Table of Contents

 

 

 

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

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**FORM 10-Q**

 

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| **x**                                                                                                                                                                                                                            | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934**  |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                             |                                                                                                     |
| **For the  quarterly period ended March 31, 2010**                                                                                                                                                                          |
|                                                                                                                                                                                                                             |                                                                                                     |
| **o**                                                                                                                                                                                                                            | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |
|                                                                                                                                                                                                                             |                                                                                                     |
| **For the  transition period from                  to                  .** |

 

**CommissionFile Number: 1-13762**

 

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**RECKSON OPERATING PARTNERSHIP, L.P.**

(Exact name ofregistrant as specified in its charter)

 

| **Maryland**                                                      | **** **** | ****11-3233647****                     |
|-------------------------------------------------------------------|----------------|----------------------------------------|
| (State or other  jurisdiction of

incorporation or  organization) |           | (I.R.S. Employer

Identification  No.) |

 

**420Lexington Avenue, New York, New York 10170**

(Address ofprincipal executive offices) (Zip Code)

 

**(212)594-2700**

(Registrant’stelephone number, including area code)

 

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Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.  YES x  NO o

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 ofthis chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files).  YES o  NO o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer or a smaller reporting company.  See definitions of “large accelerated filer,”“accelerated filer,” and “smaller reporting company” in Rule 12b-2 of theExchange Act.

 

| Large  accelerated filer o                     |   | Accelerated  filer o         |
|------------------------------------------------|--------|------------------------------|
|                                           |   |                         |
| Non-accelerated  filer x                       |   | Smaller Reporting  Company o |
| (Do not check if  a smaller reporting company) |   |                         |

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act). YES o  NO x

 

As of April 30,2010, no common units of limited partnership interest of the Registrant wereheld by non-affiliates of the Registrant. There is no established trading market for such units.

 

 

 

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Tableof Contents

 

**RECKSON OPERATING PARTNERSHIP, L.P.**

** **

**INDEX**

 
| ** **        | ** **                                                                                                           | **PAGE**   |
|-------------------|----------------------------------------------------------------------------------------------------------------------|------------|
| ** **        | ** **                                                                                                           | ** ** |
| **PART I.**  | **FINANCIAL INFORMATION**                                                                                            |       |
|              |                                                                                                                 |       |
| **ITEM 1.**       | **FINANCIAL STATEMENTS**                                                                                             |       |
|              |                                                                                                                 | ** ** |
|              | Condensed Consolidated Balance Sheets as of  March 31, 2010 (unaudited) and December 31, 2009              | 3          |
|              |                                                                                                                 |       |
|              | Condensed Consolidated Statements of Income for the  three months ended March 31, 2010 and 2009 (unaudited)     | 4          |
|              |                                                                                                                 |       |
|              | Condensed Consolidated Statements of Cash Flows for  the three months ended March 31, 2010 and 2009 (unaudited) | 5          |
|              |                                                                                                                 |       |
|              | Notes to Condensed 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**                                                      | 23         |
|              |                                                                                                                 |       |
| **ITEM 4T.**      | **CONTROLS AND  PROCEDURES**                                                                                         | 23         |
|              |                                                                                                                 |       |
| **PART II.** | **OTHER INFORMATION**                                                                                                | 23         |
|              |                                                                                                                 |       |
| **ITEM 1.**       | **LEGAL PROCEEDINGS**                                                                                                | 23         |
|              |                                                                                                                 |       |
| **ITEM 1A.**      | **RISK FACTORS**                                                                                                     | 23         |
|              |                                                                                                                 |       |
| **ITEM 2.**       | **UNREGISTERED SALES OF EQUITY SECURITIES  AND USE OF PROCEEDS**                                                     | 23         |
| ** **        | ** **                                                                                                           |       |
| **ITEM 3.**       | **DEFAULTS UPON SENIOR SECURITIES**                                                                                  | 23         |
| ** **        | ** **                                                                                                           |       |
| **ITEM 4.**       | **(REMOVED AND RESERVED)**                                                                                           | 24         |
| ** **        | ** **                                                                                                           |       |
| **ITEM 5.**       | **OTHER INFORMATION**                                                                                                | 24         |
|              |                                                                                                                 |       |
| **ITEM 6.**       | **EXHIBITS**                                                                                                         | 24         |
|              |                                                                                                                 |       |
| **SIGNATURES**    | 25                                                                                                                   |

 

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Table of Contents

 

**PART I. FINANCIALINFORMATION**

###### **ITEM1.  Financial Statements**

###### ** **

**Reckson OperatingPartnership, L.P.**

**Condensed Consolidated Balance Sheets**

**(Amountsin thousands)**

 
| ** **                                                                                            | ** ** | **March 31,********2010** | ** **    | **December 31,****2009** | ** ** |
|-------------------------------------------------------------------------------------------------------|------------|--------------------------------|---------------|-------------------------------|------------|
| ** **                                                                                            | ** ** | **(Unaudited)**                | ** **    | ** **                    | ** ** |
| **Assets**                                                                                            |       |                           |          |                          |       |
| Commercial  real estate properties, at cost:                                                          |       |                           |          |                          |       |
| Land  and land interests                                                                              | ** ** | **$**                          | **643,680**   |                          | $          | 643,667 |   |
| Building  and improvements                                                                            | ** ** | **3,298,726**                  |          | 3,294,632                     |       |
| ** **                                                                                            | ** ** | **3,942,406**                  |          | 3,938,299                     |       |
| Less:  accumulated depreciation                                                                       | ** ** | **(283,511**                   | **)**         | (259,773                      | )          |
| ** **                                                                                            | ** ** | **3,658,895**                  |          | 3,678,526                     |       |
| Cash  and cash equivalents                                                                            | ** ** | **20,639**                     |          | 22,030                        |       |
| Restricted  cash                                                                                      | ** ** | **9,083**                      |          | 9,180                         |       |
| Tenant  and other receivables, net of allowance of $2,719 and $3,016 in 2010 and  2009, respectively  | ** ** | **9,385**                      |          | 10,138                        |       |
| Deferred  rents receivable, net of allowance of $5,950 and $5,362 in 2010 and 2009,  respectively     | ** ** | **45,440**                     |          | 42,132                        |       |
| Structured  finance investments, net of allowance of $10,550 in both 2010 and 2009,  respectively     | ** ** | **28,040**                     |          | 26,993                        |       |
| Investment  in unconsolidated joint venture                                                           | ** ** | **50,045**                     |          | 51,313                        |       |
| Deferred  costs, net of accumulated amortization of $3,842 and $3,123 in 2010 and 2009,  respectively | ** ** | **22,375**                     |          | 18,047                        |       |
| Other  assets                                                                                         | ** ** | **121,727**                    |          | 111,531                       |       |
| Total  assets                                                                                         | ** ** | **$**                          | **3,965,629** |                          | $          | 3,969,890 |   |
|                                                                                                  | ** ** | ** **                     |          |                          |       |
| **Liabilities**                                                                                       |       |                           |          |                          |       |
| Mortgage  note payable                                                                                | ** ** | **$**                          | **223,343**   |                          | $          | 224,104 |   |
| Senior  unsecured notes                                                                               | ** ** | **892,428**                    |          | 663,155                       |       |
| Accrued  interest payable and other liabilities                                                       | ** ** | **11,776**                     |          | 8,733                         |       |
| Accounts  payable and accrued expenses                                                                | ** ** | **29,738**                     |          | 34,785                        |       |
| Deferred  revenue                                                                                     | ** ** | **263,916**                    |          | 275,451                       |       |
| Security  deposits                                                                                    | ** ** | **8,353**                      |          | 8,475                         |       |
| Total  liabilities                                                                                    | ** ** | **1,429,554**                  |          | 1,214,703                     |       |
|                                                                                                  | ** ** | ** **                     |          |                          |       |
| Commitments  and Contingencies                                                                        | ** ** | **—**                     |          | —                        |       |
|                                                                                                  | ** ** | ** **                     |          |                          |       |
| **Capital**                                                                                           | ** ** | ** **                     |          |                          |       |
| General  partner capital - ROP                                                                        | ** ** | **2,038,763**                  |          | 2,258,389                     |       |
| Limited  partner capital                                                                              | ** ** | **—**                     |          | —                        |       |
| Noncontrolling  interests in other partnerships                                                       | ** ** | **497,312**                    |          | 496,798                       |       |
| Total  capital                                                                                        | ** ** | **2,536,075**                  |          | 2,755,187                     |       |
| Total  liabilities and capital                                                                        | ** ** | **$**                          | **3,965,629** |                          | $          | 3,969,890 |   |

 

The accompanying notes are anintegral part of these financial statements.

 

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**Reckson OperatingPartnership, L.P.**

**Condensed Consolidated Statements of Income**

**(Unaudited,and amounts in thousands)**

 
| ** **                                                                                                                                             | ** ** | **Three Months   Ended   March 31,** | ** ** | **Three Months   Ended   March 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                                                                                                             | ** ** | **2010**                                  | ** ** | **2009**                                  | ** ** |
| **Revenues**                                                                                                                                           |       |                                      |       |                                      |       |
| Rental revenue, net                                                                                                                                    | ** ** | **$**                                     | **72,217** |                                      | $          | 70,201 |   |
| Escalation  and reimbursement                                                                                                                          | ** ** | **13,399**                                |       | 14,370                                    |       |
| Investment  income                                                                                                                                     | ** ** | **973**                                   |       | 939                                       |       |
| Other  income                                                                                                                                          | ** ** | **2,610**                                 |       | 459                                       |       |
| Total  revenues                                                                                                                                        | ** ** | **89,199**                                |       | 85,969                                    |       |
| **Expenses**                                                                                                                                           | ** ** | ** **                                |       |                                      |       |
| Operating  expenses (including $175 and $570 paid to affiliates in 2010 and 2009,  respectively                                                        | ** ** | **18,719**                                |       | 19,495                                    |       |
| Real  estate taxes                                                                                                                                     | ** ** | **14,682**                                |       | 14,361                                    |       |
| Ground  rent                                                                                                                                           | ** ** | **2,161**                                 |       | 2,161                                     |       |
| Interest  expense, net of interest income                                                                                                              | ** ** | **13,809**                                |       | 15,423                                    |       |
| Amortization  of deferred finance costs                                                                                                                | ** ** | **13**                                    |       | —                                    |       |
| Depreciation  and amortization                                                                                                                         | ** ** | **24,444**                                |       | 23,540                                    |       |
| Loan  loss reserves                                                                                                                                    | ** ** | **—**                                |       | —                                    |       |
| Marketing,  general and administrative                                                                                                                 | ** ** | **97**                                    |       | 135                                       |       |
| Total  expenses                                                                                                                                        | ** ** | **73,925**                                |       | 75,115                                    |       |
| Income  from continuing operations before equity in net income from unconsolidated  joint venture, noncontrolling interest and discontinued operations | ** ** | **15,274**                                |       | 10,854                                    |       |
| Equity  in net income from unconsolidated joint venture                                                                                                | ** ** | **291**                                   |       | 281                                       |       |
| Gain  (loss) on early extinguishment of debt                                                                                                           | ** ** | **(113**                                  | **)**      | 1,908                                     |       |
| Income  from continuing operations                                                                                                                     | ** ** | **15,452**                                |       | 13,043                                    |       |
| Income  (loss) from discontinued operations                                                                                                            | ** ** | **—**                                |       | (25                                       | )          |
| Net  income                                                                                                                                            | ** ** | **15,452**                                |       | 13,018                                    |       |
| Net  income attributable to noncontrolling interests in other partnerships                                                                             | ** ** | **(3,716**                                | **)**      | (3,327                                    | )          |
| Net  income attributable to ROP common unitholders                                                                                                     | ** ** | **$**                                     | **11,736** |                                      | $          | 9,691 |   |
|                                                                                                                                                   | ** ** | ** **                                |       |                                      |       |
| **Amounts attributable to ROP common unitholders:**                                                                                                    | ** ** | ** **                                |       |                                      |       |
| Income  from continuing operations                                                                                                                     | ** ** | **$**                                     | **11,736** |                                      | $          | 9,716 |   |
| Discontinued  operations                                                                                                                               | ** ** | **—**                                |       | (25                                       | )          |
| Net  income                                                                                                                                            | ** ** | **$**                                     | **11,736** |                                      | $          | 9,691 |   |

 

Theaccompanying notes are an integral part of these financial statements.

 

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**Reckson OperatingPartnership, L.P.**

**Condensed Consolidated Statements of Cash Flows**

**(Unaudited,and amounts in thousands)**

 
| ** **                                                                         | ** ** | **Three Months   Ended March 31,** | ** ** | **Three Months   Ended March 31,** | ** ** |
|------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|-----------------------------------------|------------|
| ** **                                                                         | ** ** | **2010**                                | ** ** | **2009**                                | ** ** |
| **Operating Activities**                                                           |       |                                    |       |                                    |       |
| Net  income                                                                        |       | $                                       | 15,452     |                                    | $          | 13,018 |   |
| Adjustment  to reconcile net income to net cash provided by operating activities:  |       |                                    |       |                                    |       |
| Depreciation  and amortization                                                     |       | 24,457                                  |       | 23,540                                  |       |
| Equity  in net income from unconsolidated joint venture                            |       | (291                                    | )          | (281                                    | )          |
| Distributions  of cumulative earnings from unconsolidated joint venture            |       | 291                                     |       | 281                                     |       |
| Loss  (gain) on early extinguishment of debt                                       |       | 113                                     |       | (1,908                                  | )          |
| Deferred  rents receivable                                                         |       | (3,308                                  | )          | (3,821                                  | )          |
| Other  non-cash adjustments                                                        |       | (6,240                                  | )          | (2,371                                  | )          |
| Changes  in operating assets and liabilities:                                      |       |                                    |       |                                    |       |
| Restricted  cash — operations                                                 |       | 101                                     |       | 431                                     |       |
| Tenant  and other receivables                                                      |       | 1,050                                   |       | (565                                    | )          |
| Deferred  lease costs                                                              |       | (1,768                                  | )          | (903                                    | )          |
| Other  assets                                                                      |       | (15,552                                 | )          | (12,410                                 | )          |
| Accounts  payable, accrued expenses and other liabilities                          |       | (697                                    | )          | (2,863                                  | )          |
| Net  cash provided by operating activities                                         |       | 13,608                                  |       | 12,148                                  |       |
| **Investing Activities**                                                           |       |                                    |       |                                    |       |
| Additions  to land, buildings and improvements                                     |       | (6,106                                  | )          | (5,289                                  | )          |
| Restricted  cash-capital improvements                                              |       | (4                                      | )          | (3                                      | )          |
| Distributions  in excess of cumulative earnings from unconsolidated joint ventures |       | 1,267                                   |       | 1,234                                   |       |
| Mortgage  loans receivable, net                                                    |       | (164                                    | )          | —                                  |       |
| Net  cash used in investing activities                                             |       | (5,007                                  | )          | (4,058                                  | )          |
| **Financing Activities**                                                           |       |                                    |       |                                    |       |
| Repayments  of mortgage notes payable                                              |       | (762                                    | )          | (717                                    | )          |
| Net  proceeds from senior unsecured notes                                          |       | 250,000                                 |       | —                                  |       |
| Repayments  of senior unsecured notes                                              |       | (21,389                                 | )          | (209,337                                | )          |
| Contributions  from common unitholders                                             |       | 85,877                                  |       | 285,382                                 |       |
| Distributions  to noncontrolling interests in other partnerships                   |       | (3,202                                  | )          | (5,073                                  | )          |
| Distributions  to common unitholders                                               |       | (317,238                                | )          | (83,560                                 | )          |
| Deferred  loan costs                                                               |       | (3,278                                  | )          | —                                  |       |
| Net  cash used in financing activities                                             |       | (9,992                                  | )          | (13,305                                 | )          |
| Net  decrease in cash and cash equivalents                                         |       | (1,391                                  | )          | (5,215                                  | )          |
| Cash  and cash equivalents at beginning of period                                  |       | 22,030                                  |       | 23,114                                  |       |
| Cash  and cash equivalents at end of period                                        |       | $                                       | 20,639     |                                    | $          | 17,899 |   |

 

Theaccompanying notes are an integral part of these financial statements.

 

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**Reckson Operating Partnership, L.P.**

**Notes to Condensed Consolidated FinancialStatements**

**(Unaudited)**

**March 31,2010**

** **

**1.  Organization and Basis of Presentation**

 

RecksonOperating Partnership, L.P., or ROP, commenced operations on June 2,1995.  Reckson Associates Realty Corp., or RARC, served as the solegeneral partner of ROP until November 15, 2007, at which timeRARC withdrew, Wyoming Acquisition GP LLC, or WAGP, succeeded it as the solegeneral partner of ROP.  WAGP is a wholly-owned subsidiary of SLGreen Operating Partnership, L.P., or the operating partnership.  The sole limited partner of ROP is theoperating partnership.

 

**ROP is engaged in the ownership,management, operation, leasing, financing and development of commercial realestate properties, principally office properties and also owns land for futuredevelopment located in New York City, Westchester and Connecticut, whichcollectively is also known as the New York Metro Area.**

 

SLGreen Realty Corp., or SL Green, and the operating partnership were formed in June 1997.  SL Green has qualified, and expects toqualify in the current fiscal year as a real estate investment trust, or REIT,under the Internal Revenue Code of 1986, as amended, or the Code, and operatesas a self-administered, self-managed REIT. A REIT is a legal entity that holds real estate interests and, throughpayments of dividends to stockholders, is permitted to reduce or avoid thepayment of Federal income taxes at the corporate level.  Unless the context requires otherwise, allreferences to “we,” “our” and “us” means ROP and all entities owned orcontrolled by ROP.

 

On January 25, 2007,SL Green completed the acquisition of all of the outstanding shares of commonstock of RARC pursuant to the terms of the Agreement and Plan of Merger, datedas of August 3, 2006, as amended, the Merger Agreement, among SL Green,Wyoming Acquisition Corp., or Wyoming, Wyoming Acquisition GP LLC, WyomingAcquisition Partnership LP, RARC and ROP. SL Green paid approximately $6.0billion, inclusive of transaction costs, for Reckson.  This transaction is referred to herein as theMerger.

 

On January 25, 2007,SL Green completed the sale of certain assets of ROP to an investment group ledby certain of RARC’s former executive management for a total consideration ofapproximately $2.0 billion.

 

As a result of thesubstantial change in ownership from the Merger, SL Green has recorded theMerger in accordance with the provisions of Emerging Issues Task Force TopicD-97, “Push-Down Accounting.”  Theapplication of “push-down accounting” resulting in the adjustment of thecarrying values of the assets and liabilities of ROP to fair value in the samemanner as ROP’s assets and liabilities were recorded by SL Green subsequent tothe Merger.  The net impact of suchadjustments was approximately $3.0 billion, related primarily to increases tothe carrying value of real estate assets and lease related intangibles.

 

As of March 31, 2010, we owned the followinginterests in commercial office properties in the New York Metro area, primarilyin midtown Manhattan, a borough of New York City, or Manhattan.  Ourinvestments in the New York Metro area also include investments in Queens,Westchester County and Connecticut, which are collectively known as theSuburban assets:

 
| ** **   | ** ** | ** **                | ** ** | ** **     | ** ** | ** **      | ** ** | **Weighted**             | ** ** |
|--------------|------------|---------------------------|------------|----------------|------------|-----------------|------------|--------------------------|------------|
| ** **   | ** ** | ** **                | ** ** | **Number of**  | ** ** | ** **      | ** ** | **Average**              | ** ** |
| **Location** | ** ** | **Ownership**             | ** ** | **Properties** | ** ** | **Square Feet** | ** ** | **Occupancy********(1)** | ** ** |
| Manhattan    |       | Consolidated properties   |       | 4              |       | 3,770,000       |       | 95.9                     | %          |
|         |       |                      |       |           |       |            |       |                     |       |
| Suburban     |       | Consolidated properties   |       | 16             |       | 2,642,100       |       | 84.5                     | %          |
|         |       | Unconsolidated properties |       | 1              |       | 1,402,000       |       | 100.0                    | %          |
|         |       |                      |       | 21             |       | 7,814,100       |       | 92.8                     | %          |

 

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(1)          The weightedaverage occupancy represents the total leased square feet divided by totalavailable rentable square feet.

 

#### **At March 31, 2010, our inventory of developmentparcels aggregated approximately 81 acres of land in four separate parcels onwhich we can, based on estimates at March 31, 2010, develop approximately1.1 million square feet of office space and in which we had investedapproximately $65.5 million.**

 

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**Reckson Operating Partnership, L.P.**

**Notes to CondensedConsolidated Financial Statements**

**(Unaudited)**

**March 31,2010**

** **

#### **Basis of Quarterly Presentation**

 

The accompanyingconsolidated financial statements include the consolidated financial positionof ROP and the Service Companies (as defined below) at March 31, 2010 and December 31,2009, the consolidated results of their operations for the three months ended March 31,2010 and 2009 and their cash flows for the three months ended March 31,2010 and 2009.  ROP’s investments inmajority-owned and controlled real estate joint ventures are reflected in theaccompanying financial statements on a consolidated basis with a reduction forthe minority partners’ interests.  ROP’sinvestments in real estate joint ventures, where it owns less than acontrolling interest, are reflected in the accompanying financial statements onthe equity method of accounting.  TheService Companies, which provide management, development and construction servicesto ROP, include Reckson Management Group, Inc., RANY Management Group, Inc.,Reckson Construction & Development LLC and Reckson Construction GroupNew York, Inc. (collectively, the “Service Companies”).  All significant intercompany balances andtransactions have been eliminated in the consolidated financial statements.

 

The accompanyingunaudited condensed consolidated financial statements have been prepared inaccordance with generally accepted accounting principles in the United States,or U.S. GAAP, for interim financial information and with the instructions to Form 10-Qand Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notesrequired by U.S. GAAP for complete financial statements.  In the opinion of management, all adjustments(consisting of normal recurring accruals) considered necessary for fairpresentation have been included.  The2010 operating results for the periods presented are not necessarily indicativeof the results that may be expected for the year ending December 31,2010.  These financial statements shouldbe read in conjunction with the financial statements and accompanying notesincluded in our Annual Report on Form 10-K for the year ended December 31,2009.

 

The balance sheet at December 31,2009 has been derived from the audited financial statements at that date butdoes not include all the information and footnotes required by U.S. GAAP forcomplete financial statements.

 

**2.  Significant Accounting Policies**

 

The consolidatedfinancial statements include our accounts and those of our subsidiaries, whichare wholly-owned or controlled by us. Entities which we do not control throughour voting interest and entities which are variable interest entities, butwhere we are not the primary beneficiary, are accounted for under the equitymethod or as structured finance investments. All significant intercompany balances and transactions have beeneliminated.

 

In June 2009, theFASB amended the guidance for determining whether an entity is a variableinterest entity, or VIE, and requires the performance of a qualitative ratherthan a quantitative analysis to determine the primary beneficiary of a VIE.Under this guidance, an entity would be required to consolidate a VIE if it has(i) the power to direct the activities that most significantly impact theentity’s economic performance and (ii) the obligation to absorb losses ofthe VIE or the right to receive benefits from the VIE that could be significantto the VIE. Adoption of this guidance on January 1, 2010 did not have amaterial impact on our consolidated financial statements.

 

A non-controllinginterest in a consolidated subsidiary is defined as the portion of the equity(net assets) in a subsidiary not attributable, directly or indirectly, to aparent.  Non-controlling interests are requiredto be presented as a separate component of equity in the consolidated balancesheet and modifies the presentation of net income by requiring earnings andother comprehensive income to be attributed to controlling and non-controllinginterests.

 

We assess the accountingtreatment for each joint venture and structured finance investment.  This assessment includes a review of eachjoint venture or limited liability company agreement to determine which partyhas what rights and whether those rights are protective or participating.  For all VIE’s, we review such agreements inorder to determine which party has the power to direct the activities that mostsignificantly impact the entities economic performance.  In situations where we or our partner approves,among other things, the annual budget, receives a detailed monthly reportingpackage from us, meets on a quarterly basis to review the results of the jointventure, reviews and approves the joint venture’s tax return before filing, andapproves all leases that cover more than a nominal amount of space relative tothe total rentable space at each property, we do not consolidate the jointventure as we consider these to be substantive participation rights that resultin shared power of the activities that most significantly impact theperformance of our joint venture.  Ourjoint venture agreements also contain certain protective rights such as therequirement of partner approval to sell, finance or refinance the property andthe payment of capital expenditures and operating expenditures outside of theapproved budget or operating plan.  Wehave no VIE’s for which we are the primary beneficiary.

 

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** **

**Reckson Operating Partnership, L.P.**

**Notes to CondensedConsolidated Financial Statements**

**(Unaudited)**

**March 31,2010**

** **

**Investmentin Commercial Real Estate Properties**

 

Ona periodic basis, we assess whether there are any indicators that the value ofour real estate properties may be impaired or that their carrying values maynot be recoverable.  A property’s valueis considered impaired if management’s estimate of the aggregate future cashflows (undiscounted and without interest charges for consolidated propertiesand discounted for unconsolidated properties) to be generated by the propertyare less than the carrying value of the property.  To the extent impairment has occurred and isconsidered to be other than temporary, the loss shall be measured as the excessof the carrying amount of the property over the calculated fair value of theproperty.  We do not believe that thevalue of any of our real estate properties or equity investment in rentalproperty was impaired at March 31, 2010 and December 31, 2009.

 

Weallocate the purchase price of real estate to land and building and, ifdetermined to be material, intangibles, such as the value of above-, below- andat-market leases and origination costs associated with the in-place leases.  We depreciate the amount allocated tobuilding and other intangible assets over their estimated useful lives, whichgenerally range from three to 40 years and from one to 14 years,respectively.  The values of the above-and below-market leases are amortized and recorded as either an increase (inthe case of below-market leases) or a decrease (in the case of above-marketleases) to rental income over the remaining term of the associated lease, whichrange from one to 14 years.  The valueassociated with in-place leases and tenant relationships are amortized over theexpected term of the relationship and its estimated term, which range from oneto 14 years.  If a tenant vacates itsspace prior to the contractual termination of the lease and no rental paymentsare being made on the lease, any unamortized balance of the related intangiblewill be written off.  The tenantimprovements and origination costs are amortized as an expense over theremaining life of the lease (or charged against earnings if the lease isterminated prior to its contractual expiration date).  We assess fair value of the leases based onestimated cash flow projections that utilize appropriate discount andcapitalization rates and available market information.  Estimates of future cash flows are based on anumber of factors including the historical operating results, known trends, andmarket/economic conditions that may affect the property.

 

Werecognized an increase of approximately $5.6 million and $4.6 million in rentalrevenue for the three months ended March 31, 2010 and 2009, respectively,for the amortization of aggregate below-market rents in excess of above-marketleases and a reduction in lease origination costs, resulting from thereallocation of the purchase price of the applicable properties.  We recognized a reduction in interest expensefor the amortization of above-market rate debt of approximately $0.3 millionand $1.8 million for the three months ended March 31, 2010 and 2009,respectively.

 

Thefollowing summarizes our identified intangible assets (acquired above-marketleases and in-place leases) and intangible liabilities (acquired below-marketleases) as of March 31, 2010 and December 31, 2009 (amounts inthousands).

 
| ** **                                                         | ** ** | **March 31,********2010** | ** **  | **December 31,********2009** | ** ** |
|--------------------------------------------------------------------|------------|--------------------------------|-------------|-----------------------------------|------------|
| Identified intangible assets (included in other  assets):          | ** ** | ** **                     |        |                              |       |
| Gross amount                                                       | ** ** | **$**                          | **167,078** |                              | $          | 167,078 |   |
| Accumulated amortization                                           | ** ** | **(68,170**                    | **)**       | (62,813                           | )          |
| Net                                                                | ** ** | **$**                          | **98,908**  |                              | $          | 104,265 |   |
|                                                               | ** ** | ** **                     |        |                              |       |
| Identified intangible liabilities (included in  deferred revenue): | ** ** | ** **                     |        |                              |       |
| Gross amount                                                       | ** ** | **$**                          | **373,950** |                              | $          | 373,950 |   |
| Accumulated amortization                                           | ** ** | **(117,592**                   | **)**       | (106,627                          | )          |
| Net                                                                | ** ** | **$**                          | **256,358** |                              | $          | 267,323 |   |

 

**IncomeTaxes**

 

No provision has beenmade for income taxes in the accompanying consolidated financial statementssince such taxes, if any, are the responsibility of the individual partners.

 

8

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Table of Contents

** **

**RecksonOperating Partnership, L.P.**

**Notes toCondensed Consolidated Financial Statements**

**(Unaudited)**

**March 31,2010**

** **

**Reserve for Possible CreditLosses**

 

The expense for possiblecredit losses in connection with structured finance investments is the chargeto earnings to increase the allowance for possible credit losses to the levelthat we estimate to be adequate considering delinquencies, loss experience andcollateral quality.  Other factorsconsidered relate to geographic trends and product diversification, the size ofthe portfolio and current economic conditions. Based upon these factors, we establish the provision for possible creditlosses by category of asset.  When it isprobable that we will be unable to collect all amounts contractually due, theaccount is considered impaired.

 

Where impairment isindicated, a valuation allowance is measured based upon the excess of therecorded investment amount over the net fair value of the collateral. Any deficiency between the carrying amount of an asset and thecalculated value of the collateral is charged to expense.  We recorded no loan loss reserves or chargeoffs during the three months ended March 31, 2010 and 2009, respectively,on investments held to maturity.

 

**Use ofEstimates**

 

The preparation offinancial statements in conformity with U.S. GAAP requires management to makeestimates and assumptions that affect the amounts reported in the financialstatements and accompanying notes. Actual results could differ from thoseestimates.

 

**FairValue Measurements**

 

The methodologies usedfor valuing such instruments have been categorized into three broad levels asfollows:

 

Level 1 - Quotedprices in active markets for identical instruments.

Level 2 -Valuations based principally on other observable market parameters, including

·                  Quoted prices in active markets forsimilar instruments,

·                  Quoted prices in less active or inactivemarkets for identical or similar instruments,

·                  Other observable inputs (such as interestrates, yield curves, volatilities, prepayment speeds, loss severities, creditrisks and default rates), and

·                  Market corroborated inputs (derivedprincipally from or corroborated by observable market data).

 

Level 3 - Valuationsbased significantly on unobservable inputs.

·                  Level 3A - Valuations based on thirdparty indications (broker quotes or counterparty quotes) which were, in turn,based significantly on unobservable inputs or were otherwise not supportable asLevel 2 valuations.

·                  Level 3B - Valuations based on internalmodels with significant unobservable inputs.

 

These levels form ahierarchy. We follow this hierarchy for our financial instruments measured atfair value on a recurring basis. The classifications are based on the lowestlevel of input that is significant to the fair value measurement.

 

**Concentrations of CreditRisk**

 

Financialinstruments that potentially subject us to concentrations of credit riskconsist primarily of cash investments, structured finance investments andaccounts receivable.  We place our cashinvestments in excess of insured amounts with high quality financialinstitutions.  The collateral securingour structured finance investments is primarily located in the Greater New YorkArea. See Note 4. We perform ongoing credit evaluations of our tenants andrequire certain tenants to provide security deposits or letters of credit.  Though these security deposits and letters ofcredit are insufficient to meet the total value of a tenant’s lease obligation,they are a measure of good faith and a source of funds to offset the economiccosts associated with lost rent and the costs associated with re-tenanting thespace.  Although the properties in ourreal estate portfolio are primarily located in Manhattan, we also have Suburbanproperties located in Westchester County, Connecticut and Long Island City.  The tenants located in our buildings operate invarious industries.  Other than twotenants who contributed approximately 6.6% and 7.1% of our annualized rent, noother tenant in the portfolio contributed more than 4.5% of our annualizedrent, including our share of joint venture annualized rent, at March 31,2010.  Approximately 15%, 16%, 28% and12% of our annualized rent, including our share of joint venture annualizedrent, was attributable to 810 Seventh Avenue, 919 Third Avenue, 1185 Avenue ofthe Americas and 1350 Avenue of the Americas, respectively, for the quarterended March 31, 2010.  One borroweraccounted for more than 10.0% of the revenue earned on structured financeinvestments during the three months ended March 31, 2010.

 

9

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Tableof Contents

 

**Reckson Operating Partnership, L.P.**

**Notes toCondensed Consolidated Financial Statements**

**(Unaudited)**

**March 31,2010**

 

**Reclassification**

 

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

 

**AccountingStandards Updates**

 

In June 2009, theFASB issued guidance on accounting for transfers of financial assets. Thisguidance amends various components of the existing guidance governing saleaccounting, including the recognition of assets obtained and liabilitiesassumed as a result of a transfer, and considerations of effective control by atransferor over transferred assets. In addition, this guidance removes theexemption for qualifying special purpose entities from the consolidationguidance. This guidance is effective January 1, 2010, with early adoptionprohibited. While the amended guidance governing sale accounting is applied ona prospective basis, the removal of the qualifying special purpose entityexception will require us to evaluate certain entities for consolidation. Theadoption of this guidance did not have a material impact on our consolidatedfinancial statements.

 

**3.  Property Dispositions and Assets Held for Sale**

 

AtMarch 31, 2009, discontinued operations included the results of operationsof real estate assets sold prior to that date. This included 100/120 White Plains Road.

 

Thefollowing table summarizes income from discontinued operations (net of minorityinterest) for the three months ended March 31, 2009 (in thousands).  No assets were considered as held for saleduring the three months ended March 31, 2010.

 
| ** **                                  | ** ** | **Three Months  Ended********March 31,** | ** ** |
|---------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                  | ** ** | **2009**                                      | ** ** |
| Revenues                                    |       |                                          |       |
| Rental revenue                              | ** ** | **$**                                         | —     | ** ** |
| Escalation  and reimbursement revenues      |       | (7                                            | )          |
| Investment  and other income                |       | —                                        |       |
| Total  revenues                             |       | (7                                            | )          |
| Operating  expenses                         |       | 18                                            |       |
| Real  estate taxes                          |       | —                                        |       |
| Depreciation  and amortization              |       | —                                        |       |
| Total  expenses                             |       | 18                                            |       |
| Income  (loss) from discontinued operations | ** ** | **$**                                         | (25        | ) |

 

**4.  Structured Finance Investments**

 

Asof March 31, 2010 and December 31, 2009, we held the followingstructured finance investments, with an aggregate weighted average currentyield of approximately 12.1% (in thousands):

 
| **Loan  Type**                       | ** ** | **Gross  Investment** | ** ** | **Senior  Financing** | ** ** | **2010  Principal  Outstanding** | ** ** | **2009  Principal  Outstanding** | ** ** | **Initial  Maturity  Date** | ** ** |
|--------------------------------------|------------|-----------------------|------------|-----------------------|------------|----------------------------------|------------|----------------------------------|------------|-----------------------------|------------|
| Mezzanine Loan (1) (2) (3) (5)       |       | $                     | 25,000     |                  | $          | 376,889                          | ** ** | **$**                            | **27,422** |                        | $          | 26,605 |   | January 2013 |   |
| Other Loan (1)                       |       | 1,000                 |       | —                | ** ** | **1,000**                        |       | 1,000                            |       | December 2010          |       |
| Junior Participation (1) (4) (5) (6) |       | 14,189                |       | —                | ** ** | **10,168**                       |       | 9,938                            |       | April 2008             |       |
| Loan loss reserves (5)               |       | —                |       | —                | ** ** | **(10,550**                      | **)**      | (10,550                          | )          | ** **                  |       |
|                                 |       | $                     | 40,189     |                  | $          | 376,889                          | ** ** | **$**                            | **28,040** |                        | $          | 26,993 |   | ** ** |   |

 

----

(1)    This is a fixed rate loan.

(2)    The difference between the pay and accrual rates isincluded as an addition to the principal balance outstanding.

(3)    This loan had been in default since December 2007.  We reached an agreement with the borrower to,amongst other things, extended the maturity date to January 2013.

(4)    This loan is in default.  The lender has begun foreclosureproceedings.  Another participant holds a$12.2 million pari-pasu interest in this loan.

(5)    This represents specifically allocated loan lossreserves recorded during the year ended December 31, 2008.  Our reserves reflect management’s judgment ofthe probability and severity of losses based on Level 3 data.  We cannot be certain that our judgment willprove to be correct and that reserves will be adequate over time to protectagainst potential future losses.

(6)    This loan is on non-accrual status.

 

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**Reckson Operating Partnership, L.P.**

**Notes toCondensed Consolidated Financial Statements**

**(Unaudited)**

**March 31,2010**

 

At March 31, 2010and December 31, 2009 all loans, other than as noted above, wereperforming in accordance with the terms of the loan agreements.

 

**5.  Investment in Unconsolidated Joint Venture**

 

In May 2005, weacquired a 1.4 million square foot, 50-story, Class A office tower locatedat One Court Square, Long Island City, NY, for approximately $471.0 million,inclusive of transfer taxes and transactional costs.  One Court Square is 100% leased to theseller, Citibank N.A., under a 15-year net lease.  The lease contains partial cancellationoptions effective during 2011 and 2012 for up to 20% of the leased space and in2014 and 2015 for up to an additional 20% of the originally leased space,subject to notice and the payment of early termination penalties. On November 30,2005, we sold a 70% joint venture interest in One Court Square to certaininstitutional funds advised by JPMorgan Investment Management, or the JPMInvestors, for approximately $329.7 million, including the assumption of $220.5million of the property’s mortgage debt. The operating agreement of the Court Square JV requires approvals frommembers on certain decisions including annual budgets, sale of the property,refinancing of the property’s mortgage debt and material renovations to theproperty. In addition, after September 20, 2009 the members each have theright to recommend the sale of the property, subject to the terms of themortgage debt, and to dissolve the Court Square JV. We account for the CourtSquare JV under the equity method of accounting. We have also concluded thatthe JPM Investors have substantive participating rights in the ordinary courseof the Court Square JV’s business.

 

**6.  Mortgage Note Payable**

** **

The first mortgage notepayable collateralized by the property and assignment of leases at March 31,2010 and December 31, 2009, respectively, was as follows (in thousands):

 
| **Property**                           | ** ** | **Interest  Rate****(1)** | ** ** | **Maturity  Date** | ** ** | **March 31,********2010** | ** **  | **December 31,********2009** | ** ** |
|----------------------------------------|------------|---------------------------|------------|--------------------|------------|--------------------------------|-------------|-----------------------------------|------------|
| 919 Third Avenue New  York, NY (2) (3) |       | 6.87                      | %          | 8/2011             |       | $                              | **223,343** |                              | $          | 224,104 |   |
|                                        |            |                           |            |                    |            |                                |             |                                   |            |  |  |

 

----

(1)    Effective interest rate for the three months endedMarch 31, 2010.

(2)    We own a 51% controlling interest in the joint venturethat is the borrower on this loan.  Thisloan is non-recourse to us.  Weconsolidate this joint venture.

(3)    Held in a bankruptcy remote special purpose entity.

 

AtMarch 31, 2010, the gross book value of the property collateralizing themortgage note was approximately $1.3 billion.

 

Interestexpense, excluding capitalized interest, was comprised of the following (inthousands):

 
| ** **             | ** ** | **Three Months Ended  March 31,** | ** ** |
|------------------------|------------|----------------------------------------|------------|
| ** **             | ** ** | **2010**                               | ** ** | **2009** | ** ** |
| Interest  expense      | ** ** | **$**                                  | **13,820** |   | $ | 15,521 |   |
| Interest  income       | ** ** | **(11**                                | **)**      | (98 | ) |
| Interest  expense, net | ** ** | **$**                                  | **13,809** |   | $ | 15,423 |   |
| Interest  capitalized  | ** ** | **$**                                  | **—** |   | $ | 28 |   |

 

At March 31, 2010,our unconsolidated joint venture had total indebtedness of approximately $315.0million with a fixed interest rate of approximately 4.91%.  The mortgage matures in June 2015.  Our aggregate pro-rata share of thenon-recourse unconsolidated joint venture debt was approximately $94.5 million.

 

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**RecksonOperating Partnership, L.P.**

**Notes toCondensed Consolidated Financial Statements**

**(Unaudited)**

**March 31,2010**

 

**7.  Corporate Indebtedness**

 

**SeniorUnsecured Notes**

 

The following table setsforth our senior unsecured notes and other related disclosures by scheduledmaturity date as of March 31, 2010 (in thousands):

 
| **Issuance**            | ** ** | **Accreted  Balance** | ** **  | **Coupon Rate(1)** | ** ** | **Term  (in Years)** | ** ** | **Maturity**         | ** **            |
|-------------------------|------------|-----------------------|-------------|--------------------|------------|----------------------|------------|----------------------|-----------------------|
| January 22, 2004   |       | $                     | 123,607     |               | 5.15       | %                    | 7          |                 | January 15, 2011 |   |
| August 13, 2004    |       | 150,000               |        | 5.875              | %          | 10                   |       | August 15, 2014 |                  |
| March 31, 2006     |       | 274,737               |        | 6.00               | %          | 10                   |       | March 31, 2016  |                  |
| June 27, 2005 (2)  |       | 94,084                |        | 4.00               | %          | 20                   |       | June 15, 2025   |                  |
| March 16, 2010 (3) |       | 250,000               |        | 7.75               | %          | 10                   |       | March 15, 2020  |                  |
|                    | ** ** | **$**                 | **892,428** |               |       |                 |       |                 |                  |   |

 

----

(1)             Interest on the senior unsecured notes ispayable semi-annually with principal and unpaid interest due on the scheduledmaturity dates.

(2)             Exchangeable senior debentures which arecallable after June 17, 2010 at 100% of par.  In addition, the debentures can be put to us,at the option of the holder at par plus accrued and unpaid interest, onJune 15, 2010, 2015 and 2020 and upon the occurrence of certain change ofcontrol transactions.  As a result of theMerger, the adjusted exchange rate for the debentures is 7.7461 shares of SLGreen common stock per $1,000 of principal amount of debentures and theadjusted reference dividend for the debentures is $1.3491.  Duringthe three months ended March 31, 2010, we repurchased approximately $21.4million of these notes and realized a net loss on early extinguishment of debtof approximately $0.1 million.  Onthe Merger date, $13.1 million was recorded in equity.  As of March 31, 2010, approximately $0.5million remained unamortized.

(3)             SL Green andthe operating partnership are co-obligors of this financing.

 

In March 2010, SLGreen commenced a cash tender offer, or Tender Offer, to purchase up to $250.0million aggregate principal amount of its outstanding 3.000% ExchangeableSenior Notes due 2027 issued by its operating partnership, and the outstanding4.000% Exchangeable Senior Debentures due 2025, 5.150% Notes due 2011 and5.875% Notes due 2014 issued by Reckson. The Tender Offer expired at 12:00midnight, New York City time, on April 7, 2010.

 

In April 2010, SLGreen completed the Tender Offer and purchased $13.0 million of the outstanding3.000% Exchangeable Senior Notes due 2027 issued by its operating partnership,and $13.2 million of the outstanding 4.000% Exchangeable Senior Debentures due2025, $38.8 million of the 5.150% Notes due 2011 and $50.0 million of the5.875% Notes due 2014 issued by Reckson.

 

ROP and certain of its subsidiaries provide a seniorguaranty of operating partnership’s obligations under SL Green’s 2007 unsecuredrevolving credit facility.  ROP and itssubsidiaries’ respective obligations to guarantee amounts payable under thesenior guaranty of operating partnership’s obligations under SL Green’s 2007unsecured revolving credit facility are limited by the Allocable GuarantyLimitation, as defined in the guaranty agreement under the senior guaranty ofoperating partnership’s obligations under SL Green’s 2007 unsecured revolvingcredit facility. ROP’s guaranty ranks pari passu in right of payment with itsother senior, unsecured indebtedness. As of March 31, 2010, the maximumamount of ROP’s guaranty obligation was $621.0 million.

 

The Allocable GuarantyLimitation is the product of the Overall Guaranty Limitation times the amountof Pari Passu Indebtedness owing in respect of the senior guaranty of operatingpartnership’s obligations under SL Green’s 2007 unsecured revolving creditfacility divided by the amount of Pari Passu Indebtedness outstanding at suchtime, each as defined in the guaranty agreement.  The Overall Guaranty Limitation is the sum of$500 million plus 95% of Reckson’s aggregate outstanding unsecured 5.15% notesdue 2011, 5.875% notes due 2014, 4.000% exchangeable debentures due 2025 and6.0% notes due 2016. Pari Passu Indebtedness includes all indebtedness owed bythe operating partnership that is not secured, ranks pari passu withindebtedness under the senior guaranty of operating partnership’s obligationsunder SL Green’s 2007 unsecured revolving credit facility and is guaranteed byROP and its subsidiaries on substantially the same terms as their guarantiesunder SL Green’s 2007 unsecured revolving credit facility.

 

On March 16, 2009,the $200.0 million, 7.75% unsecured notes scheduled to mature in March 2009,assumed as part of the Merger, were redeemed.

 

**RestrictiveCovenants**

 

Theterms of the senior unsecured notes include certain restrictions and covenantswhich limit, among other things, the incurrence of additional indebtedness andliens, and which require compliance with financial ratios relating to theminimum amount of debt service coverage, the maximum amount of consolidatedunsecured and secured indebtedness and the minimum amount of unencumberedassets.  As of March 31, 2010 and December 31,2009, we were in compliance with all such covenants.

 

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**RecksonOperating Partnership, L.P.**

**Notes toCondensed Consolidated Financial Statements**

**(Unaudited)**

**March 31,2010**

** **

**PrincipalMaturities**

 

Combined aggregateprincipal maturities of mortgages and notes payable, senior unsecured notes(net of discount) and our share of joint venture debt as of March 31,2010, including extension options, were as follows (in thousands):

 
| ** ** | ** ** | **Scheduled  Amortization** | ** ** | **Principal  Repayments** | ** ** | **Senior  Unsecured  Notes** | ** ** | **Total** | ** **  | **Joint  Venture  Debt** | ** ** |
|------------|------------|-----------------------------|------------|---------------------------|------------|------------------------------|------------|-----------|-------------|--------------------------|------------|
| 2010       |       | $                           | 3,463      |                      | $          | —                       |       | $         | 94,084      |                     | $          | 97,547 |   | — |   |
| 2011       |       | 3,224                       |       | 216,656                   |       | 123,607                      |       | 343,487   |        | —                   |       |
| 2012       |       | —                      |       | —                    |       | —                       |       | —    |        | —                   |       |
| 2013       |       | —                      |       | —                    |       | —                       |       | —    |        | —                   |       |
| 2014       |       | —                      |       | —                    |       | 150,000                      |       | 150,000   |        | —                   |       |
| Thereafter |       | —                      |       | —                    |       | 524,737                      |       | 524,737   |        | 94,500                   |       |
|       | ** ** | **$**                       | **6,687**  | ** **                | **$**      | **216,656**                  | ** ** | **$**     | **892,428** | ** **               | **$**      | **1,115,771** | ** ** | **$** | **94,500** | ** ** |
|            |            |                             |            |                           |            |                              |            |           |             |                          |            |  |  |  |  |  |

 

**8.  Fair Value of Financial Instruments**

 

The following disclosuresof estimated fair value were determined by management, using available marketinformation and appropriate valuation methodologies.  Considerable judgment is necessary tointerpret market data and develop estimated fair value.  Accordingly, the estimates presented hereinare not necessarily indicative of the amounts we could realize on dispositionof the financial instruments. The use of different market assumptions and/orestimation methodologies may have a material effect on the estimated fair valueamounts.

 

Cash and cashequivalents, restricted cash, tenant and other receivables and accrued interestpayable and other liabilities, accounts payable and accrued expenses andsecurity deposits, reasonably approximate their fair values due to the short maturitiesof these items. Mortgage notes payable and the senior unsecured notes have anestimated fair value based on discounted cash flow models, based on Level 3inputs, of approximately $1.1 billion, compared to the book value of therelated fixed rate debt of approximately $1.1 billion.  Our structured finance investments had anestimated fair value ranging between $16.8 million and $25.2 million, comparedto the book value of the related investments of approximately $28.0 million at March 31,2010.

 

Disclosure about fairvalue of financial instruments is based on pertinent information available tous as of March 31, 2010.  Althoughwe are not aware of any factors that would significantly affect the reasonablefair value amounts, such amounts have not been comprehensively revalued forpurposes of these financial statements since that date and current estimates offair value may differ significantly from the amounts presented herein.

 

**9.  Partners’Capital**

** **

Priorto the Merger, a Class A common unit of ROP and a share ofcommon stock of Reckson Associates Realty Corp., or RARC, had similareconomic characteristics as they effectively shared equally in the netincome or loss and distributions of ROP.  Since consummation of the Mergeron January 25, 2007, the operating partnership has owned all theeconomic interests in ROP either by direct ownership or by indirectownership through its wholly-owned subsidiary Wyoming Acquisition GPLLC, or WAGP.  Reckson Associates Realty Corp., or RARC, served asthe sole general partner of ROP until November 15, 2007, atwhich time RARC withdrew and WAGP succeeded it as the sole general partner ofROP.  Since consummation of the Merger,RARC has been a wholly-owned subsidiary of the operating partnership.

 

As of December 31,2006, we had issued and outstanding 1,200 preferred units of limitedpartnership interest, or Preferred Units, with a liquidation preference valueof $1,000 per unit and a stated distribution rate of 7.0% which was subject toreduction based upon terms of their initial issuance.  The terms of the Preferred Units provided forthis reduction in distribution rate in order to address the effect of certainmortgages with above market interest rates which were assumed by us inconnection with properties contributed to us in 1998.  As a result of the aforementioned reduction,no distributions were being made on the Preferred Units.  In connection with the Merger, the holder ofthe Preferred Units transferred the Preferred Units to the operatingpartnership in exchange for the issuance of 1,200 preferred units of limitedpartnership interest in the operating partnership with substantially similarterms as the Preferred Units.

 

Intercompany transactionsbetween SL Green and ROP are generally recorded as contributions anddistributions.

 

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**RecksonOperating Partnership, L.P.**

**Notes toCondensed Consolidated Financial Statements**

**(Unaudited)**

**March 31,2010**

 

**10.  Commitments and Contingencies**

 

We are not presentlyinvolved in any material litigation nor, to our knowledge, are any materiallitigation threatened against us or our properties, other than routinelitigation arising in the ordinary course of business.  Management believes the costs, if any,incurred by us related to this litigation will not materially affect ourfinancial position, operating results or liquidity.

 

The following is aschedule of future minimum lease payments under noncancellable operatingleases with initial terms in excess of one year as of March 31, 2010 (inthousands):

 
| **March 31,**            | ** ** | **Non-cancellable  operating leases** | ** ** |
|-------------------------------|------------|---------------------------------------|------------|
|                          |       |                                  |       |
| 2010                          |       | $                                     | 7,457      |   |
| 2011                          |       | 7,724                                 |       |
| 2012                          |       | 7,594                                 |       |
| 2013                          |       | 7,594                                 |       |
| 2014                          |       | 7,594                                 |       |
| Thereafter                    |       | 247,237                               |       |
| Total  minimum lease payments | ** ** | **$**                                 | 285,200    | ** ** |

 

**11.  Environmental Matters**

 

Our management believesthat the properties are in compliance in all material respects with applicableFederal, state and local ordinances and regulations regarding environmentalissues.  Management is not aware of anyenvironmental liability that it believes would have a materially adverse impacton our financial position, results of operations or cash flows.  Management is unaware of any instances inwhich it would incur significant environmental cost if any of the propertieswere sold.

 

**12.  Segment Information**

 

We are engaged in owning,managing and leasing commercial office properties in the New York Metro Areaand have two reportable segments, real estate and structured financeinvestments.  We evaluate real estateperformance and allocate resources based on earnings contribution to incomefrom continuing operations.

 

Our real estate portfoliois primarily located in the geographical markets of the New York MetroArea.  The primary sources of revenue aregenerated from tenant rents and escalations and reimbursement revenue.  Real estate property operating expensesconsist primarily of security, maintenance, utility costs, real estate taxesand ground rent expense (at certain applicable properties).  See Note 4 for additional details on ourstructured finance investments.

 

Selected results of operations for the three monthsended March 31, 2010 and 2009 and selected asset information as of March 31,2010 and December 31, 2009, regarding our operating segments are asfollows (in thousands):

 
| ** **                                                                                             | ** ** | **Real  Estate  Segment** | ** ** | **Structured  Finance  Segment** | ** ** | **Total  Company** | ** ** |
|--------------------------------------------------------------------------------------------------------|------------|---------------------------|------------|----------------------------------|------------|--------------------|------------|
| Total  revenues:                                                                                       |       |                      |       |                             |       |               |       |
| Three  months ended March 31, 2010                                                                |       | $                         | 88,226     |                             | $          | 973                |       | $ | 89,199 |   |
| Three  months ended March 31, 2009                                                                |       | 85,030                    |       | 939                              |       | 85,969             |       |
|                                                                                                   |       |                      |       |                             |       |               |       |
| Income  (loss) from continuing operations before noncontrolling interest and  discontinued operations: |       |                      |       |                             |       |               |       |
| Three  months ended March 31, 2010                                                                |       | $                         | 14,570     |                             | $          | 882                |       | $ | 15,452 |   |
| Three  months ended March 31, 2009                                                                |       | 12,448                    |       | 595                              |       | 13,043             |       |
|                                                                                                   |       |                      |       |                             |       |               |       |
| Total  assets                                                                                          |       |                      |       |                             |       |               |       |
| As  of:                                                                                                |       |                      |       |                             |       |               |       |
| March 31,  2010                                                                                   |       | $                         | 3,937,589  |                             | $          | 28,040             |       | $ | 3,965,629 |   |
| December 31,  2009                                                                                |       | 3,942,897                 |       | 26,993                           |       | 3,969,890          |       |

 

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**Reckson Operating Partnership, L.P.**

**Notes toCondensed Consolidated Financial Statements**

**(Unaudited)**

**March 31,2010**

 

Income from continuingoperations represents total revenues less total expenses for the real estate segmentand total investment income less allocated interest expense for the structuredfinance segment.  Interest costs for thestructured finance segment are imputed assuming 100% leverage at SL Green’sunsecured revolving credit facility borrowing cost.  We do not allocate marketing, general andadministrative expenses to the structured finance segment, since we baseperformance on the individual segments prior to allocating marketing, generaland administrative expenses.  All otherexpenses, except interest, relate entirely to the real estate assets.  There were no transactions between the abovetwo segments.

 

Thetable below reconciles income from continuing operations before minorityinterest to net income available to common unitholders for the three monthsended March 31, 2010 and 2009 (in thousands):

 
| ** **                                                                 | ** ** | **Three Months  Ended  March 31,** | ** ** | **Three Months  Ended  March 31,** | ** ** |
|----------------------------------------------------------------------------|------------|-----------------------------------------|------------|-----------------------------------------|------------|
| ** **                                                                 | ** ** | **2010**                                | ** ** | **2009**                                | ** ** |
|                                                                       |       |                                    |       |                                    |       |
| Income  from continuing operations                                         |       | $                                       | 15,452     |                                    | $          | 13,043 |   |
| Net  income (loss) gains from discontinued operations                      |       | —                                  |       | (25                                     | )          |
| Net  income                                                                |       | 15,452                                  |       | 13,018                                  |       |
| Net  income attributable to noncontrolling interests in other partnerships |       | (3,716                                  | )          | (3,327                                  | )          |
| Net  income attributable to ROP common unitholders                         |       | $                                       | 11,736     |                                    | $          | 9,691 |   |

 

**13. ****Related Party Transactions**

 

**Cleaning/Security/ Messenger and Restoration Services**

 

Through Alliance BuildingServices, or Alliance, First Quality Maintenance, L.P., or First Quality,provides cleaning, extermination and related services, Classic Security LLCprovides security services, Bright Star Couriers LLC provides messengerservices, and Onyx Restoration Works provides restoration services with respectto certain properties owned by us. Alliance is owned by Gary Green, a son of Stephen L. Green, the chairmanof our board of directors.  In addition,First Quality has the non-exclusive opportunity to provide cleaning and relatedservices to individual tenants at our properties on a basis separatelynegotiated with any tenant seeking such additional services.  An affiliate of ours has entered into anarrangement with Alliance whereby it will receive a profit participation abovea certain threshold for services provided by Alliance to tenants above the baseservices specified in their lease agreements. The affiliate received approximately $0.5 million and $0.3 million forthe three months ended March 31, 2010 and 2009, respectively.  We paid Alliance approximately $0.2 millionand $0.6 million for three months ended March 31, 2010 and 2009,respectively, for these services (excluding services provided directly totenants).

 

**AllocatedExpenses from SL Green**

 

Subsequent to the Merger,property operating expenses include an allocation of salary and other operatingcosts from SL Green.  Such amount wasapproximately $1.0 million and $1.0 million for the three months ended March 31,2010 and 2009, respectively.

 

**Insurance**

 

Subsequent to the Merger,we obtained insurance coverage through an insurance program administered by SLGreen.  In connection with this programwe incurred insurance expense of approximately $0.8 million and $0.7 millionfor the three months ended March 31, 2010 and 2009, respectively.

 

**14. Subsequent Events**

 

On May 10, 2010, ROP notified the holders of its outstanding 4.00%Exchangeable Senior Debentures due 2025 (the “Debentures”) of their option, pursuant to the terms of theDebentures, to require it to purchase, on June 15, 2010 (the “Put Date”),all or a portion of such holders’ Debentures (the “Put Option”) at a purchaseprice, in cash, equal to $1,000 per $1,000 principal amount at maturity of theDebentures.  The opportunity to surrenderDebentures for purchase pursuant to the Put Option will terminate at 5:00 p.m.,New York City time, on June 8, 2010. The Put Date is an interest paymentdate under the terms of the Debentures. Accordingly, interest accrued up to, but excluding, the Put Date will bepaid to all holders, including those that validly tender and do not validlywithdraw their Debentures.  ROP will paythe purchase price for the Debentures solely with cash. If all outstanding Debenturesare surrendered for purchase pursuant to the Put Option, the aggregate cashpurchase price will be approximately $81.4 million.

 

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**Table ofContents**

** **

**ITEM 2.   Management’s Discussion and Analysis ofFinancial Condition and Results of Operations**

** **

**Overview**

 

RecksonOperating Partnership, L.P., or ROP, commenced operations on June 2,1995.  Reckson Associates Realty Corp., or RARC, served as the solegeneral partner of ROP until November 15, 2007, at which timeRARC withdrew, Wyoming Acquisition GP LLC, or WAGP, succeeded it as the solegeneral partner of ROP.  WAGP is a wholly-owned subsidiary of SLGreen Operating Partnership, L.P., or the operating partnership.  The sole limited partner of ROP is theoperating partnership.

 

**ROP is engaged in the ownership,management, operation, leasing, financing and development of commercial realestate properties, principally office properties and also owns land for futuredevelopment located in the New York City, Westchester and Connecticut whichcollectively is also known as the New York Metro Area.**

** **

On January 25, 2007,SL Green Realty Corp., or SL Green, completed the acquisition of all of theoutstanding shares of common stock of RARC pursuant to the terms of theAgreement and Plan of Merger, dated as of August 3, 2006, as amended, theMerger Agreement, among SL Green, Wyoming Acquisition Corp., or Wyoming,Wyoming Acquisition GP LLC, Wyoming Acquisition Partnership LP, RARC andROP.  SL Green paid approximately $6.0billion, inclusive of transaction costs, for Reckson.  This transaction is referred to herein as theMerger.

 

On January 25, 2007,SL Green completed the sale of certain assets of ROP to an investment group ledby certain of Reckson’s former executive management for a total considerationof approximately $2.0 billion.

 

The following discussionrelated to our consolidated financial statements should be read in conjunctionwith the financial statements appearing in this Quarterly Report on Form 10-Qand in Item 8 of our Annual Report on Form 10-K for the year ended December 31,2009.

 

As a result of thesubstantial change in ownership from the Merger, SL Green has recorded theMerger in accordance with the provisions of Emerging Issues Task Force TopicD-97, “Push-Down Accounting.”  Theapplication of “push-down accounting” resulted in the adjustment of thecarrying values of the assets and liabilities of ROP to fair value in the samemanner as ROP’s assets and liabilities were recorded by SL Green subsequent tothe Merger.  The net impact of suchadjustments was approximately $3.0 billion.

 

As of March 31, 2010, we owned the followinginterests in commercial office properties in the New York Metro Area, primarilyin midtown Manhattan, a borough of New York City, or Manhattan.  Ourinvestments in the New York Metro Area also include investments in Queens,Westchester County and Connecticut, which are collectively known as theSuburban assets:

 
| **Location** | ** ** | **Ownership**             | ** ** | **Number  of  Properties** | ** ** | **Square  Feet** | ** ** | **Weighted  Average  Occupancy****(1)** | ** ** |
|--------------|------------|---------------------------|------------|----------------------------|------------|------------------|------------|-----------------------------------------|------------|
| Manhattan    |       | Consolidated properties   |       | 4                          |       | 3,770,000        |       | 95.9                                    | %          |
|         |       |                      |       |                       |       |             |       |                                    |       |
| Suburban     |       | Consolidated properties   |       | 16                         |       | 2,642,100        |       | 84.5                                    | %          |
|         |       | Unconsolidated properties |       | 1                          |       | 1,402,000        |       | 100.0                                   | %          |
|         |       |                      |       | 21                         |       | 7,814,100        |       | 92.8                                    | %          |

 

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(1)   The weighted averageoccupancy represents the total leased square feet divided by total availablerentable square feet.

 

At March 31, 2010,our inventory of development parcels aggregated approximately 81 acres of landin four separate parcels on which we can, based on estimates at March 31,2010, develop approximately 1.1 million square feet of office space and inwhich we had invested approximately $65.5 million.

 

**CriticalAccounting Policies**

 

Refer to our AnnualReport on Form 10-K for the year ended December 31, 2009 for adiscussion of our critical accounting policies, which include investment incommercial real estate properties, investment in unconsolidated joint ventures,revenue recognition, allowance for doubtful accounts and reserve for possiblecredit losses.  There have been nochanges to these policies in 2010.

 

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**Results of Operations**

 

***Comparison of the three months ended March 31, 2010 tothe three months ended March 31, 2009***

 

Thefollowing section compares the results of operations for the three months endedMarch 31, 2010 to the three months ended March 31, 2009 for the 20consolidated properties owned by ROP.

 
| **Rental  Revenues (in millions)**    | ** ** | **2010** | ** ** | **2009** | ** ** | **$  Change** | ** ** | **%  Change** | ** ** |
|---------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------|------------|
| Rental  revenue                       |       | $        | 72.2       |     | $          | 70.2          |       | $             | 2.0        |   | 2.9 | % |
| Escalation  and reimbursement revenue |       | 13.4     |       | 14.4     |       | (1.0          | )          | (6.9          | )          |
| Total                                 |       | $        | 85.6       |     | $          | 84.6          |       | $             | 1.0        |   | 1.2 | % |

 

AtMarch 31, 2010, we estimated that the current market rents on ourconsolidated Manhattan properties and consolidated Suburban properties wereapproximately 0.9% and 0.3% higher, respectively, than then existing in-placefully escalated rents.  Approximately8.2% of the space leased at our consolidated properties expires during theremainder of 2010.

 
| **Investment  and Other Income (in millions)**        | ** ** | **2010** | ** ** | **2009** | ** ** | **$  Change** | ** ** | **%********Change** | ** ** |
|-------------------------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------------|------------|
| Equity  in net income of unconsolidated joint venture |       | $        | 0.3        |     | $          | 0.3           |       | $                   | —     |   | — | % |
| Investment  and other income                          |       | 3.6      |       | 1.4      |       | 2.2           |       | 157.1               |       |
| Total                                                 |       | $        | 3.9        |     | $          | 1.7           |       | $                   | 2.2        |   | 129.4 | % |

 

Ourjoint venture at One Court Square is net leased to a single tenant until2020.  As such, we do not anticipate muchchange in occupancy rates or net income contributions from this asset.  At March 31, 2010, we estimated thatcurrent market rents at our Suburban joint venture asset was approximately 2.6%higher than then existing in-place fully escalated rents.

 

Theincrease in investment and other income is primarily related to an increase inlease buy out income earned.

 
| **Property  Operating Expenses (in millions)** | ** ** | **2010** | ** ** | **2009** | ** ** | **$  Change** | ** ** | **%  Change** | ** ** |
|------------------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------|------------|
| Operating  expenses                            |       | $        | 18.7       |     | $          | 19.5          |       | $             | (0.8       | ) | (4.1 | )% |
| Real  estate taxes                             |       | 14.7     |       | 14.4     |       | 0.3           |       | 2.1           |       |
| Ground  rent                                   |       | 2.2      |       | 2.2      |       | —        |       | —        |       |
| Total                                          |       | $        | 35.6       |     | $          | 36.1          |       | $             | (0.5       | ) | (1.4 | )% |

 

Operatingexpenses decreased compared to the same period in the prior year.  The decrease was primarily attributable todecreases in repairs and maintenance and utilities.  The increase in real estate taxes wasprimarily due to higher assessed values and higher tax rates.

 
| **Other  Expenses (in millions)**              | ** ** | **2010** | ** ** | **2009** | ** ** | **$  Change** | ** ** | **%********Change** | ** ** |
|------------------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------------|------------|
| Interest  expense, net of interest income      |       | $        | 13.8       |     | $          | 15.4          |       | $                   | (1.6       | ) | (10.4 | )% |
| Depreciation  and amortization expense         |       | 24.4     |       | 23.5     |       | 0.9           |       | 3.8                 |       |
| Marketing,  general and administrative expense |       | 0.1      |       | 0.1      |       | —        |       | —              |       |
| Total                                          |       | $        | 38.3       |     | $          | 39.0          |       | $                   | (0.7       | ) | (1.8 | )% |

 

Thedecrease in interest expense was due to the redemption of $200.0 million ofsenior unsecured notes at maturity in March 2009 and which bore an averageinterest rate of 7.75%.  We alsorepurchased approximately $219.3 million of our 4% exchangeable seniorunsecured notes and unsecured bonds during 2009 and 2010, thereby reducing ourinterest expense during the first quarter of 2010.

 

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**Liquidityand Capital Resources**

 

Weare currently experiencing a global economic downturn and credit crunchalthough positive signs have started to materialize.  As a result, many financial industryparticipants, including commercial real estate owners, operators, investors andlenders continue to find it extremely difficult to obtain cost-effective debtcapital to finance new investment activity or to refinance maturing debt.  In the few instances in which debt isavailable, it is at a cost much higher than in the recent past.

 

On January 25, 2007,we were acquired by SL Green. See Item 2 “Management’s Discussion andAnalysis — Liquidity and Capital Resources” in SL Green’s Quarterly Report on Form 10-Qfor the quarter ended March 31, 2010 for a complete discussion ofadditional sources of liquidity available to us due to our indirect ownershipby SL Green.

 

We currently expect thatour principal sources of funds to meet our short-term and long-term liquidityrequirements (working capital, property operations, debt service, redevelopmentof properties, tenant improvements and leasing costs) will include cash onhand, cash flow from operations and net proceeds from divestitures ofproperties and redemptions of structured finance investments, and proceeds fromdebt offerings.

 

Cash flow from operationsis primarily dependent upon the occupancy level of our portfolio, the neteffective rental rates achieved on our leases, the collectability of rent andoperating escalations and recoveries from our tenants and the level ofoperating and other costs.

 

We believe that oursources of working capital, specifically our cash flow from operations, areadequate for us to meet our short-term and long-term liquidity requirements forthe foreseeable future.

 

#### **Cash Flows**

#### ** **

**The following summary discussion of our cash flows is based on ourcondensed consolidated statements of cash flows in “Item 1. FinancialStatements” and is not meant to be an all-inclusive discussion of the changesin our cash flows for the periods presented below.**

** **

Cashand cash equivalents were $20.6 million and $17.9 million at March 31,2010 and March 31, 2009, respectively, representing an increase of $2.7million.  The increase was a result ofthe following increases and decreases in cash flows (in thousands):

 
| ** **                                          | ** ** | **Three Months Ended March 31,** | ** ** |
|-----------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                          | ** ** | ** **                            | ** ** | ** ** | ** ** | **Increase** | ** ** |
| ** **                                          | ** ** | **2010**                              | ** ** | **2009** | ** ** | **(Decrease)** | ** ** |
|                                                |       |                                  |       |   |   |   |   |
| Net cash provided by operating activities           |       | $                                     | 13,608     |   | $ | 12,148 |   | $ | 1,460 |   |
| Net cash (used in) provided by investing activities |       | $                                     | (5,007     | ) | $ | (4,058 | ) | $ | (949 | ) |
| Net cash used in financing activities               |       | $                                     | (9,992     | ) | $ | (13,305 | ) | $ | 3,313 |   |

 

**Our principal source of operating cash flow is related to the leasing andoperating of the properties in our portfolio. Our properties provide arelatively consistent stream of cash flow that provides us with resources topay operating expenses, debt service and fund quarterly dividend anddistribution payment requirements. At March 31, 2010, our portfolio was92.8% occupied. In addition, rental rates continue to increase and tenantconcession packages decrease in the Manhattan and Suburban marketplaces. Ourstructured finance and joint venture investments also provide a steady streamof operating cash flow to us.**

** **

**Cash isused in investing activities to fund acquisitions, redevelopment projects andrecurring and nonrecurring capital expenditures. We selectively invest inexisting buildings that meet our investment criteria.  During the three months ended March 31,2010, compared to the same period in the prior year, we used cash primarilyfrom the following investing activities (in thousands):**

 
| Capital expenditures and capitalized interest |   | $    | (817   | ) |
|-----------------------------------------------|--------|------|--------|---|
| Distributions from joint ventures             |   | 33   |   |
| Other investing activities                    |   | (165 | )      |

** **

**We generally fund our investment activity through property-levelfinancing and asset sales.  During thethree months ended March 31, 2010, compared to the same period in theprior year, we used our funds to complete the following financing activities(in thousands):**

** **
| Repayments under our  debt obligations       |       | $        | 187,903 |   |
|----------------------------------------------|------------|----------|---------|--------|
| Proceeds from debt obligations               |       | 250,000  |    |
| Contributions                                |       | (199,505 | )       |
| Distributions and other financing activities | ** ** | (231,807 | )       |
| Deferred loan costs                          | ** ** | (3,278   | )       |

 

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**Capitalization**

** **

Prior to the Merger, a Class Acommon unit and a share of common stock of RARC had similar economiccharacteristics as they effectively share equally in the net income or loss anddistributions of ROP.  As of January 25,2007, all of our issued and outstanding Class A common units were owned byRARC.  In connection with the Merger,RARC assigned all of its interest in the Class A common units to WAGP andthe operating partnership.  On November 15,2007, RARC withdrew, and WAGP succeeded it, as the sole general partner of ROP.All of our issued and outstanding Class A common units were owned by WAGPor the operating partnership.

 

As of December 31,2006, we had issued and outstanding 1,200 preferred units of limited partnershipinterest, or Preferred Units, with a liquidation preference value of $1,000 perunit and a stated distribution rate of 7.0% which was subject to reductionbased upon terms of their initial issuance. The terms of the Preferred Units provided for this reduction indistribution rate in order to address the effect of certain mortgages withabove market interest rates which were assumed by us in connection withproperties contributed to us in 1998.  As a result of the aforementioned reduction, no distributions were beingmade on the Preferred Units.  Inconnection with the Merger, the holder of the Preferred Units transferred thePreferred Units to the operating partnership in exchange for the issuance of1,200 preferred units of limited partnership interest in the operatingpartnership with substantially similar terms as the Preferred Units.

 

**ContractualObligations**

 

Combined aggregateprincipal maturities of mortgages payable and senior unsecured notes (net ofdiscount), our share of joint venture debt, including extension options,estimated interest expense, and our obligations under our ground leases, as of March 31,2010 are as follows (in thousands):

 
| ** **                  | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **2013** | ** ** | **2014** | ** ** | **Thereafter** | ** ** | **Total** | ** ** |
|-----------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------------|------------|-----------|------------|
| Property  mortgages         |       | $        | 3,463      |     | $          | 219,880  |       | $        | —     |     | $          | —         |       | $         | —     |   | $ | — |   | $ | 223,343 |   |
| Senior  unsecured notes     |       | 94,084   |       | 123,607  |       | —   |       | —   |       | 150,000  |       | 524,737        |       | 892,428   |       |
| Ground  leases              |       | 7,457    |       | 7,724    |       | 7,594    |       | 7,594    |       | 7,594    |       | 247,237        |       | 285,200   |       |
| Estimated  interest expense |       | 51,199   |       | 55,460   |       | 44,724   |       | 44,724   |       | 40,318   |       | 131,367        |       | 367,792   |       |
| Joint  venture debt         |       | —   |       | —   |       | —   |       | —   |       | —   |       | 94,500         |       | 94,500    |       |
| Total                       |       | $        | 156,203    |     | $          | 406,671  |       | $        | 52,318     |     | $          | 52,318         |       | $         | 197,912    |   | $ | 997,841 |   | $ | 1,863,263 |   |

 

**SeniorUnsecured Notes**

 

The following table setsforth our senior unsecured notes and other related disclosures by scheduledmaturity date as of March 31, 2010 (in thousands):

 
| **Issuance**            | ** ** | **Accreted  Balance** | ** **  | **Coupon  Rate****(1)** | ** ** | **Term  (in Years)** | ** ** | **Maturity**         | ** **            |
|-------------------------|------------|-----------------------|-------------|-------------------------|------------|----------------------|------------|----------------------|-----------------------|
| January 22, 2004   |       | $                     | 123,607     |                    | 5.15       | %                    | 7          |                 | January 15, 2011 |   |
| August 13, 2004    |       | 150,000               |        | 5.875                   | %          | 10                   |       | August 15, 2014 |                  |
| March 31, 2006     |       | 274,737               |        | 6.00                    | %          | 10                   |       | March 31, 2016  |                  |
| June 27, 2005 (2)  |       | 94,084                |        | 4.00                    | %          | 20                   |       | June 15, 2025   |                  |
| March 16, 2010 (3) |       | 250,000               |        | 7.75                    | %          | 10                   |       | March 15, 2020  |                  |
|                    | ** ** | **$**                 | **892,428** |                    |       |                 |       |                 |                  |   |

 

----

(1)    Interest on the senior unsecured notes is payablesemi-annually with principal and unpaid interest due on the scheduled maturitydates.

(2)    Exchangeable senior debentures which are callableafter June 17, 2010 at 100% of par. In addition, the debentures can be put to us, at the option of theholder at par plus accrued and unpaid interest, on June 15, 2010, 2015 and2020 and upon the occurrence of certain change of control transactions.  As a result of the Merger, the adjustedexchange rate for the debentures is 7.7461 shares of SL Green common stock per$1,000 of principal amount of debentures and the adjusted reference dividendfor the debentures is $1.3491.  During the three months ended March 31,2010, we repurchased approximately $21.4 million of these notes and realizednet loss on early extinguishment of debt of approximately $0.1 million.  On the Merger dated, $13.1 million wasrecorded in equity.  As of March 31,2010, approximately $0.5 million remained unamortized.

(3)    SL Green and the operating partnership areco-obligators of this financing.

 

In March 2010, SLGreen commenced a cash tender offer, or Tender Offer, to purchase up to $250.0million aggregate principal amount of its outstanding 3.000% ExchangeableSenior Notes due 2027 issued by its operating partnership, and the outstanding4.000% Exchangeable Senior Debentures due 2025, 5.150% Notes due 2011 and5.875% Notes due 2014 issued by Reckson. The Tender Offer expired at 12:00midnight, New York City time, on April 7, 2010.

 

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In April 2010, SLGreen completed the Tender Offer and purchased $13.0 million of the outstanding3.000% Exchangeable Senior Notes due 2027 issued by its operating partnership,and $13.2 million of the outstanding 4.000% Exchangeable Senior Debentures due2025, $38.8 million of the 5.150% Notes due 2011 and $50.0 million of the5.875% Notes due 2014 issued by Reckson.

 

On March 16, 2009,the $200.0 million, 7.75% unsecured notes scheduled to mature in March 2009,assumed as part of the Merger, were redeemed.

 

**RestrictiveCovenants**

 

Theterms of our senior unsecured notes include certain restrictions and covenantswhich limit, among other things, the incurrence of additional indebtedness andliens, and which require compliance with financial ratios relating to theminimum amount of debt service coverage, the maximum amount of consolidatedunsecured and secured indebtedness and the minimum amount of unencumberedassets.  As of March 31, 2010 and December 31,2009, we were in compliance with all such covenants.

 

**MarketRate Risk**

 

We arenot exposed to changes in interest rates as we have no floating rate borrowingarrangements.

 

All of our long-termdebt, totaling approximately $1.1 billion, bears interest at fixed rates, andtherefore the fair value of these instruments is affected by changes in themarket interest rates.

 

**Off-BalanceSheet Arrangements**

 

Wehave a number of off-balance sheet investments, including a joint ventureinvestment and structured finance investments. These investments all have varying ownership structures.  Our joint venture arrangement is accountedfor under the equity method of accounting as we have the ability to exercisesignificant influence, but not control over the operating and financialdecisions of this joint venture arrangement. Our off-balance sheet arrangements are discussed in Note 4, “StructuredFinance Investments” and Note 5, “Investment in Unconsolidated Joint Venture”in the accompanying financial statements.

 

**CapitalExpenditures**

 

We estimate that for thenine months ending December 31, 2010, we will incur approximately $26.1million of capital expenditures (including tenant improvements and leasingcommissions) on consolidated properties and none at our joint venture property.  We expect to fund these capital expenditureswith operating cash flow, borrowings under SL Green’s credit facility and cashon hand.  We believe that we will havesufficient resources to satisfy our capital needs during the next 12-monthperiod.

 

Thereafter, we expectthat our capital needs will be met through a combination of net cash providedby operations, borrowings, potential asset sales or additional equity or debtissuances by SL Green.

 

**RelatedParty Transactions**

 

**Cleaning/Security/ Messenger and Restoration Services**

 

Through Alliance BuildingServices, or Alliance, First Quality Maintenance, L.P., or First Quality,provides cleaning, extermination and related services, Classic Security LLCprovides security services, Bright Star Couriers LLC provides messengerservices, and Onyx Restoration Works provides restoration services with respectto certain properties owned by us. Alliance is owned by Gary Green, a son of Stephen L. Green, the chairmanof our board of directors.  In addition,First Quality has the non-exclusive opportunity to provide cleaning and relatedservices to individual tenants at our properties on a basis separatelynegotiated with any tenant seeking such additional services.  An affiliate of ours has entered into anarrangement with Alliance whereby it will receive a profit participation abovea certain threshold for services provided by Alliance to tenants above the baseservices specified in their lease agreements. The affiliate received approximately $0.5 million and $0.3 million forthe three months ended March 31, 2010 and 2009, respecitively.  We paid Alliance approximately $0.2 millionand $0.6 million for three months ended March 31, 2010 and 2009,respectively, for these services (excluding services provided directly totenants).

 

**AllocatedExpenses from SL Green**

 

Subsequent to the Merger,property operating expenses include an allocation of salary and other operatingcosts from SL Green.  Such amount wasapproximately $1.0 million and $1.0 million for the three months ended March 31,2010 and 2009, respectively.

 

**Insurance**

 

SL Green maintains “all-risk”property and rental value coverage (including coverage regarding the perils offlood, earthquake and terrorism) within two property insurance portfolios andliability insurance. This includes the ROP assets. The first property portfoliomaintains a blanket limit of $600.0 million per occurrence for themajority of the New York City properties in our portfolio with a sub-limit of$450.0 million for acts of terrorism. This policy expires on December 31,2010.  The second portfolio maintains alimit of

 

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$600.0 million peroccurrence, including terrorism, for a few New York City properties and themajority of the Suburban properties.  The second property policy expireson December 31, 2010.  Additional coverage may be purchased on astand alone basis for certain assets. The liability policies cover all our properties and provide limits of$200.0 million per property.  The liability policies expire on October 31,2010.

 

In October 2006, SLGreen formed a wholly-owned taxable REIT subsidiary, Belmont Insurance Company,or Belmont, to act as a captive insurance company and be one of the elements ofour overall insurance program Belmont was formed in an effort to, among otherreasons, stabilize to some extent the fluctuations of insurance marketconditions. Belmont is licensed in New York to write Terrorism, NBCR (nuclear,biological, chemical, and radiological), General Liability, EnvironmentalLiability and D&O coverage.

 

·      Terrorism: Belmont acts as a direct property insurerwith respect to a portion of our terrorism coverage for the New York Cityproperties.  Effective September 1,2009 Belmont increased its terrorism coverage from $250 million to $400 millionin an upper layer.  In addition, Belmontpurchased reinsurance to reinsure the retained insurable risk not otherwisecovered under Terrorism Risk Insurance Program Reauthorization and ExtensionAct of 2007 (TRIPRA), as detailed below.

 

·      NBCR: Belmont acts as a direct insurer of NBCRcoverage up to $250 million on the entire property portfolio.

 

·      General Liability: Belmont insures a deductible on thegeneral liability insurance with a $150,000 deductible per occurrence and a$2.2 million annual aggregate stop loss limit. SL Green has secured an excessinsurer to protect against catastrophic liability losses above the $150,000deductible per occurrence and a stop loss if aggregate claims exceed $2.2million.  Belmont has retained a third party administrator to manage allclaims within the deductible and we anticipate that direct management ofliability claims will improve loss experience and ultimately lower the cost ofliability insurance in future years. In addition, SL Green has an umbrellaliability policy of $200.0 million.

 

·      Environmental Liability: Belmont insures a deductibleof $1 million per occurrence on a $30 million environmental liability policycovering the entire portfolio.

 

TRIA, which was enactedin November 2002, was renewed on December 31, 2007. Congress extendedTRIA, now called TRIPRA (Terrorism Risk Insurance Program Reauthorization andExtension Act of 2007) until December 31, 2014. The law extends thefederal Terrorism Insurance Program that requires insurance companies to offerterrorism coverage and provides for compensation for insured losses resultingfrom acts of foreign and domestic terrorism. Our debt instruments, consistingof mortgage loans secured by our properties (which are generally non-recourseto us), mezzanine loans, ground leases and SL Green’s 2007 unsecured revolvingcredit facility, contain customary covenants requiring us to maintaininsurance. There can be no assurance that the lenders or ground lessors underthese instruments will not take the position that a total or partial exclusionfrom “all-risk” insurance coverage for losses due to terrorist acts is a breachof these debt and ground lease instruments that allows the lenders or groundlessors to declare an event of default and accelerate repayment of debt orrecapture of ground lease positions. In addition, if lenders insist on fullcoverage for these risks and prevail in asserting that we are required tomaintain such coverage, it could result in substantially higher insurancepremiums.

 

Subsequent to the Merger,we obtained insurance coverage through an insurance program administered by SLGreen.  In connection with this programwe incurred insurance expense of approximately $0.8 million and $0.7 millionfor the three months ended March 31, 2010 and 2009, respectively.

 

**AccountingStandards Updates**

 

TheAccounting Standards Updates are discussed in Note 2, “Significant AccountingPolicies-Accounting Standards Updates” in the accompanying financialstatements.

 

**Inflation**

 

Substantiallyall of the office leases provide for separate real estate tax and operatingexpense escalations as well as operating expense recoveries based on increasesin the Consumer Price Index or other measures such as porters’ wage.  In addition, many of the leases provide forfixed base rent increases.  We believethat inflationary increases may be at least partially offset by the contractualrent increases and expense escalations described above.

 

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**Forward-Looking Information**

 

This report includescertain statements that may be deemed to be “forward-looking statements” withinthe meaning of Section 27A of the Securities Act of 1933, as amended, orthe Act, and Section 21E of the Securities Exchange Act of 1934, asamended, or the Exchange Act.  Suchforward-looking statements relate to, without limitation, our future capitalexpenditures, dividends and acquisitions (including the amount and naturethereof) and other development trends of the real estate industry and theManhattan, Westchester, Connecticut and Long Island City office market,business strategies, and the expansion and growth of our operations.  These statements are based on certainassumptions and analyses made by us in light of our experience and ourperception of historical trends, current conditions, expected futuredevelopments and other factors we believe are appropriate.  We intend such forward-looking statements tobe covered by the safe harbor provisions for forward-looking statementscontained in Section 27A of the Act and Section 21E of the ExchangeAct.  Such statements are subject to anumber of assumptions, risks and uncertainties which may cause our actualresults, performance or achievements to be materially different from futureresults, performance or achievements expressed or implied by theseforward-looking statements. Forward-looking statements are generally identifiable by the use of thewords “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,”“project,” “continue,” or the negative of these words, or other similar wordsor terms.  Readers are cautioned not toplace undue reliance on these forward-looking statements.  Among the factors about which we have madeassumptions are:

 

·      general economic or business (particularly realestate) conditions, either nationally or in the New York metro area being lessfavorable than expected;

·      reduced demand for office space;

·      risks of real estate acquisitions;

·      risks of structured finance investments and borrowers;

·      availability and creditworthiness of prospectivetenants and borrowers;

·      tenant bankruptcies;

·      adverse changes in the real estate markets, includingincreasing vacancy, including availability of sublease space, decreasing rentalrevenue and increasing insurance costs;

·      availability, terms and deployment of capital (debtand equity);

·      unanticipated increases in financing and other costs,including a rise in interest rates;

·      market interest rates could adversely affect themarket price of our common stock, as well as our performance and cash flows;

·      declining real estate valuations and impairmentcharges;

·      our ability to comply with financial covenants in ourdebt instruments;

·      our ability to satisfy complex rules in order forSL Green to qualify as a REIT, for federal income tax purposes, our ability tosatisfy the rules in order for us to qualify as a partnership for federalincome tax purposes, the ability of certain of our subsidiaries to qualify asREITs and certain of our subsidiaries to qualify as taxable REIT subsidiariesfor federal income tax purposes and our ability and the ability of oursubsidiaries to operate effectively within the limitations imposed by theserules;

·      accounting principles and policies and guidelinesapplicable to REITs;

·      competition with other companies;

·      availability of and our ability to attract and retainqualified personnel;

·      the continuing threat of terrorist attacks on thenational, regional and local economies including, in particular, the New YorkCity area and our tenants;

·      legislative or regulatory changes adversely affectingreal estate investment trusts and the real estate business; and

·      environmental, regulatory and/or safety requirements.

 

We undertake noobligation to publicly update or revise any forward-looking statements, whetheras a result of future events, new information or otherwise.

 

The risks included hereare not exhaustive.  Other sections ofthis report may include additional factors that could adversely affect ROP’sbusiness and financial performance.  Inaddition, sections of the SL Green’s Annual Report on Form 10-K for theyear ended December 31, 2009 contains additional factors that couldadversely effect our business and financial performance.  Moreover, ROP operates in a very competitiveand rapidly changing environment.  Newrisk factors emerge from time to time and it is not possible for management topredict all such risk factors, nor can it assess the impact of all such riskfactors on ROP’s business or the extent to which any factor, or combination offactors, may cause actual results to differ materially from those contained inany forward-looking statements.  Giventhese risks and uncertainties, investors should not place undue reliance onforward-looking statements as a prediction of actual results.

 

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**ITEM3.  Quantitative and QualitativeDisclosure About Market Risk**

 

For quantitative andqualitative disclosures about market risk, see item 7A, “Quantitative andQualitative Disclosures About Market Risk,” of our Annual Report on Form 10-Kfor the year ended December 31, 2009. Our exposures to market risk have not changed materially since December 31,2009.

 

**ITEM 4T. Controls and Procedures**

** **

**Evaluation of Disclosure Controls and Procedures**

** **

We maintain disclosurecontrols and procedures that are designed to ensure that information requiredto be disclosed in our Exchange Act reports is recorded, processed, summarizedand reported within the time periods specified in the SEC’s rules andforms, and that such information is accumulated and communicated to ourmanagement, including our Chief Executive Officer and Chief Financial Officer,as appropriate, to allow timely decisions regarding required disclosure basedclosely on the definition of “disclosure controls and procedures” in Rule 13a-15(e) ofthe Exchange Act.  Notwithstanding theforegoing, a control system, no matter how well designed and operated, canprovide only reasonable, not absolute, assurance that it will detect or uncoverfailures within the Company to disclose material information otherwise requiredto be set forth in our periodic reports. Also, we have investments in certain unconsolidated entities.  As we do not control these entities, ourdisclosure controls and procedures with respect to such entities arenecessarily substantially more limited than those we maintain with respect toour consolidated subsidiaries.

 

As of the end of theperiod covered by this report, we carried out an evaluation, under thesupervision and with the participation of our management, including ourPresident and our Treasurer, of the effectiveness of the design and operationof our disclosure controls and procedures. Based upon that evaluation as of the end of the period covered by thisreport, our President and Treasurer concluded that our disclosure controls andprocedures were effective to give reasonable assurances to the timelycollection, evaluation and disclosure of information relating to the Companythat would potentially be subject to disclosure under the Securities ExchangeAct of 1934, as amended, and the rules and regulations promulgatedthereunder.

 

We are not currentlyrequired to comply with Section 404 (Management’s Annual Report onInternal Control Over Financial Reporting) of the Sarbanes-Oxley Act of 2002because we are not an “accelerated filer,” as defined by Rule 12b-2 underthe Exchange Act.  We are in the processof continuously improving our internal controls over financial reportingprocesses and procedures for our financial reporting so that our management canreport on these processes and procedures when required to do so.

 

**Changes in Internal Control over Financial Reporting**

** **

Therehave been no significant changes in our internal control over financialreporting during the quarter ended March 31, 2010, that has materiallyaffected, or is reasonably likely to material affect, our internal control overfinancial reporting.

 
| **PART II** | **OTHER INFORMATION** |
|------------------|-----------------------|

 
| **ITEM 1.** | **LEGAL PROCEEDINGS** |
|-------------|-----------------------|

 

As of March 31,2010, we were not involved in any material litigation nor, to management’sknowledge, is any material litigation threatened against us or our portfolioother than routine litigation arising in the ordinary course of business orlitigation that is adequately covered by insurance.

 
| **ITEM  1A.** | **RISK FACTORS** |
|---------------|------------------|

 

## We encourage you to read “Item 1A of Part 1-RiskFactors” in the Annual Reports on Form 10-K for ROP and Form 10-K forSL Green Realty Corp., our 100% indirect parent company.

##  

There have been nomaterial changes to the risk factors disclosed in Item 1A of Part 1 in theabove-mentioned Annual Reports on Form 10-K for the year ended December 31,2009.

 
| **ITEM 2.** | **UNREGISTERED SALES OF EQUITY SECURITIES AND USE  OF PROCEEDS** |
|-------------|------------------------------------------------------------------|
| ** **  |                                                             |
| ** **  | None                                                             |
| ** **  |                                                             |
| **ITEM 3.** | **DEFAULTS UPON SENIOR SECURITIES**                              |
| ** **  |                                                             |
| ** **  | None                                                             |

 

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| **ITEM 4.** | **(REMOVED AND RESERVED)** |
|-------------|----------------------------|

** **
| **ITEM 5.** | **OTHER INFORMATION** |
|-------------|-----------------------|
| ** **  | ** **            |
| ** **  | None                  |
| ** **  |                  |
| **ITEM 6.** | **EXHIBITS**          |

 

(a)  Exhibits: Thefollowing exhibits are filed as part of, or incorporated by reference into,this Quarterly Report on Form 10-Q.

 
| ** **          | ** ** | ** **                                                                                                                                                                                                                                                                                             | ** ** | **Incorporated by Reference** | ** ** | ** **   | ** ** |
|---------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------|------------|--------------|------------|
| **Exhibit  Number** | ** ** | **Exhibit Description**                                                                                                                                                                                                                                                                           | ** ** | **Form**                      | ** ** | **File No.** | ** ** | **Exhibit** | ** ** | **Filing  Date** | ** ** | **Filed Herewith** | ** ** |
|                |       |                                                                                                                                                                                                                                                                                                   |       |                          |       |         |       |   |   |   |   |   |   |
| 4.1                 |       | Indenture,  dated as of March 16, 2010, among Reckson Operating Partnership, L.P.,  as Issuer, SL Green Realty Corp. and SL Green Operating Partnership, L.P., as  Co-Obligors, and The Bank of New York Mellon, as Trustee.                                                                      |       | 8-K*                          |       |         |       | 4.1 |   | 3/17/2010 |   |   |   |
|                |       |                                                                                                                                                                                                                                                                                                   |       |                          |       |         |       |   |   |   |   |   |   |
| 4.2                 |       | Form of  7.75% Senior Note due 2020 of Reckson Operating Partnership, L.P., SL Green  and SL Green OP (included in the Indenture filed as Exhibit 4.1 of this  Report.                                                                                                                       |       | 8-K*                          |       |         |       | 4.2 |   | 3/17/2010 |   |   |   |
|                |       |                                                                                                                                                                                                                                                                                                   |       |                          |       |         |       |   |   |   |   |   |   |
| 4.3                 |       | Registration  Rights Agreement, dated as of March 16, 2010, among Reckson Operating  Partnership, L.P., and SL Green Realty Corp. and SL Green Operating  Partnership, L.P., as Co-Obligors, and Banc of America Securities LLC,  Citigroup Global Markets Inc. and Deutsche Bank Securities Inc. |       | 8-K*                          |       |         |       | 4.3 |   | 3/17/2010 |   |   |   |
|                |       |                                                                                                                                                                                                                                                                                                   |       |                          |       |         |       |   |   |   |   |   |   |
| 31.1                |       | Certification  of Marc Holliday President of WAGP, the sole general partner of the  Registrant, pursuant to Rule 13a—14(a) or Rule 15(d)—14(a)                                                                                                                                |       |                          |       |         |       |   |   |   |   | X |   |
|                |       |                                                                                                                                                                                                                                                                                                   |       |                          |       |         |       |   |   |   |   |   |   |
| 31.2                |       | Certification  of Gregory F. Hughes, Treasurer of WAGP, the sole general partner of the  Registrant, pursuant to Rule 13a—14(a) or Rule 15(d)—14(a)                                                                                                                           |       |                          |       |         |       |   |   |   |   | X |   |
|                |       |                                                                                                                                                                                                                                                                                                   |       |                          |       |         |       |   |   |   |   |   |   |
| 32.1                |       | Certification  of Marc Holliday, President of WAGP, the sole general partner of the  Registrant, pursuant to Section 1350 of Chapter 63 of Title 18 of the  United States Code                                                                                                                    |       |                          |       |         |       |   |   |   |   | X |   |
|                |       |                                                                                                                                                                                                                                                                                                   |       |                          |       |         |       |   |   |   |   |   |   |
| 32.2                |       | Certification  of Gregory F. Hughes, Treasurer of WAGP, the sole general partner of the  Registrant, pursuant to Section 1350 of Chapter 63 of Title 18 of the  United States Code                                                                                                                |       |                          |       |         |       |   |   |   |   | X |   |

 

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    *Previously filed as an exhibit to the Company’s filing with the SEC andincorporated herein by reference.

 

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**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, as amended, theregistrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.

 

 
|                    | RECKSON OPERATING  PARTNERSHIP, L.P. |
|-------------------------|--------------------------------------|
|                    | By: WYOMING  ACQUISITION GP LLC      |
|                    |                                 |
|                    |                                 |
|                    | By:                                  | /s/  Gregory F. Hughes |
|                    |                                 | Gregory F. Hughes |
|                    |                                 | Treasurer |
|                    |                                 |   |
|                    |                                 |   |
| Date: May 13, 2010 |                                 |   |

 

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