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


                                  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 SEPTEMBER 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 48,024,155 AND 9,915,313 SHARES OF CLASS A COMMON STOCK AND
CLASS B COMMON STOCK OUTSTANDING, RESPECTIVELY AS OF NOVEMBER 14, 2003


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


<PAGE>


                         RECKSON ASSOCIATES REALTY CORP.
                                QUARTERLY REPORT
                  FOR THE THREE MONTHS ENDED SEPTEMBER 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 September 30, 2003  (unaudited)
                              and December 31, 2002............................................................       2
                         Consolidated Statements of Income for the three and nine months ended
                              September 30, 2003 and 2002 (unaudited)..........................................       3
                         Consolidated Statements of Cash Flows for the nine months ended
                              September 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.......................................................................      23
       Item 3.           Quantitative and Qualitative Disclosures about Market Risk ...........................      42
       Item 4.           Controls and Procedures...............................................................      43
       ---------------------------------------------------------------------------------------------------------------------
       PART II.         OTHER INFORMATION
       ---------------------------------------------------------------------------------------------------------------------
       Item 1.           Legal Proceedings.....................................................................      48
       Item 2.           Changes in Securities and Use of Proceeds.............................................      48
       Item 3.           Defaults Upon Senior Securities.......................................................      48
       Item 4.           Submission of Matters to a Vote of Securities Holders.................................      48
       Item 5.           Other Information.....................................................................      48
       Item 6.           Exhibits and Reports on Form 8-K......................................................      48
       ---------------------------------------------------------------------------------------------------------------------
       SIGNATURES..............................................................................................      49
       ---------------------------------------------------------------------------------------------------------------------

</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>
                                                                                           SEPTEMBER 30,       DECEMBER 31,
                                                                                               2003                2002
                                                                                           -------------       ------------
                                                                                            (Unaudited)
<S>                                                                                         <C>                <C>
ASSETS:
Commercial real estate properties, at cost:
    Land ............................................................................       $   386,512        $   386,747
    Building and improvements .......................................................         2,241,511          2,199,896
Developments in progress:
    Land ............................................................................            89,450             92,924
    Development costs ...............................................................            61,372             28,311
Furniture, fixtures and equipment ...................................................            11,300             12,203
                                                                                            -----------        -----------
                                                                                              2,790,145          2,720,081
Less accumulated depreciation .......................................................          (446,522)          (382,022)
                                                                                            -----------        -----------
Investment in real estate, net of accumulated deprecation ...........................         2,343,623          2,338,059
Properties and related assets held for sale, net of accumulated depreciation ........           202,521            196,954
Investments in real estate joint ventures ...........................................             5,844              6,116
Investments in mortgage notes and notes receivable ..................................            70,425             54,547
Investments in service companies and affiliate loans and joint ventures .............            72,054             73,332
Cash and cash equivalents ...........................................................            24,623             30,827
Tenant receivables ..................................................................            14,842             12,529
Deferred rents receivable ...........................................................           109,622             97,145
Prepaid expenses and other assets ...................................................            33,773             32,966
Contract and land deposits and pre-acquisition costs ................................               128                240
Deferred leasing and loan costs .....................................................            64,619             65,205
                                                                                            -----------        -----------
TOTAL ASSETS ........................................................................       $ 2,942,074        $ 2,907,920
                                                                                            ===========        ===========
LIABILITIES:
Mortgage notes payable ..............................................................       $   725,002        $   733,761
Mortgage notes payable and other liabilities associated with properties
  held for sale......................................................................             9,107             10,722
Unsecured credit facility ...........................................................           374,000            267,000
Senior unsecured notes ..............................................................           499,409            499,305
Accrued expenses and other liabilities ..............................................            84,860             89,312
Dividends and distributions payable .................................................            31,606             31,575
                                                                                            -----------        -----------
TOTAL LIABILITIES ...................................................................         1,723,984          1,631,675
                                                                                            -----------        -----------
Minority partners' interests in consolidated partnerships ...........................           234,377            242,934
Preferred unit interest in the operating partnership ................................            19,662             19,662
Limited partners' minority interest in the operating partnership ....................            69,410             71,420
                                                                                            -----------        -----------
TOTAL MINORITY INTERESTS ............................................................           323,449            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, 48,012,988 and 48,246,083 shares issued
            and outstanding, respectively ...........................................               481                482
    Class B common stock, 9,915,313 shares issued and outstanding ...................                99                 99
Additional paid in capital ..........................................................           957,907          1,005,494
    Treasury stock - Class A common, 2,950,400 and 2,698,400 shares, respectively
            and Class B common, 368,200 shares ......................................           (63,954)           (63,954)
                                                                                            -----------        -----------
Total Stockholders' Equity ..........................................................           894,641            942,229
                                                                                            -----------        -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..........................................       $ 2,942,074        $ 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                NINE MONTHS ENDED
                                                                      SEPTEMBER 30,                     SEPTEMBER 30,
                                                              -----------------------------     -----------------------------
                                                                  2003             2002             2003             2002
                                                              ------------     ------------     ------------     ------------
<S>                                                           <C>              <C>              <C>              <C>
REVENUES:
Property operating revenues:
     Base rents ..........................................    $     95,239     $    100,730     $    288,202     $    295,137
     Tenant escalations and reimbursements ...............          16,466           13,994           44,817           40,794
                                                              ------------     ------------     ------------     ------------
Total property operating revenues ........................         111,705          114,724          333,019          335,931
Interest income on mortgage notes and notes receivable
     (including $1,100, $1,100, $3,100 and $3,200,
     respectively from related parties) ..................           1,724            1,589            4,814            4,710
Investment and other income ..............................           4,676              550           13,769            1,012
                                                              ------------     ------------     ------------     ------------
    TOTAL REVENUES .......................................         118,105          116,863          351,602          341,653
                                                              ------------     ------------     ------------     ------------
EXPENSES:
Property operating expenses ..............................          47,210           43,089          134,787          120,603
Marketing, general and administrative ....................           8,239            7,402           24,755           20,923
Interest .................................................          20,231           20,684           61,170           59,860
Depreciation and amortization ............................          26,273           26,690           82,845           75,654
                                                              ------------     ------------     ------------     ------------
     TOTAL EXPENSES ......................................         101,953           97,865          303,557          277,040
                                                              ------------     ------------     ------------     ------------
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 .............................          16,152           18,998           48,045           64,613
Minority partners' interests in consolidated partnerships           (4,379)          (4,446)         (13,404)         (14,379)
Distributions to preferred unit holders ..................            (273)            (273)            (820)          (1,014)
Limited partners' minority interest in the operating
     partnership .........................................            (678)            (845)          (1,869)          (3,527)
Equity (loss) in earnings of real estate joint ventures
     and service companies (including $0, $0, $0 and
     $465, respectively from related parties) ............             134              104              (30)             598
Gain on sales of depreciable real estate assets ..........              --               --               --              537
                                                              ------------     ------------     ------------     ------------
Income before discontinued operations and preferred
     dividends ...........................................          10,956           13,538           31,922           46,828
Discontinued operations (net of limited partners'
     minority interest):
     Gain on sales of real estate ........................              --            4,268               --            4,267
     Income from discontinued operations .................           4,369            3,815           10,285           11,287
                                                              ------------     ------------     ------------     ------------
Net Income ...............................................          15,325           21,621           42,207           62,382
Dividends to preferred shareholders ......................          (5,316)          (5,487)         (15,950)         (16,461)
                                                              ------------     ------------     ------------     ------------
Net income allocable to common shareholders ..............    $     10,009     $     16,134     $     26,257     $     45,921
                                                              ============     ============     ============     ============
Net income allocable to:
    Class A common .......................................    $      7,613     $     12,334     $     19,977     $     35,041
    Class B common .......................................           2,396            3,800            6,280           10,880
                                                              ------------     ------------     ------------     ------------
Total ....................................................    $     10,009     $     16,134     $     26,257     $     45,921
                                                              ============     ============     ============     ============
Basic net income per weighted average common share:
    Class A common - income from continuing operations ...    $        .09     $        .13     $        .26     $        .46
    Gain on sales of depreciable real estate assets ......              --               --               --               --
    Discontinued operations ..............................             .07              .12              .16              .24
                                                              ------------     ------------     ------------     ------------
    Basic net income per Class A common ..................    $        .16     $        .25     $        .42     $        .70
                                                              ============     ============     ============     ============
    Class B common - income from continuing operations ...    $        .13     $        .19     $        .38     $        .71
    Gain on sales of depreciable real estate assets ......              --               --               --               --
    Discontinued operations ..............................             .11              .19              .25              .36
                                                              ------------     ------------     ------------     ------------
    Basic net income per Class B common ..................    $        .24     $        .38     $        .63     $       1.07
                                                              ============     ============     ============     ============
Basic weighted average common shares outstanding:
    Class A common .......................................      48,009,138       49,525,372       48,069,657       50,102,817
    Class B common .......................................       9,915,313       10,010,423        9,915,313       10,191,483
Diluted net income per weighted average common share:
    Class A common .......................................    $        .16     $        .25     $        .41     $        .69
                                                              ============     ============     ============     ============
    Class B common .......................................    $        .17     $        .26     $        .45     $        .75
                                                              ============     ============     ============     ============
Diluted weighted average common shares outstanding:
    Class A common .......................................      48,179,428       49,825,400       48,205,207       50,445,005
    Class B common .......................................       9,915,313       10,010,423        9,915,313       10,191,483

</TABLE>
                (see accompanying notes to financial statements)


                                       3
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                             NINE MONTHS ENDED
                                                                                               SEPTEMBER 30,
                                                                                        ------------------------
                                                                                          2003            2002
                                                                                        ---------      ---------
<S>                                                                                     <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME ..........................................................................   $  42,207      $  62,382
Adjustments to reconcile net income to net cash provided by operating activities:
      Depreciation and amortization (including discontinued operations)  ............      89,959         82,913
      Gain on sales of depreciable real estate assets ...............................          --         (4,804)
      Minority partners' interests in consolidated partnerships .....................      13,404         14,379
      Limited partners' minority interest in the operating partnership ..............       3,072          4,796
      (Equity) loss in earnings of real estate joint ventures and service companies .          30           (598)
 Changes in operating assets and liabilities:
      Tenant receivables ............................................................        (654)           312
      Prepaid expenses and other assets .............................................       4,822         11,279
      Deferred rents receivable .....................................................     (13,755)       (19,666)
      Accrued expenses and other liabilities ........................................       3,932         (5,218)
                                                                                        ---------      ---------
      Net cash provided by operating activities .....................................     143,017        145,775
                                                                                        ---------      ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
      Additions to developments in progress .........................................     (15,104)       (37,304)
      Increase in mortgage notes receivable and proceeds from repayments ............     (15,000)            12
      Purchase of commercial real estate ............................................     (40,500)            --
      Additions to commercial real estate properties ................................     (36,080)       (31,029)
      Additions to furniture, fixtures and equipment ................................        (192)           (71)
      Payment of leasing costs ......................................................     (13,185)       (12,789)
      Distributions from investments in real estate joint ventures ..................         243             --
      Proceeds from sales of real estate ............................................          --         22,385
                                                                                        ---------      ---------
      Net cash used in investing activities .........................................    (119,818)       (58,796)
                                                                                        ---------      ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
      Proceeds from issuance of common stock net of issuance costs ..................          74          6,310
      Repurchases of common stock ...................................................      (4,538)       (49,227)
      Principal payments on secured borrowings ......................................      (8,932)        (7,930)
      Payment of loan and equity issuance costs .....................................        (164)        (1,538)
      Proceeds from issuance of senior unsecured notes ..............................          --         49,432
      Proceeds from unsecured credit facility .......................................     112,000        115,000
      Repayment of unsecured credit facility ........................................      (5,000)      (162,600)
      Distributions to minority partners in consolidated partnerships ...............     (16,313)       (14,572)
      Distributions to limited partners in the operating partnership ................      (9,264)        (9,451)
      Distributions to preferred unit holders .......................................        (820)        (1,047)
      Dividends to common shareholders ..............................................     (80,496)       (84,239)
      Dividends to preferred shareholders ...........................................     (15,950)       (16,461)
                                                                                        ---------      ---------
      Net cash used in financing activities .........................................     (29,403)      (176,323)
                                                                                        ---------      ---------
      Net (decrease) in cash and cash equivalents ...................................      (6,204)       (89,344)
      Cash and cash equivalents at beginning of period ..............................      30,827        121,975
                                                                                        ---------      ---------
      Cash and cash equivalents at end of period ....................................   $  24,623      $  32,631
                                                                                        =========      =========
</TABLE>
                (see accompanying notes to financial statements)


                                       4
<PAGE>


                         RECKSON ASSOCIATES REALTY CORP.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 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
September 30, 2003, the Company's ownership percentage in the Operating
Partnership was approximately 88.9%.

2.       BASIS OF PRESENTATION

The accompanying consolidated financial statements include the consolidated
financial position of the Company and the Operating Partnership at September 30,
2003 and December 31, 2002 and the results of their operations for the three and
nine months ended September 30, 2003 and 2002, respectively, and, their cash
flows for the nine months ended September 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 their
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 an eight 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 11.1% and 10.3% at September 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 September 30, 2003 and for
the three and nine month periods ended September 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.

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

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. In accordance with the provisions of
Statement No. 144, the Company allocated approximately $2.3 million and $6.8
million of it unsecured corporate interest expense to discontinued operations
for the three and nine months ended September 30, 2003, respectively.

On July 1, 2001 and January 1, 2002, the Company adopted FASB Statement No.141
"Business Combinations" and FASB Statement No. 142, "Goodwill and Other
Intangibles", respectively. As part of the acquisition of real estate assets,
the fair value of the real estate acquired is allocated to the acquired tangible
assets, consisting of land, building and building improvements, and identified
intangible assets and liabilities, consisting of the value of above-market and
below-market leases, other value of in-place leases, and value of tenant
relationships, based in each case on their fair values. The Company assesses
fair value based on estimated cash flow projections that utilize appropriate
discount and capitalization rates and available market information. Estimates of
future cash flows are based on a number of factors including the historical
operating results, known trends, and market/economic conditions that may affect
the property. If the Company incorrectly estimates the values at acquisition or
the undiscounted cash flows, initial allocation of purchase price and future
impairment charges may be different.

Recent Accounting Pronouncements

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 nine months ended September 30, 2003 and
2002 (in thousands except earnings per share data):

<TABLE>
<CAPTION>

                                                          THREE MONTHS ENDED       NINE MONTHS ENDED
                                                             SEPTEMBER 30,           SEPTEMBER 30,
                                                         --------------------    --------------------
                                                           2003        2002        2003        2002
                                                         --------    --------    --------    --------
<S>                                                      <C>         <C>         <C>         <C>
Net income as reported ..............................    $  7,613    $ 12,334    $ 19,977    $ 35,041
Add:  Stock option expense included in net
      income ........................................           1          --           4          --
Less:  Stock option expense determined under
       fair value recognition method for all awards..         (64)        (76)       (208)       (306)
                                                         --------    --------    --------    --------
Pro forma net income ................................    $  7,550    $ 12,258    $ 19,773    $ 34,735
                                                         ========    ========    ========    ========
Net income per share as reported:
     Basic ..........................................    $    .16    $    .25    $    .42    $    .70
                                                         ========    ========    ========    ========
     Diluted ........................................    $    .16    $    .25    $    .41    $    .69
                                                         ========    ========    ========    ========
Pro forma net income per share:
     Basic ..........................................    $    .16    $    .25    $    .41    $    .69
                                                         ========    ========    ========    ========
     Diluted ........................................    $    .16    $    .25    $    .41    $    .69
                                                         ========    ========    ========    ========

</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 nine month periods ended September 30, 2003 and
2002:

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED    NINE MONTHS ENDED
                                                           SEPTEMBER 30,        SEPTEMBER 30,
                                                       -------------------   -------------------
                                                         2003      2002        2003      2002
                                                         ----      -----       -----     -----
<S>                                                      <C>       <C>         <C>       <C>
Risk free interest rate ..........................        3.0%      3.0%        3.0%      3.0%
Dividend yield ...................................       7.38%     7.44%       7.38%     7.44%
Volatility factor of the expected market price
     of the Company's Class A common stock .......       .193      .196        .193      .196
Weighted average expected option life (in years) .        5.0       6.0         5.0       6.0

</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 initial determination of whether an entity qualifies as a VIE
shall be made as of the date at which a primary beneficiary becomes involved
with the entity and reconsidered as of the date of a triggering event, as
defined. The provisions of this interpretation are immediately effective for
VIE's formed after January 31, 2003. On October 9, 2003, the FASB issued FIN
46-6, deferring the effective date until the first interim or annual period
ending after December 15, 2003 for interests held by public companies in
variable interest entities created before February 1, 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.


                                       7
<PAGE>



3.       MORTGAGE NOTES PAYABLE

As of September 30, 2003, the Company had approximately $731.1 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 $44.3 million of the $731.1 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
September 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                      19,403           6.45%      October, 2005      $34 per month
200 Summit Lake Drive, Valhalla, NY                       19,050           9.25%      January, 2006           25
1350 Avenue of the Americas, NY, NY                       74,046           6.52%         June, 2006           30
Landmark Square, Stamford, CT (a)                         44,302           8.02%      October, 2006           25
100 Summit Lake Drive, Valhalla, NY                       18,075           8.50%        April, 2007           15
333 Earle Ovington Blvd, Mitchel Field, NY (b)            53,125           7.72%       August, 2007           25
810 Seventh Avenue, NY, NY                                81,710           7.73%       August, 2009           25
100 Wall Street, NY, NY                                   35,408           7.73%       August, 2009           25
6900 Jericho Turnpike, Syosset, NY                         7,259           8.07%         July, 2010           25
6800 Jericho Turnpike, Syosset, NY                        13,754           8.07%         July, 2010           25
580 White Plains Road, Tarrytown, NY                      12,530           7.86%    September, 2010           25
919 Third Ave, NY, NY (c)                                244,919          6.867%       August, 2011           30
110 Bi-County Blvd., Farmingdale, NY                       3,462          9.125%     November, 2012           20
One Orlando Center, Orlando, FL (d)                       37,914           6.82%     November, 2027           28
120 West 45th Street, NY, NY (d)                          63,507           6.82%     November, 2027           28
                                                     -----------
Total/Weighted Average                               $   731,080           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 $31.9 million
     (c) The Company has a 51% membership interest in this property and its
         proportionate share of the aggregate principal amount is approximately
         $124.9 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 September 30, 2003 is
approximately $8.0 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 September 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. As of September 30, 2003, borrowings under the Credit
Facility were priced off LIBOR plus 90 basis points and the Credit Facility
carried 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. (see Note 12) The outstanding borrowings
under the Credit Facility were $374 million at September 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 September 30, 2003, the Company had availability under the Credit
Facility to borrow approximately an additional $126 million, subject to
compliance with certain financial covenants.

6. COMMERCIAL REAL ESTATE INVESTMENTS

As of September 30, 2003, the Company owned and operated 78 office properties
(inclusive of ten office properties owned through joint ventures) comprising
approximately 13.8 million square feet, 102 industrial / R&D properties
comprising approximately 6.8 million square feet and two retail properties
comprising approximately 20,000 square feet located in the Tri-State Area. For
information relating to events subsequent to September 30, 2003, see Footnote
12.

As of September 20, 3003, the Company also owned 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 September 30, 2003, the Company had
invested approximately $150.8 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 September 30, 2003, the Company
has capitalized approximately $7.1 million related to real estate taxes,
interest and other carrying costs related to these development projects. In
October 2003, the Company entered into contracts to sell two land parcels
aggregating approximately 128 acres of its land holdings located in New Jersey.
The contracts provided for aggregate sales prices ranging from $23 million to
$43 million. These sales are contingent upon obtaining zoning for residential
use of the land and other customary approvals. The proceeds ultimately received
from such sales will be based upon the number of residential units permitted by
the rezoning. The closing is scheduled to occur upon the rezoning which is
anticipated to occur within 12 to 36 months.

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. 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. As described below,
the Company has since identified and acquired certain qualified replacement
properties and an interest in a qualified joint venture property 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 $20.9 million of which $3.3 million and $13.4 million has been
recognized during the three and nine months ended September 30, 2003,
respectively, and is included in investment and other income on the accompanying
statements of income. Approximately $7.5 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. On August 27, 2003, the Company, through Reckson Construction Group,
Inc., acquired the remaining 49% interest in the property located at 275
Broadhollow Road, Melville, NY, from the Company's joint venture partner,
Teachers Insurance and Annuity Association, for approximately $12.4 million.
These acquisitions were financed from the sales proceeds being held by the
previously referenced qualified intermediary and the properties acquired were
identified, qualified replacement properties. As a result of these acquisitions,
the Company successfully completed the exchange of real property pursuant to
Section 1031 and thereby deferred the taxes related to the gain recognized on
the sale proceeds received from the land sale to First Data Corp.


                                       9
<PAGE>



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. In accordance with FASB Statement No. 141 "Business
Combinations", the Company allocated and recorded a net deferred intangible
lease asset of approximately $1.5 million, representing the net value of
acquired above and below market leases, assumed lease origination costs and
other value of in-place leases. The net value of the above and below market
leases is amortized over the remaining terms of the respective leases to rental
income and such amortization amounted to approximately $133,000 during the third
quarter of 2003. In addition, amortization expense on the value of lease
origination costs was approximately $45,500 for the third quarter 2003. At
acquisition, there were 16 in-place leases aggregating approximately 136,000
square feet with a weighted average remaining lease term of approximately 30
months.

On September 5, 2003, the Company acquired a $15 million participating interest
in a $30 million junior mezzanine loan secured by, among other things, a pledge
of the ownership interest of an entity which owns the ground leasehold estate
under a 1.1 million square foot Class A office complex located on Long Island,
New York. The loan matures on September 9, 2005 and the borrower has the right
to extend the loan for three additional one year periods. The loan is comprised
of three tranches based upon priority: a $14 million A tranche, a $14 million B
tranche and a $2 million C tranche. The Company acquired a 25% interest in the A
tranche, a 75% interest in the B tranche and a 50% interest in the C tranche.
Interest is payable on the tranches at 9.5%, 12.5% and 12.5%, respectively, over
the greater of one month LIBOR or 1.63%. As a result, the minimum weighted
average interest rate accruing to the Company is 13.43%. In addition, as part of
the Company's participation it received a 1% origination fee amounting to
$150,000. Such fee is being recognized over a three year period.

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. As of September 30, 2003,
the Company held three other notes receivable aggregating $36.5 million bearing
interest at rates ranging from 10.5% to 12% per annum. On October 27, 2003, the
Company was repaid in full on one of these notes totaling $20 million and issued
a $5 million note receivable to the same minority partner under terms similar to
the repaid note. These notes 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"). 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 $101.4 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, a director of HQ Global Workplaces, is a partner in JAH
Realties, L.P. As of September 30, 2003, the 520JV had total assets of $19.8
million, a mortgage note payable of $12.1 million and other liabilities of
$135,000. The Company's allocable share of the 520JV mortgage note payable is
approximately $8.0 million. This mortgage note payable bears interest at 8.85%
per annum and matures on September 1, 2005. During the second quarter of 2003,
HQ Global Workplaces, a tenant of the 520JV surrendered approximately one-third
of its 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 $181,000 for the nine months ended September 30, 2003. 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
income (loss) was approximately $134,000 and ($30,000) for the three and nine
months ended September 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. In August 2003, the Company acquired TIAA's 49%
interest in the property located at 275 Broadhollow Road, Melville, NY, for
approximately $12.4 million. As a result, the Tri-State JV owns eight Class A
suburban office properties aggregating approximately 1.4 million square feet.
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.


                                       10
<PAGE>



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.



















                                       11
<PAGE>

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 September 2003, the Board of Directors of the Company declared the
following dividends on the Company's securities:

<TABLE>
<CAPTION>
                                                                                                       ANNUALIZED
                             DIVIDEND /       RECORD             PAYMENT             THREE MONTHS       DIVIDEND /
     SECURITY              DISTRIBUTION        DATE                DATE                 ENDED         DISTRIBUTION
     --------              ------------        ----                ----                 -----         ------------
<S>                          <C>          <C>                 <C>                  <C>                  <C>
Class A common stock         $ .4246      October 6, 2003     October 17, 2003     September 30, 2003   $ 1.6984
Class B common stock         $ .6471      October 15, 2003    October 31, 2003     October 31, 2003     $ 2.5884
Series A preferred stock     $ .476563    October 15, 2003    October 31, 2003     October 31, 2003     $ 1.9063
Series B preferred stock     $ .553125    October 15, 2003    October 31, 2003     October 31, 2003     $ 2.2125

</TABLE>

On September 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 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.

On October 24, 2003, the Company gave notice to its Class B common stockholders
that it will exercise its option to exchange all of its Class B common stock
outstanding on November 25, 2003 for an equal number of shares of Class A common
stock. The Board of Directors has declared a final cash dividend on the
Company's Class B common stock to holders of record on November 25, 2003 in the
amount of $.1758 per share, payable on January 12, 2004. This payment will cover
the period from November 1, 2003 through November 25, 2003 and is based on the
current quarterly Class B common stock dividend rate of $.6471 per share. In
order to align the regular quarterly dividend payment schedule of the former
holders of Class B common stock with the schedule of the holders of Class A
common stock for periods subsequent to the exchange date for the Class B common
stock, the Board of Directors has also declared a cash dividend with regard to
the Class A common stock to holders of record on October 14, 2003 in the amount
of $.2585 per share, payable on January 12, 2004. This payment will cover the
period from October 1, 2003 through November 25, 2003 and is based on the
current quarterly Class A common stock dividend rate of $.4246 per share. As a
result, the Company will have declared dividends through November 25, 2003 to
all holders of Class A common stock and Class B common stock. The Board of
Directors has also declared the Class A common stock cash dividend for the
portion of the fourth quarter subsequent to November 25, 2003. The holders of
record of Class A common stock on January 2, 2004, giving effect to the exchange
transaction, will receive a Class A common stock dividend in the amount of
$.1661 per share, payable on January 12, 2004. This payment will cover the
period from November 26, 2003 through December 31, 2003 and is based on the
current quarterly Class A common stock dividend rate of $.4246 per share.

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 nine months
ended September 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.


                                       12
<PAGE>


On September 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. During the fourth quarter of 2002, the Company purchased and
retired 357,500 shares of its Class A preferred stock at $22.29 per share for
approximately $8.0 million.

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), it issued 465,845
Class C common units of limited partnership interest. The Class C common units
will receive an initial 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. On October 17, 2003, the Company paid a
distribution on the Class C common units of approximately $130,000 for the
period from August 7, 2003 through September 30, 2003.

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 $3.3 million
of compensation expense was recorded for each of the nine month periods ended
September 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.

The outstanding stock loan balances due from executive and senior officers
aggregated approximately $13.0 million and $17.0 million at September 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 September 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 certain 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 nine months ended September 30, 2003, the Company recorded approximately
$228,000 and $653,000 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.


                                       13
<PAGE>


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 $403,000 and $2.0 million
of compensation expense for the three and nine months ended September 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 48,009,138 and
49,525,372 for the three months ended September 30, 2003 and 2002, respectively,
and 48,069,657 and 50,102,817 for the nine months ended September 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
10,010,423 for the three months ended September 30, 2003 and 2002, respectively
and 9,915,313 and 10,191,483 for the nine months ended September 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.










                                       14
<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      Nine Months Ended
                                                                           September 30,           September 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   $ 10,956    $ 13,538    $ 31,922    $ 46,828
     Discontinued operations (net of share applicable to limited
         partners and Class B shareholders) ........................      3,321       6,180       7,823      11,882
     Dividends to preferred shareholders ...........................     (5,316)     (5,487)    (15,950)    (16,461)
     (Income) allocated to Class B common shareholders .............     (1,348)     (1,897)     (3,818)     (7,208)
                                                                       --------    --------    --------    --------
Numerator for basic and diluted earnings per Class A common share ..   $  7,613    $ 12,334    $ 19,977    $ 35,041
                                                                       ========    ========    ========    ========
Denominator:
     Denominator for basic earnings per share - weighted average
     Class A common shares .........................................     48,009      49,525      48,070      50,103
     Effect of dilutive securities:
            Common stock equivalents ...............................        170         300         135         342
                                                                       --------    --------    --------    --------
Denominator for diluted earnings per Class A common share -
     adjusted weighted average shares and assumed conversions ......     48,179      49,825      48,205      50,445
                                                                       ========    ========    ========    ========
Basic earnings per weighted average common share:
     Class A common - income from continuing operations ............   $    .09    $    .13    $    .26    $    .46
     Gain on sales of depreciable real estate assets ...............         --          --          --          --
     Discontinued operations .......................................        .07         .12         .16         .24
                                                                       --------    --------    --------    --------
     Net income per Class A common share ...........................   $    .16    $    .25    $    .42    $    .70
                                                                       ========    ========    ========    ========
Diluted earnings per weighted average common share:
     Class A common - income from continuing operations ............   $    .09    $    .13    $    .25    $    .45
     Gain on sales of depreciable real estate assets ...............         --          --          --          --
     Discontinued operations .......................................        .07         .12         .16         .24
                                                                       --------    --------    --------    --------
     Diluted net income per Class A common share ...................   $    .16    $    .25    $    .41    $    .69
                                                                       ========    ========    ========    ========
</TABLE>


                                       15
<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      NINE MONTHS ENDED
                                                                   SEPTEMBER 30,          SEPTEMBER 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 ...............................   $ 10,956    $ 13,538    $ 31,922    $ 46,828
     Discontinued operations (net of share  applicable to
       limited partners and Class A shareholders) .........      1,048       1,903       2,462       3,672
     Dividends to preferred shareholders ..................     (5,316)     (5,487)    (15,950)    (16,461)
     (Income) allocated to Class A common shareholders ....     (4,292)     (6,154)    (12,154)    (23,159)
                                                              --------    --------    --------    --------
Numerator for basic earnings per Class B common share .....      2,396       3,800       6,280      10,880
Add back:
     Income allocated to Class A common shareholders ......      7,613      12,334      19,977      35,041
     Limited partner's  minority interest in the operating
       partnership ........................................      1,202       1,941       3,072       5,538
                                                              --------    --------    --------    --------
Numerator for diluted earnings per Class B common share ...   $ 11,211    $ 18,075    $ 29,329    $ 51,459
                                                              ========    ========    ========    ========
Denominator:
     Denominator for basic earnings per share-weighted
       average Class B common shares ......................      9,915      10,010       9,915      10,191
     Effect of dilutive securities:
       Weighted average Class A common shares outstanding .     48,009      49,525      48,070      50,103
       Weighted average OP Units outstanding ..............      7,554       7,276       7,370       7,427
       Common stock equivalents ...........................        170         300         135         342
                                                              --------    --------    --------    --------
Denominator for diluted earnings per Class B common share -
  adjusted weighted average shares and assumed conversions      65,648      67,111      65,490      68,063
                                                              ========    ========    ========    ========
Basic earnings per weighted average common share:
     Class B common - income from continuing operations ...   $    .13    $    .19    $    .38    $    .71
     Gain on sales of depreciable real estate assets ......         --          --          --          --
     Discontinued operations ..............................        .11         .19         .25         .36
                                                              --------    --------    --------    --------
     Net income per Class B common share ..................   $    .24    $    .38    $    .63    $   1.07
                                                              ========    ========    ========    ========
Diluted earnings per weighted average common share:
     Class B common - income from continuing operations ...   $    .15    $    .23    $    .41    $    .70
     Gain on sales of depreciable real estate assets ......         --          --          --          --
     Discontinued operations ..............................        .02         .03         .04         .05
                                                              --------    --------    --------    --------
     Diluted net income per Class B common share ..........   $    .17    $    .26    $    .45    $    .75
                                                              ========    ========    ========    ========
</TABLE>

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

<TABLE>
<CAPTION>
                                                                      NINE MONTHS ENDED
                                                                         SEPTEMBER 30,
                                                                   -----------------------
                                                                      2003          2002
                                                                   ---------     ---------
<S>                                                                <C>           <C>
       Cash paid during the period for interest................    $  79,193     $  79,456
                                                                   =========     =========
       Interest capitalized during the period .................    $   5,804     $   6,354
                                                                   =========     =========

</TABLE>


                                       16
<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 President 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 September 30,
2003 and 2002 (in thousands):

<TABLE>
<CAPTION>
                                                                                 Three months ended
                                               -----------------------------------------------------------------------------------
                                                          September 30, 2003                         September 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 .........    $  110,167      $  1,538     $  111,705    $  112,566      $  2,158     $  114,724
Other income .............................           686         5,714          6,400           239         1,900          2,139
                                              ----------      --------     ----------    ----------      --------     ----------
Total Revenues ...........................       110,853         7,252        118,105       112,805         4,058        116,863
                                              ----------      --------     ----------    ----------      --------     ----------
EXPENSES:
Property operating expenses ..............        46,376           834         47,210        41,965         1,124         43,089
Marketing, general and administrative ....         3,895         4,344          8,239         4,244         3,158          7,402
Interest .................................        12,633         7,598         20,231        11,034         9,650         20,684
Depreciation and amortization ............        24,702         1,571         26,273        24,273         2,417         26,690
                                              ----------      --------     ----------    ----------      --------     ----------
Total Expenses ...........................        87,606        14,347        101,953        81,516        16,349         97,865
                                              ----------      --------     ----------    ----------      --------     ----------
Income (loss) before minority interests,
  preferred dividends and distributions,
  equity (loss) in earnings of real estate
  joint ventures and service companies,
  and discontinued operations ............    $   23,247      $ (7,095)    $   16,152    $   31,289      $(12,291)    $   18,998
                                              ==========      ========     ==========    ==========      ========     ==========
Total Assets .............................    $2,495,844      $446,230     $2,942,074    $2,485,675      $413,273     $2,898,948
                                              ==========      ========     ==========    ==========      ========     ==========
</TABLE>



                                       17
<PAGE>



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

<TABLE>
<CAPTION>
                                                                                 Nine months ended
                                               -----------------------------------------------------------------------------------
                                                          September 30, 2003                         September 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..........     $327,874       $  5,145     $333,019        $329,356      $  6,575     $335,931
Other income..............................        2,520         16,063       18,583             399         5,323        5,722
                                               --------       --------     --------        --------      --------     --------
Total Revenues............................      330,394         21,208      351,602         329,755        11,898      341,653
                                               --------       --------     --------        --------      --------     --------
EXPENSES:
Property operating expenses...............      132,051          2,736      134,787         117,138         3,465      120,603
Marketing, general and administrative.....       12,055         12,700       24,755          12,207         8,716       20,923
Interest..................................       37,902         23,268       61,170          33,044        26,816       59,860
Depreciation and amortization.............       78,144          4,701       82,845          69,498         6,156       75,654
                                               --------       --------     --------        --------      --------     --------
Total Expenses............................      260,152         43,405      303,557         231,887        45,153      277,040
                                               --------       --------     --------        --------      --------     --------
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..............................     $ 70,242       $(22,197)    $ 48,045        $ 97,868      $(33,255)    $ 64,613
                                               ========       ========     ========        ========      ========     ========
</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 were either owned by certain
Rechler family members who were also executive officers of the Company, or in
which the Rechler family members owned 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. In connection with the
Company's disposition of the Long Island industrial portfolio, four of the five
remaining options (the "Remaining Option Properties") granted to the Company at
the time of the IPO to purchase interests in properties owned by Rechler family
members were terminated. In return the Company received an aggregate payment
from the Rechler family members of $972,000. Rechler family members have also
agreed to extend the term of the remaining option on the property located at 225
Broadhollow Road, Melville, New York (the Company's current headquarters) for
five years and to release the Company from approximately 15,500 square feet
under its lease at this property. In connection with the restructuring of the
remaining option the Rechler family members paid Reckson $1 million in return
for Reckson's agreement not to exercise the option during the next three years.
As part of the agreement, the exercise price of the option payable by Reckson
was increased by $1 million.


                                       18
<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 nine
months ended September 30, 2003, Reckson Construction Group, Inc. billed
approximately $317,000 of market rate services and Reckson Management Group,
Inc. billed approximately $207,000 of market rate management fees to the
Remaining Option Properties. In addition, for the nine months ended September
30, 2003, Reckson Construction Group, Inc. performed market rate services,
aggregating approximately $178,500, for a property in which certain executive
officers of the Company maintain an equity interest.

Reckson Management Group, Inc. leases approximately 28,200 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 $653,000. The Company has also entered into a short term license
agreement at the property for 6,000 square feet of temporary space expiring in
January 2004. Reckson Management Group, Inc. also leases 10,722 square feet of
warehouse space used for equipment, materials and inventory storage at a
property owned by certain members of the Rechler family at an annual base rent
of approximately $75,000.

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 $447,000. 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 invested 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 September 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 September 30, 2003, interest accrued (net of reserves) under the FrontLine
Facility and the RSVP Facility was approximately $19.6 million.

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.


                                       19
<PAGE>



In September 2003, RSVP completed the restructuring of its capital structure and
management arrangements. In connection with the restructuring, RSVP redeemed the
interest of the preferred equity holders of RSVP for an aggregate of
approximately $137 million in cash and the transfer to the preferred equity
holders of the assets that comprised RSVP's parking investment valued at
approximately $28.5 million. RSVP also restructured its management arrangements
whereby a management company formed by its former managing directors has been
retained to manage RSVP pursuant to a management agreement and the employment
contracts of the managing directors with RSVP have been terminated. The
management agreement provides for an annual base management fee, and disposition
fees equal to 2% of the net proceeds received by RSVP on asset sales. (The base
management fee and disposition fees are subject to a maximum over the term of
the agreement of $7.5 million.) In addition, the managing directors retained a
one-third residual interest in RSVP's assets which is subordinated to the
distribution of an aggregate amount of $75 million to RSVP and/or the Company in
respect of its joint ventures with RSVP. The management agreement has a
three-year term, subject to early termination in the event of the disposition of
all of the assets of RSVP.

In connection with the restructuring, RSVP and certain of its affiliates
obtained a $60 million secured loan. In connection with this loan, the Operating
Partnership agreed to indemnify the lender in respect of any environmental
liabilities incurred with regard to RSVP's remaining assets in which the
Operating Partnership has a joint venture interest (primarily certain student
housing assets held by RSVP) and guaranteed the obligation of an affiliate of
RSVP to the lender in an amount up to $6 million plus collection costs for any
losses incurred by the lender as a result of certain acts of malfeasance on the
part of RSVP and/or its affiliates. The loan is scheduled to mature in 2006 and
is expected to be repaid from proceeds of assets sales by RSVP.

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 September 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.

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.


                                       20
<PAGE>



11.      COMMITMENTS AND CONTINGENCIES

HQ Global Workplaces, Inc. ("HQ"), one of the largest providers of flexible
officing solutions in the world and which was formerly controlled by FrontLine,
previously operated eleven executive office centers comprising approximately
205,000 square feet at the Company's properties, including two operated at the
Company's joint venture properties. 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 and subsequently rejected three of
its leases with the Company and surrendered approximately an additional 20,500
square feet from two other leases. The Company has since re-leased 100% of the
rejected space. In September 2003, the Bankruptcy Court approved the assumption
and amendment by HQ of its remaining eight leases with the Company. The assumed
leases expire between 2007 and 2011, encompass approximately 150,000 square feet
and provide for current annual base rents totaling approximately $3.5 million. A
committee designated by the Board and chaired by an independent director
conducted all negotiations with HQ.

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. The Company has agreed to restructure five
of the remaining leases. Pursuant to WorldCom's Plan of Reorganization which has
been confirmed by the Bankruptcy Court, WorldCom must assume or reject the
remaining leases prior to the effective date of the Plan. The effective date of
the Plan is estimated to occur during the first quarter of 2004. All of
WorldCom's leases are current on base rental charges through November 30, 2003,
other than under the four rejected leases and the Company currently holds
approximately $195,000 in security deposits relating to the non-rejected leases.
There can be no assurance as to whether WorldCom will affirm or reject any or
all of its remaining leases with the Company.

As of September 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.

12.   SUBSEQUENT EVENTS

On September 10, 2003, the Company announced that it had entered into agreements
relating to the disposition of its Long Island industrial building portfolio
(the "Disposition") to members of the Rechler family for approximately $315.5
million in cash and other consideration. The transactions contemplated by the
agreements were consummated on November 10 and November 12, 2003. As a result,
the Company has disposed of all but three of its 95 property, 5.9 million square
foot, Long Island industrial building portfolio for approximately $225.1 million
in cash and debt assumption and 3,932,111 OP Units valued at approximately $90.4
million. Approximately $210 million of cash sales proceeds from the Disposition
were used to repay the Credit Facility. The remaining three properties, two of
which are subject to transfer pursuant to Section 1031 of the Code, are
anticipated to close within three to six months.

In addition, four of the five remaining options granted to the Company at the
time of its IPO to purchase interests in properties owned by Rechler family
members (including three properties in which the Rechler family members hold
non-controlling interests and one industrial property) were terminated along
with the Company's management contracts relating to three of such properties. In
return the Company received an aggregate payment from the Rechler family members
of $972,000. Rechler family members also extended the term of the remaining
option on the property located at 225 Broadhollow Road, Melville, New York (the
Company's current headquarters) for five years and released the Company from
approximately 15,500 square feet under its lease at this property. In connection
with the restructuring of the remaining option the Rechler family members paid
the Company $1 million in return for the Company's agreement not to exercise the
option during the next three years. As part of the agreement, the exercise price
of the option payable by the Company was increased by $1 million. In addition,
as part of the transaction, the Rechler family entity was granted rights of
first refusal with respect to five vacant land parcels located near the
industrial properties for a period of five years.


                                       21

<PAGE>


In connection with the closing, each of Donald Rechler, Roger Rechler, Gregg
Rechler and Mitchell Rechler resigned as an officer of the Company. Mr. Donald
Rechler remains a member of the Board of Directors of the Company. In settlement
of their employment agreements, these four executives received accelerated
vesting of certain equity based awards and an assignment of certain loans owed
to the Company. Additionally, these exiting executives have agreed to provide
two-year commitments to assist the Company in the transition and entered into
specified non-compete arrangements.

In addition, the Company also announced certain other management changes and
corporate governance enhancements. The reconstituted Board consists of six
independent directors and Messers Scott and Donald Rechler. The Company has
filled the executive positions vacated by the departing Rechler family members
by promoting from within.

In conjunction with this transaction, the Company is also proposing to
de-stagger its Board of Directors at its next Annual Shareholders Meeting, to
opt out of state anti-takeover provisions and to authorize modification of the
ownership limit currently in its charter relating to the "five or fewer rule."

The Company is also under contract to sell a 181,000 square foot office property
located on Long Island for approximately $24.4 million and is scheduled to close
during the fourth quarter. Net proceeds from the sale are anticipated to be used
to repay the Credit Facility.

In accordance with the provisions of FASB Statement No. 144, the Company has
separately identified and classified the assets and liabilities of the
aforementioned 95 industrial properties and the office property located on Long
Island on its consolidated balance sheets as held for sale. In addition, income
from the operations of these properties has been reflected on the Company's
consolidated statements of income as income from discontinued operations.

On November 10, 2003, in connection with the Company's sale of its Long Island
industrial building portfolio and the settlement of the employment contracts of
the departing Rechler family members, the Company incurred the following
restructuring charges: (i) approximately $7.5 million related to outstanding
stock loans under the Company's historical LTIP program were transferred to the
purchaser and approximately $575,000 of loans related to life insurance
contracts were extinguished, (ii) approximately $2.9 million paid to the
departing Rechler family members in exchange for 127,689, or 100%, of their 2002
Rights and their 2003 Rights were forfeited in their entirety and (iii) with
respect to two of the departing Rechler family members participating in the
Company's March 2003 LTIP, each received 8,681 shares of the Company's Class A
common stock related to the service component of their core award which was
valued at $399,000 in the aggregate. In addition, if the Company attains its
annual performance measure in March 2004, these individuals will also be
entitled to each receive 26,041 shares of Class A common stock representing the
balance of the annual core award as if they had remained in continuous
employment with the Company. The remainder of their core awards, aggregating
208,334 shares of Class A common stock, was forfeited.

On November 10, 2003, the Company entered into a contract to acquire 1185 Avenue
of the Americas, a 42-story, 1.1 million square foot Class A office tower,
located between 46th and 47th Streets in New York City for $321 million. The
building is presently encumbered by a $202 million mortgage and $48 million of
mezzanine debt that the Company would assume at closing. The balance of the
purchase price would be paid through an advance under the Credit Facility. The
floating rate mortgage and mezzanine debt both mature in August 2004 and
presently have a weighted average interest rate of 4.95%. The property is also
encumbered by a ground lease which has a remaining term of approximately 40
years with rent scheduled to be re-set at the end of 2005 and then remain
constant for the balance of the term. The closing is subject to customary
consents and conditions.

As of September 30, 2003, the Credit Facility carried a facility fee of 20 basis
points per annum and outstanding borrowings were priced off LIBOR plus 90 basis
points. On November 12, 2003, as a result of one of the Operating Partnership's
rating agencies changing the Operating Partnership's unsecured credit rating,
the facility fee was increased to 30 basis points and the interest rate on
outstanding borrowings was re-set to LIBOR plus 120 basis points. Based on
current outstanding borrowings under the Credit Facility and giving effect to
repayments under the Credit Facility as part of the Long Island industrial
building portfolio sale, the change in the Operating Partnership's unsecured
credit rating will increase interest expense by approximately $1.1 million per
annum. In the event the Operating Partnership re-establishes its previous
unsecured credit rating the interest rates and facility fee will be re-set to
their previous levels.


                                       22
<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; changes in the Company's credit
ratings; changes in the Company's cost and access to capital; 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 nine months ended September 30, 2003, the Company incurred
approximately $373,000 and $3.7 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.


                                       23
<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 their
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.

On July 1, 2001 and January 1, 2002, the Company adopted FASB Statement No.141
"Business Combinations" and FASB Statement No. 142, "Goodwill and Other
Intangibles", respectively. As part of the acquisition of real estate assets,
the fair value of the real estate acquired is allocated to the acquired tangible
assets, consisting of land, building and building improvements, and identified
intangible assets and liabilities, consisting of the value of above-market and
below-market leases, other value of in-place leases, and value of tenant
relationships, based in each case on their fair values. The Company assesses
fair value based on estimated cash flow projections that utilize appropriate
discount and capitalization rates and available market information. Estimates of
future cash flows are based on a number of factors including the historical
operating results, known trends, and market/economic conditions that may affect
the property. If the Company incorrectly estimates the values at acquisition or
the undiscounted cash flows, initial allocation of purchase price and future
impairment charges may be different.



                                       24
<PAGE>


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." In accordance with the provisions of Statement No. 144, the Company
allocated approximately $2.3 million and $6.8 million of its unsecured corporate
interest expense to discontinued operations for the three and nine months ended
September 30, 2003, respectively.









                                       25
<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 September 30, 2003, the Company owned and operated 78 office properties
(inclusive of ten office properties owned through joint ventures) comprising
approximately 13.8 million square feet, 102 industrial / R&D properties
comprising approximately 6.8 million square feet and two retail properties
comprising approximately 20,000 square feet located in the Tri-State Area. For
information relating to events subsequent to September 30, 2003, see "Recent
Developments".

As of September 20, 3003, the Company also owned 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 September 30, 2003, the Company had
invested approximately $150.8 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 September 30, 2003, the Company
has capitalized approximately $7.1 million related to real estate taxes,
interest and other carrying costs related to these development projects. In
October 2003, the Company entered into contracts to sell two land parcels
aggregating approximately 128 acres of its land holdings located in New Jersey.
The contracts provided for aggregate sales prices ranging from $23 million to
$43 million. These sales are contingent upon obtaining zoning for residential
use of the land and other customary approvals. The proceeds ultimately received
from such sales will be based upon the number of residential units permitted by
the rezoning. The closing is scheduled to occur upon the rezoning which is
anticipated to occur within 12 to 36 months.

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"). 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. As described below, the Company has since
identified and acquired certain qualified replacement properties and an interest
in a qualified joint venture property 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 $20.9 million
of which $3.3 million and $13.4 million has been recognized during the three and
nine months ended September 30, 2003, respectively and is included in investment
and other income on the Company's statements of income. Approximately $7.5
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. On August 27, 2003, the Company, through Reckson Construction Group,
Inc., acquired the remaining 49% interest in the property located at 275
Broadhollow Road, Melville, NY, from the Company's joint venture partner,
Teachers Insurance and Annuity Association, for approximately $12.4 million.
These acquisitions were financed from the sales proceeds being held by the
previously referenced qualified intermediary and the properties acquired were
identified, qualified replacement properties. As a result of these acquisitions,
the Company successfully completed the exchange of real property pursuant to
Section 1031 and thereby deferred the taxes related to the gain recognized on
the sale proceeds received from the land sale to First Data Corp.

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 Company's unsecured 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. In accordance with FASB
Statement No. 141 "Business Combinations", the Company allocated and recorded a
net deferred intangible lease asset of approximately $1.5 million, representing
the net value of acquired above and below market leases, assumed lease
origination costs and other value of in-place leases. The net value of the above
and below market leases is amortized over the remaining terms of the respective
leases to rental income and such amortization amounted to approximately $133,000
during the third quarter of 2003. In addition, amortization expense on the value
of lease origination costs was approximately $45,500 for the third quarter 2003.
At acquisition, there were 16 in-place leases aggregating approximately 136,000
square feet with a weighted average remaining lease term of approximately 30
months.



                                       26
<PAGE>

On September 5, 2003, the Company acquired a $15 million participating interest
in a $30 million junior mezzanine loan secured by, among other things, a pledge
of the ownership interest of an entity which owns the ground leasehold estate
under a 1.1 million square foot Class A office complex located on Long Island,
New York. The loan matures on September 9, 2005 and the borrower has the right
to extend the loan for three additional one year periods. The loan is comprised
of three tranches based upon priority: a $14 million A tranche, a $14 million B
tranche and a $2 million C tranche. The Company acquired a 25% interest in the A
tranche, a 75% interest in the B tranche and a 50% interest in the C tranche.
Interest is payable on the tranches at 9.5%, 12.5% and 12.5%, respectively, over
the greater of one month LIBOR or 1.63%. As a result, the minimum weighted
average interest rate accruing to the Company is 13.43%. In addition, as part of
the Company's participation it received a 1% origination fee amounting to
$150,000. Such fee is being recognized over a three year period.

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. As of September 30, 2003,
the Company held three other notes receivable aggregating $36.5 million bearing
interest at rates ranging from 10.5% to 12% per annum. On October 27, 2003, the
Company was repaid in full on one of these notes totaling $20 million and issued
a $5 million note receivable to the same minority partner under terms similar to
the repaid note. These notes 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"). 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 $101.4 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, a director of HQ Global Workplaces, is a partner in JAH
Realties, L.P. As of September 30, 2003, the 520JV had total assets of $19.8
million, a mortgage note payable of $12.1 million and other liabilities of
$135,000. The Company's allocable share of the 520JV mortgage note payable is
approximately $8.0 million. This mortgage note payable bears interest at 8.85%
per annum and matures on September 1, 2005. During the second quarter of 2003,
HQ Global Workplaces, a tenant of the 520JV surrendered approximately one-third
of its 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 $181,000 for the nine months ended September 30, 2003. 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
income (loss) was approximately $134,000 and $(30,000) for the three and nine
months ended September 30, 2003, respectively.

In connection with the IPO, the Company was granted ten year options to acquire
ten properties (the "Option Properties") which were either owned by certain
Rechler family members who were also executive officers of the Company, or in
which the Rechler family members owned 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. In connection with the
Company's disposition of the Long Island industrial portfolio, four of the five
remaining options (the "Remaining Option Properties") granted to the Company at
the time of the IPO to purchase interests in properties owned by Rechler family
members were terminated. In return the Company received an aggregate payment
from the Rechler family members of $972,000. Rechler family members have also
agreed to extend the term of the remaining option on the property located at 225
Broadhollow Road, Melville, New York (the Company's current headquarters) for
five years and to release the Company from approximately 15,500 square feet
under its lease at this property. In connection with the restructuring of the
remaining option the Rechler family members paid Reckson $1 million in return
for Reckson's agreement not to exercise the option during the next three years.
As part of the agreement, the exercise price of the option payable by Reckson
was increased by $1 million.

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

                                       27
<PAGE>

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 nine
months ended September 30, 2003, Reckson Construction Group, Inc. billed
approximately $317,000 of market rate services and Reckson Management Group,
Inc. billed approximately $207,000 of market rate management fees to the
Remaining Option Properties. In addition, for the nine months ended September
30, 2003, Reckson Construction Group, Inc. performed market rate services,
aggregating approximately $178,500, for a property in which certain executive
officers of the Company maintain an equity interest.

Reckson Management Group, Inc. leases approximately 28,200 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 $653,000. The Company has also entered into a short term license
agreement at the property for 6,000 square feet expiring in January 2004.
Reckson Management Group, Inc. also leases 10,722 square feet of warehouse space
used for equipment, materials and inventory storage at a property owned by
certain members of the Rechler family at an annual base rent of approximately
$75,000.

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 $447,000. 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.


                                       28
<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. In August 2003, the Company acquired TIAA's 49%
interest in the property located at 275 Broadhollow Road, Melville, NY, for
approximately $12.4 million. As a result, the Tri-State JV owns eight Class A
suburban office properties aggregating approximately 1.4 million square feet.
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 September 30, 2003 was
approximately $3.3 billion. 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 $23.11 per share/unit (based on the closing
price of the Company's Class A common stock on September 30, 2003), (ii) the
market value of the Company's Class B common stock of $23.15 per share (based on
the closing price of the Company's Class B common stock on September 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 $1.5 billion (including its share of joint venture debt and
net of minority partners' interests share of joint venture debt) of debt
outstanding at September 30, 2003. As a result, the Company's total debt to
total market capitalization ratio at September 30, 2003 equaled approximately
44.9%.

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 invested 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 September 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 September 30, 2003, interest accrued (net of reserves) under the FrontLine
Facility and the RSVP Facility was approximately $19.6 million.

The following table sets forth the Company's original invested capital (at cost
and 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
                                    ========          ========      ========

On July 1, 2003, the Company's aggregate invested capital (before valuation
reserves) in RSVP controlled (REIT-qualified) joint ventures totaled
approximately $59.8 million and amounts which were advanced under the RSVP
Commitment to FrontLine, for its investment in RSVP controlled investments
totaled approximately $49.4 million.


                                       29
<PAGE>

In September 2003, RSVP completed the restructuring of its capital structure. In
connection with the restructuring, RSVP redeemed the interest of the preferred
equity holders of RSVP for an aggregate of $137 million in cash and the transfer
to the preferred equity holders of the assets that comprised RSVP's parking
investments valued at approximately $28.5 million. As a result of this
transaction amounts formerly invested in the privatization, parking and medical
office platforms have been reinvested as part of the buyout transaction.

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.

RSVP also restructured its management arrangements whereby a management company
formed by its former managing directors has been retained to manage RSVP
pursuant to a management agreement and the employment contracts of the managing
directors with RSVP have been terminated. The management agreement provides for
an annual base management fee, and disposition fees equal to 2% of the net
proceeds received by RSVP on asset sales. (The base management fee and
disposition fees are subject to a maximum over the term of the agreement of $7.5
million.) In addition, the managing directors retained a one-third residual
interest in RSVP's assets which is subordinated to the distribution of an
aggregate amount of $75 million to RSVP and/or the Company in respect of its
joint ventures with RSVP. The management agreement has a three-year term,
subject to early termination in the event of the disposition of all of the
assets of RSVP.

In connection with the restructuring, RSVP and certain of its affiliates
obtained a $60 million secured loan. In connection with this loan, the Operating
Partnership agreed to indemnify the lender in respect of any environmental
liabilities incurred with regard to RSVP's remaining assets in which the
Operating Partnership has a joint venture interest (primarily certain student
housing assets held by RSVP) and guaranteed the obligation of an affiliate of
RSVP to the lender in an amount up to $6 million plus collection costs for any
losses incurred by the lender as a result of certain acts of malfeasance on the
part of RSVP and/or its affiliates. The loan is scheduled to mature in 2006 and
is expected to be repaid from proceeds of assets sales by RSVP.

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 September 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.

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.


                                       30
<PAGE>

RESULTS OF OPERATIONS

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

Property operating revenues which include base rents and tenant escalations and
reimbursements ("Property Operating Revenues") decreased by approximately $3.0
million for the three months ended September 30, 2003 as compared to the 2002
period. The change in Property Operating Revenues is attributable to a weighted
average decrease in property occupancy rates in certain "same store" properties
amounting to approximately $3.3 million, a decrease in straight-line rental
income of approximately $1.5 million in certain of our "same store" properties,
a decrease in termination fees of approximately $3.0 million and approximately
$600,000 related to properties sold in 2002. These decreases were offset by
built-in rent increases and escalation increases in certain of our property
leases of approximately $5.5 million.

Investment and other income increased by $4.3 million. This increase is
primarily attributable to the gain recognized on the First Data land sale and
build-to-suit construction contract of approximately $3.3 million.

Property operating expenses, real estate taxes and ground rents ("Property
Expenses") increased by $4.1 million or 9.6% for the three months ended
September 30, 2003 as compared to the 2002 period. This increase includes a $1.5
million increase in property operating expenses and a $2.6 million increase in
real estate taxes. Included in the $1.5 million of property operating expense
increase is $275,000 attributable to increases in insurance costs. The insurance
cost increase is primarily attributable to generally higher cost for insurance
in the marketplace particularly liability insurance costs. Recently, we have
seen their costs moderate and expect to see reduced costs to take effect in
future periods. 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 $240,000 of increased utility costs which was primarily
attributable to energy rate increases.

Gross Operating Margins (defined as Property Operating Revenues less Property
Expenses, taken as a percentage of Property Operating Revenues) for the three
months ended September 30, 2003 and 2002 were 57.7% and 62.4%, 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.

Marketing, general and administrative expenses increased by approximately
$837,000 for the three months ended September 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 $447,000
for the three months ended September 30, 2003. The Company also incurred an
increase of property related marketing costs to lease space which amounted to
approximately $83,000 and increased costs related to director fees of $107,000.
Marketing, general and administrative expenses, as a percentage of total
revenues were, 7.0% for the three months ended September 30, 2003 as compared to
6.3% for the 2002 period. The Company capitalized approximately $1.1 million of
marketing, general and administrative expenses for each of the three-month
periods ended September 30, 2003 and 2002. These costs relate to leasing,
construction and development activities, which are performed by the Company and
its subsidiaries.

Nine months ended September 30, 2003 as compared to the nine months ended
September 30, 2002:

Property Operating Revenues decreased by approximately $2.9 million for the nine
months ended September 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 $8.6 million and
$6.0 million attributable to lease up of newly developed and redeveloped
properties. These increases were offset by approximately 11.7 million related to
decreases in certain property occupancy rates and, decreases in rental rates.

Investment and other income increased by $12.9 million. This increase is
primarily attributable to the gain recognized on the First Data land sale and
build-to-suit construction contract of approximately $13.4 million. This
increase in investment and other income was offset by decreases in income
generated by the Service Companies.


                                       31
<PAGE>



Property Operating Expenses increased by $14.2 million or 11.8% for the nine
months ended September 30, 2003 as compared to the 2002 period. This increase
includes a $8.2 million increase in property operating expenses and a $6.0
million increase in real estate taxes. Included in the $8.2 million of property
operating expense increase is $2.7 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. Recently, we
have seen insurance costs particularly related to terrorism risk begin to
moderate. We expect to see reduced costs in future periods. 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 $3.6 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 $803,000 due to
inflationary/contractual increases and property related marketing costs
increased by approximately $417,000 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 nine
months ended September 30, 2003 and 2002 were 59.5% and 64.1%, 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 $3.8
million for the nine months ended September 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 $2.3
million for the nine months ended September 30, 2003. In addition, the Company
incurred increased costs, over the comparable 2002 period, of approximately
$500,000 related to abandoned acquisition and disposition transactions and
approximately $400,000 related to director and officer's insurance and director
fees. Marketing, general and administrative expenses, as a percentage of total
revenues were, 7.0% for the nine months ended September 30, 2003 as compared to
6.1% for the 2002 period. The Company capitalized approximately $3.5 million of
marketing, general and administrative expenses for the nine months ended
September 30, 2003 as compared to $3.6 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 $1.3 million for the nine months
ended September 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 $547,000 attributable to a
decrease in the level of development projects. In addition, the increase
includes approximately $1.3 million 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 $319.7 million for the nine months
ended September 30, 2003 as compared to $213.6 million for the nine months ended
September 30, 2002. These increases were offset by a decrease of approximately
$657,000 in mortgage note payable interest expense and an increase of
approximately $1.3 million of corporate interest expense allocated to
discontinued operations.



                                       32
<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. The Company is currently experiencing high
tenanting costs including tenant improvement costs, leasing commissions and free
rent in all of its markets. For the three and nine month periods ended September
30, 2003, the Company paid $12.0 million and $40.1 million, respectively for
tenanting costs including tenant improvement costs and leasing commissions. This
compares to $12.8 million and $31.0 million paid for the comparable periods
ended September, 30, 2002, respectively. As a result of these and/or other
operating factors the Company's cash flow from operating activities may not be
sufficient to pay 100% of the quarterly dividends payable 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 periodically reviews its dividend policy to determine the
appropriateness of the Company's dividend rate relative to the Company's cash
flows. The Company adjusts its dividend rate based on forecasted increases and
decreases in its cash flow as well as required distributions of taxable income
to maintain REIT status. There can be no assurance that the Company will
maintain the current quarterly distribution level on the Class A common stock.
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. The
Company's senior debt is currently rated "Ba1" by Moody's and "BBB-" by Standard
& Poor's. The rating agencies review the ratings assigned to an issuer such as
the Company on an ongoing basis. Negative changes in the Company's ratings would
result in increases in the Company's borrowing costs, including borrowings under
the Company's unsecured credit facility.

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.


                                       33
<PAGE>



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. As of September 30, 2003, borrowings under the Credit
Facility were priced off LIBOR plus 90 basis points and the Credit Facility
carried 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 (see "Recent Developments"). The outstanding
borrowings under the Credit Facility were $374 million at September 30, 2003.



                                       34
<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 September 30, 2003, the Company had availability under the Credit
Facility to borrow approximately an additional $126 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 September 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 Class B common stock currently receives an annual dividend
of $2.5884 per share and 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.

On October 24, 2003, the Company gave notice to its Class B common stockholders
that it will exercise its option to exchange all of its Class B common stock
outstanding on November 25, 2003 for an equal number of shares of Class A common
stock. The Board of Directors has declared a final cash dividend on the
Company's Class B common stock to holders of record on November 25, 2003 in the
amount of $.1758 per share, payable on January 12, 2004. This payment will cover
the period from November 1, 2003 through November 25, 2003 and is based on the
current quarterly Class B common stock dividend rate of $.6471 per share. In
order to align the regular quarterly dividend payment schedule of the former
holders of Class B common stock with the schedule of the holders of Class A
common stock for periods subsequent to the exchange date for the Class B common
stock, the Board of Directors has also declared a cash dividend with regard to
the Class A common stock to holders of record on October 14, 2003 in the amount
of $.2585 per share, payable on January 12, 2004. This payment will cover the
period from October 1, 2003 through November 25, 2003 and is based on the
current quarterly Class A common stock dividend rate of $.4246 per share. As a
result, the Company will have declared dividends through November 25, 2003 to
all holders of Class A common stock and Class B common stock. The Board of
Directors has also declared the Class A common stock cash dividend for the
portion of the fourth quarter subsequent to November 25, 2003. The holders of
record of Class A common stock on January 2, 2004, giving effect to the exchange
transaction, will receive a Class A common stock dividend in the amount of
$.1661 per share, payable on January 12, 2004. This payment will cover the
period from November 26, 2003 through December 31, 2003 and is based on the
current quarterly Class A common stock dividend rate of $.4246 per share.

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 nine months
ended September 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 September 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. During the fourth quarter of 2002, the Company purchased and
retired 357,500 shares of its Class A preferred stock at $22.29 per share for
approximately $8.0 million.


                                       35
<PAGE>

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 it issued 465,845 Class C
common units of limited partnership interest. The Class C common units will
receive an initial 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. On October 17, 2003, the Company paid a
distribution on the Class C common units of approximately $130,000 for the
period from August 7, 2003 through September 30, 2003.

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 nine months ended September 30, 2003,
the Company recorded approximately $1,332 and $4,000, 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 September 30, 2003 totaled approximately $1.5
billion (including its share of joint venture debt and net of minority partners'
interests share of joint venture debt) and was comprised of $374 million
outstanding under the Credit Facility, approximately $499.4 million of senior
unsecured notes and approximately $597.9 million of mortgage indebtedness. Based
on the Company's total market capitalization of approximately $3.3 billion at
September 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 $1.5
billion of debt), the Company's debt represented approximately 44.9% of its
total market capitalization.

HQ Global Workplaces, Inc. ("HQ"), one of the largest providers of flexible
officing solutions in the world and which was formerly controlled by FrontLine,
previously operated eleven executive office centers comprising approximately
205,000 square feet at the Company's properties, including two operated at the
Company's joint venture properties. 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 and subsequently rejected three of
its leases with the Company and surrendered approximately an additional 20,500
square feet from two other leases. The Company has since re-leased 100% of the
rejected space. In September 2003, the Bankruptcy Court approved the assumption
and amendment by HQ of its remaining eight leases with the Company. The assumed
leases expire between 2007 and 2011, encompass approximately 150,000 square feet
and provide for current annual base rents totaling approximately $3.5 million. A
committee designated by the Board and chaired by an independent director
conducted all negotiations with HQ.

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. The Company has agreed to restructure five
of the remaining leases. Pursuant to WorldCom's Plan of Reorganization which has
been confirmed by the Bankruptcy Court, WorldCom must assume or reject the
remaining leases prior to the effective date of the Plan. The effective date of
the Plan is estimated to occur during the first quarter of 2004. All of
WorldCom's leases are current on base rental charges through November 30, 2003,
other than under the four rejected leases and the Company currently holds
approximately $195,000 in security deposits relating to the non-rejected leases.
There can be no assurance as to whether WorldCom will affirm or reject any or
all of its remaining leases with the Company.

As of September 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.


                                       36
<PAGE>

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 September 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)     $    3,367     $   13,169     $   14,167     $   13,785     $   11,305     $  117,390     $  173,183
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              --             --        374,000             --             --             --        374,000
Land lease obligations                848          3,425          3,429          3,410          3,350         94,286        108,748
Operating leases                      350          1,313          1,359          1,407          1,455            683          6,567
Air rights lease
  obligations                          95            379            379            379            379          4,280          5,891
                               ----------     ----------     ----------     ----------     ----------     ----------     ----------
                               $    4,660     $  120,902     $  411,887     $  148,901     $  277,028     $  762,908     $1,726,286
                               ==========     ==========     ==========     ==========     ==========     ==========     ==========
</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 September
      30, 2003 is approximately $8.0 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 September 30, 2003, the Company had approximately $950,000 in
outstanding undrawn standby letters of credit issued under the Credit Facility.
In addition, approximately $44.3 million, or 6.1%, of the Company's mortgage
debt is recourse to the Company.

Recent Developments

On September 10, 2003, the Company announced that it had entered into agreements
relating to the disposition of its Long Island industrial building portfolio
(the "Disposition") to members of the Rechler family for approximately $315.5
million in cash and other consideration. The transactions contemplated by the
agreements were consummated on November 10 and November 12, 2003. As a result,
the Company has disposed of all but three of its 95 property, 5.9 million square
foot, Long Island industrial building portfolio for approximately $225.1 million
in cash and debt assumption and 3,932,111 OP Units valued at approximately $90.4
million. Approximately $210 million of cash sales proceeds from the Disposition
were used to repay the Credit Facility. The remaining three properties, two of
which are subject to transfer pursuant to Section 1031 of the Code, are
anticipated to close within three to six months.

In addition, four of the five remaining options granted to the Company at the
time of its IPO to purchase interests in properties owned by Rechler family
members (including three properties in which the Rechler family members hold
non-controlling interests and one industrial property) were terminated along
with the Company's management contracts relating to three of such properties. In
return the Company received an aggregate payment from the Rechler family members
of $972,000. Rechler family members also extended the term of the remaining
option on the property located at 225 Broadhollow Road, Melville, New York (the
Company's current headquarters) for five years and released the Company from
approximately 16,000 square feet under its lease at this property. In connection
with the restructuring of the remaining option the Rechler family members paid
the Company $1 million in return for the Company's agreement not to exercise the
option during the next three years. As part of the agreement, the exercise price
of the option payable by the Company was increased by $1 million. In addition,
as part of the transaction, the Rechler family entity was granted rights of
first refusal with respect to five vacant land parcels located near the
industrial properties for a period of five years.

In connection with the closing, each of Donald Rechler, Roger Rechler, Gregg
Rechler and Mitchell Rechler resigned as an officer of the Company. Mr. Donald
Rechler remains a member of the Board of Directors of the Company. In settlement
of their employment agreements, these four executives received accelerated
vesting of certain equity based awards and an assignment of certain loans owed
to the Company. Additionally, these exiting executives have agreed to provide
two-year commitments to assist the Company in the transition and entered into
specified non-compete arrangements.

In addition, the Company also announced certain other management changes and
corporate governance enhancements. The reconstituted Board consists of six
independent directors and Messers Scott and Donald Rechler. The Company has
filled the executive positions vacated by the departing Rechler family members
by promoting from within.


                                       37
<PAGE>


In conjunction with this transaction, the Company is also proposing to
de-stagger its Board of Directors at its next Annual Shareholders Meeting, to
opt out of state anti-takeover provisions and to authorize modification of the
ownership limit currently in its charter relating to the "five or fewer rule."

For information concerning certain litigation matters pertaining to this
transaction see Part II-Other Information; Item 1. Legal Proceedings of this
Form 10-Q.

The description of the Disposition contained in the Company's current reports on
Form 8-K filed with the Securities and Exchange Commission on September 18,
2003, October 1, 2003 and October 22, 2003 are incorporated herein by reference.
The information in this quarterly report on Form 10-Q supplements and amends the
information contained in those previously filed current reports.

The Company is also under contract to sell a 181,000 square foot office property
located on Long Island for approximately $24.4 million and is scheduled to close
during the fourth quarter. Net proceeds from the sale are anticipated to be used
to repay the Credit Facility.

In accordance with the provisions of FASB Statement No. 144, the Company has
separately identified and classified the assets and liabilities of the
aforementioned 95 industrial properties and the office property located on Long
Island on its consolidated balance sheets as held for sale. In addition, income
from the operations of these properties has been reflected on the Company's
consolidated statements of income as income from discontinued operations.

On November 10, 2003, in connection with the Company's sale of its Long Island
industrial building portfolio and the settlement of the employment contracts of
the departing Rechler family members, the Company incurred the following
restructuring charges: (i) approximately $7.5 million related to outstanding
stock loans under the Company's historical LTIP program were transferred to the
purchaser and approximately $575,000 of loans related to life insurance
contracts were extinguished, (ii) approximately $2.9 million paid to the
departing Rechler family members in exchange for 127,689, or 100%, of their 2002
Rights and their 2003 Rights were forfeited in their entirety and (iii) with
respect to two of the departing Rechler family members participating in the
Company's March 2003 LTIP, each received 8,681 shares of the Company's Class A
common stock related to the service component of their core award which was
valued at $399,000 in the aggregate. In addition, if the Company attains its
annual performance measure in March 2004, these individuals will also be
entitled to each receive 26,041 shares of Class A common stock representing the
balance of the annual core award as if they had remained in continuous
employment with the Company. The remainder of their core awards, aggregating
208,334 shares of Class A common stock, was forfeited.

On November 10, 2003, the Company entered into a contract to acquire 1185 Avenue
of the Americas, a 42-story, 1.1 million square foot Class A office tower,
located between 46th and 47th Streets in New York City for $321 million. The
building is presently encumbered by a $202 million mortgage and $48 million of
mezzanine debt that the Company would assume at closing. The balance of the
purchase price would be paid through an advance under the Credit Facility. The
floating rate mortgage and mezzanine debt both mature in August 2004 and
presently have a weighted average interest rate of 4.95%. The property is also
encumbered by a ground lease which has a remaining term of approximately 40
years with rent scheduled to be re-set at the end of 2005 and then remain
constant for the balance of the term. The closing is subject to customary
consents and conditions. There can be no assurances that this transaction will
be consummated.

As of September 30, 2003, the Credit Facility carried a facility fee of 20 basis
points per annum and outstanding borrowings were priced off LIBOR plus 90 basis
points. On November 12, 2003, as a result of one of the Operating Partnership's
rating agencies changing the Operating Partnership's unsecured credit rating,
the facility fee was increased to 30 basis points and the interest rate on
outstanding borrowings was re-set to LIBOR plus 120 basis points. Based on
current outstanding borrowings under the Credit Facility and giving effect to
repayments under the Credit Facility as part of the Long Island industrial
building portfolio sale, the change in the Operating Partnership's unsecured
credit rating will increase interest expense by approximately $1.1 million per
annum. In the event the Operating Partnership re-establishes its previous
unsecured credit rating the interest rates and facility fee will be re-set to
their previous levels.

Other Matters

Seven 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 2007 and 2013.

Nine 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.


                                       38
<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 $3.3 million
of compensation expense was recorded for each of the nine month periods ended
September 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 September 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 September 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 certain 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 nine months ended September 30, 2003, the Company recorded approximately
$228,000 and $653,000 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 $403,000 and $2.0 million
of compensation expense for the three and nine months ended September 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.


                                       39
<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 ("NAREIT"). FFO is defined by NAREIT as net income or
loss, excluding gains or losses from 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 nine
month periods ended September 30, 2003 includes a gain from the sale of land in
the amount of $867,000 and $8.5 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         NINE MONTHS ENDED
                                                                               SEPTEMBER 30,              SEPTEMBER 30,
                                                                           ---------------------     ---------------------
                                                                             2003         2002         2003         2002
                                                                           --------     --------     --------     --------
<S>                                                                        <C>          <C>          <C>          <C>
Net income allocable to common shareholders ..........................     $ 10,009     $ 16,134     $ 26,257     $ 45,921
Adjustments for basic funds from operations:
  Add:
    Limited partners' minority interest in the operating partnership .        1,202        1,941        3,072        5,538
    Real estate depreciation and amortization ........................       27,465       28,208       87,919       80,570
    Minority partners' interests in consolidated partnerships ........        4,379        4,446       13,404       14,379
  Less:
    Gain on sales of depreciable real estate assets ..................           --        4,896           --        5,433
    Amounts distributable to minority partners in consolidated
      partnerships ...................................................        6,339        6,050       19,914       18,943
                                                                           --------     --------     --------     --------
Basic Funds From Operations ("FFO") ..................................       36,716       39,783      110,738      122,032
  Add:
  Dividends and distributions on dilutive shares and units ...........        4,485        5,761       13,452       17,476
                                                                           --------     --------     --------     --------
  Diluted FFO ........................................................     $ 41,201     $ 45,544     $124,190     $139,508
                                                                           ========     ========     ========     ========
Weighted average common shares outstanding ...........................       57,924       59,535       57,985       60,294
Weighted average units of limited partnership interest outstanding ...        7,554        7,276        7,370        7,427
                                                                           --------     --------     --------     --------
Basic weighted average common shares and units outstanding ...........       65,478       66,811       65,355       67,721
Adjustments for dilutive FFO weighted average shares and
  units outstanding:
  Add:
    Weighted average common stock equivalents ........................          170          300          136          342
    Weighted average shares of Series A Preferred Stock ..............        7,747        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          770
                                                                           --------     --------     --------     --------
    Dilutive FFO weighted average shares and units outstanding .......       74,056       77,751       73,899       78,812
                                                                           ========     ========     ========     ========
</TABLE>

                                       40
<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.














                                       41
<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 September 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 September 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.......       $    3,367   $  115,785   $   32,720   $   143,705   $  271,844   $  663,659   $1,231,080   $1,251,768
    Weighted average
      interest rate.....          7.47%        7.47%        6.92%         7.38%        7.14%        7.32%        7.29%

    Variable rate.......    $       --   $       --   $  374,000   $        --   $       --   $       --   $  374,000     $374,000
    Weighted average
      interest rate.....            --           --%        2.02%           --           --           --         2.02%
</TABLE>

     (1) Includes aggregate unamortized issuance discounts of approximately
         $591,000 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 $3.7 million annual increase in interest expense based on
     $374 million of variable rate debt outstanding at September 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 September 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   $   54,510
  Weighted average
   interest rate ..                 --        11.32%          --           --           --        12.00%       11.54%

Variable rate .....         $       --   $       --   $   15,000   $        --   $       --   $       --   $   15,000   $   15,000
  Weighted average
   interest rate ..                 --           --        13.43%           --           --           --        13.43%          --
</TABLE>

(1) Excludes interest receivables aggregating approximately $1.9 million
dollars.

                                       42
<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 Chief
Executive Officer 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.



                                       43
<PAGE>


The following table sets forth the Company's schedule of its top 25 tenants
based on base rental revenue as of September 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%                    5.5%
  VERIZON COMMUNICATIONS INC.          Office         210,426           1.6%                    1.3%
* SCHULTE ROTH & ZABEL                 Office         287,177           1.4%                    2.4%
* FUJI PHOTO FILM USA                  Office         186,484           1.3%                    1.2%
  DUN & BRADSTREET CORP.               Office         123,000           1.2%                    1.0%
* WORLDCOM/MCI                         Office         245,030           1.1%                    1.1%
  UNITED DISTILLERS                    Office         137,918           1.1%                    1.0%
  T.D. WATERHOUSE                      Office         103,381           1.0%                    0.8%
* BANQUE NATIONALE DE PARIS            Office         145,834           0.9%                    1.5%
  D.E.SHAW                             Office          70,104           0.8%                    0.7%
* KRAMER LEVIN NESSEN KAMIN            Office         158,144           0.8%                    1.4%
  HELLER EHRMAN WHITE                  Office          64,526           0.8%                    0.7%
* PRUDENTIAL                           Office         116,910           0.8%                    0.8%
  VYTRA HEALTHCARE                     Office         105,613           0.8%                    0.7%
* HQ GLOBAL                      Office/Industrial    150,487           0.8%                    0.8%
  NORTH FORK BANK                      Office         124,064           0.8%                    0.7%
* STATE FARM                     Office/Industrial    184,013           0.8%                    1.1%
  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%
  EMI ENTERTAINMENT WORLD              Office          65,844           0.7%                    0.6%
  ESTEE LAUDER                       Industrial       374,578           0.7%                    0.6%
  LOCKHEED MARTIN CORP.                Office         123,554           0.7%                    0.6%
* DRAFT WORLDWIDE INC.                 Office         124,008           0.7%                    1.1%
  PRACTICING LAW INSTITUTE             Office          77,500           0.7%                    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 nine month period ended
September 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    $ 4,622,469
     Per Square Foot       $      0.23    $      0.33    $      0.45    $      0.53    $      0.39    $      0.45
NYC Office Properties
     Total                         N/A    $   946,718    $ 1,584,501    $ 1,939,111    $ 1,490,110    $ 1,442,554
     Per Square Foot               N/A    $      0.38    $      0.45    $      0.56    $      0.46    $      0.41
Industrial Properties
     Total                 $ 1,048,688    $   813,431    $   711,666    $ 1,881,627    $ 1,113,853    $ 1,059,820
     Per Square Foot       $      0.11    $      0.11    $      0.11    $      0.28    $      0.15    $      0.16
TOTAL PORTFOLIO
                           --------------------------------------------------------------------------------------
     Total                 $ 3,347,587    $ 5,049,265    $ 6,902,236    $ 9,104,413                   $ 7,124,843
     Per Square Foot       $      0.17    $      0.25    $      0.34    $      0.45                   $      0.35
</TABLE>

                                       44

<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 nine month period ended September 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  $ 3,274,369    $ 2,350,515  $  923,854
  Per Square Foot Improved   $     4.73  $     6.99  $     8.47  $      7.81     $     7.00  $      6.92    $      9.85  $     3.94
  Leasing Commissions        $  551,762  $2,208,604  $1,444,412  $ 1,026,970     $1,307,937  $ 2,359,435    $ 1,880,400  $  479,035
  Per Square Foot Leased     $     2.59  $     4.96  $     4.49  $      4.18     $     4.06  $      4.98    $      7.88  $     2.04
                             ------------------------------------------------------------------------------------------------------
   Total Per Square Foot     $     7.32  $    11.95  $    12.96  $     11.99     $    11.06  $     11.90    $     17.73  $     5.98
                             ======================================================================================================
Westchester Office
  Properties
  Tenant Improvements        $1,316,611  $1,860,027  $2,584,728  $ 6,391,589(1)  $3,038,239  $ 1,156,389    $ 1,025,325  $  131,064
  Per Square Foot Improved   $     5.62  $     5.72  $     5.91  $     15.05     $     8.08  $     11.27    $     16.15  $     3.35
  Leasing Commissions        $  457,730  $  412,226  $1,263,012  $ 1,975,850     $1,027,204  $   276,630    $   237,294  $   39,336
  Per Square Foot Leased     $     1.96  $     3.00  $     2.89  $      4.65     $     3.13  $      2.70    $      3.74  $     1.01
                             ------------------------------------------------------------------------------------------------------
   Total Per Square Foot     $     7.58  $     8.72  $     8.80  $     19.70     $    11.21  $     13.97    $     19.89  $     4.36
                             ======================================================================================================
Connecticut Office
  Properties
  Tenant Improvements        $  179,043  $  385,531  $  213,909  $   491,435     $  317,480  $   504,422    $   476,988  $   27,434
  Per Square Foot Improved   $     4.88  $     4.19  $     1.46  $      3.81     $     3.58  $      9.38    $     16.51  $     1.10
  Leasing Commissions        $  110,252  $  453,435  $  209,322  $   307,023     $  270,008  $   423,758    $   262,465  $  161,293
  Per Square Foot Leased     $     3.00  $     4.92  $     1.43  $      2.38     $     2.93  $      7.88    $      9.09  $     6.48
                             ------------------------------------------------------------------------------------------------------
   Total Per Square Foot     $     7.88  $     9.11  $     2.89  $      6.19     $     6.51  $     17.26    $     25.60  $     7.58
                             ======================================================================================================
New Jersey Office
  Properties
  Tenant Improvements        $  454,054  $1,580,323  $1,146,385  $ 2,842,521     $1,505,821  $ 3,887,607    $ 3,474,339  $  413,268
  Per Square Foot Improved   $     2.29  $     6.71  $     2.92  $     10.76     $     5.67  $     13.34    $     24.89  $     2.72
  Leasing Commissions        $  787,065  $1,031,950  $1,602,962  $ 1,037,012     $1,114,747  $ 1,857,889    $ 1,140,527  $  717,362
  Per Square Foot Leased     $     3.96  $     4.44  $     4.08  $      3.92     $     4.10  $      6.38    $      8.18  $     4.73
                             ------------------------------------------------------------------------------------------------------
   Total Per Square Foot     $     6.25  $    11.15  $     7.00  $     14.68     $     9.77  $     19.72    $     33.07  $     7.45
                             ======================================================================================================
New York City Office
  Properties
  Tenant Improvements               N/A  $   65,267  $  788,930  $ 4,350,106     $1,734,768  $ 5,689,670(3) $ 5,406,410  $  283,260
  Per Square Foot Improved          N/A  $     1.79  $    15.69  $     18.39     $    11.96  $     34.48    $     45.53  $     6.12
  Leasing Commissions               N/A  $  418,185  $1,098,829  $ 2,019,837     $1,178,950  $ 2,939,132(3) $ 2,648,485  $  290,648
  Per Square Foot Leased            N/A  $    11.50  $    21.86  $      8.54     $    13.97  $     17.81    $     22.30  $     6.28
                             ------------------------------------------------------------------------------------------------------
   Total Per Square Foot            N/A  $    13.29  $    37.55  $     26.93     $    25.93  $     52.29    $     67.83  $    12.40
                             ======================================================================================================
Industrial Properties
  Tenant Improvements        $  375,646  $  650,216  $1,366,488  $ 1,850,812     $1,060,791  $ 1,249,200    $   998,972  $  250,228
  Per Square Foot Improved   $     0.25  $     0.95  $     1.65  $      1.97     $     1.20  $      2.42    $      3.25  $     1.19
  Leasing Commissions        $  835,108  $  436,506  $  354,572  $   890,688     $  629,218  $   574,256    $   500,654  $   73,602
  Per Square Foot Leased     $     0.56  $     0.64  $     0.43  $      0.95     $     0.64  $      1.11    $      1.63  $     0.35
                             ------------------------------------------------------------------------------------------------------
   Total Per Square Foot     $     0.81  $     1.59  $     2.08  $      2.92     $     1.84  $      3.53    $      4.88  $     1.54
                             ======================================================================================================
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL PORTFOLIO
  Tenant Improvements        $3,334,711  $7,395,070  $8,822,897  $17,843,929     $9,782,844  $15,761,657(3) $13,732,549  $2,029,108
  Per Square Foot Improved   $     1.53  $     4.15  $     4.05  $      7.96     $     4.75  $      9.83    $     15.31  $     2.87
  Leasing Commissions        $2,741,917  $4,960,906  $5,973,109  $ 7,257,379     $5,528,065  $ 8,431,101(3) $ 6,669,825  $1,761,276
  Per Square Foot Leased     $     1.26  $     3.05  $     2.75  $      3.24     $     2.66  $      5.26    $      7.44  $     2.49
                             ------------------------------------------------------------------------------------------------------
   Total Per Square Foot     $     2.79  $     7.20  $     6.80  $     11.20     $     7.41  $     15.09    $     22.75  $     5.36
                             ======================================================================================================
</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 $696,625 of deferred leasing costs attributable to space marketed
    but not yet leased.

(3) Excludes $5.8 million of tenant improvements and $2.2 million of leasing
    commissions related to a new 121,108 square foot lease to Debevoise with a
    lease commencement date in 2005. Also excludes tenant improvements of $0.2
    million for Sandler O'Neil & Partners (7,446 SF) for expansion space with a
    lease commencement date in 2004.

                                       45
<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 nine months ended September 30, 2003 as
reported on its "Statements of Cash Flows - Investment Activities" contained in
its consolidated financial statements (in thousands):

                                                             September 30,
                                                                 2003
                                                             -------------
      Capital expenditures:
           Non-incremental..............................       $  7,523
           Incremental..................................          1,674

      Tenant improvements:
           Non-incremental..............................         23,411
           Incremental..................................          3,473
                                                               --------
      Additions to commercial real estate properties....       $ 36,081
                                                               ========
      Leasing costs:
           Non-incremental..............................       $  9,952
           Incremental..................................          3,233
                                                               --------
      Payment of deferred leasing costs ................       $ 13,185
                                                               ========
      Acquisition and development costs ................       $ 55,604
                                                               ========



                                       46
<PAGE>


The following table sets forth the Company's lease expiration table at October
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                           51             320,905         1.6%             1.6%
         2004                          184           1,513,421         7.3%             8.9%
         2005                          221           2,306,451        11.2%            20.0%
         2006                          232           2,629,149        12.7%            32.8%
         2007                          137           1,456,481         7.0%            39.8%
         2008                          142           1,644,252         8.0%            47.8%
         2009 and thereafter           351           9,027,294        43.8%            91.5%
         -----------------------------------------------------------------------------------------
         Total/Weighted Average      1,318          18,897,953        91.5%              --
         -----------------------------------------------------------------------------------------
         Total Portfolio Square Feet                20,662,134
         -----------------------------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>

         OFFICE 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                           49             276,565         2.0%             2.0%
         2004                          152             996,042         7.2%             9.2%
         2005                          188           1,600,298        11.6%            20.8%
         2006                          178           1,585,835        11.5%            32.2%
         2007                          107           1,100,529         8.0%            40.2%
         2008                          106             934,284         6.7%            46.9%
         2009 and thereafter           287           6,089,187        44.0%            91.0%
         -----------------------------------------------------------------------------------------
         Total/Weighted Average      1,067          12,582,740        91.0%              --
         -----------------------------------------------------------------------------------------
         Total Office Portfolio Square Feet         13,842,643
         -----------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                          INDUSTRIAL/R&D 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                            2              44,340         0.7%             0.7%
         2004                           32             517,379         7.6%             8.2%
         2005                           33             706,153        10.4%            18.6%
         2006                           54           1,043,314        15.3%            33.9%
         2007                           30             355,952         5.2%            39.1%
         2008                           36             709,968        10.4%            49.5%
         2009 and thereafter            64           2,938,107        43.1%            92.6%
         -----------------------------------------------------------------------------------------
         Total/Weighted Average        251           6,315,213        92.6%              --
         -----------------------------------------------------------------------------------------
         Total Industrial/R&D
           Portfolio Square Feet                     6,819,491                           --
         -----------------------------------------------------------------------------------------
</TABLE>

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


                                       47
<PAGE>

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

A number of shareholder derivative actions have been commenced purportedly on
behalf of the Company against the Board of Directors in the Supreme Court of the
State of New York, County of Nassau (Lowinger v. Rechler et al., Index No. 01
4162/03 (9/16/03)), the Supreme Court of the State of New York, County of
Suffolk (Steiner v. Rechler et al., Index No. 03 32545 (10/2/03) and Lighter v.
Rechler et al., Index No. 03 23593 (10/3/03)), the United States District Court,
Eastern District of New York (Tucker v. Rechler et al., Case No. cv 03 4917
(9/26/03), Clinton Charter Township Police and Fire Retirement System v. Rechler
et al., Case No. cv 03 5008 (10/1/03) and Teachers' Retirement System of
Louisiana v. Rechler et al., Case No. cv 03 5178 (10/14/03)) and the Circuit
Court for Baltimore County (Sekuk Global Enterprises Profit Sharing Plan v.
Rechler et al., Civil No. 24-C- 03007496 (10/16/03), Hoffman v. Rechler et al.,
24-C-03-007876 (10/27/03) and Chirko v. Rechler et al., 24-C-03-008010
(10/30/03)), relating to the sale of the Long Island Industrial Portfolio to
certain members of the Rechler family. The complaints allege, among other
things, that the process by which the directors agreed to the transaction was
not sufficiently independent of the Rechler family and did not involve a "
market check" or third party auction process and as a result was not for
adequate consideration. The Plaintiffs seek similar relief, including a
declaration that the directors violated their fiduciary duties, an injunction
against the transaction and damages. The Company believes that complaints are
without merit.

Except as provided above, 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 - None
Item 5. Other information - None
Item 6. Exhibits and Reports on Form 8-K
     a)   Exhibits

          31.1    Certification of Scott H. Rechler, Chief Executive Officer and
                  President of the Registrant, pursuant to Rule 13a - 14(a) or
                  Rule 15(d) - 14(a).

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

          32.1    Certification of Scott H. Rechler, Chief Executive Officer and
                  President of the Registrant, pursuant to Section 1350 of
                  Chapter 63 of Title 18 of the United States Code.

          32.2    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 September 30, 2003, the Registrant
          filed the following reports on Form 8-K:

          On August 6, 2003, the Registrant submitted a report on Form 8-K under
          Items 7 and 12 thereof in order to file a press release announcing its
          consolidated financial results for the quarter ended June 30, 2003.

          On September 18, 2003, the Registrant submitted a report on Form 8-K
          under Items 5 and 7 thereof in order to describe its disposition of
          its Long Island industrial portfolio.


                                       48
<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, Chief Executive           Michael Maturo, Executive Vice
Officer and President                       President, Treasurer and Chief
                                            Financial Officer


DATE: November 14, 2003


                                       49