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**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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**FORM 10-Q**

 

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

 

**For the quarterly period ended June 30, 2010**

 

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

 

**For the transition period from              to                .**

 

**Commission File Number: 1-13762**

 

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

(Exact name of registrant as specified in its charter)

 

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| **Maryland**                                                    |   | **11-3233647**                        |
|-----------------------------------------------------------------|--------|---------------------------------------|
| (State or other jurisdiction of  incorporation or organization) |   | (I.R.S. Employer  Identification No.) |

 

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

(Address of principal executive offices) (Zip Code)

 

**(212) 594-2700**

(Registrant’s telephone number, including area code)

 

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Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the 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

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-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) |   |                         |

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).  YES o NO x

 

Asof July 31, 2010, no common units of limited partnership interest of theRegistrant were held by non-affiliates of the Registrant.  There is no established trading market forsuch units.

 

 

 

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Table ofContents

 

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

 

**INDEX**

 
| **PART I.**  | **FINANCIAL INFORMATION**                                                                                                |     |
|-------------------|--------------------------------------------------------------------------------------------------------------------------|----------|
|              |                                                                                                                     |     |
| **ITEM 1.**       | **FINANCIAL STATEMENTS**                                                                                                 |     |
|              |                                                                                                                     |     |
| ** **        | ** **                                                                                                               | **PAGE** |
|              |                                                                                                                     |     |
|              | Condensed  Consolidated Balance Sheets as of June 30, 2010 (unaudited) and  December 31, 2009                  | 3        |
|              |                                                                                                                     |     |
|              | Condensed  Consolidated Statements of Income for the three and six months ended  June 30, 2010 and 2009 (unaudited) | 4        |
|              |                                                                                                                     |     |
|              | Condensed  Consolidated Statements of Cash Flows for the six months ended June 30,  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**                          | 17       |
|              |                                                                                                                     |     |
| **ITEM 3.**       | **QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**                                                          | 25       |
| ** **        | ** **                                                                                                               |     |
| **ITEM 4T.**      | **CONTROLS AND  PROCEDURES**                                                                                             | 25       |
| ** **        | ** **                                                                                                               |     |
| **PART II.** | **OTHER INFORMATION**                                                                                                    | 25       |
| ** **        | ** **                                                                                                               |     |
| **ITEM 1.**       | **LEGAL PROCEEDINGS**                                                                                                    | 25       |
| ** **        | ** **                                                                                                               |     |
| **ITEM 1A.**      | **RISK FACTORS**                                                                                                         | 25       |
| ** **        | ** **                                                                                                               |     |
| **ITEM 2.**       | **UNREGISTERED  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**                                                         | 25       |
| ** **        | ** **                                                                                                               |     |
| **ITEM 3.**       | **DEFAULTS UPON  SENIOR SECURITIES**                                                                                     | 25       |
| ** **        | ** **                                                                                                               |     |
| **ITEM 4.**       | **(REMOVED AND RESERVED)**                                                                                               | 26       |
| ** **        | ** **                                                                                                               |     |
| **ITEM 5.**       | **OTHER INFORMATION**                                                                                                    | 26       |
| ** **        | ** **                                                                                                               |     |
| **ITEM 6.**       | **EXHIBITS**                                                                                                             | 26       |
| ** **        | ** **                                                                                                               |     |
| **SIGNATURES**    | 27                                                                                                                       |

 

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Table ofContents

 

**PART I.****        ****FINANCIAL INFORMATION**

**ITEM 1.****      ****Financial Statements**

 

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

**Condensed Consolidated BalanceSheets**

**(Amounts in thousands)**

 
| ** **                                                                                           | ** ** | **June 30,********2010** | ** ** | **December 31,****2009** | ** ** |
|------------------------------------------------------------------------------------------------------|------------|-------------------------------|------------|-------------------------------|------------|
| ** **                                                                                           | ** ** | **(Unaudited)**               | ** ** | ** **                    | ** ** |
| **Assets**                                                                                           |       |                          |       |                          |       |
| Commercial real estate properties, at cost:                                                          |       |                          |       |                          |       |
| Land and land interests                                                                              |       | $                             | 643,902    |                          | $          | 643,667 |   |
| Building and improvements                                                                            |       | 3,303,932                     |       | 3,294,632                     |       |
| ** **                                                                                           |       | 3,947,834                     |       | 3,938,299                     |       |
| Less: accumulated depreciation                                                                       |       | (306,946                      | )          | (259,773                      | )          |
| ** **                                                                                           |       | 3,640,888                     |       | 3,678,526                     |       |
| Cash and cash equivalents                                                                            |       | 20,280                        |       | 22,030                        |       |
| Restricted cash                                                                                      |       | 9,378                         |       | 9,180                         |       |
| Tenant and other receivables, net of allowance of  $2,483 and $3,016 in 2010 and 2009, respectively  |       | 6,119                         |       | 10,138                        |       |
| Deferred rents receivable, net of allowance of $6,135  and $5,362 in 2010 and 2009, respectively     |       | 48,938                        |       | 42,132                        |       |
| Structured finance investments, net of allowance  of $10,550 in both 2010 and 2009, respectively     |       | 27,810                        |       | 26,993                        |       |
| Investment in unconsolidated joint venture                                                           |       | 49,026                        |       | 51,313                        |       |
| Deferred costs, net of accumulated amortization of  $4,503 and $3,123 in 2010 and 2009, respectively |       | 23,543                        |       | 18,047                        |       |
| Other assets                                                                                         |       | 105,411                       |       | 111,531                       |       |
| Total assets                                                                                         |       | $                             | 3,931,393  |                          | $          | 3,969,890 |   |
|                                                                                                 |       |                          |       |                          |       |
| **Liabilities**                                                                                      |       |                          |       |                          |       |
| Mortgage note payable                                                                                |       | $                             | 222,333    |                          | $          | 224,104 |   |
| Senior unsecured notes                                                                               |       | 708,804                       |       | 663,155                       |       |
| Accrued interest payable and other liabilities                                                       |       | 13,135                        |       | 8,733                         |       |
| Accounts payable and accrued expenses                                                                |       | 20,289                        |       | 34,785                        |       |
| Deferred revenue                                                                                     |       | 250,369                       |       | 275,451                       |       |
| Security deposits                                                                                    |       | 8,628                         |       | 8,475                         |       |
| Total liabilities                                                                                    |       | 1,223,558                     |       | 1,214,703                     |       |
|                                                                                                 |       |                          |       |                          |       |
| Commitments and Contingencies                                                                        |       | —                        |       | —                        |       |
|                                                                                                 |       |                          |       |                          |       |
| **Capital**                                                                                          |       |                          |       |                          |       |
| General partner capital - ROP                                                                        |       | 2,210,744                     |       | 2,258,389                     |       |
| Limited partner capital                                                                              |       | —                        |       | —                        |       |
| Noncontrolling interests in other partnerships                                                       |       | 497,091                       |       | 496,798                       |       |
| Total capital                                                                                        |       | 2,707,835                     |       | 2,755,187                     |       |
| Total liabilities and capital                                                                        |       | $                             | 3,931,393  |                          | $          | 3,969,890 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

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

**Condensed Consolidated Statementsof Income**

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

 
| ** **                                                                                                                                                    | ** ** | **Three months ended  June 30,** | ** ** | **Six months ended  June 30,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|-------------------------------------|------------|
| ** **                                                                                                                                                    | ** ** | **2010**                              | ** ** | **2009**                            | ** ** | **2010** | ** ** | **2009** | ** ** |
| **Revenues**                                                                                                                                                  |       |                                  |       |                                |       |   |   |   |   |
| Rental revenue, net                                                                                                                                           | ** ** | **$**                                 | 71,164     |                                | $          | 71,687 |   | $ | 143,381 |   | $ | 141,888 |   |
| Escalation and reimbursement                                                                                                                                  |       | 12,292                                |       | 13,654                              |       | 25,691 |   | 28,025 |   |
| Investment income                                                                                                                                             |       | 100                                   |       | 488                                 |       | 1,072 |   | 1,427 |   |
| Other income                                                                                                                                                  |       | 2,166                                 |       | 1,154                               |       | 4,777 |   | 1,616 |   |
| Total revenues                                                                                                                                                |       | 85,722                                |       | 86,983                              |       | 174,921 |   | 172,956 |   |
| **Expenses**                                                                                                                                                  |       |                                  |       |                                |       |   |   |   |   |
| Operating expenses (including $2,046 and $4,065,  $2,379 and $4,643 paid to affiliates in 2010 and 2009, respectively                                         |       | 18,623                                |       | 18,411                              |       | 37,342 |   | 37,906 |   |
| Real estate taxes                                                                                                                                             |       | 14,683                                |       | 14,228                              |       | 29,365 |   | 28,590 |   |
| Ground rent                                                                                                                                                   |       | 2,161                                 |       | 2,161                               |       | 4,322 |   | 4,322 |   |
| Interest expense, net of interest income                                                                                                                      |       | 16,057                                |       | 14,239                              |       | 29,866 |   | 29,662 |   |
| Amortization of deferred finance costs                                                                                                                        |       | 98                                    |       | —                              |       | 111 |   | — |   |
| Depreciation and amortization                                                                                                                                 |       | 24,028                                |       | 23,356                              |       | 48,472 |   | 46,897 |   |
| Loan loss reserves                                                                                                                                            |       | —                                |       | 24,907                              |       | — |   | 24,907 |   |
| Marketing, general and administrative                                                                                                                         |       | 116                                   |       | 95                                  |       | 214 |   | 230 |   |
| Total expenses                                                                                                                                                |       | 75,766                                |       | 97,397                              |       | 149,692 |   | 172,514 |   |
| Income (loss) from continuing operations before  equity in net income from unconsolidated joint venture, noncontrolling  interest and discontinued operations |       | 9,956                                 |       | (10,414                             | )          | 25,229 |   | 442 |   |
| Equity in net income from unconsolidated joint  venture                                                                                                       |       | 185                                   |       | 287                                 |       | 476 |   | 568 |   |
| Gain (loss) on early extinguishment of debt                                                                                                                   |       | (1,089                                | )          | 1,774                               |       | (1,202 | ) | 3,682 |   |
| Income (loss) from continuing operations                                                                                                                      |       | 9,052                                 |       | (8,353                              | )          | 24,503 |   | 4,692 |   |
| Income (loss) from discontinued operations                                                                                                                    |       | —                                |       | (16                                 | )          | — |   | (42 | ) |
| Net income (loss)                                                                                                                                             |       | 9,052                                 |       | (8,369                              | )          | 24,503 |   | 4,650 |   |
| Net income attributable to noncontrolling  interests in other partnerships                                                                                    |       | (3,185                                | )          | (3,647                              | )          | (6,901 | ) | (6,975 | ) |
| Net income (loss) attributable to ROP common  unitholders                                                                                                     | ** ** | **$**                                 | 5,867      |                                | $          | (12,016 | ) | $ | 17,602 |   | $ | (2,325 | ) |
|                                                                                                                                                          |       |                                  |       |                                |       |   |   |   |   |
| **Amounts attributable to ROP  common unitholders:**                                                                                                          |       |                                  |       |                                |       |   |   |   |   |
| Income from continuing operations                                                                                                                             | ** ** | **$**                                 | 5,867      |                                | $          | (12,000 | ) | $ | 17,602 |   | $ | (2,283 | ) |
| Discontinued operations                                                                                                                                       |       | —                                |       | (16                                 | )          | — |   | (42 | ) |
| Net income (loss)                                                                                                                                             | ** ** | **$**                                 | 5,867      |                                | $          | (12,016 | ) | $ | 17,602 |   | $ | (2,325 | ) |

 

The accompanying notes are an integral part of these financialstatements.

 

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

**Condensed Consolidated Statementsof Cash Flows**

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

 
| ** **                                                                        | ** ** | **Six months ended  June 30,** | ** ** | **Six months ended  June 30,** | ** ** |
|-----------------------------------------------------------------------------------|------------|-------------------------------------|------------|-------------------------------------|------------|
| ** **                                                                        | ** ** | **2010**                            | ** ** | **2009**                            | ** ** |
| **Operating Activities**                                                          |       |                                |       |                                |       |
| Net income                                                                        |       | $                                   | 24,503     |                                | $          | 4,650 |   |
| Adjustment to reconcile net income to net cash  provided by operating activities: |       |                                |       |                                |       |
| Depreciation and amortization                                                     |       | 48,583                              |       | 46,897                              |       |
| Equity in net income from unconsolidated joint  venture                           |       | (476                                | )          | (568                                | )          |
| Distributions of cumulative earnings from  unconsolidated joint venture           |       | 476                                 |       | 568                                 |       |
| Loss (gain) on early extinguishment of debt                                       |       | 1,202                               |       | (3,682                              | )          |
| Loan loss reserve                                                                 |       | —                              |       | 24,907                              |       |
| Deferred rents receivable                                                         |       | (6,806                              | )          | (6,164                              | )          |
| Other non-cash adjustments                                                        |       | (11,956                             | )          | (7,647                              | )          |
| Changes in operating assets and liabilities:                                      |       |                                |       |                                |       |
| Restricted cash – operations                                                 |       | (190                                | )          | (219                                | )          |
| Tenant and other receivables                                                      |       | 4,486                               |       | (646                                | )          |
| Deferred lease costs                                                              |       | (2,693                              | )          | (1,955                              | )          |
| Other assets                                                                      |       | (4,201                              | )          | 630                                 |       |
| Accounts payable, accrued expenses and other  liabilities                         |       | (10,554                             | )          | (10,125                             | )          |
| Net cash provided by operating activities                                         |       | 42,374                              |       | 46,646                              |       |
| **Investing Activities**                                                          |       |                                |       |                                |       |
| Additions to land, buildings and improvements                                     |       | (12,801                             | )          | (12,926                             | )          |
| Restricted cash-capital improvements                                              |       | (8                                  | )          | (7                                  | )          |
| Distributions in excess of cumulative earnings  from unconsolidated joint venture |       | 2,287                               |       | 2,466                               |       |
| Mortgage loans receivable, net                                                    |       | 65                                  |       | 38,616                              |       |
| Net cash used in investing activities                                             |       | (10,457                             | )          | 28,149                              |       |
| **Financing Activities**                                                          |       |                                |       |                                |       |
| Repayments of mortgage note payable                                               |       | (1,771                              | )          | (1,656                              | )          |
| Net proceeds from senior unsecured notes                                          |       | 250,000                             |       | —                              |       |
| Repayments of senior unsecured notes                                              |       | (205,859                            | )          | (268,438                            | )          |
| Contributions from common unitholders                                             |       | 325,282                             |       | 402,737                             |       |
| Distributions to noncontrolling interests in other  partnerships                  |       | (6,608                              | )          | (9,480                              | )          |
| Distributions to common unitholders                                               |       | (390,529                            | )          | (199,804                            | )          |
| Deferred loan costs                                                               |       | (4,182                              | )          | —                              |       |
| Net cash used in financing activities                                             |       | (33,667                             | )          | (76,641                             | )          |
| Net decrease in cash and cash equivalents                                         |       | (1,750                              | )          | (1,846                              | )          |
| Cash and cash equivalents at beginning of period                                  |       | 22,030                              |       | 23,114                              |       |
| Cash and cash equivalents at end of period                                        |       | $                                   | 20,280     |                                | $          | 21,268 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

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

**Notes to Condensed ConsolidatedFinancial Statements**

**(Unaudited)**

**June 30, 2010**

 

**1.  Organization and Basis of Presentation**

 

Reckson Operating Partnership, L.P., or ROP,commenced operations on June 2, 1995.  Reckson Associates RealtyCorp., or RARC, served as the sole general partner of ROP until November 15,2007, at which time RARC withdrew, Wyoming Acquisition GP LLC, or WAGP,succeeded it as the sole general partner of ROP.  WAGP is awholly-owned subsidiary of SL Green Operating Partnership, L.P., or theoperating partnership.  The sole limitedpartner of ROP is the operating partnership.

 

ROPis engaged in the ownership, management, operation, leasing, financing anddevelopment of commercial real estate properties, principally office propertiesand also owns land for future development located in New York City, Westchesterand Connecticut, which collectively is also known as the New York Metro Area.

 

SL Green Realty Corp., or SL Green, and theoperating 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, underthe Internal Revenue Code of 1986, as amended, or the Code, and operates as aself-administered, self-managed REIT.  AREIT is a legal entity that holds real estate interests and, through paymentsof dividends to stockholders, is permitted to reduce or avoid the payment ofFederal income taxes at the corporate level. Unless the context requires otherwise, all references to “we,” “our” and“us” means ROP and all entities owned or controlled by ROP.

 

OnJanuary 25, 2007, 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 and ROP.SL Green paid approximately $6.0 billion, inclusive of transaction costs, forReckson.  This transaction is referred toherein as the Merger.

 

OnJanuary 25, 2007, SL Green completed the sale of certain assets of ROP toan investment group led by certain of RARC’s former executive management for atotal consideration of approximately $2.0 billion.

 

Asa result of the substantial change in ownership from the Merger, SL Green hasrecorded the Merger in accordance with the provisions of Emerging Issues TaskForce Topic D-97, “Push-Down Accounting.” The application of “push-down accounting” resulting in the adjustment ofthe carrying values of the assets and liabilities of ROP to fair value in thesame manner as ROP’s assets and liabilities were recorded by SL Greensubsequent to the Merger.  The net impactof such adjustments was approximately $3.0 billion, related primarily toincreases to the carrying value of real estate assets and lease relatedintangibles.

 

As of June 30, 2010, weowned the following interests in commercial office properties in the New YorkMetro area, primarily in midtown Manhattan, a borough of New York City, orManhattan.  Our investments in the New York Metro area also includeinvestments in Queens, Westchester County and Connecticut, which arecollectively known as the Suburban assets:

 
| ** **   | ** ** | ** **                | ** ** | ** **     | ** ** | ** **      | ** ** | **Weighted**             | ** ** |
|--------------|------------|---------------------------|------------|----------------|------------|-----------------|------------|--------------------------|------------|
| ** **   | ** ** | ** **                | ** ** | **Number of**  | ** ** | ** **      | ** ** | **Average**              | ** ** |
| **Location** | ** ** | **Ownership**             | ** ** | **Properties** | ** ** | **Square Feet** | ** ** | **Occupancy********(1)** | ** ** |
| Manhattan    |       | Consolidated properties   |       | 4              |       | 3,770,000       |       | 94.1                     | %          |
|         |       |                      |       |           |       |            |       |                     |       |
| Suburban     |       | Consolidated properties   |       | 16             |       | 2,642,100       |       | 84.0                     | %          |
|         |       | Unconsolidated properties |       | 1              |       | 1,402,000       |       | 100.0                    | %          |
|         |       |                      |       | 21             |       | 7,814,100       |       | 91.7                     | %          |

 

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

 

AtJune 30, 2010, our inventory of development parcels aggregatedapproximately 81 acres of land in four separate parcels on which we can, basedon estimates at June 30, 2010, develop approximately 1.1 million squarefeet of office space and in which we had invested approximately $65.7 million.

 

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** **

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

**Notes to Condensed Consolidated Financial Statements**

**(Unaudited)**

**June 30, 2010**

 

**Basis of Quarterly Presentation**

 

Theaccompanying consolidated financial statements include the consolidatedfinancial position of ROP and the Service Companies (as defined below) at June 30,2010 and December 31, 2009, the consolidated results of their operationsfor the three and six months ended June 30, 2010 and 2009 and their cashflows for the six months ended June 30, 2010 and 2009.  ROP’s investments in majority-owned andcontrolled real estate joint ventures are reflected in the accompanyingfinancial statements on a consolidated basis with a reduction for thenoncontrolling 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 constructionservices to ROP, include Reckson Management Group, Inc., RANY ManagementGroup, Inc., Reckson Construction & Development LLC and RecksonConstruction Group New York, Inc. (collectively, the “Service Companies”).  All significant intercompany balances andtransactions have been eliminated in the consolidated financial statements.

 

Theaccompanying unaudited condensed consolidated financial statements have beenprepared in accordance with generally accepted accounting principles in theUnited States, or U.S. GAAP, for interim financial information and with theinstructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of theinformation and notes required by U.S. GAAP for complete financialstatements.  In the opinion ofmanagement, all adjustments (consisting of normal recurring accruals)considered necessary for fair presentation have been included.  The 2010 operating results for the periodspresented are not necessarily indicative of the results that may be expectedfor the year ending December 31, 2010. These financial statements should be read in conjunction with thefinancial statements and accompanying notes included in our Annual Report on Form 10-Kfor the year ended December 31, 2009.

 

Thebalance sheet at December 31, 2009 has been derived from the auditedfinancial statements at that date but does not include all the information andfootnotes required by U.S. GAAP for complete financial statements.

 

**2.  Significant Accounting Policies**

 

Theconsolidated financial statements include our accounts and those of oursubsidiaries, which are wholly-owned or controlled by us. Entities which we donot control through our voting interest and entities which are variableinterest entities, but where we are not the primary beneficiary, are accountedfor under the equity method or as structured finance investments.  All significant intercompany balances andtransactions have been eliminated.

 

InJune 2009, the FASB amended the guidance for determining whether an entityis a variable interest entity, or VIE, and requires the performance of aqualitative rather than a quantitative analysis to determine the primarybeneficiary of a VIE. Under this guidance, an entity would be required toconsolidate a VIE if it has (i) the power to direct the activities thatmost significantly impact the entity’s economic performance and (ii) theobligation to absorb losses of the VIE or the right to receive benefits fromthe VIE that could be significant to the VIE. Adoption of this guidance on January 1,2010 did not have a material impact on our consolidated financial statements.

 

Anoncontrolling interest in a consolidated subsidiary is defined as the portionof the equity (net assets) in a subsidiary not attributable, directly orindirectly, to a parent.  Noncontrollinginterests are required to be presented as a separate component of equity in theconsolidated balance sheet and modifies the presentation of net income byrequiring earnings and other comprehensive income to be attributed tocontrolling and noncontrolling interests.

 

Weassess the accounting treatment for each joint venture and structured financeinvestment.  This assessment includes areview of each joint venture or limited liability company agreement todetermine which party has what rights and whether those rights are protective orparticipating.  For all VIE’s, we reviewsuch agreements in order to determine which party has the power to direct theactivities that most significantly impact the entities economicperformance.  In situations where we orour partner approves, among other things, the annual budget, receives adetailed monthly reporting package from us, meets on a quarterly basis toreview the results of the joint venture, reviews and approves the joint venture’stax return before filing, and approves all leases that cover more than anominal amount of space relative to the total rentable space at each property,we do not consolidate the joint venture as we consider these to be substantiveparticipation rights that result in shared power of the activities that mostsignificantly impact the performance of our joint venture.  Our joint venture agreements also containcertain protective rights such as the requirement of partner approval to sell,finance or refinance the property and the payment of capital expenditures andoperating expenditures outside of the approved budget or operating plan.  We have no VIE’s for which we are the primarybeneficiary.

 

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

**Notes to Condensed Consolidated Financial Statements**

**(Unaudited)**

**June 30, 2010**

 

**Investment in Commercial Real Estate Properties**

 

On a periodic basis, we assess whether there are anyindicators that the value of our real estate properties may be impaired or thattheir carrying values may not be recoverable. A property’s value is considered impaired if management’s estimate ofthe aggregate future cash flows (undiscounted and without interest charges forconsolidated properties and discounted for unconsolidated properties) to begenerated by the property are less than the carrying value of theproperty.  To the extent impairment hasoccurred and is considered to be other than temporary, the loss shall be measuredas the excess of the carrying amount of the property over the calculated fairvalue of the property.  We do not believethat the value of any of our real estate properties or equity investment inrental property was impaired at June 30, 2010 and December 31, 2009.

 

We allocate the purchase price of real estate toland and building and, if determined to be material, intangibles, such as thevalue of above-, below- and at-market leases and origination costs associatedwith the in-place leases.  We depreciatethe amount allocated to building and other intangible assets over theirestimated useful lives, which generally range from three to 40 years and fromone to 14 years, respectively.  Thevalues of the above- and below-market leases are amortized and recorded aseither an increase (in the case of below-market leases) or a decrease (in thecase of above-market leases) to rental income over the remaining term of theassociated lease, which generally range from one to 14 years.  The value associated with in-place leases andtenant relationships are amortized over the expected term of the relationshipand its estimated term, which generally range from one to 14 years.  If a tenant vacates its space prior to thecontractual termination of the lease and no rental payments are being made onthe lease, any unamortized balance of the related intangible will be writtenoff.  The tenant improvements andorigination costs are amortized as an expense over the remaining life of thelease (or charged against earnings if the lease is terminated prior to itscontractual expiration date).  We assessfair value of the leases based on estimated cash flow projections that utilizeappropriate discount and capitalization 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 $5.3 million, $10.9 million, $5.2million and $9.8 million in rental revenue for the three and six months ended June 30,2010 and 2009, respectively, for the amortization of aggregate below-marketrents in excess of above-market leases and a reduction in lease originationcosts, resulting from the reallocation of the purchase price of the applicableproperties.  We recognized a reduction ininterest expense for the amortization of above-market rate debt ofapproximately $0.6 million, $0.9 million, $0.3 million and $2.1 million for thethree and six months ended June 30, 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 June 30, 2010 and December 31, 2009 (amounts inthousands).

 
| ** **                                                         | ** ** | **June 30,  2010** | ** ** | **December 31,  2009** | ** ** |
|--------------------------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| Identified intangible assets (included in other  assets):          | ** ** | ** **              |       |                        |       |
| Gross amount                                                       |       | $                       | 167,078    |                        | $          | 167,078 |   |
| Accumulated amortization                                           |       | (73,134                 | )          | (62,813                     | )          |
| Net                                                                |       | $                       | 93,944     |                        | $          | 104,265 |   |
|                                                               |       |                    |       |                        |       |
| Identified intangible liabilities (included in deferred  revenue): |       |                    |       |                        |       |
| Gross amount                                                       |       | $                       | 373,950    |                        | $          | 373,950 |   |
| Accumulated amortization                                           |       | (127,859                | )          | (106,627                    | )          |
| Net                                                                |       | $                       | 246,091    |                        | $          | 267,323 |   |

 

**Income Taxes**

 

Noprovision has been made for income taxes in the accompanying consolidatedfinancial statements since such taxes, if any, are the responsibility of theindividual partners.

 

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Table of Contents

 

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

**Notes to Condensed Consolidated Financial Statements**

**(Unaudited)**

**June 30, 2010**

 

**Reservefor Possible Credit Losses**

 

Theexpense for possible credit losses in connection with structured financeinvestments is the charge to earnings to increase the allowance for possiblecredit losses to the level that we estimate to be adequate consideringdelinquencies, loss experience and collateral quality.  Other factors considered relate to geographictrends and product diversification, the size of the portfolio and currenteconomic conditions.  Based upon thesefactors, we establish the provision for possible credit losses by category ofasset.  When it is probable that we willbe unable to collect all amounts contractually due, the account is consideredimpaired.

 

Whereimpairment is indicated, a valuation allowance is measured based upon theexcess of the recorded 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 in2010 and $24.9 million and $24.9million in loan loss reserves or charge offs during the three and six monthsended June 30, 2009, respectively, on investments held to maturity.

 

**Use of Estimates**

 

Thepreparation of financial statements in conformity with U.S. GAAP requiresmanagement to make estimates and assumptions that affect the amounts reportedin the financial statements and accompanying notes. Actual results could differfrom those estimates.

 

**Fair Value Measurements**

 

Themethodologies used for valuing financial instruments have been categorized intothree broad levels as follows:

 

Level 1 - Quoted prices in active markets foridentical instruments.

 

Level 2 - Valuations based principally on otherobservable market parameters, including

 

·      Quoted prices in active markets for similarinstruments,

 

·      Quoted prices in less active or inactive markets foridentical or similar instruments,

 

·      Other observable inputs (such as interest rates,yield curves, volatilities, prepayment speeds, loss severities, credit risksand default rates), and

 

·      Market corroborated inputs (derived principally fromor corroborated by observable market data).

 

Level 3 - Valuations based significantly onunobservable inputs.

 

·      Valuations based on third party indications (brokerquotes or counterparty quotes) which were, in turn, based significantly onunobservable inputs or were otherwise not supportable as Level 2 valuations.

 

·      Valuations based on internal models with significantunobservable inputs.

 

Theselevels form a hierarchy. We follow this hierarchy for our financial instrumentsmeasured at fair value on a recurring basis. The classifications are based onthe lowest level of input that is significant to the fair value measurement.

 

**Concentrations of Credit Risk**

 

Financial instruments that potentially subject us to concentrations ofcredit risk consist primarily of cash investments, structured financeinvestments and accounts receivable.  Weplace our cash investments in excess of insured amounts with high qualityfinancial institutions.  The collateralsecuring our structured finance investments is primarily located in the GreaterNew York Area. See Note 4. We perform ongoing credit evaluations of our tenantsand require certain tenants to provide security deposits or letters ofcredit.  Though these security depositsand letters of credit are insufficient to meet the total value of a tenant’slease obligation, they are a measure of good faith and a source of funds tooffset the economic costs associated with lost rent and the costs associatedwith re-tenanting the space.  Althoughthe properties in our real estate portfolio are primarily located in Manhattan,we also have Suburban properties located in Westchester County, Connecticut andLong Island City.  The tenants located inour buildings operate in various industries. Other than two tenants who contributed approximately 5.5% and 7.4% ofour annualized rent, no other tenant in the portfolio contributed more than4.6% of our annualized rent, including our share of joint venture annualizedrent, at June 30, 2010. Approximately 14%, 17%, 28% and 12% of our annualized rent, includingour share of joint venture annualized rent, was attributable to 810 SeventhAvenue, 919 Third Avenue, 1185 Avenue of the Americas and 1350 Avenue of theAmericas, respectively, for the quarter ended June 30, 2010.

 

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Table ofContents

 

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

**Notes to Condensed Consolidated Financial Statements**

**(Unaudited)**

**June 30, 2010**

 

**Accounting Standards Updates**

 

InJune 2009, the FASB issued guidance on accounting for transfers offinancial assets. This guidance amends various components of the existingguidance governing sale accounting, including the recognition of assetsobtained and liabilities assumed as a result of a transfer, and considerationsof effective control by a transferor over transferred assets. In addition, thisguidance removes the exemption for qualifying special purpose entities from theconsolidation guidance. This guidance is effective January 1, 2010, withearly adoption prohibited. The adoption of this guidance did not have a materialimpact on our consolidated financial statements.

 

InJuly 2010, the FASB issued updated guidance on disclosures about thecredit quality of financing receivables and the allowance for credit losseswhich will require a greater level of information disclosed about the creditquality of loans and allowance for loan losses, as well as additionalinformation related to credit quality indicators, past due information, andinformation related to loans modified in trouble debt restructuring.  Thisguidance is effective for the fourth quarter of 2010 and it only amendsexisting disclosure requirements.

 

InMarch 2010, the FASB issued updated guidance on embedded creditderivatives for contracts containing an embedded credit derivative featurerelated to the transfer of credit risk that is not solely in the form ofsubordination.  This guidance is effective for the third quarter of 2010,though early adoption is permitted. We do not expect the adoption of thisguidance to have a material effect on our consolidated financial statements.

 

InJanuary 2010, the FASB issued updated guidance on fair value measurementsand disclosures, which requires disclosure of details of significant asset orliability transfers in and out of Level 1 and Level 2 measurements within thefair value hierarchy and inclusion of gross purchases, sales, issuances, andsettlements in the rollforward of assets and liabilities valued using Level 3inputs within the fair value hierarchy.  The guidance also clarifies andexpands existing disclosure requirements related to the disaggregation of fairvalue disclosures and inputs used in arriving at fair values for assets andliabilities using Level 2 and Level 3 inputs within the fair value hierarchy. These disclosure requirements were effective for interim and annualreporting periods beginning after December 15, 2009. The grosspresentation of the Level 3 rollforward is required for interim and annualreporting periods beginning after December 15, 2010.

 

**3.  Property Dispositions and Assets Held forSale**

 

At June 30, 2009, discontinued operationsincluded the results of operations of real estate assets sold prior to thatdate.  This included 100/120 White PlainsRoad.

 

The following table summarizes income fromdiscontinued operations for the three and six months ended March 31, 2009(in thousands).  No assets wereconsidered as held for sale during the six months ended June 30, 2010.

 
| ** **                            | ** ** | **Three months  ended********June 30,** | ** ** | **Six months********ended********June 30,** | ** ** |
|---------------------------------------|------------|----------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                            | ** ** | **2009**                                     | ** ** | **2009**                                         | ** ** |
| Revenues                              |       |                                         |       |                                             |       |
| Rental revenue                        | ** ** | **$**                                        | —     |                                             | **$**      | — |   |
| Escalation and reimbursement revenues |       | 3                                            | ** ** | (3                                               | )          |
| Investment and other income           |       | —                                       |       | —                                           |       |
| Total revenues                        |       | 3                                            |       | (3                                               | )          |
| Operating expenses                    |       | 19                                           |       | 39                                               |       |
| Real estate taxes                     |       | —                                       |       | —                                           |       |
| Depreciation and amortization         |       | —                                       |       | —                                           |       |
| Total expenses                        |       | 19                                           |       | 39                                               |       |
| Loss from discontinued operations     | ** ** | **$**                                        | (16        | )                                                | **$**      | (42 | ) |

 

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Table ofContents

 

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

**Notes to Condensed Consolidated Financial Statements**

**(Unaudited)**

**June 30, 2010**

 

**4.  Structured FinanceInvestments**

 

As of June 30, 2010 and December 31, 2009,we held the following structured finance investments, with an aggregateweighted average current yield of approximately 0.4% (in thousands):

 
| **Loan  Type**                          | ** ** | **Gross  Investment** | ** ** | **Senior  Financing** | ** ** | **2010  Principal  Outstanding** | ** ** | **2009  Principal  Outstanding** | ** ** | **Initial  Maturity  Date** | ** ** |
|-----------------------------------------|------------|-----------------------|------------|-----------------------|------------|----------------------------------|------------|----------------------------------|------------|-----------------------------|------------|
| Mezzanine  Loan(1)(2)(3)(5)(6)          |       | $                     | 25,000     |                  | $          | 312,676                          |       | $                                | 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                |       | —                |       | 9,938                            |       | 9,938                            |       | April 2008             |       |
| Loan loss reserves(5)                   |       | —                |       | —                |       | (10,550                          | )          | (10,550                          | )          |                        | ** ** |
|                                    |       | $                     | 40,189     |                  | $          | 312,676                          |       | $                                | 27,810     |                        | $          | 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 sinceDecember 2007.  We reached anagreement with the borrower to, amongst other things, extended the maturitydate 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 specificallyallocated loan loss reserves recorded during the year ended December 31,2008.  Our reserves reflect management’sjudgment of the 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-accrualstatus.

 

AtJune 30, 2010 and December 31, 2009 all loans, other than as notedabove, were performing in accordance with the terms of the loan agreements.

 

**5.  Investment in Unconsolidated Joint Venture**

 

InMay 2005, we acquired a 1.4 million square foot, 50-story, Class Aoffice tower located at One Court Square, Long Island City, NY, forapproximately $471.0 million, inclusive of transfer taxes and transactionalcosts.  One Court Square is 100% leasedto the seller, Citibank N.A., under a 15-year net lease.  The lease contained 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 Court Square JV under theequity method of accounting. We have also concluded that the JPM Investors havesubstantive participating rights in the ordinary course of the Court Square JV’sbusiness that result in shared power of the activities that most significantlyimpact the performance of the joint venture.

 

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Table ofContents

 

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

**Notes to Condensed Consolidated Financial Statements**

**(Unaudited)**

**June 30, 2010**

 

**6.  Mortgage NotePayable**

 

Thefirst mortgage note payable collateralized by the property and assignment ofleases at June 30, 2010 and December 31, 2009, respectively, was asfollows (in thousands):

 
| **Property**                          | ** ** | **Interest  Rate****(1)** | ** ** | **Maturity Date** | ** ** | **June 30,  2010** | ** ** | **December 31,  2009** | ** ** |
|---------------------------------------|------------|---------------------------|------------|-------------------|------------|-------------------------|------------|-----------------------------|------------|
| 919 Third Avenue New  York, NY (2)(3) |       | 6.87                      | %          | 8/2011            |       | $                       | 222,333    |                        | $          | 224,104 |   |
|                                       |            |                           |            |                   |            |                         |            |                             |            |  |  |

 

----

(1)          Effective interest rate forthe three and six months ended June 30, 2010.

(2)          We own a 51% controllinginterest in the joint venture that is the borrower on this loan.  This loan is non-recourse to us.  We consolidate this joint venture.

(3)          Held in a bankruptcy remotespecial purpose entity.

 

At June 30, 2010, the gross book value of theproperty collateralizing the mortgage note was approximately $1.3 billion.

 

Interest expense, excluding capitalized interest,was comprised of the following (in thousands):

 
| ** **            | ** ** | **Three months ended** | ** ** | **Six months ended** | ** ** |
|-----------------------|------------|------------------------|------------|----------------------|------------|
| ** **            | ** ** | **June 30,**      | ** ** | **June 30,**    | ** ** |
| ** **            | ** ** | **2010**               | ** ** | **2009**             | ** ** | **2010** | ** ** | **2009** | ** ** |
| Interest expense      | ** ** | **$**                  | 16,067     | ** **           | **$**      | 14,253 | ** ** | **$** | 29,887 |   | $ | 29,774 |   |
| Interest income       |       | (10                    | )          | (14                  | )          | (21 | ) | (112 | ) |
| Interest expense, net | ** ** | **$**                  | 16,057     | ** **           | **$**      | 14,239 | ** ** | **$** | 29,866 |   | $ | 29,662 |   |
| Interest capitalized  | ** ** | **$**                  | —     | ** **           | **$**      | 26 | ** ** | **$** | — |   | $ | — |   |

 

AtJune 30, 2010, our unconsolidated joint venture had total indebtedness ofapproximately $315.0 million with a fixed interest rate of approximately4.91%.  The mortgage matures in June 2015.  Our aggregate pro-rata share of thenon-recourse unconsolidated joint venture debt was approximately $94.5 million.

 

**7.  CorporateIndebtedness**

 

**Senior Unsecured Notes**

 

Thefollowing table sets forth our senior unsecured notes and other relateddisclosures by scheduled maturity date as of June 30, 2010 (in thousands):

 
| **Issuance**                    | ** ** | **Accreted  Balance** | ** ** | **Coupon  Rate(1)** | ** ** | **Term  (in Years)** | ** ** | **Maturity**         | ** **            |
|---------------------------------|------------|-----------------------|------------|---------------------|------------|----------------------|------------|----------------------|-----------------------|
| January 22, 2004(4)        |       | $                     | 84,823     |                | 5.15       | %                    | 7          |                 | January 15, 2011 |   |
| August 13, 2004(4)         |       | 98,578                |       | 5.875               | %          | 10                   |       | August 15, 2014 |                  |
| March 31, 2006             |       | 274,746               |       | 6.00                | %          | 10                   |       | March 31, 2016  |                  |
| June 27, 2005 (2) (4) |       | 657                   |       | 4.00                | %          | 20                   |       | June 15, 2025   |                  |
| March 16, 2010 (3)         |       | 250,000               |       | 7.75                | %          | 10                   |       | March 15, 2020  |                  |
|                            |       | $                     | 708,804    |                |       |                 |       |                 |                  |   |

 

----

(1)   Interest on the seniorunsecured notes is payable semi-annually with principal and unpaid interest dueon the scheduled maturity dates.

(2)   Exchangeable seniordebentures which are currently redeemable 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, 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 six months ended June 30, 2010, we repurchased approximately $115.4million of these notes (inclusive of the tender offer described in Note(4) and $80.7 million repurchased pursuant to their terms.) and realized anet loss on early extinguishment of debt of approximately $0.3 million.  On the date of the Merger, $13.1million was recorded in equity.  As ofJune 30, 2010, this was fully amortized.

(3)   SLGreen and the operating partnership are co-obligors of this financing.

(4)   In April 2010, SL Greencompleted a cash tender offer and purchased $13.0 million of its outstanding3.000% Exchangeable Senior Debentures due 2027, $13.2 million of ouroutstanding 4.000% Exchangeable Senior Debentures due 2025, $38.8 million ofour 5.150% Notes due 2011 and $50.0 million of our 5.875% Notes due 2014.

 

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

**Notes to Condensed Consolidated Financial Statements**

**(Unaudited)**

**June 30, 2010**

 

ROP and certain of itssubsidiaries provide a senior guaranty of operating partnership’s obligationsunder SL Green’s 2007 unsecured revolving credit facility.  ROP and its subsidiaries’ respectiveobligations to guarantee amounts payable under the senior guaranty of operatingpartnership’s obligations under SL Green’s 2007 unsecured revolving creditfacility are limited by the Allocable Guaranty Limitation, as defined in theguaranty agreement under the senior guaranty of operating partnership’sobligations under SL Green’s 2007 unsecured revolving credit facility. ROP’sguaranty ranks pari passu in right of payment with its other senior, unsecuredindebtedness. As of June 30, 2010, the maximum amount of ROP’s guarantyobligation was $566.1 million.

 

TheAllocable Guaranty Limitation is the product of the Overall Guaranty Limitationtimes the amount of Pari Passu Indebtedness owing in respect of the seniorguaranty of operating partnership’s obligations under SL Green’s 2007 unsecuredrevolving credit facility divided by the amount of Pari Passu Indebtednessoutstanding at such time, 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.

 

OnMarch 16, 2009, ROP’s $200.0 million, 7.75% unsecured notes matured andwere repaid at par.

 

**Restrictive Covenants**

 

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 June 30, 2010 and December 31,2009, we were in compliance with all such covenants.

 

**Principal Maturities**

 

Combinedaggregate principal maturities of mortgage note payable, senior unsecured notes(net of discount) and our share of joint venture debt as of June 30, 2010,including extension options, were as follows (in thousands):

 
| ** ** | ** ** | **Scheduled  Amortization** | ** ** | **Principal  Repayments** | ** ** | **Senior  Unsecured  Notes** | ** ** | **Total** | ** ** | **Joint  Venture  Debt** | ** ** |
|------------|------------|-----------------------------|------------|---------------------------|------------|------------------------------|------------|-----------|------------|--------------------------|------------|
| 2010       |       | $                           | 2,453      |                      | $          | —                       |       | $         | —     |                     | $          | 2,453 |   | — |   |
| 2011       |       | 3,224                       |       | 216,656                   |       | 84,823                       |       | 304,703   |       | —                   |       |
| 2012       |       | —                      |       | —                    |       | —                       |       | —    |       | —                   |       |
| 2013       |       | —                      |       | —                    |       | —                       |       | —    |       | —                   |       |
| 2014       |       | —                      |       | —                    |       | 98,578                       |       | 98,578    |       | —                   |       |
| Thereafter |       | —                      |       | —                    |       | 525,403                      |       | 525,403   |       | 94,500                   |       |
| ** ** |       | $                           | 5,677      |                      | $          | 216,656                      |       | $         | 708,804    |                     | $          | 931,137 |   | $ | 94,500 |   |
|            |            |                             |            |                           |            |                              |            |           |            |                          |            |  |  |  |  |  |

 

**8.  Fair Value of Financial Instruments**

 

Thefollowing disclosures of estimated fair value were determined by management,using available market information and appropriate valuationmethodologies.  Considerable judgment isnecessary to interpret 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.

 

Cashand cash equivalents, restricted cash, tenant and other receivables and accruedinterest payable and other liabilities, accounts payable and accrued expensesand security deposits, reasonably approximate their fair values due to theshort maturities of these items. Mortgage note payable and the senior unsecurednotes have an estimated fair value based on discounted cash flow models, basedon Level 3 inputs, of approximately $0.9 billion, compared to the book value ofthe related fixed rate debt of approximately $0.9 billion.  Our structured finance investments had anestimated fair value ranging between $16.7 million and $25.0 million, comparedto the book value of the related investments of approximately $27.8 million at June 30,2010.

 

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** **

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

**Notes to Condensed Consolidated Financial Statements**

**(Unaudited)**

**June 30, 2010**

 

Disclosureabout fair value of financial instruments is based on pertinent informationavailable to us as of June 30, 2010. Although we are not aware of any factors that would significantly affectthe reasonable fair value amounts, such amounts have not been comprehensivelyrevalued for purposes of these financial statements since that date and currentestimates of fair value may differ significantly from the amounts presentedherein.

 

**9.  Partners’ Capital**

 

Prior to the Merger, a Class A commonunit of ROP and a share of common stock of Reckson Associates RealtyCorp., or RARC, had similar economic characteristics as they effectivelyshared equally in the net income or loss and distributions of ROP. Since consummation of the Merger on January 25, 2007, the operatingpartnership has owned all the economic interests in ROP either by directownership or by indirect ownership through its wholly-ownedsubsidiary Wyoming Acquisition GP LLC, or WAGP.  RecksonAssociates Realty Corp., or RARC, served as the sole general partner ofROP until November 15, 2007, at which time RARC withdrewand WAGP succeeded it as the sole general partner ofROP.   Since consummation of the Merger, RARC has been awholly-owned subsidiary of SL Green.

 

Asof December 31, 2006, we had issued and outstanding 1,200 preferred unitsof limited partnership interest, or Preferred Units, with a liquidationpreference value of $1,000 per unit and a stated distribution rate of 7.0%which was subject to reduction 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 limited partnershipinterest in the operating partnership with substantially similar terms as thePreferred Units.

 

Intercompanytransactions between SL Green and ROP are generally recorded as contributionsand distributions.

 
| ** **                        | ** ** | **Class A  Common  Units** | ** ** | **Noncontrolling  Interest** | ** ** |
|-----------------------------------|------------|---------------------------------|------------|------------------------------|------------|
| Balance at December 31, 2009 |       | $                               | 2,258,389  |                         | $          | 496,798 |   |
| Net income                        |       | 17,602                          |       | 6,901                        |       |
| Contributions                     |       | 325,282                         |       | —                       |       |
| Distributions                     |       | (390,529                        | )          | (6,608                       | )          |
|                              |       |                            |       |                         |       |
| Balance at June 30, 2010     |       | $                               | 2,210,744  |                         | $          | 497,091 |   |

 

**10.  Commitments and Contingencies**

 

Weare not presently involved in any material litigation nor, to our knowledge, isany material litigation threatened against us or our properties, other thanroutine litigation 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.

 

Thefollowing is a schedule of future minimum lease payments undernoncancellable operating lease obligations with initial terms in excess of oneyear as of June 30, 2010 (in thousands):

 
| **June 30,**            | ** ** | **Non-cancellable  operating leases** | ** ** |
|------------------------------|------------|---------------------------------------|------------|
|                         |       |                                  |       |
| 2010                         |       | $                                     | 7,091      |   |
| 2011                         |       | 7,724                                 |       |
| 2012                         |       | 7,594                                 |       |
| 2013                         |       | 7,594                                 |       |
| 2014                         |       | 7,594                                 |       |
| Thereafter                   |       | 247,237                               |       |
| Total minimum lease payments | ** ** | **$**                                 | 284,834    | ** ** |

 

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

**Notes to Condensed Consolidated Financial Statements**

**(Unaudited)**

**June 30, 2010**

 

**11.  Environmental Matters**

 

Ourmanagement believes that the properties are in compliance in all materialrespects with applicable Federal, state and local ordinances and regulationsregarding environmental issues. Management is not aware of any environmental liability that it believeswould have a materially adverse impact on our financial position, results ofoperations or cash flows.  Management isunaware of any instances in which it would incur significant environmental costif any of the properties were sold.

 

**12.  Segment Information**

 

Weare engaged in owning, managing and leasing commercial office properties in theNew York Metro Area and have two reportable segments, real estate andstructured finance investments.  Weevaluate real estate performance and allocate resources based on earningscontribution to income from continuing operations.

 

Ourreal estate portfolio is primarily located in the geographical markets of theNew York Metro Area.  The primary sourcesof revenue are generated from tenant rents and escalations and reimbursementrevenue.  Real estate property operatingexpenses consist primarily of security, maintenance, utility costs, real estatetaxes and ground rent expense (at certain applicable properties).  See Note 4 for additional details on ourstructured finance investments.

 

Selected results ofoperations for the three and six months ended June 30, 2010 and 2009 andselected asset information as of June 30, 2010 and December 31, 2009,regarding our operating segments are as follows (in thousands):

 
| ** **                                | ** ** | **Real  Estate  Segment** | ** ** | **Structured  Finance  Segment** | ** ** | **Total  Company** | ** ** |
|-------------------------------------------|------------|---------------------------|------------|----------------------------------|------------|--------------------|------------|
| Total revenues:                           |       |                      |       |                             |       |               |       |
| Three months ended June 30, 2010     |       | $                         | 85,622     |                             | $          | 100                |       | $ | 85,722 |   |
| Three months ended June 30, 2009     |       | 86,495                    |       | 488                              |       | 86,983             |       |
| Six months ended June 30, 2010       |       | 173,849                   |       | 1,072                            |       | 174,921            |       |
| Six months ended June 30, 2009       |       | 171,529                   |       | 1,427                            |       | 172,956            |       |
|                                      |       |                      |       |                             |       |               |       |
| Income (loss) from continuing operations: |       |                      |       |                             |       |               |       |
| Three months ended June 30, 2010     |       | $                         | 9,036      |                             | $          | 16                 |       | $ | 9,052 |   |
| Three months ended June 30, 2009     |       | 16,263                    |       | (24,616                          | )          | (8,353             | )          |
| Six months ended June 30, 2010       |       | 23,606                    |       | 897                              |       | 24,503             |       |
| Six months ended June 30, 2009       |       | 28,668                    |       | (23,976                          | )          | 4,692              |       |
|                                      |       |                      |       |                             |       |               |       |
| Total assets                              |       |                      |       |                             |       |               |       |
| As of:                                    |       |                      |       |                             |       |               |       |
| June 30, 2010                        |       | $                         | 3,903,583  |                             | $          | 27,810             |       | $ | 3,931,393 |   |
| December 31, 2009                    |       | 3,942,897                 |       | 26,993                           |       | 3,969,890          |       |

 

Incomefrom continuing operations represents total revenues less total expenses forthe real estate segment and total investment income less allocated interestexpense for the structured finance segment. Interest costs for the structured finance segment are imputed assuming100% leverage at SL Green’s unsecured revolving credit facility borrowingcost.  We do not allocate marketing,general and administrative expenses to the structured finance segment, since webase performance on the individual segments prior to allocating marketing,general and administrative expenses.  Allother expenses, except interest, relate entirely to the real estateassets.  There were no transactionsbetween the above two segments.

 

Thetable below reconciles income from continuing operations before noncontrollinginterest to net income available to common unitholders for the three and sixmonths ended June 30, 2010 and 2009 (in thousands):

 
| ** **                                                                 | ** ** | **Three months  ended  June 30,** | ** ** | **Three months  ended  June 30,** | ** ** | **Six months  ended  June 30,** | ** ** | **Six months  ended  June 30,** | ** ** |
|----------------------------------------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|--------------------------------------|------------|--------------------------------------|------------|
| ** **                                                                 | ** ** | **2010**                               | ** ** | **2009**                               | ** ** | **2010**                             | ** ** | **2009**                             | ** ** |
|                                                                       |       |                                   |       |                                   |       |                                 |       |                                 |       |
| Income (loss) from continuing operations                                   |       | $                                      | 9,052      |                                   | $          | (8,353                               | )          | $                                    | 24,503     |   | $ | 4,692 |   |
| Net loss from discontinued operations                                      |       | —                                 |       | (16                                    | )          | —                               |       | (42                                  | )          |
| Net income (loss)                                                          |       | 9,052                                  |       | (8,369                                 | )          | 24,503                               |       | 4,650                                |       |
| Net income attributable to noncontrolling  interests in other partnerships |       | (3,185                                 | )          | (3,647                                 | )          | (6,901                               | )          | (6,975                               | )          |
| Net income (loss) attributable to ROP common  unitholders                  |       | $                                      | 5,867      |                                   | $          | (12,016                              | )          | $                                    | 17,602     |   | $ | (2,325 | ) |

 

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

**Notes to Condensed Consolidated Financial Statements**

**(Unaudited)**

**June 30, 2010**

 

**13. ****RelatedParty Transactions**

 

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

 

ThroughAlliance Building Services, or Alliance, First Quality Maintenance, L.P., orFirst Quality, provides cleaning, extermination and related services, ClassicSecurity LLC provides security services, Bright Star Couriers LLC providesmessenger services, and Onyx Restoration Works provides restoration serviceswith respect to 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, $0.9 million, $0.5million and $0.8 million for the three and six months ended June 30, 2010and 2009, respectively.  We paid Allianceapproximately $0.3 million, $0.5 million, $0.7 million and $1.3 million forthree and six months ended June 30, 2010 and 2009, respectively, for theseservices (excluding services provided directly to tenants).

 

**Allocated Expenses from SL Green**

 

Subsequentto the Merger, property operating expenses include an allocation of salary andother operating costs from SL Green. Such amount was approximately $1.0 million, $2.0 million, $0.9 millionand $1.9 million for the three and six months ended June 30, 2010 and2009, respectively.

 

**Insurance**

 

Subsequentto the Merger, we obtained insurance coverage through an insurance programadministered by SL Green.  In connectionwith this program we incurred insurance expense of approximately $0.8 million,$1.6 million, $0.7 million and $1.5 million for the three and six months ended June 30,2010 and 2009, respectively.

 

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**ITEM 2.   Management’s Discussionand Analysis of Financial Condition and Results of Operations**

 

**Overview**

 

Reckson Operating Partnership, L.P., or ROP,commenced operations on June 2, 1995.  Reckson Associates RealtyCorp., or RARC, served as the sole general partner of ROP until November 15,2007, at which time RARC withdrew, Wyoming Acquisition GP LLC, or WAGP,succeeded it as the sole general partner of ROP.  WAGP is awholly-owned subsidiary of SL Green Operating Partnership, L.P., or theoperating partnership.  The sole limitedpartner of ROP is the operating partnership.

 

ROPis engaged in the ownership, management, operation, leasing, financing anddevelopment of commercial real estate properties, principally office propertiesand also owns land for future development located in the New York City,Westchester and Connecticut which collectively is also known as the New YorkMetro Area.

 

OnJanuary 25, 2007, SL Green Realty Corp., or SL Green, completed theacquisition of all of the outstanding shares of common stock of RARC pursuantto the terms of the Agreement and Plan of Merger, dated as of August 3,2006, as amended, the Merger Agreement, among SL Green, Wyoming AcquisitionCorp., or Wyoming, Wyoming Acquisition GP LLC, Wyoming Acquisition PartnershipLP, RARC and ROP.  SL Green paidapproximately $6.0 billion, inclusive of transaction costs, for Reckson.  This transaction is referred to herein as theMerger.

 

OnJanuary 25, 2007, SL Green completed the sale of certain assets of ROP toan investment group led by certain of Reckson’s former executive management fora total consideration of approximately $2.0 billion.

 

Thefollowing discussion related to our consolidated financial statements should beread in conjunction with the financial statements appearing in this QuarterlyReport on Form 10-Q and in Item 8 of our Annual Report on Form 10-Kfor the year ended December 31, 2009.

 

Asa result of the substantial change in ownership from the Merger, SL Green hasrecorded the Merger in accordance with the provisions of Emerging Issues TaskForce Topic D-97, “Push-Down Accounting.” The application of “push-down accounting” resulted in the adjustment ofthe carrying values of the assets and liabilities of ROP to fair value in thesame manner as ROP’s assets and liabilities were recorded by SL Greensubsequent to the Merger.  The net impactof such adjustments was approximately $3.0 billion.

 

As of June 30, 2010, weowned the following interests in commercial office properties in the New YorkMetro Area, primarily in midtown Manhattan, a borough of New York City, orManhattan.  Our investments in the New York Metro Area also includeinvestments in Queens, Westchester County and Connecticut, which arecollectively known as the Suburban assets:

 
| **Location** | ** ** | **Ownership**             | ** ** | **Number of  Properties** | ** ** | **Square Feet** | ** ** | **Weighted Average  Occupancy****(1)** | ** ** |
|--------------|------------|---------------------------|------------|---------------------------|------------|-----------------|------------|----------------------------------------|------------|
| Manhattan    |       | Consolidated properties   |       | 4                         |       | 3,770,000       |       | 94.1                                   | %          |
|         |       |                      |       |                      |       |            |       |                                   |       |
| Suburban     |       | Consolidated properties   |       | 16                        |       | 2,642,100       |       | 84.0                                   | %          |
|         |       | Unconsolidated properties |       | 1                         |       | 1,402,000       |       | 100.0                                  | %          |
|         |       |                      |       | 21                        |       | 7,814,100       |       | 91.7                                   | %          |

 

----

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

 

AtJune 30, 2010, our inventory of development parcels aggregatedapproximately 81 acres of land in four separate parcels on which we can, basedon estimates at June 30, 2010, develop approximately 1.1 million squarefeet of office space and in which we had invested approximately $65.7 million.

 

**Critical Accounting Policies**

 

Referto our Annual Report on Form 10-K for the year ended December 31,2009 for a discussion of our critical accounting policies, which includeinvestment in commercial real estate properties, investment in unconsolidatedjoint ventures, revenue recognition, allowance for doubtful accounts andreserve for possible credit losses. There have been no changes to these policies in 2010.

 

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**Resultsof Operations**

 

***Comparison of the three months ended June 30,2010 to the three months ended June 30, 2009***

 

The following section compares the results ofoperations for the three months ended June 30, 2010 to the three monthsended June 30, 2009 for the 20 consolidated properties owned by ROP.

 
| **Rental  Revenues (in millions)**   | ** ** | **2010** | ** ** | **2009** | ** ** | **$  Change** | ** ** | **%  Change** | ** ** |
|--------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------|------------|
| Rental revenue                       |       | $        | 71.2       |     | $          | 71.7          |       | $             | (0.5       | ) | (0.7 | )% |
| Escalation and reimbursement revenue |       | 12.3     |       | 13.7     |       | (1.4          | )          | (10.2         | )          |
| Total                                |       | $        | 83.5       |     | $          | 85.4          |       | $             | (1.9       | ) | (2.2 | )% |

 

Occupancy at the Reckson properties was 91.7% atJune 30, 2010 compared to 95.0% at June 30, 2009.  At June 30, 2010, we estimated that thecurrent market rents on our consolidated Manhattan properties and consolidatedSuburban properties were approximately 0.6% and 0.1% higher, respectively, thanthen existing in-place fully escalated rents. Approximately 5.7% of the space leased at our consolidated propertiesexpires during the remainder of 2010.

 
| **Investment  and Other Income (in millions)**        | ** ** | **2010** | ** ** | **2009** | ** ** | **$  Change** | ** ** | **%********Change** | ** ** |
|-------------------------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------------|------------|
| Equity in net income of unconsolidated joint  venture |       | $        | 0.2        |     | $          | 0.3           |       | $                   | (0.1       | ) | (33.3 | )% |
| Investment and other income                           |       | 2.3      |       | 1.6      |       | 0.7           |       | 43.8                |       |
| Total                                                 |       | $        | 2.5        |     | $          | 1.9           |       | $                   | 0.6        |   | 31.6 | % |

 

Our joint venture at One Court Square is net leasedto a single tenant until 2020.  As such,we do not anticipate much change in occupancy rates or net income contributionsfrom this asset.  At June 30, 2010,we estimated that current market rents at our Suburban joint venture asset wasapproximately 23.2% higher than then existing in-place fully escalated rents.

 

The increase in investment and other income isprimarily related to an increase in lease buy out income earned as well as realestate tax refunds received.

 
| **Property  Operating Expenses (in millions)** | ** ** | **2010** | ** ** | **2009** | ** ** | **$  Change** | ** ** | **%  Change** | ** ** |
|------------------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------|------------|
| Operating expenses                             |       | $        | 18.6       |     | $          | 18.4          |       | $             | 0.2        |   | 1.1 | % |
| Real estate taxes                              |       | 14.7     |       | 14.2     |       | 0.5           |       | 3.5           |       |
| Ground rent                                    |       | 2.2      |       | 2.2      |       | —        |       | —        |       |
| Total                                          |       | $        | 35.5       |     | $          | 34.8          |       | $             | 0.7        |   | 2.0 | % |

 

Operating expenses increased compared to the sameperiod in the prior year.  The increasewas primarily attributable to increases in repairs and maintenance and payrollcosts which were partially offset by reductions in 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      |       | $        | 16.2       |     | $          | 14.2          |       | $                   | 2.0        |   | 14.1 | % |
| Depreciation and amortization expense         |       | 24.0     |       | 23.4     |       | 0.6           |       | 2.6                 |       |
| Loan loss reserves                            |       | —   |       | 24.9     |       | (24.9         | )          | (100.0              | )          |
| Marketing, general and administrative expense |       | 0.1      |       | 0.1      |       | —        |       | —              |       |
| Total                                         |       | $        | 40.3       |     | $          | 62.6          |       | $                   | (22.3      | ) | (35.6 | )% |

 

The increase in interest expense was due to theissuance of $250.0 million of senior unsecured notes in March 2010, whichbear interest at a rate of 7.75%.  Theseinterest costs exceeded the interest savings generated by the repurchases ofour 4.00% exchangeable senior unsecured notes and other unsecured bonds during2009 and 2010.

 

The reduction in loan loss reserves is due to therecognition of a loss on the sale of a structured finance investment in2009.  We have not recorded any loan lossreserves in 2010.

 

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***Comparison of the six months ended June 30,2010 to the six months ended June 30, 2009***

 

The following section compares the results ofoperations for the six months ended June 30, 2010 to the six months endedJune 30, 2009 for the 20 consolidated properties owned by ROP.

 
| **Rental  Revenues (in millions)**   | ** ** | **2010** | ** ** | **2009** | ** ** | **$  Change** | ** ** | **%  Change** | ** ** |
|--------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------|------------|
| Rental revenue                       |       | $        | 143.4      |     | $          | 141.9         |       | $             | 1.5        |   | 1.1 | % |
| Escalation and reimbursement revenue |       | 25.7     |       | 28.0     |       | (2.3          | )          | (8.2          | )          |
| Total                                |       | $        | 169.1      |     | $          | 169.9         |       | $             | (0.8       | ) | (0.5 | )% |

 

Occupancy at the Reckson properties was 91.7% atJune 30, 2010 compared to 95.0% at June 30, 2009.  At June 30, 2010, we estimated that thecurrent market rents on our consolidated Manhattan properties and consolidatedSuburban properties were approximately 0.6% and 0.1% higher, respectively, thanthen existing in-place fully escalated rents. Approximately 5.7% of the space leased at our consolidated propertiesexpires during the remainder of 2010.

 
| **Investment  and Other Income (in millions)**        | ** ** | **2010** | ** ** | **2009** | ** ** | **$  Change** | ** ** | **%********Change** | ** ** |
|-------------------------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------------|------------|
| Equity in net income of unconsolidated joint  venture |       | $        | 0.5        |     | $          | 0.6           |       | $                   | (0.1       | ) | (16.7 | )% |
| Investment and other income                           |       | 5.8      |       | 3.0      |       | 2.8           |       | 93.3                |       |
| Total                                                 |       | $        | 6.3        |     | $          | 3.6           |       | $                   | 2.7        |   | 75.0 | % |

 

Our joint venture at One Court Square is net leasedto a single tenant until 2020.  As such,we do not anticipate much change in occupancy rates or net income contributionsfrom this asset.  At June 30, 2010,we estimated that current market rents at our Suburban joint venture asset wasapproximately 23.2% higher than then existing in-place fully escalated rents.

 

The increase in investment and other income isprimarily related to an increase in lease buy out income earned.

 
| **Property  Operating Expenses (in millions)** | ** ** | **2010** | ** ** | **2009** | ** ** | **$  Change** | ** ** | **%  Change** | ** ** |
|------------------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------|------------|
| Operating expenses                             |       | $        | 37.3       |     | $          | 37.9          |       | $             | (0.6       | ) | (1.6 | )% |
| Real estate taxes                              |       | 29.4     |       | 28.6     |       | 0.8           |       | 2.8           |       |
| Ground rent                                    |       | 4.3      |       | 4.3      |       | —        |       | —        |       |
| Total                                          |       | $        | 71.0       |     | $          | 70.8          |       | $             | 0.2        |   | 0.3 | % |

 

Operating expenses decreased compared to the sameperiod in the prior year.  The decreasewas primarily attributable to decreases in utilities and professional feeswhich were partially offset by increases in payroll and repairs and maintenancecosts.  The increase in real estate taxeswas primarily due to higher assessed values and higher tax rates.

 
| **Other  Expenses (in millions)**             | ** ** | **2010** | ** ** | **2009** | ** ** | **$  Change** | ** ** | **%********Change** | ** ** |
|-----------------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------------|------------|
| Interest expense, net of interest income      |       | $        | 30.0       |     | $          | 29.7          |       | $                   | 0.3        |   | 1.0 | % |
| Depreciation and amortization expense         |       | 48.5     |       | 46.9     |       | 1.6           |       | 3.4                 |       |
| Loan loss reserves                            |       | —   |       | 24.9     |       | (24.9         | )          | (100.0              | )          |
| Marketing, general and administrative expense |       | 0.2      |       | 0.2      |       | —        |       | —              |       |
| Total                                         |       | $        | 78.7       |     | $          | 101.7         |       | $                   | (23.0      | ) | (22.6 | )% |

 

The increase in interest expense was due to theissuance of $250.0 million of senior unsecured notes in March 2010, whichbear interest at a rate of 7.75%.  Theseinterest costs exceeded the interest savings generated by the purchases of our4.00% exchangeable senior unsecured notes and other unsecured bonds during 2009and 2010.

 

The reduction in loan loss reserves is due to therecognition of a loss on the sale of a structured finance investment in2009.  We have not recorded any loan lossreserves in 2010.

 

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**Liquidity and Capital Resources**

 

We continue to experience a global economic downturnand difficult credit environment although positive signs have started tomaterialize.  As a result, many financialindustry participants, including commercial real estate owners, operators,investors and lenders continue to find it extremely difficult to obtaincost-effective debt capital to finance new investment activity or to refinancematuring debt.  When debt is available,it is generally at a cost higher than may have been available in the recentpast.

 

OnJanuary 25, 2007, we were acquired by SL Green. See Item 2“Management’s Discussion and Analysis — Liquidity and Capital Resources” in SLGreen’s Quarterly Report on Form 10-Q for the quarter ended June 30,2010 for a complete discussion of additional sources of liquidity available tous due to our indirect ownership by SL Green.

 

Wecurrently expect that our principal sources of funds to meet our short-term andlong-term liquidity requirements (working capital, property operations, debtservice, redevelopment of properties, tenant improvements and leasing costs)will include cash on hand, cash flow from operations and net proceeds fromdivestitures of properties and redemptions of structured finance investments,and proceeds from debt offerings.

 

Cashflow from operations is primarily dependent upon the occupancy level of ourportfolio, the net effective rental rates achieved on our leases, thecollectability of rent and operating escalations and recoveries from ourtenants and the level of operating and other costs.

 

Webelieve that our sources of working capital, specifically our cash flow fromoperations, are adequate for us to meet our short-term and long-term liquidityrequirements for the foreseeable future.

 

**Cash Flows**

 

The following summary discussion of our cash flowsis based on our condensed consolidated statements of cash flows in “Item 1.Financial Statements” and is not meant to be an all-inclusive discussion of thechanges in our cash flows for the periods presented below.

 

Cashand cash equivalents were $20.3 million and $21.3 million at June 30, 2010and 2009, respectively, representing a decrease of $1.0 million.  The increase was a result of the followingincreases and decreases in cash flows (in thousands):

 
| ** **                                           | ** ** | **Six months ended June 30,** | ** ** |
|------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                           | ** ** | **2010**                           | ** ** | **2009** | ** ** | **Increase********(Decrease)** | ** ** |
| ** **                                           | ** ** | ** **                         | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net cash provided by operating activities            |       | $                                  | 42,374     |   | $ | 46,646 |   | $ | (4,272 | ) |
| Net cash (used in) provided by investing  activities |       | $                                  | (10,457    | ) | $ | 28,149 |   | $ | (38,606 | ) |
| Net cash used in financing activities                |       | $                                  | (33,667    | ) | $ | (76,641 | ) | $ | 42,974 |   |

 

Our principal source of operating cash flow isrelated to the leasing and operating of the properties in our portfolio. Ourproperties provide a relatively consistent stream of cash flow that provides uswith resources to pay operating expenses, debt service and fund quarterlydividend and distribution payment requirements. At June 30, 2010, ourportfolio was 91.7% occupied. In addition, rental rates continue to increaseand tenant concession packages decrease in the Manhattan and Suburbanmarketplaces. Our structured finance and joint venture investments also providea steady stream of operating cash flow to us.

 

Cash is used in investing activities to fundacquisitions, redevelopment projects and recurring and nonrecurring capitalexpenditures. We selectively invest in existing buildings that meet ourinvestment criteria.  During the sixmonths ended June 30, 2010, compared to the same period in the prior year,we used cash primarily from the following investing activities (in thousands):

 
| Capital expenditures and capitalized interest |   | $       | 125 |   |
|-----------------------------------------------|--------|---------|-----|--------|
| Distributions from joint ventures             |   | (179    | )   |
| Other investing activities                    |   | (38,552 | )   |

 

We generally fund our investment activity throughproperty-level financing and asset sales. During the six months ended June 30, 2010, compared to the sameperiod in the prior year, we used our funds to complete the following financingactivities (in thousands):

 
| Repayments under our debt obligations        |   | $        | 62,464 |   |
|----------------------------------------------|--------|----------|--------|--------|
| Proceeds from debt obligations               |   | 250,000  |   |
| Contributions                                |   | (77,455  | )      |
| Distributions and other financing activities |   | (187,853 | )      |
| Deferred loan costs                          |   | (4,182   | )      |

 

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**Capitalization**

 

Priorto the Merger, a Class A common unit and a share of common stock of RARChad similar economic characteristics as they effectively share equally in thenet income or loss and distributions of ROP. As of January 25, 2007, all of our issued and outstanding Class Acommon units were owned by RARC.  Inconnection with the Merger, RARC assigned all of its interest in the Class Acommon units to WAGP and the operating partnership.  On November 15, 2007, RARC withdrew, andWAGP succeeded it, as the sole general partner of ROP. All of our issued andoutstanding Class A common units were owned by WAGP or the operatingpartnership.

 

Asof December 31, 2006, we had issued and outstanding 1,200 preferred unitsof limited partnership interest, or Preferred Units, with a liquidationpreference value of $1,000 per unit and a stated distribution rate of 7.0%which was subject to reduction 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.

 

**Contractual Obligations**

 

Combinedaggregate principal maturities of mortgage note payable and senior unsecurednotes (net of discount), our share of joint venture debt, including extensionoptions, estimated interest expense, and our obligations under our groundleases, as of June 30, 2010 are as follows (in thousands):

 
| ** **                 | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **2013** | ** ** | **2014** | ** ** | **Thereafter** | ** ** | **Total** | ** ** |
|----------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------------|------------|-----------|------------|
| Property mortgage          |       | $        | 2,453      |     | $          | 219,880  |       | $        | —     |     | $          | —         |       | $         | —     |   | $ | — |   | $ | 222,333 |   |
| Senior unsecured notes     |       | —   |       | 84,823   |       | —   |       | —   |       | 98,578   |       | 525,403        |       | 708,804   |       |
| Ground leases              |       | 7,091    |       | 7,724    |       | 7,594    |       | 7,594    |       | 7,594    |       | 247,237        |       | 284,834   |       |
| Estimated interest expense |       | 30,645   |       | 51,468   |       | 41,731   |       | 41,731   |       | 38,835   |       | 131,382        |       | 335,792   |       |
| Joint venture debt         |       | —   |       | —   |       | —   |       | —   |       | —   |       | 94,500         |       | 94,500    |       |
| Total                      |       | $        | 40,189     |     | $          | 363,895  |       | $        | 49,325     |     | $          | 49,325         |       | $         | 145,007    |   | $ | 998,522 |   | $ | 1,646,263 |   |

 

**Senior Unsecured Notes**

 

Thefollowing table sets forth our senior unsecured notes and other relateddisclosures by scheduled maturity date as of June 30, 2010 (in thousands):

 
| **Issuance**                    | ** ** | **Accreted  Balance** | ** ** | **Coupon  Rate(1)** | ** ** | **Term  (in Years)** | ** ** | **Maturity**         | ** **            |
|---------------------------------|------------|-----------------------|------------|---------------------|------------|----------------------|------------|----------------------|-----------------------|
| January 22, 2004(4)        |       | $                     | 84,823     |                | 5.15       | %                    | 7          |                 | January 15, 2011 |   |
| August 13, 2004(4)         |       | 98,578                |       | 5.875               | %          | 10                   |       | August 15, 2014 |                  |
| March 31, 2006             |       | 274,746               |       | 6.00                | %          | 10                   |       | March 31, 2016  |                  |
| June 27, 2005 (2) (4) |       | 657                   |       | 4.00                | %          | 20                   |       | June 15, 2025   |                  |
| March 16, 2010 (3)         |       | 250,000               |       | 7.75                | %          | 10                   |       | March 15, 2020  |                  |
|                            |       | $                     | 708,804    |                |       |                 |       |                 |                  |   |

 

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| (1) | Interest  on the senior unsecured notes is payable semi-annually with principal and  unpaid interest due on the scheduled maturity dates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Exchangeable  senior debentures which are currently redeemable 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, on June 15, 2015 and 2020 and upon the  occurrence of certain change of control transactions. As a result of the  Merger, the adjusted exchange 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 dividend for the debentures is $1.3491. During the six months ended June 30,  2010, we repurchased approximately $115.4 million of these notes (inclusive  of the Tender Offer described in Note (4) and $80.7 million repurchased  pursuant to their terms) and realized a net loss on early extinguishment of  debt of approximately $0.3 million. On the date of the Merger, $13.1  million was recorded in equity. As of June 30, 2010, this was fully  amortized. |
| (3) | SL  Green and the operating partnership are co-obligators.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (4) | In  April 2010, SL Green completed a cash tender offer and purchased $13.0  million of its 3.000% Exchangeable Senior Debentures due 2027, $13.2 million  of our outstanding 4.00% Exchangeable Senior Debentures due 2025, $38.8  million of our 5.15% Notes due 2011 and $50.0 million of our 5.875% Notes due  2014.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

 

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OnMarch 16, 2009, ROP’s $200.0 million, 7.75% unsecured notes matured andwere repaid at par.

 

**Restrictive Covenants**

 

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 June 30, 2010 and December 31,2009, we were in compliance with all such covenants.

 

**Market Rate Risk**

 

Weare not exposed to changes in interest rates as we have no floating rateborrowing arrangements.

 

Allof our long-term debt, totaling approximately $0.9 billion, bears interest atfixed rates, and therefore the fair value of these instruments is affected bychanges in the market interest rates.

 

**Off-Balance Sheet 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.

 

**Capital Expenditures**

 

Weestimate that for the six months ending December 31, 2010, we will incurapproximately $20.0 million of capital expenditures (including tenant improvementsand leasing commissions) on consolidated properties and none at our jointventure property.  We expect to fundthese capital expenditures with operating cash flow and cash on hand.  We believe that we will have sufficientresources to satisfy our capital needs during the next 12-month period.

 

Thereafter,we expect that our capital needs will be met through a combination of net cashprovided by operations, borrowings and potential asset sales.

 

**Related Party Transactions**

 

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

 

ThroughAlliance Building Services, or Alliance, First Quality Maintenance, L.P., orFirst Quality, provides cleaning, extermination and related services, ClassicSecurity LLC provides security services, Bright Star Couriers LLC providesmessenger services, and Onyx Restoration Works provides restoration serviceswith respect to 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, $0.9 million, $0.5million and $0.8 million for the three and six months ended June 30, 2010and 2009, respectively.  We paid Allianceapproximately $0.3 million, $0.5 million, $0.7 million and $1.3 million forthree and six months ended June 30, 2010 and 2009, respectively, for theseservices (excluding services provided directly to tenants).

 

**Allocated Expenses from SL Green**

 

Subsequentto the Merger, property operating expenses include an allocation of salary andother operating costs from SL Green. Such amount was approximately $1.0 million, $2.0 million, $0.9 millionand $1.9 million for the three and six months ended June 30, 2010 and2009, respectively.

 

**Insurance**

 

SLGreen maintains “all-risk” property and rental value coverage (includingcoverage regarding the perils of flood, earthquake and terrorism) within twoproperty insurance portfolios and liability insurance. This includes the ROPassets. The first property portfolio maintains a blanket limit of$600.0 million per occurrence for the majority of the New York Cityproperties in our portfolio with a sub-limit of $500.0 million for acts ofterrorism. This policy expires on December 31, 2010.  The second portfolio maintains a limit of

 

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$600.0million per occurrence, including terrorism, for a few New York City propertiesand the majority 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 onOctober 31, 2010.

 

InOctober 2006, SL Green formed a wholly-owned taxable REIT subsidiary,Belmont Insurance Company, or Belmont, to act as a captive insurance companyand be one of the elements of our overall insurance program. Belmont was formedin an effort to, among other reasons, stabilize to some extent the fluctuationsof insurance market conditions. Belmont is licensed in New York to writeTerrorism, NBCR (nuclear, biological, chemical, and radiological), GeneralLiability, Environmental Liability and D&O coverage.

 

·                  Terrorism:Belmont acts as a direct property insurer with respect to a portion of ourterrorism coverage for the New York City properties.  Effective September 1, 2009 Belmontincreased its terrorism coverage from $250 million to $400 million in an upperlayer.  In addition, Belmont purchasedreinsurance to reinsure the retained insurable risk not otherwise covered underTerrorism Risk Insurance Program Reauthorization and Extension Act of 2007, orTRIPRA, as detailed below.

 

·                  NBCR: Belmontacts as a direct insurer of NBCR coverage up to $250 million on the entireproperty portfolio for certified acts of terrorism above a program trigger of$100.0 million.  Belmont is responsiblefor a small deductible and 15% of the remaining balance of a loss, with the remaining85% covered by the fereral government.

 

·                  GeneralLiability: Belmont insures a deductible on the general liability insurance witha $150,000 deductible per occurrence and a $2.2 million annual aggregate stoploss limit. SL Green has secured an excess insurer to protect againstcatastrophic liability losses above the $150,000 deductible per occurrence anda stop loss if aggregate claims exceed $2.2 million.  Belmont has retaineda third party administrator to manage all claims within the deductible and weanticipate that direct management of liability claims will improve lossexperience and ultimately lower the cost of liability insurance in futureyears. In addition, SL Green has an umbrella liability policy of $200.0million.

 

·                  EnvironmentalLiability: Belmont insures a deductible of $1 million per occurrence on a $30million environmental liability policy covering the entire portfolio.

 

TheTerrorism Risk Insurance Act, or TRIA, which was enacted in November 2002,was renewed on December 31, 2007. Congress extended TRIA, now calledTRIPRA (Terrorism Risk Insurance Program Reauthorization and Extension Act of2007) until December 31, 2014. The law extends the federal TerrorismInsurance Program that requires insurance companies to offer terrorism coverageand provides for compensation for insured losses resulting from acts ofcertified terrorism, subject to our current program trigger of $100.0million.  Our debt instruments,consisting of mortgage loans secured by our properties (which are generallynon-recourse to us), mezzanine loans, ground leases, SL Green’s 2007 unsecuredrevolving credit facility and other corporate obligations, contain customarycovenants requiring us to maintain insurance. Although we believe that we currentlymaintain sufficient insurance coverage to satisfy these obligations, there isno assurance that in the future we will be able to procure coverage atreasonable cost.  In such instances,there can be no assurance that the lenders or ground lessors under theseinstruments will not take the position that a total or partial exclusion from “all-risk”insurance coverage for losses due to terrorist acts is a breach of these debtand ground lease instruments that allows the lenders or ground lessors todeclare an event of default and accelerate repayment of debt or recapture ofground lease positions. In addition, if lenders insist on full coverage forthese risks and prevail in asserting that we are required to maintain suchcoverage, it could result in substantially higher insurance premiums.

 

Subsequentto the Merger, we obtained insurance coverage through an insurance programadministered by SL Green.  In connectionwith this program we incurred insurance expense of approximately $0.8 million,$1.6 million, $0.7 million and $1.5 million for the three and six months ended June 30,2010 and 2009, respectively.

 

**Accounting Standards Updates**

 

The Accounting Standards Updates are discussed inNote 2, “Significant Accounting Policies-Accounting Standards Updates” in theaccompanying financial statements.

 

**Inflation**

 

Substantially all of the office leases provide forseparate real estate tax and operating expense escalations as well as operatingexpense recoveries based on increases in the Consumer Price Index or othermeasures such as porters’ wage.  Inaddition, many of the leases provide for fixed base rent increases.  We believe that inflationary increases may beat least partially offset by the contractual rent increases and expenseescalations described above.

 

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**Forward-LookingInformation**

 

Thisreport includes certain statements that may be deemed to be “forward-lookingstatements” within the meaning of Section 27A of the Securities Act of1933, as amended, or the Act, and Section 21E of the Securities ExchangeAct of 1934, as amended, or the Exchange Act. Such forward-looking statements relate to, without limitation, ourfuture capital expenditures, dividends and acquisitions (including the amountand nature thereof) and other development trends of the real estate industryand the Manhattan, 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-lookingstatements are generally identifiable by the use of the words “may,” “will,” “should,”“expect,” “anticipate,” “estimate,” “believe,” “intend,” “project,” “continue,”or the negative of these words, or other similar words or terms.  Readers are cautioned not to place unduereliance on these forward-looking statements. Among the factors about which we have made assumptions are:

 

·                  generaleconomic or business (particularly real estate) conditions, either nationallyor in the New York Metro area being less favorable than expected;

 

·                  reduced demandfor office space;

 

·                  risks of realestate acquisitions;

 

·                  risks ofstructured finance investments and borrowers;

 

·                  availabilityand creditworthiness of prospective tenants and borrowers;

 

·                  tenantbankruptcies;

 

·                  adverse changesin the real estate markets, including increasing vacancy, includingavailability of sublease space, decreasing rental revenue and increasinginsurance costs;

 

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

 

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

 

·                  market interestrates could adversely affect the market price of SL Green’s common stock, aswell as our performance and cash flows;

 

·                  declining realestate valuations and impairment charges;

 

·                  our ability tocomply with financial covenants in our debt instruments;

 

·                  our ability tosatisfy complex rules in order for SL Green to qualify as a REIT, forfederal income tax purposes, our ability to satisfy the rules in order forus to qualify as a partnership for federal income tax purposes, the ability ofcertain of our subsidiaries to qualify as REITs and certain of our subsidiariesto qualify as taxable REIT subsidiaries for federal income tax purposes and ourability and the ability of our subsidiaries to operate effectively within thelimitations imposed by these rules;

 

·                  accountingprinciples and policies and guidelines applicable to REITs;

 

·                  competitionwith other companies;

 

·                  availability ofand our ability to attract and retain qualified personnel;

 

·                  the continuingthreat of terrorist attacks on the national, regional and local economiesincluding, in particular, the New York City area and our tenants;

 

·                  legislative orregulatory changes adversely affecting real estate investment trusts and thereal estate business; and

 

·                  environmental,regulatory and/or safety requirements.

 

Weundertake no obligation to publicly update or revise any forward-lookingstatements, whether as a result of new information, future events or otherwise.

 

Therisks included here are not exhaustive. Other sections of this report may include additional factors that couldadversely affect ROP’s business and financial performance.  In addition, sections of the SL Green’s andROP’s respective Annual Reports on Form 10-K for the year ended December 31,2009 contains additional factors that could adversely effect our business andfinancial performance.  Moreover, ROPoperates in a very competitive and rapidly changing environment.  New risk factors emerge from time to time andit is not possible for management to predict all such risk factors, nor can itassess the impact of all such risk factors on ROP’s business or the extent towhich any factor, or combination of factors, may cause actual results to differmaterially from those contained in any forward-looking statements.  Given these risks and uncertainties,investors should not place undue reliance on forward-looking statements as aprediction of actual results.

 

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**ITEM 3.  Quantitative andQualitative Disclosure About Market Risk**

 

Forquantitative and qualitative disclosures about market risk, see item 7A, “Quantitativeand Qualitative 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**

 

**Evaluationof Disclosure Controls and Procedures**

 

Wemaintain disclosure controls and procedures that are designed to ensure thatinformation required to be disclosed in our Exchange Act reports is recorded,processed, summarized and reported within the time periods specified in the SEC’srules and forms, and that such information is accumulated and communicatedto our management, including our Chief Executive Officer and Chief FinancialOfficer, as appropriate, to allow timely decisions regarding requireddisclosure based closely on the definition of “disclosure controls andprocedures” in Rule 13a-15(e) of the Exchange Act.  Notwithstanding the foregoing, a controlsystem, no matter how well designed and operated, can provide only reasonable,not absolute, assurance that it will detect or uncover failures within the Companyto disclose material information otherwise required to be set forth in ourperiodic reports.  Also, we haveinvestments in certain unconsolidated entities. As we do not control these entities, our disclosure controls andprocedures with respect to such entities are necessarily substantially morelimited than those we maintain with respect to our consolidated subsidiaries.

 

Asof the end of the period covered by this report, we carried out an evaluation,under the supervision and with the participation of our management, includingour President and our Treasurer, of the effectiveness of the design andoperation of our disclosure controls and procedures.  Based upon that evaluation as of the end ofthe period covered by this report, our President and Treasurer concluded thatour disclosure controls and procedures were effective to give reasonableassurances to the timely collection, evaluation and disclosure of informationrelating to the Company that would potentially be subject to disclosure underthe Securities Exchange Act of 1934, as amended, and the rules andregulations promulgated thereunder.

 

Weare not currently required to comply with Section 404 (Management’s AnnualReport on Internal Control Over Financial Reporting) of the Sarbanes-Oxley Actof 2002 because we are not an “accelerated filer,” as defined by Rule 12b-2under the Exchange Act.  We are in theprocess of continuously improving our internal controls over financialreporting processes and procedures for our financial reporting so that ourmanagement can report on these processes and procedures when required to do so.

 

**Changesin Internal Control over Financial Reporting**

 

Therehave been no significant changes in our internal control over financialreporting during the quarter ended June 30, 2010, that has materiallyaffected, or is reasonably likely to material affect, our internal control overfinancial reporting.

 

**PART**** II                 OTHERINFORMATION**

 

**ITEM 1.                  LEGAL PROCEEDINGS**

 

Asof June 30, 2010, we were not involved in any material litigation nor, tomanagement’s knowledge, is any material litigation threatened against us or ourportfolio other than routine litigation arising in the ordinary course ofbusiness or litigation that is adequately covered by insurance.

 

**ITEM 1A.               RISK FACTORS**

 

Weencourage you to read “Item 1A of Part 1-Risk Factors” in the AnnualReports on Form 10-K for ROP and Form 10-K for SL Green Realty Corp.,our indirect parent company.

 

Therehave been no material changes to the risk factors disclosed in Item 1A of Part 1in the above-mentioned Annual Reports on Form 10-K for the year ended December 31,2009.

 

**ITEM 2.                  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OFPROCEEDS**

 

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: The following exhibits are filed as part of, or incorporated byreference into, this Quarterly Report on Form 10-Q.

 
| ** **          | ** ** | ** **                                                                                                                                                                         | ** ** | **Incorporated by Reference** | ** ** | ** **   |
|---------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------|------------|--------------|
| **Exhibit  Number** | ** ** | **Exhibit Description**                                                                                                                                                       | ** ** | **Form**                      | ** ** | **File No.** | ** ** | **Exhibit** | ** ** | **Filing  Date** | ** ** | **Filed Herewith** |
| ** **          | ** ** | ** **                                                                                                                                                                         | ** ** | ** **                    | ** ** | ** **   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| 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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**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:       August 12, 2010

 

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