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UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549


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FORM 10-Q

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

For the quarterly period
      ended June 30, 2005Commission 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 incorporation or organization) | (IRS Employer Identification Number)
|                                                               |                                     
|225 Broadhollow Road, Melville, NY                             | 11747                               
|(Address of principal executive office)                        | (zip code)                          
|                                                               |                                     

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



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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  No ,
      and (2) has been subject to such filing requirements for
the past 90 days.

|Yes |  | No .
|--- |  | ----

Indicate by check mark whether the registrant
is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

|Yes |  | No .
|--- |  | ----
|    |  |     

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The Company has one class of common stock, par value $.01
per share, with 82,541,523 shares outstanding as of August 5, 2005


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RECKSON
ASSOCIATES REALTY CORP. 
QUARTERLY REPORT 
FOR THE THREE MONTHS ENDED JUNE 30, 2005

TABLE OF CONTENTS

|INDEX      |                                                                                                             | PAGE
|---------- | ----------------------------------------------------------------------------------------------------------- | ----
|           |                                                                                                             |     
|PART I.    | FINANCIAL INFORMATION                                                                                       | 1   
|           |                                                                                                             |     
|          
|Item 1.    | Financial Statements                                                                                        | 1   
|           | Consolidated Balance Sheets
    as of June 30, 2005 (unaudited) and December 31, 2004                       | 1   
|           | Consolidated Statements of Income for the three and six months
    ended June
30, 2005 and 2004 (unaudited) | 2   
|           | Consolidated Statements of Cash Flows for the six months ended June
30, 2005 and 2004 (unaudited)           | 3   
|           | Notes to the Consolidated Financial Statements (unaudited)                                                  | 4   
|Item 2.    | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                   | 21  
|Item 3.    | Quantitative and Qualitative Disclosures about Market Risk                                                  | 40  
|Item 4.    | Controls and Procedures                                                                                     | 41  
|           |                                                                                                             |     
|           |                                                                                                             |     
|PART II.   | OTHER INFORMATION                                                                                           | 46  
|           |                                                                                                             |     
|Item 1.    | Legal Proceedings                                                                                           | 46  
|Item 2.    | Unregistered Sales of Equity Securities and Use of Proceeds                                                 | 46  
|Item 3.    | Defaults Upon Senior Securities                                                                             | 46  
|Item 4.    | Submission of Matters to a Vote of Securities Holders                                                       | 46  
|Item 5.    | Other Information                                                                                           | 46  
|Item 6.    | Exhibits                                                                                                    | 47  
|           |                                                                                                             |     
|           |                                                                                                             |     
|SIGNATURES |                                                                                                             | 48  
|           |                                                                                                             |     

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PART
      I - FINANCIAL INFORMATION 
      ITEM 1 - FINANCIAL STATEMENTS

RECKSON ASSOCIATES REALTY CORP.CONSOLIDATED BALANCE SHEETS 
(Dollars in thousands, except for share amounts)

|                                                                             |   | June 30,    |   |   | December 31, |  
|---------------------------------------------------------------------------- | - | ----------- | - | - | ------------ | -
|                                                                             |   | 2005        |   |   | 2004         |  
|                                                                             |   |             |   |   |              |  
|                                                                             |   | (unaudited) |   |   |              |  
|ASSETS:                                                                      |   |             |   |   |              |  
|Commercial real estate properties, at cost:                                  |   |             |   |   |              |  
|Land                                                                         | $ | 551,269     |   | $ | 409,034      |  
|Building and improvements                                                    |   | 3,111,512   |   |   | 2,706,406    |  
|Developments in progress:                                                    |   |             |   |   |              |  
|Land                                                                         |   | 126,375     |   |   | 103,986      |  
|Development costs                                                            |   | 48,950      |   |   | 29,159       |  
|Furniture, fixtures and equipment                                            |   | 12,622      |   |   | 11,935       |  
|                                                                             |   |             |   |   |              |  
|                                                                             |   | 3,850,728   |   |   | 3,260,520    |  
|Less accumulated depreciation                                                |   | (623,134    | ) |   | (563,706     | )
|                                                                             |   |             |   |   |              |  
|Investments in real estate, net of accumulated deprecation                   |   | 3,227,594   |   |   | 2,696,814    |  
|Properties and related assets held for sale, net of accumulated depreciation |   | 3,650       |   |   | 4,651        |  
|Investment in real estate joint ventures                                     |   | 6,308       |   |   | 6,657        |  
|Investment in notes receivable                                               |   | 135,449     |   |   | 85,855       |  
|Investments in affiliate loans and joint ventures                            |   | 59,778      |   |   | 60,951       |  
|Cash and cash equivalents                                                    |   | 23,672      |   |   | 25,137       |  
|Tenant receivables                                                           |   | 10,483      |   |   | 9,470        |  
|Deferred rents receivable                                                    |   | 151,034     |   |   | 133,012      |  
|Prepaid expenses and other assets                                            |   | 104,828     |   |   | 64,025       |  
|Contract and land deposits and pre-acquisition costs                         |   | 5,206       |   |   | 121          |  
|Deferred leasing and loan costs                                              |   | 85,162      |   |   | 80,915       |  
|                                                                             |   |             |   |   |              |  
|TOTAL ASSETS                                                                 | $ | 3,813,164   |   | $ | 3,167,608    |  
|                                                                             |   |             |   |   |              |  
|LIABILITIES:                                                                 |   |             |   |   |              |  
|Mortgage notes payable                                                       | $ | 614,834     |   | $ | 609,518      |  
|Unsecured credit facility                                                    |   | 128,000     |   |   | 235,500      |  
|Unsecured bridge facility                                                    |   | 470,000     |   |   | —            |  
|Senior unsecured notes                                                       |   | 979,857     |   |   | 697,974      |  
|Liabilities associated with properties held for sale                         |   | 124         |   |   | 82           |  
|Accrued expenses and other liabilities                                       |   | 90,357      |   |   | 73,767       |  
|Deferred revenues and tenant security deposits                               |   | 53,942      |   |   | 50,373       |  
|Dividends and distributions payable                                          |   | 36,175      |   |   | 35,924       |  
|                                                                             |   |             |   |   |              |  
|TOTAL LIABILITIES                                                            |   | 2,373,289   |   |   | 1,703,138    |  
|                                                                             |   |             |   |   |              |  
|Minority partners interests in consolidated partnerships                    |   | 213,371     |   |   | 211,178      |  
|Preferred unit interest in the operating partnership                         |   | 1,200       |   |   | 1,200        |  
|Limited partners minority interest in the operating partnership             |   | 31,088      |   |   | 53,231       |  
|                                                                             |   |             |   |   |              |  
|TOTAL MINORITY INTERESTS                                                     |   | 245,659     |   |   | 265,609      |  
|                                                                             |   |             |   |   |              |  
|Commitments and contingencies                                                |   | —           |   |   | —            |  
|STOCKHOLDERS EQUITY:                                                        |   |             |   |   |              |  
|Preferred stock, $.01 par value, 25,000,000 shares authorized                |   | —           |   |   | —            |  
|Common stock, $.01 par value, 200,000,000 shares authorized                  |   |             |   |   |              |  
|82,533,774 and 80,618,339 shares issued and outstanding, respectively        |   | 825         |   |   | 806          |  
|Additional paid in capital                                                   |   | 1,265,330   |   |   | 1,266,547    |  
|Accumulated other comprehensive loss                                         |   | (3,447      | ) |   | —            |  
|Treasury stock, 3,318,600 shares                                             |   | (68,492     | ) |   | (68,492      | )
|                                                                             |   |             |   |   |              |  
|TOTAL STOCKHOLDERS EQUITY                                                   |   | 1,194,216   |   |   | 1,198,861    |  
|                                                                             |   |             |   |   |              |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                   | $ | 3,813,164   |   | $ | 3,167,608    |  
|                                                                             |   |             |   |   |              |  

(see accompanying notes to financial statements)

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RECKSON ASSOCIATES REALTY CORP.CONSOLIDATED STATEMENTS
  OF INCOME(Unaudited and in thousands, except per share
  and share amounts)

|                                                                 |   | Three Months Ended |   |   | Six
    Months Ended |  
|---------------------------------------------------------------- | - | ------------------ | - | - | -------------------- | -
|                                                                 |   | June 30,           |   |   | June 30,             |  
|                                                                 |   |                    |   |  
|                                                                 |   | 2005               |   |   | 2004                 |  
|                                                                 |   |                    |   |   |                      |  
|PROPERTY OPERATING REVENUES:                                     |   |                    |   |   |                      |  
|Base Rents                                                       | $ | 123,804            |   | $ | 109,265              |  
|Tenant escalations and reimbursements                            |   | 17,998             |   |   | 17,452               |  
|                                                                 |   |                    |   |   |                      |  
|Total property operating revenues                                |   | 141,802            |   |   | 126,717              |  
|                                                                 |   |                    |   |   |                      |  
|OPERATING EXPENSES:                                              |   |                    |   |   |                      |  
|Property operating expenses                                      |   | 53,995             |   |   | 50,369               |  
|Marketing, general and administrative                            |   | 8,477              |   |   | 7,354                |  
|Depreciation and amortization                                    |   | 32,994             |   |   | 28,621               |  
|                                                                 |   |                    |   |   |                      |  
|Total operating expenses                                         |   | 95,466             |   |   | 86,344               |  
|                                                                 |   |                    |   |   |                      |  
|Operating income                                                 |   | 46,336             |   |   | 40,373               |  
|                                                                 |   |                    |   |   |                      |  
|NON-OPERATING INCOME AND EXPENSES:                               |   |                    |   |   |                      |  
|Interest income on notes receivable (including $418, $539,       |   |                    |   |   |                      |  
|$1,269 and $1,128,
    respectively from related parties)        |   | 3,333              |   |   | 1,876                |  
|Investment income and other                                      |   | 486                |   |   | 1,442                |  
|Interest:                                                        |   |                    |   |   |                      |  
|Expense                                                          |   | (27,257            | ) |   | (24,607              | )
|Amortization of deferred financing costs                         |   | (1,021             | ) |   | (899                 | )
|                                                                 |   |                    |   |   |                      |  
|Total non-operating income and expenses                          |   | (24,459            | ) |   | (22,188              | )
|                                                                 |   |                    |   |   |                      |  
|Income before minority interests, preferred dividends and        |   |                    |   |   |                      |  
|distributions, equity in earnings of real estate joint           |   |                    |   |   |                      |  
|ventures and discontinued operations                             |   | 21,877             |   |   | 18,185               |  
|Minority partners interests in consolidated partnerships        |   | (3,848             | ) |   | (4,422               | )
|Limited partners minority interest in the operating partnership |   | (694               | ) |   | (492                 | )
|Distributions to preferred unit holders                          |   | —                  |   |   | (227                 | )
|Equity in earnings of real estate joint ventures                 |   | 83                 |   |   | 294                  |  
|                                                                 |   |                    |   |   |                      |  
|Income before discontinued operations and dividends              |   |                    |   |   |                      |  
|to preferred shareholders                                        |   | 17,418             |   |   | 13,338               |  
|Discontinued operations (net of minority interests):             |   |                    |   |   |                      |  
|Income from discontinued operations                              |   | 173                |   |   | 238                  |  
|Gain on sales of real estate                                     |   | 175                |   |   | 3,639                |  
|                                                                 |   |                    |   |   |                      |  
|Net income                                                       |   | 17,766             |   |   | 17,215               |  
|                                                                 |   |                    |   |   |                      |  
|Dividends to preferred shareholders                              |   | —                  |   |   | (4,172               | )
|Net income allocable to common shareholders                      | $ | 17,766             |   | $ | 13,043               |  
|                                                                 |   |                    |   |   |                      |  
|Basic net income per weighted average common share:              |   |                    |   |   |                      |  
|Common                                                           | $ | .22                |   | $ | .13                  |  
|Discontinued operations                                          |   | —                  |   |   | .06                  |  
|                                                                 |   |                    |   |   |                      |  
|Basic net income per common share                                | $ | .22                |   | $ | .19                  |  
|                                                                 |   |                    |   |   |                      |  
|Basic weighted average common shares outstanding                 |   | 81,882,157         |   |   | 66,892,096           |  
|Diluted net income per weighted average common share             | $ | .22                |   | $ | .19                  |  
|                                                                 |   |                    |   |   |                      |  
|Diluted weighted average common shares outstanding               |   | 82,290,396         |   |   | 67,326,754           |  

(see accompanying notes to financial statements)

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RECKSON ASSOCIATES REALTY CORP.CONSOLIDATED STATEMENTS
      OF CASH FLOWS(Unaudited and in thousands)

|                                                                                  |                                                                                                   | Six Months Ended |         
|--------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------- | ---------------- | --------
|                                                                                  |                                                                                                   | June 30,         |         
|                                                                                  |                                                                                                   |                  |         
|                                                                                  |                                                                                                   | 2005             |         
|                                                                                  |                                                                                                   |                  |         
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |                                                                                                   |                  |         
|NET INCOME                                                                        | $                                                                                                 | 35,120           |         
|Adjustments to reconcile net income to net cash
provided by operating activities: |                                                                                                   |                  |         
|                                                                                  | Depreciation and amortization
    (including discontinued operations)                             |                  | 65,579  
|                                                                                  | Minority partners interests
    in consolidated partnerships                                     |                  | 7,628   
|                                                                                  | Limited partners minority
    interest in consolidated partnerships                              |                  | 1,494   
|                                                                                  | Gain on sales
	    of real estate                                                                 |                  | (181    
|                                                                                  | Equity in earnings of real estate
	    joint ventures                                             |                  | (205    
|Changes in operating assets and liabilities:                                      |                                                                                                   |                  |         
|                                                                                  | Deferred rents
	    receivable                                                                    |                  | (17,444 
|                                                                                  | Prepaid expenses and other assets                                                                 |                  | 11,455  
|                                                                                  | Tenant receivables                                                                                |                  | (1,013  
|                                                                                  | Accrued expenses and other liabilities                                                            |                  | 2,350   
|                                                                                  |                                                                                                   |                  |         
|Net cash provided by operating activities                                         |                                                                                                   | 104,783          |         
|                                                                                  |                                                                                                   |                  |         
|CASH FLOWS FROM INVESTMENT ACTIVITIES:                                            |                                                                                                   |                  |         
|                                                                                  | Purchases
	    of commercial real estate properties                                               |                  | (547,823
|                                                                                  | Additions to developments in
	    progress                                                        |                  | (22,590 
|                                                                                  | Increase in
	    contract and land deposits and pre-acquisition costs                             |                  | (5,221  
|                                                                                  | Repayments of notes receivable                                                                    |                  | 2,952   
|                                                                                  | Additions
	    to notes receivable                                                                |                  | (50,219 
|                                                                                  | Additions to commercial real
	    estate properties                                               |                  | (30,491 
|                                                                                  | Payment of
	    deferred leasing costs                                                            |                  | (9,108  
|                                                                                  | Investments in real estate joint
	    ventures                                                    |                  | (6,223  
|                                                                                  | Contributions
	    to a real estate joint venture                                                 |                  | —       
|                                                                                  | Additions to furniture, fixtures
	    and equipment                                               |                  | (606    
|                                                                                  | Proceeds from
	    sales of real estate                                                           |                  | 1,285   
|                                                                                  |                                                                                                   |                  |         
|Net cash (used in) investing activities                                           |                                                                                                   | (668,044         | )       
|                                                                                  |                                                                                                   |                  |         
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |                                                                                                   |                  |         
|                                                                                  | Principal
	    payments on secured borrowings                                                     |                  | (5,742  
|                                                                                  | Proceeds from issuance of senior
	    unsecured notes, net of issuance costs                      |                  | 281,750 
|                                                                                  | Repayment
	    of senior unsecured notes                                                          |                  | —       
|                                                                                  | Payment of loan and equity issuance
	    costs                                                    |                  | (1,683  
|                                                                                  | Proceeds from
	    unsecured credit facility                                                      |                  | 182,000 
|                                                                                  | Principal payments on unsecured
	    credit facility                                              |                  | (289,500
|                                                                                  | Proceeds from
	    unsecured bridge facility                                                      |                  | 470,000 
|                                                                                  | Proceeds from issuance of common
	    stock, net of issuance costs, and exercise of stock options |                  | 3,369   
|                                                                                  | Distributions
	    to minority partners in consolidated partnerships                              |                  | (5,629  
|                                                                                  | Distributions to limited partners
	    in the operating partnership                               |                  | (3,173  
|                                                                                  | Distributions
	    to preferred unit holders                                                      |                  | —       
|                                                                                  | Dividends to common shareholders                                                                  |                  | (69,596 
|                                                                                  | Dividends
	    to preferred shareholders                                                          |                  | —       
|                                                                                  |                                                                                                   |                  |         
|Net cash provided by financing activities                                         |                                                                                                   | 561,796          |         
|                                                                                  |                                                                                                   |                  |         
|Net increase in cash and cash equivalents                                         |                                                                                                   | (1,465           | )       
|Cash and cash equivalents at beginning of period                                  |                                                                                                   | 25,137           |         
|                                                                                  |                                                                                                   |                  |         
|Cash and cash equivalents at end of period                                        | $                                                                                                 | 23,672           |         
|                                                                                  |                                                                                                   |                  |         

(see accompanying notes to financial statements)

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RECKSON ASSOCIATES REALTY CORP.NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2005(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, acquisition, leasing,
financing and development of commercial real estate properties, principally office and to a lesser extent industrial / R&D properties and also owns land for future development (collectively, the Properties) located in the New York
City 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 and assumed certain indebtedness 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. The Companys ownership percentage in the Operating
Partnership was approximately 96.8% and 94.8% at June 30, 2005 and 2004, respectively.

|2. | BASIS OF PRESENTATION
|-- | ---------------------

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 U.S. generally accepted accounting principles (GAAP) may have been condensed or omitted pursuant to such rules and regulations, although
management believes that the disclosures are adequate to not make the information presented misleading. The unaudited financial statements at June 30, 2005 and for the three and six month periods ended June 30, 2005 and 2004 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, 2005. 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, 2004.

The accompanying consolidated financial statements include the consolidated financial position of the Company, the Operating Partnership and the Service Companies (as defined below) at June 30, 2005 and December 31,
2004 and the consolidated results of their operations for the three and six month periods ended June 30, 2005 and 2004, respectively, and their cash flows for the six months ended June 30, 2005 and 2004, 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s investments in real estate joint ventures, where it owns less than a controlling interest, are reflected in the accompanying financial statements on the equity method of accounting. The Operating Partnership had an investment in a
real estate joint venture in which it owned less than a controlling interest and which was reflected in the accompanying financial statements on the equity method of accounting. Commencing June 20, 2005, as a result of the Company acquiring the
minority partners interest, the Company commenced consolidating the financial results of this investment. The Service Companies which provide management, development and construction services to the Company, the Operating Partnership and to
third parties are Reckson Management Group, Inc., RANY Management Group, Inc., Reckson Construction & Development LLC and Reckson Construction Group New York, Inc. (collectively, the Service Companies).  All significant intercompany
balances and transactions have been eliminated in the consolidated financial statements.

Minority partners interests in consolidated partnerships represent a 49% non-affiliated interest in RT Tri-State LLC, owner of a six 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 3rd Avenue, LLC, owner of the property located at 919 Third Avenue, New York, NY. Limited partners minority interests
in the Operating Partnership was approximately 3.2% and 5.2% at June 30, 2005 and 2004, respectively.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes thereto. Actual results
could differ from those estimates.

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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 they are 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, which are included in buildings and improvements, are amortized on a straight-line basis over the term of the related leases. Depreciation expense, net of discontinued operations, for each of the three and six month periods ended June
30, 2005 and 2004 amounted to approximately $22.5 million and $43.1 million and $19.6 million and $39.2 million, respectively.

We are required to make subjective assessments as to the useful lives of our 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 our net income. Should we 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.

On July 1, 2001 and January 1, 2002, we adopted Financial Accounting Standards Board (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.

We allocate a portion of the purchase price to tangible assets including the fair value of the building and building improvements on an as-if-vacant basis and to land determined either by real estate tax assessments,
independent appraisals or other relevant data. Additionally, we assess fair value of identified intangible assets and liabilities 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 we incorrectly estimate the
values at acquisition or the undiscounted cash flows, initial allocation of purchase price and future impairment charges may be different.

Long Lived Assets

We are required to make subjective assessments as to whether there are impairments in the value of our real estate properties and other investments. An investment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 investment are less than the carrying value of the investment. Such assessments consider factors such as cash flows, expected future
operating income, trends and prospects, as well as the effects of demand, competition and other factors. To the extent impairment has occurred it will be measured as the excess of the carrying amount of the property over the fair value of the
property. These assessments have a direct impact on our net income, because recognizing an impairment results in an immediate negative adjustment to net income. In determining impairment, if any, we have followed FASB Statement No. 144,
Accounting for the Impairment or Disposal of Long Lived Assets. Statement No. 144 did 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 real estate assets for those properties sold during the period within the consolidated statements of income.

Cash Equivalents

We consider highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Tenants lease security deposits aggregating approximately $4.5 million at June 30, 2005 and December 31, 2004 have been included in cash and cash equivalents on the accompanying balance sheets.

Deferred Costs

Tenant leasing commissions and related costs incurred in connection with leasing tenant space are capitalized and amortized over the life of the related lease. In addition, loan costs incurred in obtaining financing
are capitalized and amortized over the term of the related loan.

Costs incurred in connection with equity offerings are charged to stockholders equity when incurred.

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Income Taxes

Commencing with its taxable year ended December
31, 1995, the Company elected to be taxed as a REIT under the Internal Revenue Code
of 1986, as amended (the Code). To qualify as a REIT, the Company
must meet a number of organizational and operational requirements, including
a requirement that it currently distribute at least 90% of  its adjusted taxable
income to its stockholders. It is managements current intention to adhere
to these requirements and maintain the Companys REIT status. As a REIT,
the Company generally will not be subject to corporate level federal  income
tax on taxable income it distributes currently to its stockholders. If the Company
fails to qualify as a REIT in any taxable year, it will be subject to federal
income taxes at regular corporate rates (including any applicable alternative

minimum tax) and may not be able to qualify as a REIT for the subsequent four
taxable years. Even if the Company qualifies for taxation as a REIT, the Company
may be subject to certain state and local taxes on its income and property, and
to federal  income and excise taxes on its undistributed taxable income. In addition,
taxable income from non-REIT activities managed through the Service Companies
as taxable REIT subsidiaries are subject to federal, state and local income taxes.

Revenue Recognition & Accounts Receivable

Minimum 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 accompanying balance sheets. Contractually due but unpaid rents are included in tenant receivables on the accompanying balance sheets. Certain lease agreements also provide for reimbursement of real estate taxes, insurance, common
area maintenance costs and indexed rental increases, which are recorded on an accrual basis. Ancillary and other property related income is recognized in the period earned.

We make estimates of the collectibility of our accounts receivables related to base rents, tenant escalations and reimbursements and other revenue or income. We specifically analyze tenant receivables and historical
bad debts, customer credit worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of our allowance for doubtful accounts. In addition, when tenants are in bankruptcy, we make 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 our net income because a higher bad debt reserve results in less net income.

We incurred approximately $657,000
and $1.1 million
and $700,000 and $1.8 million of bad debt expense during the three
and six month periods ended June 30, 2005 and 2004, respectively, related to
tenant  receivables which accordingly reduced our total revenues and reported
net income during those periods.

We record interest income on our investments in notes receivable on the accrual basis of accounting. We do 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 we consider 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 & Development LLC (the successor to 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 us having no substantial
continuing involvement with the buyer.

We follow the guidance provided for under 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.
We use the percentage of completion method, as future costs of development and profit are reliably estimated.

Earnings Per Share

In 1997, the FASB issued Statement No. 128, Earnings per Share (Statement No. 128) which replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings
per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share are very similar to the previously reported fully diluted earnings per
share. The conversion of OP Units into common stock would not have a significant effect on per share amounts as the OP Units share proportionately with the common stock in the results of the Operating Partnerships operations.

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Stock Options

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 Accounting Principles Board Opinion No. 28, Interim
  Financial Reporting to require disclosure in thesummary
  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.

The following table sets forth our pro forma information
  for common shareholders (in thousands except earnings per share data):

|                                                         |          |   | Three Months Ended |      |   | Six Months Ended |  
|-------------------------------------------------------- | -------- | - | ------------------ | ---- | - | ---------------- | -
|June 30,                                                 | June 30, |  
|                                                         |          |  
|                                                         | 2005     |   |                    | 2004 |   | 2005             |  
|                                                         |          |   |                    |      |   |                  |  
|Net income allocable to common shareholders as reported  |          | $ | 17,766             |      | $ | 13,043           |  
|Add: Stock option expense included above                 |          |   | —                  |      |   | 1                |  
|Deduct: Stock option expense determined under fair value |          |   |                    |      |   |                  |  
|recognition method for all awards                        |          |   | —                  |      |   | (104             | )
|                                                         |          |   |                    |      |   |                  |  
|Pro forma net income allocable to common shareholders    |          | $ | 17,766             |      | $ | 12,940           |  
|                                                         |          |   |                    |      |   |                  |  
|Net income per share as reported:                        |          |   |                    |      |   |                  |  
|Basic                                                    |          | $ | .22                |      | $ | .19              |  
|                                                         |          |   |                    |      |   |                  |  
|Diluted                                                  |          | $ | .22                |      | $ | .19              |  
|                                                         |          |   |                    |      |   |                  |  
|Pro forma net income per share:                          |          |   |                    |      |   |                  |  
|Basic                                                    |          | $ | .22                |      | $ | .19              |  
|                                                         |          |   |                    |      |   |                  |  
|Diluted                                                  |          | $ | .22                |      | $ | .19              |  
|                                                         |          |   |                    |      |   |                  |  

The fair value for those options was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

|                                                                   |          | Three Months Ended |          | Six Months Ended
|------------------------------------------------------------------ | -------- | ------------------ | -------- | ----------------
|June 30,                                                           | June 30,
|                                                                   |         
|2005 (a)                                                           |          | 2004               | 2005 (a) |                 
|                                                                   |          |                    |          |                 
|Risk free interest rate                                            |          | N/A                |          | 3.00%           
|Dividend yield                                                     |          | N/A                |          | 7.07%           
|Volatility factor of the expected market price of our common stock |          | N/A                |          | .200            
|Weighted average expected option life (in years)                   |          | N/A                |          | 4.0             

|(a) | No options were granted or vested during the six months ended June 30, 2005. As a result, no weighted-average assumptions or calculations were required.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------

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

On December 16, 2004, the FASB issued Statement
    No. 123 (revised 2004), Share-Based Payment (Statement No. 123R), which is a
  revision of FASB Statement No. 123, Accounting for Stock-Based Compensation (Statement
  No. 123). Statement No. 123R supersedes Accounting Principles
  Board Opinion No. 25, Accounting for Stock Issued to Employees, and
  amends FASB Statement No. 95, Statement of Cash Flows. Generally,
  the approach in Statement No. 123R is similar to the approach described in Statement
  No.  123. However, Statement No. 123R requires all share-based payments to employees,
  including grants of employee stock options, to be recognized in the income statement
  based on their fair values. Pro forma disclosure is no longer an
  alternative.

Statement No. 123R must be adopted no later than January 1, 2006. Early adoption will be permitted in periods in which financial statements have not yet been issued. We expect to adopt Statement No. 123R on January 1,
2006.

Effective January 1, 2002, we elected to follow Statement No. 123 and use the Black-Scholes option pricing model to estimate the value of stock options granted to employees and expect to continue to use this acceptable
option valuation model upon the required adoption of Statement No. 123R on January 1, 2006. Because Statement No. 123R must be applied not only to new awards but to previously granted awards that are not fully vested on the effective date, and
because we adopted Statement No. 123 using the prospective transition method (which applied only to awards granted, modified or settled after the adoption date), compensation cost for some previously granted awards that were not recognized under
Statement No. 123 would be recognized under Statement No. 123R. However, on January 1, 2006, the date we expect to adopt Statement No. 123R, all of the unexercised options outstanding at June 30, 2005 under our stock option plans will be fully
vested. As a result, no additional expense will be recognized. In addition, had we adopted Statement No. 123R in prior periods, the impact of that standard would have approximated the impact of Statement No. 123 as described above.

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Derivative Instruments

FASB Statement No. 133, Accounting for
    Derivative Instruments and Hedging Activities (Statement No.
    133), as amended, establishes accounting and reporting standards for
    derivative instruments, including certain derivative instruments embedded
    in other contracts, and for hedging activities.

The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset,
liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted
transactions, are considered cash flow hedges.

As required by Statement No. 133, we record all derivatives on our balance sheet at fair value. For effective hedges, depending on the nature of the hedge, changes in the fair value of the derivative will be offset
against the corresponding change in fair value of the hedged asset, liability, or firm commitment through earnings or recognized in accumulated other comprehensive income (OCI) on our balance sheet until the hedged item is recognized in
earnings.

For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in OCI and subsequently reclassified to earnings when the hedged transaction
affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. We assess the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the
derivative hedging instrument with the changes in fair value or cash flows of the designated hedged item or transaction. For derivatives not designated as hedges, changes in fair value are recognized in earnings.

We do not enter into derivative financial instruments for trading or speculative purposes. However, in the normal course of our business and to help us manage our debt issuances and maturities, we do use derivative
financial instruments in the form of cash flow hedges to protect ourselves against potentially rising interest rates.

Variable Interest Entities

In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46), which explains how to identify variable interest entities (VIEs) and how
to assess whether to consolidate such entities. VIEs are primarily entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making
ability. All VIEs which we are involved with must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes. 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 VIEs formed after January 31, 2003. In December 2003 the FASB issued FIN 46R, deferring the effective date until the period ended March 31, 2004 for interests held by public companies in VIEs created
before February 1, 2003, which were non-special purpose entities. We adopted FIN 46R during the period ended March 31, 2004 and have determined that our consolidated subsidiaries do not represent VIEs pursuant to such interpretation. We will
continue to monitor any changes in circumstances relating to certain of our consolidated and unconsolidated joint ventures which could result in a change in the our consolidation policy.

Current pronouncements

In June 2005, the FASB ratified the consensus in EITF Issue No. 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights (Issue 04-5), which provides guidance in determining whether a general partner controls a limited partnership.
Issue 04-5 states that the general partner in a limited partnership is presumed to control that limited partnership.
The presumption may be overcome if the limited partners have either (1) the substantive ability to dissolve the limited partnership or
otherwise remove the general partner without cause or (2) substantive participating rights, which provide the limited partners with the
ability to effectively participate in significant decisions that would be expected to be made in the ordinary course of the limited
partnerships business and thereby preclude the general partner from exercising unilateral control over the partnership. The adoption of
Issue 04-5 by the Company for new or modified limited partnership arrangements is effective June 30, 2005 and for existing limited
partnership arrangements effective January 1, 2006. We do not expect that we will be required to consolidate our current unconsolidated
joint venture investment nor will Issue 04-05 have a material effect on our consolidated financial statements.

Reclassifications

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

|3. | MORTGAGE
    NOTES PAYABLE
|-- | --------------------------

On June 20, 2005, in connection with our acquiring
  our joint venture partners 40% interest in the property located at 520 White Plains Road, Tarrytown, NY, we assumed approximately $4.1 million of secured
mortgage indebtedness of the joint venture. As a result, our total secured debt related to this property at June 30, 2005 was approximately $11.1 million. This mortgage note bears interest at 8.85% per annum and matures on September 1, 2005 at
which time the balance will be approximately $10.9 million. We anticipate
making a borrowing under our unsecured credit facility to satisfy the mortgage
note at its scheduled maturity date.

During the quarterly period ended June 30, 2005 we entered into anticipatory interest rate hedge instruments totaling $250.0 million to protect ourselves against potentially rising interest rates. These instruments
were settled prior to their maturity in exchange for a mortgage rate lock agreement in connection with a 15 year permanent financing on the property located at One Court Square in Queens, NY which closed on August 3, 2005. Costs related to the
terminated instruments of approximately $1.4 million were incorporated into the final fixed mortgage rate of 4.905%. At June 30, 2005, the fair value of the mortgage rate lock approximated its carrying value.

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We also entered into an additional $200.0 million of anticipatory interest rate hedge instruments during the quarterly period ended June 30, 2005, which are scheduled to coincide with certain secured debt we
anticipate incurring on a group of our office properties. These properties are anticipated to be included in a joint venture transaction in the latter part of 2005. As of June 30, 2005, we incurred approximately $207,000 of ineffectiveness
related to these hedge instruments, which has been included in interest expense on our consolidated statements of income. At June 30, 2005, the carrying value of these instruments exceeded their fair value by approximately $2.0 million, which
has been reflected as accumulated other comprehensive loss with a corresponding increase in accrued expenses and other liabilities on our balance sheet. These instruments were settled on August 1, 2005, at which time their fair value exceeded their
carrying value by approximately $1.1 million. Such amount will be classified as an offset to deferred loan costs and amortized against deferred financing costs over the term of the secured debt. Based on the settlement proceeds of approximately
$1.1 million and a projected debt tenor of five years, we would anticipate that during the twelve-month period commencing on July 1, 2005 we would amortize approximately $165,000 of these settlement proceeds (representing the period October
1, 2005 through June 30, 2006) against the amortization of deferred financing costs.

At June 30, 2005, there were 13 fixed rate mortgage
notes payable with an aggregate outstanding principal amount of approximately $614.8
million. These mortgage notes are secured by properties with an aggregate  carrying
value at June 30, 2005 of approximately $1.3 billion and which are pledged
as collateral against the mortgage notes payable. In addition, approximately $42.3
million of the $614.8 million is recourse to us. The mortgage notes
bear interest at rates ranging from 6.45% to 9.25%, and mature between 2005 and
2011. The weighted average interest rate on the outstanding mortgage notes payable
at June 30, 2005 was approximately 7.3%. Certain of the mortgage notes payable
are  guaranteed by the Company and/or certain limited partners in the Operating
Partnership. 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.

The following table sets forth our mortgage notes payable at June 30, 2005, by scheduled maturity date (dollars in thousands):

|Property                                        |      |      | Principal    |  | Interest |  | Maturity        |  | Amortization 
|----------------------------------------------- | ---- | ---- | ------------ |  | -------- |  | --------------- |  | -------------
|Outstanding                                     | Rate | Date | Term (Years)
|                                                |      |      |              |  |          |  |                 | 
|520 White Plains Road, Tarrytown, NY            |      | $    | 11,059       |  | 8.85%    |  | September, 2005 |  | 20           
|395 North Service Road, Melville, NY            |      |      | 18,689       |  | 6.45%    |  | October, 2005   |  | $34 per month
|200 Summit Lake Drive, Valhalla, NY             |      |      | 18,204       |  | 9.25%    |  | January, 2006   |  | 25           
|1350 Avenue of the Americas, NY, NY             |      |      | 72,559       |  | 6.52%    |  | June, 2006      |  | 30           
|Landmark Square, Stamford, CT (a)               |      |      | 42,269       |  | 8.02%    |  | October, 2006   |  | 25           
|100 Summit Lake Drive, Valhalla, NY             |      |      | 15,409       |  | 8.50%    |  | April, 2007     |  | 15           
|333 Earle Ovington Blvd., Mitchel Field, NY (b) |      |      | 51,226       |  | 7.72%    |  | August, 2007    |  | 25           
|810 Seventh Avenue, NY, NY (c)                  |      |      | 78,770       |  | 7.73%    |  | August, 2009    |  | 25           
|100 Wall Street, NY, NY (c)                     |      |      | 34,134       |  | 7.73%    |  | August, 2009    |  | 25           
|6900 Jericho Turnpike, Syosset, NY              |      |      | 7,030        |  | 8.07%    |  | July, 2010      |  | 25           
|6800 Jericho Turnpike, Syosset, NY              |      |      | 13,320       |  | 8.07%    |  | July, 2010      |  | 25           
|580 White Plains Road, Tarrytown, NY            |      |      | 12,130       |  | 7.86%    |  | September, 2010 |  | 25           
|919 Third Avenue, NY, NY (d)                    |      |      | 240,035      |  | 6.87%    |  | August, 2011    |  | 30           
|                                                |      |      |              |  |          |  |                 | 
|Total / Weighted average                        |      | $    | 614,834      |  | 7.33%    |  |                 |  |              
|                                                |      |      |              |  |          |  |                 | 

|
|
|
|
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On August 3, 2005, we placed a first mortgage in the amount of $315.0 million on the property located at One Court Square in Queens, NY. The mortgage note bears interest at a fixed rate of 4.905%, requires monthly
payments of interest only through September 1, 2015, the anticipated repayment date (ARD). After the ARD, all excess cash flow, as defined, shall be applied to amortize the loan and the interest rate shall be reset to 2% plus the greater
of 4.905% and the then-current ten-year U.S. Treasury yield. The final maturity date of the loan is May 1, 2020. The mortgage note is secured by the property and is otherwise non-recourse except in limited circumstances regarding breaches of
material representations. As additional collateral for the loan, we may be required to post letters of credit for the benefit of the lender, in the amount of $10.0 million each, during September 2013, March 2014 and September 2014 if Citibank,
N.A., the propertys current sole tenant, exercises its second cancellation option for up to 20% of its leased space during 2014 and 2015. Net proceeds received of approximately $303.5 million were used to re-pay a portion of our unsecured
bridge facility discussed below.

We have given notice to the mortgagee with respect to the mortgage debt on the property located at 200 Summit Lake Drive in Valhalla, NY to pre-pay the mortgage debt during the third calendar quarter of 2005. Pursuant
to the terms of the mortgage note, the mortgage may be pre-paid without penalty subsequent to September 1, 2005 and upon notice. The balance of the mortgage note will be approximately $18.1 million on September 1, 2005. We anticipate making a
borrowing under our unsecured credit facility to satisfy this mortgage note on the prepayment date.

Our mortgage debt on the property located at 395 North Service Road in Melville, NY matures on October 28, 2005. We have given notice to the mortgagee to prepay the mortgage debt on September 30, 2005, at which time
the balance will be approximately $18.6 million. We anticipate making a borrowing under our unsecured credit facility to satisfy the mortgage note at its scheduled maturity.

|4. | SENIOR UNSECURED NOTES
|-- | ----------------------

During June 2005, the Operating Partnership issued $287.5
million aggregate principal amount of 4.00% exchangeable senior debentures due
June 15, 2025. Interest on the debentures will be payable semi-annually on  June
15 and December 15, commencing December 15, 2005. The debentures are callable
after June 17, 2010 at 100% of par. In addition, the debentures can be put to
us, at the option of the holder and at par, on June 15, 2010, 2015 and 2020.
The net
proceeds from the offering, after the underwriters discounts and expenses,
were approximately $281.6 million and were used for repayment of amounts
outstanding under our unsecured credit facility.
(See
footnote 7, Stockholders Equity, regarding the terms of the debentures
exchange into our common stock).

At June 30, 2005, the Operating Partnership
    had outstanding approximately $979.9 million (net of unamortized 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):

|Issuance         |      |            | Face     |  | Coupon |  | Term |  |                 
|---------------- | ---- | ---------- | -------- |  | ------ |  | ---- |  | ----------------
|Amount           | Rate | (in Years) | Maturity
|                 |      |            |          |  |        |  |      |  |                 
|June 17, 2002    |      | $          | 50,000   |  | 6.00%  |  | 5    |  | June 15, 2007   
|August 27, 1997  |      |            | 150,000  |  | 7.20%  |  | 10   |  | August 28, 2007 
|March 26, 1999   |      |            | 200,000  |  | 7.75%  |  | 10   |  | March 15, 2009  
|January 22, 2004 |      |            | 150,000  |  | 5.15%  |  | 7    |  | January 15, 2011
|August 13, 2004  |      |            | 150,000  |  | 5.875% |  | 10   |  | August 15, 2014 
|June 27, 2005    |      |            | 287,500  |  | 4.00%  |  | 20   |  | June 15, 2025   
|                 |      |            |          |  |        |  |      |  |                 
|                 |      | $          | 987,500  |  |        |  |      |  |                 
|                 |      |            |          |  |        |  |      |  |                 

Interest on the Senior Unsecured Notes is payable semiannually with principal and unpaid interest due on the scheduled maturity dates. In addition, certain of the Senior Unsecured Notes were issued at discounts
aggregating approximately $8.3 million. Such discounts are being amortized to interest expense over the term of the Senior Unsecured Notes to which they relate.

|5. | UNSECURED CREDIT FACILITY & BRIDGE FACILITY
|-- | -------------------------------------------

On May 13, 2005, we obtained a $470.0 million
unsecured bridge facility (the Bridge Facility) from Citibank, N.A.
The Bridge Facility is for an initial term of six months and we have the option
for a  six-month extension upon paying a one-time fee of 7.5 basis points on
the amount then outstanding. The Bridge Facility has terms, including interest
rates and financial covenants, substantially similar to our unsecured $500
million revolving
credit facility (the Credit Facility), and was amended in June 2005
in the same manner as our Credit Facility as described below. As of June 30,
2005, there was $470.0 million outstanding under the Bridge Facility at an
interest rate  of 4.04%. On August 3, 2005, net proceeds received from the secured
financing of the property located at One Court Square in Queens, NY of approximately $303.5
million were used to repay amounts outstanding under the Bridge Facility.

During the three months ended June 30, 2005, we amended our Credit Facility to, among other things, extend the maturity for one year, modify a financial covenant to increase the percentage that our total indebtedness
can represent when compared to the total value of our assets from 55% to 60% and on a temporary basis to 65% upon an acquisition of a material property, reduce the rate of interest on borrowings by 0.10%, modify the capitalization rates used to
value our properties for purposes of the financial covenants contained in the Credit Facility, increase the portion of assets and net operating income that may come from minority joint ventures from 5% to 10% and certain other matters.

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We currently maintain
our $500 million 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 August 2008, contains options for a one-year
 extension subject to a fee of 25 basis points and, upon receiving additional
lender commitments, increasing the maximum revolving credit amount to $750
million. In addition, borrowings under the Credit Facility are currently priced
off LIBOR  plus 80 basis points and the Credit Facility carries a facility fee
of 20 basis points per annum. In the event of a change in the Operating Partnerships
senior unsecured credit ratings, the interest rates and facility fee are subject
to  change. At June 30, 2005, the outstanding borrowings under the Credit Facility
aggregated $128.0 million and carried a weighted average interest rate of
4.04% per annum.

We utilize the Credit Facility primarily to finance real estate investments, fund our real estate development activities and for working capital purposes. At June 30, 2005, we had availability under the Credit Facility
to borrow approximately an additional $370.8 million, subject to compliance with certain financial covenants. Such amount is net of approximately $1.2 million in outstanding undrawn standby letters of credit, which are issued under the
Credit Facility.

In connection with the acquisition of certain properties, contributing partners of such properties have provided guarantees on certain of our indebtedness. As a result, we maintain certain outstanding balances on our
Credit Facility.

|6. | COMMERCIAL REAL ESTATE INVESTMENTS
|-- | ----------------------------------

During January 2005, we acquired, in two separate transactions, two Class A office properties located at One and Seven Giralda Farms in Madison, New Jersey for total consideration of approximately $78.0 million.
One Giralda Farms encompasses approximately 150,000 rentable square feet and Seven Giralda Farms encompasses approximately 203,000 rentable square feet. We made these acquisitions through borrowings under our Credit Facility.

In May 2005, we acquired a 1.4 million square
foot, 50-story, Class A office tower located at One Court Square, Long Island
City, a sub-market of New York City, for approximately $471.0 million, inclusive
of  transfer taxes and transactional costs. One Court Square is 100% leased to
the seller, Citibank N.A., under a 15-year net lease. The lease contains partial
cancellation options effective during 2011 and 2012 for up to 20% of the leased
space and in
2014 and 2015 for up to an additional 20% of the leased space, subject to notice
and the payment of early termination penalties. We are currently negotiating
with an institutional joint venture partner to sell between a 60% to 70% interest
in this property.

In May 2005, we completed mandatory arbitration proceedings relating to the re-setting of the rent under the ground lease pursuant to which we own an approximately 1.1 million square foot Class A office tower located
at 1185 Avenue of the Americas, New York, NY. The rent was re-set, and is not subject to further increase, for the remaining 37 years of the ground lease (inclusive of a 20-year extension at our option) to approximately $6.9 million per annum.
Such re-set is retroactive to June 2004.

On May 26, 2005, we entered into a contract to sell approximately 60 acres of vacant land located in Chatham Township, NJ for up to approximately $30.0 million which is based upon a final approved site plan. The
closing is anticipated to occur upon receiving final zoning approvals and other customary due diligence and approvals. The sale is contingent upon due diligence, environmental assessment, zoning and other customary approvals. There can be no
assurances that any of the aforementioned contingences will be achieved and the sale ultimately completed.

On June 8, 2005, we sold a three-acre vacant land parcel located on Long Island for approximately $1.4 million which resulted in a net gain of approximately $175,000, net of limited partners minority
interest. Such gain is reflected as a component of discontinued operations on our consolidated statements of income.

On June 20, 2005, we acquired our joint venture partners 40% interest in a 172,000 square foot office property located at 520 White Plains Road, Tarrytown, NY for approximately $8.1 million which consisted of
the issuance of 127,510 OP Units valued at $31.37 per OP Unit and the assumption of approximately $4.1 million of secured mortgage indebtedness of the joint venture. Prior to us acquiring this interest, we accounted for the joint venture
under the equity method of accounting. In accordance with the equity method of accounting our proportionate share of the joint ventures income was approximately $25,000 and $176,000 and $294,000 and $408,000 for the three and
six month periods ended June 30, 2005 and 2004, respectively.

On June 21, 2005, we entered into a contract to sell two suburban office properties, aggregating approximately 69,000 square feet, located at 310 and 333 East Shore Road in Great Neck, Long Island for aggregate
consideration of approximately $17.3 million. The sale is scheduled to close within 3 months. There can be no assurances that such sale will occur under the terms anticipated or at all. Pursuant to FASB Statement No. 144, the operating results
of these properties are classified within discontinued operations, for all periods presented, on our consolidated statements of income and their assets and liabilities are classified as held for sale on our consolidated balance sheets.

As of June 30, 2005, we owned and operated 82 office properties (inclusive of eight office properties owned through joint ventures) comprising approximately 16.8 million square feet and eight industrial / R&D
properties comprising approximately 863,000 square feet located in the Tri-State Area.

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At June 30, 2005, we owned approximately
    341 acres of land in 12 separate parcels of which we can, based on current
    estimates, develop approximately 3.1 million square feet of office space
    (the “Development Parcels”).  During July 2004, we commenced
    the ground-up development on one of the Development Parcels of a 305,000
    square foot Class A office building with a total anticipated investment of
    approximately $61.3 million. This development is located within our existing
    three building executive office park in Melville, NY. In addition, during
    July 2005, we commenced the ground-up development on one of the Development
    Parcels of a 37,000 square foot Class A retail property with a total anticipated
    investment of approximately $10.1 million. This development is located within
    our existing six building office park in Stamford, Connecticut. There can
    be no assurances that the actual cost of these ground-up development projects
    will not exceed their anticipated amounts. Further, one of the Development
    Parcels, aggregating approximately 4.1 acres is classified as held for sale
    on our balance sheets and is expected to close during 2006 for aggregate
    consideration of $2.0 million. In addition, as previously discussed, in May
    2005, we entered into a contract to sell approximately 60 acres of vacant
    land in Chatham Township, NJ. As of June 30, 2005, we had invested approximately
    $175.3 million in the Development Parcels. One of the Development Parcels,
    comprising 39.5 acres located in Valhalla, NY, was previously under
contract for sale and was contingent upon obtaining zoning for residential use
    of the land and other customary due diligence and approvals. In May 2005,
    the purchaser terminated the contract.

Management has made subjective assessments
    as to the value and recoverability of our investments in the Development
    Parcels based on current and proposed development plans, market comparable
    land values and alternative use values. We are currently evaluating alternative
    land uses for certain of the remaining Development Parcels to realize their
    highest economic value. These alternatives may include rezoning certain Development
    Parcels from commercial to residential for potential disposition.

We also own a 354,000 square foot office building in Orlando, Florida. This non-core real estate holding was acquired in May 1999 in connection with our initial New York City portfolio acquisition.

On July 8, 2005, we entered into a contract to purchase a 1.1 million square foot Class A office complex located at 204 EAB Plaza in Uniondale, NY, commonly referred to as “EAB Plaza”, for approximately
$240 million. The property is encumbered by a long-term ground lease which
has a remaining term in excess of 75 years, including renewal options. Pursuant
to the terms of the contract, we provided the seller with a down payment in the
form of
a $24.0 million standby letter of credit. Such letter of credit was issued under our Credit Facility. We currently hold a $27.6 million junior mezzanine loan which is secured by a pledge of an indirect ownership interest of an entity which
currently owns the ground leasehold estate. Prior to closing on the acquisition of EAB Plaza, we have the option to purchase an adjoining 8.2 -acre development site. If we do not exercise this option, we will provide a two-year $10 million loan
to the seller, secured by the development site and will be retained to provide development related consulting services for the site. We anticipate closing on this complex in October 2005 through the satisfaction of our junior mezzanine loan and a
borrowing under our Credit Facility. There can be no assurances that we will acquire this property or that we will fund the purchase price as described.

On July 14, 2005, we acquired two adjacent Class A suburban office properties aggregating 228,000 square feet located at 225 High Ridge Road in Stamford, CT for approximately $76.3 million. This acquisition was
made through a borrowing under our Credit Facility. The buildings are currently 100% leased and we anticipate contributing the property to a to-be-formed joint venture. There can be no assurances that this property will be contributed to the
aforementioned joint venture or that such joint venture will be formed.

On July 26, 2005, we announced the commencement of marketing of an offering in Australia of A$271 million (approximately US$203 million) of units in Reckson New York Property Trust (“Reckson LPT”), a
newly-formed listed property trust to be traded on the Australia Securities Exchange (ASX). It is contemplated that Reckson LPT will contribute the net proceeds of the offering in exchange for a 75% indirect interest in a newly-formed joint venture
in the United States. We will transfer 25 of our properties with a value of approximately $563 million and containing an aggregate of 3.4 million square feet to the joint venture in exchange for a 25% interest and approximately $502 million
in cash (inclusive of proceeds from mortgage debt). We will arrange for approximately $319 million of debt, including approximately $247 million of fixed rate debt and approximately $72 million of floating rate debt, that will encumber
the properties transferred to the joint venture. We will also grant the joint venture options to acquire 10 additional properties containing an aggregate of approximately 1.2 million square feet over a two year period at a price based upon the fair
market value at the time of transfer to the joint venture.

In accordance with FASB Statement No. 144, it is anticipated that the assets and liabilities of the properties to be contributed to the joint venture will be classified as held for sale on our consolidated balance
sheets, for all periods presented, commencing with the quarterly period ended September 30, 2005.

Pursuant to the terms of the offering of the units of Reckson LPT, investors will pay 65% of the price of the units in a closing scheduled to occur in late September 2005 and the remaining 35% in October 2006. We will
transfer the 25 properties to the joint venture in three tranches, with properties having a value of approximately $367 million being transferred in late September 2005, approximately $72 million being transferred in January 2006 (such
transfer to be funded entirely from the proceeds of mortgage debt) and approximately $124 million being transferred in October 2006.

We also announced the formation of Reckson Australia Management Limited (“RAML”), a wholly-owned subsidiary, that will manage Reckson LPT and serve as its “Responsible Entity.” The Responsible
Entity will be managed by a six member board that will include three independent directors from Australia. Our affiliates will provide asset management, property management, leasing, construction and other services to the joint venture.

It is anticipated that a portion of the gain relating to the properties transferred to the joint venture will be deferred through an exchange qualifying under Section 1031 of the Internal Revenue Code in connection
with our acquisition of EAB Plaza in Uniondale, New York. We do not currently anticipate that we will make any special distribution to our stockholders with regard to the gain.

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Under the terms of the offering we will be entitled
to receive certain transaction fees. In addition, it is contemplated that RAML
and Reckson Management Group, Inc. will share in certain other ongoing fees related
to
property management, leasing, construction, acquisition and disposition services.

Although the marketing of the units of Reckson
    LPT has commenced, the underwriting agreement relating to the offering, contribution
    agreement relating to the contribution of the properties to the joint venture
    and other documents have not been executed. There can be no assurance that
    the offering will be completed and that the joint venture will be formed
    on the terms described above or at all.

On March 16, 2005, a wholly owned subsidiary
    of the Operating Partnership advanced under separate mezzanine loan agreements,
    each of which bears interest at 9% per annum, (i) approximately $8.0 million which
  matures in April 2010 and is secured, in part, by indirect ownership interests in ten suburban office properties located in adjacent office parks in Long Island, NY and (ii) approximately $20.4 million which matures in April 2012 and is secured,
  in part, by indirect ownership interests in twenty-two suburban office properties located in adjacent office parks in Long Island, NY. Each mezzanine loan is additionally secured by other guaranties, pledges and assurances and are pre-payable
  without penalty after 18 months from the initial funding. We made these investments through a borrowing under our Credit Facility.

In May 2005, we acquired a 65% interest in an
$85 million,15-year loan secured by an indirect interest in a 550,000 square
foot
condominium
in
a Class A office tower located at 1166 Avenue of the Americas, New York, NY for

approximately $55.3 million. The loan accrues compounded interest at 9.0%
and pays interest at an annual rate of 6.0% through March 2010, 8.5% thereafter
through March 2015 and 11.0% thereafter through maturity in 2020. The loan is
pre-payable  only under certain circumstances and, in any case, not before 2009.
Upon a capital event related to the indirect interest in the property which secures
the loan, we are entitled to participate in 30% of net proceeds derived from
such capital event.
This investment replaced our $34.0 million mezzanine loan, including accrued
and unpaid interest, to one of the partners owning such condominium interest.
We also acquired an approximately 5% indirect ownership interest in the property
for a
purchase price of approximately $6.2 million. The property is currently 100%
leased. The balance of these investments was funded through a borrowing under
our Credit Facility and cash on hand.

We hold a $17.0 million 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”). We currently own a 60% majority partnership interest in Omni Partners, 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.

At June 30, 2005, we had invested approximately $111.2 million in mezzanine loans and participating loan investments. In general these investments are secured by a pledge of either a direct or indirect ownership
interest in the underlying real estate or leasehold, other guaranties, pledges and assurances.

The following table sets forth the terms of these investments at June 30, 2005 (in thousands):

|Description        |  | Property                     |  |   | Amount  |  | Interest Rate |     |  | Funding    |  | Maturity            | 
|------------------ |  | ---------------------------- |  | - | ------- |  | ------------- | --- |  | ---------- |  | ------------------- | 
|                   |  |                              |  |   |         |  |               |     |  |            |  |                     | 
|Mezzanine loan     |  | EAB Plaza                    |  | $ | 27,592  |  | 14.19%        | (a) |  | Sep., 2003 |  | Sep., 2005
	    (b) | 
|Participating loan |  | 1166 Avenue of the Americas  |  |   | 55,250  |  | 9.00%         | (c) |  | May, 2005  |  | Dec., 2020          | 
|Mezzanine loan     |  | Long Island office portfolio |  |   | 8,031   |  | 9.00%         |     |  | Mar., 2005 |  | Apr., 2010 (d)      | 
|Mezzanine loan     |  | Long Island office portfolio |  |   | 20,356  |  | 9.00%         |     |  | Mar., 2005 |  | Apr., 2012 (d)      | 
|                   |  |                              |  |   |         |  |               |     |  |            |  |                     | 
|                   |  |                              |  | $ | 111,229 |  |               |     |  |            |  |                     | 
|                   |  |                              |  |   |         |  |               |     |  |            |  |                     | 

|(a) | Weighted average interest rate which is based on a spread over LIBOR, with a LIBOR floor of 1.63% per annum.                                                                                 
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | The borrower has rights to extend the term for three additional one-year periods and, under certain circumstances, prepay amounts outstanding.                                               
|(c) | Average interest rate of 9.0%. Interest pay rate is currently at an annual rate of 6.0% through March 2010, 8.5% thereafter through March 2015 and 11.0% thereafter through maturity in 2020.
|(d) | Prepayable without penalty after 18 months from initial funding.                                                                                                                             

As of June 30, 2005, we held two other notes receivable, which aggregated $1.9 million and carried a weighted average interest rate of 11.21% per annum (the “Other Notes”) and collectively with the Omni
Note, our mezzanine loans and preferred loan investments (the “Note Receivable Investments”). The Other Notes are secured in part by a minority partners preferred unit interest in the Operating Partnership, an interest in real
property and a personal guarantee. $900,000 of the Other Notes matures on December 1, 2005 and the remaining $1.0 million matures on January 31, 2010.

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As of June 30, 2005, management has made subjective
    assessments as to the underlying security value on the Note Receivable Investments.
    These assessments indicate an excess of market value over the carrying value
    and, based on these assessments, we believe there is no impairment to their
carrying value.

|7. | STOCKHOLDERS EQUITY
|-- | --------------------

Basic net income per share on the Companys common stock was calculated using the weighted average number of shares outstanding of 81,882,157 and 66,892,096 for the three months ended June 30, 2005 and 2004,
respectively, and 81,493,293 and 64,127,596 for the six months ended June 30, 2005 and 2004, respectively.

The following table sets forth our 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 common stock (in thousands except for earnings per share data):

|                                                                    |          | Three Months Ended |          |      | Six Months Ended, |     
|------------------------------------------------------------------- | -------- | ------------------ | -------- | ---- | ----------------- | ----
|                                                                    | June 30, |                    | June 30,
|                                                                    |          |                   
|                                                                    | 2005     |                    |          | 2004 |                   | 2005
|                                                                    |          |                    |          |      |                   |     
|Numerator:                                                          |          |                    |          |      |                   |     
|Income before discontinued operations
    and dividends to          |          |                    |          |      |                   |     
|preferred
 stockholders                                             | $        | 17,418             |          | $    | 13,338            |     
|Discontinued
        operations (net of share applicable
to limited |          |                    |          |      |                   |     
|partners
and Minority
interests)                                    |          | 348                |          |      | 3,877             |     
|Dividends to preferred
 shareholders                                |          | —                  |          |      | (4,172            | )   
|                                                                    |          |                    |          |      |                   |     
|Numerator for basic and diluted earnings per common
share           | $        | 17,766             |          | $    | 13,043            |     
|                                                                    |          |                    |          |      |                   |     
|                                                                    |          |                    |          |      |                   |     
|Denominator:                                                        |          |                    |          |      |                   |     
|Denominator for basic
 earnings per share  weighted average        |          |                    |          |      |                   |     
|common
 shares                                                      |          | 81,882             |          |      | 66,892            |     
|Effect of dilutive
 securities:                                     |          |                    |          |      |                   |     
|Common
 stock equivalents                                           |          | 408                |          |      | 435               |     
|                                                                    |          |                    |          |      |                   |     
|Denominator for diluted earnings per common share  adjusted        |          |                    |          |      |                   |     
|Weighted
 average shares and assumed conversions                    |          | 82,290             |          |      | 67,327            |     
|                                                                    |          |                    |          |      |                   |     
|                                                                    |          |                    |          |      |                   |     
|Basic earnings per weighted average common share:                   |          |                    |          |      |                   |     
|Income from continuing
 operations                                  | $        | .22                |          | $    | .13               |     
|Discontinued operations                                             |          | —                  |          |      | .06               |     
|                                                                    |          |                    |          |      |                   |     
|Net income per common
 share                                        | $        | .22                |          | $    | .19               |     
|                                                                    |          |                    |          |      |                   |     
|                                                                    |          |                    |          |      |                   |     
|Diluted earnings per weighted average common share:                 |          |                    |          |      |                   |     
|Income from continuing
 operations                                  | $        | .22                |          | $    | .13               |     
|Discontinued operations                                             |          | —                  |          |      | .06               |     
|                                                                    |          |                    |          |      |                   |     
|Diluted net income
 per common share                                | $        | .22                |          | $    | .19               |     
|                                                                    |          |                    |          |      |                   |     

In calculating diluted net income per weighted average common share, the Company takes into consideration any security that may be potentially dilutive with respect to its common stock. For all periods presented,
securities considered to be potentially dilutive include, to the extent outstanding, stock option grants, Series A preferred stock and Series B preferred stock. OP Units have a distribution rate equivalent to a share of common stock and are
convertible into common stock on a one for one basis. As such, OP Units are not dilutive with respect to the common stock.

A Class A OP Unit and a share of common stock have similar economic characteristics as they effectively share equally in the net income or loss and distributions of the Operating Partnership. As of June 30, 2005, the
Operating Partnership had issued and outstanding 1,617,675 Class A OP Units and 465,845 Class C OP Units. The Class A OP Units and the Companys common stock currently receive a quarterly distribution of $0.4246 per unit/share. The Class C
OP Units were issued in August 2003 in connection with the contribution of real property to the Operating Partnership and currently receive a quarterly distribution of $0.4664 per unit. Subject to certain holding periods, OP Units may either be
redeemed for cash or, at the election of the Company, exchanged for shares of common stock on a one-for-one basis.

On June 20, 2005, as part of the consideration to acquire our joint venture partners 40% interest in the property located at 520 White Plains Road, Tarrytown, NY, we issued 127,510 OP Units valued at $31.37
per OP Unit.

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During June 2005, the Operating Partnership issued $287.5 million aggregate principal amount of 4.00% exchangeable senior debentures due June 15, 2025. The debentures were issued at 98% of par and are exchangeable
for shares of common stock of the Company on or after June 15, 2024, and also under certain circumstances, at an initial exchange rate of 24.6124 common shares per $1,000 of principal amount of debentures. The initial exchange price of
$40.63 represents a premium of approximately 25% to the closing price of the Companys common stock on the issuance date of $32.50 per share. If exchanged in accordance with their terms, the debentures will be settled in cash up to
their principal amount and any remaining exchange value will be settled, at our option, in cash, the Companys common stock or a combination thereof. In accordance with the exchange rate terms of the debentures the Company has reserved
approximately 8.8 million shares of its authorized common stock, $.01 par value, for potential future issuance upon the exchange of the debentures. Such amount is based on an exchange rate of 30.7692 common shares per $1,000 of principal
amount of debentures. Although we have reserved these shares pursuant to the terms of the exchange rate terms, we believe the issuance of our shares, if any, would be significantly less than 8.8 million shares. The debentures are guaranteed by the
Company. We have the option to redeem the debentures beginning June 18, 2010 for the principal amount plus accrued and unpaid interest. Holders of the debentures have the right to require us to repurchase their debentures at 100% of the principal
amount thereof plus accrued and unpaid interest on June 15, 2010, June 15, 2015 and June 15, 2020 or, in the event of certain change in control transactions, prior to June 15, 2010.

The limited partners minority interest in the Operating Partnership (Limited Partner Equity), which is reflected on the accompanying balance sheets, is reported at an amount equal to the limited
partners ownership percentage of the net equity of the Operating Partnership at the end of the reporting period. The Limited Partner Equity is adjusted at the end of the period to reflect the ownership percentages at that time. The Limited
Partner Equity was approximately 3.2% and 5.2% at June 30, 2005 and 2004, respectively.

During the three month period ended June 30, 2005, 53,410 shares of the Companys common stock were issued in connection with the exercise of outstanding options to purchase stock under its stock option plans
resulting in proceeds to us of approximately $800,000. In addition, a limited partner in the Operating Partnership exchanged 841,992 OP Units for an equal number of shares of the Companys common stock.

The Operating Partnership has issued and outstanding 1,200 preferred units of limited partnership interest with a liquidation preference value of $1,000 per unit and a stated distribution rate of 7.0%, which is
subject to reduction based upon terms of their initial issuance (the Preferred Units). The terms of the Preferred Units provide for this reduction in distribution rate in order to address the effect of certain mortgages with above market
interest rates which were assumed by the Operating Partnership in connection with properties contributed to the Operating Partnership in 1998.

The Board of Directors of the Company initially authorized the purchase of up to 5.0 million shares of the Companys common stock. Transactions conducted on the New York Stock Exchange have been, and will continue
to 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. Since the Boards initial authorization, the Company has purchased 3,318,600 shares of its
common stock for an aggregate purchase price of approximately $71.3 million. In June 2004, the Board of Directors re-set the Companys common stock repurchase program back to 5.0 million shares. No purchases have been made since March,
2003.

In July 2002, as a result of certain provisions of the Sarbanes-Oxley Act of 2002, we discontinued the use of stock loans in our Long Term Incentive Programs (LTIP). In connection with LTIP grants made
prior to the enactment of the Sarbanes-Oxley Act of 2002, we currently have stock loans outstanding to certain executive officers which were used to purchase 385,000 shares of our common stock. The stock loans were priced at the market prices of our
common stock at the time of issuance, bear interest at the mid-term Applicable Federal Rate and are secured by the shares purchased. Such stock loans (including accrued interest) are scheduled to vest and be ratably forgiven each year on the
anniversary of the grant date based upon initial vesting periods ranging from seven to ten years. Such forgiveness is based on continued service and in part on the Company attaining certain annual performance measures. These stock loans had an
initial aggregate weighted average vesting period of approximately nine years. As of June 30, 2005, there remains 180,714 shares of common stock subject to the original stock loans which are anticipated to vest between 2006 and 2011. Approximately
$276,000 and $507,000 and $248,000 and $556,000 of compensation expense was recorded for the three and six month periods ended June 30, 2005 and 2004, 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 officers aggregated approximately $3.8 million and $4.7 million at June 30, 2005 and December 31, 2004, respectively, and have been included as a reduction
of additional paid in capital on the accompanying consolidated balance sheets. Other outstanding loans to executive and senior officers at June 30, 2005 and December 31, 2004 amounted to approximately $1.8 million and $2.7 million,
respectively, and are included in investments in affiliate loans and joint ventures on the accompanying consolidated balance sheets and are primarily related to tax payment advances on stock compensation awards and life insurance contracts made to
certain executive and non-executive officers.

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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 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 vest in four equal annual installments beginning on November 14, 2003 (and shall be fully vested on November 14, 2006). The 2003 Rights were earned on March 13, 2005 and 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 2002 Rights. The 2002 Rights aggregate 62,835 shares of the Companys common stock and the 2003 Rights
aggregate 26,040 shares of common stock. As of June 30, 2005, there remains 31,417 shares of common stock reserved related to the 2002 Rights and 17,360 shares of common stock reserved related to the 2003 Rights. Approximately $120,000 and
$224,000 and $100,000 and $201,000 of compensation expense was recorded for the three and six month periods ended June 30, 2005 and 2004, respectively, related to the Rights. Such amounts have been included in marketing, general and
administrative expenses on the accompanying consolidated statements of income.

In March 2003, the Company established a new LTIP for its executive and senior officers (the 2003 LTIP). The four-year plan has a core award, which provides for annual stock based compensation based upon
continued service and in part based on the Company attaining certain annual performance measures. The plan also has a special outperformance component in the form of a bonus pool equal to 10% of the total return in excess of a 9% cumulative and
compounded annual total return on the Companys common equity for the period through the four-year anniversary after the date of grant (the Special Outperformance Pool). The aggregate amount payable to such officers from the Special
Outperformance Pool is capped at an amount calculated based upon a total cumulative and compounded annual return on the common equity of 15%. An officers special outperformance award represents an allocation of the Special Outperformance Pool
and will become vested on the fourth anniversary of the date of grant, provided that the officer remains in continuous employment with the Company or any of its affiliates until such date, and the Company has achieved on a cumulative and compounded
basis, during the four fiscal years completed on the applicable anniversary date, a total return to holders of the common equity that (i) is at or above the 60thpercentile of the total return to stockholders achieved by members of the peer group during the same period and (ii) equals at least 9% per annum. Special outperformance awards will be paid in cash; however, the Compensation
Committee, in its sole discretion, may elect to pay such an award in shares of common stock, valued at the date of vesting, if shares are available at such time under any of the Companys existing stock option plans. The LTIP provides that no
dividends or dividend equivalent payments will accrue with respect to the special outperformance awards. On March 13, 2003, the Company made available 827,776 shares of its common stock under its existing stock option plans in connection with the
core award of the 2003 LTIP for certain of its executive and senior officers. During May 2003, the special outperformance awards of the 2003 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.

The Board of Directors approved an amendment to the 2003 LTIP to revise the peer group used to measure relative performance. The amendment eliminated the mixed office and industrial companies and added certain other
pure office companies in order to revise the peer group to office sector companies. The Board has also approved the revision of the performance measurement dates for future vesting under the core component of the 2003 LTIP from the
anniversary of the date of grant to December 31 of each year. This was done in order to have the performance measurement coincide with the performance period that the Company believes many investors use to judge the performance of the Company.

On December 27, 2004, the Operating Partnership entered into definitive agreements with certain executive and senior officers of the Company to revise their incentive awards under the 2003 LTIP. The revised agreements
provide for (i) the rescission of the unvested portion of their core awards and (ii) an award in exchange for the rescinded core awards of an equal number of units of a new class of limited partnership interests (LTIP Units) of the
Operating Partnership.

Each executive and senior officer participating in the 2003 LTIP was offered the option to retain all or a portion of his core awards or to rescind them in exchange for new awards of LTIP Units. On December 27, 2004,
certain executive and senior officers accepted such offer and thereby amended their Amended and Restated Long-Term Incentive Award Agreement to cancel, in the aggregate, 362,500 shares of restricted stock of the Company representing all or a portion
of their unvested core award, and received an equal number of LTIP Units.

The revised awards under the 2003 LTIP were designed to provide the potential for executives to retain a greater equity interest in the Company by eliminating the need for executives to sell a portion of the core
awards immediately upon vesting in order to satisfy personal income taxes which are due upon vesting under the original core awards.

On March 13, 2005 and March 13, 2004, with respect to the 2003 LTIP, the Company met its annual performance measure with respect to the 2004 and 2003 annual measurement periods, respectively. As a result, the Company
issued to the participants of the 2003 LTIP 102,779 and 206,944 shares of its common stock, respectively, related to the core component of the 2003 LTIP.

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The terms of each award of LTIP Units are substantially similar to those of the core awards under the 2003 LTIP. The vesting, performance hurdles and timing for vesting remain unchanged. However, an LTIP Unit
represents an equity interest in the Operating Partnership, rather than the Company. At issuance, the LTIP Unit has no value but may over time accrete to a value equal to (but never greater than) the value of one share of common stock of the Company
(a REIT Share). Initially, LTIP Units will not have full parity with OP Units with respect to liquidating distributions. Upon the occurrence of certain triggering events, the Operating Partnership will revalue its assets for
the purpose of the capital accounts of its partners and any increase in valuation of the Operating Partnerships assets from the date of the issuance of the LTIP Units through the triggering event will be allocated to the capital
accounts of holders of LTIP Units until their capital accounts are equivalent to the capital accounts of holders of OP Units. If such equivalence is reached, LTIP Units would achieve full parity with OP Units for all purposes, and therefore accrete
to an economic value equivalent to REIT Shares on a one-for-one basis. After two years from the date of grant, if such parity is reached, vested LTIP Units may be redeemed for cash in an amount equal to the then fair market value of an equal number
of REIT Shares or converted into an equal number of OP Units, as determined by the Companys Compensation Committee. However, there are circumstances under which such economic equivalence would not be reached. Until and unless such economic
equivalence is reached, the value that the officers will realize for vested LTIP Units will be less than the value of an equal number of REIT Shares. In addition, unlike core awards under the 2003 LTIP (wherein dividends that accumulate are paid
upon vesting), LTIP Units will receive the same quarterly distributions as OP Units on a current basis, thus providing full dividend equivalence with REIT Shares. At the scheduled March 2005 vesting date, the specified performance hurdles were met,
and officers that received LTIP Units received a one-time cash payment that represented payment of the full vested amount of the accrued unpaid dividends under the core award of the 2003 LTIP through December 27, 2004, the issuance date of the LTIP
Units. In addition, the officers, in the aggregate, vested in 104,167 LTIP Units. In order to more closely replicate the terms of the core awards being rescinded, the Company also entered into agreements with three executive officers, which provide
that in the event of a change of control the executive shall receive the equivalent value of one REIT Share for each LTIP Unit.

In March 2005, following the recommendation of the Compensation Committee of the Board of Directors, eight senior and executive officers of the Company were awarded, in the aggregate, 272,100 LTIP Units to continue to
incentivize them for the long-term (the 2005 LTIP Unit Grants). Each such LTIP Unit awarded is deemed equivalent to an award of one share of common stock reserved under one of the Companys stock option plans, reducing availability
for other equity awards on a one-for-one basis. The terms of the 2005 LTIP Unit Grants are generally consistent with the terms of the 2003 LTIP, including with respect to the impact upon vesting in the event of a change in control.

As of June 30, 2005, and as a result of the foregoing, there remains 155,553 shares of common stock reserved for future issuance under the core award of the 2003 LTIP and 530,433 shares of common stock reserved for
issuance with respect to the issuance of LTIP Units. With respect to the core award of the 2003 LTIP, the Company recorded approximately $305,000 and $610,000 and $699,000 and $1.4 million of compensation expense for the three and
six month periods ended June 30, 2005 and 2004, respectively. In addition, with respect to the LTIP Units and the 2005 LTIP Unit Grants, the Company recorded compensation expense of approximately $822,000 and $1.3 million for the three and
six month periods ended June 30, 2005, respectively. Such amounts have been included in marketing, general and administrative expenses on the accompanying consolidated statements of income. No accrual has been made with respect to the Special
Outperformance Pool of the 2003 LTIP due to the uncertainty of the outcome of achieving the requisite performance measures.

Compensation expense with respect to the core component of the 2003 LTIP, which relates to the Company
attaining certain annual performance measures, is recognized in accordance with paragraph 26 of Statement No. 123 as a target stock
price plan. Under this type of plan, compensation expense is recognized for the target stock price awards whether or not the targeted
stock price condition is achieved as long as the underlying service conditions are achieved. Accordingly, we obtained an independent third
party valuation of the 2003 LTIP awards and recognize compensation expense on a straight-line basis through the vesting period
for awards to employees who remain in service over the requisite period regardless of whether the target stock price has been reached.

Compensation expense with respect to the core component of the 2003 LTIP, which relates to the continued service of the grantee, is recognized in accordance with Statement No. 123 in which compensation expense is recognized on a straight-line basis through the vesting period based on the fair market value of the stock on the date of grant.

As a result of the election of certain executive and senior officers to exchange all or a portion of their 2003 LTIP into an equal number of LTIP Units we again obtained an independent third party valuation of the newly granted LTIP Units and determined that the fair value of the LTIP Units was not greater than the exchanged 2003 LTIP awards on the date of the exchange. As such, compensation expense to be recognized, on a straight-lined basis, over the vesting period of the LTIP Units equals the amount of unamortized compensation expense cost for the 2003 LTIP awards as of the exchange date.

We expect to adopt Statement No. 123R on January 1, 2006; however, we have not yet been able to determine the impact of Statement No. 123R on our consolidated financial statements at this time.

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

|                                         |  | Six Months Ended
June30, |       
|---------------------------------------- |  | ------------------------ | ------
|                                         |  |                          |       
|                                         |  | 2005                     |       
|                                         |  |                          |       
|Cash paid during the period for interest |  | $                        | 51,561
|                                         |  |                          |       
|Interest capitalized during the period   |  | $                        | 4,611 
|                                         |  |                          |       
|                                         |  |                          |       

|9. | SEGMENT
    DISCLOSURE
|-- | ----------------------

We own all of the interests in our real estate properties directly or indirectly through the Operating Partnership. Our 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). Our portfolio also includes one office property located in Orlando, Florida. We have formed an Operating
Committee that reports 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.

We do not consider (i) interest incurred on our
Credit Facility, Bridge 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 on our
consolidated statements of income and (iv) the operating results of the Service
Companies as part of our Core Portfolios property operating performance
for purposes of our component
disclosure set forth below.

The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. In addition, historical amounts have been adjusted to give effect to our
discontinued operations in accordance with Statement No. 144.

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The following table sets forth the components of our revenues and expenses and other related disclosures (in thousands):

|                                                                                                                                                                        | Three months ended |        
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------ | -------
|                                                                                                                                                                        |                    |        
|                                                                                                                                                                        | June 30, 2005      |        
|                                                                                                                                                                        |                    |        
|                                                                                                                                                                        | Core Portfolio     |        
|                                                                                                                                                                        |                    |        
|PROPERTY OPERATING REVENUES:                                                                                                                                            |                    |        
|Base rents, tenant                                                                                                                                                      |                    |        
|escalations and reimbursements                                                                                                                                          | $                  | 138,916
|                                                                                                                                                                        |                    |        
|                                                                                                                                                                       
|EXPENSES:                                                                                                                                                               |                    |        
|Property operating expenses                                                                                                                                             |                    | 52,626 
|Marketing, general and administrative                                                                                                                                   |                    | 4,318  
|Depreciation and amortization                                                                                                                                           |                    | 32,048 
|                                                                                                                                                                        |                    |        
|Total Operating Expenses                                                                                                                                                |                    | 88,992 
|                                                                                                                                                                        |                    |        
|Operating Income (loss)                                                                                                                                                 |                    | 49,924 
|                                                                                                                                                                        |                    |        
|NON-OPERATING INCOME AND EXPENSES                                                                                                                                       |                    |        
|Interest and investment income and other                                                                                                                                |                    | 557    
|Interest:                                                                                                                                                               |                    |        
|Expense incurred                                                                                                                                                        |                    | (13,976
|Amortization of deferred financing
 costs                                                                                                                               |                    | (280   
|                                                                                                                                                                        |                    |        
|Total Non-Operating Income and Expenses                                                                                                                                 |                    | (13,699
|                                                                                                                                                                        |                    |        
|                                                                                                                                                                       
|Income
	      (loss) before minority interests, preferred dividends and distributions,
    equity in earnings of real estate joint ventures and discontinued operations | $                  | 36,225 
|                                                                                                                                                                        |                    |        
|                                                                                                                                                                        |                    |        
|                                                                                                                                                                        |                    |        

|                                                                                                                                                                                                 | Six Months
    Ended    |          
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------- | ---------
|                                                                                                                                                                                                 |                         |          
|                                                                                                                                                                                                 | June 30,
          2005 |          
|                                                                                                                                                                                                 |                         |          
|                                                                                                                                                                                                 | Core Portfolio          |          
|                                                                                                                                                                                                 |                         |          
|PROPERTY OPERATING REVENUES:                                                                                                                                                                     |                         |          
|Base rents, tenant                                                                                                                                                                               |                         |          
|escalations
        and reimbursements                                                                                                                                                           | $                       | 274,200  
|                                                                                                                                                                                                 |                         |          
|EXPENSES:                                                                                                                                                                                        |                         |          
|Property operating expenses                                                                                                                                                                      |                         | 107,453  
|Marketing, general and administrative                                                                                                                                                            |                         | 8,617    
|Depreciation and amortization                                                                                                                                                                    |                         | 61,192   
|                                                                                                                                                                                                 |                         |          
|Total Operating Expenses                                                                                                                                                                         |                         | 177,262  
|                                                                                                                                                                                                 |                         |          
|Operating Income (loss)                                                                                                                                                                          |                         | 96,938   
|                                                                                                                                                                                                 |                         |          
|NON-OPERATING INCOME
    AND EXPENSES                                                                                                                                                            |                         |          
|Interest and investment income
        and other                                                                                                                                                 |                         | 1,444    
|Interest:                                                                                                                                                                                        |                         |          
|Expense incurred                                                                                                                                                                                 |                         | (25,078  
|Amortization
        of deferred financing costs                                                                                                                                                 |                         | (567     
|                                                                                                                                                                                                 |                         |          
|Total Non-Operating Income
        and Expenses                                                                                                                                                  |                         | (24,201  
|                                                                                                                                                                                                 |                         |          
|Income
                (loss) before minority interests, preferred dividends
                and distributions, equity in earnings of real estate joint
    ventures and discontinued operations | $                       | 72,737   
|                                                                                                                                                                                                 |                         |          
|Total Assets                                                                                                                                                                                     | $                       | 3,520,263
|                                                                                                                                                                                                 |                         |          
|                                                                                                                                                                                                 |                         |          

|10. | NON-CASH INVESTING
    AND FINANCING ACTIVITIES
|--- | -----------------------------------------------

During June 2005, a limited partner exchanged
    841,992 OP Units for an equal number of shares of the Companys common
stock which were priced at $31.60 per share.

On June 20, 2005, as part of the consideration
    to acquire our joint venture partners 40% interest in the property
    located at 520 White Plains Road, Tarrytown, NY, we issued 127,510 OP Units
    valued at $31.37 per OP Unit and assumed approximately $4.1 of secured
    mortgage indebtedness of the joint venture.

In May 2005, we acquired an approximate $55.3
    million interest in a 15-year loan secured by an indirect interest in a 550,000
    square foot condominium in a Class A office tower located at 1166 Avenue
    of the Americas, New York, NY. This investment replaced our $34.0 million
    mezzanine loan, including accrued and unpaid interest, to one of the partners
    owning such condominium interest.

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|11. | RELATED PARTY TRANSACTIONS
|--- | --------------------------

In connection with our IPO, we were 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 prices 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 us for an aggregate purchase price of approximately $35.0 million, which included the issuance of approximately 475,000 Class A OP Units valued at approximately $8.8 million. During November, 2003,
in connection with the sale of all but three of our 95 property, 5.9 million square foot, Long Island industrial building portfolio to members of the Rechler family, four of the five remaining options (the Remaining Option Properties)
were terminated along with management contracts relating to three of the properties.

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. During the three and six months ended June 30, 2005 and 2004, Reckson Construction & Development LLC (RCD) billed approximately $17,000 and $26,000 and $217,000 and $678,000, respectively, of market
rate services and Reckson Management Group, Inc. (RMG) billed approximately $71,000 and $142,000 and $72,000 and $138,000, respectively, of market rate management fees to the Remaining Option Properties.

RMG leases approximately 26,000 square feet of office space at a Remaining Option Property located at 225 Broadhollow Road, Melville, NY for its corporate offices at an annual base rent of approximately $780,000.
RMG 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 $79,000. In addition, commencing April
1, 2004, RCD has been leasing approximately 17,000 square feet of space at a Remaining Option Property, located at 225 Broadhollow Road, Melville, NY, which is scheduled to terminate on September 30, 2006. Base rent of approximately $122,000 and
$244,000 was paid by RCD during the three and six months ended June 30, 2005, respectively, and $121,000 was paid for the three months ended June 30, 2004. Commencing in April 2005, RCD sub-let the entire 17,000 square feet to a third party
for approximately $35,000 per month through RCDs September 2006 lease termination date.

On March 28, 2005, an entity (REP) owned by members of the Rechler family (excluding Scott Rechler, but including his father, Roger, and brother, Gregg) exercised a Right of First Refusal (which was granted
in connection with the 2003 sale of the industrial portfolio by us) to acquire a vacant parcel of land for a purchase price of $2.0 million. We have agreed to provide REP with the option to defer the closing on the purchase until September 2006,
for a non-refundable deposit of $400,000 and a fee of $10,666 per month for each month that the closing is deferred. In connection therewith, REP agreed to settle a dispute concerning an easement on a separate parcel of land owned by us
adjacent to one of the properties transferred to REP in the 2003 industrial transaction.

A company affiliated with an independent director of the Company leases 15,566 square feet in a property owned by us at an annual base rent of approximately $430,000.

During 1997, the Company formed FrontLine Capital Group, formerly Reckson Service Industries, Inc. (FrontLine), and Reckson Strategic Venture Partners, LLC (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 advanced approximately $93.4 million under the FrontLine Facility. The Operating Partnership also approved the funding of investments of up to $110 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). At March 31, 2005, 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. Interest accrued (net of reserves) under the FrontLine Facility and the RSVP Facility was approximately
$19.6 million.

A committee of the Board of Directors, comprised
solely of independent directors, considers 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.

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.

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In September 2003, RSVP completed the restructuring of its capital structure and management arrangements. 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 (the RSVP 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 RSVP Secured Loan is scheduled to mature in 2006 and is expected to be repaid from proceeds of assets sales by RSVP and/or a joint venture between RSVP and a subsidiary of the Operating
  Partnership.

As a result of certain transactions including the successful public offering of American Campus Communities, a joint venture owned by RSVP and Reckson Operating Partnership, 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 $55.2 million which was reassessed with no
change by management as of June 30, 2005. Such amount has been reflected in investments in affiliate loans and joint ventures on the Companys consolidated balance sheet.

Scott H. Rechler, who serves as Chief Executive Officer, President and Chairman of the Board 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 and serves as a member of the Board of Directors of ACC.

In November 2004, Concord Associates LLC and Sullivan Resorts LLC, a joint venture approximately 47% owned by RSVP, executed a binding agreement to contribute its Concord and Grossingers resort properties (excluding
residential land) to Empire Resorts Inc. (NASDAQ: NYNY)(Empire) for consideration of 18 million shares of common stock of Empire and the right to appoint five members of the Board of Directors. It is currently anticipated that Scott H.
Rechler will be appointed to fill one seat on Empires Board. On March 4, 2005, Empire announced that the agreement had been amended, whereby the parties agreed to waive the condition to closing which required final governmental approval of
gaming in the Catskills. The transaction is subject to satisfaction of certain conditions and approvals, including the approval of Empires shareholders. There can be no assurances that gaming will be approved in the Catskills or that the
transaction will be completed on its current terms or at all.

|12. | COMMITMENTS
AND CONTINGENCIES
|--- | -----------------------------

The Company has entered into amended and restated employment and noncompetition agreements with three executive officers. The agreements are for five years and expire on August 15, 2005. The Company has also entered
into an employment agreement with one additional officer prior to his appointment as an executive officer. This agreement expires in December 2006.

We had undrawn letters of credit outstanding against our Credit Facility of approximately $1.2 million at June 30, 2005. On July 8, 2005 we issued a $24.0 million standby letter of credit to secure a deposit
obligation for the pending acquisition of a 1.1 million square foot Class A office complex located at 204 EAB Plaza in Uniondale, NY. (See Note 6)

A number of shareholder derivative
    actions have been commenced purportedly on behalf of the Company against
    the Board of Directors relating to the disposition of our Long Island industrial
    portfolio. 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 and damages. On May 25, 2004, the Circuit Court for Baltimore City granted the defendants motions to dismiss the three consolidated Maryland actions on the ground that the plaintiffs in those actions had failed to make a
  pre-suit demand on the Board of Directors, or to allege facts showing that such a demand would have been futile. Final judgment was entered on June 8, 2004, and on June 30, 2004, the plaintiffs in the Maryland actions filed a notice of appeal from
  that judgment to the Maryland Court of Special Appeals. The Companys management believes that the complaints are without merit.

On April 4, 2005 the Company and the other parties to the shareholder derivative actions filed against the Company in connection with its disposition of its industrial portfolio have agreed to settle such actions
pursuant to the Stipulation of Settlement, dated as of March 14, 2005 and executed subsequent thereto. The proposed settlement includes various changes to the Companys corporate governance policies to provide for an Affiliate Transaction
Committee and to require that the Companys Board of Directors be comprised of at least two-thirds independent directors (as defined in the Companys Corporate Governance Guidelines), as well as certain other concessions. The proposed
settlement is subject to court approval.

On June 16, 2005, Judge Evelyn Omega Connor
    of the Circuit Court of Baltimore City signed an order regarding preliminary
    approval and notice with respect to the shareholder derivative actions. A
    hearing to consider approval of the proposed settlement has been scheduled
    for September 20, 2005, at 9:30 a.m., in the Circuit Court for Baltimore
City. There can be no assurance that final court approval will be obtained.

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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction
with the historical 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 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; the financial condition of our tenants; changes in operating costs, including utility, security, real estate tax and insurance costs; repayment of debt owed to the
Company by third parties; 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 and controlled subsidiaries. The preparation of financial statements in conformity with U.S. generally
accepted accounting principles (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

Minimum 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 our balance sheets. Contractually due but unpaid rents are included in tenant receivables on our balance sheets. Certain lease agreements also provide for reimbursement of real estate taxes, insurance, common area maintenance costs and
indexed rental increases, which are recorded on an accrual basis. Ancillary and other property related income is recognized in the period earned.

We make estimates of the collectibility of our accounts receivables related to base rents, tenant escalations and reimbursements and other revenue or income. We specifically analyze tenant receivables and historical
bad debts, customer credit worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of our allowance for doubtful accounts. In addition, when tenants are in bankruptcy, we make 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 our net income because a higher bad debt reserve results in less net income.

We incurred approximately $657,000 and $1.1
million
and $700,000 and $1.8 million of bad debt expense, net of discontinued
operations, for the three and six month periods ended June 30, 2005 and 2004,
 respectively, related to tenant receivables which accordingly reduced our total
revenues and reported net income during the period.

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We record interest income on our investments in notes receivable on the accrual basis of accounting. We do 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 we consider 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 & Development LLC (the successor to 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 us having no substantial continuing involvement with the buyer.

We follow the guidance provided for under the Financing Accounting Standards Board (FASB) Statement No. 66 Accounting for Sales of Real Estate (Statement No. 66),
whichprovides 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. We use the percentage of completion method, as future costs of development and profit are 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 they are 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, which are included in buildings and improvements, are amortized on a straight-line basis over the term of the related leases.

We are required to make subjective assessments as to the useful lives of our 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 our net income. Should we 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.

On July 1, 2001 and January 1, 2002, we 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.

We allocate a portion of the purchase price to tangible assets including the fair value of the building and building improvements on an as-if-vacant basis and to land determined either by real estate tax assessments,
independent appraisals or other relevant data. Additionally, we assess fair value of identified intangible assets and liabilities 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 we incorrectly estimate the
values at acquisition or the undiscounted cash flows, initial allocation of purchase price and future impairment charges may be different.

Long Lived Assets

We are required to make subjective assessments as to whether there are impairments in the value of our real estate properties and other investments. An investment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 investment are less than the carrying value of the investment. Such assessments consider factors such as cash flows, expected future
operating income, trends and prospects, as well as the effects of demand, competition and other factors. To the extent impairment has occurred it will be measured as the excess of the carrying amount of the property over the fair value of the
property. These assessments have a direct impact on our net income, because recognizing an impairment results in an immediate negative adjustment to net income. In determining impairment, if any, we have followed FASB Statement No. 144,
Accounting for the Impairment or Disposal of Long Lived Assets. Statement No. 144 did 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 real estate assets for those properties sold during the period within the consolidated statements of income.

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Stock-Based Compensation

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 Accounting Principles
Board 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.

On December 16, 2004, the FASB issued Statement No. 123 (revised 2004), Share-Based Payment (Statement No. 123R), which is a revision of FASB Statement No. 123, Accounting for Stock-Based
Compensation (Statement No. 123). Statement No. 123R supersedes Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash
Flows. Generally, the approach in Statement No. 123R is similar to the approach described in Statement No. 123. However, Statement No. 123R requires all share-based payments to employees, including grants of employee stock options, to be
recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative.

Statement No. 123R must be adopted no later than January 1, 2006. Early adoption will be permitted in periods in which financial statements have not yet been issued. We expect to adopt Statement No. 123R on January 1,
2006.

Effective January 1, 2002, we elected to follow Statement No. 123 and use the Black-Scholes option pricing model to estimate the value of stock options granted to employees and expect to continue to use this acceptable
option valuation model upon the required adoption of Statement No. 123R on January 1, 2006. Because Statement No. 123R must be applied not only to new awards but to previously granted awards that are not fully vested on the effective date, and
because we adopted Statement No. 123 using the prospective transition method (which applied only to awards granted, modified or settled after the adoption date), compensation cost for some previously granted awards that were not recognized under
Statement No. 123 would be recognized under Statement No. 123R. However, on January 1, 2006, the date we expect to adopt Statement No. 123R, all of the unexercised options outstanding at June 30, 2005 under our stock option plans will be fully
vested. As a result, no additional expense will be recognized. In addition, had we adopted Statement No. 123R in prior periods, the impact of that standard would have approximated the impact of Statement No. 123 as described in the disclosure of pro
forma net income and earnings per share in Note 1 to our consolidated financial statements.

Variable Interest Entities

In
    January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46), which explains how to identify variable interest entities (VIEs)
    and how to assess whether to consolidate such entities. VIEs are primarily
    entities that lack sufficient equity to finance their activities without additional
    financial
    support from other parties or whose equity holders lack adequate decision making
    ability. All VIEs which we are involved with must be evaluated to determine
    the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary
    is required to consolidate the VIE for financial reporting purposes. 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 VIEs formed after January 31,
    2003.
    In December 2003 the FASB issued FIN 46R, deferring the effective date until
    the period ended March 31, 2004 for interests held by public companies in VIEs
    created before February 1, 2003, which were non-special purpose entities. We
    adopted FIN 46R during the period ended March 31, 2004 and have determined
    that our consolidated subsidiaries do not represent VIEs pursuant to such interpretation.
    We will
    continue to monitor any changes in circumstances relating to certain of our
    consolidated
    and unconsolidated joint ventures which could result in a change in our consolidation
    policy.

Current pronouncements

In June 2005, the FASB
    ratified the consensus in EITF Issue No. 04-5, Determining Whether a
    General Partner, or the General Partners as a Group, Controls a Limited Partnership
    or Similar Entity When the Limited Partners Have Certain Rights (Issue
    04-5), which provides guidance in determining whether a general partner
    controls a limited partnership. Issue 04-5 states that the general
    partner in a limited partnership is presumed to control that limited partnership. The
    presumption may be overcome if the limited partners have either (1) the
    substantive ability to dissolve the limited partnership or otherwise remove
    the general partner without cause or (2) substantive participating rights,
    which provide the limited partners with the ability to effectively participate
    in significant decisions that would be expected to be made in the ordinary
    course of the limited partnerships business and thereby preclude the
    general partner from exercising unilateral control over the partnership.
    The adoption of Issue 04-5 by the Company for new or modified limited partnership
    arrangements is effective June 30, 2005 and for existing limited partnership
    arrangements effective January 1, 2006. We do not expect that we will
    be required to consolidate our current unconsolidated joint venture investment
    nor will Issue 04-05 have a material effect on our consolidated financial
    statements.

Overview and Background

The
      Reckson Group, the predecessor to the Company, was engaged in the ownership,
      management, operation, leasing and development of commercial real estate
      properties, principally office and industrial / R&D
  buildings, and also owned undeveloped land located primarily on Long Island,
      NY. In June 1995, the Company completed an initial public offering (the
      IPO), succeeded to the Reckson Groups
  real estate business and commenced operations.

The Company is a self-administered and self managed real estate investment trust (REIT) engaged in the ownership, operation, acquisition, leasing, financing, management and development of commercial real
estate properties, principally office and to a lesser extent industrial / R&D properties and also owns land for future development. The Companys growth strategy is focused on the commercial real estate markets in and around the New York
City tri-state area (the Tri-State Area). All of the Companys interests in its real properties, land held for development and investments in notes receivable are held directly or indirectly by, and all of its operations are
conducted through, Reckson Operating Partnership, L.P. (the Operating Partnership).

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In connection with our IPO, we were 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 prices 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 us for an aggregate purchase price of approximately $35.0 million, which included the issuance of approximately 475,000 common units of limited partnership interest in the Operating Partnership (OP
Units) valued at approximately $8.8 million. During November, 2003, in connection with the sale of our Long Island industrial building portfolio to members of the Rechler family, four of the five remaining options (the Remaining
Option Properties) were terminated, along with management contracts relating to three of the properties.

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 Internal Revenue Code of 1986, as amended
(the
Code). These services are currently provided by Reckson Management
Group, Inc. (RMG), RANY Management Group, Inc., Reckson Construction
and Development LLC (RCD) and Reckson Construction Group New York,
Inc.
(collectively, the Service Companies). During the three and six months
ended June 30, 2005 and 2004, RCD billed approximately $17,000 and $26,000
and $217,000 and $678,000 of market rate services and RMG billed
approximately $71,000 and $142,000 and $72,000 and $138,000 of
market rate management fees to the Remaining Option Properties.

RMG leases approximately
  26,000 square feet of office space at a Remaining Option Property located at
  225  Broadhollow Road, Melville, NY for its corporate offices at an annual
    base rent of approximately $780,000. RMG 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 $79,000.
  In addition, commencing April 1, 2004, RCD has been leasing approximately 17,000
  square feet of space at a Remaining Option Property, located at 225 Broadhollow
  Road,  Melville, NY, which is scheduled to terminate on September 30, 2006. Base
  rent of approximately $122,000 and $244,000 was paid by RCD during the
  three and six months ended June 30, 2005, respectively, and $121,000 was
  paid for the three  months ended June 30, 2004. Commencing in April 2005, RCD
  sub-let the entire 17,000 square feet to a third party for approximately $35,000
  per month through RCDs September 2006 lease termination date.

On March 28, 2005, an entity (REP) owned by members of the Rechler family (excluding Scott Rechler, but including his father, Roger, and brother, Gregg) exercised a Right of First Refusal (which was granted
in connection with the 2003 sale of the industrial portfolio by us) to acquire a vacant parcel of land for a purchase price of $2.0 million. We have agreed to provide REP with the option to defer the closing on the purchase until September 2006,
for a non-refundable deposit of $400,000 and a fee of $10,666 per month for each month that the closing is deferred. In connection therewith, REP agreed to settle a dispute concerning an easement on a separate parcel of land owned by us
adjacent to one of the properties transferred to REP in the 2003 industrial transaction.

A company affiliated with an independent director of the Company leases 15,566 square feet in a property owned by us at an annual base rent of approximately $430,000.

As of June 30, 2005 we owned and operated 82 office properties (inclusive of eight office properties owned through joint ventures), encompassing approximately 16.8 million rentable square feet and eight industrial /
R&D properties encompassing approximately 863,000 rentable square feet located in the Tri-State Area.

At June 30, 2005, we owned approximately
    341 acres of land in 12 separate parcels of which we can, based on current
    estimates, develop approximately 3.1 million square feet of office space
    (the “Development Parcels”).  During July 2004, we commenced
    the ground-up development on one of the Development Parcels of a 305,000
    square foot Class A office building with a total anticipated investment of
    approximately $61.3 million. This development is located within our existing
    three building executive office park in Melville, NY. In addition, during
    July 2005, we commenced the ground-up development on one of the Development
    Parcels of a 37,000 square foot Class A retail property with a total anticipated
    investment of approximately $10.1 million. This development is located within
    our existing six building office park in Stamford, Connecticut. There can
    be no assurances that the actual cost of these ground-up development projects
    will not exceed their anticipated amounts. Further, one of the Development
    Parcels, aggregating approximately 4.1 acres is classified as held for sale
    on our balance sheets and is expected to close during 2006 for aggregate
    consideration of $2.0 million. In addition, as previously discussed, in May
    2005, we entered into a contract to sell approximately 60 acres of vacant
    land in Chatham Township, NJ. As of June 30, 2005, we had invested approximately
    $175.3 million in the Development Parcels. One of the Development Parcels,
    comprising 39.5 acres located in Valhalla, NY, was previously under
contract for sale and was contingent upon obtaining zoning for residential use
    of the land and other customary due diligence and approvals. In May 2005,
    the purchaser terminated the contract.

Management has made subjective assessments
    as to the value and recoverability of our investments in the Development
    Parcels based on current and proposed development plans, market comparable
    land values and alternative use values. We are currently evaluating alternative
    land uses for certain of the remaining Development Parcels to realize their
    highest economic value. These alternatives may include rezoning certain Development
    Parcels from commercial to residential for potential disposition.

We also own a 354,000 square foot office building located in Orlando, Florida. This non-core real estate holding was acquired in May 1999 in connection with our initial New York City portfolio acquisition.

During January 2005, we acquired, in two separate transactions, two Class A office properties located at One and Seven Giralda Farms in Madison, New Jersey for total consideration of approximately $78.0 million.
One Giralda Farms encompasses approximately 150,000 rentable square feet and Seven Giralda Farms encompasses approximately 203,000 rentable square feet. We made these acquisitions through borrowings under our Credit Facility.

In May 2005, we acquired a 1.4 million square
    foot, 50-story, Class A office tower located at One Court Square, Long Island
    City, a sub-market of New York City, for approximately $471.0 million,
    inclusive of transfer taxes and transactional costs. One Court Square is
    100% leased to the seller, Citibank N.A., under a 15-year net lease. The
    lease contains partial cancellation options effective during 2011 and 2012
    for up to 20% of the leased space and in 2014 and 2015 for up to an additional
    20% of the leased space, subject to notice and the payment of early termination
penalties. We are currently negotiating with an institutional joint venture partner
    to sell between a 60% and 70% interest in this property.

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In May 2005, we completed mandatory arbitration
    proceedings relating to the re-setting of the rent under the ground lease
    pursuant to which we own an approximately 1.1 million square foot Class A
    office tower located at 1185 Avenue of the Americas, New York, NY. The rent
    was re-set, and is not subject to further increase, for the remaining 37
    years of the ground lease (inclusive of a 20-year extension at our option)
    to approximately $6.9 million per annum.
Such re-set is retroactive to June 2004.

On May 26, 2005, we entered into a contract to sell approximately 60 acres of vacant land located in Chatham Township, NJ for up to approximately $30.0 million which is based upon a final approved site plan. The
closing is anticipated to occur upon receiving final zoning approvals and other customary due diligence and approvals. The sale is contingent upon due diligence, environmental assessment, zoning and other customary approvals. There can be no
assurances that any of the aforementioned contingences will be achieved and the sale ultimately completed.

On June 8, 2005, we sold a three-acre vacant land parcel located on Long Island for approximately $1.4 million which resulted in a net gain of approximately $175,000, net of limited partners minority
interest. Such gain is reflected as a component of discontinued operations on our consolidated statements of income.

On June 20, 2005, we acquired our joint venture partners 40% interest in a 172,000 square foot office property located at 520 White Plains Road, Tarrytown, NY for approximately $8.1 million which consisted of
the issuance of 127,510 OP Units valued at $31.37 per OP Unit and the assumption of approximately $4.1 million of secured mortgage indebtedness of the joint venture. Prior to us acquiring this interest, we accounted for the joint venture
under the equity method of accounting. In accordance with the equity method of accounting our proportionate share of the joint ventures income was approximately $25,000 and $176,000 and $294,000 and $408,000 for the three and
six month periods ended June 30, 2005 and 2004, respectively.

On June 21, 2005, we entered into a contract to sell two suburban office properties, aggregating approximately 69,000 square feet, located at 310 and 333 East Shore Road in Great Neck, Long Island for aggregate
consideration of approximately $17.3 million. The sale is scheduled to close within 3 months. There can be no assurances that such sale will occur under the terms anticipated or at all.

On July 8, 2005, we entered into a contract to
purchase a 1.1 million square foot Class A office complex located at 204 EAB
Plaza in Uniondale, NY, commonly referred to as EAB Plaza, for approximately
$240 million. The property is encumbered by a long-term ground lease which
has a remaining term in excess of 75 years, including renewal options. Pursuant
to the terms of the contract, we provided the seller with a down payment in the
form of
a $24.0 million standby letter of credit. Such letter of credit was issued
under our unsecured credit facility. We currently hold a $27.6 million junior
mezzanine loan which is secured by a pledge of an indirect ownership interest
of an  entity which currently owns the ground leasehold estate. Prior to closing
on the acquisition of EAB Plaza, we have the option to purchase an adjoining
8.2-acre development site. If we do not exercise this option, we will provide
a two-year $10
million loan to the seller, secured by the development site and will be retained
to provide development related consulting services for the site. We anticipate
closing on this complex in October 2005 through the satisfaction of our junior
mezzanine  loan and a borrowing under our unsecured credit facility. There can
be no assurances that we will acquire this property or that we will fund the
purchase price as described.

On July 14, 2005, we acquired two adjacent Class A suburban office properties aggregating 228,000 square feet located at 225 High Ridge Road in Stamford, CT for approximately $76.3 million. This acquisition was
made through a borrowing under our unsecured credit facility. The buildings are currently 100% leased and we anticipate contributing the property to a to-be-formed joint venture. There can be no assurances that this property will be contributed to
the aforementioned joint venture or that such joint venture will be formed.

On July 26, 2005, we announced the commencement of marketing of an offering in Australia of A$271 million (approximately US$203 million) of units in Reckson New York Property Trust (Reckson LPT), a
newly-formed listed property trust to be traded on the Australia Securities Exchange (ASX). It is contemplated that Reckson LPT will contribute the net proceeds of the offering in exchange for a 75% indirect interest in a newly-formed joint venture
in the United States. We will transfer 25 of our properties with a value of approximately $563 million and containing an aggregate of 3.4 million square feet to the joint venture in exchange for a 25% interest and approximately $502 million
in cash (inclusive of proceeds from mortgage debt). We will arrange for approximately $319 million of debt, including approximately $247 million of fixed rate debt and approximately $72 million of floating rate debt, that will encumber
the properties transferred to the joint venture. We will also grant the joint venture options to acquire 10 additional properties containing an aggregate of approximately 1.2 million square feet over a two year period at a price based upon the fair
market value at the time of transfer to the joint venture.

In accordance with FASB Statement No. 144, it is anticipated that the assets and liabilities of the properties to be contributed to the joint venture will be classified as held for sale on our consolidated balance
sheets, for all periods presented, commencing with the quarterly period ended September 30, 2005.

Pursuant to the terms of the offering of the units
of Reckson LPT, investors will pay 65% of the price of the units in a closing
scheduled to occur in late September 2005 and the remaining 35% in October 2006.
We will
transfer the 25 properties to the joint venture in three tranches, with properties
having a value of approximately $367 million being transferred in late September
2005, approximately $72 million being transferred in January 2006 (such transfer
to be funded entirely
from the proceeds of mortgage debt) and approximately $124 million being
transferred in October 2006.

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We also announced the formation of Reckson
    Australia Management Limited (RAML), a wholly-owned subsidiary, that will manage Reckson LPT and serve as its Responsible Entity. The
    Responsible Entity will be managed by a six member board that will include
    three independent directors from Australia. Our affiliates will provide asset
    management, property management, leasing, construction and other services
to the joint venture.

It is anticipated that a portion of the gain relating to the properties transferred to the joint venture will be deferred through an exchange qualifying under Section 1031 of the Internal Revenue Code in connection
with our acquisition of EAB Plaza in Uniondale, New York. We do not currently anticipate that we will make any special distribution to our stockholders with regard to the gain.

Under the terms of the offering we will be entitled to receive certain transaction fees. In addition, it is contemplated that RAML and Reckson Management Group, Inc. will share in certain other ongoing fees related to
property management, leasing, construction, acquisition and disposition services.

Although the marketing of the units of Reckson LPT has commenced, the underwriting agreement relating to the offering, contribution agreement relating to the contribution of the properties to the joint venture and
other documents have not been executed. There can be no assurance that the offering will be completed and that the joint venture will be formed on the terms described above or at all.

On March 16, 2005, a wholly owned subsidiary of the Operating Partnership advanced under separate mezzanine loan agreements, each of which bears interest at 9% per annum, (i) approximately $8.0 million which
matures in April 2010 and is secured, in part, by indirect ownership interests in ten suburban office properties located in adjacent office parks in Long Island, NY and (ii) approximately $20.4 million which matures in April 2012 and is secured,
in part, by indirect ownership interests in twenty-two suburban office properties located in adjacent office parks in Long Island, NY. Each mezzanine loan is additionally secured by other guaranties, pledges and assurances and are pre-payable
without penalty after 18 months from the initial funding. We made these investments through a borrowing under our unsecured credit facility.

In May 2005, we acquired a 65% interest in an
$85 million,
15-year loan secured by an indirect interest in a 550,000 square foot condominium
in
a Class A office tower located at 1166 Avenue of the Americas, New York, NY for

approximately $55.3 million. The loan accrues compounded interest at 9.0%
and pays interest at an annual rate of 6.0% through March 2010, 8.5% thereafter
through March 2015 and 11.0% thereafter through maturity in 2020. The loan is
pre-payable  only under certain circumstances and, in any case, not before 2009.
Upon a capital event related to the indirect interest in the property which secures
the loan, we are entitled to participate in 30% of net proceeds derived from
such capital event.
This investment replaced our $34.0 million mezzanine loan, including accrued
and unpaid interest, to one of the partners owning such condominium interest.
We also acquired an approximately 5% indirect ownership interest in the property
for a
purchase price of approximately $6.2 million. The property is currently 100%
leased. The balance of these investments was funded through a borrowing under
our unsecured credit facility and cash on hand.

We hold a $17.0 million 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). We currently own a 60% majority partnership interest in Omni Partners, 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.

At June 30, 2005, we had invested approximately $111.2 million in mezzanine loans and participating loan investments. In general these investments are secured by a pledge of either a direct or indirect ownership
interest in the underlying real estate or leasehold, other guaranties, pledges and assurances.

The following table sets forth the terms of
these investments at June 30, 2005 (in thousands):

|Description                |  | Property                             |  |   | Amount  |  | Interest
          Rate |     | Funding   |  | Maturity  |    
|-------------------------- |  | ------------------------------------ |  | - | ------- |  | ----------------------- | --- | --------- |  | --------- | ---
|                           |  |                                      |  |   |         |  |                         |     |           |  |           |    
|Mezzanine
        loan     |  | EAB Plaza                            |  | $ | 27,592  |  | 14.19%                  | (a) | Sep, 2003 |  | Sep, 2005 | (b)
|Participating
        loan |  | 1166 Avenue
        of the Americas  |  |   | 55,250  |  | 9.00%                   | (c) | May, 2005 |  | Dec, 2020 |    
|Mezzanine
        loan     |  | Long Island
        office portfolio |  |   | 8,031   |  | 9.00%                   |     | Mar, 2005 |  | Apr, 2010 | (d)
|Mezzanine
        loan     |  | Long Island
        office portfolio |  |   | 20,356  |  | 9.00%                   |     | Mar, 2005 |  | Apr, 2012 | (d)
|                           |  |                                      |  |   |         |  |                         |     |           |  |           |    
|                           |  |                                      |  | $ | 111,229 |  |                         |     |           |  |           |    
|                           |  |                                      |  |   |         |  |                         |     |           |  |           |    

|    |                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------
|(a) | Weighted average interest
        rate which is based on a spread over LIBOR, with a LIBOR floor of 1.63%
        per annum.

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| | (b) | The borrower has rights to extend the
        term for three additional one-year periods and, under certain circumstances,
    prepay amounts outstanding.                                                       
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                  
| | (c) | Average interest rate of 9.0%. Interest
        pay rate is currently at an annual rate of 6.0% through March 2010, 8.5%
        thereafter through March 2015 and 11.0% thereafter through maturity in
    2020.
| |     |                                                                                                                                                                                                                  
| | (d) | Prepayable without penalty after 18 months
    from initial funding.                                                                                                                                             

As of June 30, 2005, we held two other notes receivable, which aggregated approximately $1.9 million and carried a weighted average interest rate of 11.21% per annum (the Other Notes) and collectively
with the Omni Note, our mezzanine loans and preferred loan investments (the Note Receivable Investments). The Other Notes are secured in part by a minority partners preferred unit interest in the Operating Partnership, an interest
in real property and a personal guarantee. $900,000 of the Other Notes matures on December 1, 2005 and the remaining $1.0 million matures on January 31, 2010.

As of June 30, 2005, management has made subjective assessments as to the underlying security value on the Note Receivable Investments. These assessments indicate an excess of market value over the carrying value and,
based on these assessments, we believe there is no impairment to their carrying value.

Our market capitalization at June 30, 2005 was approximately $4.9 billion. Our market capitalization is based on the sum of (i) the market value of the Companys common stock and OP Units (assuming conversion)
of $33.55 per share / unit (based on the closing price of the Companys common stock on June 30, 2005), (ii) the liquidation preference value of the Operating Partnerships preferred units of $1,000 per unit and (iii) approximately
$2.1 billion (net of minority partners interests share of consolidated joint venture debt) of debt outstanding at June 30, 2005. As a result, our total debt to total market capitalization ratio at June 30, 2005 equaled approximately
42.0% .

During 1997, the Company formed FrontLine Capital
    Group, formerly Reckson Service Industries, Inc. (FrontLine), and Reckson Strategic Venture Partners, LLC (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 advanced approximately $93.4 million under the FrontLine Facility. The Operating Partnership also approved the funding of investments of up to $110 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). At March 31, 2005, 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. Interest accrued (net of reserves) under the FrontLine Facility and the RSVP Facility was approximately $19.6
  million.

A committee of the Board of Directors, comprised solely of independent directors, considers 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.

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.

In September 2003, RSVP completed the restructuring of its capital structure and management arrangements. 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 (the RSVP
    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 RSVP Secured Loan is scheduled
    to mature in 2006 and is expected to be repaid from proceeds of assets sales
    by RSVP and/or a joint venture between RSVP and a subsidiary of the Operating
Partnership.

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As a result of certain transactions including the successful public offering of American Campus Communities, a joint venture owned by RSVP and Reckson Operating Partnership, 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 $55.2 million which was reassessed with no
change by management as of June 30, 2005. Such amount has been reflected in investments in affiliate loans and joint ventures on the Companys consolidated balance sheet.

Scott H. Rechler, who serves as Chief Executive Officer, President and Chairman of the Board 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 and serves as a member of the Board of Directors of ACC.

In November 2004, Concord Associates LLC and Sullivan Resorts LLC, a joint venture approximately 47% owned by RSVP, executed a binding agreement to contribute its Concord and Grossingers resort properties (excluding
residential land) to Empire Resorts Inc. (NASDAQ: NYNY)(Empire) for consideration of 18 million shares of common stock of Empire and the right to appoint five members of the Board of Directors. It is currently anticipated that Scott H.
Rechler will be appointed to fill one seat on Empires Board. On March 4, 2005, Empire announced that the agreement had been amended, whereby the parties agreed to waive the condition to closing which required final governmental approval of
gaming in the Catskills. The transaction is subject to satisfaction of certain conditions and approvals, including the approval of Empires shareholders. There can be no assurances that gaming will be approved in the Catskills or that the
transaction will be completed on its current terms or at all.

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Results of Operations

The following table is a comparison of the results of operations for the three month period ended June 30, 2005 to the three month period ended June 30, 2004 (dollars in thousands):

|                                         |                                          | Three months ended June 30, |        
|---------------------------------------- | ---------------------------------------- | --------------------------- | -------
|                                         |                                          |                             |        
|                                         |                                          |                             |        
|                                         |                                          |                             |        
|                                         |                                          | 2005                        |        
|                                         |                                          |                             |        
|Property Operating Revenues:             |                                          |                             |        
|                                         | Base rents                               | $                           | 123,804
|                                         | Tenant escalations and reimbursements    |                             | 17,998 
|                                         |                                          |                             |        
|                                         | Total property operating revenues        | $                           | 141,802
|                                         |                                          |                             |        
|Property Operating Expenses:             |                                          |                             |        
|                                         | Operating expenses                       | $                           | 31,430 
|                                         | Real estate taxes                        |                             | 22,565 
|                                         |                                          |                             |        
|                                         | Total property operating expenses        | $                           | 53,995 
|                                         |                                          |                             |        
|Interest and Investment Income and Other | $                                        | 3,819                       |        
|                                         |                                          |                             |        
|Other Expenses:                          |                                          |                             |        
|                                         | Interest expense incurred                | $                           | 27,257 
|                                         | Amortization of deferred financing costs |                             | 1,021  
|                                         | Marketing, general and administrative    |                             | 8,477  
|                                         |                                          |                             |        
|                                         | Total other expenses                     | $                           | 36,755 
|                                         |                                          |                             |        

Our property operating revenues, which include
base rents and tenant escalations and reimbursements (Property Operating
Revenues), increased by $15.1 million for the three months ended June
30, 2005 as  compared to the 2004 period. Property Operating Revenues increased
by $8.6 million attributable to newly acquired properties during 2005 and $6.9
million in built in rent increases and straight line rental revenue increases
in our same store
properties. These increases were offset by $0.5. million decrease in termination
fees.

Our property operating expenses, real estate taxes
and ground rents (Property Expenses) increased by $3.6 million
for the three months ended June 30, 2005 as compared to the 2004 period. The
increase is
due to a $1.1 million increase in real estate taxes and operating expenses
related to our same store properties. Newly acquired properties in 2005 increased
property expenses by $2.5
million. The increase in real estate taxes is attributable to the increases levied
by certain municipalities, particularly in New York City and Westchester County,
New York.

Interest and Investment income and other increased
by $501,000 or 15.1% for the three months ended June 30, 2005 as compared
to the 2004 period. This increase is primarily a result of an increase in interest
income
of approximately $1.5 million due to a weighted average increase in our Note
Receivable Investments of approximately $56.8 million from the 2004 period.
This increase was offset by a decrease of $400,000 in the gain recognized
on a land  sale and build-to-suit transaction earned in 2004 with no such gain
recognized in the 2005 period and a decrease of approximately $550,000 related
to real estate tax and other non-tenant related recoveries.

Interest expense incurred increased by $2.7 million or 10.8 % for the three months ended June 30, 2005 as compared to the 2004 period. Approximately $2.3 million of the increase is attributable to the Operating
Partnerships senior unsecured notes issued in August 2004 which were not outstanding during the 2004 period and the issuance of $287.5 million of senior unsecured debentures in June 2005. Interest expense also increased by $2.7 million
incurred under our unsecured bridge facility, which was funded in May 2005, and $3.3 million incurred under our unsecured revolving credit facility. The increase in interest expense incurred under our unsecured credit facility is a result of an
increase in the weighted average balance outstanding and an increase in the weighted average interest rate from 3.2% to 4.2% . The weighted average balance outstanding under our unsecured credit facility was $381.5 million for the three months
ended June 30, 2005 as compared to $90.0 million for the three months ended June 30, 2004. During the 2005 period we also incurred approximately $200,000 of interest ineffective costs related to our anticipatory interest rate hedge
agreements with no such costs incurred during the 2004 period. These aggregate increases of $8.5 million were off-set by decreases in interest expense of approximately $472,000 incurred under our same store mortgage portfolio and a decrease
in interest expense of approximately $5.1 million incurred during the 2004 period from two mortgage notes which were subsequently satisfied.

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Marketing, general and administrative expenses
increased by $1.1 million for the three months ended June 30, 2005 as compared
to the 2004 period. This overall net increase is attributable to increased costs
of
maintaining offices and infrastructure in each of our five divisional markets,
higher compensation costs including amortization expense related to restricted
stock awards to non-executive
officers and increases in charitable contributions to organizations that operate
within  our market places. Marketing, general and administrative costs represented
5.8% of total revenues from continuing operations (excluding gains on sales of
depreciable real estate assets) in the 2005 period as compared to 5.6% in the
2004 period.

Discontinued operations net of minority interests
    decreased by approximately $3.5
  million for the three months ended June 30, 2005 as compared to the 2004 period.
  This decrease is primarily attributable to a decrease in the gain on sales related
   to those properties sold, including their income from discontinued operations
  in the 2004 period of $3.7 million as compared to $175,000 for the 2005
  period.

The following table is a comparison of the results of operations for the six month period ended June 30, 2005 to the six month period ended June 30, 2004 (dollars in thousands):

|                                         |                                          | Six months ended June 30, |        
|---------------------------------------- | ---------------------------------------- | ------------------------- | -------
|                                         |                                          |                           |        
|                                         |                                          |                           |        
|                                         |                                          |                           |        
|                                         |                                          | 2005                      |        
|                                         |                                          |                           |        
|Property Operating Revenues:             |                                          |                           |        
|                                         | Base rents                               | $                         | 242,095
|                                         | Tenant escalations and reimbursements    |                           | 36,576 
|                                         |                                          |                           |        
|                                         | Total property operating revenues        | $                         | 278,671
|                                         |                                          |                           |        
|Property Operating Expenses:             |                                          |                           |        
|                                         | Operating expenses                       | $                         | 64,522 
|                                         | Real estate taxes                        |                           | 44,958 
|                                         |                                          |                           |        
|                                         | Total property operating expenses        | $                         | 109,480
|                                         |                                          |                           |        
|Interest and Investment Income and Other | $                                        | 6,998                     |        
|                                         |                                          |                           |        
|Other Expenses:                          |                                          |                           |        
|                                         | Interest expense incurred                | $                         | 50,825 
|                                         | Amortization of deferred financing costs |                           | 2,059  
|                                         | Marketing, general and administrative    |                           | 16,692 
|                                         |                                          |                           |        
|                                         | Total other expenses                     | $                         | 69,576 
|                                         |                                          |                           |        

Property Operating Revenues increased by $23.3
million for the six months ended June 30, 2005 as compared to the 2004 period.
Property Operating Revenues increased by $15.6 million attributable to newly
acquired
properties during 2005 and $13.2 million in built in rent increases and straight
line rental revenue increases in our same store properties. These increases were
offset by $5.5 million decrease in termination fees.

Property Expenses increased by $7.9 million for the six months ended June 30, 2005 as compared to the 2004 period. The increase is due to a $3.3 million increase in real estate taxes and operating expenses
related to our same store properties. Newly acquired properties in 2005 increased property expenses by $4.6
million. The increase in real estate taxes is attributable to the increases levied
by certain municipalities, particularly in New York City and Westchester County,
New York.

Interest and Investment income and other decreased by $2.0 million or 22.1% for the six months ended June 30, 2005 as compared to the 2004 period. This decrease is primarily attributable to a decrease of $3.1
million in the gain recognized and related tenant work on a land sale and build-to-suit transaction earned in 2004 with no such gain recognized in the 2005 period, a decrease of approximately $1.3 million related to real estate tax and other
non-tenant related recoveries. These aggregate decreases of $4.4 million were mitigated by an increase of $2.3 million in interest income due to a weighted average increase in our Note Receivable Investments of approximately $57.9
million from the 2004 period.

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Interest expense incurred increased by $557,000
for the six months ended June 30, 2005 as compared to the 2004 period. This increase
is attributable to a net increase in interest expense of $3.4 million
attributable a net increase of $50.0 million in the Operating Partnerships
senior unsecured notes and its issuance of $287.5 million of senior unsecured
debentures in June 2005. Interest expense also increased by $2.7 million
 incurred under our unsecured bridge facility, which was funded in May 2005,
and $5.4 million incurred under our unsecured revolving credit facility.
The increase in interest expense incurred under our unsecured credit facility
is a result of an  increase in the weighted average balance outstanding and an
increase in the weighted average interest rate from 3.3% to 4.1% . The weighted
average balance outstanding under our unsecured credit facility was $351.0
million for the six months
ended June 30, 2005 as compared to $104.9 million for the six months ended
June 30, 2004. During the 2005 period we also incurred approximately $200,000
of interest ineffective costs related to our anticipatory interest rate hedge
agreements  with no such costs incurred during the 2004 period. These aggregate
increases of $11.7 million were off-set by decreases in interest expense
of approximately $1.0 million incurred under our same store mortgage portfolio
and a decrease in
interest expense of approximately $9.9 million incurred during the 2004 period
from two mortgage notes which were subsequently satisfied.

Marketing, general and administrative expenses
increased by $2.3 million for the six months ended June 30, 2005 as compared
to the 2004 period. This overall net increase is attributable to increased costs
of  maintaining offices and infrastructure in each of our five divisional markets,
higher compensation costs including amortization expense related to restricted
stock awards to non-executive officers, increases in charitable contributions
to
organizations that operate within our market places and higher accounting fees
related to maintaining compliance with the requirements of the Sarbanes-Oxley
Act of 2002. Marketing, general and administrative costs represented 5.8% of
total revenues  from continuing operations (excluding gains on sales of depreciable
real estate assets) in the 2005 period as compared to 5.4% in the 2004 period.

Discontinued operations net of minority interests decreased by approximately $9.2 million for the six months ended June 30, 2005 as compared to the 2004 period. This decrease is primarily attributable to a decrease
in the gain on sales related to those properties sold, including their income from discontinued operations in the 2004 period of $9.4 million as compared to $175,000 for the 2005 period.

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. We expect to meet our
 short-term liquidity requirements generally through our net cash provided by
operating activities along with our Credit Facility described below. The Credit
Facility contains several financial covenants with which we must be in compliance
in order
to borrow funds thereunder. During recent quarterly periods, we have incurred
significant leasing costs as a result of market demands from tenants and high
levels of leasing transactions that result from the re-tenanting of scheduled
expirations or  space vacated as a result of early terminations of leases. We
are also expending costs on tenants that are renewing or extending their leases
earlier than scheduled. We have recently experienced high tenanting costs including
tenant improvement
costs, leasing commissions and free rent in all of our markets. For the three
month period ended June 30, 2005, we paid or accrued approximately $13.5
million
for tenanting costs including tenant improvement costs and leasing commissions.
As a  result of these and / or other operating factors, our cash available for
distribution from operating activities was not sufficient to pay 100% of the
dividends paid on our common equity. However, we are beginning to see a moderation
in the cost of
retenanting our properties, particularly in terms of free rent concessions and
costs to renew existing tenants. To meet the short-term funding requirements
relating to the higher leasing costs, we have used proceeds of property sales
or borrowings  under our Credit Facility. Based on our forecasted leasing, we
anticipate that we will continue to incur shortfalls during 2005. We currently
intend to fund any shortfalls with proceeds from non-income producing asset sales
or borrowings under our
Credit Facility. We periodically review our dividend policy to determine the
appropriateness of our dividend rate relative to our cash flows. We adjust our
distribution rate based on such factors as leasing activity, market conditions
and forecasted  increases and decreases in our cash flow as well as required
distributions of taxable income to maintain REIT status. There can be no assurance
that we will maintain the current quarterly distribution level on our common
equity.

We expect to meet most of our financing requirements through long-term unsecured borrowings and the issuance of debt and equity securities of the Company. In certain situations, primarily in joint venture transactions,
we use secured debt in connection with the acquisition of properties. During the year ended December 31, 2004, the Company issued approximately $436.2 million of common stock and the Operating Partnership issued $300 million of senior
unsecured debt securities. In addition, during June 2005, the Operating Partnership issued $287.5 million of exchangeable senior debentures. 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. Similarly, there can be no assurance that the Operating Partnership will be able to access the unsecured debt markets at the time when the Operating
Partnership desires to sell its unsecured notes. In addition, when valuations for commercial real estate properties are high, we will seek to sell certain land inventory to realize value and profit created. We will then seek opportunities to
reinvest the capital realized from these dispositions back into value-added assets in our core Tri-State Area markets. However, there can be no assurances that we will be able to identify such opportunities that meet our underwriting criteria.
Additionally, we are actively seeking joint venture relationships to access new sources of equity capital. We anticipate that we may sell assets or interests in assets to establish such joint ventures. We may realize cash proceeds from these sales.
We would also seek to utilize these joint ventures to acquire assets where we would own a joint venture interest. There can be no assurances that we will be able to successfully execute this strategy. We will refinance existing mortgage
indebtedness, senior unsecured notes or indebtedness under our Credit Facility at maturity or retire such debt through the issuance of additional unsecured debt securities or additional equity securities. We anticipate 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 and non-income producing assets, will be adequate to meet our capital and liquidity
requirements in both the short and long-term. Our senior unsecured debt is currently investment grade rated BBB- by Fitch Ratings, BBB- by Standard & Poors and Baa3 by Moodys Investors Service. The
rating agencies review the ratings assigned to an issuer such as us on an ongoing basis. Negative changes in our ratings may result in increases in our borrowing costs, including borrowings under our Credit Facility.

Our markets are currently experiencing a recovery
in the economic cycle. As a result of current economic conditions, we have experienced
higher renewal rates and a lower number of lease terminations. Our results  reflect
decreased vacancy rates in our markets and our asking rents in our markets have
stabilized and in some instances have begun to trend higher. Landlords are still
required to grant concessions such as free rent and tenant improvements but at
a lower rate than had been experienced in the prior year. Our markets continue
to experience higher real estate taxes and utility rates. We believe that trends
are moving positively from a landlords perspective and that the above average
tenant costs relating to leasing are decreasing. This trend is supported by increased
occupancy and reduced vacancy rates in all of our markets, by the general economic
recovery in the market resulting in job growth and the limited new supply of
office space.

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We carry comprehensive liability, fire, extended
    coverage and rental loss insurance on all of our properties. Six of our properties
    are located in New York City. As a result of the events of September 11,
    2001,
insurance companies were 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 2005. Our current property insurance coverage, which expires on June 2, 2006, provides for full replacement cost of our properties, including for acts of terrorism up
to $540 million on a per occurrence basis.

The potential impact of terrorist attacks in the New York City and Tri-State Area may adversely affect the value of our properties and our ability to generate cash flow. As a result, there may be a decrease in demand
for office space in metropolitan areas that are considered at risk for future terrorist attacks, and this decrease may reduce our revenues from property rentals.

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

On May 13, 2005, we obtained a $470.0 million unsecured bridge facility (the Bridge Facility) from Citibank, N.A. The Bridge Facility is for an initial term of six months and we have the option for a
six-month extension upon paying a one-time fee of 7.5 basis points on the amount then outstanding. The Bridge Facility has terms, including interest rates and financial covenants, substantially similar to our unsecured $500 million revolving
credit facility (the Credit Facility), and was amended in June 2005 in the same manner as our Credit Facility as described below. As of June 30, 2005, there was $470.0 million outstanding under the Bridge Facility at an interest rate
of 4.04% . On August 3, 2005, net proceeds received from the secured financing of the property located at One Court Square in Queens, NY of approximately $303.5 million were used to repay amounts outstanding under the Bridge Facility.

During the three months ended June 30, 2005, we amended our Credit Facility to, among other things, extend the maturity for one year, modify a financial covenant to increase the percentage that our total indebtedness
can represent when compared to the total value of our assets from 55% to 60% and on a temporary basis to 65% upon an acquisition of a material property, reduce the rate of interest on borrowings by 0.10%, modify the capitalization rates used to
value our properties for purposes of the financial covenants contained in the Credit Facility, increase the portion of assets and net operating income that may come from minority joint ventures from 5% to 10% and certain other matters.

We currently maintain our $500 million 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 August 2008, contains options for a one-year extension subject to a fee of 25 basis points and, upon receiving additional lender commitments, increasing the
maximum revolving credit amount to $750 million. In addition, borrowings under the Credit Facility are currently priced off LIBOR plus 80 basis points and the Credit Facility carries a facility fee of 20 basis points per annum. In the event of a
change in the Operating Partnerships senior unsecured credit ratings, the interest rates and facility fee are subject to change. At June 30, 2005, the outstanding borrowings under the Credit Facility aggregated $128.0 million and carried a
weighted average interest rate of 4.04% per annum.

We utilize the Credit Facility primarily to finance real estate investments, fund our real estate development activities and for working capital purposes. At June 30, 2005, we had availability under the Credit Facility
to borrow approximately an additional $370.8 million, subject to compliance with certain financial covenants. Such amount is net of approximately $1.2 million in outstanding undrawn standby letters of credit, which are issued under the
Credit Facility.

In connection with the acquisition of certain properties, contributing partners of such properties have provided guarantees on certain of our indebtedness. As a result, we maintain certain outstanding balances on our
Credit Facility.

We continue to seek opportunities to acquire real
estate assets in our markets. We have historically sought to acquire properties
where we could use our real estate expertise to create additional value subsequent
to  acquisition. As a result of increased market values for our commercial real
estate assets, we have sold certain non-core assets or interests in assets where
significant value has been created. During 2003, we sold assets or interests
in assets with
aggregate sales prices of approximately $350.6 million. In addition, during
2004, we sold assets or interests in assets with aggregate sales prices of approximately $51.4
million, net of minority partners
joint venture interest. We used the proceeds from these sales primarily to pay
down borrowings under the Credit Facility, for general corporate purposes and
to invest in short-term liquid investments until such time as alternative real
estate investments could be made. During 2005 we sold, have under contract or
are negotiating to sell
approximately $771 million of our real estate properties.

A Class A OP Unit and a share of common stock
have similar economic characteristics as they effectively share equally in the
net income or loss and distributions of the Operating Partnership. As of June
30, 2005, the  Operating Partnership had issued and outstanding 1,617,675 Class
A OP Units and 465,845 Class C OP Units. The Class A OP Units and the Companys
common stock currently receive a quarterly distribution of $.4246 per unit/share.
The Class C  OP Units were issued in August 2003 in connection with the contribution
of real property to the Operating Partnership and currently receive a quarterly
distribution of $.4664 per unit. Subject to certain holding periods, OP Units
may either be redeemed for cash or, at the election of the Company, exchanged
for shares of common stock on a one-for-one basis.

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On June 20, 2005, as part of the consideration
    to acquire our joint venture partners 40% interest in the property located at 520 White Plains Road, Tarrytown, NY, we issued 127,510 OP Units valued at $31.37
per OP Unit.

During June 2005 the Operating Partnership issued $287.5 million aggregate principal amount of 4.00% exchangeable senior debentures due June 15, 2025. The debentures were issued at 98% of par and are exchangeable
for shares of common stock of the Company on or after June 15, 2024, and also under certain circumstances, at an initial exchange rate of 24.6124 common shares per $1,000 of principal amount of debentures. The initial exchange price of
$40.63 represents a premium of approximately 25% to the closing price of the Companys common stock on the issuance date of $32.50 per share. If exchanged in accordance with their terms, the debentures will be settled in cash up to
their principal amount and any remaining exchange value will be settled, at our option, in cash, the Companys common stock or a combination thereof. In accordance with the exchange rate terms of the debentures the Company has reserved
approximately 8.8 million shares of its authorized common stock, $.01 par value, for potential future issuance upon the exchange of the debentures. Such amount is based on an exchange rate of 30.7692 common shares per $1,000 of principal
amount of debentures. Although we have reserved these shares pursuant to the terms of the exchange rate terms, we believe the issuance of our shares, if any, would be significantly less than 8.8 million shares. The debentures are guaranteed by the
Company. We have the option to redeem the debentures beginning June 18, 2010 for the principal amount plus accrued and unpaid interest. Holders of the debentures have the right to require us to repurchase their debentures at 100% of the principal
amount thereof plus accrued and unpaid interest on June 15, 2010, June 15, 2015 and June 15, 2020 or, in the event of certain change in control transactions, prior to June 15, 2010.

During the three month period ended June 30, 2005, 53,410 shares of the Companys common stock were issued in connection with the exercise of outstanding options to purchase stock under its stock option plans
resulting in proceeds to us of approximately $800,000. In addition, a limited partner in the Operating Partnership exchanged 841,992 OP Units for an equal number of shares of the Companys common stock.

The Board of Directors of the Company initially authorized the purchase of up to 5.0 million shares of the Companys common stock. Transactions conducted on the New York Stock Exchange have been, and will continue
to 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. Since the Boards initial authorization, the Company has purchased 3,318,600 shares of its
common stock for an aggregate purchase price of approximately $71.3 million. In June 2004, the Board of Directors re-set the Companys common stock repurchase program back to 5.0 million shares. No purchases have been made since March,
2003.

The Operating Partnership has issued and outstanding 1,200 preferred units of limited partnership interest with a liquidation preference value of $1,000 per unit and a stated distribution rate of 7.0%, which is
subject to reduction based upon terms of their initial issuance (the Preferred Units). The terms of the Preferred Units provide for this reduction in distribution rate in order to address the effect of certain mortgages with above market
interest rates, which were assumed by the Operating Partnership in connection with properties contributed to the Operating Partnership in 1998.

Capitalization

Our indebtedness at June 30, 2005 totaled approximately $2.1 billion (net of minority partners interests share of consolidated joint venture debt) and was comprised of $598.0 million outstanding
  under the Credit Facility and Bridge Facility, approximately $979.9 million of senior unsecured notes and approximately $476.7 million of mortgage indebtedness with a weighted average interest rate of approximately 7.43% and a weighted
  average maturity of approximately 3.4 years. Based on our total market capitalization of approximately $4.9 billion at June 30, 2005 (calculated based on the sum of (i) the market value of the Companys common stock and OP Units, assuming
  conversion, (ii) the liquidation preference value of the Preferred Units and (iii) the $2.1
  billion of debt), our debt represented approximately 42.0% of our total market
  capitalization.

CONTRACTUAL OBLIGATIONS
      AND COMMERCIAL COMMITMENTS

On June 20, 2005, in connection with the
      acquisition of our joint venture partners 40% interest in the property located at 520 White Plains Road, Tarrytown, NY, we assumed approximately $4.1 million of
secured mortgage indebtedness of the joint venture. As a result, our total secured debt related to this property at June 30, 2005 was approximately $11.1 million. This mortgage note bears interest at 8.85% per annum and matures on September 1,
2005 at which time the balance will be approximately $10.9 million. We anticipate
making a borrowing under our Credit Facility to satisfy the mortgage note at
its scheduled maturity date.

During the quarterly period ended June 30, 2005 we entered into anticipatory interest rate hedge instruments totaling $250.0 million to protect ourselves against potentially rising interest rates. These instruments
were settled prior to their maturity in exchange for a mortgage rate lock agreement in connection with a 15 year permanent financing on the property located at One Court Square in Queens, NY which closed on August 3, 2005. Costs related to the
terminated instruments of approximately $1.4 million were incorporated into
the final fixed mortgage rate of 4.905% . At June 30, 2005, the fair value of
the mortgage rate lock approximated its carrying value.

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We also entered into an additional $200.0
million of anticipatory interest rate hedge instruments during the quarterly
period ended June 30, 2005, which are scheduled to coincide with certain secured
debt we anticipate incurring on a group of our office properties.
These properties are anticipated to be included in a joint venture transaction
in the latter part of 2005. As of June 30, 2005, we incurred approximately $207,000
of ineffectiveness related to these hedge instruments,  which has been included
in interest expense on our consolidated statements of income. At June 30, 2005,
the carrying value of these hedge instruments exceeded their fair value by approximately $2.0
million, which has been reflected as  accumulated other comprehensive loss with
a corresponding increase in accrued expenses and other liabilities on our balance
sheet. These instruments were settled on August 1, 2005, at which time their
fair value exceeded their carrying value by
approximately $1.1 million. Such amount will be classified as an offset to
deferred loan costs and amortized against deferred financing costs over the term
of the secured debt.

During June 2005, the Operating Partnership issued $287.5
million aggregate principal amount of 4.00% exchangeable senior debentures due
June 15, 2025. Interest on the debentures will be payable semi-annually on  June
15 and December 15, commencing December 15, 2005. The debentures are callable
after June 17, 2010 at 100% of par. In addition, the debentures can be put to
us, at the option of the holder and at par, on June 15, 2010, 2015 and 2020.
The net
proceeds from the offering, after the underwriters discounts and expenses,
were approximately $281.6 million and were used for repayment of amounts
outstanding
under our Credit Facility. (See
Liquidity and Capital Resources for information regarding the terms
of the debentures exchange into our common stock).

The following table
  sets forth our significant consolidated debt obligations by scheduled principal
  cash flow  payments and maturity date and our commercial commitments by scheduled
  maturity at June 30, 2005 (in thousands):

|                             | MATURITY DATE |        |      |  
|---------------------------- | ------------- | ------ | ---- | -
|                             |               |        |      |  
|                             | 2005          |        | 2006 |  
|                             |               |        |      |  
|Mortgage notes payable(1)    | $             | 6,449  |      | $
|Mortgage notes payable (2)   |               | 29,444 |      |  
|Senior unsecured notes       |               | —      |      |  
|Credit Facility              |               | —      |      |  
|Bridge Facility              |               | —      |      |  
|Land lease obligations (3)   |               | 2,516  |      |  
|Air rights lease obligations |               | 181    |      |  
|Operating leases             |               | 742    |      |  
|                             |               |        |      |  
|                             | $             | 39,332 |      | $
|                             |               |        |      |  

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Scheduled principal amortization payments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (2) | Principal payments due at maturity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (3) | We lease, pursuant to noncancellable operating
        leases, the land on which eleven of our buildings were constructed. The
        leases, certain of which contain renewal options at our direction, expire
        between 2043 and 2090. The leases either contain provisions for scheduled
        increases in the minimum rent at specified intervals or for adjustments
        to rent based upon the fair market value of the underlying land or other
        indices at specified intervals. Minimum ground rent is recognized on
        a straight-line basis over the terms of the leases and includes lease
    renewals if reasonably assured that we will exercise that option.

Certain of the mortgage notes payable are guaranteed by the Company and/or certain limited partners in the Operating Partnership. 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.

As indicated above, on June 30, 2005, we had approximately $2.1 billion of debt outstanding (net of minority partners interests share of consolidated joint venture debt). During the three month period
ended June 30, 2005, we incurred interest costs related to our debt, including capitalized interest and amortization of deferred finance costs, of approximately $30.7 million. Our rental revenues are our principal source of funds along with our
net cash provided by operating activities to meet these and future interest obligations.

At June 30, 2005, we had approximately $1.2 million in outstanding undrawn standby letters of credit issued under our Credit Facility. On July 8, 2005, we issued a $24.0 million standby letter of credit to
secure a deposit obligation for the pending acquisition of a 1.1 million Class A office complex located at 204 EAB Plaza in Uniondale, NY. In addition, approximately $42.3 million, or 6.9%, of our mortgage debt is recourse to us.

On August 3, 2005, we placed a first mortgage in the amount of $315.0 million on the property located at One Court Square in Queens, NY. The mortgage note bears interest at a fixed rate of 4.905%, requires monthly
payments of interest only through September 1, 2015, the anticipated repayment date (ARD). After the ARD, all excess cash flow, as defined, shall be applied to amortize the loan and the interest rate shall be reset to 2% plus the greater
of 4.905% and the then-current ten-year U.S. Treasury yield. The final maturity date of the loan is May 1, 2020. The mortgage note is secured by the property and is otherwise non-recourse except in limited circumstances regarding breaches of
material representations. As additional collateral for the loan, we may be required to post letters of credit for the benefit of the lender, in the amount of $10.0 million each, during September 2013, March 2014 and September 2014 if Citibank,
N.A., the propertys current sole tenant, exercises its second cancellation option for up to 20% of its leased space during 2014 and 2015. Net proceeds received of approximately $303.5 million were used to re-pay a portion of our Bridge
Facility.

We have given notice to the mortgagee with respect to the mortgage debt on the property located at 200 Summit Lake Drive in Valhalla, NY to pre-pay the mortgage debt during the third calendar quarter of 2005. Pursuant to the terms of the
mortgage note, the mortgage may be pre-paid without penalty subsequent to September 1, 2005 and upon notice. The balance of the mortgage note will be approximately $18.1 million on September 1, 2005. We anticipate making a borrowing under our
Credit Facility to satisfy this mortgage note on the prepayment date.

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Our mortgage debt on the property located at
    395 North Service Road in Melville, NY matures on October 28, 2005. We have
    given notice to the mortgagee to prepay the mortgage debt on September 30,
    2005, at which time
the balance will be approximately $18.6 million. We anticipate making a borrowing
under our Credit Facility to satisfy the mortgage note at its scheduled maturity.

Corporate Governance

A number of shareholder derivative actions have been commenced purportedly on behalf of the Company against the Board of Directors relating to the disposition of our Long Island industrial portfolio. 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 and damages. On May 25, 2004, the Circuit Court for Baltimore City granted the defendants motions to
dismiss the three consolidated Maryland actions on the ground that the plaintiffs in those actions had failed to make a pre-suit demand on the Board of Directors, or to allege facts showing that such a demand would have been futile. Final judgment
was entered on June 8, 2004, and on June 30, 2004, the plaintiffs in the Maryland actions filed a notice of appeal from that judgment to the Maryland Court of Special Appeals. The Companys management believes that the complaints are without
merit.

On April 4, 2005 the Company and the other parties to the shareholder derivative actions filed against the Company in connection with its disposition of its industrial
  portfolio have agreed to settle such actions pursuant to the Stipulation of Settlement, dated as of March 14, 2005 and executed subsequent thereto. The proposed settlement includes various changes to the Companys corporate governance policies
  to provide for an Affiliate Transaction Committee and to require that the Companys Board of Directors be comprised of at least two-thirds independent directors (as defined in the Companys Corporate Governance Guidelines), as well as
  certain other concessions. The proposed settlement is subject to court approval.

On June 16, 2005, Judge Evelyn Omega Connor of the Circuit Court of Baltimore City signed an order regarding preliminary approval and notice with respect to the shareholder derivative actions. A hearing to consider
approval of the proposed settlement has been scheduled for September 20, 2005, at 9:30 a.m., in the Circuit Court for Baltimore City. There can be no assurance that final court approval will be obtained.

Other Matters

In July 2002, as a result of certain provisions of the Sarbanes-Oxley Act of 2002, we discontinued the use of stock loans in our Long Term Incentive Programs (LTIP). In connection with LTIP grants made
prior to the enactment of the Sarbanes-Oxley Act of 2002, we currently have stock loans outstanding to certain executive officers which were used to purchase 385,000 shares of our common stock. The stock loans were priced at the market prices of our
common stock at the time of issuance, bear interest at the mid-term Applicable Federal Rate and are secured by the shares purchased. Such stock loans (including accrued interest) are scheduled to vest and be ratably forgiven each year on the
anniversary of the grant date based upon initial vesting periods ranging from seven to ten years. Such forgiveness is based on continued service and in part on the Company attaining certain annual performance measures. These stock loans had an
initial aggregate weighted average vesting period of approximately nine years. As of June 30, 2005, there remains 180,714 shares of common stock subject to the original stock loans which are anticipated to vest between 2006 and 2011. Approximately
$276,000 and $507,000 and $248,000 and $556,000 of compensation expense was recorded for the three and six month periods ended June 30, 2005 and 2004, respectively, related to these LTIP. Such amounts have been included in marketing,
general and administrative expenses on our consolidated statements of income.

The outstanding stock loan balances due from executive officers aggregated approximately $3.8 million and $4.7 million at June 30, 2005 and December 31, 2004, respectively, and have been included as a reduction
of additional paid in capital on our consolidated balance sheets. Other outstanding loans to executive and senior officers at June 30, 2005 and December 31, 2004 amounted to approximately $1.8 million and $2.7 million, respectively, and are
included in investments in affiliate loans and joint ventures on the accompanying consolidated balance sheets and are primarily related to tax payment advances on stock compensation awards and life insurance contracts made to certain executive and
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 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 vest in four equal annual installments beginning on November 14, 2003 (and shall be fully vested on November 14, 2006). The 2003 Rights were earned on March 13, 2005 and 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 2002 Rights. The 2002 Rights aggregate 62,835 shares of the Companys common stock and the 2003 Rights
aggregate 26,040 shares of common stock. As of June 30, 2005, there remains 31,417 shares of common stock reserved related to the 2002 Rights and 17,360 shares of common stock reserved related to the 2003 Rights. Approximately $120,000 and
$224,000 and $100,000 and $201,000 of compensation expense was recorded for the three and six month periods ended June 30, 2005 and 2004, respectively, related to the Rights. Such amounts have been included in marketing, general and
administrative expenses on our consolidated statements of income.

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In March 2003, the Company established a new LTIP
for its executive and senior officers (the 2003 LTIP). The four-year
plan has a core award, which provides for annual stock based compensation based
upon continued service and in part based on the Company attaining certain annual
performance measures. The plan also has a special outperformance component in
the form of a bonus pool equal to 10% of the total return in excess of a 9% cumulative
and
compounded annual total return on the Companys common equity for the period
through the four-year anniversary after the date of grant (the Special
Outperformance Pool). The aggregate amount payable to such officers from
the Special Outperformance Pool is capped at an amount calculated based upon
a total cumulative and compounded annual return on the common equity of 15%.
An officers special outperformance award represents an allocation of the
Special Outperformance Pool and will become vested on the fourth anniversary
of the date of grant, provided that the officer remains in continuous employment
with the Company or any of its affiliates until such date, and the Company has
achieved on a cumulative and compounded basis, during the four fiscal years completed
on the applicable anniversary date, a total return to holders of the common equity
that (i) is at or above the 60thpercentile of the total return to stockholders achieved by
members of the peer group during the same period and (ii) equals at least 9%
per annum. Special outperformance awards will be paid in cash; however, the Compensation
Committee, in its sole discretion, may elect topay
such an award in shares of common stock, valued at the date of vesting, if shares
are available at such time under any of the Companys existing stock option
plans. The LTIP provides that no dividends or  dividend equivalent payments will
accrue with respect to the special outperformance awards. On March 13, 2003,
the Company made available 827,776 shares of its common stock under its existing
stock option plans in connection with the core award of
the 2003 LTIP for certain of its executive and senior officers. During May 2003,
the special outperformance awards of the 2003 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.

The Board of Directors approved an amendment to the 2003 LTIP to revise the peer group used to measure relative performance. The amendment eliminated the mixed office and industrial companies and added certain other
pure office companies in order to revise the peer group to office sector companies. The Board has also approved the revision of the performance measurement dates for future vesting under the core component of the 2003 LTIP from the
anniversary of the date of grant to December 31 of each year. This was done in order to have the performance measurement coincide with the performance period that the Company believes many investors use to judge the performance of the Company.

On December 27, 2004, the Operating Partnership entered into definitive agreements with certain executive and senior officers of the Company to revise their incentive awards under the 2003 LTIP. The revised agreements
provide for (i) the rescission of the unvested portion of their core awards and (ii) an award in exchange for the rescinded core awards of an equal number of units of a new class of limited partnership interests (LTIP Units) of the
Operating Partnership.

Each executive and senior officer participating
in the 2003 LTIP was offered the option to retain all or a portion of his core
awards or to rescind them in exchange for new awards of LTIP Units. On December
27, 2004,  certain executive and senior officers accepted such offer and thereby
amended their Amended and Restated Long-Term Incentive Award Agreement to cancel,
in the aggregate, 362,500 shares of restricted stock of the Company representing
all or a portion
of their unvested core award, and received an equal number of LTIP Units.

The
  revised awards under the 2003 LTIP were designed to provide the potential for
  executives to retain a greater equity interest in the Company by eliminating
  the need for  executives to sell a portion of the core awards immediately upon
  vesting in order to satisfy personal income taxes which are due upon vesting
  under the original core awards.

On March 13, 2005 and March 13, 2004, with respect to the 2003 LTIP, the Company met its annual performance measure with respect to the 2004 and 2003 annual measurement periods, respectively. As a result, the Company
has issued to the participants of the 2003 LTIP 102,779 and 206,944 shares of its common stock, respectively, related to the core component of the 2003 LTIP.

The terms of each award of LTIP Units are substantially similar to those of the core awards under the 2003 LTIP. The vesting, performance hurdles and timing for vesting remain unchanged. However, an LTIP Unit
represents an equity interest in the Operating Partnership, rather than the Company. At issuance, the LTIP Unit has no value but may over time accrete to a value equal to (but never greater than) the value of one share of common stock of the Company
(a REIT Share). Initially, LTIP Units will not have full parity with OP Units with respect to liquidating distributions. Upon the occurrence of certain triggering events, the Operating Partnership will revalue its assets for
the purpose of the capital accounts of its partners and any increase in valuation of the Operating Partnerships assets from the date of the issuance of the LTIP Units through the triggering event will be allocated to the capital
accounts of holders of LTIP Units until their capital accounts are equivalent to the capital accounts of holders of OP Units. If such equivalence is reached, LTIP Units would achieve full parity with OP Units for all purposes, and therefore accrete
to an economic value equivalent to REIT Shares on a one-for-one basis. After two years from the date of grant, if such parity is reached, vested LTIP Units may be redeemed for cash in an amount equal to the then fair market value of an equal number
of REIT Shares or converted into an equal number of OP Units, as determined by the Companys Compensation Committee. However, there are circumstances under which such economic equivalence would not be reached. Until and unless such economic
equivalence is reached, the value that the officers will realize for vested LTIP Units will be less than the value of an equal number of REIT Shares. In addition, unlike core awards under the 2003 LTIP (wherein dividends that accumulate are paid
upon vesting), LTIP Units will receive the same quarterly distributions as OP Units on a current basis, thus providing full dividend equivalence with REIT Shares. At the scheduled March 2005 vesting date, the specified performance hurdles were met,
and officers that received LTIP Units received a one-time cash payment that represented payment of the full vested amount of the accrued unpaid dividends under the core award of the 2003 LTIP through December 27, 2004, the issuance date of the LTIP
Units. In addition, the officers, in the aggregate, vested in 104,167 LTIP Units. In order to more closely replicate the terms of the core awards being rescinded, the Company also entered into agreements with three executive officers, which provide
that in the event of a change of control the executive shall receive the equivalent value of one REIT Share for each LTIP Unit.

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In March 2005, following the recommendation of
the Compensation Committee of the Board of Directors, eight senior and executive
officers of the Company were awarded, in the aggregate, 272,100 LTIP Units to
continue to
incentivize them for the long-term (the 2005 LTIP Unit Grants). Each
such LTIP Unit awarded is deemed equivalent to an award of one share of common
stock reserved under one of the Companys stock option plans, reducing availability
for other equity awards on a one-for-one basis. The terms of the 2005 LTIP Unit
Grants are generally consistent with the terms of the 2003 LTIP, including with
respect to the impact upon vesting in the event of a change in control.

As of June 30, 2005, and as a result of the
    foregoing, there remains 155,553 shares of common stock reserved for future
    issuance under the core award of the 2003 LTIP and 530,443 shares of common
    stock reserved for issuance with respect to the issuance of LTIP Units. With
    respect to the core award of the 2003 LTIP, the Company recorded approximately $305,000
    and $610,000 and $699,000 and $1.4 million of compensation expense
    for the three and six month periods ended June 30, 2005 and 2004, respectively.
    In addition, with respect to the LTIP Units and the 2005 LTIP Unit Grants,
    the Company recorded compensation expense of approximately $822,000 and $1.3
    million for the three and six month periods ended June 30, 2005, respectively.
    Such amounts have been included in marketing, general and administrative
    expenses on our consolidated statements of income. No accrual has been made
    with respect to the Special Outperformance Pool of the 2003 LTIP due to the
    uncertainty of the outcome of achieving the requisite performance measures.

Compensation expense with respect to the core component of the 2003 LTIP, which relates to the Company
attaining certain annual performance measures, is recognized in accordance with paragraph 26 of Statement No. 123 as a target stock
price plan. Under this type of plan, compensation expense is recognized for the target stock price awards whether or not the targeted
stock price condition is achieved as long as the underlying service conditions are achieved. Accordingly, we obtained an independent third
party valuation of the 2003 LTIP awards and recognize compensation expense on a straight-line basis through the vesting period
for awards to employees who remain in service over the requisite period regardless of whether the target stock price has been reached.

Compensation expense with respect to the core component of the 2003 LTIP, which relates to the continued service of the grantee, is recognized in accordance with Statement No. 123 in which compensation expense is recognized on a straight-line basis through the vesting period based on the fair market value of the stock on the date of grant.

As a result of the election of certain executive and senior officers to exchange all or a portion of their 2003 LTIP into an equal number of LTIP Units we again obtained an independent third party valuation of the newly granted LTIP Units and determined that the fair value of the LTIP Units was not greater than the exchanged 2003 LTIP awards on the date of the exchange. As such, compensation expense to be recognized, on a straight-lined basis, over the vesting period of the LTIP Units equals the amount of unamortized compensation expense cost for the 2003 LTIP awards as of the exchange date.

We expect to adopt Statement No. 123R on January 1, 2006; however, we have not yet been able to determine the impact of Statement No. 123R on our consolidated financial statements at this time.

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, we 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.

All of our properties have been subjected to a Phase I or similar environmental audit (which involved general inspections without soil sampling, ground water analysis or radon testing) completed by independent
environmental consultant companies. These environmental audits have not revealed any environmental liability that would have a material adverse effect on our business.

Soil, sediment and groundwater contamination, consisting of volatile organic compounds (VOCs) and metals, has been identified at the property at 32 Windsor Place, Central Islip, NY. The contamination is
associated with industrial activities conducted by a tenant at the property over a number of years. The contamination, which was identified through an environmental investigation conducted on behalf of us, has been reported to the New York State
Department of Environmental Conservation. We have notified the tenant of the findings and have demanded that the tenant take appropriate actions to fully investigate and remediate the contamination.  Under applicable environmental laws, both the
tenant and we are liable for the cost of investigation and remediation. We do not believe that the cost of investigation and remediation will be material and we have recourse against the tenant. However, there can be no assurance that we will not
incur liability that would have a material adverse effect on our business.

Eight of our office properties, which were acquired by the issuance of OP Units, are subject to agreements limiting our ability to transfer them prior to agreed upon dates without the consent of the limited partner who
transferred the respective property to us. In the event we transfer any of these properties prior to the expiration of these limitations, we may be required to make a payment relating to taxes incurred by the limited partner. These limitations
expire between 2011 and 2015.

Two of our office properties that are held in joint ventures 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, rights of first offer, and buy / sell provisions.

Off Balance Sheet Arrangements

Our only off-balance sheet arrangements are our approximate 5% indirect ownership interest in a joint venture that owns an investment in a New York City Class A office tower and our joint venture interest in RSVP. (For
a more detailed description of these arrangements see Overview and Background of this Item.)

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Funds from Operations

Funds from Operations (FFO) is defined by the National Association of Real Estate Investment Trusts (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. We present FFO because we consider it an important supplemental measure of our operating performance and believe it is
frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is intended to exclude GAAP historical cost depreciation and amortization of real
estate and related assets, which assumes that the value of real estate diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. As a result, FFO provides a performance measure that, when
compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities, interest costs and other matters without the inclusion of depreciation and amortization, providing
perspective that may not necessarily be apparent from net income.

We compute FFO in accordance with the standards established by NAREIT. 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 our operating performance or as an alternative to cash flow as a measure of liquidity. Since all companies and analysts do not calculate FFO in a similar fashion, our
calculation of FFO presented herein may not be comparable to similarly titled measures as reported by other companies.

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The following table presents our FFO calculations
      (in thousands):


|                                                                 | Three months ended |          | Six months ended, |  
|---------------------------------------------------------------- | ------------------ | -------- | ----------------- | -
|                                                                 | June 30,           |          | June 30,          |  
|                                                                 |                    |          |                   |  
|                                                                 | 2005               |          | 2004              |  
|                                                                 |                    |          |                   |  
|Net income allocable to common shareholders                      | $                  | 17,766   |                   | $
|Adjustments for basic Funds From Operations                      |                    |          |                   |  
|Add:                                                             |                    |          |                   |  
|Limited
partners minority interest in the Operating Partnership |                    | 570      |                   |  
|Real estate depreciation and amortization                        |                    | 30,175   |                   |  
|Minority partners interests in consolidated partnerships        |                    | 6,791    |                   |  
|                                                                
|Deduct:                                                          |                    |          |                   |  
|Gain on sales of depreciable real estate                         |                    | —        |                   |  
|Amounts distributable to minority partners in                   |                    |          |                   |  
|consolidated partnerships                                        |                    | 5,478    |                   |  
|                                                                 |                    |          |                   |  
|Basic Funds From Operations                                      |                    | 49,824   |                   |  
|Add:                                                             |                    |          |                   |  
|Dividends and distributions on dilutive shares and units         |                    | —        |                   |  
|                                                                 |                    |          |                   |  
|                                                                
|Diluted Funds From Operations                                    |                    | $ 49,824 |                   | $
|                                                                 |                    |          |                   |  
|                                                                
|Weighted Average Shares/OP Units outstanding (1)                 |                    | 84,464   |                   |  
|                                                                 |                    |          |                   |  
|                                                                
|Diluted Weighted Average Shares/OP Units outstanding (1)         |                    | 84,913   |                   |  
|                                                                 |                    |          |                   |  

| |     |                                                                              
| | --- | -----------------------------------------------------------------------------
| | (1) | Assumes conversion of limited partnership units of the Operating Partnership.

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. We believe that inflationary increases in expenses
      will be mitigated by contractual rent increases and expense escalations
      described above. As a result of the impact of the events of September 11,
      2001, we have realized increased insurance costs, particularly relating
      to property and terrorism insurance, and security costs. We have included
      these costs as part of our escalatable expenses and have billed them to
      our tenants consistent with the terms of the underlying leases and believes
      they are collectible. To the extent our properties contain vacant space,
      we will bear such inflationary increases in expenses.


The Credit Facility, Bridge Facility and
      one of our Note Receivable Investments bear interest at variable rates,
      which will be influenced by changes in short-term interest rates, and are
      sensitive to inflation.


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Item 3.
        Quantitative and Qualitative Disclosures About Market Risk


The primary market risk facing us is interest
      rate risk on our long-term debt and notes receivable. We do not enter into
      derivative financial instruments for trading or speculative purposes. However,
      in the normal course of our business and to help us manage our debt issuances
      and maturities, we do use derivative financial instruments in the form
      of cash flow hedges to protect ourselves against potentially rising interest
      rates. We are not subject to foreign currency risk.


The accounting for changes in the fair value
      of derivatives depends on the intended use of the derivative and the resulting
      designation. Derivatives used to hedge the exposure to changes in the fair
      value of an asset, liability, or firm commitment attributable to a particular
      risk, such as interest rate risk, are considered fair value hedges. Derivatives
      used to hedge the exposure to variability in expected future cash flows,
      or other types of forecasted transactions, are considered cash flow hedges.


As required by Statement No. 133, we record
      all derivatives on our balance sheet at fair value. For effective hedges,
      depending on the nature of the hedge, changes in the fair value of the
      derivative will be offset against the corresponding change in fair value
      of the hedged asset, liability, or firm commitment through earnings or
      recognized in accumulated other comprehensive income (OCI)
      on our balance sheet until the hedged item is recognized in earnings.


For derivatives designated as cash flow
      hedges, the effective portion of changes in the fair value of the derivative
      is initially reported in OCI and subsequently reclassified to earnings
      when the hedged transaction affects earnings, and the ineffective portion
      of changes in the fair value of the derivative is recognized directly in
      earnings. We assess the effectiveness of each hedging relationship by comparing
      the changes in fair value or cash flows of the derivative hedging instrument
      with the changes in fair value or cash flows of the designated hedged item
      or transaction. For derivatives not designated as hedges, changes in fair
      value are recognized in earnings.


The fair market value (FMV)
      of our long term debt and Note Receivable Investments is estimated based
      on discounting future cash flows at interest rates that we believe reflects
      the risks associated with long term debt and notes receivable of similar
      risk and duration.


The following table sets forth our long-term
      debt obligations by scheduled principal cash flow payments and maturity
      date, weighted average interest rates and estimated FMV at June 30, 2005
      (dollars in thousands):


|                 |  | For the Year Ended December 31 |        |      |   |          |  |      |         |      |  
|---------------- |  | ------------------------------ | ------ | ---- | - | -------- |  | ---- | ------- | ---- | -
|                 |  |                                |        |      |   |          |  |      |         |      |  
|                 |  | 2005                           |        | 2006 |   | 2007     |  | 2008 |         | 2009 |  
|                 |  |                                |        |      |   |          |  |      |         |      |  
|Long term debt:  |  |                                |        |      |   |          |  |      |         |      |  
|                
|Fixed rate       |  | $                              | 35,893 |      | $ | 141,405  |  | $    | 269,370 |      | $
|Weighted average |  |                                |        |      |   |          |  |      |         |      |  
|interest rate    |  |                                | 7.39%  |      |   | 7.38%    |  |      | 7.14%   |      |  
|                
|Variable rate    |  | $                              | —      |      |   | $470,000 |  | $    |         |      | $
|Weighted average |  |                                |        |      |   |          |  |      |         |      |  
|interest rate    |  |                                | —      |      |   | 4.04%    |  |      | %       |      |  

| |     |                                                                                                                                         
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Includes aggregate unamortized issuance discounts of approximately $7.6 million on the senior unsecured notes which are due at maturity.

In addition, we have assessed the market
      risk for our variable rate debt, which is based upon LIBOR, and believe
      that a one percent increase in the LIBOR rate would have an approximate $6.0
      million annual increase in interest expense based on $598.0 million
      of variable rate debt outstanding at June 30, 2005.


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The following table sets forth
      our Note Receivable Investments by scheduled maturity date, weighted average
      interest rates and estimated FMV at June 30, 2005 (dollars in thousands):


|                 |  | For the Year Ended December 31 |        |   |   |      |  |   |       
|---------------- |  | ------------------------------ | ------ | - | - | ---- |  | - | ------
|                 |  |                                |        |   |   |      |  |   |       
|                 |  |                                | 2005   |   |   | 2006 |  |   | 2007  
|                 |  |                                |        |   |   |      |  |   |       
|Note Receivable  |  |                                |        |   |   |      |  |   |       
|Investments:     |  |                                |        |   |   |      |  |   |       
|                
|Fixed rate       |  | $                              | 900    |   | $ | —    |  | $ | 16,990
|Weighted average |  |                                |        |   |   |      |  |   |       
|interest rate    |  |                                | 12.00  | % |   | —    |  |   | 12.00 
|                
|Variable rate    |  | $                              | 27,592 |   | $ | —    |  | $ | —     
|Weighted average |  |                                |        |   |   |      |  |   |       
|interest rate    |  |                                | 14.19  | % |   | —    |  |   | —     

| |     |                                                                                                                                                                                                                                                    
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Excludes interest receivables and unamortized acquisition costs aggregating approximately $4.8 million.                                                                                                                                            
| | (2) | Our investment balance, with respect to a participating loan investment, includes approximately $21.2 million of accretive interest which is due at maturity. The FMV calculation considers only accretive interest
recorded through June 30, 2005.

In addition, we have assessed the market
      risk for our variable rate receivables, which are based upon LIBOR, and
      believe that a one percent increase in the LIBOR rate would have an approximate $2.8
      million annual increase in interest income based on $28.1 million of
      variable rate receivables outstanding at June 30, 2005. 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, we have formed
      a Disclosure Committee currently comprised of all of our executive officers
      as well as certain other members of our senior management 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 us with the SEC and supports our Chief Executive Officer and Chief Financial
      Officer in connection with their certifications contained in our SEC reports.
      The Committee meets regularly and reports to the Audit Committee on a quarterly
      or more frequent basis. Our Chief Executive Officer and Chief Financial
      Officer have evaluated, with the participation of our senior 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 Chief
      Executive Officer and Chief Financial Officer 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.


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SELECTED PORTFOLIO INFORMATION


The following table sets forth our schedule
      of top 25 tenants based on base rental revenue as of June 30, 2005:


|  |                             |  | Wtd. Avg.      |  |             |  | Percent of Pro Rata |  | Percent of Consolidated
|- | --------------------------- |  | -------------- |  | ----------- |  | ------------------- |  | -----------------------
|  |                             |  | Term Remaining |  | Total       |  | Share of Annualized |  | Annualized Base        
|  | Tenant Name (1) (2) (3)     |  | (years)        |  | Square Feet |  | Base Rental Revenue |  | Rental Revenue         
|  |                             |  |                |  |             |  |                     |  |                        
| 
|* | Citigroup / Citibank        |  | 13.4           |  | 1,603,194   |  | 8.5%                |  | 7.9%                   
|* | Debevoise & Plimpton        |  | 16.5           |  | 586,528     |  | 3.7%                |  | 6.4%                   
|  | King & Spalding             |  | 6.6            |  | 180,391     |  | 2.1%                |  | 1.8%                   
|  | Verizon Communications Inc. |  | 2.1            |  | 266,404     |  | 1.8%                |  | 1.6%                   
|* | American Express            |  | 8.2            |  | 129,818     |  | 1.6%                |  | 1.5%                   
|* | Schulte Roth & Zabel        |  | 15.4           |  | 279,746     |  | 1.5%                |  | 2.6%                   
|  | Amerada Hess Corporation    |  | 22.5           |  | 127,300     |  | 1.4%                |  | 1.2%                   
|* | Bank of America/Fleet Bank  |  | 5.1            |  | 215,061     |  | 1.2%                |  | 1.1%                   
|* | Fuji Photo Film USA         |  | 7.2            |  | 194,984     |  | 1.2%                |  | 1.1%                   
|  | D.E. Shaw                   |  | 9.1            |  | 144,005     |  | 1.2%                |  | 1.1%                   
|* | MCI                         |  | 1.6            |  | 244,730     |  | 1.1%                |  | 1.0%                   
|  | Dun & Bradstreet Corp.      |  | 7.3            |  | 123,000     |  | 1.0%                |  | 0.9%                   
|  | Arrow Electronics Inc.      |  | 8.5            |  | 163,762     |  | 1.0%                |  | 0.9%                   
|* | Schering-Plough Corporation |  | 1.0            |  | 152,970     |  | 0.9%                |  | 0.9%                   
|  | T.D. Waterhouse             |  | 2.1            |  | 103,381     |  | 0.9%                |  | 0.8%                   
|  | Westdeutsche Landesbank     |  | 10.8           |  | 53,000      |  | 0.9%                |  | 0.8%                   
|  | North Fork Bank             |  | 13.5           |  | 126,770     |  | 0.8%                |  | 0.7%                   
|  | Practicing Law Institute    |  | 8.7            |  | 77,500      |  | 0.8%                |  | 0.7%                   
|* | State Farm                  |  | 3.3            |  | 189,310     |  | 0.8%                |  | 1.2%                   
|  | Vytra Healthcare            |  | 2.5            |  | 105,613     |  | 0.8%                |  | 0.7%                   
|* | Banque Nationale De Paris   |  | 11.1           |  | 145,834     |  | 0.8%                |  | 1.3%                   
|  | Laboratory Corp. Of America |  | 1.9            |  | 108,000     |  | 0.7%                |  | 0.6%                   
|  | P.R. Newswire Associates    |  | 2.9            |  | 67,000      |  | 0.7%                |  | 0.6%                   
|* | HQ Global                   |  | 3.3            |  | 126,487     |  | 0.7%                |  | 0.7%                   
|  | County of Nassau            |  | 16.3           |  | 219,066     |  | 0.7%                |  | 0.6%                   

| |     |                                                                                                                   
| | --- | ------------------------------------------------------------------------------------------------------------------
| | (1) | Ranked by pro rata share of annualized base rental revenue adjusted for pro rata share of joint venture interests.
| | (2) | Excludes One Orlando Centre in Orlando, Florida.                                                                  
| | (3) | Total square footage is based on currently leased space and excludes expansions or leases with future start dates.
| | *   | 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 we paid or accrued, during the respective periods, to retain revenues
      attributable to existing leased space (at 100% of cost) for the years 2001
      through 2004 and for the six month period ended June 30, 2005 for our consolidated
      office and industrial / R&D properties other than One Orlando Centre
      in Orlando, FL:


| |                            |      |           |      |   |           |  |      |           |           |   |           |  | Average |           | YTD
| | -------------------------- | ---- | --------- | ---- | - | --------- |  | ---- | --------- | --------- | - | --------- |  | ------- | --------- | ---
| |                            | 2001 |           | 2002 |   | 2003      |  | 2004 |           | 2001-2004 |   | 2005     
| |                            |      |           |      |   |           |  |      |           |           |   |          
| | Suburban Office Properties |      |           |      |   |           |  |      |           |           |   |           |  |         |           |    
| | Total                      | $    | 4,606,069 |      | $ | 5,283,674 |  | $    | 6,791,336 |           | $ | 7,034,154 |  | $       | 5,928,783 |    
| | Per Square Foot            | $    | 0.45      |      | $ | 0.53      |  | $    | 0.67      |           | $ | 0.69      |  | $       | 0.58      |    
| |                            |      |           |      |   |           |  |      |           |           |   |           |  |         |           |    
| | NYC Office Properties      |      |           |      |   |           |  |      |           |           |   |           |  |         |           |    
| | Total                      | $    | 1,584,501 |      | $ | 1,939,111 |  | $    | 1,922,209 |           | $ | 2,515,730 |  | $       | 1,990,388 |    
| | Per Square Foot            | $    | 0.45      |      | $ | 0.56      |  | $    | 0.55      |           | $ | 0.56      |  | $       | 0.53      |    
| |                            |      |           |      |   |           |  |      |           |           |   |           |  |         |           |    
| | Industrial Properties      |      |           |      |   |           |  |      |           |           |   |           |  |         |           |    
| | Total                      | $    | 711,666   |      | $ | 1,881,627 |  | $    | 1,218,401 | (1)       | $ | 207,028   |  | $       | 1,004,681 |    
| | Per Square Foot            | $    | 0.11      |      | $ | 0.28      |  | $    | 0.23      |           | $ | 0.23      |  | $       | 0.21      |    

| | (1) | Excludes non-incremental capital expenditures of $435,140 incurred during the fourth quarter of 2003 for the industrial properties which were sold during the period.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

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The following table sets forth annual and per
square foot non-incremental revenue-generating tenant improvement costs and leasing commissions
(at 100% of cost) which we committed to perform, during the respective periods,
to retain revenues attributable to existing leased space for the years 2001 through
2004 and for the six month period ended  June 30, 2005 for our consolidated office
and industrial / R&D properties other than One Orlando Centre in Orlando,
FL:

|                                    |                              |   |           |  |   |           |     |   |           |        |   |           |        |   |                   |  |   |           |     |   |           |     |   |         | 
|----------------------------------- | ---------------------------- | - | --------- |  | - | --------- | --- | - | --------- | ------ | - | --------- | ------ | - | ----------------- |  | - | --------- | --- | - | --------- | --- | - | ------- | 
|                                    |                              |   | 2001      |  |   | 2002      |     |   | 2003      |        |   | 2004      |        |   | Average
2001-2004 |  |   | YTD
2005  |     |   | New       |     |   | Renewal | 
|                                    |                              |   |           |  |   |           |     |   |           |        |   |           |        |   |                   |  |   |           |     |   |           |     |   |         | 
|Long
    Island Office Properties   |                              |   |           |  |   |           |     |   |           |        |   |           |        |   |                   |  |   |           |     |   |           |     |   |        
|                                    | Tenant
    Improvements      | $ | 2,722,457 |  | $ | 1,917,466 |     | $ | 3,774,722 |        | $ | 4,856,604 |        | $ | 3,317,812         |  | $ | 2,709,674 |     | $ | 1,902,050 |     | $ | 807,624 | 
|                                    | Per
    Square Foot Improved | $ | 8.47      |  | $ | 7.81      |     | $ | 7.05      |        | $ | 8.78      |        | $ | 8.03              |  | $ | 10.89     |     | $ | 11.40     |     | $ | 9.85    | 
|                                    | Leasing
    Commissions      | $ | 1,444,412 |  | $ | 1,026,970 |     | $ | 2,623,245 |        | $ | 2,345,325 |        | $ | 1,859,988         |  | $ | 963,552   |     | $ | 775,265   |     | $ | 188,287 | 
|                                    | Per
    Square Foot Leased   | $ | 4.49      |  | $ | 4.18      |     | $ | 4.90      |        | $ | 4.24      |        | $ | 4.45              |  | $ | 3.87      |     | $ | 4.65      |     | $ | 2.30    | 
|                                    |                              |   |           |  |   |           |     |   |           |        |   |           |        |   |                   |  |   |           |     |   |           |     |   |         | 
|                                    | Total
    Per Square Foot    | $ | 12.96     |  | $ | 11.99     |     | $ | 11.95     |        | $ | 13.02     |        | $ | 12.48             |  | $ | 14.76     |     | $ | 16.05     |     | $ | 12.15   | 
|                                    |                              |   |           |  |   |           |     |   |           |        |   |           |        |   |                   |  |   |           |     |   |           |     |   |         | 
|Westchester
    Office Properties   |                              |   |           |  |   |           |     |   |           |        |   |           |        |   |                   |  |   |           |     |   |           |     |   |        
|                                    | Tenant
    Improvements      | $ | 2,584,728 |  | $ | 6,391,589 | (1) | $ | 3,732,370 |        | $ | 6,323,134 |        | $ | 4,757,955         |  | $ | 2,097,017 |     | $ | 1,737,286 |     | $ | 359,731 | 
|                                    | Per
    Square Foot Improved | $ | 5.91      |  | $ | 15.05     |     | $ | 15.98     |        | $ | 11.95     |        | $ | 12.22             |  | $ | 13.73     |     | $ | 21.70     |     | $ | 4.95    | 
|                                    | Leasing
    Commissions      | $ | 1,263,012 |  | $ | 1,975,850 | (1) | $ | 917,487   |        | $ | 2,671,548 |        | $ | 1,706,974         |  | $ | 689,636   |     | $ | 534,986   |     | $ | 154,650 | 
|                                    | Per
    Square Foot Leased   | $ | 2.89      |  | $ | 4.65      |     | $ | 3.93      |        | $ | 5.05      |        | $ | 4.13              |  | $ | 4.51      |     | $ | 6.68      |     | $ | 2.13    | 
|                                    |                              |   |           |  |   |           |     |   |           |        |   |           |        |   |                   |  |   |           |     |   |           |     |   |         | 
|                                    | Total
    Per Square Foot    | $ | 8.80      |  | $ | 19.70     |     | $ | 19.91     |        | $ | 17.00     |        | $ | 16.35             |  | $ | 18.24     |     | $ | 28.38     |     | $ | 7.08    | 
|                                    |                              |   |           |  |   |           |     |   |           |        |   |           |        |   |                   |  |   |           |     |   |           |     |   |         | 
|Connecticut
    Office Properties   |                              |   |           |  |   |           |     |   |           |        |   |           |        |   |                   |  |   |           |     |   |           |     |   |        
|                                    | Tenant
    Improvements      | $ | 213,909   |  | $ | 491,435   |     | $ | 588,087   |        | $ | 3,051,833 |        | $ | 1,086,316         |  | $ | 2,897,613 |     | $ | 2,365,430 |     | $ | 532,183 | 
|                                    | Per
    Square Foot Improved | $ | 1.46      |  | $ | 3.81      |     | $ | 8.44      |        | $ | 12.71     |        | $ | 6.60              |  | $ | 16.53     |     | $ | 33.11     |     | $ | 5.12    | 
|                                    | Leasing
    Commissions      | $ | 209,322   |  | $ | 307,023   |     | $ | 511,360   |        | $ | 1,493,664 |        | $ | 630,342           |  | $ | 782,007   |     | $ | 582,809   |     | $ | 199,198 | 
|                                    | Per
    Square Foot Leased   | $ | 1.43      |  | $ | 2.38      |     | $ | 7.34      |        | $ | 6.22      |        | $ | 4.34              |  | $ | 4.46      |     | $ | 8.16      |     | $ | 1.92    | 
|                                    |                              |   |           |  |   |           |     |   |           |        |   |           |        |   |                   |  |   |           |     |   |           |     |   |         | 
|                                    | Total
    Per Square Foot    | $ | 2.89      |  | $ | 6.19      |     | $ | 15.78     |        | $ | 18.93     |        | $ | 10.94             |  | $ | 20.99     |     | $ | 41.27     |     | $ | 7.04    | 
|                                    |                              |   |           |  |   |           |     |   |           |        |   |           |        |   |                   |  |   |           |     |   |           |     |   |         | 
|New
    Jersey Office Properties    |                              |   |           |  |   |           |     |   |           |        |   |           |        |   |                   |  |   |           |     |   |           |     |   |        
|                                    | Tenant
    Improvements      | $ | 1,146,385 |  | $ | 2,842,521 |     | $ | 4,327,295 |        | $ | 1,379,362 |        | $ | 2,423,891         |  | $ | 744,766   |     | $ | 623,531   |     | $ | 121,235 | 
|                                    | Per
    Square Foot Improved | $ | 2.92      |  | $ | 10.76     |     | $ | 11.57     |        | $ | 7.12      |        | $ | 8.09              |  | $ | 11.09     |     | $ | 20.91     |     | $ | 3.25    | 
|                                    | Leasing
    Commissions      | $ | 1,602,962 |  | $ | 1,037,012 |     | $ | 1,892,635 |        | $ | 832,658   |        | $ | 1,341,317         |  | $ | 545,651   |     | $ | 410,782   |     | $ | 134,869 | 
|                                    | Per
    Square Foot Leased   | $ | 4.08      |  | $ | 3.92      |     | $ | 5.06      |        | $ | 4.30      |        | $ | 4.34              |  | $ | 8.12      |     | $ | 13.78     |     | $ | 3.61    | 
|                                    |                              |   |           |  |   |           |     |   |           |        |   |           |        |   |                   |  |   |           |     |   |           |     |   |         | 
|                                    | Total
    Per Square Foot    | $ | 7.00      |  | $ | 14.68     |     | $ | 16.63     |        | $ | 11.42     |        | $ | 12.43             |  | $ | 19.21     |     | $ | 34.69     |     | $ | 6.86    | 
|                                    |                              |   |           |  |   |           |     |   |           |        |   |           |        |   |                   |  |   |           |     |   |           |     |   |         | 
|New
    York City Office Properties |                              |   |           |  |   |           |     |   |           |        |   |           |        |   |                   |  |   |           |     |   |           |     |   |        
|                                    | Tenant
    Improvements      | $ | 788,930   |  | $ | 4,350,106 |     | $ | 5,810,017 | (2)(3) | $ | 9,809,822 | (3)(4) | $ | 5,189,719         |  | $ | 5,128,847 | (2) | $ | 5,128,847 | (2) | $ | 0       | 
|                                    | Per
    Square Foot Improved | $ | 15.69     |  | $ | 18.39     |     | $ | 32.84     |        | $ | 23.21     |        | $ | 22.53             |  | $ | 26.44     |     | $ | 31.85     |     | $ | 0.00    | 
|                                    | Leasing
    Commissions      | $ | 1,098,829 |  | $ | 2,019,837 |     | $ | 2,950,330 | (2)    | $ | 3,041,141 | (4)    | $ | 2,277,534         |  | $ | 2,001,046 | (2) | $ | 1,971,069 | (2) | $ | 29,977  | 
|                                    | Per
    Square Foot Leased   | $ | 21.86     |  | $ | 8.54      |     | $ | 16.68     |        | $ | 7.19      |        | $ | 13.57             |  | $ | 10.32     |     | $ | 12.24     |     | $ | 0.91    | 
|                                    |                              |   |           |  |   |           |     |   |           |        |   |           |        |   |                   |  |   |           |     |   |           |     |   |         | 
|                                    | Total
    Per Square Foot    | $ | 37.55     |  | $ | 26.93     |     | $ | 49.52     |        | $ | 30.40     |        | $ | 36.10             |  | $ | 36.76     |     | $ | 44.09     |     | $ | 0.91    | 
|                                    |                              |   |           |  |   |           |     |   |           |        |   |           |        |   |                   |  |   |           |     |   |           |     |   |         | 
|Industrial
    Properties           |                              |   |           |  |   |           |     |   |           |        |   |           |        |   |                   |  |   |           |     |   |           |     |   |        
|                                    | Tenant
    Improvements      | $ | 1,366,488 |  | $ | 1,850,812 |     | $ | 1,249,200 |        | $ | 310,522   |        | $ | 1,194,256         |  | $ | 85,293    |     | $ | 85,293    |     | $ | 0       | 
|                                    | Per
    Square Foot Improved | $ | 1.65      |  | $ | 1.97      |     | $ | 2.42      |        | $ | 2.27      |        | $ | 2.08              |  | $ | 14.60     |     | $ | 14.60     |     | $ | 0.00    | 
|                                    | Leasing
    Commissions      | $ | 354,572   |  | $ | 890,688   |     | $ | 574,256   |        | $ | 508,198   |        | $ | 581,928           |  | $ | 0         |     | $ | 0         |     | $ | 0       | 
|                                    | Per
    Square Foot Leased   | $ | 0.43      |  | $ | 0.95      |     | $ | 1.11      |        | $ | 3.71      |        | $ | 1.55              |  | $ | 0.00      |     | $ | 0.00      |     | $ | 00      | 
|                                    |                              |   |           |  |   |           |     |   |           |        |   |           |        |   |                   |  |   |           |     |   |           |     |   |         | 
|                                    | Total
    Per Square Foot    | $ | 2.08      |  | $ | 2.92      |     | $ | 3.53      |        | $ | 5.98      |        | $ | 3.63              |  | $ | 14.60     |     | $ | 14.60     |     | $ | 0.00    | 
|                                    |                              |   |           |  |   |           |     |   |           |        |   |           |        |   |                   |  |   |           |     |   |           |     |   |         | 

|(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 $15.5 million of tenant improvements
and $2.2 million of leasing commissions related to a new 121,108 square foot
lease to Debevoise and Plimpton that was signed during the third quarter of 2003
with a lease commencement date of May 2005.                                                                                                                                                                                                                                       
|(3) | 2003 numbers exclude tenant improvements of $0.2 million for
Sandler ONeil Partners (7,446 square feet) for expansion space with a lease commencement
date in the second quarter of 2004. The tenant improvement allowance is reflected in the second
quarter of 2004.                                                                                                                                                                                                                       
|(4) | Excludes 86,800 square feet related to Westpoint Stevens early renewal. There were no tenant improvements or leasing costs associated with this transaction. Also excludes $1.4 million of tenant improvements and
$1.2 million of leasing commissions related to a 74,293 square foot lease to Harper Collins Publishers with a lease commencement date in 2006. Also excludes Bank of America retail lease with $0.6 million of tenant improvements and $0.8
million of leasing commissions.
|   

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As noted, incremental revenue-generating tenant improvement costs and leasing commissions are excluded from the tables previously set forth. The historical capital expenditures, tenant improvement costs and leasing
commissions previously set forth are not necessarily indicative of future non-incremental revenue-generating capital expenditures or non-incremental revenue-generating tenant improvement costs and leasing commissions that may be incurred to retain
revenues on leased space.

The following table sets forth our components of paid or accrued non-incremental and incremental revenue-generating capital expenditures, tenant improvements and leasing costs for the periods presented as reported on
our Statements of Cash Flows  Investment Activities contained in our consolidated financial statements (in thousands):

|                                               | Six months ended |       
|---------------------------------------------- | ---------------- | ------
|                                               | June 30,         |       
|                                               |                  |       
|                                               | 2005             |       
|                                               |                  |       
|Capital expenditures:                          |                  |       
|Non-incremental                                | $                | 4,864 
|Incremental                                    |                  | 5,059 
|Tenant improvements:                           |                  |       
|Non-incremental                                |                  | 11,871
|Incremental                                    |                  | 8,697 
|                                               |                  |       
|Additions to commercial real estate properties | $                | 30,491
|                                               |                  |       
|Leasing costs:                                 |                  |       
|Non-incremental                                | $                | 6,833 
|Incremental                                    |                  | 2,275 
|                                               |                  |       
|Payment of deferred leasing costs              | $                | 9,108 
|                                               |                  |       
|Acquisition and development costs              | $                | 22,590
|                                               |                  |       

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The following table sets forth our lease expiration table, as adjusted for pre-leased space, at July 1, 2005 for our Total Portfolio of properties, our Office Portfolio and our Industrial / R&D Portfolio:

|Total Portfolio             | 
|--------------------------- | 
|                            | 
|                            | 
|Year of                     | 
|Expiration                  | 
|                            | 
|2005                        | 
|2006                        | 
|2007                        | 
|2008                        | 
|2009                        | 
|2010 and thereafter         | 
|                            | 
|Total/Weighted Average      | 
|                            | 
|Total Portfolio Square Feet | 
|                            | 



|Office Portfolio                   | 
|---------------------------------- | 
|                                   | 
|                                   | 
|Year of                            | 
|Expiration                         | 
|                                   | 
|2005                               | 
|2006                               | 
|2007                               | 
|2008                               | 
|2009                               | 
|2010 and thereafter                | 
|                                   | 
|Total/Weighted Average             | 
|                                   | 
|Total Office Portfolio Square Feet | 
|                                   | 



|Industrial/R&D Portfolio                   | 
|------------------------------------------ | 
|                                           | 
|                                           | 
|Year of                                    | 
|Expiration                                 | 
|                                           | 
|2005                                       | 
|2006                                       | 
|2007                                       | 
|2008                                       | 
|2009                                       | 
|2010 and thereafter                        | 
|                                           | 
|Total/Weighted Average                     | 
|                                           | 
|Total Industrial/R&D Portfolio Square Feet | 
|                                           | 

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PART
II – OTHER INFORMATION

Item 1. Legal Proceedings

On April 4, 2005 the Company and the other parties to the shareholder derivative actions filed against the Company in connection with its disposition of its industrial portfolio have agreed to settle such actions
pursuant to the Stipulation of Settlement, dated as of March 14, 2005 and executed subsequent thereto. The proposed settlement includes various changes to the Companys corporate governance policies to provide for an Affiliate Transaction
Committee and to require that the Companys Board of Directors be comprised of at least two-thirds independent directors (as defined in the Companys Corporate Governance Guidelines), as well as certain other concessions. The proposed
settlement is subject to court approval.

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.

On June 16, 2005, Judge Evelyn Omega Connor of the Circuit Court of Baltimore City signed an order regarding preliminary approval and notice with respect to the shareholder derivative actions. A hearing to consider
approval of the proposed settlement has been scheduled for September 20, 2005, at 9:30 a.m., in the Circuit Court for Baltimore City.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds - None

Item 3. Defaults Upon Senior Securities  None

Item 4. Submission of Matters to a Vote of Securities
  Holders

On May 19, 2005, the Company held its annual meeting of stockholders. The matters on which the stockholders voted, in person or by proxy, were (1) the election of eight directors to serve until the 2006 annual meeting
of stockholders and until their respective successors are duly elected and qualified, (2) to amend the Charter of the Company to increase the number of authorized shares of common stock of the Company from 100,000,000 to 200,000,000, (3) to approve
the Companys 2005 Stock Option Plan, and (4) to ratify the selection of Ernst & Young LLP as the independent auditors of the Company for the fiscal year ending December 31, 2005. The eight nominees were elected, the share increase was
approved, the Companys 2005 Stock Option Plan was approved, and the auditors were ratified. The results of the voting are set forth below:

|                                                                       |  | Votes Cast |  |           |  | Votes Cast |  |           | 
|---------------------------------------------------------------------- |  | ---------- |  | --------- |  | ---------- |  | --------- | 
|                                                                       |  | For        |  | Withheld  |  | Against    |  | Abstain   | 
|                                                                       |  |            |  |           |  |            |  |           | 
|Amend
	      Charter To Increase Authorized Shares
    of Common Stock |  | 67,264,644 |  | N/A       |  | 7,571,527  |  | 26,063    | 
|Approve 2005 Stock Option Plan                                         |  | 53,548,352 |  | N/A       |  | 14,426,790 |  | 1,374,293 | 
|Election of Directors:                                                 |  |            |  |           |  |            |  |           | 
|Peter Quick                                                            |  | 74,819,014 |  | 43,222    |  | N/A        |  | N/A       | 
|Stanley Steinberg                                                      |  | 74,569,157 |  | 293,082   |  | N/A        |  | N/A       | 
|John Ruffle                                                            |  | 74,817,545 |  | 44,691    |  | N/A        |  | N/A       | 
|Elizabeth McCaul                                                       |  | 74,667,671 |  | 194,565   |  | N/A        |  | N/A       | 
|Douglas Crocker                                                        |  | 73,548,355 |  | 1,313,881 |  | N/A        |  | N/A       | 
|Scott Rechler                                                          |  | 73,953,114 |  | 909,122   |  | N/A        |  | N/A       | 
|Lewis Ranieri                                                          |  | 71,639,622 |  | 3,222,614 |  | N/A        |  | N/A       | 
|Ronald Menaker                                                         |  | 73,041,755 |  | 1,820,477 |  | N/A        |  | N/A       | 
|Ratification of Auditors                                               |  | 73,465,539 |  | N/A       |  | 1,374,293  |  | 22,404    | 

Item 5. Other information

| | a) | None                                                                                                                                   
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------
| | b) | There have been no material changes to the procedures by which stockholders may recommend nominees to the Companys Board of Directors.

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Item 6. Exhibits

Exhibits

|3.1  |  | Articles of Amendment of the Registrant filed with the Maryland State Department of Assessments and Taxation on May 26, 2005.                                                                             
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|10.1 |  | Reckson Associates Realty Corp. 2005 Stock Option Plan.                                                                                                                                                   
|    
|10.2 |  | Contract of Sale, made as of July 8, 2005, between
Galaxy LI Associates LLC, as seller, and Reckson EAB LLC, as buyer.                                                                                    
|     |  |                                                                                                                                                                                                           
|10.3 |  | Note, dated August 3, 2005 by Reckson Court
      Square, LLC (Borrower), in favor of German American Capital Corporation
      (Lender).                                                                 
|     |  |                                                                                                                                                                                                           
|10.4 |  | Loan and Security Agreement, dated as of
      August 3, 2005 between Reckson Court Square, LLC and German American Capital
      Corporation.                                                            
|    
|31.1 |  | Certification of Scott H. Rechler, Chairman
    of the Board, Chief Executive Officer, President and Director 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, Chairman of the Board, Chief Executive Officer, President and Director 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.         
|    

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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                          |                      |  | Michael Maturo                        |                   
|Chairman of the Board, Chief              |                      |  | Executive Vice President,             |                   
|Executive Officer, President and Director |                      |  | Treasurer and Chief Financial Officer |                   
|                                         
|                                         
|DATE:August
8, 2005                       |                      |  |                                       |                   

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