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                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC 20549
                              ------------------

                                   FORM 10-Q

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

               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000

                        COMMISSION FILE NUMBER: 1-13762

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

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

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

</TABLE>

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

                              ------------------
     Indicate  by  check  mark  whether the registrant (1) has filed all reports
required  to  be  filed by section 13 or 15(d) of the Securities Exchange Act of
1934  during  the  preceding  12  months  (or  for  such shorter period that the
registrant  was  required  to  file  such reports) Yes X No __, and (2) has been
subject to such filing requirements for the past 90 days. Yes X No ___.

                              ------------------
     The  company  has two classes of common stock, issued at $.01 par value per
share  with 45,326,722 and 10,283,513 shares of Class A common stock and Class B
common stock outstanding, respectively as of November 9, 2000
--------------------------------------------------------------------------------
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<PAGE>

                        RECKSON ASSOCIATES REALTY CORP.
                                QUARTERLY REPORT
                 FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000


                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
 INDEX                                                                              PAGE
-------                                                                            -----
<S>     <C>                                                                        <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
        Consolidated Balance Sheets as of September 30, 2000 (unaudited) and
        December 31, 1999 ........................................................   3
        Consolidated Statements of Income for the three and nine months ended
        September 30, 2000 and 1999 (unaudited) ..................................   4
        Consolidated Statements of Cash Flows for the nine months ended
        September 30, 2000 and 1999 (unaudited) ..................................   5
        Notes to the Consolidated Financial Statements (unaudited) ...............   6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
        Operations ...............................................................  16
Item 3. Quantitative and Qualitative Disclosures about Market Risk ...............  28
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ........................................................  29
Item 2. Changes in Securities and Use of Proceeds ................................  29
Item 3. Defaults Upon Senior Securities ..........................................  29
Item 4. Submission of Matters to a Vote of Securities Holders ....................  29
Item 5. Other Information ........................................................  29
Item 6. Exhibits and Reports on Form 8-K .........................................  29
SIGNATURES .....................................................................    29
</TABLE>

                                       2
<PAGE>

                        PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS

                        RECKSON ASSOCIATES REALTY CORP.
                          CONSOLIDATED BALANCE SHEETS
               (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
<TABLE>
<CAPTION>
                                                                                            SEPTEMBER 30, 2000   DECEMBER 31,
                                                                                                (UNAUDITED)          1999
                                                                                           -------------------- -------------
<S>                                                                                        <C>                  <C>
ASSETS:
Commercial real estate properties, at cost:
 Land ....................................................................................     $   290,873       $  276,204
 Building and improvements ...............................................................       1,986,104        1,802,611
Developments in progress:
 Land ....................................................................................          61,022           60,894
 Development costs .......................................................................          96,634           68,690
Furniture, fixtures and equipment ........................................................           7,109            6,473
                                                                                               -----------       ----------
                                                                                                 2,441,742        2,214,872
Less accumulated depreciation ............................................................        (266,788)        (218,385)
                                                                                               -----------       ----------
                                                                                                 2,174,954        1,996,487
Investment in real estate joint ventures .................................................          40,236           31,531
Investment in mortgage notes and notes receivable ........................................         352,809          352,466
Cash and cash equivalents ................................................................          32,954           21,368
Tenants receivables ......................................................................           4,679            5,117
Investments in and advances to affiliates ................................................         169,021          178,695
Deferred rents receivable ................................................................          53,910           32,132
Prepaid expenses and other assets ........................................................          57,530           66,977
Contract and land deposits and pre-acquisition costs .....................................           7,794            9,585
Deferred leasing and loan costs ..........................................................          50,233           39,520
                                                                                               -----------       ----------
TOTAL ASSETS .............................................................................     $ 2,944,120       $2,733,878
                                                                                               ===========       ==========
LIABILITIES:
Mortgage notes payable ...................................................................     $   530,819       $  459,174
Unsecured credit facility ................................................................         362,600          297,600
Unsecured term loan ......................................................................              --           75,000
Senior unsecured notes ...................................................................         449,367          449,313
Accrued expenses and other liabilities. ..................................................          85,433           82,079
Dividends and distributions payable ......................................................          28,498           27,166
                                                                                               -----------       ----------
TOTAL LIABILITIES ........................................................................       1,456,717        1,390,332
                                                                                               -----------       ----------
Commitments and other comments ...........................................................              --               --
Minority partners' interests in consolidated partnerships ................................         228,742           93,086
Preferred unit interest in the operating partnership .....................................          42,518           42,518
Limited partners' minority interest in the operating partnership .........................          98,079           90,986
                                                                                               -----------       ----------
                                                                                                   369,339          226,590
                                                                                               -----------       ----------
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value, 25,000,000 shares authorized
 Series A preferred stock, 9,192,000 shares issued and outstanding .......................              92               92
 Series B preferred stock, 2,000,000 and 6,000,000 shares issued and outstanding,                       20               60
  respectively

Common Stock, $01 par value, 100,000,000 shares authorized
 Class A Common Stock, 45,290,722 and 40,375,506 shares issued and outstanding,                        453              401
  respectively
 Class B Common Stock, 10,283,513 and 10,283,763 shares issued and outstanding,                        103              103
  respectively
Additional paid in capital ...............................................................       1,117,396        1,116,300
                                                                                               -----------       ----------
Total Stockholders' Equity ...............................................................       1,118,064        1,116,956
                                                                                               -----------       ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...............................................     $ 2,944,120       $2,733,878
                                                                                               ===========       ==========
</TABLE>

                (see accompanying notes to financial statements)

                                       3
<PAGE>

                        RECKSON ASSOCIATES REALTY CORP.
                       CONSOLIDATED STATEMENTS OF INCOME
       (UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<TABLE>
<CAPTION>
                                                                            THREE MONTHS ENDED
                                                                               SEPTEMBER 30,
                                                                       -----------------------------
                                                                            2000           1999
                                                                       -------------- --------------
<S>                                                                    <C>            <C>
REVENUES:
Base rents ...........................................................  $    100,854   $     95,474
Tenant escalations and reimbursements ................................        14,900         15,395
Equity in earnings of real estate joint ventures and service
 companies ...........................................................           706            483
Interest income on mortgage notes and notes receivable ...............         1,901            520
Gain on sales of real estate .........................................        15,206         10,052
Other ................................................................         6,735          3,421
                                                                        ------------   ------------
 Total Revenues ......................................................       140,302        125,345
                                                                        ------------   ------------
EXPENSES:
Property operating expenses ..........................................        41,255         40,679
Marketing, general and administrative ................................         6,930          6,804
Interest .............................................................        24,651         20,774
Depreciation and amortization ........................................        24,083         21,868
                                                                        ------------   ------------
 Total Expenses ......................................................        96,919         90,125
                                                                        ------------   ------------
Income before preferred dividends and distributions, minority
 interests and extraordinary loss ....................................        43,383         35,220
Minority partners' interests in consolidated partnerships ............        (1,874)        (2,150)
Distributions to preferred unit holders ..............................          (660)          (660)
Limited partners' minority interest in the operating partnership .....        (4,050)        (3,014)
                                                                        ------------   ------------
Income before dividends to preferred shareholders and
 extraordinary loss ..................................................        36,799         29,396
Dividends to preferred shareholders ..................................        (5,425)        (7,325)
Extraordinary loss on extinguishment of debts, net of limited
 partners' minority interest share of $175, $74, $175 and $74,
 respectively ........................................................        (1,396)          (555)
                                                                        ------------   ------------
Net income available to common shareholders ..........................  $     29,978   $     21,516
                                                                        ============   ============
Net Income available to:
 Class A common shareholders .........................................  $     22,143   $     15,066
 Class B common shareholders .........................................         7,835          6,450
                                                                        ------------   ------------
Total ................................................................  $     29,978   $     21,516
                                                                        ============   ============
Basic net income per weighted average common share before
 extraordinary loss:
 Class A common shareholders .........................................  $        .51   $        .38
 Extraordinary loss per Class A common share .........................         ( .02)         ( .01)
                                                                        ------------   ------------
 Basic net income per weighted average Class A common share ..........  $        .49   $        .37
                                                                        ============   ============
 Class B common shareholders .........................................  $        .80   $        .57
 Extraordinary loss per Class B common share .........................         ( .04)         ( .01)
                                                                        ============   ============
 Basic net income per weighted average Class B common share ..........  $        .76   $        .56
                                                                        ============   ============
Basic weighted average common shares outstanding:
 Class A common shareholders .........................................    45,178,451     40,367,161
 Class B common shareholders .........................................    10,283,513     11,456,931
Diluted net income per weighted average common share:
 Class A common shareholders .........................................  $        .48   $        .37
                                                                        ============   ============
 Class B common shareholders .........................................  $        .53   $        .41
                                                                        ============   ============
Diluted weighted average common shares outstanding:
 Class A common shareholders .........................................    49,818,354     40,796,597
 Class B common shareholders .........................................    10,283,513     11,456,931

<PAGE>
<CAPTION>
                                                                             NINE MONTHS ENDED
                                                                               SEPTEMBER 30,
                                                                       -----------------------------
                                                                            2000           1999
                                                                       -------------- --------------
<S>                                                                    <C>            <C>
REVENUES:
Base rents ...........................................................  $    291,353   $    234,759
Tenant escalations and reimbursements ................................        40,730         32,524
Equity in earnings of real estate joint ventures and service
 companies ...........................................................         3,893          1,372
Interest income on mortgage notes and notes receivable ...............         6,377          5,627
Gain on sales of real estate .........................................        21,868         10,052
Other ................................................................        19,194          8,359
                                                                        ------------   ------------
 Total Revenues ......................................................       383,415        292,693
                                                                        ------------   ------------
EXPENSES:
Property operating expenses ..........................................       115,778         91,125
Marketing, general and administrative ................................        20,151         16,241
Interest .............................................................        72,667         53,620
Depreciation and amortization ........................................        67,520         56,086
                                                                        ------------   ------------
 Total Expenses ......................................................       276,116        217,072
                                                                        ------------   ------------
Income before preferred dividends and distributions, minority
 interests and extraordinary loss ....................................       107,299         75,621
Minority partners' interests in consolidated partnerships ............        (5,773)        (4,933)
Distributions to preferred unit holders ..............................        (1,981)        (1,981)
Limited partners' minority interest in the operating partnership .....        (9,411)        (7,082)
                                                                        ------------   ------------
Income before dividends to preferred shareholders and
 extraordinary loss ..................................................        90,134         61,625
Dividends to preferred shareholders ..................................       (19,946)       (17,035)
Extraordinary loss on extinguishment of debts, net of limited
 partners' minority interest share of $175, $74, $175 and $74,
 respectively ........................................................        (1,396)          (555)
                                                                        ------------   ------------
Net income available to common shareholders ..........................  $     68,792   $     44,035
                                                                        ============   ============
Net Income available to:
 Class A common shareholders .........................................  $     50,244   $     35,854
 Class B common shareholders .........................................        18,548          8,181
                                                                        ------------   ------------
Total ................................................................  $     68,792   $     44,035
                                                                        ============   ============
Basic net income per weighted average common share before
 extraordinary loss:
 Class A common shareholders .........................................  $       1.21   $        .90
 Extraordinary loss per Class A common share .........................        (  .02)        (  .01)
                                                                        ------------   ------------
 Basic net income per weighted average Class A common share ..........  $       1.19   $        .89
                                                                        ============   ============
 Class B common shareholders .........................................  $       1.84   $       1.52
 Extraordinary loss per Class B common share .........................        (  .04)        (  .03)
                                                                        ============   ============
 Basic net income per weighted average Class B common share ..........  $       1.80   $       1.49
                                                                        ============   ============
Basic weighted average common shares outstanding:
 Class A common shareholders .........................................    42,311,751     40,234,749
 Class B common shareholders .........................................    10,283,541      5,488,759
Diluted net income per weighted average common share:
 Class A common shareholders .........................................  $       1.18   $        .88
                                                                        ============   ============
 Class B common shareholders .........................................  $       1.28   $        .95
                                                                        ============   ============
Diluted weighted average common shares outstanding:
 Class A common shareholders .........................................    42,735,828     40,651,512
 Class B common shareholders .........................................    10,283,541      5,488,759

</TABLE>

                (see accompanying notes to financial statements)

                                       4
<PAGE>

                        RECKSON ASSOCIATES REALTY CORP.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                         (UNAUDITED AND IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                                  NINE MONTHS ENDED
                                                                                                     SEPTEMBER 30
                                                                                             ----------------------------
                                                                                                  2000           1999
                                                                                             -------------   ------------
<S>                                                                                          <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income before dividends to preferred shareholders ........................................    $   88,738          61,070
Adjustments to reconcile income before dividends to preferred shareholders to net cash
provided by
 operating activities:
 Depreciation and amortization ...........................................................        67,520          56,086
 Gain on sales of real estate ............................................................       (21,868)        (10,052)
 Minority partners' interests in consolidated partnerships ...............................         5,773           4,933
 Extraordinary loss on extinguishment of debts ...........................................         1,396             555
 Limited partners' minority interest in the operating partnership ........................         9,411           7,082
 Equity in earnings of real estate joint ventures and service companies ..................        (3,893)         (1,372)
Changes in operating assets and liabilities:
 Tenant receivables ......................................................................           438           1,899
 Real estate tax escrows .................................................................         2,112          (2,405)
 Prepaid expenses and other assets .......................................................        (7,592)        (13,764)
 Deferred rents receivable ...............................................................       (21,778)         (3,473)
 Accrued expenses and other liabilities ..................................................           615           4,817
                                                                                              ----------         -------
 Net cash provided by operating activities ...............................................       120,872         105,376
                                                                                              ----------         -------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Increase in deposits and pre-acquisition costs ..........................................       (11,893)         (3,485)
 Increase in developments in progress ....................................................       (11,668)         (8,198)
 Purchase of commercial real estate properties ...........................................      (184,613)       (265,400)
 Investment in mortgage notes and notes receivable .......................................            --        (295,048)
 Proceeds from mortgage note repayments ..................................................         5,213              --
 Investments in real estate joint ventures ...............................................        (7,450)        (11,875)
 Distribution from a real estate joint venture ...........................................           312             337
 Additions to commercial real estate properties ..........................................       (32,772)        (21,612)
 Purchase of furniture, fixtures and equipment ...........................................          (707)           (396)
 Payment of leasing costs ................................................................       (15,465)        (11,851)
 Proceeds from sales of real estate ......................................................        42,594         269,324
                                                                                              ----------        --------
 Net cash used in investing activities ...................................................      (216,449)       (348,204)
                                                                                              ----------        --------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from issuance of common stock net of issuance costs ............................         3,999           1,397
 Proceeds from issuance of preferred stock net of issuance costs .........................            --         148,000
 Proceeds from redemption of KTR preferred stock .........................................        19,903              --
 Repurchases of Class B common stock .....................................................            --         (17,389)
 Principal payments on secured borrowings ................................................       (25,518)         (3,163)
 Payment of loan and equity issuance costs ...............................................        (7,643)         (7,113)
 Investments in and advances to affiliates ...............................................        (4,161)       (107,768)
 Proceeds from issuance of senior unsecured notes net of issuance costs ..................            --         299,262
 Proceeds from secured borrowings ........................................................        97,163         125,547
 Proceeds from unsecured credit facilities ...............................................       659,600         353,500
 Repayment of unsecured credit facilities and term loan ..................................      (669,600)       (510,750)
 Contributions of minority partners in consolidated partnerships .........................       135,975          75,000
 Distributions to minority partners in consolidated partnerships .........................        (6,893)         (4,573)
 Distributions to limited partners in the operating partnership ..........................        (8,684)         (8,081)
 Distributions to preferred unit holders .................................................        (1,981)         (1,981)
 Dividends to common shareholders ........................................................       (63,785)        (47,044)
 Dividends to preferred shareholders .....................................................       (21,212)        (15,073)
                                                                                              ----------        --------
Net cash provided by financing activities ................................................       107,163         279,771
                                                                                              ----------        --------
Net increase in cash and cash equivalents ................................................        11,586          36,943
Cash and cash equivalents at beginning of period .........................................        21,368           2,349
                                                                                              ----------        --------
Cash and cash equivalents at end of period ...............................................    $   32,954      $   39,292
                                                                                              ==========      ==========
</TABLE>

                (see accompanying notes to financial statements)

                                       5
<PAGE>

                        RECKSON ASSOCIATES REALTY CORP.
                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                              SEPTEMBER 30, 2000
                                  (UNAUDITED)


1. ORGANIZATION AND FORMATION OF THE COMPANY

     Reckson  Associates Realty Corp. (the "Company") is a self-administered and
self-managed  real  estate  investment  trust ("REIT") which was incorporated in
Maryland  in  September  1994.  In  June,  1995 the Company completed an initial
public offering (the "IPO") and commenced operations.

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

     As  of  September  30,  2000,  the  Company  owned  and  operated 81 office
properties  comprising  approximately  14.2  million  square feet,103 industrial
properties  comprising  approximately  6.6  million  square  feet and two retail
properties  comprising approximately 20,000 square feet, located in the New York
tri-state  area  (the  "Tri-State Area"). During the quarter ended September 30,
2000,   the  Company  completed  the  repositioning  of  two  former  industrial
properties  into  Class  A  office  properties. The Company is in the process of
developing  one  office  property encompassing approximately 277,500 square feet
and  one industrial property encompassing approximately 206,000 square feet. The
Company  also  owns  a  357,000  square foot office building located in Orlando,
Florida  and approximately 315 acres of land in 14 separate parcels of which the
Company  can  develop  approximately 1.9 million square feet of office space and
approximately  224,000  square  feet  of  industrial space. The Company also has
invested  approximately $297.7 million in mortgage notes encumbering one Class A
office   property   encompassing   approximately   1.4   million   square  feet,
approximately  403  acres  of land located in New Jersey and approximately $17.1
million  in  a  note  receivable  secured  by  a  partnership  interest  in Omni
Partner's,  L.P.,  owner  of  the  Omni,  a  575,000  square foot Class A office
property  located  in  Uniondale, New York. On November 2, 2000, a mortgage note
investment  and  related  acquisition costs of approximately $292.5 million were
exchanged,  through  a  pre-packaged  consensual  bankruptcy,  for  title to the
property which was secured by such mortgage note investment (see Note 6).

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

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


2. BASIS OF PRESENTATION

     The   accompanying   consolidated   financial   statements   include   the
consolidated  financial position of the Company and the Operating Partnership at
September  30,  2000  and  December 31, 1999 and the results of their operations
for the three and nine months ended September 30, 2000 and 1999 respectively,


                                       6
<PAGE>

and,  their  cash  flows  for the nine months ended September 30, 2000 and 1999,
respectively.  The  Operating  Partnership's  investments  in Metropolitan, Omni
Partner's,  L.  P.  ("Omni"),  the  Tri-State  JV  and  certain industrial joint
venture  properties  formerly  owned by Reckson Morris Operating Partnership, L.
P.  ("RMI")  are  reflected  in  the  accompanying  financial  statements  on  a
consolidated  basis  with  a  reduction  for  minority  partners'  interest. The
Operating  Partnership's  investment  in  RMI  was reflected in the accompanying
financial  statements  on  a  consolidated  basis  with a reduction for minority
partner's  interest  through  September  26,  1999.  On  September 27, 1999, the
Operating  Partnership  sold  its  interest  in  RMI  to Keystone Property Trust
("KTR").  The operating results of the service businesses currently conducted by
Reckson  Management  Group,  Inc.,  and  Reckson  Construction  Group, Inc., are
reflected  in  the  accompanying  financial  statements  on the equity method of
accounting.  The  Operating  Partnership  also  invests  in  real  estate  joint
ventures  where  it  may  own less than a controlling interest, such investments
are  also  reflected  in  the  accompanying  financial  statements on the equity
method  of  accounting.  All  significant intercompany balances and transactions
have been eliminated in the consolidated financial statements.

     The  minority  interests at September 30, 2000 represent an approximate 12%
limited  partnership  interest  in  the  Operating  Partnership,  a  convertible
preferred  interest  in  Metropolitan , a 49% interest in the Tri-State JV and a
40% interest in Omni.

     The  accompanying interim unaudited financial statements have been prepared
by  the  Company's  management  pursuant  to  the  rules  and regulations of the
Securities  and Exchange Commission. Certain information and footnote disclosure
normally  included  in  the  financial  statements  prepared  in accordance with
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  make  the  information  presented not
misleading.  The unaudited financial statements as of September 30, 2000 and for
the  three  and nine month periods ended September 30, 2000 and 1999 include, in
the  opinion  of  management,  all  adjustments,  consisting of normal recurring
adjustments,  necessary  to  present  fairly the financial information set forth
herein.  The  results  of operations for the interim periods are not necessarily
indicative  of the results that may be expected for the year ending December 31,
2000.  These  financial  statements  should  be  read  in  conjunction  with the
Company's  audited  financial  statements  and the notes thereto included in the
Company's Form 10K for the year ended December 31, 1999.

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

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

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


3. MORTGAGE NOTES PAYABLE

     As  of  September 30, 2000, the Company had approximately $460.8 million of
fixed  rate  mortgage notes which mature at various times between 2001 and 2027.
The  notes  are  secured  by  22 properties and have a weighted average interest
rate  of approximately 7.6%. In addition, the Company had a $70 million variable
rate  mortgage  note  which  matures  in August 2001. The note is secured by one
property and bears interest at LIBOR plus 165 basis points.

     On  November  2,  2000,  the  Company  obtained  a  three year secured $250
million  first  mortgage commitment on the property located at 919 Third Avenue,
New  York  N.  Y. Interest rates on borrowings under the commitment are based on
LIBOR plus a spread ranging from 110 basis points to 140 basis


                                       7
<PAGE>
points  based  upon the outstanding balance. At closing, $200 million was funded
under  the  commitment  at  an  interest rate of LIBOR plus 120 basis points. In
addition,  in  connection  with  the  $200  million initial funding, the Company
purchased  a LIBOR interest rate hedge that provides for a maximum LIBOR rate of
9.25%.  The  initial  funding was used primarily to repay outstanding borrowings
under the Company's unsecured credit facility.

4. SENIOR UNSECURED NOTES

     As  of  September  30,  2000,  the  Operating  Partnership  had outstanding
approximately  $449.4  million  (net  of issuance discounts) of senior unsecured
notes  (the  "Senior  Unsecured  Notes").  The  following  table  sets forth the
Operating  Partnership's  Senior  Unsecured  Notes and other related disclosures
(dollars in thousands):
<TABLE>
<CAPTION>
                             FACE
       ISSUANCE             AMOUNT      COUPON RATE       TERM          MATURITY
----------------------   -----------   -------------   ----------   ----------------
<S>                      <C>           <C>             <C>          <C>
    August 27, 1997       $150,000          7.20%      10 years     August 28, 2007
    March 26, 1999        $100,000          7.40%       5 years      March 15, 2004
    March 26, 1999        $200,000          7.75%      10 years      March 15, 2009
 </TABLE>

     Interest  on  the  Senior  Unsecured  Notes  is  payable  semiannually with
principal  and unpaid interest due on the scheduled maturity dates. In addition,
the  Senior Unsecured Notes issued on March 26, 1999 were issued at an aggregate
discount of $738,000.

5. UNSECURED CREDIT FACILITY

     On  September  7,  2000,  the  Company  obtained  a three year $575 million
unsecured  revolving  credit  facility  (the  "Credit  Facility") from The Chase
Manhattan  Bank,  as  administrative agent, UBS Warburg LLC as syndication agent
and  Deutsche  Bank  as  documentation  agent.  The  Credit  Facility matures in
September,  2003  and  borrowings under the Credit Facility are currently priced
off of LIBOR plus 105 basis points.

     The  Credit Facility replaced the Company's existing $500 million unsecured
credit  facility  (together with the Credit Facility, the "Credit Facility") and
$75  million  term  loan.  As  a result, certain deferred loan costs incurred in
connection  with  the  existing  unsecured  credit  facility  and term loan were
written  off.  Such  amount  is  reflected  as  an  extraordinary  loss  in  the
accompanying consolidated statements of income.

     The  Company  utilizes the Credit Facility primarily to finance real estate
investments,  fund  its  real  estate  development  activities  and  for working
capital  purposes. At September 30, 2000, the Company had availability under the
Credit  Facility to borrow an additional $212.4 million (of which, $62.3 million
has been allocated for outstanding undrawn letters of credit).

6. COMMERCIAL REAL ESTATE INVESTMENTS

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

     On  August  15,  2000, the Company acquired 538 Broadhollow Road, a 180,000
square  foot  Class  A  office  property  located  in  Melville,  New York for a
purchase  price  of  approximately $25.6 million. This acquisition was financed,
in part, through a borrowing under the Credit Facility.

     On  June  15, 1999, the Company acquired the first mortgage note secured by
a  47  story,  1.4  million  square  foot Class A office property located at 919
Third  Avenue  in  New  York  City  for  approximately $277.5 million. The first
mortgage  note entitles the Company to all the net cash flow of the property and
to  substantial  rights  regarding  the  operations  of  the  property, with the
Company   anticipating   to  ultimately  obtain  title  to  the  property.  This
acquisition  was  financed with proceeds from the issuance of six million shares
of Series B Convertible Cumulative Preferred Stock and through draws under the


                                       8
<PAGE>

Credit  Facility.  Current  financial accounting guidelines provide that where a
lender  has  virtually  the  same risks and potential rewards as those of a real
estate  owner  it  should  recognize  the  full  economics  associated  with the
operations  of the property. As such, the Company has recognized the real estate
operations  of  the 919 Third Avenue in the accompanying consolidated statements
of  income from the date of acquisition. On July 28, 2000, the Company consented
to  the  filing  of  a consensual, pre-packaged bankruptcy plan with the current
fee owner and on November 2, 2000 the Company obtained title to the property.

     On  August  9,  1999,  the  Company executed a contract for the sale of its
interest  in RMI, which consisted of 28 properties, comprising approximately 6.1
million  square  feet  and  three other big box industrial properties to KTR. In
addition,  the  Company  also entered into a sale agreement with Matrix relating
to  a  first  mortgage  note  and  certain industrial land holdings (the "Matrix
Sale").  The  combined total sale price is $310 million ($52 million of which is
attributable  to  the  Morris  Companies and its affiliates in the form of $41.6
million  of  preferred units of KTR's operating partnership and $10.4 million of
debt  relief)  and  consists  of  a  combination  of  (i) cash, (ii) convertible
preferred  and  common  stock  of  KTR, (iii) preferred units of KTR's operating
partnership,  (iv) relief of debt and (v) a purchase money mortgage note secured
by certain land that is being sold to Matrix.

     As  of  September  30,  2000, the Matrix Sale and the sale of the Company's
interest  in  RMI was completed for a combined sales price of approximately $258
million  (net  of  minority  partner's  interest).  The  combined  consideration
consisted  of  approximately  (i)  $159.7  million  in cash, (ii) $60 million of
preferred  stock  and  operating partnership units of KTR, (iii) $1.5 million in
common  stock  of  KTR,  (iv) approximately $26.7 million of debt relief and (v)
approximately  $10.1  million  in  purchase  money  mortgages.  As a result, the
Company  realized  a  gain of approximately $16.7 million of which approximately
$6.7  million  was recognized during the current fiscal year. Cash proceeds from
the  sales  were  used  primarily to repay borrowings under the Credit Facility.
During  July  2000,  the  Company  redeemed  approximately  $20  million  of the
preferred  stock of KTR which was used primarily for general corporate purposes.


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

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

     On  September  28,  2000, the Company formed the Tri-State JV with TIAA and
contributed  eight  Class A suburban office properties aggregating approximately
1.5  million  square feet to the Tri-State JV in exchange for approximately $136
million  and a 51% majority ownership interest in the Tri-State JV. As a result,
the  Company  realized  a  gain  of  approximately  $15.2 million. Cash proceeds
received  were  used  primarily  to  repay borrowings under the Company's Credit
Facility.

7. STOCKHOLDERS' EQUITY

     On  May  24,  1999,  the  Company  issued  11,694,567  shares  of  Class  B
Exchangeable  Common Stock, par value $.01 per share, of the Company (the "Class
B  common  stock"),  which  were  valued  for GAAP purposes at $26 per share for
total consideration of approximately $304.1 million. The shares of Class B


                                       9
<PAGE>

common  stock  were  entitled to receive an initial annual dividend of $2.24 per
share,  which  dividend  is subject to adjustment annually. On July 1, 2000, the
annual dividend on the Class B Common Stock was increased to $2.40 per share.


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


     On  September  14, 2000, the Board of Directors of the Company declared the
following dividends on the Company's securities:
<TABLE>
<CAPTION>
                                                                                                                 ANNUALIZED
                               DIVIDEND /           RECORD               PAYMENT            THREE MONTHS         DIVIDEND /
         SECURITY             DISTRIBUTION           DATE                 DATE                  ENDED           DISTRIBUTION
--------------------------   --------------   ------------------   ------------------   --------------------   -------------
<S>                          <C>              <C>                  <C>                  <C>                    <C>
Class A common stock           $ .386          October 6, 2000     October 17, 2000     September 30, 2000        $ 1.544
Class B common stock           $ .60          October 13, 2000     October 31, 2000      October 31, 2000         $ 2.40
Series A preferred stock       $ .4766        October 13, 2000     October 31, 2000      October 31, 2000         $ 1.906
Series B preferred stock       $ .52188       October 13, 2000     October 31, 2000      October 31, 2000         $ 2.088
</TABLE>

     On  June  20,  2000,  the Company issued 4,181,818 shares of Class A common
stock  in  exchange  for  four million shares of Series B Convertible Cumulative
Preferred Stock with a liquidation preference value of $100 million.


     The  Board of Directors of the Company has authorized the purchase of up to
three  million  shares  of  the Company's Class B common stock. In addition, the
Board  of  Directors  has  also  authorized  the purchase of up to an additional
three  million  shares  of the Company's Class B common stock and/or its Class A
common  stock. The buy-back program will be effected in accordance with the safe
harbor  provisions  of the Securities Exchange Act of 1934 and may be terminated
by  the Company at any time. As of September 30, 2000, the Company had purchased
and  retired  1,410,804  shares  of Class B common stock for approximately $30.3
million.


     Basic  net  income  per  share  on  the  Company's Class A common stock was
calculated   using   the  weighted  average  number  of  shares  outstanding  of
45,178,451  and  40,367,161  for  the  three months ended September 30, 2000 and
1999,  respectively  and  42,311,751  and  40,234,749  for the nine months ended
September 30, 2000 and 1999, respectively.


     Basic  net  income  per  share  on  the  Company's Class B common stock was
calculated   using   the  weighted  average  number  of  shares  outstanding  of
10,283,513  and  11,456,931  for  the  three months ended September 30, 2000 and
1999,  respectively  and  10,283,541  and  5,488,759  for  the nine months ended
September 30, 2000 and 1999, respectively.


                                       10
<PAGE>

     The  following  table sets forth the Company's reconciliation of numerators
and  denominators  of the basic and diluted earnings per weighted average common
share  and  the  computation  of  basic  and  diluted earnings per share for the
Company's  Class  A  common  stock  (in  thousands except for earnings per share
data):
<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED            NINE MONTHS ENDED
                                                                      SEPTEMBER 30,                SEPTEMBER 30,
                                                               ---------------------------   --------------------------
                                                                   2000           1999           2000           1999
                                                               ------------   ------------   ------------   -----------
<S>                                                            <C>            <C>            <C>            <C>
Numerator:
 Income before, dividends to preferred shareholders,
   income allocated to Class B common shareholders
   and extraordinary loss ..................................     $ 36,799       $ 29,396      $  90,134      $  61,625
 Dividends to preferred shareholders .......................       (5,425)        (7,325)       (19,946)       (17,035)
 Income allocated to Class B common shareholders ...........       (8,200)        (6,616)       (18,913)        (8,347)
 Extraordinary loss (net of share applicable to limited
   partners and Class B shareholders) ......................       (1,031)          (389)        (1,031)          (389)
                                                                 --------       --------      ---------      ---------
 Numerator for basic earnings per Class A common
   share ...................................................       22,143         15,066         50,244         35,854
 Minority partner's preferred interest in a consolidated
   partnership .............................................        1,594             --             --             --
 Preferred units of limited partnership interest ...........          272             --             --             --
                                                                 --------       --------      ---------      ---------
 Numerator for diluted earnings per Class A common
   share ...................................................     $ 24,009       $ 15,066      $  50,244      $  35,854
                                                                 ========       ========      =========      =========
Denominator:
 Denominator for basic earnings per share-weighted
   average Class A common shares ...........................       45,178         40,367         42,312         40,235
 Effect of dilutive securities:
   Employee stock options ..................................          588            430            424            417
   Minority partner's preferred interest in a
    consolidated partnership ...............................        3,454             --             --             --
   Preferred units of limited partnership interest .........          598             --             --             --
                                                                 --------       --------      ---------      ---------
 Denominator for diluted earnings per Class A common
   share-adjusted weighted average shares and assumed
   conversions .............................................       49,818         40,797         42,736         40,652
                                                                 ========       ========      =========      =========
Basic earnings per Class A common share:
 Income before extraordinary loss ..........................     $    .51       $    .38      $    1.21      $     .90
 Extraordinary loss ........................................        ( .02)         ( .01)        (  .02)         ( .01)
                                                                 --------       --------      ---------      ---------
 Net income per Class A common share .......................     $    .49       $    .37      $    1.19      $     .89
                                                                 ========       ========      =========      =========
Diluted earnings per Class A common share:
 Income before extraordinary loss ..........................     $    .50       $    .38      $    1.20      $     .89
 Extraordinary loss ........................................        ( .02)         ( .01)        (  .02)         ( .01)
                                                                 --------       --------      ---------      ---------
 Diluted net income per Class A common share ...............     $    .48       $    .37      $    1.18      $     .88
                                                                 ========       ========      =========      =========

</TABLE>

                                       11
<PAGE>

     The  following  table sets forth the Company's reconciliation of numerators
and  denominators  of the basic and diluted earnings per weighted average common
share  and  the  computation  of  basic  and  diluted earnings per share for the
Company's  Class  B  common  stock  (in  thousands except for earnings per share
data):
<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED            NINE MONTHS ENDED
                                                                      SEPTEMBER 30,                SEPTEMBER 30,
                                                               ---------------------------   --------------------------
                                                                   2000           1999           2000           1999
                                                               ------------   ------------   ------------   -----------
<S>                                                            <C>            <C>            <C>            <C>
Numerator:
 Income before dividends to preferred shareholders,
   income allocated to Class A common shareholders
   and extraordinary loss ..................................    $  36,799      $  29,396      $  90,134      $  61,625
 Dividends to preferred shareholders .......................       (5,425)        (7,325)       (19,946)       (17,035)
 Income allocated to Class A common shareholders ...........      (23,174)       (15,455)       (51,275)       (36,243)
 Extraordinary loss (net of share applicable to limited
   partners and Class A common shareholders) ...............         (365)          (166)          (365)          (166)
                                                                ---------      ---------      ---------      ---------
 Numerator for basic earnings per Class B common
   share ...................................................        7,835          6,450         18,548          8,181
Add back:
 Income allocated to Class A common shareholders ...........       22,143         15,066         50,244         35,854
 Limited partners' minority interest in the operating
   partnership .............................................        4,050          3,014          9,411          7,082
 Minority partner's preferred interest in a consolidated
   partnership .............................................        1,594             --             --             --
 Preferred units of limited partnership interest ...........          272             --             --             --
                                                                ---------      ---------      ---------      ---------
 Numerator for diluted earnings per Class B common
   share ...................................................    $  35,894      $  24,530      $  78,203      $  51,117
                                                                =========      =========      =========      =========
Denominator:
 Denominator for basic earnings per
   share-weighted average Class B common shares ............       10,284         11,457         10,284          5,489
 Effect of dilutive securities:
   Weighted average Class A common shares
    outstanding ............................................       45,178         40,367         42,312         40,235
   Weighted average OP Units outstanding ...................        7,695          7,702          7,697          7,706
   Minority partner's preferred interest in a
    consolidated partnership ...............................        3,454             --             --             --
   Preferred units of limited partnership interest .........          598             --             --             --
   Employee stock options ..................................          588            430            424            417
                                                                ---------      ---------      ---------      ---------
Denominator for diluted earnings per Class B common
 share-adjusted weighted average shares and assumed
 conversions ...............................................       67,797         59,956         60,717         53,847
                                                                =========      =========      =========      =========
Basic earnings per Class B common share:
 Income before extraordinary loss ..........................    $     .80      $     .57      $    1.84      $    1.52
 Extraordinary loss ........................................        ( .04)         ( .01)        (  .04)        (  .03)
                                                                ---------      ---------      ---------      ---------
 Net income per Class B common share .......................    $     .76      $     .56      $    1.80      $    1.49
                                                                =========      =========      =========      =========
Diluted earnings per Class B common share:
 Income before extraordinary loss ..........................    $     .55      $     .42      $    1.31      $     .96
 Extraordinary loss ........................................        ( .02)         ( .01)        (  .03)        (  .01)
                                                                ---------      ---------      ---------      ---------
 Diluted net income per Class B common share ...............    $     .53      $     .41      $    1.28      $     .95
                                                                =========      =========      =========      =========

</TABLE>

                                       12
<PAGE>
8. SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                             NINE MONTHS ENDED
                                                               SEPTEMBER 30,
                                                          -----------------------
                                                             2000         1999
                                                          ----------   ----------
<S>                                                       <C>          <C>
     Cash paid during the period for interest .........    $88,290      $61,892
                                                           =======      =======
     Interest capitalized during the period ...........    $ 8,447      $ 7,281
                                                           =======      =======
</TABLE>
     On  June  20,  2000,  the Company issued 4,181,818 shares of Class A common
stock  in  exchange  for  four million shares of Series B Convertible Cumulative
Preferred Stock with a liquidation preference value of $100 million.

9. SEGMENT DISCLOSURE

     The  Company  owns all of the interests in its real estate properties by or
through  the  Operating Partnership. The Company's portfolio consists of Class A
office  properties  located within the New York City metropolitan area and Class
A  suburban  office  and  industrial  properties located and operated within the
Tri-State  Area  (the  "Core  Portfolio"). The Company's portfolio also includes
one  office  property  located  in  Orlando,  Florida,  certain industrial joint
venture  properties  formerly owned by RMI and for the period commencing January
6,  1998  and  ending September 26, 1999, industrial properties which were owned
by  RMI  and  subsequently  sold  to KTR. The Company has managing directors who
report  directly  to the Chief Operating Officer and Chief Financial Officer who
have  been  identified  as  the Chief Operating Decision Makers because of their
final  authority over resource allocation, decisions and performance assessment.

     In  addition,  the  Company  does not consider (i) interest incurred on its
Credit  Facility,  term  loan  and  Senior  Unsecured  Notes, (ii) the operating
performance  of  the  office  property  located  in  Orlando,  Florida and (iii)
commencing  January  1,  2000, the operating performance of the industrial joint
venture  properties  formerly  owned  by  RMI  as  part  of its Core Portfolio's
property operating performance.

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

     The  following  table  sets  forth the components of the Company's revenues
and  expenses and other related disclosures for the three months ended September
30, 2000 and 1999 (in thousands):
<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED
                                                         SEPTEMBER 30, 2000
                                            --------------------------------------------
                                                                           CONSOLIDATED
                                             CORE PORTFOLIO      OTHER        TOTALS
                                            ---------------- ------------ --------------
<S>                                         <C>              <C>          <C>
REVENUES:
Base rents, tenant escalations and
 reimbursements ...........................    $   113,546    $   2,208    $   115,754
Equity in earnings of real estate joint
 ventures and service companies ...........             --          706            706
Interest and other income .................            191       23,651         23,842
                                               -----------    ---------    -----------
Total Revenues ............................        113,737       26,565        140,302
                                               -----------    ---------    -----------
EXPENSES:
Property operating expenses ...............         40,666          589         41,255
Marketing, general and administrative .....          5,405        1,525          6,930
Interest ..................................          9,623       15,028         24,651
Depreciation and amortization .............         21,282        2,801         24,083
                                               -----------    ---------    -----------
Total Expenses ............................         76,976       19,943         96,919
                                               -----------    ---------    -----------
Income before preferred dividends and
 distributions, minority interests and
 extraordinary loss .......................    $    36,761    $   6,622    $    43,383
                                               ===========    =========    ===========
Total assets ..............................    $ 2,115,236    $ 828,884    $ 2,944,120
                                               ===========    =========    ===========
<PAGE>
<CAPTION>
                                                              THREE MONTHS ENDED
                                            ------------------------------------------------------
                                                              SEPTEMBER 30, 1999
                                            ------------------------------------------------------
                                                                                      CONSOLIDATED
                                             CORE PORTFOLIO      RMI        OTHER        TOTALS
                                            ---------------- ---------- ------------ -------------
<S>                                         <C>              <C>        <C>          <C>
REVENUES:
Base rents, tenant escalations and
 reimbursements ...........................    $    97,787    $ 5,480    $   7,602    $   110,869
Equity in earnings of real estate joint
 ventures and service companies ...........             --         --          483            483
Interest and other income .................            209         --       13,784         13,993
                                               -----------    -------    ---------    -----------
Total Revenues ............................         97,996      5,480       21,869        125,345
                                               -----------    -------    ---------    -----------
EXPENSES:
Property operating expenses ...............         37,202        823        2,654         40,679
Marketing, general and administrative .....          4,384        158        2,262          6,804
Interest ..................................          7,428        128       13,218         20,774
Depreciation and amortization .............         18,684      1,343        1,841         21,868
                                               -----------    -------    ---------    -----------
Total Expenses ............................         67,698      2,452       19,975         90,125
                                               -----------    -------    ---------    -----------
Income before preferred dividends and
 distributions, minority interests and
 extraordinary loss .......................    $    30,298    $ 3,028    $   1,894    $    35,220
                                               ===========    =======    =========    ===========
Total assets ..............................    $ 2,104,169    $    --    $ 576,995    $ 2,681,164
                                               ===========    =======    =========    ===========
</TABLE>

                                       13
<PAGE>

     The  following  table  sets  forth the components of the Company's revenues
and  expenses  and other related disclosures for the nine months ended September
30, 2000 and 1999 (in thousands):
<TABLE>
<CAPTION>
                                                   NINE MONTHS ENDED
                                       ------------------------------------------
                                                   SEPTEMBER 30, 2000
                                       ------------------------------------------
                                                                    CONSOLIDATED
                                        CORE PORTFOLIO     OTHER       TOTALS
                                       ---------------- ---------- --------------
<S>                                    <C>              <C>        <C>
REVENUES:
Base rents, tenant
 escalations and
 reimbursements ......................     $ 325,218     $ 6,865      $ 332,083
Equity in earnings of real
 estate joint ventures and
 service companies ...................            --       3,893          3,893
Interest and other income ............           855      46,584         47,439
                                           ---------     -------      ---------
Total Revenues .......................       326,073      57,342        383,415
                                           ---------     -------      ---------
EXPENSES:
Property operating expenses ..........       113,963       1,815        115,778
Marketing, general and
 administrative ......................        15,434       4,717         20,151
Interest .............................        28,218      44,449         72,667
Depreciation and
 amortization ........................        60,670       6,850         67,520
                                           ---------     -------      ---------
Total Expenses .......................       218,285      57,831        276,116
                                           ---------     -------      ---------
Income (loss) before preferred
 dividends and
 distributions, minority
 interests and extraordinary loss          $ 107,788     $  (489)     $ 107,299
                                           =========     =======      =========

<CAPTION>
                                                           NINE MONTHS ENDED
                                       ---------------------------------------------------------
                                                          SEPTEMBER 30, 1999
                                       ---------------------------------------------------------
                                                                                    CONSOLIDATED
                                        CORE PORTFOLIO      RMI          OTHER         TOTALS
                                       ---------------- ----------- -------------- -------------
<S>                                    <C>              <C>         <C>            <C>
REVENUES:
Base rents, tenant
 escalations and
 reimbursements ......................     $ 240,753     $ 15,380     $   11,150     $ 267,283
Equity in earnings of real
 estate joint ventures and
 service companies ...................            --           --          1,372         1,372
Interest and other income ............           422            2         23,614        24,038
                                           ---------     --------     ----------     ---------
Total Revenues .......................       241,175       15,382         36,136       292,693
                                           ---------     --------     ----------     ---------
EXPENSES:
Property operating expenses ..........        84,912        2,390          3,823        91,125
Marketing, general and
 administrative ......................        12,184          456          3,601        16,241
Interest .............................        17,179          671         35,770        53,620
Depreciation and
 amortization ........................        47,677        3,710          4,699        56,086
                                           ---------     --------     ----------     ---------
Total Expenses .......................       161,952        7,227         47,893       217,072
                                           ---------     --------     ----------     ---------
Income (loss) before preferred
 dividends and
 distributions, minority
 interests and extraordinary loss          $  79,223     $  8,155     $  (11,757)    $  75,621
                                           =========     ========     ==========     =========
</TABLE>

10. OTHER INVESTMENTS AND ADVANCES
     During  1997,  the  Company  formed  FrontLine  Capital Group ("FrontLine")
(formerly  Reckson  Service  Industries,  Inc.)  and  Reckson  Strategic Venture
Partners,  LLC  ("RSVP").  In  connection  with  the formation of FrontLine, the
Operating   Partnership  established  a  credit  facility  with  FrontLine  (the
"FrontLine  Facility")  in the amount of $100 million for FrontLine's e-commerce
and  e-services operations and other general corporate purposes. As of September
30,  2000,  the  Company  had  advanced  approximately  $92.5  million under the
FrontLine  Facility.  In  addition,  the  Operating Partnership has approved the
funding  of  investments  of  up  to  $100  million  with  or in RSVP (the "RSVP
Commitment"),  through  RSVP-controlled joint venture REIT-qualified investments
or  advances made to FrontLine under terms similar to the FrontLine Facility. As
of  September  30,  2000,  approximately $77.5 million had been invested through
the  RSVP  Commitment,  of  which $37.6 million represents RSVP-controlled joint
venture  REIT-qualified  investments  and  $39.9  million represents advances to
FrontLine  under the RSVP Commitment. In addition, as of September 30, 2000, the
Company,  through  its Credit Facility, has allocated approximately $3.2 million
in  outstanding undrawn letters of credit for the benefit of FrontLine. Both the
FrontLine  Facility  and  the  RSVP  Commitment  have  a  term of five years and
advances  under  each are recourse obligations of FrontLine. Interest accrues on
advances  made under the credit facilities at a rate equal to the greater of (a)
the  prime rate plus two percent and (b) 12% per annum, with the rate on amounts
that  are  outstanding  for  more than one year increasing annually at a rate of
four  percent  of  the prior year's rate. Prior to maturity, interest is payable
quarterly  but  only  to  the  extent  of  net cash flow and on an interest-only
basis.  As  of September 30, 2000, interest accrued under the FrontLine Facility
and  RSVP Commitment was approximately $13.3 million of which approximately $3.2
million was received subsequent to September 30, 2000.

     During  November  1999,  the  Board of Directors of the Company approved an
amendment  to the FrontLine Facility and the RSVP Commitment to permit FrontLine
to  incur  secured debt and to pay interest thereon and to issue preferred stock
and to pay dividends thereon. In consideration of the


                                       14
<PAGE>

amendments,  FrontLine  paid  the  Operating  Partnership a fee of approximately
$3.6  million in the form of shares of FrontLine common stock. Such fee has been
recognized in income over an estimated nine month benefit period.

     FrontLine  currently  has  two  distinct  operating  units:  one  of  which
represents  its  interest  in  HQ Global Holdings, Inc., the largest provider of
flexible  officing  solutions  in  the  world,  and  the  other which represents
interests  in  its  e-commerce  and  e-services  partner companies. RSVP invests
primarily  in  real estate and real estate related operating companies generally
outside of the Company's core office and industrial focus.


                                       15
<PAGE>

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

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

     The   Company   considers   certain  statements  set  forth  herein  to  be
forward-looking  statements  within the meaning of Section 27A or the Securities
Act  of  1933,  as  amended,  and  Section 21E of the Securities Exchange Act of
1934,  as  amended,  with  respect  to  the  Company's  expectations  for future
periods.  Certain  forward-looking  statements,  including,  without limitation,
statements  relating to the timing and success of acquisitions, the financing of
the  Company's  operations, the ability to lease vacant space and the ability to
renew   or  relet  space  under  expiring  leases,  involve  certain  risks  and
uncertainties.  Although the Company believes that the expectations reflected in
such  forward-looking statements are based on reasonable assumptions, the actual
results  may  differ  materially  from  those  set  forth in the forward-looking
statements  and  the  Company can give no assurance that its expectation will be
achieved.  Certain factors that might cause the results of the Company to differ
materially  from  those  indicated  by  such forward-looking statements include,
among  other  factors, general economic conditions, general real estate industry
risks,  tenant  default  and  bankruptcies, loss of major tenants, the impact of
competition  and  acquisition,  redevelopment and development risks, the ability
to  finance  business  opportunities  and  local  real  estate  risks such as an
oversupply  of  space  or a reduction in demand for real estate in the Company's
real  estate  markets.  Consequently,  such forward-looking statements should be
regarded   solely   as  reflections  of  the  Company's  current  operating  and
development  plans  and  estimates.  These  plans  and  estimates are subject to
revisions  from  time  to  time as additional information becomes available, and
actual results may differ from those indicated in the referenced statements.


OVERVIEW AND BACKGROUND

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

     The  Company  owns  all  of  the  interests  in its real properties through
Reckson  Operating  Partnership,  L.P.  (the  "Operating  Partnership").  As  of
September  30,  2000,  the  Company  owned  and  operated  81  office properties
comprising  approximately  14.2  million  square feet, 103 industrial properties
comprising  approximately  6.6  million  square  feet  and two retail properties
comprising  approximately  20,000  square  feet,  located in the Tri-State Area.
During  the  quarter  ended  September  30,  2000,  the  Company  completed  the
repositioning   of   two  former  industrial  properties  into  Class  A  office
properties.  The  Company  is  in  the process of developing one office property
encompassing  approximately  277,500  square  feet  and  one industrial property
encompassing  approximately 206,000 square feet. The Company also owns a 357,000
square  foot  office  building located in Orlando, Florida and approximately 315
acres  of  land  in  14  separate  parcels  of  which  the  Company  can develop
approximately  1.9 million square feet of office space and approximately 224,000
square  feet  of  industrial  space. The Company also has invested approximately
$297.7  million  in  mortgage  notes  encumbering  one  Class  A office property
encompassing  approximately  1.4 million square feet, approximately 403 acres of
land  located in New Jersey and approximately $17.1 million in a note receivable
secured  by a partnership interest in Omni Partner's, L.P., owner of the Omni, a
575,000  square  foot Class A office property located in Uniondale, New York. On
November  2,  2000,  a mortgage note investment and related acquisition costs of
approximately  $292.5  million were exchanged, through a pre-packaged consensual
bankruptcy,  for  title  to the property which was secured by such mortgage note
investment.

     During  1997,  the  Company  formed  FrontLine  Capital Group ("FrontLine")
(formerly  Reckson  Service  Industries,  Inc.)  and  Reckson  Strategic Venture
Partners,  LLC  ("RSVP").  In  connection  with  the formation of FrontLine, the
Operating   Partnership  established  a  credit  facility  with  FrontLine  (the
"FrontLine  Facility")  in the amount of $100 million for FrontLine's e-commerce
and  e-services operations and other general corporate purposes. As of September
30,  2000,  the  Company  had  advanced  approximately  $92.5  million under the
FrontLine Facility. In addition, the Operating Partnership has


                                       16
<PAGE>
approved  the  funding of investments of up to $100 million with or in RSVP (the
"RSVP   Commitment"),   through  RSVP-controlled  joint  venture  REIT-qualified
investments  or  advances made to FrontLine under terms similar to the FrontLine
Facility.  As  of  September  30,  2000,  approximately  $77.5  million had been
invested  through  the  RSVP  Commitment,  of  which  $37.6  million  represents
RSVP-controlled  joint  venture  REIT-qualified  investments  and  $39.9 million
represents  advances  to FrontLine under the RSVP Commitment. In addition, as of
September  30,  2000,  the  Company,  through its unsecured credit facility, has
allocated  approximately  $3.2  million in outstanding undrawn letters of credit
for  the  benefit  of  FrontLine.  Both  the  FrontLine  Facility  and  the RSVP
Commitment  have  a  term  of  five  years  and advances under each are recourse
obligations  of  FrontLine.  Interest  accrues on advances made under the credit
facilities  at  a  rate  equal  to  the  greater  of (a) the prime rate plus two
percent  and  (b)  12%  per annum, with the rate on amounts that are outstanding
for  more  than  one  year  increasing annually at a rate of four percent of the
prior  year's rate. Prior to maturity, interest is payable quarterly but only to
the  extent  of  net cash flow of FrontLine and on an interest-only basis. As of
September  30,  2000,  interest  accrued  under  the FrontLine Facility and RSVP
Commitment  was  approximately $13.3 million of which approximately $3.2 million
was received subsequent to September 30, 2000.

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

     FrontLine  currently  has  two  distinct  operating  units:  one  of  which
represents  its  interest  in  HQ Global Holdings, Inc., the largest provider of
flexible  officing  solutions  in  the  world,  and  the  other which represents
interests  in  its  e-commerce  and  e-services  partner companies. RSVP invests
primarily  in  real estate and real estate related operating companies generally
outside of the Company's core office and industrial focus.

     On  August  9,  1999,  the  Company executed a contract for the sale of its
interest   in  Reckson  Morris  Operating  Partnership,  L.  P.  ("RMI"),  which
consisted  of  28  properties,  comprising approximately 6.1 million square feet
and  three  other  big  box  industrial  properties  to  Keystone Property Trust
("KTR").  In  addition,  the  Company  also  entered  into a sale agreement with
Matrix  relating  to  a first mortgage note and certain industrial land holdings
(the  "Matrix Sale"). The combined total sale price is $310 million ($52 million
of  which is attributable to the Morris Companies and its affiliates in the form
of  $41.6  million  of  preferred units of KTR's operating partnership and $10.4
million  of  debt  relief)  and  consists  of  a  combination  of (i) cash, (ii)
convertible  preferred  and  common stock of KTR, (iii) preferred units of KTR's
operating  partnership,  (iv)  relief  of debt and (v) a purchase money mortgage
note secured by certain land that is being sold to Matrix.

     As  of  September  30,  2000, the Matrix Sale and the sale of the Company's
interest  in  RMI was completed for a combined sales price of approximately $258
million  (net  of  minority  partner's  interest).  The  combined  consideration
consisted  of  approximately  (i)  $159.7  million  in cash, (ii) $60 million of
preferred  stock  and  operating partnership units of KTR, (iii) $1.5 million in
common  stock  of  KTR,  (iv) approximately $26.7 million of debt relief and (v)
approximately  $10.1  million  in  purchase  money  mortgages.  As a result, the
Company  realized  a  gain of approximately $16.7 million of which approximately
$6.7  million  was recognized during the current fiscal year. Cash proceeds from
the  sales were used primarily to repay borrowings under the Company's unsecured
credit  facility.  During  July  2000,  the  Company  redeemed approximately $20
million  of  the  preferred  stock  of  KTR which was used primarily for general
corporate purposes.

     In  July  1998,  the  Company formed a joint venture, Metropolitan Partners
LLC  "Metropolitan"),  with  Crescent Real Estate Equities Company, a Texas REIT
("Crescent")  for  the  purpose of acquiring Tower Realty Trust, Inc. ("Tower").
On  May  24, 1999 the Company completed the merger with Tower and acquired three
Class  A  office properties located in New York City totaling 1.6 million square
feet  and  one  office  property  located  on Long Island totaling approximately
101,000 square feet. In addition,


                                       17
<PAGE>

pursuant  to  the merger, the Company also acquired certain office properties, a
property  under  development and land located outside of the Tri-State Area. All
of  the  assets  acquired  in  the merger located outside of the Tri-State Area,
other  than  a  357,000 square foot office property located in Orlando, Florida,
have been sold.

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

     On  September  28, 2000, the Company formed a joint venture (the "Tri-State
JV")  with  Teachers  Insurance  and  Annuity  Association and contributed eight
Class  A suburban office properties aggregating approximately 1.5 million square
feet  to  the  Tri-State JV in exchange for approximately $136 million and a 51%
majority  ownership  interest  in  the  Tri-State  JV.  As a result, the Company
realized  a  gain  of  approximately  $15.2 million. Cash proceeds received were
used  primarily  to  repay  borrowings  under  the  Company's  unsecured  credit
facility.

     The  market  capitalization  of  the  Company  at  September  30,  2000 was
approximately  $3.4 billion. The Company's market capitalization is based on the
sum  of  (i)  the  market value of the Company's Class A common stock and common
units  of limited partnership interest in the Operating Partnership ("OP Units")
(assuming  conversion)  of  $25.50 per share/unit (based on the closing price of
the  Company's  Class  A  common  stock  on September 30, 2000), (ii) the market
value  of  the  Company's Class B common stock of $26.75 per share (based on the
closing  price  of  the  Company's  Class B common stock on September 30, 2000),
(iii)  the  liquidation preference value of the Company's Series A preferred and
Series  B  preferred  stock  of  $25  per share, (iv) the liquidation preference
value  of  the  Operating  Partnership's preferred units of $1,000 per unit, (v)
the  contributed  value  of Metropolitan's preferred interest of $85 million and
(vi)  the  approximately $1.3 billion (including its share of joint venture debt
and  net  of  minority partners' interests) of debt outstanding at September 30,
2000.  As  a  result,  the  Company's  total debt to total market capitalization
ratio at September 30, 2000 equaled approximately 39.5%.


RESULTS OF OPERATIONS

     The  Company's  total  revenues increased by $15.0 million or 11.9% for the
three  months  ended September 30, 2000 as compared to the 1999 period. Property
operating  revenues,  which  include  base  rents  and  tenant  escalations  and
reimbursements  ("Property  Operating  Revenues")  increased  by $4.9 million or
4.4%  for  the  three  months  ended  September 30, 2000 as compared to the 1999
period.  The  increase  in  Property  Operating  Revenues is attributable to the
acquisition   of  1350  Avenue  of  the  Americas  and  the  development  and/or
redevelopment  of  several  properties. In addition, Property Operating Revenues
were  also  positively  impacted by approximately $5.2 million from increases in
occupancies  and  rental  rates  in  our "same store" properties. Offsetting the
increases   in   Property   Operating   Revenues  was  the  negative  impact  of
approximately  $8.0  million  of  expired  rent  attributable  to a major tenant
vacating  at  919  Third  Avenue.  Furthermore, Property Operating Revenues were
negatively  impacted  by  approximately $5.2 million of rent attributable to the
industrial  joint  venture  properties  formerly  owned by RMI, which properties
were  sold on September 27, 1999 as well as $4.6 million of rent attributable to
certain  Tower  properties  disposed of subsequent to the Tower transaction. The
Company's  base  rent  reflects  the  positive  impact of the straight-line rent
adjustment  of  $12.2  million  for the three months ended September 30, 2000 as
compared  to  $2.1  million  for  the 1999 period. Included in the $12.2 million
straight-line  rent adjustment is $8.2 million attributable to 919 Third Avenue.
This  amount  is  attributable  to  the free rent periods contained in the three
tenants'  leases  which  replaced  the major tenant vacating as described above.
The  remaining  balance of the increase in total revenues is attributable to the
gain  on  sales  of  real  estate,  interest  income  and  fees  relating to the
FrontLine   Facility   and   the  RSVP  Commitment  and  earnings  generated  by
RSVP-controlled joint venture REIT-qualified investments.


                                       18
<PAGE>
     Property  operating expenses, real estate taxes and ground rents ("Property
Expenses")  increased  by  $.6  million  or  1.4%  for  the  three  months ended
September  30,  2000  as compared to the 1999 period. This increase is primarily
due  to  the  acquisition  of  1350  Avenue  of  the  Americas  in January 2000.
Offsetting  the  increase  in  Property Expenses is a reduction of approximately
$.8  million  and  $2.2  million,  respectively,  relating  to the RMI and Tower
dispositions.

     Gross  Operating  Margins  (defined  as  Property  Operating  Revenues less
Property  Expenses,  taken  as  a percentage of Property Operating Revenues) for
the  three  months  ended  September  30  ,  2000  and 1999 were 64.4% and 63.3%
respectively.  The increase in Gross Operating Margins is primarily attributable
to the increase in rental rates and occupancy levels.

     Marketing,  general  and administrative expenses increased by approximately
$126,000  for  the three months ended September 30, 2000 as compared to the 1999
period.  Marketing, general and administrative expenses as a percentage of total
revenues  were 4.9% for the three months ended September 30, 2000 as compared to
5.4% for the 1999 period.

     Interest  expense  increased  by  $3.9  million  for the three months ended
September  30,  2000  as compared to the 1999 period. The increase is due to new
debt  incurred  with  the  1350  Avenue  of  the  Americas  acquisition  and  is
attributable  to  an increase in interest expense on the Company's variable rate
debt due to rising interest rates.

     The  Company's  total  revenues increased by $90.7 million or 31.0% for the
nine  months  ended  September 30, 2000 as compared to the 1999 period. Property
Operating  Revenues,  increased  by  $64.8  million or 24.2% for the nine months
ended  September  30,  2000  as  compared  to  the  1999 period. The increase in
Property  Operating  Revenues  is  substantially  attributable to the properties
retained  from  the  Tower portfolio acquisition in May 1999, the acquisition of
the  first  mortgage  note secured by 919 Third Avenue (which property and other
revenue  was  reflected  in  Property  Operating  Revenues) in June 1999 and the
acquisition  of  1350  Avenue  of  the  Americas  in  January 2000. In addition,
Property  Operating Revenues were also positively impacted by approximately $8.9
million  from  increases  in  occupancies  and  rental rates in our "same store"
properties.  Offsetting  the  increase  in  Property  Operating Revenues was the
negative  impact  of approximately $14.8 million of rent attributable to the RMI
disposition  and  approximately  $7.3  million  of  rent attributable from Tower
properties  disposed  of subsequent to the Tower transaction. The Company's base
rent  reflects the positive impact of the straight-line rent adjustment of $25.0
million  for  the  nine  months  ended  September  30,  2000 as compared to $6.8
million  for  the  1999  period.  Included in the $25.0 million is $13.6 million
attributable  to  919 Third Avenue. This amount is attributable to the free rent
periods  contained  in the three tenants' leases which replaced the major tenant
vacating  as  described  above.  The  remaining balance of the increase in total
revenues  is  attributable  to the gain on sales of real estate, interest income
and  fees  relating  to  the  FrontLine  Facility  and  the  RSVP Commitment and
earnings  generated by RSVP-controlled joint venture REIT-qualified investments.
<PAGE>

     Property  Expenses  increased by $24.7 million or 27.1% for the nine months
ended  September  30,  2000  as  compared  to  the 1999 period. This increase is
primarily  due  to  the  acquisition  of  the  Tower  portfolio in May 1999, the
acquisition  of  the  first  mortgage  note  secured by 919 Third Avenue in June
1999,   (which   operations   were  reflected  in  Property  Expenses)  and  the
acquisition  of  1350  Avenue  of  the  Americas in January 2000. Offsetting the
increases  in Property Expenses is a reduction of expenses of approximately $2.2
million   and  $3.2  million,  respectively,  relating  to  the  RMI  and  Tower
dispositions.

     Gross  Operating  Margins for the nine months ended September 30 , 2000 and
1999  were  65.1%  and  65.9%,  respectively.  The  decrease  in Gross Operating
Margins  is  primarily  attributable  to  a  larger proportionate share of gross
operating  margin derived from office properties, which has a lower gross margin
percentage,  in  2000  compared  to  1999. The higher proportionate share of the
gross  operating  margins  is  attributable  to  the  office properties acquired
during  the  period  May  1999  through  January 2000 and the disposition of net
leased  industrial  properties  in September 1999. This shift in the composition
of  the  portfolio  was  offset by increases in rental rates and occupancies and
operating efficiencies realized.

     Marketing,  general  and  administrative expenses increased by $3.9 million
for  the  nine  months  ended September 30, 2000 as compared to the 1999 period.
The  increase  is  due  to  the  increased  costs  of  managing  the acquisition
properties  and  the  increase  in corporate management and administrative costs
associated  with the growth of the Company including the opening of its New York
City division in March

                                       19
<PAGE>
1999.  Marketing,  general  and administrative expenses as a percentage of total
revenues  were  5.3% for the nine months ended September 30, 2000 as compared to
5.6% for the 1999 period.

     Interest  expense  increased  by  $19.0  million  for the nine months ended
September  30,  2000  as  compared to the 1999 period. The increase is primarily
due  to  secured borrowings assumed in the Tower acquisition as well as new debt
incurred   with  the  Tower  and  1350  Avenue  of  the  Americas  acquisitions.
Additionally,  the  increase  is  also  due  to $300 million of Senior Unsecured
Notes  issued  on  March  26,  1999  and  an  increased  cost attributable to an
increased  average  balance  on the Company's unsecured credit facility and term
loan.  The  weighted  average balance on the Company's unsecured credit facility
and  term  loan  was $465.6 million for the nine months ended September 30, 2000
as compared to $446.1 million for the nine months ended September 30, 1999.

LIQUIDITY AND CAPITAL RESOURCES

     On  September  7,  2000,  the  Company  obtained  a three year $575 million
unsecured  revolving  credit  facility  (the  "Credit  Facility") from The Chase
Manhattan  Bank,  as  administrative agent, UBS Warburg LLC as syndication agent
and  Deutsche  Bank  as  documentation  agent.  The  Credit  Facility matures in
September,  2003  and  borrowings under the Credit Facility are currently priced
off of LIBOR plus 105 basis points.

     The  Credit Facility replaced the Company's existing $500 million unsecured
credit  facility  (together with the Credit Facility, the "Credit Facility") and
$75  million  term  loan.  As  a result, certain deferred loan costs incurred in
connection  with  the  existing  unsecured  credit  facility  and term loan were
written  off. Such amount is reflected as an extraordinary loss in the Company's
consolidated statements of income.

     The  Company  utilizes the Credit Facility primarily to finance real estate
investments,  fund  its  real  estate  development  activities  and  for working
capital  purposes. At September 30, 2000, the Company had availability under the
Credit  Facility to borrow an additional $212.4 million (of which, $62.3 million
has been allocated for outstanding undrawn letters of credit).

     On  November  2,  2000,  the  Company  obtained  a  three year secured $250
million  first  mortgage commitment on the property located at 919 Third Avenue,
New  York  N.  Y. Interest rates on borrowings under the commitment are based on
LIBOR  plus  a  spread  ranging  from 110 basis points to 140 basis points based
upon  the  outstanding  balance.  At  closing, $200 million was funded under the
commitment  at  an interest rate of LIBOR plus 120 basis points. In addition, in
connection  with the $200 million initial funding, the Company purchased a LIBOR
interest  rate  hedge  that  provides  for  a  maximum  LIBOR rate of 9.25%. The
initial  funding  was  used  primarily to repay outstanding borrowings under the
Company's Credit Facility.
<PAGE>
     On  May  24,  1999,  the  Company  issued  11,694,567  shares  of  Class  B
Exchangeable  Common Stock, par value $.01 per share, of the Company (the "Class
B   common   stock"),  which  were  valued  for  generally  accepted  accounting
principles  ("GAAP")  purposes  at  $26  per  share  for  total consideration of
approximately  $304.1  million. The shares of Class B common stock were entitled
to  receive  an  initial  annual  dividend of $2.24 per share, which dividend is
subject  to  adjustment  annually.  On  July 1, 2000, the annual dividend on the
Class B Common Stock was increased to $2.40 per share.

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

     On  June  20,  2000,  the Company issued 4,181,818 shares of Class A common
stock  in  exchange  for  four million shares of Series B Convertible Cumulative
Preferred Stock with a liquidation preference value of $100 million.

     The  Board of Directors of the Company has authorized the purchase of up to
three  million  shares  of  the Company's Class B common stock. In addition, the
Board  of  Directors  has  also  authorized  the purchase of up to an additional
three  million  shares  of the Company's Class B common stock and/or its Class A
common  stock. The buy-back program will be effected in accordance with the safe
harbor  provisions  of the Securities Exchange Act of 1934 and may be terminated
by  the Company at any time. As of September 30, 2000, the Company had purchased
and  retired  1,410,804  shares  of Class B Common Stock for approximately $30.3
million.

                                       20
<PAGE>

     The  Company's  indebtedness  at  September  30, 2000 totaled approximately
$1.3  billion  (including  its  share  of joint venture debt and net of minority
partners'  interests)  and was comprised of $362.6 million outstanding under the
Credit  Facility,  approximately  $449.4  million  of senior unsecured notes and
approximately  $516.7  million  of mortgage indebtedness. Based on the Company's
total  market capitalization of approximately $3.4 billion at September 30, 2000
(calculated  based  on  the sum of (i) the market value of the Company's Class A
common  stock  and  OP  Units, assuming conversion, (ii) the market value of the
Company's  Class  B  common stock, (iii) the liquidation preference value of the
Company's  preferred  stock,  (iv)  the  liquidation  preference  value  of  the
Operating   Partnership's   preferred   units,  (v)  the  contributed  value  of
Metropolitan's  preferred  interest  and  (vi)  the  $1.3  billion of debt), the
Company's   debt   represented   approximately   39.5%   of   its  total  market
capitalization.
     Historically,  rental revenue has been the principal source of funds to pay
operating   expenses,   debt   service   and   capital  expenditures,  excluding
non-recurring  capital  expenditures of the Company. The Company expects to meet
its  short-term  liquidity  requirements generally through its net cash provided
by  operating  activities  along  with the Credit Facility previously discussed.
The  Company  expects  to  meet  certain  of  its financing requirements through
long-term  secured  and unsecured borrowings and the issuance of debt and equity
securities  of the Company. In addition, the Company also believes that it will,
from  time  to  time, generate funds from the sale of certain of its real estate
properties  or  interests  therein. The Company will refinance existing mortgage
indebtedness  or  indebtedness  under  the Credit Facility at maturity or retire
such  debt  through  the  issuance  of  additional debt securities or additional
equity  securities. The Company anticipates that the current balance of cash and
cash  equivalents  and  cash flows from operating activities, together with cash
available  from  borrowings  and  equity offerings, will be adequate to meet the
capital  and  liquidity  requirements  of  the  Company  in  both  the short and
     long-term.  In  order to qualify as a REIT for federal income tax purposes,
the  Company  is  required to make distributions to its stockholders of at least
95%  of  REIT  taxable  income.  The  Company  expects to use its cash flow from
operating  activities  for  distributions  to  stockholders  and  for payment of
recurring,  non-incremental revenue-generating expenditures. The Company intends
to invest amounts accumulated for distribution in short-term investments.

INFLATION
     The  office  leases  generally  provided  for  fixed base rent increases or
indexed  escalations.  In  addition,  the  office  leases  provide  for separate
escalations  of  real  estate  taxes  and electric costs over a base amount. The
industrial  leases  generally provide for fixed base rent increases, direct pass
through  of  certain operating expenses and separate real estate tax escalations
over  a  base  amount.  The  Company  believes  that  inflationary  increases in
expenses  will  be  offset by contractual rent increases and expense escalations
described above.
     The  Credit Facility and a certain mortgage note payable bear interest at a
variable  rate,  which  will  be  influenced  by  changes in short-term interest
rates, and is sensitive to inflation.

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

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


                                       21
<PAGE>

     The  following  table presents the Company's FFO calculation (unaudited and
in thousands, except per share/unit data):
<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED               NINE MONTHS ENDED
                                                                         SEPTEMBER 30,                   SEPTEMBER 30,
                                                                 -----------------------------   ------------------------------
                                                                      2000            1999            2000             1999
                                                                 -------------   -------------   --------------   -------------
<S>                                                              <C>             <C>             <C>              <C>
Net income available to common shareholders ..................     $ 29,978        $ 21,516        $  68,792        $ 44,035
Adjustments for basic funds from operations:
 Add:
  Limited partners' minority interest in the operating
   partnership ...............................................        4,050           3,014            9,411           7,082
  Real estate depreciation and amortization ..................       23,632          21,312           66,184          54,406
  Minority partners' interests in consolidated partnerships .         1,874           2,150            5,773           4,933
  Extraordinary loss .........................................        1,396             555            1,396             555
 Less:
  Gain on sales of real estate ...............................       15,206          10,052           21,868          10,052
  Amounts distributable to minority partners in
   consolidated partnerships .................................        2,247           2,607            6,764           6,031
                                                                   --------        --------        ---------        --------
Basic Funds From Operations (FFO) ............................       43,477          35,888          122,924          94,928
 Add:
  Dividends and distributions on dilutive shares and units .          7,679           9,579           26,708          21,283
                                                                   --------        --------        ---------        --------
  Diluted FFO ................................................     $ 51,156        $ 45,467        $ 149,632        $116,211
                                                                   ========        ========        =========        ========
Basic FFO calculations:
 Weighted average common shares outstanding ..................       55,462          51,824           52,595          45,724
 Weighted average units of limited partnership interest
  outstanding ................................................        7,695           7,702            7,697           7,706
                                                                   --------        --------        ---------        --------
 Basic weighted average common shares and units
  outstanding ................................................       63,157          59,526           60,292          53,430
                                                                   ========        ========        =========        ========
 Basic FFO per weighted average common share or unit .........     $   .69         $   .60         $    2.04        $   1.78
 Basic weighted average dividends or distributions per share
  or unit ....................................................     $   .42         $   .41         $    1.25        $   1.14
 Basic FFO payout ratio ......................................        61.2%           67.6%             61.2%           64.3%
Diluted FFO calculations:
 Basic weighted average common shares and units
  outstanding ................................................       63,157          59,526           60,292          53,430
 Adjustments for dilutive FFO weighted average shares and
  unit outstanding:
  Add:
   Weighted average common stock equivalents .................          588             430              424             417
   Weighted average shares of Series A Preferred Stock .              8,060           8,060            8,060           8,060
   Weighted average shares of Series B Preferred Stock .              1,919           5,758            4,315           2,552
   Weighted average shares of minority partners
     preferred interest ......................................        3,454           3,454            3,454           1,645
   Weighted average units of preferred limited
     partnership interest ....................................        1,367           1,367            1,367           1,367
                                                                   --------        --------        ---------        --------
 Dilutive FFO weighted average shares and units
  outstanding ................................................       78,545          78,595           77,912          67,471
                                                                   ========        ========        =========        ========
 Diluted FFO per weighted average share or unit ..............     $   .65         $   .58         $    1.92        $   1.72
 Diluted weighted average dividends or distributions per
  share or unit ..............................................     $   .41         $   .40         $    1.22        $   1.13
 Diluted FFO payout ratio ....................................        63.7%           68.9%             63.7%           65.5%

</TABLE>


                                       22
<PAGE>

     The  following  table presents the Company's CAD calculation (unaudited and
in thousands, except per share/unit data):
<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED                NINE MONTHS ENDED
                                                                   SEPTEMBER 30,                    SEPTEMBER 30,
                                                           -----------------------------   -------------------------------
                                                                2000            1999            2000             1999
                                                           -------------   -------------   --------------   --------------
<S>                                                        <C>             <C>             <C>              <C>
Basic Funds From Operations ............................     $  43,477       $ 35,888        $ 122,924        $  94,928
Adjustments for basic cash available for distribution:
 Less:
  Straight line rents (Note a) .........................        12,153          2,086           24,991            6,600
  Non-incremental capitalized tenant improvements
   and leasing commissions .............................         4,239          1,618            8,982            3,673
  Non-incremental capitalized improvements .............         1,075            833            3,773            2,312
                                                             ---------       --------        ---------        ---------
Basic Cash Available for Distribution (CAD) ............        26,010         31,351           85,178           82,343
 Add: ..................................................
  Dividends and distributions on dilutive shares and
   units ...............................................            --          9,579            5,597           21,283
                                                             ---------       --------        ---------        ---------
  Diluted CAD ..........................................     $  26,010       $ 40,930        $  90,775        $ 103,626
                                                             =========       ========        =========        =========
Basic CAD calculations:
 Weighted average common shares outstanding ............        55,462         51,824           52,595           45,724
 Weighted average units of limited partnership
  interest outstanding .................................         7,695          7,702            7,697            7,706
                                                             ---------       --------        ---------        ---------
 Basic weighted average common shares and units
  outstanding ..........................................        63,157         59,526           60,292           53,430
                                                             =========       ========        =========        =========
 Basic CAD per weighted average common share or
  unit .................................................     $    .41        $   .53         $    1.41        $    1.54
 Basic weighted average dividends or distributions
  per share or unit ....................................     $    .42        $   .41         $    1.25        $    1.14
 Basic CAD payout ratio (Note a) .......................        102.4%          77.4%             88.3%            74.1%
Diluted CAD calculations:
 Basic weighted average common shares and units
  outstanding ..........................................        63,157         59,526           60,292           53,430
 Adjustments for dilutive CAD weighted average
  shares and units outstanding:
 Add:
  Weighted average common stock equivalents ............           588            430              424              417
  Weighted average shares of Series A Preferred
   Stock ...............................................            --          8,060               --            8,060
  Weighted average shares of Series B Preferred
   Stock ...............................................            --          5,758               --            2,552
  Weighted average shares of minority partners
   preferred interest ..................................            --          3,454            3,454            1,645
  Weighted average units of preferred limited
   partnership interest ................................            --          1,367              598            1,367
                                                             ---------       --------        ---------        ---------
Dilutive CAD weighted average shares and units
 outstanding ...........................................        63,745         78,595           64,768           67,471
                                                             =========       ========        =========        =========
Diluted CAD per weighted average share or unit .........     $    .41        $   .52         $    1.40        $    1.54
Diluted weighted average dividends or distributions
 per share or unit .....................................     $    .42        $   .40         $    1.24        $    1.13
Diluted CAD payout ratio (Note a) ......................        103.2%          76.6%             88.5%            73.5%
</TABLE>

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

(a) Includes  straight  line  rental income attributable to the property located
    at  919  Third  Avenue,  New  York, N. Y. of $8,175, $834, $13,560 and $995,
    respectively.


                                       23
<PAGE>

               SUPPLEMENTAL INFORMATION ON CAPITAL EXPENDITURES,
                  TENANT IMPROVEMENTS AND LEASING COMMISSIONS

     The   following   table   summarizes   the   expenditures   incurred   for
non-incremental   capital   expenditures,   tenant   improvements   and  leasing
commissions  for  the  Company's  office  and industrial properties for the nine
month  period  ended  September  30,  2000  and  the  historical average of such
non-incremental   capital   expenditures,   tenant   improvements   and  leasing
commissions for the years 1996 through 1999.

            NON-INCREMENTAL REVENUE GENERATING CAPITAL EXPENDITURES
<TABLE>
<CAPTION>
                                                                                                           NINE MONTHS
                                                                                            1996 -1999        ENDED
                                1996           1997            1998            1999          AVERAGE      SEPT. 30, 2000
                           ------------- --------------- --------------- --------------- --------------- ---------------
<S>                        <C>           <C>             <C>             <C>             <C>             <C>
SUBURBAN OFFICE PROPERTIES
 Total ...................   $ 375,026     $ 1,108,675     $ 2,004,976     $ 2,298,899     $ 1,446,894     $ 2,376,738
 Per Square Foot .........        0.13            0.22            0.23            0.23            0.20            0.24
CBD OFFICE PROPERTIES
 Total ...................      N/A            N/A             N/A             N/A             N/A         $   916,657
 Per Square Foot .........      N/A            N/A             N/A             N/A             N/A                0.43
INDUSTRIAL PROPERTIES
 Total ...................   $ 670,751     $   733,233     $ 1,205,266     $ 1,048,688     $   914,485     $   658,848
 Per Square Foot .........        0.18            0.15            0.12            0.11            0.14            0.09

</TABLE>
<PAGE>
NON-INCREMENTAL REVENUE GENERATING TENANT IMPROVEMENTS AND LEASING COMMISSIONS

<TABLE>
<CAPTION>
                                                                                                                  NINE MONTHS
                                                                                                   1996 -1999        ENDED
                                         1996          1997            1998            1999          AVERAGE     SEPT. 30, 2000
                                    ------------- -------------- --------------- --------------- -------------- ---------------
<S>                                 <C>           <C>            <C>             <C>             <C>            <C>
LONG ISLAND OFFICE PROPERTIES
 Tenant Improvements ..............   $ 523,574     $  784,044     $ 1,140,251     $ 1,009,357     $  864,307     $ 2,373,409
 Per Square Foot Improved .........        4.28           7.00            3.98            4.73           5.00            6.37
 Leasing Commissions ..............   $ 119,047     $  415,822     $   418,191     $   551,762     $  376,206     $ 1,995,078
 Per Square Foot Leased ...........        0.97           4.83            1.46            2.59           2.46            4.88
                                      ---------     ----------     -----------     -----------     ----------     -----------
 Total Per Square Foot ............   $    5.25     $    11.83     $      5.44     $      7.32     $     7.46     $     11.25
                                      =========     ==========     ===========     ===========     ==========     ===========
WESTCHESTER OFFICE PROPERTIES
 Tenant Improvements ..............   $ 834,764     $1,211,665     $   711,160     $ 1,316,611     $1,018,550     $   992,895
 Per Square Foot Improved .........        6.33           8.90            4.45            5.62           6.33            4.39
 Leasing Commissions ..............   $ 264,388     $  366,257     $   286,150     $   457,730     $  343,631     $   340,099
 Per Square Foot Leased ...........        2.00           2.69            1.79            1.96           2.11            3.00
                                      ---------     ----------     -----------     -----------     ----------     -----------
 Total Per Square Foot ............   $    8.33     $    11.59     $      6.24     $      7.58     $     8.44     $      7.39
                                      =========     ==========     ===========     ===========     ==========     ===========
CONNECTICUT OFFICE PROPERTIES (A)
 Tenant Improvements ..............   $  58,000     $1,022,421     $   202,880     $   179,043     $  449,952     $   342,973
 Per Square Foot Improved .........       12.45          13.39            5.92            4.88           9.16            4.86
 Leasing Commissions ..............   $       0     $  256,615     $   151,063     $   110,252     $  159,363     $   277,483
 Per Square Foot Leased ...........        0.00           3.36            4.41            3.00           2.69            3.93
                                      ---------     ----------     -----------     -----------     ----------     -----------
 Total Per Square Foot ............   $   12.45     $    16.75     $     10.33     $      7.88     $    11.85     $      8.79
                                      =========     ==========     ===========     ===========     ==========     ===========
NEW JERSEY OFFICE PROPERTIES
 Tenant Improvements ..............      N/A           N/A         $   654,877     $   454,054     $  554,466     $ 1,724,101
 Per Square Foot Improved .........      N/A           N/A                3.78            2.29           3.04            8.11
 Leasing Commissions ..............      N/A           N/A         $   396,127     $   787,065     $  591,596     $ 1,205,706
 Per Square Foot Leased ...........      N/A           N/A                2.08            3.96           3.02            5.76
                                      ---------     ----------     -----------     -----------     ----------     -----------
 Total Per Square Foot ............      N/A           N/A         $      5.86     $      6.25     $     6.06     $     13.87
                                      =========     ==========     ===========     ===========     ==========     ===========
NEW YORK OFFICE PROPERTIES
 Tenant Improvements ..............      N/A           N/A             N/A             N/A            N/A         $    11,977
 Per Square Foot Improved .........      N/A           N/A             N/A             N/A            N/A                0.51
 Leasing Commissions ..............      N/A           N/A             N/A             N/A            N/A         $   212,673
 Per Square Foot Leased ...........      N/A           N/A             N/A             N/A            N/A                9.01
                                      ---------     ----------     -----------     -----------     ----------     -----------
 Total Per Square Foot ............      N/A           N/A             N/A             N/A            N/A         $      9.52
                                      =========     ==========     ===========     ===========     ==========     ===========
INDUSTRIAL PROPERTIES
 Tenant Improvements ..............   $ 380,334     $  230,466     $   283,842     $   375,646     $  317,572     $   360,691
 Per Square Foot Improved .........        0.72           0.55            0.76            0.25           0.57            0.64
 Leasing Commissions ..............   $ 436,213     $   81,013     $   200,154     $   835,108     $  388,122     $   137,184
 Per Square Foot Leased ...........        0.82           0.19            0.44            0.56           0.50            0.24
                                      ---------     ----------     -----------     -----------     ----------     -----------
 Total Per Square Foot ............   $    1.54     $     0.74     $      1.20     $      0.81     $     1.07     $      0.88
                                      =========     ==========     ===========     ===========     ==========     ===========

</TABLE>

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

                                       24
<PAGE>

                               LEASE EXPIRATIONS

     The  following  table  sets  forth scheduled lease expirations for executed
leases as of September 30, 2000:


LONG ISLAND OFFICE PROPERTIES (EXCLUDING OMNI):
<TABLE>
<CAPTION>
         YEAR OF                           TOTAL RENTABLE        % OF TOTAL            PER             PER
          LEASE                NUMBER        SQUARE FEET      RENTABLE SQUARE      SQUARE FOOT     SQUARE FOOT
        EXPIRATION           OF LEASES        EXPIRING         FEET EXPIRING      S/L RENT (1)      RENT (2)
-------------------------   -----------   ----------------   -----------------   --------------   ------------
<S>                         <C>           <C>                <C>                 <C>              <C>
2000 ....................        13              37,717              1.2%           $ 21.01         $ 23.39
2001 ....................        40             179,285              5.8%           $ 22.94         $ 24.62
2002 ....................        33             165,462              5.4%           $ 22.24         $ 24.82
2003 ....................        49             291,296              9.4%           $ 22.12         $ 25.09
2004 ....................        45             275,654              8.9%           $ 23.04         $ 25.84
2005 ....................        67             603,218             19.5%           $ 22.17         $ 24.66
2006 AND THEREAFTER .....        85           1,543,154             49.8%                --              --
                                 --           ---------            -----
TOTAL ...................       332           3,095,786            100.0%
                                ===           =========            =====
</TABLE>

OMNI:

<TABLE>
<CAPTION>
         YEAR OF                           TOTAL RENTABLE        % OF TOTAL            PER             PER
          LEASE                NUMBER        SQUARE FEET      RENTABLE SQUARE      SQUARE FOOT     SQUARE FOOT
        EXPIRATION           OF LEASES        EXPIRING         FEET EXPIRING      S/L RENT (1)      RENT (2)
-------------------------   -----------   ----------------   -----------------   --------------   ------------
<S>                         <C>           <C>                <C>                 <C>              <C>
2000 ....................        --                 --                --                 --              --
2001 ....................         4             32,680               5.6%           $ 27.39         $ 34.02
2002 ....................         4             80,060              13.8%           $ 26.23         $ 30.60
2003 ....................         6             81,809              14.1%           $ 29.60         $ 34.59
2004 ....................         4            112,414              19.4%           $ 26.05         $ 33.44
2005 ....................         7             59,166              10.2%           $ 27.99         $ 34.47
2006 AND THEREAFTER .....         8            214,323              36.9%                --              --
                                 --            -------             -----
TOTAL ...................        33            580,452             100.0%
                                 ==            =======             =====
</TABLE>

INDUSTRIAL PROPERTIES:

<TABLE>
<CAPTION>
         YEAR OF                           TOTAL RENTABLE        % OF TOTAL            PER             PER
          LEASE                NUMBER        SQUARE FEET      RENTABLE SQUARE      SQUARE FOOT     SQUARE FOOT
        EXPIRATION           OF LEASES        EXPIRING         FEET EXPIRING      S/L RENT (1)      RENT (2)
-------------------------   -----------   ----------------   -----------------   --------------   ------------
<S>                         <C>           <C>                <C>                 <C>              <C>
2000 ....................        10             213,450              4.3%            $ 4.74          $ 5.43
2001 ....................        28             557,139             11.2%            $ 5.42          $ 6.77
2002 ....................        26             240,344              4.8%            $ 6.43          $ 7.19
2003 ....................        30             731,234             14.7%            $ 5.30          $ 6.11
2004 ....................        34             634,085             12.8%            $ 6.40          $ 7.10
2005 ....................        18             396,810              8.0%            $ 5.81          $ 7.96
2006 AND THEREAFTER .....        49           2,192,911             44.2%                --              --
                                 --           ---------            -----
TOTAL ...................       195           4,965,973            100.0%
                                ===           =========            =====
</TABLE>



                                       25
<PAGE>

                       LEASE EXPIRATIONS -- (CONTINUED)


RESEARCH AND DEVELOPMENT PROPERTIES:

<TABLE>
<CAPTION>
         YEAR OF                           TOTAL RENTABLE        % OF TOTAL            PER             PER
          LEASE                NUMBER        SQUARE FEET      RENTABLE SQUARE      SQUARE FOOT     SQUARE FOOT
        EXPIRATION           OF LEASES        EXPIRING         FEET EXPIRING      S/L RENT (1)      RENT (2)
-------------------------   -----------   ----------------   -----------------   --------------   ------------
<S>                         <C>           <C>                <C>                 <C>              <C>
2000 ....................         2              13,204              1.1%           $ 15.04         $ 11.60
2001 ....................         7              96,120              7.5%           $ 11.61         $ 13.21
2002 ....................         3             118,620              9.3%           $ 10.19         $ 11.80
2003 ....................         5             244,648             19.1%           $  5.01         $  5.88
2004 ....................        10             129,218             10.1%           $ 11.98         $ 13.43
2005 ....................         4             359,417             28.1%           $  8.33         $  9.27
2006 AND THEREAFTER .....        13             317,457             24.8%                --              --
                                 --             -------            -----
TOTAL ...................        44           1,278,684            100.0%
                                 ==           =========            =====
</TABLE>

WESTCHESTER OFFICE PROPERTIES:
<TABLE>
<CAPTION>
         YEAR OF                           TOTAL RENTABLE        % OF TOTAL            PER             PER
          LEASE                NUMBER        SQUARE FEET      RENTABLE SQUARE      SQUARE FOOT     SQUARE FOOT
        EXPIRATION           OF LEASES        EXPIRING         FEET EXPIRING      S/L RENT (1)      RENT (2)
-------------------------   -----------   ----------------   -----------------   --------------   ------------
<S>                         <C>           <C>                <C>                 <C>              <C>
2000 ....................        12              39,684              1.3%           $ 21.57         $ 21.50
2001 ....................        39             255,484              8.3%           $ 20.73         $ 21.12
2002 ....................        47             459,105             14.8%           $ 20.20         $ 20.47
2003 ....................        43             263,153              8.5%           $ 21.94         $ 23.26
2004 ....................        26             158,602              5.1%           $ 21.08         $ 22.04
2005 ....................        48             381,712             12.3%           $ 24.97         $ 25.17
2006 AND THEREAFTER .....        46           1,539,039             49.7%                --              --
                                 --           ---------            -----
TOTAL ...................       261           3,096,779            100.0%
                                ===           =========            =====
</TABLE>

STAMFORD OFFICE PROPERTIES:
<TABLE>
<CAPTION>
         YEAR OF                           TOTAL RENTABLE        % OF TOTAL            PER             PER
          LEASE                NUMBER        SQUARE FEET      RENTABLE SQUARE      SQUARE FOOT     SQUARE FOOT
        EXPIRATION           OF LEASES        EXPIRING         FEET EXPIRING      S/L RENT (1)      RENT (2)
-------------------------   -----------   ----------------   -----------------   --------------   ------------
<S>                         <C>           <C>                <C>                 <C>              <C>
2000 ....................        10              30,373              2.9%           $ 21.22         $ 21.22
2001 ....................        22             136,087             12.9%           $ 22.58         $ 25.11
2002 ....................        20             100,199              9.5%           $ 27.39         $ 28.30
2003 ....................        14              95,298              9.1%           $ 31.50         $ 32.26
2004 ....................        20             221,929             21.1%           $ 22.85         $ 23.74
2005 ....................        23             109,943             10.4%           $ 28.28         $ 30.27
2006 AND THEREAFTER .....        20             359,099             34.1%                --              --
                                 --             -------            -----
TOTAL ...................       129           1,052,928            100.0%
                                ===           =========            =====
</TABLE>



                                       26
<PAGE>

                       LEASE EXPIRATIONS -- (CONTINUED)


NEW JERSEY OFFICE PROPERTIES:
<TABLE>
<CAPTION>
         YEAR OF                           TOTAL RENTABLE        % OF TOTAL            PER             PER
          LEASE                NUMBER        SQUARE FEET      RENTABLE SQUARE      SQUARE FOOT     SQUARE FOOT
        EXPIRATION           OF LEASES        EXPIRING         FEET EXPIRING      S/L RENT (1)      RENT (2)
-------------------------   -----------   ----------------   -----------------   --------------   ------------
<S>                         <C>           <C>                <C>                 <C>              <C>
2000 ....................         4              12,054              0.6%           $ 20.54         $ 21.49
2001 ....................        21             239,999             12.3%           $ 17.85         $ 18.08
2002 ....................        21             184,595              9.4%           $ 19.80         $ 20.43
2003 ....................        20             335,298             17.2%           $ 19.94         $ 20.04
2004 ....................        34             244,184             12.5%           $ 22.44         $ 22.98
2005 ....................        34             382,221             19.6%           $ 22.56         $ 23.61
2006 AND THEREAFTER .....        18             555,154             28.4%                --              --
                                 --             -------            -----
TOTAL ...................       152           1,953,505            100.0%
                                ===           =========            =====
</TABLE>

NEW YORK CITY OFFICE
<TABLE>
<CAPTION>
         YEAR OF                           TOTAL RENTABLE        % OF TOTAL            PER             PER
          LEASE                NUMBER        SQUARE FEET      RENTABLE SQUARE      SQUARE FOOT     SQUARE FOOT
        EXPIRATION           OF LEASES        EXPIRING         FEET EXPIRING      S/L RENT (1)      RENT (2)
-------------------------   -----------   ----------------   -----------------   --------------   ------------
<S>                         <C>           <C>                <C>                 <C>              <C>
2000 ....................         5              55,468              1.6%           $ 38.28         $ 38.32
2001 ....................        18             134,464              3.9%           $ 33.07         $ 30.43
2002 ....................        18             184,130              5.4%           $ 32.02         $ 32.87
2003 ....................         7             115,726              3.4%           $ 31.89         $ 32.34
2004 ....................        20             223,686              6.6%           $ 36.74         $ 37.72
2005 ....................        34             437,590             12.8%           $ 35.58         $ 36.89
2006 AND THEREAFTER .....       114           2,262,900             66.3%                --              --
                                ---           ---------            -----
TOTAL ...................       216           3,413,964            100.0%
                                ===           =========            =====
</TABLE>

(1) Per  square  foot rental rate represents annualized straight line rent as of
  the lease expiration date.

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


                                       27
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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

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

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

     The  following table sets forth the Company's long term debt obligations by
scheduled  principal  cash  flow  payments  and  maturity date, weighted average
interest rates and estimated FMV at September 30, 2000 (dollars in thousands):
<TABLE>
<CAPTION>
                                                   FOR THE YEAR ENDED DECEMBER 31,
                                  ------------------------------------------------------------------
                                      2000        2001          2002         2003          2004
                                  ----------- ------------ ------------- ------------ --------------
<S>                               <C>         <C>          <C>           <C>          <C>
Long term debt:
 Fixed rate .....................   $ 1,872     $ 23,227     $  17,014     $  8,907     $  112,372
 Weighted average interest rate .      7.76%        7.59%         7.80%        7.79%          7.50%
 Variable rate ..................   $    --     $ 70,000     $      --     $362,600     $       --
 Weighted average interest rate .        --         8.28%           --         7.68%            --


<CAPTION>
                                    THEREAFTER      TOTAL(1)         FMV
                                  -------------- -------------- ------------
<S>                               <C>            <C>            <C>
Long term debt:
 Fixed rate .....................   $  747,427     $  910,819    $ 910,819
 Weighted average interest rate .         7.56%          7.56%
 Variable rate ..................   $       --     $  432,600    $ 432,600
 Weighted average interest rate .           --           7.77%

</TABLE>

------------------
(1) Includes  unamortized  issuance  discounts  of $633,000 on the 5 and 10 year
    senior  unsecured  notes issued on March 26, 1999 which are due at maturity.
<PAGE>

     In  addition,  the  Company  has  assessed the market risk for its variable
rate  debt,  which is based upon LIBOR, and believes that a one percent increase
in  the  LIBOR  rate  would  have an approximate $4.3 million annual increase in
interest  expense  based  on  approximately $432.6 million of variable rate debt
outstanding at September 30, 2000.

     The  following  table  sets  forth  the  Company's  mortgage notes and note
receivables  by  scheduled  maturity  date,  weighted average interest rates and
estimated FMV at September 30, 2000 (dollars in thousands):
<TABLE>
<CAPTION>
                                                  FOR THE YEAR ENDED DECEMBER 31,
                                      --------------------------------------------------------
                                           2000        2001        2002     2003      2004
                                      ------------- ---------- ----------- ------ ------------
<S>                                   <C>           <C>        <C>         <C>    <C>
Mortgage notes and Notes
 receivable:
 Fixed rate .........................   $ 277,551    $     15   $  6,326    $ --    $ 36,500
 Weighted average Interest rate .....        9.41%       9.00%     10.22%     --       10.23%

<CAPTION>
                                       THEREAFTER    TOTAL (2)       FMV
                                      ------------ ------------- -----------
<S>                                   <C>          <C>           <C>
Mortgage notes and Notes
 receivable:
 Fixed rate .........................   $ 16,990     $ 337,382    $337,382
 Weighted average Interest rate .....      11.65%         9.63%
 </TABLE>
------------------
(2) Excludes   mortgage   note   receivable   acquisition   costs  and  interest
receivables aggregating approximately $15.4 million.

                                       28
<PAGE>
                         PART II -- OTHER INFORMATION

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

     On  October  13,  2000,  the Board of Directors of the Company authorized a
dividend  distribution  of  one  preferred  share purchase right (a "Right") for
each  outstanding  share  of  Class  A  common  stock  of  the  Company  under a
shareholder  rights plan. This dividend was distributed to all holders of record
on  October  27,  2000. Each Right generally entitles the holder to purchase one
one-thousandth  of a share of Series C junior participating preferred stock (the
"Preferred  Shares")  at a price of $84.44 per one one-thousandth of a Preferred
Share  (the  "Purchase  Price").  The  Rights expire on October 13, 2010, unless
earlier redeemed by the Company.

     The  Rights are generally exercisable only if a person or group becomes the
beneficial  owner  of  15%  or  more  of the outstanding Class A common stock or
announces  a  tender  offer  for  15%  or  more  of  the  outstanding  stock (an
"Acquiring  Person").  In  the event that a person or group becomes an Acquiring
Person,  each  holder  of a Right, excluding the Acquiring Person, will have the
right  to  receive, upon exercise, Class A common stock or one one-thousandth of
a  Preferred  Share  having a market value equal to two times the Purchase Price
of the Right.

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

      a) Exhibits
<TABLE>
<CAPTION>
   NUMBER
------------
<S>          <C>
      3(ii)  Amended and Restated By-Laws of Reckson Associates Realty Corp.
    27.0     Financial Data Schedule
</TABLE>

      b) During  the three months ended September 30, 2000, the Registrant filed
      the following reports on Form 8-K:

       None

                                  SIGNATURES

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


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

DATE: November 9, 2000

                                       29