**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

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**FORM 10-Q**

 

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| **x**                                                   | ** ** | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934**  |
|---------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------|
|                                                    |       |                                                                                                     |
| **For the  quarterly period ended March 31, 2008** |
|                                                    |       |                                                                                                     |
| **o**                                                   | ** ** | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |

 

**For thetransition period from              to                .**

 

**CommissionFile Number: 1-13762**

 

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**RECKSONOPERATING PARTNERSHIP, L.P.**

(Exact name ofregistrant as specified in its charter)

 

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

 

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

(Address ofprincipal executive offices) (Zip Code)

 

**(212)594-2700**

(Registrant’stelephone number, including area code)

 

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

 

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

 

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

 

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

 

As of April 30, 2008,no common units of limited partnership interest of the Registrant were held bynon-affiliates of the Registrant.  Thereis no established trading market for such units.

 

 

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

** **

**INDEX**

 
| ** **        | ** **                                                                                                                                                                                                                                             | **PAGE** |
|-------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
| ** **        | ** **                                                                                                                                                                                                                                             |     |
| **PART I.**  | **FINANCIAL  INFORMATION**                                                                                                                                                                                                                             |     |
|              |                                                                                                                                                                                                                                                   |     |
| **ITEM 1.**       | **FINANCIAL STATEMENTS**                                                                                                                                                                                                                               |     |
|              |                                                                                                                                                                                                                                                   |     |
|              | Condensed Consolidated  Balance Sheets as of March 31, 2008 (unaudited) andDecember 31, 2007                                                                                                                                                 | 3        |
|              |                                                                                                                                                                                                                                                   |     |
|              | Condensed Consolidated  Statements of Operations for the three months ended March 31, 2008  (Successor) and the periods January 26, 2007 to March 31, 2007  (Successor) and January 1, 2007 to January 25, 2007 (Predecessor) | 4        |
|              |                                                                                                                                                                                                                                                   |     |
|              | Condensed Consolidated  Statements of Cash Flows for the three months ended March 31, 2008 and  2007 (unaudited)                                                                                                                                  | 5        |
|              |                                                                                                                                                                                                                                                   |     |
|              | Notes to  Condensed Consolidated Financial Statements (unaudited)                                                                                                                                                                                      | 6        |
|              |                                                                                                                                                                                                                                                   |     |
| **ITEM 2.**       | **MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**                                                                                                                                                        | 16       |
|              |                                                                                                                                                                                                                                                   |     |
| **ITEM 3.**       | **QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**                                                                                                                                                                                        | 23       |
|              |                                                                                                                                                                                                                                                   |     |
| **ITEM 4T.**      | **CONTROLS AND  PROCEDURES**                                                                                                                                                                                                                           | 23       |
|              |                                                                                                                                                                                                                                                   |     |
| **PART II.** | **OTHER INFORMATION**                                                                                                                                                                                                                                  | 23       |
|              |                                                                                                                                                                                                                                                   |     |
| **ITEM 1.**       | **LEGAL PROCEEDINGS**                                                                                                                                                                                                                                  | 23       |
|              |                                                                                                                                                                                                                                                   |     |
| **ITEM 1A.**      | **RISK FACTORS**                                                                                                                                                                                                                                       | 23       |
|              |                                                                                                                                                                                                                                                   |     |
| **ITEM 2.**       | **UNREGISTERED  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**                                                                                                                                                                                       | 24       |
| ** **        | ** **                                                                                                                                                                                                                                             |     |
| **ITEM 3.**       | **DEFAULTS UPON  SENIOR SECURITIES**                                                                                                                                                                                                                   | 24       |
| ** **        | ** **                                                                                                                                                                                                                                             |     |
| **ITEM 4.**       | **SUBMISSION OF  MATTERS TO A VOTE OF SECURITY HOLDERS**                                                                                                                                                                                               | 24       |
| ** **        | ** **                                                                                                                                                                                                                                             |     |
| **ITEM 5.**       | **OTHER INFORMATION**                                                                                                                                                                                                                                  | 24       |
|              |                                                                                                                                                                                                                                                   |     |
| **ITEM 6.**       | **EXHIBITS**                                                                                                                                                                                                                                           | 24       |
|              |                                                                                                                                                                                                                                                   |     |
| **SIGNATURES**    | 25                                                                                                                                                                                                                                                     |

 

2

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

###### **ITEM 1.**              FinancialStatements

** **

**R**eckson Operating Partnership, L.P.Condensed Consolidated Balance Sheets(Amounts inthousands)

 
| ** **                                                                                        | ** ** | **March 31  2008** |          | **December 31,  2007** | ** ** |
|---------------------------------------------------------------------------------------------------|------------|-------------------------|---------------|-----------------------------|------------|
| ** **                                                                                        | ** ** | **(Unaudited)**         |          | ** **                  | ** ** |
| **Assets**                                                                                        |       |                    |          |                        |       |
| Commercial real  estate properties, at cost:                                                      |       |                    |          |                        |       |
| Land and land  interests                                                                          | ** ** | **$**                   | **652,583**   |                        | $          | 652,504 |   |
| Building and  improvements                                                                        | ** ** | **3,285,179**           |          | 3,285,556                   |       |
| ** **                                                                                        |       | **3,937,762**           |          | 3,938,060                   |       |
| Less:  accumulated depreciation                                                                   | ** ** | **(94,974**             | **)**         | (73,506                     | )          |
| ** **                                                                                        |       | **3,842,788**           |          | 3,864,554                   |       |
| Cash and cash  equivalents                                                                        | ** ** | **10,927**              |          | 16,463                      |       |
| Restricted cash                                                                                   | ** ** | **7,400**               |          | 8,449                       |       |
| Tenant and other  receivables, net of allowance of $320 and $256 in 2008 and 2007, respectively   | ** ** | **11,307**              |          | 8,145                       |       |
| Deferred rents  receivable, net of allowance of $3,358 and $3,036 in 2008 and 2007,  respectively | ** ** | **21,354**              |          | 17,682                      |       |
| Structured  finance investments                                                                   | ** ** | **99,696**              |          | 99,171                      |       |
| Investment in  unconsolidated joint venture                                                       | ** ** | **59,842**              |          | 61,372                      |       |
| Deferred costs,  net                                                                              | ** ** | **4,875**               |          | 4,247                       |       |
| Other assets                                                                                      | ** ** | **191,786**             |          | 186,786                     |       |
| Total assets                                                                                      | ** ** | **$**                   | **4,249,975** |                        | $          | 4,266,869 |   |
|                                                                                              |       |                    |          |                        |       |
| **Liabilities  and Partners’ Capital**                                                       |       |                    |          |                        |       |
| Mortgage notes  payable                                                                           | ** ** | **$**                   | **231,048**   |                        | $          | 231,680 |   |
| Unsecured notes                                                                                   | ** ** | **1,056,959**           |          | 1,056,900                   |       |
| Accrued interest  payable and other liabilities                                                   | ** ** | **23,016**              |          | 24,259                      |       |
| Accounts payable  and accrued expenses                                                            | ** ** | **38,003**              |          | 43,010                      |       |
| Deferred revenue                                                                                  | ** ** | **364,202**             |          | 371,881                     |       |
| Due to affiliate                                                                                  | ** ** | **—**              |          | 286                         |       |
| Security  deposits                                                                                | ** ** | **5,883**               |          | 5,757                       |       |
| Total  liabilities                                                                                | ** ** | **1,719,111**           |          | 1,733,773                   |       |
|                                                                                              |       |                    |          |                        |       |
| Commitments and  Contingencies                                                                    | ** ** | **—**              |          | —                      |       |
| Minority  interests in other partnerships                                                         | ** ** | **526,569**             |          | 526,531                     |       |
|                                                                                              |       |                    |          |                        |       |
| **Partners’  Capital**                                                                       |       |                    |          |                        |       |
| General partner  capital                                                                          | ** ** | **2,004,295**           |          | 2,006,565                   |       |
| Limited partner  capital                                                                          | ** ** | **—**              |          | —                      |       |
| Total partner  capital                                                                            | ** ** | **2,004,295**           |          | 2,006,565                   |       |
| Total  liabilities and partners’ capital                                                     | ** ** | **$**                   | **4,249,975** |                        | $          | 4,266,869 |   |

 

The accompanying notes are anintegral part of these financial statements.

 

3

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**R**eckson Operating Partnership, L.P.Condensed Consolidated Statementsof Operations(Unaudited, and amounts in thousands)

 
| ** **                                                                                                                                              | ** ** | **Three Months  Ended  March 31,** | ** ** | **Period  January 26  to March 31,** | ** ** | **Period  January 1 to  January 25,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|-----------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                                                                                                              | ** ** | **2008**                                     | ** ** | **2007**                                            | ** ** | **2007**                                             | ** ** |
| ** **                                                                                                                                              | ** ** | **(Successor)**                              | ** ** | **(Successor)**                                     | ** ** | **(Predecessor)**                                    | ** ** |
| **Revenues**                                                                                                                                            |       |                                         |       |                                                |       |                                                 |       |
| Rental revenue, net                                                                                                                                     | ** ** | **$**                                        | **70,278** |                                                | $          | 46,684                                               |       | $ | 21,821 |   |
| Escalation and  reimbursement                                                                                                                           | ** ** | **13,338**                                   |       | 9,719                                               |       | 3,728                                                |       |
| Investment  income                                                                                                                                      | ** ** | **2,542**                                    |       | 3,451                                               |       | 1,201                                                |       |
| Other income                                                                                                                                            | ** ** | **245**                                      |       | 12                                                  |       | —                                               |       |
| Total revenues                                                                                                                                          | ** ** | **86,403**                                   |       | 59,866                                              |       | 26,750                                               |       |
| **Expenses**                                                                                                                                            |       |                                         |       |                                                |       |                                                 |       |
| Operating  expenses                                                                                                                                     | ** ** | **19,283**                                   |       | 13,035                                              |       | 6,921                                                |       |
| Real estate  taxes                                                                                                                                      | ** ** | **12,888**                                   |       | 9,781                                               |       | 4,744                                                |       |
| Ground rent                                                                                                                                             | ** ** | **2,161**                                    |       | 1,858                                               |       | 699                                                  |       |
| Interest                                                                                                                                                | ** ** | **17,388**                                   |       | 14,453                                              |       | 6,728                                                |       |
| Amortization of  deferred financing costs                                                                                                               | ** ** | **—**                                   |       | —                                              |       | 152                                                  |       |
| Depreciation and  amortization                                                                                                                          | ** ** | **21,473**                                   |       | 13,853                                              |       | 5,311                                                |       |
| Long-term  incentive compensation expense                                                                                                               | ** ** | **—**                                   |       | —                                              |       | 1,800                                                |       |
| Merger related  costs                                                                                                                                   | ** ** | **—**                                   |       | —                                              |       | 8,814                                                |       |
| Marketing,  general and administrative                                                                                                                  | ** ** | **477**                                      |       | 31                                                  |       | 3,547                                                |       |
| Total expenses                                                                                                                                          | ** ** | **73,670**                                   |       | 53,011                                              |       | 38,716                                               |       |
| Income (loss)  from continuing operations before equity in net income from unconsolidated  joint venture, minority interest and discontinued operations | ** ** | **12,733**                                   |       | 6,855                                               |       | (11,966                                              | )          |
| Equity in net  (loss) income from unconsolidated joint venture                                                                                          | ** ** | **(52**                                      | **)**      | 230                                                 |       | 8                                                    |       |
| Income (loss)  from continuing operations before minority interest and discontinued  operations                                                         | ** ** | **12,681**                                   |       | 7,085                                               |       | (11,958                                              | )          |
| Minority  interest in other partnerships                                                                                                                | ** ** | **(5,318**                                   | **)**      | (881                                                | )          | (1,665                                               | )          |
| Income (loss)  from continuing operations                                                                                                               | ** ** | **7,363**                                    |       | 6,204                                               |       | (13,623                                              | )          |
| Income from  discontinued operations, net                                                                                                               | ** ** | **—**                                   |       | —                                              |       | 2,520                                                |       |
|                                                                                                                                                    | ** ** | ** **                                   |       |                                                |       |                                                 |       |
| Net income  (loss) available to common unitholders                                                                                                      | ** ** | **$**                                        | **7,363**  |                                                | $          | 6,204                                                |       | $ | (11,103 | ) |

 

Theaccompanying notes are an integral part of these financial statements.

 

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**Reckson OperatingPartnership, L.P.**

**Condensed Consolidated Statements of Cash Flows(Unaudited, and amounts in thousands)**

 
| ** **                                                                         | ** ** | **Three Months  Ended March 31,** | ** ** | **Three Months  Ended March 31,** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                         | ** ** | **2008**                                         | ** ** | **2007**                                         | ** ** |
| **Operating  Activities**                                                          |       |                                             |       |                                             |       |
| Net income                                                                         |       | $                                                | 7,363      |                                             | $          | (4,899 | ) |
| Adjustment to  reconcile net income to net cash provided by operating activities:  |       |                                             |       |                                             |       |
| Depreciation and  amortization                                                     |       | 21,473                                           |       | 22,688                                           |       |
| Equity in net  income from unconsolidated joint venture                            |       | 52                                               |       | (238                                             | )          |
| Distributions of  cumulative earnings from unconsolidated joint venture            |       | —                                           |       | 238                                              |       |
| Minority  interest in other partnerships                                           |       | 5,318                                            |       | 3,054                                            |       |
| Deferred rents  receivable                                                         |       | (3,672                                           | )          | (3,046                                           | )          |
| Other non-cash  adjustments                                                        |       | (4,772                                           | )          | —                                           |       |
| Changes in  operating assets and liabilities:                                      |       |                                             |       |                                             |       |
| Restricted cash –  operations                                                 |       | 985                                              |       | 11,696                                           |       |
| Tenant and other  receivables                                                      |       | (3,226                                           | )          | (1,916                                           | )          |
| Other assets                                                                       |       | (12,054                                          | )          | (10,099                                          | )          |
| Accounts  payable, accrued expenses and other liabilities                          |       | (2,060                                           | )          | (82,686                                          | )          |
| Net cash  provided by (used in) operating activities                               |       | 9,407                                            |       | (65,208                                          | )          |
| **Investing  Activities**                                                          |       |                                             |       |                                             |       |
| Additions to  land, buildings and improvements                                     |       | —                                           |       | (19,631                                          | )          |
| Restricted  cash-capital improvements                                              |       | 64                                               |       | —                                           |       |
| Distributions in  excess of cumulative earnings from unconsolidated joint ventures |       | 1,481                                            |       | 5,897                                            |       |
| Proceeds from  the Asset Sale                                                      |       | —                                           |       | 1,978,764                                        |       |
| Deferred lease  costs                                                              |       | (417                                             | )          | —                                           |       |
| Structured  finance and other investments net of repayments/participations         |       | (525                                             | )          | 4,250                                            |       |
| Net cash  provided by investing activities                                         |       | 603                                              |       | 1,969,280                                        |       |
| **Financing  Activities**                                                          |       |                                             |       |                                             |       |
| Repayments of  mortgage notes payable                                              |       | (632                                             | )          | (172,072                                         | )          |
| Proceeds from  revolving credit facility and unsecured notes                       |       | —                                           |       | 12,000                                           |       |
| Repayments of  revolving credit facility and unsecured notes                       |       | —                                           |       | (281,000                                         | )          |
| Contributions                                                                      |       | 63,794                                           |       | 34,800                                           |       |
| Minority  interest in other partnerships - distributions                           |       | (5,280                                           | )          | (3,119                                           | )          |
| Distributions                                                                      |       | (73,428                                          | )          | (1,526,261                                       | )          |
| Net cash used in  financing activities                                             |       | (15,546                                          | )          | (1,935,652                                       | )          |
| Net decrease in  cash and cash equivalents                                         |       | (5,536                                           | )          | (31,580                                          | )          |
| Cash and cash  equivalents at beginning of period                                  |       | 16,463                                           |       | 51,192                                           |       |
| Cash and cash  equivalents at end of period                                        |       | $                                                | 10,927     |                                             | $          | 19,612 |   |

 

Theaccompanying notes are an integral part of these financial statements.

 

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

**Notes to Condensed Consolidated FinancialStatements**

**(Unaudited)**

**March 31, 2008**

** **

**1.  Organization and Basis of Presentation**

 

**RecksonOperating Partnership, L.P., or ROP, commenced operations on June 2,1995.  Reckson Associates Realty Corp.,or RARC, served as the sole general partner until November 15, 2007, atwhich time RARC withdrew, and Wyoming Acquisition GP LLC, or WAGP, succeededit, as the sole general partner of ROP. WAGP is a wholly-owned subsidiary of SL Green Realty Corp., or SLGreen.  The sole limited partner of ROPis SL Green Operating Partnership, L.P., or the operating partnership.**

** **

**ROP is engagedin the ownership, management, operation and development of commercial realestate properties, principally office properties and also owns land for futuredevelopment located in New York City, Westchester and Connecticut, whichcollectively is also known as the New York Metro Area.  At March 31, 2008, our inventory ofdevelopment parcels aggregated approximately 81 acres of land in four separateparcels on which we can, based on estimates at March 31, 2008, developapproximately 1.1 million square feet of office space and in which we hadinvested approximately $64.1 million.  Inaddition, ROP also held approximately $99.7 million of structured financeinvestments.**

** **

SL Green and the operating partnership were formed in June 1997.  SL Green has qualified, and expects toqualify in the current fiscal year as a real estate investment trust, or REIT,under the Internal Revenue Code of 1986, as amended, or the Code, and operatesas a self-administered, self-managed REIT. A REIT is a legal entity that holds real estate interests and, throughpayments of dividends to stockholders, is permitted to reduce or avoid the paymentof Federal 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.

 

On January 25,2007, SL Green completed the acquisition of all of the outstanding shares ofcommon stock of RARC pursuant to the terms of the Agreement and Plan of Merger,dated as of August 3, 2006, as amended, the Merger Agreement, among SLGreen, Wyoming Acquisition Corp., or Wyoming, Wyoming Acquisition GP LLC,Wyoming Acquisition Partnership LP, RARC and ROP. Pursuant to the terms of theMerger Agreement, each of the issued and outstanding shares of common stock ofRARC was converted into (i) $31.68 in cash, (ii) 0.10387 of a shareof the common stock, par value $0.01 per share, of SL Green and (iii) apro-rated dividend in an amount equal to approximately $0.0977 in cash. SLGreen also assumed an aggregate of approximately $226.3 million of ROP mortgagedebt, approximately $287.5 million of ROP convertible public debt andapproximately $967.8 million of ROP public unsecured notes.  This transaction is referred to herein as theMerger.

 

On January 25,2007, SL Green completed the sale, or Asset Sale, of certain assets of ROP toan investment group led by certain of RARC’s former executive management, orthe Buyer, for a total consideration of approximately $2.0 billion. SL Greencaused ROP to transfer the following assets to the Buyer in the Asset Sale: (1) certainreal property assets and/or entities owning such real property assets, ineither case, of ROP and 100% of certain loans secured by real property, all ofwhich are located in Long Island, New York; (2) certain real propertyassets and/or entities owning such real property assets, in either case, of ROPlocated in White Plains and Harrison, New York; (3) all of the realproperty assets and/or entities owning 100% of the interests in such realproperty assets, in either case, of ROP located in New Jersey; (4) theentity owning a 25% interest in Reckson Australia Operating Company LLC, RARC’sformer Australian management company (including its former Australian licensedresponsible entity), and other related entities, and ROP and ROP subsidiaries’rights to and interests in, all related contracts and assets, including,without limitation, property management and leasing, construction services andasset management contracts and services contracts; (5) the direct orindirect interest of RARC in Reckson Asset Partners, LLC, an affiliate of RSVPand all of ROP’s rights in and to certain loans made by ROP to FrontlineCapital Group, the bankrupt parent of RSVP, and other related entities, whichwill be purchased by a 50/50 joint venture with an affiliate of SL Green; (6) a50% participation interest in certain loans made by a subsidiary of ROP thatare secured by four real property assets located in Long Island, New York; and (7) 100%of certain loans secured by real property located in White Plains and NewRochelle, New York.

 

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

 

6

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

**Notes to CondensedConsolidated Financial Statements**

**(Unaudited)**

**March 31, 2008**

** **

As of March 31,2008, we owned the following interests in commercial office properties in theNew York Metro area, primarily in midtown Manhattan, a borough of New YorkCity, or Manhattan.  Our investments in the New York Metro area alsoinclude investments 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            |       | 95.8                   | %          |
|         |       |                       |       |               |       |                 |       |                   |       |
| Suburban     |       | Consolidated  properties   |       | 19                 |       | 2,889,900            |       | 88.3                   | %          |
|         |       | Unconsolidated  properties |       | 1                  |       | 1,402,000            |       | 100.0                  | %          |
|         |       |                       |       | 24                 |       | 8,061,900            |       | 93.9                   | %          |

 

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(1)                  The weighted average occupancy represents thetotal leased square feet divided by total available rentable square feet.

#### ** **

#### **Basisof Quarterly Presentation**

 

The accompanyingconsolidated financial statements include the consolidated financial positionof ROP and the Service Companies (as defined below) at March 31, 2008(Successor) and December 31, 2007 (Successor), the consolidated results oftheir operations for the three months ended March 31, 2008 (Successor) andfor each of the periods January 26, 2007 to March 31, 2007(Successor) and January 1, 2007 to January 25, 2007 (Predecessor) andtheir cash flows for the three months ended March 31, 2008 (Successor) andthe periods January 1, 2007 to January 25, 2007 (Predecessor) and January 26,2007 to March 31, 2007 (Successor) (presented on a combined basis for thethree months ended March 31, 2007). ROP’s investments in majority-owned and controlled real estate jointventures are reflected in the accompanying financial statements on aconsolidated basis with a reduction for the minority partners’ interests.  ROP investments in real estate joint ventures,where it owns less than a controlling interest, are reflected in theaccompanying financial statements on the equity method of accounting.  The Service Companies, which providemanagement, development and construction services to ROP and to third parties,include Reckson Management Group, Inc., RANY Management Group, Inc.,Reckson Construction & Development LLC and Reckson Construction GroupNew York, Inc. (collectively, the “Service Companies”).  All significant intercompany balances andtransactions have been eliminated in the consolidated financial statements.

 

The accompanyingunaudited condensed consolidated financial statements have been prepared inaccordance with accounting principles generally accepted in the United Statesfor interim financial information and with the instructions to Form 10-Qand Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notesrequired by accounting principles generally accepted in the United States forcomplete financial statements.  In theopinion of management, all adjustments (consisting of normal recurringaccruals) considered necessary for fair presentation have been included.  The 2008 operating results for the periodspresented are not necessarily indicative of the results that may be expectedfor the year ending December 31, 2008. 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, 2007.

 

The balance sheetat December 31, 2007 has been derived from the audited financialstatements at that date but does not include all the information and footnotesrequired by accounting principles generally accepted in the United States forcomplete financial statements.

 

The results ofoperations for the period from January 1, 2007 to January 25, 2007(Predecessor) have been recorded based on the historical values of the assetsand liabilities of ROP prior to the Merger. The results of operations for the three months ended March 31, 2008(Successor) and the period from January 26, 2007 to March 31, 2007(Successor) have been recorded based on the fair values assigned to the assetsand liabilities of ROP in connection with the Merger.  As such, the information presented may not becomparable.

 

7

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

**Notes to Condensed Consolidated FinancialStatements**

**(Unaudited)**

**March 31, 2008**

** **

**2.  Significant Accounting Policies**

 

**Principlesof Consolidation**

 

The consolidatedfinancial statements include our accounts and those of our subsidiaries, whichare wholly-owned or controlled by us or entities which are variable interestentities, or VIEs in which we are the primary beneficiary under the FinancialAccounting Standards Board, or FASB, Interpretation No. 46R, or FIN 46R, “Consolidationof Variable Interest Entities - an Interpretation of ARB No. 51.”  Entities which we do not control and entitieswhich are VIEs, but where we are not the primary beneficiary are accounted forunder the equity method.  We consolidateVIEs in which we are determined to be the primary beneficiary.  The interest that we do not own is includedin “Minority Interests in Other Partnerships” on the balance sheet.  All significant intercompany balances andtransactions have been eliminated.

 

**In June 2005, the FASBratified the consensus in EITF Issue No. 04-5, or EITF 04-5, “DeterminingWhether a General Partner, or the General Partners as a Group, Controls aLimited Partnership or Similar Entity When the Limited Partners Have CertainRights,” which provides guidance in determining whether a general partnercontrols a limited partnership. EITF 04-5 states that the generalpartner in a limited partnership is presumed to control that limitedpartnership. The presumption may be overcome if the limited partners haveeither (1) the substantive ability to dissolve the limited partnership orotherwise remove the general partner without cause or (2) substantiveparticipating rights, which provide the limited partners with the ability toeffectively participate in significant decisions that would be expected to bemade in the ordinary course of the limited partnership’s business and therebypreclude the general partner from exercising unilateral control over thepartnership.**

** **

**We consolidate our investment in919 Third Avenue as we own a 51% controlling interest.**

** **

**Investmentin Commercial Real Estate Properties**

 

In accordance with SFAS No. 141, “Business Combinations,” weallocate the purchase price of real estate to land and building and, ifdetermined to be material, intangibles, such as the value of above-, below- andat-market leases and origination costs associated with the in-placeleases.  We depreciate the amountallocated to building and other intangible assets over their estimated usefullives, which generally range from three to 40 years and from one to 40 years,respectively.  The values of the above-and below-market leases are amortized and recorded as either an increase (in thecase of below-market leases) or a decrease (in the case of above-market leases)to rental income over the remaining term of the associated lease, which rangefrom one to 14 years.  The valueassociated with in-place leases and tenant relationships are amortized over theexpected term of the relationship, which includes an estimated probability ofthe lease renewal, and its estimated term, which range from one to 14years.  If a tenant vacates its spaceprior to the contractual termination of the lease and no rental payments arebeing made on the lease, any unamortized balance of the related intangible willbe written off.  The tenant improvementsand origination costs are amortized as an expense over the remaining life ofthe lease (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 marketinformation.  Estimates of future cashflows are based on a number of factors including the historical operatingresults, known trends, and market/economic conditions that may affect theproperty.

 

As a result of our evaluations, under SFAS No. 141, ofacquisitions made, we recognized an increase of approximately $4.8 million andnone in rental revenue for the three months ended March 31, 2008 and 2007,respectively, for the amortization of aggregate below-market rents in excess ofabove-market leases and a reduction in lease origination costs, resulting fromthe reallocation of the purchase price of the applicable properties.  We recognized a reduction in interest expensefor the amortization of above-market rate mortgages of approximately $1.7million and $1.1 million, including none related to the period January 1,2007 to January 25, 2007, for the three months ended March 31, 2008and 2007, respectively.

 

8

----

 

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

**Notes to Condensed Consolidated FinancialStatements**

**(Unaudited)**

**March 31, 2008**

** **

The following summarizes our identified intangible assets(acquired above-market leases and in-place leases) and intangible liabilities(acquired below-market leases) as of March 31, 2008 and December 31,2007 (Amounts in thousands).

 
| ** **                                                         | ** ** | **March 31,  2008** | ** **  | **December 31,  2007** | ** ** |
|--------------------------------------------------------------------|------------|--------------------------|-------------|-----------------------------|------------|
| Identified intangible assets (included in other  assets):          |       |                     |        |                        |       |
| Gross amount                                                       | ** ** | **$**                    | **167,078** | ** **                  | $          | 167,078 |   |
| Accumulated amortization                                           | ** ** | **(9,473**               | **)**       | (2,280                      | )          |
| Net                                                                | ** ** | **$**                    | **157,605** | ** **                  | $          | 164,798 |   |
|                                                               |       |                     | ** **  |                        |       |
| Identified intangible liabilities (included in  deferred revenue): |       |                     | ** **  |                        |       |
| Gross amount                                                       | ** ** | **$**                    | **373,950** | ** **                  | $          | 373,950 |   |
| Accumulated amortization                                           | ** ** | **(16,017**              | **)**       | (3,988                      | )          |
| Net                                                                | ** ** | **$**                    | **357,933** | ** **                  | $          | 369,962 |   |

 

**IncomeTaxes**

 

No provision hasbeen made for income taxes in the accompanying consolidated financialstatements since such taxes, if any, are the responsibility of the individualpartners.

 

**EarningsPer Unit**

 

Earnings per unitwas not computed in 2008 or 2007 as there were no outstanding common unitssubsequent to January 25, 2007.

 

**Useof Estimates**

 

The preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States requires management to make estimates andassumptions that affect the amounts reported in the financial statements andaccompanying notes. Actual results could differ from those estimates.

 

**Concentrations of CreditRisk**

 

Financial instruments that potentially subject us toconcentrations of credit risk consist primarily of cash investments, structuredfinance investments and accounts receivable. We place our cash investments in excess of insured amounts with highquality financial institutions.  Thecollateral securing our structured finance investments is primarily located inthe Greater New York Area. See Note 4. We perform ongoing credit evaluations ofour tenants and require certain tenants to provide security deposits or lettersof credit.  Though these securitydeposits and letters of credit are insufficient to meet the total value of atenant’s lease obligation, they are a measure of good faith and a source offunds to offset the economic costs associated with lost rent and the costsassociated with re-tenanting the space. Although the properties in our real estate portfolio are primarilylocated in Manhattan, we also have Suburban properties located in WestchesterCounty, Connecticut and Long Island City. The tenants located in our buildings operate in various industries.  Other than two tenants who contributedapproximately 7.3% and 7.0% of our annualized rent, no other tenant in theportfolio contributed more than 4.2% of our annualized rent, including ourshare of joint venture annualized rent, at March 31, 2008.  Approximately 15%, 16%, 23% and 12% of ourannualized rent, including our share of joint venture annualized rent, wasattributable to 810 Seventh Avenue, 919 Third Avenue, 1185 Avenue of theAmericas and 1350 Avenue of the Americas, respectively, for the quarter ended March 31,2008.  Two borrowers accounted for morethan 10.0% of the revenue earned on structured finance investments during thethree months ended March 31, 2008.

 

**Reclassification**

 

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

 

**RecentlyIssued Accounting Pronouncements**

 

In September 2006,the FASB issued SFAS No. 157, or SFAS No. 157, “Fair ValueMeasurements”, SFAS No. 157 provides guidance for using fair value tomeasure assets and liabilities. This statement clarifies the principle thatfair value should be based on the assumptions that market participants woulduse when pricing the asset or liability. SFAS No. 157 establishes a fairvalue hierarchy, giving the highest priority to quoted prices in active marketsand the lowest priority to unobservable data. SFAS No. 157 applies wheneverother standards require assets or liabilities to be measured at fair value.This statement is effective in fiscal years beginning after November 15,2007. The adoption of this standard on January 1, 2008 did not have amaterial effect on our consolidated financial statements.  In February 2008, the FASB delayed theeffective date of SFAS No. 157 for non-financial assets and non-financialliabilities to fiscal year beginning after November 15, 2008.

 

9

----

 

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

**Notes to Condensed Consolidated FinancialStatements**

**(Unaudited)**

**March 31, 2008**

** **

In February 2007,the FASB issued SFAS No. 159, or SFAS 159, “The Fair Value Option forFinancial Assets and Financial Liabilities.” SFAS No. 159 allows entitiesto voluntarily choose, at specified election dates, to measure many financialassets (as well as certain nonfinancial instruments that are similar tofinancial instruments) at fair value (the “fair value option”). The election ismade on an instrument-by-instrument basis and is irrevocable. If the fair valueoption is elected for an instrument, the statement specifies that allsubsequent changes in fair value for that instrument shall be reported inearnings (or another performance indicator for entities such as not-for profitorganizations that do not report earnings). Upon initial adoption, SFAS No. 159provides entities with a one-time chance to elect the fair value option forexisting eligible items. SFAS No. 159 is effective as of the beginning ofan entity’s first fiscal year that begins after November 15, 2007. We did not make the election to measure financial assets at fair valueand therefore, adoption of this standard did not have an effect on thefinancial statements.

 

In March 2008,the FASB issued SFAS No. 161, or SFAS No. 161, “Disclosures aboutDerivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133.”SFAS No. 161 requires entities to provide greater transparency about (a) howand why and entity uses derivative instruments, (b) how derivativeinstruments and related hedged items are accounted for under SFAS No. 133and its related interpretations, and (c) how derivative instruments andrelated hedged items affect an entity’s financial position, results ofoperations, and cash flows.  SFAS No. 161is effective on January 1, 2009.  Wedo not expect this statement to have a material impact on our financialstatements.

 

**3.  Property Dispositions**

 

On January 25,2007, we sold the interests in various properties as part of the Asset Sale forapproximately $2.0 billion, excluding closing costs.  Due to the application of “push-downaccounting,” no gain on sale was recognized. Simultaneous with the Merger, the properties located at 120 West 45thStreet, NY, and Landmark Square 1-6, Connecticut, were assigned by ROP to theoperating partnership.

 

At March 31, 2008, discontinued operations included the results ofoperations of real estate assets sold prior to that date.  This included the assets sold as part of theAsset Sale.

 

The following table summarizes income from discontinued operations (netof minority interest) and the related realized gain on sale of discontinuedoperations (net of minority interest) for the period January 1, 2007 to January 25,2007 (Predecessor) (in thousands).  Noassets were considered as held for sale during the Successor period.

 
| ** **                                                     | ** ** | **Period January 1  to January 25,** | ** ** |
|----------------------------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                                                     | ** ** | **2007**                                                 | ** ** |
| ** **                                                     | ** ** | **(Predecessor)**                                        | ** ** |
| Revenues                                                       |       |                                                     |       |
| Rental revenue                                                 | ** ** | $                                                        | 14,344     | ** ** |
| Escalation and reimbursement revenues                          |       | 346                                                      |       |
| Investment and other income                                    |       | —                                                   |       |
| Total revenues                                                 |       | 14,690                                                   |       |
| Operating expenses                                             |       | 3,731                                                    |       |
| Real estate taxes                                              |       | 2,658                                                    |       |
| Ground rent                                                    |       | 134                                                      |       |
| Interest                                                       |       | 465                                                      |       |
| Marketing, general and administrative                          |       | 1,150                                                    |       |
| Depreciation and amortization                                  |       | 3,524                                                    |       |
| Total expenses                                                 |       | 11,662                                                   |       |
| Income from discontinued operations                            |       | 3,028                                                    |       |
| Gain on disposition of discontinued operations                 |       | —                                                   |       |
| Minority interest in other partnerships                        |       | (508                                                     | )          |
| Income from discontinued operations, net of minority  interest | ** ** | $                                                        | 2,520      | ** ** |

 

10

----

 

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

**Notes to Condensed Consolidated FinancialStatements**

**(Unaudited)**

**March 31, 2008**

** **

**4.  Structured Finance Investments**

 

As of March 31, 2008 and December 31, 2007, we held thefollowing structured finance investments, with an aggregate weighted averagecurrent yield of approximately 9.0% (in thousands):

 
| **Loan  Type**           | ** ** | **Gross  Investment** | ** ** | **Senior  Financing** | ** ** | **2008  Principal  Outstanding** | ** ** | **2007  Principal  Outstanding** | ** ** | **Initial  Maturity  Date** | ** ** |
|--------------------------|------------|-----------------------|------------|-----------------------|------------|----------------------------------|------------|----------------------------------|------------|-----------------------------|------------|
| Mezzanine Loan (1)(2)    |       | $                     | 55,250     |                  | $          | 225,000                          | ** ** | **$**                            | **60,516** |                        | $          | 59,991 |   | December 2020 |   |
| Mezzanine Loan (1)(2)(3) |       | 25,000                |       | 314,830               | ** ** | **27,742**                       |       | 27,742                           |       | November 2009          |       |
| Other Loan (1)           |       | 1,000                 |       | —                | ** ** | **1,000**                        |       | 1,000                            |       | January 2010           |       |
| Other Loan (1)           |       | 500                   |       | —                | ** ** | **500**                          |       | 500                              |       | December 2009          |       |
| Participation (1)(4)     |       | 14,189                |       | —                | ** ** | **9,938**                        |       | 9,938                            |       | April 2008             |       |
|                     |       | $                     | 95,939     | ** **            | $          | 539,830                          |       | **$**                            | **99,696** |                        | $          | 99,171 |   |   |   |

 

----

(1)                      This is afixed rate loan.

(2)                      Thedifference between the pay and accrual rates is included as an addition to theprincipal balance outstanding.

(3)                      As ofDecember 31, 2007, this loan was in default.  We are pursuing our remedies and expect torecover the full value of our investment.

(4)                      We are indiscussions with the borrower to settle the loan.  Our partner holds a $12.2 million pari-pasuinterest in this loan.

 

At March 31,2008 and December 31, 2007 all loans, other than as noted above, wereperforming in accordance with the terms of the loan agreements.

 

**5.  Investment in Unconsolidated Joint Venture**

 

In May 2005,we acquired a 1.4 million square foot, 50-story, Class A office towerlocated at One Court Square, Long Island City, NY, for approximately $471.0million, inclusive of transfer taxes and transactional costs.  One Court Square is 100% leased to theseller, Citibank N.A., under a 15-year net lease.  The lease contains partial cancellationoptions effective during 2011 and 2012 for up to 20% of the leased space and in2014 and 2015 for up to an additional 20% of the originally leased space,subject to notice and the payment of early termination penalties. On November 30,2005, we sold a 70% joint venture interest in One Court Square to certaininstitutional funds advised by JPMorgan Investment Management, or the JPMInvestors, for approximately $329.7 million, including the assumption of $220.5million of the property’s mortgage debt.  The operating agreement of the Court Square JV requires approvals frommembers on certain decisions including annual budgets, sale of the property,refinancing of the property’s mortgage debt and material renovations to theproperty. In addition, after September 20, 2009 the members each have theright to recommend the sale of the property, subject to the terms of themortgage debt, and to dissolve the Court Square JV. We have evaluated theimpact of FIN 46R on our accounting for the Court Square JV and have concludedthat the Court Square JV is not a VIE. We account for the Court Square JV under the equity method ofaccounting. We have also evaluated, under EITF 04-5, that the JPM Investorshave substantive participating rights in the ordinary course of the CourtSquare JV’s business.

 

**6.  Mortgage Note Payable**

** **

The first mortgagenote payable collateralized by the property and assignment of leases at March 31,2008 and December 31, 2007, respectively, was as follows (in thousands):

 
| **Property**                      | ** ** | **Interest  Rate ****(1)** | ** ** | **Maturity Date** | ** ** | **March 31,  2008** | ** **  | **December 31,  2007** | ** ** |
|-----------------------------------|------------|---------------------------------|------------|------------------------|------------|--------------------------|-------------|-----------------------------|------------|
| 919 Third Avenue New York, NY (2) |       | 6.87                            | %          | 7/2011                 | ** ** | **$**                    | **231,048** |                        | $          | 231,680 |   |
|                                   |            |                                 |            |                        |            |                          |             |                             |            |  |  |

 

----

(1)      Effective interest rate for the three months endedMarch 31, 2008.

(2)      We own a 51% controlling interest in the joint venture thatis the borrower on this loan.  This loanis non-recourse to us.  We consolidatethis joint venture.

 

At March 31, 2008, the gross book value of the property collateralizingthe mortgage note was approximately $1.3 billion.

 

For the three months ended March 31,2008 (Successor), the periods January 26, 2007 to March 31, 2007(Successor) and January 1, 2007 to January 25, 2007 (Predecessor), weincurred approximately $17.4 million, $14.5 million and $6.9 million ofinterest expense, inclusive of amortization of deferred financing costs,respectively, excluding interest which was capitalized of approximately $0.1million, $1.1 million and none, respectively.

 

11

----

** **

**RecksonOperating Partnership, L.P.**

**Notes toCondensed Consolidated Financial Statements**

**(Unaudited)**

**March 31,2008**

** **

At March 31, 2008,our unconsolidated joint venture had total indebtedness of approximately $315.0million with a fixed interest rate of approximately 4.91%.  The mortgage matures in June 2015.  Our aggregate pro-rata share of theunconsolidated joint venture debt was approximately $94.5 million.

 

**7.  Corporate Indebtedness**

 

**SeniorUnsecured Notes**

 

The following table setsforth our senior unsecured notes and other related disclosures by scheduledmaturity date as of March 31, 2008 (in thousands):

 
| **Issuance**            | ** ** | **Face Amount** | ** **    | **Coupon Rate****(2)** | ** ** | **Term  (in Years)** | ** ** | **Maturity**          | ** **          |
|-------------------------|------------|----------------------|---------------|-----------------------------|------------|---------------------------|------------|-----------------------|---------------------|
| March 26,  1999    |       | $                    | 200,000       |                        | 7.75       | %                         | 10         |                  | March 15, 2009 |   |
| January 22,  2004  |       | 150,000              |          | 5.15                        | %          | 7                         |       | January 15, 2011 |                |
| August 13,  2004   |       | 150,000              |          | 5.875                       | %          | 10                        |       | August 15, 2014  |                |
| March 31,  2006    |       | 275,000              |          | 6.00                        | %          | 10                        |       | March 31, 2016   |                |
| June 27,  2005 (1) |       | 287,500              |          | 4.00                        | %          | 20                        |       | June 15, 2025    |                |
|                    |       | 1,062,500            |          |                        |       |                      |       |                  |                |
| Net discount            |       | (5,541               | )             |                        |       |                      |       |                  |                |
| ** **              |       | **$**                | **1,056,959** |                        |       |                      |       |                  |                |   |

 

----

(1)              Exchangeable senior debentureswhich are callable after June 17, 2010 at 100% of par.  In addition, the debentures can be put to us,at the option of the holder at par plus accrued and unpaid interest, on June 15,2010, 2015 and 2020 and upon the occurrence of certain change of controltransactions.  As a result of the Merger,the adjusted exchange rate for the debentures is 7.7461 shares of SL Greencommon stock per $1,000 of principal amount of debentures and the adjustedreference dividend for the debentures is $1.3491.

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

 

On April 27, 2007,the $50.0 million, 6.0% unsecured notes scheduled to mature in June 2007and the $150.0 million, 7.20% unsecured notes scheduled to mature inAugust 2007, assumed as part of the Merger, were redeemed.

 

**RestrictiveCovenants**

 

Theterms of the senior unsecured notes include certain restrictions and covenantswhich limit, among other things, the incurrence of additional indebtedness andliens, and which require compliance with financial ratios relating to theminimum amount of debt service coverage, the maximum amount of consolidatedunsecured and secured indebtedness and the minimum amount of unencumberedassets.  As of March 31, 2008 andDecember 31, 2007, we were in compliance with all such covenants.

 

**PrincipalMaturities**

 

Combined aggregateprincipal maturities of mortgages and notes payable, senior unsecured notes(net of discount) and our share of joint venture debt as of March 31,2008, excluding extension options, were as follows (in thousands):

** **
| ** ** | ** ** | **Scheduled  Amortization** | ** ** | **Principal  Repayments** | ** ** | **Unsecured  Notes** | ** ** | **Total** | ** **    | **Joint  Venture  Debt** | ** ** |
|------------|------------|-----------------------------|------------|---------------------------|------------|----------------------|------------|-----------|---------------|--------------------------|------------|
| 2008       |       | $                           | 3,002      |                      | $          | —               |       | $         | —        |                     | $          | 3,002 |   | — |   |
| 2009       |       | 3,942                       |       | —                    |       | 200,000              |       | 203,942   |          | —                   |       |
| 2010       |       | 4,225                       |       | —                    |       | —               |       | 4,225     |          | —                   |       |
| 2011       |       | 3,223                       |       | 216,656                   |       | 150,000              |       | 369,879   |          | —                   |       |
| 2012       |       | —                      |       |                      |       | —               |       | —    |          | —                   |       |
| Thereafter |       | —                      |       | —                    |       | 706,959              |       | 706,959   |          | 94,500                   |       |
| ** ** | ** ** | **$**                       | **14,392** | ** **                | **$**      | **216,656**          | ** ** | **$**     | **1,056,959** | ** **               | **$**      | **1,288,007** | ** ** | **$** | **94,500** | ** ** |
|            |            |                             |            |                           |            |                      |            |           |               |                          |            |  |  |  |  |  |

 

12

----

 

**RecksonOperating Partnership, L.P.**

**Notes toCondensed Consolidated Financial Statements**

**(Unaudited)**

**March 31,2008**

** **

**8.  Partners’Capital**

** **

Prior to the Merger, aClass A unit and a share of common stock of RARC had similar economiccharacteristics as they effectively shared equally in the net income or lossand distributions of ROP.  As ofJanuary 25, 2007, all of our issued and outstanding Class A commonunits were owned by RARC.  In connectionwith the Merger, RARC assigned all of its interest in the Class A commonunits to WAGP and the operating partnership. On November 15, 2007, RARC withdrew, and WAGP succeeded it, as thesole general partner of ROP.  All of ourissued and outstanding Class A common units are owned by WAGP and theoperating partnership.

 

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

 

**Net income per common partnership unitwas determined by allocating net income after preferred distributions andminority partners’ interest in consolidated partnerships income to the generaland limited partners based on their weighted average distribution per commonpartnership units outstanding during the respective periods presented.**

** **

Holders of preferredunits of limited and general partnership interest were entitled todistributions based on the stated rates of return (subject to adjustment) forthose units.

 

Prior to the Merger, RARCmaintained a long term incentive program, or LTIP. With respect to the LTIPunits and the restricted equity awards, RARC recorded compensation expensewhich has been included in marketing, general and administrative expenses onthe accompanying consolidated statements of operations. As of December 31,2006, RARC had accrued approximately $33.7 million of compensation expense withrespect to the special outperformance pool. These costs were included inaccounts payable and accrued expenses on the balance sheet at December 31,2006.  During January 2007, inconnection with the Merger, RARC paid, in cash, approximately $35.5 millionto the participants of the special outperformance pool of which $1.8 millionwas expensed during the period January 1, 2007 to January 25, 2007(Predecessor).

 

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

 

**9.  Commitments and Contingencies**

 

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

 

13

----

 

**RecksonOperating Partnership, L.P.**

**Notes toCondensed Consolidated Financial Statements**

**(Unaudited)**

**March 31,2008**

** **

The following is aschedule of future minimum lease payments under noncancellable operatingleases with initial terms in excess of one year as of March 31, 2008 (inthousands):

 
| **March 31,**            | ** ** | **Non-cancellable  operating leases** | ** **  |
|-------------------------------|------------|--------------------------------------------|-------------|
|                          |       |                                       |        |
| 2008                          |       | $                                          | 7,143       |   |
| 2009                          |       | 9,524                                      |        |
| 2010                          |       | 9,083                                      |        |
| 2011                          |       | 7,109                                      |        |
| 2012                          |       | 6,979                                      |        |
| Thereafter                    |       | 214,487                                    |        |
| Total minimum  lease payments | ** ** | **$**                                      | **254,325** | ** ** |

 

**10.  Environmental Matters**

 

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

 

**11.  Segment Information**

 

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

 

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

 

Selected results of operations for the three monthsended March 31, 2008 (Successor) and the periods January 26, 2007 toMarch 31, 2007 (Successor) and January 1, 2007 to January 25,2007 (Predecessor) and selected asset information as of March 31, 2008 andDecember 31, 2007, regarding our operating segments are as follows (inthousands):

 
| ** **                                                                                                     | ** ** | **Real  Estate  Segment** | ** ** | **Structured  Finance  Segment** | ** ** | **Total  Company** | ** ** |
|----------------------------------------------------------------------------------------------------------------|------------|---------------------------|------------|----------------------------------|------------|--------------------|------------|
| Total revenues:                                                                                                |       |                      |       |                             |       |               |       |
| Three months  ended March 31, 2008 (Successor)                                                            |       | $                         | 83,861     |                             | $          | 2,542              |       | $ | 86,403 |   |
| January 26  to March 31, 2007 (Successor)                                                            |       | 56,415                    |       | 3,451                            |       | 59,866             |       |
| January 1  to January 25, 2007 (Predecessor)                                                         |       | 25,549                    |       | 1,201                            |       | 26,750             |       |
|                                                                                                           |       |                      |       |                             |       |               |       |
| Income (loss)  from continuing operations before minority interest, gain on sale and  discontinued operations: |       |                      |       |                             |       |               |       |
| Three months  ended March 31, 2008 (Successor)                                                            |       | $                         | 11,000     |                             | $          | 1,681              |       | $ | 12,681 |   |
| January 26  to March 31, 2007 (Successor)                                                            |       | 5,220                     |       | 1,865                            |       | 7,085              |       |
| January 1  to January 25, 2007 (Predecessor)                                                         |       | (12,422                   | )          | 464                              |       | (11,958            | )          |
|                                                                                                           |       |                      |       |                             |       |               |       |
| Total assets                                                                                                   |       |                      |       |                             |       |               |       |
| As of:                                                                                                         |       |                      |       |                             |       |               |       |
| March 31, 2008                                                                                            |       | $                         | 4,149,749  |                             | $          | 100,226            |       | $ | 4,249,975 |   |
| December 31,  2007                                                                                        |       | 4,167,159                 |       | 99,710                           |       | 4,266,869          |       |

 

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

 

14

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

**Notes toCondensed Consolidated Financial Statements**

**(Unaudited)**

**March 31,2008**

** **

Thetable below reconciles income from continuing operations before minorityinterest to net income available to common unitholders for the three monthsended March 31, 2008 (Successor) and the periods January 26, 2007 toMarch 31, 2007 (Successor) and January 1, 2007 to January 25,2007 (Predecessor) (in thousands):

 
| ** **                                                                                                     | ** ** | **Three Months  Ended  March 31,** | ** ** | **Period  January 26 to  March 31,** | ** ** | **Period  January 1 to  January 25,** | ** ** |
|----------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|-----------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                                                                     | ** ** | **2008**                                     | ** ** | **2007**                                            | ** ** | **2007**                                             | ** ** |
| ** **                                                                                                     | ** ** | **(Successor)**                              | ** ** | **(Successor)**                                     | ** ** | **(Predecessor)**                                    | ** ** |
| Income (loss)  from continuing operations before minority interest, gain on sale and  discontinued operations: | ** ** | **$**                                        | **12,681** |                                                | $          | 7,085                                                |       | $ | (11,958 | ) |
| Minority  interest in other partnerships                                                                       | ** ** | **(5,318**                                   | )          | (881                                                | )          | (1,665                                               | )          |
| Income from  continuing operations                                                                             | ** ** | **7,363**                                    |       | 6,204                                               |       | (13,623                                              | )          |
| Net income/  gains from discontinued operations                                                                | ** ** | **—**                                   |       | —                                              |       | 2,520                                                |       |
| Net income  (loss) available to common unitholders                                                             | ** ** | **$**                                        | **7,363**  |                                                | $          | 6,204                                                |       | $ | (11,103 | ) |

 

**12.  Related Party Transactions**

 

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

 

Through Alliance BuildingServices, or Alliance, First Quality Maintenance, L.P., or First Quality,provides cleaning, extermination and related services, Classic Security LLCprovides security services, Bright Star Couriers LLC provides messengerservices, and Onyx Restoration Works provides restoration services with respectto certain properties owned by us. Alliance is owned by Gary Green, a son of Stephen L. Green, the chairmanof our board of directors.  In addition,First Quality has the non-exclusive opportunity to provide cleaning and relatedservices to individual tenants at our properties on a basis separatelynegotiated with any tenant seeking such additional services.  We paid Alliance approximately $0.5 millionand none for three months ended March 31, 2008 and 2007, respectively, forthese services (excluding services provided directly to tenants).

 

**AllocatedExpenses from SL Green**

 

Subsequent to the Merger,property operating expenses include an allocation of salary and other operatingcosts from SL Green.  Such amount wasapproximately $1.1 million and $0.7 million for the three months endedMarch 31, 2008 and 2007 (Successor), respectively.

 

**Insurance**

 

Subsequent to the Merger,we obtained insurance coverage through an insurance program administered by SLGreen.  In connection with this programwe incurred insurance expense of approximately $0.6 million and $0.5 millionfor the three months ended March 31, 2008 and the period January 26,2007 to March 31, 2007, respectively.

 

**13.  Supplemental Disclosure of Non-Cash Investingand Financing Activities**

 

Asummary of our non-cash investing and financing activities for the three monthsended March 31, 2008 and 2007 is presented below (in thousands):

 
| ** **                                                                                                               | ** ** | **Three Months Ended  March 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                                                               | ** ** | **2008**                                         | ** ** | **2007 (1)** | ** ** |
| Redemption of  preferred units                                                                                           | ** ** | **$**                                            | **—** |   | $ | 1,200 |   |
| Transfer of real  estate to the operating partnership                                                                    | ** ** | **—**                                       |       | 608,222 |   |
| Adjustment to  fair value of real estate, investment in unconsolidated joint venture and  structured finance investments | ** ** | **—**                                       |       | (3,131,606 | ) |
| Adjustments to  contributed capital                                                                                      | ** ** | **—**                                       |       | 2,327,290 |   |
| Other non-cash  adjustments-financing                                                                                    | ** ** | **—**                                       |       | 92,017 |   |
| Other non-cash  adjustments-investing                                                                                    | ** ** | **—**                                       |       | 104,077 |   |
| Accretion of  debt discount                                                                                              | ** ** | **59**                                           |       | 1,654 |   |
|                                                                                                                          |            |                                                  |            |  |  |  |  |

 

----

(1)     Presentedon a combined basis for the 2007 Successor and Predecessor periods.

 

15

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

 

**Overview**

 

**Reckson Operating Partnership, L.P., orROP, commenced operations on June 2, 1995. Reckson Associates Realty Corp., or RARC, served as the sole generalpartner until November 15, 2007, at which time RARC withdrew, and WyomingAcquisition GP LLC, or WAGP, succeeded it, as the sole general partner ofROP.  WAGP is a wholly-owned subsidiaryof SL Green Realty Corp., or SL Green.  Thesole limited partner of ROP is SL Green Operating Partnership, L.P., or theoperating partnership.**

** **

**ROP is engaged in the ownership,management, operation, acquisition, leasing, financing and development ofcommercial real estate properties, principally office properties and also ownsland for future development located in the New York City, Westchester andConnecticut which collectively is also known as the New York Metro area.  At March 31, 2008, our inventory ofdevelopment parcels aggregated approximately 81 acres of land in four separateparcels on which we can, based on estimates at March 31, 2008, developapproximately 1.1 million square feet of office space and in which we hadinvested approximately $64.1 million.  Inaddition, as of March 31, 2008 ROP also held approximately $99.7 millionof structured finance investments.**

** **

On January 25, 2007,SL Green completed the acquisition of all of the outstanding shares of commonstock of RARC pursuant to the terms of the Agreement and Plan of Merger, datedas of August 3, 2006, as amended, the Merger Agreement, among SL Green,Wyoming Acquisition Corp., or Wyoming, Wyoming Acquisition GP LLC, WyomingAcquisition Partnership LP, RARC and ROP. Pursuant to the terms of the MergerAgreement, each of the issued and outstanding shares of common stock of RARCwas converted into (i) $31.68 in cash, (ii) 0.10387 of a share of thecommon stock, par value $0.01 per share, of SL Green and (iii) a pro-rateddividend in an amount equal to approximately $0.0977 in cash. SL Green alsoassumed an aggregate of approximately $226.3 million of ROP mortgage debt,approximately $287.5 million of ROP convertible public debt and approximately$967.8 million of ROP public unsecured notes. This transaction is referred to herein as the Merger.

 

On January 25, 2007,SL Green completed the sale, or Asset Sale, of certain assets of ROP to aninvestment group led by certain of Reckson’s former executive management, orthe Buyer, for a total consideration of approximately $2.0 billion. SL Greencaused ROP to transfer the following assets to the Buyer in the Asset Sale:(1) certain real property assets and/or entities owning such real propertyassets, in either case, of ROP and 100% of certain loans secured by realproperty, all of which are located in Long Island, New York; (2) certainreal property assets and/or entities owning such real property assets, ineither case, of ROP located in White Plains and Harrison, New York;(3) all of the real property assets and/or entities owning 100% of theinterests in such real property assets, in either case, of ROP located in NewJersey; (4) the entity owning a 25% interest in Reckson AustraliaOperating Company LLC, RARC’s former Australian management company (includingits former Australian licensed responsible entity), and other related entities,and ROP and ROP subsidiaries’ rights to and interests in, all related contractsand assets, including, without limitation, property management and leasing,construction services and asset management contracts and services contracts;(5) the direct or indirect interest of RARC in Reckson Asset Partners,LLC, an affiliate of RSVP and all of ROP’s rights in and to certain loans madeby ROP to Frontline Capital Group, the bankrupt parent of RSVP, and other relatedentities, which were purchased by a 50/50 joint venture with an affiliate of SLGreen; (6) a 50% participation interest in certain loans made by asubsidiary of ROP that are secured by four real property assets located in LongIsland, New York; and (7) 100% of certain loans secured by real propertylocated in White Plains and New Rochelle, New York.

 

The following discussionrelated to our consolidated financial statements should be read in conjunctionwith the financial statements appearing in this Quarterly Report onForm 10-Q and in Item 8 of our Annual Report on Form 10-K for theyear ended December 31, 2007.

 

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

 

As of March 31, 2008, we owned the followinginterests in commercial office properties in the New York Metro area, primarilyin midtown Manhattan, a borough of New York City, or Manhattan.  Ourinvestments in the New York Metro area also include investments in Queens,Westchester County and Connecticut, which are collectively known as theSuburban assets:

 

16

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| ** **   | ** ** | ** **                | ** ** | **Number of** | ** ** | ** **           | ** ** | **Weighted Average** | ** ** |
|--------------|------------|---------------------------|------------|--------------------|------------|----------------------|------------|---------------------------|------------|
| **Location** | ** ** | **Ownership**             | ** ** | **Properties**     | ** ** | **Square Feet** | ** ** | **Occupancy(1)**          | ** ** |
| Manhattan    |       | Consolidated properties   |       | 4                  |       | 3,770,000            |       | 95.8                      | %          |
|         |       |                      |       |               |       |                 |       |                      |       |
| Suburban     |       | Consolidated properties   |       | 19                 |       | 2,889,900            |       | 88.3                      | %          |
|         |       | Unconsolidated properties |       | 1                  |       | 1,402,000            |       | 100.0                     | %          |
|         |       |                      |       | 24                 |       | 8,061,900            |       | 93.9                      | %          |

 

----

(1)          The weighted average occupancy represents thetotal leased square feet divided by total available rentable square feet.

 

**CriticalAccounting Policies**

 

Refer to our 2007 AnnualReport on Form 10-K for a discussion of our critical accounting policies,which include investment in commercial real estate properties, investment inunconsolidated joint ventures, revenue recognition, allowance for doubtfulaccounts and reserve for possible credit losses.  There have been no changes to these policiesin 2008.

 

**Results of Operations**

 

***Comparison of the three months ended March 31, 2008 tothe three months ended March 31, 2007***

 

Comparisonsdiscussed below are made using the combined operations of the Predecessor andSuccessor for 2007 as compared to the Successor’s operations for the sameperiod in 2008.  The results ofoperations may not be comparable for the periods presented due to the change inthe basis of accounting between the Successor and Predecessor periods resultingfrom the application of “push-down accounting.” The results of operations for the Predecessor period in 2007 include 120West 45th Street and Landmark Square 1-6.  In connection with the Merger, theseproperties were assigned to the operating partnership and are therefore notincluded in the Successor period results of operations.

 
| ** **                                       | ** ** | ** ** | ** ** | ** ** | ** ** | **$**      | ** ** | **%**      | ** ** |
|--------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|
| **Rental Revenues (in millions)** | ** ** | **2008**   | ** ** | **2007**   | ** ** | **Change** | ** ** | **Change** | ** ** |
| Rental revenue                                   |       | $          | 70.3       |       | $          | 68.5       |       | $          | 1.8        |   | 2.6 | % |
| Escalation and reimbursement  revenue            |       | 13.3       |       | 13.4       |       | (0.1       | )          | (0.8       | )          |
| Total                                            |       | $          | 83.6       |       | $          | 81.9       |       | $          | 1.7        |   | 2.1 | % |

 

AtMarch 31, 2008, we estimated that the current market rents on ourconsolidated Manhattan properties and consolidated Suburban properties wereapproximately 46.0% and 13.5% higher, respectively, than then existing in-placefully escalated rents.  Approximately3.1% of the space leased at our consolidated properties expires during theremainder of 2008.

 
| ** **                                                             | ** ** | ** ** | ** ** | ** ** | ** ** | **$**      | ** ** | **%**      | ** ** |
|------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|
| **Investment and Other Income (in millions)** | ** ** | **2008**   | ** ** | **2007**   | ** ** | **Change** | ** ** | **Change** | ** ** |
| Equity in net  income of unconsolidated joint ventures                 |       | $          | (0.1       | )          | $          | 0.2        |       | $          | (0.3       | ) | (150.0 | )% |
| Investment and  other income                                           |       | 2.8        |       | 4.7        |       | (1.9       | )          | (40.4      | )          |
| Total                                                                  |       | $          | 2.7        |       | $          | 4.9        |       | $          | (2.2       | ) | (44.9 | )% |

 

Thedecrease in equity in net income of unconsolidated joint venture was primarilydue to lower net income contribution from One Court Square resulting fromadditional depreciation expense due to the purchase accounting adjustment tothe investment in connection with the Merger. Our joint venture at One Court Square is net leased to a single tenantuntil 2020.  As such, we do notanticipate much change in occupancy rates or net income contributions from thisasset.  At March 31, 2008, weestimated that current market rents at our Suburban joint venture asset wasapproximately 10.4% higher than then existing in-place fully escalated rents.

 

Thedecrease in investment and other income is primarily due to the averageinvestment balance decreasing between 2007 and 2008 due to the redemption ofcertain loans during 2007.

 

17

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| ** **                                                        | ** ** | ** ** | ** ** | ** ** | ** ** | **$**      | ** ** | **%**      | ** ** |
|-------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|
| **Property Operating Expenses (in millions)** | ** ** | **2008**   | ** ** | **2007**   | ** ** | **Change** | ** ** | **Change** | ** ** |
| Operating  expenses                                               |       | $          | 19.3       |       | $          | 20.0       |       | $          | (0.7       | ) | (3.5 | )% |
| Real estate  taxes                                                |       | 12.9       |       | 14.5       |       | (1.6       | )          | (11.0      | )          |
| Ground rent                                                       |       | 2.2        |       | 2.6        |       | (0.4       | )          | (15.4      | )          |
| Total                                                             |       | $          | 34.4       |       | $          | 37.1       |       | $          | (2.7       | ) | (7.3 | )% |

 

Operatingexpenses remained comparable to the same period in the prior year whenexcluding the operating expenses and real estate taxes for 120 West 45thStreet and Landmark Square 1-6 from the 2007 Predecessor period.  The decrease in ground rent expense relatedprimarily to the ground rent at 1185 Avenue of the Americas.  The reduction in real estate taxes wasprimarily due to lower taxes at 1185 Avenue of the Americas and 919 ThirdAvenue.

 
| ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **$**      | ** ** | **%**      | ** ** |
|-------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|
| **Other Expenses (in millions)** | ** ** | **2008**   | ** ** | **2007**   | ** ** | **Change** | ** ** | **Change** | ** ** |
| Interest expense                                |       | $          | 17.4       |       | $          | 21.3       |       | $          | (3.9       | ) | (18.3 | )% |
| Depreciation and  amortization expense          |       | 21.5       |       | 19.2       |       | 2.3        |       | 12.0       |       |
| Marketing,  general and administrative expense  |       | 0.5        |       | 14.2       |       | (13.7      | )          | (96.5      | )          |
| Total                                           |       | $          | 39.4       |       | $          | 54.7       |       | $          | (15.3      | ) | (28.0 | )% |

 

Thedecrease in interest expense is due to mortgage debt on certain propertiesbeing repaid after March 31, 2007 and those properties remainingunencumbered.  In addition, inApril 2007, we redeemed $200.0 million of unsecured notes which bore anaverage interest rate of 6.9%.  Weincurred a $1.0 million make-whole payment in 2007 in connection with the earlyredemption of these bonds.

 

Thedecrease in marketing, general and administrative expenses is primarily due tothe Predecessor 2007 period including approximately $8.8 million related tomerger costs and $1.8 million related to the long-term incentive compensationprogram.  None of these costs wereincurred in 2008.

 

**Liquidityand Capital Resources**

 

We currently expect that our principal sources offunds to meet our short-term and long-term liquidity requirements (workingcapital, property operations, debt service, redevelopment of properties, tenantimprovements and leasing costs) will include cash flow from operations and netproceeds from divestitures of properties and redemptions of structured financeinvestments.

 

Cash flow from operations is primarily dependent uponthe occupancy level of our portfolio, the net effective rental rates achievedon our leases, the collectibility of rent and operating escalations andrecoveries from our tenants and the level of operating and other costs.

 

We believe that our sources of working capital,specifically our cash flow from operations, are adequate for us to meet ourshort-term and long-term liquidity requirements for the foreseeable future.

 

On January 25, 2007, we were acquired by SLGreen. See Item 2 “Management’s Discussion and Analysis — Liquidity andCapital Resources” in SL Green’s Quarterly Report on Form 10-Q for thequarter ended March 31, 2008 for a complete discussion of additionalsources of liquidity available to us due to our indirect ownership by SL Green.

 

#### **Cash Flows**

 

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

** **

Forpurposes of this cash flow analysis, the cash flows for the period fromJanuary 1, 2007 to January 25, 2007 (Predecessor), the date of theMerger, have been combined with the cash flows for the period January 26,2007 to March 31, 2007 (Successor) to provide a reasonable comparison tothe cash flows for the three months ended March 31, 2008 (Successor).  Cash and cash equivalents were $10.9 millionand $19.6 million at March 31, 2008 and March 31, 2007, respectively,representing a decrease of $8.7 million. The decrease was a result of the following increases and decreases incash flows (in thousands):

 
| ** **                                           | ** ** | **Three Months Ended March 31,** | ** ** |
|------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                           | ** ** | **2008**                                             | ** ** | **2007** | ** ** | **Increase  (Decrease)** | ** ** |
| ** **                                           | ** ** | ** **                                           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net cash  provided by (used in) operating activities |       | $                                                    | 9,407      |   | $ | (65,208 | ) | $ | 74,615 |   |
| Net cash provided  by investing activities           |       | $                                                    | 603        |   | $ | 1,969,280 |   | $ | (1,968,677 | ) |
| Net cash used in  financing activities               |       | $                                                    | (15,546    | ) | $ | (1,935,652 | ) | $ | 1,920,106 |   |

 

18

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**Ourprincipal source of operating cash flow is related to the leasing and operatingof the properties in our portfolio. Our properties provide a relativelyconsistent stream of cash flow that provides us with resources to pay operatingexpenses, debt service and fund quarterly dividend and distribution paymentrequirements. At March 31, 2008, our portfolio was 93.9% occupied. Inaddition, rental rates continue to increase and tenant concession packagesdecrease in the Manhattan and Suburban marketplaces. Our structured finance andjoint venture investments also provide a steady stream of operating cash flowto us.**

** **

**Cash isused in investing activities to fund acquisitions, redevelopment projects andrecurring and nonrecurring capital expenditures. We selectively invest inexisting buildings that meet our investment criteria.  During the three months ended March 31,2008, compared to the same period in the prior year, we generated cashprimarily from the following investing activities (in thousands):**

 
| Capital  expenditures and capitalized interest |   | $          | 19,631 |   |
|------------------------------------------------|--------|------------|--------|--------|
| Distributions  from joint ventures             |   | (4,416     | )      |
| Other investing  activities                    |   | (353       | )      |
| Structured  finance and other investments      |   | (4,775     | )      |
| Proceeds from  Asset Sale                      |   | (1,978,764 | )      |

** **

**Wegenerally fund our investment activity through property-level financing andasset sales.  During the three monthsended March 31, 2008, compared to the same period in the prior year, thefollowing financing activities used the funds to complete the investingactivity noted above (in thousands):**

** **
| Proceeds from  our debt obligations           |       | $         | (12,000    | ) |
|-----------------------------------------------|------------|-----------|------------|---|
| Repayments under  our debt obligations        |       | 452,440   |       |
| Contributions                                 |       | 28,994    |       |
| Distributions  and other financing activities | ** ** | 1,450,672 | ** ** |

** **

**Capitalization**

** **

Prior to the Merger, a Class Acommon unit and a share of common stock of RARC had similar economiccharacteristics as they effectively share equally in the net income or loss anddistributions of ROP.  As of January 25,2007, all of our issued and outstanding Class A common units were owned byRARC.  In connection with the Merger,RARC assigned all of its interest in the Class A common units to WAGP andthe operating partnership.  On November 15,2007, RARC withdrew, and WAGP succeeded it, as the sole general partner of ROP.As of December 31, 2007, all of our issued and outstanding Class Acommon units were owned by WAGP or the operating partnership.

 

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

 

**ContractualObligations**

 

Combined aggregateprincipal maturities of mortgages payable and senior unsecured notes (net ofdiscount), our share of joint venture debt, excluding extension options,estimated interest expense, and our obligations under our ground leases, as of March 31,2008 are as follows (in thousands):

 
| ** **                  | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **Thereafter** | ** ** | **Total** | ** ** |
|-----------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------------|------------|-----------|------------|
| Property  mortgages         |       | $        | 3,002      |     | $          | 3,942    |       | $        | 4,225      |     | $          | 219,879        |       | $         | —     |   | $ | — |   | $ | 231,048 |   |
| Senior unsecured  notes     |       | —   |       | 200,000  |       | —   |       | 150,000  |       | —   |       | 706,959        |       | 1,056,959 |       |
| Ground leases               |       | 7,143    |       | 9,524    |       | 9,083    |       | 7,109    |       | 6,979    |       | 214,487        |       | 254,325   |       |
| Estimated  interest expense |       | 76,038   |       | 68,059   |       | 60,028   |       | 48,468   |       | 37,053   |       | 217,432        |       | 507,078   |       |
| Joint venture  debt         |       | —   |       | —   |       | —   |       | —   |       | —   |       | 94,500         |       | 94,500    |       |
| Total                       |       | $        | 86,183     |     | $          | 281,525  |       | $        | 73,336     |     | $          | 425,456        |       | $         | 44,032     |   | $ | 1,233,378 |   | $ | 2,143,910 |   |

 

19

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**SeniorUnsecured Notes**

** **

The following table setsforth our senior unsecured notes and other related disclosures by scheduledmaturity date (in thousands):

 
| **Issuance**            | ** ** | **Face Amount** | ** **    | **Coupon Rate(2)** | ** ** | **Term  (in Years)** | ** ** | **Maturity**          | ** ** |
|-------------------------|------------|----------------------|---------------|-------------------------|------------|---------------------------|------------|-----------------------|------------|
| March 26,  1999    |       | 200,000              |          | 7.75                    | %          | 10                        |       | March 15, 2009   |       |
| January 22,  2004  |       | 150,000              |          | 5.15                    | %          | 7                         |       | January 15, 2011 |       |
| August 13,  2004   |       | 150,000              |          | 5.875                   | %          | 10                        |       | August 15, 2014  |       |
| March 31,  2006    |       | 275,000              |          | 6.00                    | %          | 10                        |       | March 31, 2016   |       |
| June 27,  2005 (1) |       | 287,500              |          | 4.00                    | %          | 20                        |       | June 15, 2025    |       |
|                    |       | 1,062,500            |          |                    |       |                      |       |                  |       |
| Net discount            |       | (5,541               | )             |                    |       |                      |       |                  |       |
| ** **              |       | **$**                | **1,056,959** |                    |       |                      |       |                  |       |   |
|                         |            |                      |               |                         |            |                           |            |                       |            |  |

 

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(1)              Exchangeable senior debentureswhich are callable after June 17, 2010 at 100% of par.  In addition, the debentures can be put to us,at the option of the holder at par plus accrued and unpaid interest, on June 15,2010, 2015 and 2020 and upon the occurrence of certain change of controltransactions. As a result of the Merger, the adjusted exchange rate for thedebentures is 7.7461 shares of SL Green’s common stock per $1,000 of principalamount of debentures and the adjusted reference dividend for the debentures is$1.3491.

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

 

OnApril 27, 2007, the $50.0 million, 6.0% unsecured notes scheduled tomature in June 2007 and the $150.0 million, 7.20% unsecured notesscheduled to mature in August 2007, assumed as part of the Merger, wereredeemed.

 

**RestrictiveCovenants**

 

Theterms of our senior unsecured notes include certain restrictions and covenantswhich limit, among other things, the incurrence of additional indebtedness andliens, and which require compliance with financial ratios relating to theminimum amount of debt service coverage, the maximum amount of consolidatedunsecured and secured indebtedness and the minimum amount of unencumberedassets.  As of March 31, 2008 and December 31,2007, we were in compliance with all such covenants.

 

**MarketRate Risk**

 

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

 

All of our long-termdebt, totaling approximately $1.3 billion, bears interest at fixed rates, andtherefore the fair value of these instruments is affected by changes in themarket interest rates.

 

**Off-BalanceSheet Arrangements**

 

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

 

**CapitalExpenditures**

 

We estimate that for thenine months ending December 31, 2008, we will incur approximately $60.6million of capital expenditures (including tenant improvements and leasingcommissions) on consolidated properties and none at our joint ventureproperty.  We expect to fund thesecapital expenditures with operating cash flow, borrowings under SL Green’scredit facility and cash on hand.  Webelieve that we will have sufficient resources to satisfy our capital needsduring the next 12-month period.

 

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

 

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**RelatedParty Transactions**

 

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

 

Through Alliance BuildingServices, or Alliance, First Quality Maintenance, L.P., or First Quality,provides cleaning, extermination and related services, Classic Security LLCprovides security services, Bright Star Couriers LLC provides messengerservices, and Onyx Restoration Works provides restoration services with respectto certain properties owned by us. Alliance is owned by Gary Green, a son of Stephen L. Green, the chairmanof our board of directors.  In addition,First Quality has the non-exclusive opportunity to provide cleaning and relatedservices to individual tenants at our properties on a basis separatelynegotiated with any tenant seeking such additional services.  We paid Alliance approximately $0.5 millionand none for three months ended March 31, 2008 and 2007, respectively, forthese services (excluding services provided directly to tenants).

 

**AllocatedExpenses from SL Green**

 

Subsequent to the Merger,property operating expenses include an allocation of salary and other operatingcosts from SL Green.  Such amount wasapproximately $1.1 million and $0.7 million for the three months ended March 31,2008 and 2007 (Successor), respectively.

 

**Other**

 

**Insurance**

** **

**SLGreen maintains “all-risk” property and rental value coverage (includingcoverage regarding the perils of flood, earthquake and terrorism) and liabilityinsurance with limits in excess of $200.0 million per location. Theseinsurance policies cover the ROP assets. SL Green now maintains two property insurance portfolios. The firstportfolio maintains a blanket limit of $600.0 million per occurrence forthe majority of the New York City properties in our portfolio with a sub-limitof $450.0 million for acts of terrorism. This policy expires on December 31,2008.  The second portfolio maintains alimit of $600.0 million per occurrence, including terrorism, for the majorityof the Suburban properties. This policy expires on December 31, 2008.  The liability policy expires on October 31,2008.  The New York City portfolioincorporates SL Green’s captive, Belmont Insurance Company, which SL Greenformed in an effort to stabilize, to some extent, the fluctuations of insurancemarket conditions. Belmont is licensed to write up to $100.0 million ofcoverage for us, but at this time is providing $50.0 million of terrorismcoverage in excess of $250.0 million and is insuring a large deductible onthe liability insurance with a $250,000 deductible per occurrence and a $2.4million annual aggregate loss limit. SL Green has secured an excess insurer toprotect against catastrophic liability losses (above $250,000 deductible peroccurrence) and a stop loss for aggregate claims that exceed $2.4 million.  SL Green has retained a third partyadministrator to manage all claims within the deductible and we anticipate thatdirect management of liability claims will improve loss experience and ultimatelylower the cost of liability insurance in future years. Although SL Greenconsiders its insurance coverage (inclusive of the ROP assets) to beappropriate, in the event of a major catastrophe, such as an act of terrorism,SL Green may not have sufficient coverage to replace certain properties.**

** **

The Terrorism RiskInsurance Act, or TRIA, which was enacted in November 2002, was renewed onDecember 31, 2007. Congress extended TRIA, now called TRIPRA (TerrorismRisk Insurance Program Reauthorization and Extension Act of 2007) until December 31,2014. The law extends the federal Terrorism Insurance Program that requiresinsurance companies to offer terrorism coverage and provides for compensationfor insured losses resulting from acts of terrorism. Our debt instruments,consisting of mortgage loans secured by our properties (which are generallynon-recourse to us), mezzanine loans, ground leases and SL Green’s 2005unsecured revolving credit facility and secured term loan, contain customarycovenants requiring us to maintain insurance. There can be no assurance thatthe lenders or ground lessors under these instruments will not take theposition that a total or partial exclusion from “all-risk” insurance coveragefor losses due to terrorist acts is a breach of these debt and ground leaseinstruments that allows the lenders or ground lessors to declare an event ofdefault and accelerate repayment of debt or recapture of ground leasepositions. In addition, if lenders insist on full coverage for these risks andprevail in asserting that we are required to maintain such coverage, it couldresult in substantially higher insurance premiums.

 

Subsequent to the Merger,we obtained insurance coverage through an insurance program administered by SLGreen.  In connection with this programwe incurred insurance expense of approximately $0.6 million and $0.5 millionfor the three months ended March 31, 2008 and the period January 26,2007 to March 31, 2007, respectively.

 

**RecentlyIssued Accounting Pronouncements**

** **

TheRecently Issued Accounting Pronouncements are discussed in Note 2, “SignificantAccounting Policies-Recently Issued Accounting Pronouncements” in theaccompanying financial statements.

 

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**Inflation**

** **

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

 

**Forward-Looking Information**

 

This report includescertain statements that may be deemed to be “forward-looking statements” withinthe meaning of Section 27A of the Securities Act of 1933, as amended, orthe Act, and Section 21E of the Securities Exchange Act of 1934, asamended, or the Exchange Act.  Suchforward-looking statements relate to, without limitation, our future capitalexpenditures, dividends and acquisitions (including the amount and naturethereof) and other development trends of the real estate industry and theManhattan, Westchester, Connecticut and Long Island City office market,business strategies, and the expansion and growth of our operations.  These statements are based on certainassumptions and analyses made by us in light of our experience and our perceptionof historical trends, current conditions, expected future developments andother factors we believe are appropriate. We intend such forward-looking statements to be covered by the safeharbor provisions for forward-looking statements contained in Section 27Aof the Act and Section 21E of the Exchange Act.  Such statements are subject to a number ofassumptions, risks and uncertainties which may cause our actual results,performance or achievements to be materially different from future results,performance or achievements expressed or implied by these forward-lookingstatements.  Forward-looking statementsare generally identifiable by the use of the words “may,” “will,” “should,” “expect,”“anticipate,” “estimate,” “believe,” “intend,” “project,” “continue,” or thenegative 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:

 

·                  general economicor business (particularly real estate) conditions, either nationally or in theNew York metro area being less favorable than expected;

·                  reduced demandfor office space;

·                  risks of realestate acquisitions;

·                  risks ofstructured finance investments;

·                  availability andcreditworthiness of prospective tenants;

·                  adverse changesin the real estate markets, including increasing vacancy, decreasing rentalrevenue and increasing insurance costs;

·                  availability ofcapital (debt and equity);

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

·                  market interestrates could adversely affect the market price of our common stock, as well asour performance and cash flows;

·                  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;

·                  competition withother companies;

·                  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.

 

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

 

The risks included hereare not exhaustive.  Other sections ofthis report and our Annual Report on Form 10-K for the year ended December 31,2007 may include additional factors that could adversely affect ROP’s businessand financial performance.  In addition,sections of the SL Green’s Annual Report on Form 10-K contains additionalfactors that could adversely effect our business and financialperformance.  Moreover, ROP operates in avery 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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**ITEM3.  Quantitative and QualitativeDisclosure About Market Risk**

** **

For quantitative andqualitative disclosures about market risk, see item 7A, “Quantitative andQualitative Disclosures About Market Risk,” of our Annual Report on Form 10-Kfor the year ended December 31, 2007. Our exposures to market risk have not changed materially since December 31,2007.

 

**ITEM 4T. Controls and Procedures**

** **

**Evaluation of Disclosure Controls and Procedures**

** **

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

 

As of the end of theperiod covered by this report, we carried out an evaluation, under thesupervision and with the participation of our management, including ourPresident and our Treasurer, of the effectiveness of the design and operationof our disclosure controls and procedures. Based upon that evaluation as of the end of the period covered by thisreport, our President and Treasurer concluded that our disclosure controls andprocedures were effective to give reasonable assurances to the timelycollection, evaluation and disclosure of information relating to the Company thatwould potentially be subject to disclosure under the Securities Exchange Act of1934, as amended, and the rules and regulations promulgated thereunder.

 

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

 

**Changes in Internal Control over Financial Reporting**

** **

Therehave been no significant changes in our internal control over financialreporting during the quarter ended March 31, 2008, that has materiallyaffected, or is reasonably likely to material affect, our internal control overfinancial reporting.

** **

**PART II****                                                   OTHERINFORMATION**

 

##### **ITEM 1.**                                                     LEGALPROCEEDINGS

##### ** **

As of March 31,2008, we were not involved in any material litigation nor, to management’sknowledge, is any material litigation threatened against us or our portfolioother than routine litigation arising in the ordinary course of business orlitigation that is adequately covered by insurance.

 

On December 6, 2006,SL Green announced that it and RARC had reached an agreement in principal withthe plaintiffs to settle the previously disclosed class action lawsuitsrelating to the Merger.  The settlement,which has been executed by all parties, and will be presented to the New Yorkcourt for approval, provides (1) for certain contingent profit sharingparticipations for former RARC stockholders relating to specified assets, noneof which are owned by ROP (2) for potential payments to former RARCstockholders of amounts relating to Reckson’s interest in contingent profitsharing participations in connection with the sale of certain Long Islandindustrial properties in a prior transaction, none of which are owned by ROP and(3) for the dismissal by the plaintiffs of all actions with prejudice andcustomary releases of all defendants and related parties.

 

##### **ITEM 1A.**                                            RISKFACTORS

##### ** **

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

 

There have been nomaterial changes to the risk factors disclosed in Item 1A of Part 1 in theabove-mentioned Annual Reports on Form 10-K for the year ended December 31,2007.

 

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| **ITEM 2.** | **UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF  PROCEEDS**                                                                              |
|-------------|-----------------------------------------------------------------------------------------------------------------------------------------------|
| ** **  | ** **                                                                                                                                    |
|        | None                                                                                                                                          |
|        |                                                                                                                                          |
| **ITEM 3.** | **DEFAULTS UPON SENIOR SECURITIES**                                                                                                           |
| ** **  | ** **                                                                                                                                    |
|        | None                                                                                                                                          |
|        |                                                                                                                                          |
| **ITEM 4.** | **SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**                                                                                       |
| ** **  | ** **                                                                                                                                    |
| ** **  | **None**                                                                                                                                      |
| ** **  | ** **                                                                                                                                    |
| **ITEM 5.** | **OTHER INFORMATION**                                                                                                                         |
| ** **  | ** **                                                                                                                                    |
| ** **  | **None**                                                                                                                                      |
| ** **  | ** **                                                                                                                                    |
| **ITEM 6.** | **EXHIBITS**                                                                                                                                  |
| ** **  | ** **                                                                                                                                    |
| (a)         | Exhibits:                                                                                                                                     |
|        |                                                                                                                                          |
| 31.1        | Certification by the  President pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  filed herewith.                               |
|        |                                                                                                                                          |
| 31.2        | Certification by the  Treasurer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  filed herewith.                               |
|        |                                                                                                                                          |
| 32.1        | Certification pursuant  to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002 filed herewith. |
|        |                                                                                                                                          |
| 32.2        | Certification pursuant  to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002 filed herewith. |

 

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**SIGNATURES**

 

Pursuant to the requirements of the Securities ExchangeAct of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned thereunto duly authorized.

** **

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

 

 

Date:                    May 14, 2008

 

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