payable interest expense.



                                       27
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

Historically, rental revenue has been the principal source of funds to pay
operating expenses, debt service and non-incremental capital expenditures,
excluding incremental 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 its unsecured credit facility
described below. The credit facility contains several financial covenants with
which the Company must be in compliance in order to borrow funds thereunder.
During certain quarterly periods, the Company may incur significant leasing
costs as a result of increased market demands from tenants and high levels of
leasing transactions that result from the re-tenanting of scheduled expirations
or early terminations of leases. As a result, during these periods the Company's
cash flow from operating activities may not be sufficient to pay 100% of the
quarterly dividends due on its common stock. To meet the short-term funding
requirements relating to these leasing costs, the Company may use proceeds of
property sales or borrowings under its credit facility. The Company expects to
meet certain of its financing requirements through long-term secured and
unsecured borrowings and the issuance of debt and equity securities of the
Company. There can be no assurance that there will be adequate demand for the
Company's equity at the time or at the price in which the Company desires to
raise capital through the sale of additional equity. In addition, when
valuations for commercial real estate properties are high, the Company will seek
to sell certain land inventory to realize value and profit created. The Company
will then seek opportunities to reinvest the capital realized from these
dispositions back into value-added assets in the Company's core Tri-State Area
markets, as well as pursue its stock repurchase program. The Company will
refinance existing mortgage indebtedness, senior unsecured notes or indebtedness
under its 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, equity
offerings and proceeds from sales of land, will be adequate to meet the capital
and liquidity requirements of the Company in both the short and long-term.

As a result of current economic conditions, certain tenants have either not
renewed their leases upon expiration or have paid the Company to terminate their
leases. In addition, a number of U.S. companies have filed for protection under
federal bankruptcy laws. Certain of these companies are tenants of the Company.
The Company is subject to the risk that other companies that are tenants of the
Company may file for bankruptcy protection. This may have an adverse impact on
the financial results and condition of the Company. In addition, vacancy rates
in our markets have been trending higher and in some instances our asking rents
in our markets have been trending lower and landlords are being required to
grant greater concessions such as free rent and tenant improvements.
Additionally, the Company carries comprehensive liability, fire, extended
coverage and rental loss insurance on all of its properties. Five of the
Company's properties are located in New York City. As a result of the events of
September 11, 2001, insurance companies are limiting coverage for acts of
terrorism in all risk policies. In November 2002, the Terrorism Risk Insurance
Act of 2002 was signed into law which, among other things, requires insurance
companies to offer coverage for losses resulting from defined "acts of
terrorism" through 2004. The Company's current insurance coverage provides for
full replacement cost of its properties, except that the coverage for acts of
terrorism on its properties covers losses in an amount up to $300 million per
occurrence. As a result, the Company may suffer losses from acts of terrorism
that are not covered by insurance. In addition, the mortgage loans which are
secured by certain of the Company's properties contain customary covenants,
including covenants that require the Company to maintain property insurance in
an amount equal to replacement cost of the properties. There can be no assurance
that the lenders under these mortgage loans will not take the position that
exclusions from the Company's coverage for losses due to terrorist acts is a
breach of a covenant which, if uncured, could allow the lenders to declare an
event of default and accelerate repayment of the mortgage loans. Other
outstanding debt instruments contain standard cross default provisions that
would be triggered in the event of an acceleration of the mortgage loans. This
matter could adversely affect the Company's financial results, its ability to
finance and / or refinance its properties or to buy or sell properties.

The terrorist attacks of September 11, 2001, in New York City may adversely
effect the value of the Company's New York City properties and its ability to
generate cash flow. There may be a decrease in demand in metropolitan areas that
are considered at risk for future terrorist attacks, and this decrease may
reduce the Company's revenues from property rentals.

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

The Company currently has a three year $500 million unsecured revolving credit
facility (the "Credit Facility") from JPMorgan Chase Bank, as administrative
agent, Wells Fargo Bank, National Association, as syndication agent, and
Citicorp North America, Inc. and Wachovia Bank, National Association, as
co-documentation agents. The Credit Facility matures in December 2005, contains
options for a one-year extension subject to a fee of 25 basis points and, upon
receiving additional lender commitments, increasing the maximum revolving credit
amount to $750 million. In addition, borrowings under the Credit Facility are
currently priced off LIBOR plus 90 basis points and the Credit Facility carries
a facility fee of 20 basis points per annum. In the event of a change in the
Operating Partnership's unsecured credit rating the interest rates and facility
fee are subject to change. The outstanding borrowings under the Credit Facility
were $322.0 million at June 30, 2003.



                                       28
<PAGE>

The Company utilizes the Credit Facility primarily to finance real estate
investments, fund its real estate development activities and for working capital
purposes. At June 30, 2003, the Company had availability under the Credit
Facility to borrow approximately an additional $178.0 million, subject to
compliance with certain financial covenants.

The Company continues to seek opportunities to acquire real estate assets in its
markets. The Company has historically sought to acquire properties where it
could use its real estate expertise to create additional value subsequent to
acquisition. As a result of increased market values for the Company's commercial
real estate assets, the Company has sold certain non-core assets or interests in
assets where significant value has been created. During 2000, 2001 and 2002, the
Company has sold assets or interests in assets with aggregate sales prices of
approximately $499.8 million. The Company has used the proceeds from these sales
primarily to pay down borrowings under the Credit Facility, repurchase its
outstanding stock and for general corporate purposes. In addition, during the
quarterly period ended March 31, 2003, the Company through Reckson Construction
Group, Inc. entered into a sale of a 19.3 acre land parcel and build-to-suit
195,000 square foot office building for aggregate consideration of approximately
$47.0 million.

On June 30, 2003, the Company had issued and outstanding 9,915,313 shares of
Class B Exchangeable Common Stock, par value $.01 per share (the "Class B common
stock"). The dividend on the shares of Class B common stock is subject to
adjustment annually based on a formula which measures increases or decreases in
the Company's Funds From Operations, as defined, over a base year. The Class B
common stock currently receives an annual dividend of $2.5884 per share.

The shares of Class B common stock are exchangeable at any time, at the option
of the holder, into an equal number of shares of Class A common stock, subject
to customary antidilution adjustments. The Company, at its option, may redeem
any or all of the Class B common stock in exchange for an equal number of shares
of the Company's Class A common stock at any time following November 23, 2003 at
which time the Company anticipates that it will exercise its option to redeem
all of its Class B common stock outstanding.

The Board of Directors of the Company has authorized the purchase of up to five
million shares of the Company's Class A common stock and / or its Class B common
stock. Transactions conducted on the New York Stock Exchange 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. During the six months
ended June 30, 2003, under this buy-back program, the Company purchased 252,000
shares of Class A common stock at an average price of $18.01 per Class A share
for an aggregate purchase price of approximately $4.5 million.

The following table sets forth the Company's historical activity under its
current common stock buy-back program (dollars in thousands except per share
data):

                            SHARES          AVERAGE          AGGREGATE
                           PURCHASED    PRICE PER SHARE    PURCHASE PRICE
                           ---------    ---------------    --------------
     Current program:
      Class A common       2,950,400       $ 21.30           $  62,830
      Class B Common         368,200       $ 22.90               8,432
                           ---------                         ---------
                           3,318,600                         $  71,262
                           =========                         =========

The Board of Directors of the Company has formed a pricing committee to consider
purchases of up to $75 million of the Company's outstanding preferred
securities.

On June 30, 2003, the Company had issued and outstanding 8,834,500 shares of
7.625% Series A Convertible Cumulative Preferred Stock (the "Series A preferred
stock"). The Series A preferred stock is redeemable by the Company on or after
April 13, 2003 at a price of approximately $25.95 per share with such price
decreasing, at annual intervals, to $25.00 per share over a five year period. In
addition, the Series A preferred stock, at the option of the holder, is
convertible at any time into the Company's Class A common stock at a price of
$28.51 per share.

The Company currently has issued and outstanding two million shares of Series B
Convertible Cumulative Preferred Stock (the "Series B preferred stock"). The
Series B preferred stock is redeemable by the Company as follows: (i) on or
after June 3, 2003 to and including June 2, 2004, at $25.50 per share and (ii)
on or after June 3, 2004 and thereafter, at $25.00 per share. In addition, the
Series B preferred stock, at the option of the holder, is convertible at any
time into the Company's Class A common stock at a price of $26.05 per share. The
Series B preferred stock currently accumulates dividends at a rate of 8.85% per
annum.

On August 7, 2003, in conjunction with the Company's acquisition of a Class A
office property located in Stamford, Connecticut the Company issued 465,845
Class C common units of limited partnership interest. The Class C units will
receive an annual distribution of $1.87 per unit, which amount will increase or
decrease pro-rata based upon changes in the dividend paid on the Company's Class
A common stock.


                                       29
<PAGE>


Effective January 1, 2002 the Company has elected to follow FASB Statement No.
123, "Accounting for Stock Based Compensation". Statement No.123 requires the
use of option valuation models which determine the fair value of the option on
the date of the grant. All future employee stock option grants will be expensed
over the options' vesting periods based on the fair value at the date of the
grant in accordance with Statement No. 123. The Company expects minimal
financial impact from the adoption of Statement No. 123. To determine the fair
value of the stock options granted, the Company uses a Black-Scholes option
pricing model. Historically, the Company had applied Accounting Principles Board
Opinion No. 25 and related interpretations in accounting for its stock option
plans and reported pro forma disclosures in its Form 10-K filings by estimating
the fair value of options issued and the related expense in accordance with
Statement No. 123. During the three and six months ended June 30, 2003, the
Company recorded approximately $1,300 and $2,700, respectively of expense
related to the fair value of stock options issued. Such amounts have been
included in marketing, general and administrative expenses in the Company's
consolidated statements of income.

The Company's indebtedness at June 30, 2003 totaled approximately $1.4 billion
(including its share of joint venture debt and net of minority partners'
interests share of joint venture debt) and was comprised of $322.0 million
outstanding under the Credit Facility, approximately $499.4 million of senior
unsecured notes and approximately $600.7 million of mortgage indebtedness. Based
on the Company's total market capitalization of approximately $3.1 billion at
June 30, 2003 (calculated based on the sum of (i) the market value of the
Company's Class A common stock and OP Units, assuming conversion, (ii) the
market value of the Company's Class B common stock, (iii) the liquidation
preference value of the Company's preferred stock, (iv) the liquidation
preference value of the Operating Partnership's preferred units and (v) the $1.4
billion of debt), the Company's debt represented approximately 46.2% of its
total market capitalization.

HQ Global Workplaces, Inc. ("HQ"), one of the largest providers of flexible
officing solutions in the world and which is controlled by FrontLine, currently
operates eight (formerly eleven) executive office centers in the Company's
properties, two of which are held through joint ventures. The leases under which
these office centers operate expire between 2008 and 2011, encompass
approximately 160,600 square feet and have current contractual annual base rents
of approximately $3.8 million. On March 13, 2002, as a result of experiencing
financial difficulties, HQ voluntarily filed a petition for relief under Chapter
11 of the U.S. Bankruptcy Code. As of June 30, 2002, HQ's leases with the
Company were in default. Further, the Bankruptcy Court has (i) granted HQ's
petition to reject three of its leases with the Company, one of which is held
through the 919JV and (ii) modify the terms of the lease, which is held through
the 520JV. Two of the three rejected leases were held through wholly owned
entities, aggregated approximately 23,900 square feet and were rejected in March
2002. The Company has since re-leased 100% of the space related to these two
rejected leases. The third rejected lease held through the 919JV aggregated
approximately 31,000 square feet and was to provide for contractual base rents
of approximately $1.9 million for the 2003 calendar year. With respect to the
lease held through the 520JV, HQ surrendered approximately 10,500 square feet,
or one-third of the total leased premises, to the Company. The restructured
lease provides for initial base rent of $23.25 per foot and is scheduled to
expire in 2011. Of the surrendered space, approximately 6,500 square feet has
been released at $18.50 per foot to an existing tenant in the 520JV and is
scheduled to expire in 2010. Pursuant to the bankruptcy filing, HQ has been
paying current rental charges under its leases with the Company, other than
under the three rejected leases. The Company is in negotiation to restructure
two of the leases and leave the terms of the remaining five leases unchanged.
All negotiations with HQ are conducted by a committee designated by the Board
and chaired by an independent director. There can be no assurance as to whether
any deal will be consummated with HQ or if HQ will affirm or reject any or all
of its remaining leases with the Company. As a result of the foregoing, the
Company has currently established reserves of approximately $428,000 (net of
minority partners' interests and including the Company's share of unconsolidated
joint venture interest), or 85%, of the amounts due from HQ as of June 30, 2003.



                                       30
<PAGE>



WorldCom/MCI and its affiliates ("WorldCom"), a telecommunications company,
which leased approximately 527,000 square feet in thirteen of the Company's
properties located throughout the Tri-State Area voluntarily filed a petition
for relief under Chapter 11 of the U.S. Bankruptcy Code on July 21, 2002. The
Bankruptcy Court granted WorldCom's petition to reject four of its leases with
the Company. The four rejected leases aggregated approximately 282,000 square
feet and were to provide for contractual base rents of approximately $7.2
million for the 2003 calendar year. All of WorldCom's leases are current on base
rental charges through August 31, 2003, other than under the four rejected
leases and the Company currently holds approximately $300,000 in security
deposits relating to the non-rejected leases. The Company has reached an
agreement with WorldCom to restructure the remaining WorldCom leases, which is
subject to approval of the Bankruptcy Court. There can be no assurance as to
whether any deal will be consummated with WorldCom or if WorldCom will affirm or
reject any or all of its remaining leases with the Company.

As of June 30, 2003, WorldCom occupied approximately 245,000 square feet of
office space with aggregate annual base rental revenues of approximately $4.1
million, or 1.1% of the Company's total 2003 annualized rental revenue based on
base rental revenue earned on a consolidated basis.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

The following table sets forth the Company's significant debt obligations by
scheduled principal cash flow payments and maturity date and its commercial
commitments by scheduled maturity at June 30, 2003 (in thousands):

<TABLE>
<CAPTION>
                                                                MATURITY DATE
                             --------------------------------------------------------------------------
                                2003         2004         2005         2006         2007      THEREAFTER      TOTAL
                             ----------   ----------   ----------   ----------   ----------   ----------   ----------
<S>                          <C>          <C>          <C>          <C>          <C>          <C>          <C>
Mortgage notes payable (1)   $    6,421   $   13,169   $   14,167   $   13,785   $   11,305   $  117,390   $  176,237
Mortgage notes payable
  (2) (3)                            --        2,616       18,553      129,920       60,539      346,269      557,897
Senior unsecured notes               --      100,000           --           --      200,000      200,000      500,000
Unsecured credit facility            --           --      322,000           --           --           --      322,000
Land lease obligations            1,357        2,811        2,814        2,795        2,735       43,276       55,788
Operating leases                    690        1,313        1,359        1,407        1,455          683        6,907
Air rights lease
  obligations                       188          379          379          379          379        4,280        5,984
                             ----------   ----------   ----------   ----------   ----------   ----------   ----------
                             $    8,656   $  120,288   $  359,272   $  148,286   $  276,413   $  711,898   $1,624,813
                             ==========   ==========   ==========   ==========   ==========   ==========   ==========

</TABLE>

(1)   Scheduled principal amortization payments
(2)   Principal payments due at maturity
(3)   In addition, the Company has a 60% interest in an unconsolidated joint
      venture property. The Company's share of the mortgage debt at June 30,
      2003 is approximately $8.2 million. This mortgage note bears interest at
      8.85% per annum and matures on September 1, 2005 at which time the
      Company's share of the mortgage debt will be approximately $6.9 million

Certain of the mortgage notes payable are guaranteed by certain limited partners
in the Operating Partnership and/or the Company. In addition, consistent with
customary practices in non-recourse lending, certain non-recourse mortgages may
be recourse to the Company under certain limited circumstances including
environmental issues and breaches of material representations.

In addition, at June 30, 2003, the Company had approximately $950,000 in
outstanding undrawn standby letters of credit issued under the Credit Facility.
In addition, approximately $44.6 million, or 6.1%, of the Company's mortgage
debt is recourse to the Company.

Other Matters

Eight of the Company's office properties which were acquired by the issuance of
OP Units are subject to agreements limiting the Company's ability to transfer
them prior to agreed upon dates without the consent of the limited partner who
transferred the respective property to the Company. In the event the Company
transfers any of these properties prior to the expiration of these limitations,
the Company may be required to make a payment relating to taxes incurred by the
limited partner. These limitations expire between the remainder of 2003 and
2013.

Eleven of the Company's office properties are held in joint ventures which
contain certain limitations on transfer. These limitations include requiring the
consent of the joint venture partner to transfer a property prior to various
specified dates ranging from 2003 to 2005, rights of first offer, and buy / sell
provisions.

On May 29, 2003, the Board of Directors appointed Mr. Peter Quick as Lead
Director and Chairman of the Nominating/Governance Committee. The
Nominating/Governance Committee as well as the Audit Committee and Compensation
Committee are comprised solely of independent directors.

In addition, in May 2003, the Company revised its policy with respect to
compensation of its independent directors to provide that a substantial portion
of the independent director's compensation shall be in the form of Class A
common stock of the Company. Such common stock may not be sold until such time
as the director is no longer a member of the Company's Board.



                                       31
<PAGE>



The Company had historically structured long term incentive programs ("LTIP")
using restricted stock and stock loans. In July 2002, as a result of certain
provisions of the Sarbanes Oxley legislation, the Company discontinued the use
of stock loans in its LTIP. In connection with LTIP grants made prior to the
enactment of the Sarbanes Oxley legislation the Company made stock loans to
certain executive and senior officers to purchase 1,372,393 shares of its Class
A common stock at market prices ranging from $18.44 per share to $27.13 per
share. The stock loans were set to bear interest at the mid-term Applicable
Federal Rate and were secured by the shares purchased. Such stock loans
(including accrued interest) vest and are ratably forgiven each year on the
anniversary of the grant date based upon vesting periods ranging from four to
ten years based on continued service and in part on attaining certain annual
performance measures. These stock loans had an initial aggregate weighted
average vesting period of approximately nine years. Approximately $2.2 million
of compensation expense was recorded for each of the six month periods ended
June 30, 2003 and 2002, respectively, related to these LTIP. Such amounts have
been included in marketing, general and administrative expenses on the Company's
consolidated statements of income.

The outstanding stock loan balances due from executive and senior officers
aggregated approximately $13.0 million and $17.0 million at June 30, 2003 and
December 31, 2002, respectively, and have been included as a reduction of
additional paid in capital on the Company's consolidated balance sheets. Other
outstanding loans to executive and senior officers at June 30, 2003 amounted to
approximately $1.0 million related to life insurance contracts and approximately
$2.0 million primarily related to tax payment advances on stock compensation
awards made to non-executive officers.

In November 2002 and March 2003 an award of rights was granted to certain
executive officers of the Company (the "2002 Rights" and "2003 Rights",
respectively and collectively, the "Rights"). Each Right represents the right to
receive, upon vesting, one share of Class A common stock if shares are then
available for grant under one of the Company's stock option plans or, if shares
are not so available, an amount of cash equivalent to the value of such stock on
the vesting date. The 2002 Rights will vest in four equal annual installments
beginning on November 14, 2003 (and shall be fully vested on November 14, 2006).
The 2003 Rights will be earned as of March 13, 2005 and will vest in three equal
annual installments beginning on March 13, 2005 (and shall be fully vested on
March 13, 2007). Dividends on the shares will be held by the Company until such
shares become vested, and will be distributed thereafter to the applicable
officer. The 2002 Rights also entitle the holder thereof to cash payments in
respect of taxes payable by the holder resulting from the Rights. The 2002
Rights aggregate 190,524 shares of the Company's Class A common stock and the
2003 Rights aggregate 60,760 shares of Class A common stock. During the three
and six months ended June 30, 2003, the Company recorded approximately $209,000
and $425,000 of compensation expense, respectively, related to the Rights. Such
amounts have been included in marketing, general and administrative expenses on
the Company's consolidated statements of income.

In March 2003, the Company established a new LTIP for its executive and senior
officers. The four-year plan has a core award which provides for annual stock
based compensation based upon continued service and in part based on attaining
certain annual performance measures. The plan also has a special outperformance
award which provides for compensation to be earned at the end of a four year
period if the Company attains certain four year cumulative performance measures.
Amounts earned under the special outperformance award may be paid in cash or
stock at the discretion of the Compensation Committee of the Board. Performance
measures are based on total shareholder returns on a relative and absolute
basis. On March 13, 2003, the Company made available 1,384,102 shares of its
Class A common stock under its existing stock option plans in connection with
the core award of this LTIP for twelve of its executive and senior officers.
During May 2003, two of the Company's executive officers waived these awards
under this LTIP in their entirety, which aggregated 277,778 shares or 20% of the
core awards granted. In addition, the special outperformance awards of the LTIP
were amended to increase the per share base price above which the four year
cumulative return is measured from $18.00 to $22.40. With respect to the core
award of this LTIP, the Company recorded approximately $1.3 million and $1.5
million of compensation expense for the three and six months ended June 30,
2003, respectively. Such amounts have been included in marketing, general and
administrative expenses on the Company's consolidated statements of income.
Further, no provision will be made for the special outperformance award of this
LTIP until such time as achieving the requisite performance measures is
determined to be probable.

Under various Federal, state and local laws, ordinances and regulations, an
owner of real estate is liable for the costs of removal or remediation of
certain hazardous or toxic substances on or in such property. These laws often
impose such liability without regard to whether the owner knew of, or was
responsible for, the presence of such hazardous or toxic substances. The cost of
any required remediation and the owner's liability therefore as to any property
is generally not limited under such enactments and could exceed the value of the
property and/or the aggregate assets of the owner. The presence of such
substances, or the failure to properly remediate such substances, may adversely
affect the owner's ability to sell or rent such property or to borrow using such
property as collateral. Persons who arrange for the disposal or treatment of
hazardous or toxic substances may also be liable for the costs of removal or
remediation of such substances at a disposal or treatment facility, whether or
not such facility is owned or operated by such person. Certain environmental
laws govern the removal, encapsulation or disturbance of asbestos-containing
materials ("ACMs") when such materials are in poor condition, or in the event of
renovation or demolition. Such laws impose liability for release of ACMs into
the air and third parties may seek recovery from owners or operators of real
properties for personal injury associated with ACMs. In connection with the
ownership (direct or indirect), operation, management and development of real
properties, the Company may be considered an owner or operator of such
properties or as having arranged for the disposal or treatment of hazardous or
toxic substances and, therefore, potentially liable for removal or remediation
costs, as well as certain other related costs, including governmental fines and
injuries to persons and property.



                                       32
<PAGE>


All of the Company's office and industrial / R&D properties have been subjected
to a Phase I or similar environmental audit after April 1, 1994 (which involved
general inspections without soil sampling, ground water analysis or radon
testing and, for the Company's properties constructed in 1978 or earlier, survey
inspections to ascertain the existence of ACMs were conducted) completed by
independent environmental consultant companies (except for 35 Pinelawn Road
which was originally developed by Reckson, the predecessor to the Company, and
subjected to a Phase 1 in April 1992). These environmental audits have not
revealed any environmental liability that would have a material adverse effect
on the Company's business.

FUNDS FROM OPERATIONS

The Company believes that Funds from Operations ("FFO") is a widely recognized
and appropriate measure of performance of an equity REIT. Although FFO is a
non-GAAP financial measure, the Company believes it provides useful information
to shareholders, potential investors and management. The Company computes FFO in
accordance with the standards established by the National Association of Real
Estate Investment Trusts ("NARIET"). FFO is defined by NAREIT as net income or
loss, excluding gains or losses from debt restructuring and sales of depreciable
properties plus real estate depreciation and amortization, and after adjustments
for unconsolidated partnerships and joint ventures. FFO does not represent cash
generated from operating activities in accordance with GAAP and is not
indicative of cash available to fund cash needs. FFO should not be considered as
an alternative to net income as an indicator of the Company's operating
performance or as an alternative to cash flow as a measure of liquidity. FFO for
the three and six month periods ended June 30, 2003 includes a gain from the
sale of land in the amount of $2.2 million and $7.7 million, respectively.

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.

The following table presents the Company's FFO calculation (unaudited and in
thousands):

<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED     SIX MONTHS ENDED
                                                                      JUNE 30,               JUNE 30,
                                                                 ------------------    ------------------
                                                                  2003        2002       2003       2002
                                                                 -------    -------    -------    -------
<S>                                                              <C>        <C>        <C>        <C>
Net income allocable to common shareholders .................    $ 7,585    $13,805    $16,248    $29,787
Adjustments for basic funds from operations:
   Add:
     Limited partners' minority interest in the operating
       partnership ..........................................        874      1,663      1,870      3,597
     Real estate depreciation and amortization ..............     29,127     27,041     60,454     52,362
     Minority partners' interests in consolidated
       partnerships .........................................      4,335      4,813      9,025      9,933
   Less:
     Gain on sales of depreciable real estate assets ........         --         --         --        537
     Amounts distributable to minority partners in
       consolidated partnerships ............................      6,769      6,329     13,576     12,893
                                                                 -------    -------    -------    -------
Basic Funds From Operations ("FFO") .........................     35,152     40,993     74,021     82,249
    Add:
     Dividends and distributions on dilutive shares and
       units ................................................        273      5,767      8,968     11,715
                                                                 -------    -------    -------    -------
     Diluted FFO ............................................    $35,425    $46,760    $82,989    $93,964
                                                                 =======    =======    =======    =======
   Weighted average common shares outstanding ...............     57,916     61,059     58,016     60,680
   Weighted average units of limited partnership interest
     outstanding ............................................      7,276      7,500      7,276      7,504
                                                                 -------    -------    -------    -------
   Basic weighted average common shares and units outstanding     65,192     68,559     65,292     68,184
   Adjustments for dilutive FFO weighted average shares and
     units outstanding:
    Add:
      Weighted average common stock equivalents .............        117        390        118        363
      Weighted average shares of Series A Preferred Stock ...         --      8,060      7,747      8,060
      Weighted average shares of Series B Preferred Stock ...         --      1,919         --      1,919
      Weighted average shares of preferred limited
        partnership interest ................................        661        661        661        834
                                                                 -------    -------    -------    -------
   Dilutive FFO weighted average shares and units outstanding     65,970     79,589     73,818     79,360
                                                                 =======    =======    =======    =======

</TABLE>


                                       33
<PAGE>


INFLATION

The office leases generally provide for fixed base rent increases or indexed
escalations. In addition, the office leases provide for separate escalations of
real estate taxes, operating expenses and electric costs over a base amount. The
industrial / R&D 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. As a result of the impact of the events of September 11, 2001,
the Company has realized increased insurance costs, particularly relating to
property and terrorism insurance, and security costs. The Company has included
these costs as part of its escalatable expenses. The Company has billed these
escalatable expense items to its tenants consistent with the terms of the
underlying leases and believes they are collectible. To the extent the Company's
properties contain vacant space, the Company will bear such inflationary
increases in expenses.

The Credit Facility bears interest at a variable rate, which will be influenced
by changes in short-term interest rates, and is sensitive to inflation.







                                       34
<PAGE>


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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

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

The Company will recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges will be adjusted to fair value through income.
If a derivative is a hedge, depending on the nature of the hedge, changes in the
fair value of the derivative will either be offset against the change in fair
value of the hedged asset, liability, or firm commitment through earnings, or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. As of June 30, 2003, the Company had no
derivatives outstanding.

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

The following table sets forth the Company's long-term debt obligations by
scheduled principal cash flow payments and maturity date, weighted average
interest rates and estimated FMV at June 30, 2003 (dollars in thousands):


<TABLE>
<CAPTION>
                                       For the Year Ended December 31,
                            -----------------------------------------------------------
                               2003       2004         2005        2006        2007      Thereafter    Total(1)       FMV
                            ------------------------------------------------------------------------------------------------------
<S>                         <C>         <C>          <C>         <C>          <C>         <C>         <C>          <C>
Long term debt:
    Fixed rate.......       $   6,421   $ 115,785    $  32,720   $ 143,705    $ 271,844   $ 663,659   $ 1,234,134  $ 1,254,661
    Weighted average
      interest rate.....         7.50%       7.47%        6.92%       7.38%        7.14%       7.32%         7.29%

    Variable rate.......    $      --   $      --    $ 322,000   $      --     $     --    $     --    $  322,000    $ 322,000
    Weighted average
      interest rate.....           --          --%        2.12%         --           --          --          2.12%

</TABLE>



     (1) Includes aggregate unamortized issuance discounts of approximately
         $626,000 on the senior unsecured notes issued during March 1999 and
         June 2002, which are due at maturity.

     In addition, a one percent increase in the LIBOR rate would have an
     approximate $3.2 million annual increase in interest expense based on
     $322.0 million of variable rate debt outstanding at June 30, 2003.

     The following table sets forth the Company's mortgage notes and note
     receivables by scheduled maturity date, weighted average interest rates and
     estimated FMV at June 30, 2003 (dollars in thousands):

<TABLE>
<CAPTION>
                                       For the Year Ended December 31,
                        ---------------------------------------------------------------
                                2003         2004      2005            2006       2007     Thereafter   Total (1)      FMV
                        ------------------------------------------------------------------------------------------------------
<S>                          <C>         <C>        <C>              <C>        <C>        <C>         <C>          <C>
Mortgage notes and
  notes receivable:

Fixed rate.............      $     --    $     --   $  36,500        $   --     $   --     $  16,990   $ 53,490     $ 54,568
    Weighted average
     interest rate......           --          --      11.32%            --         --        12.00%     11.54%


</TABLE>

     (1) Excludes interest receivables aggregating approximately $1.1 million
         dollars.



                                       35
<PAGE>


ITEM 4.  CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures designed to ensure that
information required to be disclosed in our filings under the Securities
Exchange Act of 1934 is reported within the time periods specified in the SEC's
rules and forms. In this regard, the Company has formed a Disclosure Committee
currently comprised of all of the Company's executive officers as well as
certain other employees with knowledge of information that may be considered in
the SEC reporting process. The Committee has responsibility for the development
and assessment of the financial and non-financial information to be included in
the reports filed by the Company with the SEC and assists the Company's Co-Chief
Executive Officers and Chief Financial Officer in connection with their
certifications contained in the Company's SEC reports. The Committee meets
regularly and reports to the Audit Committee on a quarterly or more frequent
basis. Our principal executive and financial officers have evaluated, with the
participation of the Company's management, our disclosure controls and
procedures as of the end of the period covered by this Quarterly Report on Form
10-Q. Based upon the evaluation, our principal executive and financial officers
concluded that such disclosure controls and procedures are effective.

There were no changes in our internal control over financial reporting that
occurred during our most recent fiscal quarter that have materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting.



                                       36
<PAGE>


The following table sets forth the Company's schedule of its top 25 tenants
based on base rental revenue as of June 30, 2003:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
                                                                PERCENT OF PRO-RATA   PERCENT OF CONSOLIDATED
                                                      TOTAL     SHARE OF ANNUALIZED       ANNUALIZED BASE
 TENANT NAME (1)                    TENANT TYPE    SQUARE FEET  BASE RENTAL REVENUE        RENTAL REVENUE
-------------------------------------------------------------------------------------------------------------
<S>                              <C>                  <C>               <C>                     <C>
* DEBEVOISE & PLIMPTON                 Office         465,420           3.3%                    5.6%
* AMERICAN EXPRESS                     Office         238,342           2.0%                    1.8%
  BELL ATLANTIC                        Office         210,426           1.6%                    1.4%
* SCHULTE ROTH & ZABEL                 Office         238,052           1.4%                    2.4%
  DUN & BRADSTREET CORP.               Office         123,000           1.2%                    1.0%
* FUJI PHOTO FILM USA                  Office         186,484           1.2%                    1.0%
* WORLDCOM/MCI                         Office         244,870           1.1%                    1.1%
  UNITED DISTILLERS                    Office         137,918           1.1%                    1.0%
  T.D. WATERHOUSE                      Office         103,381           1.0%                    0.8%
* PRUDENTIAL                           Office         127,153           0.9%                    0.9%
* BANQUE NATIONALE DE PARIS            Office         145,834           0.9%                    1.5%
* HQ GLOBAL                      Office/Industrial    160,637           0.9%                    0.9%
* KRAMER LEVIN NESSEN KAMIN            Office         158,144           0.9%                    1.4%
  HELLER EHRMAN WHITE                  Office          64,526           0.9%                    0.7%
  VYTRA HEALTHCARE                     Office         105,613           0.8%                    0.7%
  P.R. NEWSWIRE ASSOCIATES             Office          67,000           0.8%                    0.7%
  HOFFMANN-LA ROCHE INC.               Office         120,736           0.7%                    0.6%
  LABORATORY CORP OF AMERICA           Office         108,000           0.7%                    0.6%
* STATE FARM                     Office/Industrial    184,013           0.7%                    1.0%
  EMI ENTERTAINMENT WORLD              Office          65,844           0.7%                    0.6%
  ESTEE LAUDER                       Industrial       374,578           0.7%                    0.6%
* DRAFT WORLDWIDE INC.                 Office         124,008           0.7%                    1.1%
  PRACTICING LAW INSTITUTE             Office          77,500           0.7%                    0.6%
  LOCKHEED MARTIN CORP.                Office         123,554           0.7%                    0.6%
  D.E.SHAW                             Office          70,104           0.6%                    0.6%
----------------------------------------------------------------------------------------------------------------

</TABLE>

  (1) Ranked by pro-rata share of annualized based rental revenue adjusted for
      pro rata share of joint venture interests and to reflect WorldCom/MCI and
      HQ Global leases rejected to date.

   *  Part or all of space occupied by tenant is in a 51% or more owned joint
      venture building.

HISTORICAL NON-INCREMENTAL REVENUE-GENERATING CAPITAL EXPENDITURES, TENANT
IMPROVEMENT COSTS AND LEASING COMMISSIONS

The following table sets forth annual and per square foot non-incremental
revenue-generating capital expenditures in which the Company paid or accrued,
during the respective periods, to retain revenues attributable to existing
leased space for the years 1999 through 2002 and for the six month period ended
June 30, 2003 for the Company's office and industrial / R&D properties other
than One Orlando Center in Orlando, FL:

<TABLE>
<CAPTION>
                                                                                   Average            YTD
                                1999         2000         2001          2002     1999-2002           2003
                         -----------------------------------------------------------------------------------
<S>                         <C>          <C>          <C>           <C>            <C>           <C>
  Suburban Office
    Properties
     Total                  $2,298,899   $3,289,116   $4,606,069    $5,283,674     $3,869,440    $2,751,646
     Per Square Foot             $0.23        $0.33        $0.45         $0.53          $0.39         $0.27
  NYC Office Properties
     Total                         N/A     $946,718   $1,584,501    $1,939,111     $1,490,110      $841,074
     Per Square Foot               N/A         0.38         0.45         $0.56           0.46         $0.24
  Industrial Properties
     Total                  $1,048,688     $813,431     $711,666    $1,881,627     $1,113,853      $466,192
     Per Square Foot             $0.11        $0.11        $0.11         $0.28          $0.15         $0.07
TOTAL PORTFOLIO
                         -----------------------------------------------------------------------------------
     Total                  $3,347,587   $5,049,265   $6,902,236    $9,104,413                   $4,058,912
     Per Square Foot             $0.17        $0.25        $0.34         $0.45                        $0.20

</TABLE>



                                       37
<PAGE>



The following table sets forth annual and per square foot non-incremental
revenue-generating tenant improvement costs and leasing commissions in which the
Company committed to perform, during the respective periods, to retain revenues
attributable to existing leased space for the years 1999 through 2002 and for
the six month period ended June 30, 2003 for the Company's office and industrial
/ R&D properties other than One Orlando Center in Orlando, FL:

<TABLE>
<CAPTION>
                                                                                  Average       YTD
                                 1999        2000        2001         2002       1999-2002     2003(2)      New       Renewal
                            ----------------------------------------------------------------------------------------------------
<S>                           <C>         <C>         <C>         <C>            <C>         <C>         <C>         <C>
  Long Island Office
   Properties
    Tenant Improvements       $1,009,357  $2,853,706  $2,722,457  $ 1,917,466    $2,125,747  $2,401,302  $1,893,468  $  507,834
    Per Square Foot Improved  $     4.73  $     6.99  $     8.47  $      7.81    $     7.00  $     5.90  $     9.54  $     2.44
    Leasing Commissions       $  551,762  $2,208,604  $1,444,412  $ 1,026,970    $1,307,937  $2,014,264  $1,734,685  $  279,579
    Per Square Foot Leased    $     2.59  $     4.96  $     4.49  $      4.18    $     4.06  $     4.95  $     8.74  $     1.34
                            -------------------------------------------------------------------------------------------------
     Total Per Square Foot    $     7.32  $    11.95  $    12.96  $     11.99    $    11.06  $    10.85  $    18.28  $     3.78
                            ==================================================================================================
  Westchester Office
   Properties
    Tenant Improvements       $1,316,611  $1,860,027  $2,584,728  $ 6,391,589(1) $3,038,239  $  871,401  $  871,401  $        0
    Per Square Foot Improved  $     5.62  $     5.72  $     5.91  $     15.05    $     8.08  $    13.27  $    21.34  $     0.00
    Leasing Commissions       $  457,730  $  412,226  $1,263,012  $ 1,975,850    $1,027,204  $  231,190  $  207,191  $   23,999
    Per Square Foot Leased    $     1.96  $     3.00  $     2.89  $      4.65    $     3.13  $     3.52  $     5.07  $     0.97
                            -------------------------------------------------------------------------------------------------
     Total Per Square Foot    $     7.58  $     8.72  $     8.80  $     19.70    $    11.20  $    16.79  $    26.41  $     0.97
                            ==================================================================================================
  Connecticut Office
   Properties
    Tenant Improvements       $  179,043  $  385,531  $  213,909  $   491,435    $  317,480  $   25,868  $   15,758  $   10,110
    Per Square Foot Improved  $     4.88  $     4.19  $     1.46  $      3.81    $     3.58  $     1.29  $     1.24  $     1.39
    Leasing Commissions       $  110,252  $  453,435  $  209,322  $   307,023    $  270,008  $   76,485  $   57,855  $   18,630
    Per Square Foot Leased    $     3.00  $     4.92  $     1.43  $      2.38    $     2.93  $     3.82  $     4.55  $     2.56
                            -------------------------------------------------------------------------------------------------
     Total Per Square Foot    $     7.88  $     9.11  $     2.89  $      6.19    $     6.52  $     5.11  $     5.79  $     3.95
                            ==================================================================================================
  New Jersey Office
   Properties
    Tenant Improvements       $  454,054  $1,580,323  $1,146,385  $ 2,842,521    $1,505,821  $3,410,777  $3,086,839  $  323,938
    Per Square Foot Improved  $     2.29  $     6.71  $     2.92  $     10.76    $     5.67  $    13.25  $    26.91  $     2.27
    Leasing Commissions       $  787,065  $1,031,950  $1,602,962  $ 1,037,012    $1,114,747  $1,758,933  $1,041,571  $  717,362
    Per Square Foot Leased    $     3.96  $     4.44  $     4.08  $      3.92    $     4.10  $     6.83  $     9.09  $     5.02
                              -----------------------------------------------------------------------------------------------
     Total Per Square Foot    $     6.25  $    11.15  $     7.00  $     14.68    $     9.77  $    20.08  $    36.00  $     7.29
                            ==================================================================================================
  New York City Office
   Properties
    Tenant Improvements              N/A  $   65,267  $  788,930  $ 4,350,106    $1,734,768  $2,076,732  $1,936,972  $  139,760
    Per Square Foot Improved         N/A  $     1.79  $    15.69  $     18.39    $    11.96  $    35.19  $    58.24  $     5.42
    Leasing Commissions              N/A  $  418,185  $1,098,829  $ 2,019,837    $1,178,950  $  707,192  $  677,039  $   30,153
    Per Square Foot Leased           N/A  $    11.50  $    21.86  $      8.54    $    13.97  $    11.98  $    20.36  $     1.17
                            -------------------------------------------------------------------------------------------------
     Total Per Square Foot           N/A  $    13.29  $    37.55  $     26.93    $    25.92  $    47.17  $    78.60  $     6.59
                            ==================================================================================================
  Industrial Properties
    Tenant Improvements       $  375,646  $  650,216  $1,366,488  $ 1,850,812    $1,060,791  $  926,248  $  887,012  $   39,236
    Per Square Foot Improved  $     0.25  $     0.95  $     1.65  $      1.97    $     1.20  $     2.33  $     3.35  $     0.29
    Leasing Commissions       $  835,108  $  436,506  $  354,572  $   890,688    $  629,218  $  464,371  $  444,193  $   20,178
    Per Square Foot Leased    $     0.56  $     0.64  $     0.43  $      0.95    $     0.64  $     1.17  $     1.68  $     0.15
                            --------------------------------------------------------------------------------------------------
     Total Per Square Foot    $     0.81  $     1.59  $     2.08  $      2.92    $     1.85  $     3.50  $     5.03  $     0.44
                            ==================================================================================================
------------------------------------------------------------------------------------------------------------------------------
TOTAL PORTFOLIO
    Tenant Improvements       $3,334,711  $7,395,070  $8,822,897  $17,843,929    $9,782,844  $9,712,328  $8,691,450  $1,020,878
    Per Square Foot Improved  $     1.53  $     4.15  $     4.05  $      7.96    $     4.75  $     8.05  $    13.07  $     1.88

    Leasing Commissions       $2,741,917  $4,960,906  $5,973,109  $ 7,257,379    $5,528,065  $5,252,435  $4,162,534  $1,089,901
    Per Square Foot Leased    $     1.26  $     3.05  $     2.75  $      3.24    $     2.66  $     4.35  $     6.26  $     2.01
                            --------------------------------------------------------------------------------------------------
     Total Per Square Foot    $     2.79  $     7.20  $     6.80  $     11.20    $     7.41  $    12.40  $    19.33  $     3.89
                            ==================================================================================================

</TABLE>

NOTES:
------

(1) Excludes tenant improvements and leasing commissions related to a 163,880
    square foot leasing transaction with Fuji Photo Film U.S.A. Leasing
    commissions on this transaction amounted to $5.33 per square foot and tenant
    improvement allowance amounted to $40.88 per square foot.

(2) Excludes $644,445 of deferred leasing costs attributable to space marketed
    but not yet leased.



                                       38
<PAGE>


The following table sets forth the Company's components of its paid or accrued
non-incremental and incremental revenue-generating capital expenditures, tenant
improvements and leasing costs for the six months ended June 30, 2003 as
reported on its "Statements of Cash Flows - Investment Activities" contained in
its consolidated financial statements (in thousands):

                                                       June 30,
                                                         2003
                                                       ---------
       Capital expenditures:
            Non-incremental .........................   $ 4,297
            Incremental .............................       899
       Tenant improvements:
            Non-incremental .........................    19,901
            Incremental .............................        52
                                                        -------
       Additions to commercial real estate properties   $25,149
                                                        =======
       Leasing costs:
            Non-incremental .........................   $ 6,554
            Incremental .............................     2,211
                                                        -------
       Payment of deferred leasing costs ............   $ 8,765
                                                        =======
       Acquisition and development costs ............   $16,237
                                                        =======












                                       39


<PAGE>


The following table sets forth the Company's lease expiration table at July 1,
2003 for its Total Portfolio of properties, its Office Portfolio and its
Industrial / R&D Portfolio.

         LEASE EXPIRATION SCHEDULE

<TABLE>
<CAPTION>
                                             TOTAL PORTFOLIO
         -----------------------------------------------------------------------------------------
                                   Number of         Square        % of Total       Cumulative
         Year of                     Leases           Feet          Portfolio       % of Total
         Expiration                 Expiring        Expiring          Sq Ft       Portfolio Sq Ft
         -----------------------------------------------------------------------------------------
         <S>                         <C>            <C>               <C>              <C>
         2003                           75             704,082          3.4%             3.4%
         2004                          183           1,511,741          7.4%            10.8%
         2005                          220           2,345,589         11.5%            22.3%
         2006                          226           2,636,183         12.9%            35.2%
         2007                          138           1,473,608          7.2%            42.4%
         2008                          127           1,591,864          7.8%            50.1%
         2009 and thereafter           315           8,540,939         41.8%            91.8%
         -----------------------------------------------------------------------------------------
         Total/Weighted Average      1,284          18,804,006         91.8%              --
         -----------------------------------------------------------------------------------------
         Total Portfolio Square Feet                20,474,097
         -----------------------------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>
         OFFICE PORTFOLIO
         -----------------------------------------------------------------------------------------
                                   Number of         Square        % of Total       Cumulative
         Year of                     Leases           Feet           Office         % of Total
         Expiration                 Expiring        Expiring          Sq Ft       Portfolio Sq Ft
         -----------------------------------------------------------------------------------------
         <S>                         <C>           <C>                <C>              <C>
         2003                           68             591,719          4.4%             4.4%
         2004                          145             945,855          7.0%            11.3%
         2005                          187           1,639,436         12.1%            23.4%
         2006                          171           1,557,869         11.5%            34.9%
         2007                          107           1,114,656          8.2%            43.1%
         2008                           94             893,876          6.6%            49.7%
         2009 and thereafter           256           5,675,221         41.8%            91.6%
         -----------------------------------------------------------------------------------------
         Total/Weighted Average      1,028          12,418,632         91.6%              --
         -----------------------------------------------------------------------------------------
         Total Office Portfolio
           Square Feet                              13,565,420
         -----------------------------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>
                                      INDUSTRIAL/R&D PORTFOLIO
         -----------------------------------------------------------------------------------------
                                   Number of         Square        % of Total       Cumulative
         Year of                     Leases           Feet       Industrial/R&D     % of Total
         Expiration                 Expiring        Expiring          Sq Ft       Portfolio Sq Ft
         -----------------------------------------------------------------------------------------
         <S>                         <C>           <C>                <C>              <C>
         2003                            7             112,363          1.6%             1.6%
         2004                           38             565,886          8.2%             9.8%
         2005                           33             706,153         10.2%            20.0%
         2006                           55           1,078,314         15.6%            35.6%
         2007                           31             358,952          5.2%             40.8%
         2008                           33             697,988         10.1%            50.9%
         2009 and thereafter            59           2,865,718         41.5%            92.4%
         -----------------------------------------------------------------------------------------
         Total/Weighted Average        256           6,385,374         92.4%              --
         -----------------------------------------------------------------------------------------
         Total Industrial/R&D
           Portfolio Square Feet                     6,908,677                            --

         -----------------------------------------------------------------------------------------
</TABLE>

(a) Excludes the 355,000 square foot office property located in Orlando, Florida



                                       40
<PAGE>


PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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

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

On May 29, 2003, the Company held its annual meeting of stockholders. The
matters on which the stockholders voted, in person or by proxy, were (1) the
election of three nominees as Class II directors to serve until the 2006 annual
meeting of stockholders and until their respective successors are duly elected
and qualified, (2) the election of one nominee as a Class III director to serve
until the 2004 annual meeting of stockholders and until a respective successor
is duly elected and qualified and (3) to ratify the selection of Ernst & Young,
LLP as the independent auditors of the Company for the fiscal year ending
December 31, 2003. The four nominees were elected and the auditors were
ratified. The results of the voting are set for below:

<TABLE>
<CAPTION>
Election of Directors                 Votes Cast For            Withheld            Votes Cast Against      Abstain
---------------------                 --------------            --------            ------------------      -------
<S>                                     <C>                    <C>                     <C>                 <C>
Donald Rechler                          40,881,623             10,528,385                 N/A                 N/A
Mitchell Rechler                        40,881,623             10,528,385                 N/A                 N/A
Ronald Menaker                          41,731,002              9,679,006                 N/A                 N/A
Peter Quick                             41,731,002              9,679,006                 N/A                 N/A

Ratification of Auditors                50,428,370               N/A                   902,254             79,384
------------------------

</TABLE>


Item 5. Other information - None

Item 6. Exhibits and Reports on Form 8-K
     a) Exhibits

         10.04 Supplement to the Amended and Restated Agreement of Limited
               Partnership of Reckson operating Partnership, L.P. establishing
               the Series C common units of limited partnership interest.

         10.1  Reckson Associates Realty Corp. amended and restated 1995 Stock
               Option Plan

         10.2  Reckson Associates Realty Corp. amended and restated 1997 Stock
               Option Plan

         10.3  Reckson Associates Realty Corp. amended and restated 2002 Stock
               Option Plan

         31.1  Certification of Donald J. Rechler, Co-Chief Executive Officer of
               the Registrant, pursuant to Rule 13a - 14(a)/15(d) - 14(a).


         31.2  Certification of Scott H. Rechler, Co-Chief Executive Officer of
               the Registrant, pursuant to Rule 13a - 14(a)/15(d) - 14(a).

         31.3  Certification of Michael Maturo, Executive Vice President,
               Treasurer and Chief Financial Officer of the Registrant, pursuant
               to Rule 13a - 14(a)/15(d) - 14(a).

         32.1  Certification of Donald J. Rechler, Co-Chief Executive Officer of
               the Registrant, pursuant to Section 1350 of Chapter 63 of Title
               18 of the United States Code.

         32.2  Certification of Scott H. Rechler, Co-Chief Executive Officer of
               the Registrant, pursuant to Section 1350 of Chapter 63 of Title
               18 of the United States Code.

         32.3  Certification of Michael Maturo, Executive Vice President,
               Treasurer and Chief Financial Officer of the Registrant, pursuant
               to Section 1350 of Chapter 63 of Title 18 of the United States
               Code.

     b) During the three months ended June 30, 2003, the Registrant filed the
        following reports on Form 8-K:

                 On May 7, 2003, the Registrant submitted a report on Form 8-K
                 under Items 7 and 9 thereof in order to file a press release
                 announcing its consolidated financial results for the quarter
                 ended March 31, 2003.

                 On May 28, 2003, the Registrant submitted a report on Form 8-K
                 under Item 5 thereof in order to describe certain amendments to
                 its Long Term Incentive Plan.



                                       41
<PAGE>


SIGNATURES

Pursuant to the requirements of the Securities 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.

By:  /s/ Scott H. Rechler             By:     /s/ Michael Maturo
   ---------------------------        ------------------------------
Scott H. Rechler, Co-Chief            Michael Maturo, Executive Vice President,
Executive Officer                     Treasurer and Chief Financial Officer

By   /s/ Donald J. Rechler
  ----------------------------
Donald J. Rechler, Co-Chief
Executive Officer


DATE: August 8, 2003



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