Table of Contents

 

 

 

**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 13OR 15(d) OF**

**THE SECURITIES EXCHANGE ACT OF 1934**

 

**For thequarterly period ended September 30, 2009**

 

o                                  **TRANSITION REPORT PURSUANT TO SECTION 13OR 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)

 

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

 

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

(Address ofprincipal executive offices) (Zip Code)

** **

**(212)594-2700**

(Registrant’stelephone number, including area code)

 

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

 

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

 

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

 

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

 

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

 

As of October 31,2009, no common units of limited partnership interest of the Registrant wereheld by non-affiliates of the Registrant. There is no established trading market for such units.

 

 

 

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Tableof Contents

 

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

** **

**INDEX**

 
| ** **        | ** **                                                                                                                     |       | **PAGE**   |
|-------------------|--------------------------------------------------------------------------------------------------------------------------------|------------|------------|
| **PART I.**  | **FINANCIAL INFORMATION**                                                                                                      |       |       |
| ** **        | ** **                                                                                                                     |       |       |
| **ITEM 1.**       | **FINANCIAL STATEMENTS**                                                                                                       |       |       |
| ** **        | ** **                                                                                                                     |       |       |
| ** **        | ** **                                                                                                                     | ** ** | ** ** |
| ** **        | ** **                                                                                                                     | ** ** | ** ** |
|              | Condensed  Consolidated Balance Sheets as of September 30, 2009 (unaudited) and  December 31, 2008                   |       | 3          |
|              |                                                                                                                           |       |       |
|              | Condensed  Consolidated Statements of Income for the three and nine months ended  September 30, 2009 and 2008 (unaudited) |       | 4          |
|              |                                                                                                                           |       |       |
|              | Condensed  Consolidated Statements of Cash Flows for the nine months ended  September 30, 2009 and 2008 (unaudited)       |       | 5          |
|              |                                                                                                                           |       |       |
|              | Notes to Condensed Consolidated Financial Statements  (unaudited)                                                              |       | 6          |
| ** **        | ** **                                                                                                                     | ** ** | ** ** |
| **ITEM 2.**       | **MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**                                |       | 17         |
|              |                                                                                                                           |       |       |
| **ITEM 3.**       | **QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**                                                                |       | 25         |
|              |                                                                                                                           |       |       |
| **ITEM 4T.**      | **CONTROLS AND  PROCEDURES**                                                                                                   |       | 25         |
|              |                                                                                                                           |       |       |
| **PART II.** | **OTHER INFORMATION**                                                                                                          |       | 25         |
|              |                                                                                                                           |       |       |
| **ITEM 1.**       | **LEGAL PROCEEDINGS**                                                                                                          |       | 25         |
|              |                                                                                                                           |       |       |
| **ITEM 1A.**      | **RISK FACTORS**                                                                                                               |       | 25         |
|              |                                                                                                                           |       |       |
| **ITEM 2.**       | **UNREGISTERED  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**                                                               |       | 25         |
| ** **        | ** **                                                                                                                     |       |       |
| **ITEM 3.**       | **DEFAULTS UPON  SENIOR SECURITIES**                                                                                           |       | 25         |
| ** **        | ** **                                                                                                                     |       |       |
| **ITEM 4.**       | **SUBMISSION OF  MATTERS TO A VOTE OF SECURITY HOLDERS**                                                                       |       | 26         |
| ** **        | ** **                                                                                                                     |       |       |
| **ITEM 5.**       | **OTHER INFORMATION**                                                                                                          |       | 26         |
|              |                                                                                                                           |       |       |
| **ITEM 6.**       | **EXHIBITS**                                                                                                                   |       | 26         |
|              |                                                                                                                           |       |       |
| **SIGNATURES**    |                                                                                                                           | 27         |

 

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Table of Contents

 

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

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

###### ** **

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

**Condensed Consolidated Balance Sheets**

**(Amountsin thousands)**

 
| ** **                                                                                            | ** ** | **September 30,********2009** | ** **    | **December 31,****2008** | ** ** |
|-------------------------------------------------------------------------------------------------------|------------|------------------------------------|---------------|-------------------------------|------------|
| ** **                                                                                            | ** ** | **(Unaudited)**                    | ** **    | ** **                    | ** ** |
| **Assets**                                                                                            |       |                               |          |                          |       |
| Commercial  real estate properties, at cost:                                                          |       |                               |          |                          |       |
| Land  and land interests                                                                              | ** ** | **$**                              | **643,457**   |                          | $          | 643,156 |   |
| Building  and improvements                                                                            | ** ** | **3,283,154**                      |          | 3,264,826                     |       |
| ** **                                                                                            |       | **3,926,611**                      |          | 3,907,982                     |       |
| Less:  accumulated depreciation                                                                       | ** ** | **(235,508**                       | **)**         | (162,324                      | )          |
| ** **                                                                                            |       | **3,691,103**                      |          | 3,745,658                     |       |
| Cash  and cash equivalents                                                                            | ** ** | **20,852**                         |          | 23,114                        |       |
| Restricted  cash                                                                                      | ** ** | **7,787**                          |          | 7,265                         |       |
| Tenant  and other receivables, net of allowance of $2,621 and $659 in 2009 and 2008,  respectively    | ** ** | **12,205**                         |          | 12,796                        |       |
| Deferred  rents receivable, net of allowance of $5,056 and $4,548 in 2009 and 2008,  respectively     | ** ** | **39,475**                         |          | 31,148                        |       |
| Structured  finance investments, net of allowance of $10,550 at both 2009 and 2008                    | ** ** | **26,821**                         |          | 90,794                        |       |
| Investment  in unconsolidated joint venture                                                           | ** ** | **52,574**                         |          | 56,291                        |       |
| Deferred  costs, net of accumulated amortization of $2,557 and $1,157 in 2009 and 2008,  respectively | ** ** | **17,007**                         |          | 15,267                        |       |
| Other  assets                                                                                         | ** ** | **130,923**                        |          | 139,714                       |       |
| Total  assets                                                                                         | ** ** | **$**                              | **3,998,747** |                          | $          | 4,122,047 |   |
|                                                                                                  |       |                               |          |                          |       |
| **Liabilities**                                                                                       |       |                               |          |                          |       |
| Mortgage  notes payable                                                                               | ** ** | **$**                              | **225,434**   |                          | $          | 228,046 |   |
| Senior  unsecured notes                                                                               | ** ** | **662,562**                        |          | 954,315                       |       |
| Accrued  interest payable and other liabilities                                                       | ** ** | **11,868**                         |          | 17,321                        |       |
| Accounts  payable and accrued expenses                                                                | ** ** | **28,978**                         |          | 30,883                        |       |
| Deferred  revenue                                                                                     | ** ** | **287,672**                        |          | 326,227                       |       |
| Security  deposits                                                                                    | ** ** | **8,154**                          |          | 5,667                         |       |
| Total  liabilities                                                                                    | ** ** | **1,224,668**                      |          | 1,562,459                     |       |
|                                                                                                  |       |                               |          |                          |       |
| Commitments  and Contingencies                                                                        | ** ** | **—**                         |          | —                        |       |
|                                                                                                  |       |                               |          |                          |       |
| **Capital**                                                                                           |       |                               |          |                          |       |
| General  partner capital - ROP                                                                        | ** ** | **2,275,302**                      |          | 2,057,111                     |       |
| Limited  partner capital                                                                              | ** ** | **—**                         |          | —                        |       |
| Noncontrolling  interests in other partnerships                                                       | ** ** | **498,777**                        |          | 502,477                       |       |
| Total  capital                                                                                        | ** ** | **2,774,079**                      |          | 2,559,588                     |       |
| Total  liabilities and capital                                                                        | ** ** | **$**                              | **3,998,747** |                          | $          | 4,122,047 |   |

 

The accompanying notes are anintegral part of these financial statements.

 

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**Reckson OperatingPartnership, L.P.**

**Condensed Consolidated Statements of Income**

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

 
| ** **                                                                                                                                             | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                                                                                                             | ** ** | **2009**                                  | ** ** | **2008**                                 | ** ** | **2009** | ** ** | **2008** | ** ** |
| **Revenues**                                                                                                                                           |       |                                      |       |                                     |       |   |   |   |   |
| Rental revenue, net                                                                                                                                    |       | $                                         | 71,637     |                                     | $          | 70,963 |   | $ | 213,524 |   | $ | 207,068 |   |
| Escalation  and reimbursement                                                                                                                          |       | 13,072                                    |       | 14,337                                   |       | 41,097 |   | 39,772 |   |
| Investment  income                                                                                                                                     |       | 330                                       |       | 1,433                                    |       | 1,757 |   | 4,205 |   |
| Other  income                                                                                                                                          |       | 517                                       |       | 939                                      |       | 2,131 |   | 5,483 |   |
| Total  revenues                                                                                                                                        |       | 85,556                                    |       | 87,672                                   |       | 258,509 |   | 256,528 |   |
| **Expenses**                                                                                                                                           |       |                                      |       |                                     |       |   |   |   |   |
| Operating  expenses ($2,040, $6,683, $2,154 and $6,279 paid to/ allocated from  affiliates in 2009 and 2008, respectively                              |       | 19,068                                    |       | 22,325                                   |       | 56,974 |   | 59,560 |   |
| Real  estate taxes                                                                                                                                     |       | 13,581                                    |       | 12,497                                   |       | 42,171 |   | 37,759 |   |
| Ground  rent                                                                                                                                           |       | 2,161                                     |       | 2,161                                    |       | 6,483 |   | 6,483 |   |
| Interest  expense, net of interest income                                                                                                              |       | 13,387                                    |       | 18,486                                   |       | 43,048 |   | 55,149 |   |
| Depreciation  and amortization                                                                                                                         |       | 28,064                                    |       | 22,517                                   |       | 74,960 |   | 66,555 |   |
| Loan  loss reserves                                                                                                                                    |       | —                                    |       | —                                   |       | 24,907 |   | 2,000 |   |
| Marketing,  general and administrative                                                                                                                 |       | 142                                       |       | 2,097                                    |       | 373 |   | 2,286 |   |
| Total  expenses                                                                                                                                        |       | 76,403                                    |       | 80,083                                   |       | 248,916 |   | 229,792 |   |
| Income  from continuing operations before equity in net income from unconsolidated  joint venture, noncontrolling interest and discontinued operations |       | 9,153                                     |       | 7,589                                    |       | 9,593 |   | 26,736 |   |
| Equity  in net income from unconsolidated joint venture                                                                                                |       | 269                                       |       | 284                                      |       | 837 |   | 575 |   |
| Gain  (loss) on early extinguishment of debt                                                                                                           |       | (163                                      | )          | —                                   |       | 3,519 |   | — |   |
| Income  from continuing operations                                                                                                                     |       | 9,259                                     |       | 7,873                                    |       | 13,949 |   | 27,311 |   |
| Income  (loss) from discontinued operations                                                                                                            |       | —                                    |       | 143                                      |       | (42 | ) | 670 |   |
| Net  income                                                                                                                                            |       | 9,259                                     |       | 8,016                                    |       | 13,907 |   | 27,981 |   |
| Net  income attributable to noncontrolling interests in other partnerships                                                                             |       | (2,904                                    | )          | (3,753                                   | )          | (9,879 | ) | (12,321 | ) |
| Net  income attributable to ROP common unitholders                                                                                                     |       | $                                         | 6,355      |                                     | $          | 4,263 |   | $ | 4,028 |   | $ | 15,660 |   |
|                                                                                                                                                   |       |                                      |       |                                     |       |   |   |   |   |
| **Amounts attributable to ROP common unitholders:**                                                                                                    |       |                                      |       |                                     |       |   |   |   |   |
| Income  from continuing operations                                                                                                                     |       | $                                         | 6,355      |                                     | $          | 4,120 |   | $ | 4,070 |   | $ | 14,990 |   |
| Discontinued  operations                                                                                                                               |       | —                                    |       | 143                                      |       | (42 | ) | 670 |   |
| Net  income                                                                                                                                            |       | $                                         | 6,355      |                                     | $          | 4,263 |   | $ | 4,028 |   | $ | 15,660 |   |

 

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)**

 
| ** **                                                                         | ** ** | **Nine Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|------------------------------------------------------------------------------------|------------|-------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                                         | ** ** | **2009**                                  | ** ** | **2008**                                  | ** ** |
| **Operating Activities**                                                           |       |                                      |       |                                      |       |
| Net  income                                                                        |       | $                                         | 13,907     |                                      | $          | 27,981 |   |
| Adjustment  to reconcile net income to net cash provided by operating activities:  |       |                                      |       |                                      |       |
| Depreciation  and amortization                                                     |       | 74,960                                    |       | 67,607                                    |       |
| Equity  in net income from unconsolidated joint venture                            |       | (837                                      | )          | (575                                      | )          |
| Distributions  of cumulative earnings from unconsolidated joint venture            |       | 837                                       |       | 628                                       |       |
| Gain  on early extinguishment of debt                                              |       | (3,519                                    | )          | —                                    |       |
| Loan  loss reserves                                                                |       | 24,907                                    |       | 2,000                                     |       |
| Deferred  rents receivable                                                         |       | (8,327                                    | )          | (11,160                                   | )          |
| Other  non-cash adjustments                                                        |       | (11,626                                   | )          | (8,538                                    | )          |
| Changes  in operating assets and liabilities:                                      |       |                                      |       |                                      |       |
| Restricted  cash — operations                                                 |       | (512                                      | )          | 752                                       |       |
| Tenant  and other receivables                                                      |       | (1,371                                    | )          | (8,613                                    | )          |
| Deferred  lease costs                                                              |       | (3,144                                    | )          | (8,716                                    | )          |
| Other  assets                                                                      |       | (11,531                                   | )          | (13,240                                   | )          |
| Accounts  payable, accrued expenses and other liabilities                          |       | (5,301                                    | )          | (13,431                                   | )          |
| Net  cash provided by operating activities                                         |       | 68,443                                    |       | 34,695                                    |       |
| **Investing Activities**                                                           |       |                                      |       |                                      |       |
| Additions  to land, buildings and improvements                                     |       | (22,266                                   | )          | (10,266                                   | )          |
| Restricted  cash-capital improvements                                              |       | (10                                       | )          | 64                                        |       |
| Distributions  in excess of cumulative earnings from unconsolidated joint ventures |       | 3,717                                     |       | 3,822                                     |       |
| Structured  finance investment redemption                                          |       | 40,122                                    |       | —                                    |       |
| Net  cash (used in) provided by investing activities                               |       | 21,563                                    |       | (6,380                                    | )          |
| **Financing Activities**                                                           |       |                                      |       |                                      |       |
| Repayments  of mortgage notes payable                                              |       | (2,612                                    | )          | (2,395                                    | )          |
| Repayments  of senior unsecured notes                                              |       | (290,328                                  | )          | —                                    |       |
| Contributions  from common unitholders                                             |       | 491,878                                   |       | 209,919                                   |       |
| Noncontrolling  interest in other partnerships - distributions                     |       | (13,579                                   | )          | (13,114                                   | )          |
| Distributions  to common unitholders                                               |       | (277,627                                  | )          | (226,706                                  | )          |
| Net  cash used in financing activities                                             |       | (92,268                                   | )          | (32,296                                   | )          |
| Net  (decrease) increase in cash and cash equivalents                              |       | (2,262                                    | )          | (3,981                                    | )          |
| Cash  and cash equivalents at beginning of period                                  |       | 23,114                                    |       | 16,463                                    |       |
| Cash  and cash equivalents at end of period                                        |       | $                                         | 20,852     |                                      | $          | 12,482 |   |

 

Theaccompanying notes are an integral part of these financial statements.

 

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**Tableof Contents**

** **

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

**Notes to Condensed Consolidated FinancialStatements**

**(Unaudited)**

**September 30, 2009**

** **

**1.  Organization and Basis of Presentation**

 

RecksonOperating Partnership, L.P., or ROP, commenced operations on June 2,1995.  Since consummation of the Mergeron January 25, 2007, SL Green Operating Partnership, L.P., or theoperating partnership, has owned all the economic interests in ROP eitherby direct ownership or by indirect ownership through its wholly-ownedsubsidiary Wyoming Acquisition GP LLC, or WAGP.  RecksonAssociates Realty Corp., or RARC, served as the sole general partner ofROP until November 15, 2007, at which time RARC withdrewand WAGP succeeded it as the sole general partner ofROP.   Since consummation of the Merger, RARC has been awholly-owned subsidiary of SL Green Realty Corp., or SL Green.

 

**ROP is engaged in the ownership,management, operation, leasing, financing and development of commercial realestate properties, principally office properties and also owns land for futuredevelopment located in New York City, Westchester and Connecticut, whichcollectively is also known as the New York Metro Area.  At September 30, 2009, our inventory ofdevelopment parcels aggregated approximately 81 acres of land in four separateparcels on which we can, based on estimates at September 30, 2009, developapproximately 1.1 million square feet of office space and in which we had investedapproximately $65.1 million.  Inaddition, as of September 30, 2009 ROP also held approximately $26.8million of structured finance investments.**

** **

SLGreen and the operating partnership were formed in June 1997.  SL Green has qualified, and expects to qualifyin the current fiscal year as a real estate investment trust, or REIT, underthe Internal Revenue Code of 1986, as amended, or the Code, and operates as aself-administered, self-managed REIT.  AREIT is a legal entity that holds real estate interests and, through paymentsof dividends to stockholders, is permitted to reduce or avoid the payment ofFederal income taxes at the corporate level. Unless the context requires otherwise, all references to “we,” “our” and“us” means ROP and all entities owned or controlled by ROP.

 

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. We paid approximately $6.0 billion,inclusive of transaction costs, for Reckson. This transaction is referred to herein as the Merger.

 

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

 

As a result of thesubstantial change in ownership from the Merger, SL Green has recorded theMerger in accordance with the provisions of “push-down accounting.”  The application of “push-down accounting”resulting in the adjustment of the carrying values of the assets andliabilities of ROP to fair value in the same manner as ROP’s assets andliabilities were recorded by SL Green subsequent to the Merger.  The net impact of such adjustments wasapproximately $3.0 billion, related primarily to increases to the carryingvalue of real estate assets and lease related intangibles.

 

As of September 30, 2009, we owned the followinginterests in commercial office properties in the New York Metro area, primarilyin midtown Manhattan, a borough of New York City, or Manhattan.  Ourinvestments in the New York Metro area also include investments in Queens,Westchester County and Connecticut, which are collectively known as theSuburban assets:

 
| ** **   | ** ** | ** **                 | ** ** | ** **     | ** ** | ** **      | ** ** | **Weighted**             | ** ** |
|--------------|------------|----------------------------|------------|----------------|------------|-----------------|------------|--------------------------|------------|
| ** **   | ** ** | ** **                 | ** ** | **Number of**  | ** ** | ** **      | ** ** | **Average**              | ** ** |
| **Location** | ** ** | **Ownership**              | ** ** | **Properties** | ** ** | **Square Feet** | ** ** | **Occupancy********(1)** | ** ** |
| Manhattan    |       | Consolidated properties    |       | 4              |       | 3,770,000       |       | 97.2                     | %          |
|         |       |                       |       |           |       |            |       |                     |       |
| Suburban     |       | Consolidated properties    |       | 16             |       | 2,642,100       |       | 89.5                     | %          |
|         |       | Unconsolidated  properties |       | 1              |       | 1,402,000       |       | 100.0                    | %          |
|         |       |                       |       | 21             |       | 7,814,100       |       | 95.1                     | %          |

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

 

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

**Notes to CondensedConsolidated Financial Statements**

**(Unaudited)**

**September 30, 2009**

** **

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

 

The accompanyingconsolidated financial statements include the consolidated financial positionof ROP and the Service Companies (as defined below) at September 30, 2009and December 31, 2008, the consolidated results of their operations forthe three and nine months ended September 30, 2009 and 2008 and their cashflows for the nine months ended September 30, 2009 and 2008.  ROP’s investments in majority-owned andcontrolled real estate joint ventures are reflected in the accompanyingfinancial statements on a consolidated basis with a reduction for thenoncontrolling partners’ interests.  ROP’sinvestments in real estate joint ventures, where it owns less than acontrolling interest, are reflected in the accompanying financial statements onthe equity method of accounting.  TheService Companies, which provide management, development and constructionservices to ROP and to third parties, include Reckson Management Group, Inc.,RANY Management Group, Inc., Reckson Construction & DevelopmentLLC and Reckson Construction Group New York, Inc. (collectively, the “ServiceCompanies”).  All significantintercompany balances and transactions have been eliminated in the consolidatedfinancial statements.

 

The accompanyingunaudited condensed consolidated financial statements have been prepared inaccordance with generally accepted accounting principles in the United States,or U.S. GAAP, for interim financial information and with the instructions to Form 10-Qand Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notesrequired by U.S. GAAP for complete financial statements.  In the opinion of management, all adjustments(consisting of normal recurring accruals) considered necessary for fairpresentation have been included.  The2009 operating results for the periods presented are not necessarily indicativeof the results that may be expected for the year ending December 31,2009.  These financial statements shouldbe read in conjunction with the financial statements and accompanying notesincluded in our annual report on Form 10-K for the year ended December 31,2008.

 

The balance sheet at December 31,2008 has been derived from the audited financial statements at that date butdoes not include all the information and footnotes required by U.S. GAAP forcomplete financial statements.

 

In June 2009, theFinancial Accounting Standards Board, or FASB, issued guidance regarding theAccounting Codification and the Hierarchy of Generally Accepted AccountingPrinciples. This guidance establishes the FASB Accounting StandardsCodification, or the Codification, as the source of authoritative accountingprinciples recognized by the FASB to be applied by nongovernmental entities inthe preparation of financial statements in conformity with GAAP, and statesthat all guidance contained in the Codification carries equal level ofauthority.  Rules and interpretivereleases of the Securities and Exchange Commissions, or SEC, under federalsecurities laws are also sources of authoritative GAAP for SECregistrants.  The Codification does notchange GAAP, however it does change the way in which it is to be researched andreferenced.  This guidance is effectivefor financial statements issued for interim and annual periods ended September 15,2009. We have implemented the Codification in this quarterly report.

 

**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.  Entities which we do not control and entitieswhich are VIEs, but where we are not the primary beneficiary are accounted forunder the equity method.  The interestthat we do not own is included in “Noncontrolling Interests in OtherPartnerships” on the balance sheet.  Allsignificant intercompany balances and transactions have been eliminated.

 

Effective January 1,2009, we revised the presentation of noncontrolling interests in ourconsolidated financial statements.  Anon-controlling interest in a consolidated subsidiary is defined as “theportion of the equity (net assets) in a subsidiary not attributable, directlyor indirectly, to a parent”. Noncontrolling interests are required to be presented as a separatecomponent of equity in the consolidated balance sheet.  In addition, the presentation of net incomewas modified by requiring earnings and other comprehensive income to beattributed to controlling and noncontrolling interests. Below are the steps wehave taken as a result of the implementation of this standard:

 

·                  We have reclassified the noncontrolling interests of other consolidatedpartnerships from the mezzanine section of our balance sheets to equity. Thisreclassification totaled approximately $502.5 million as of December 31,2008.

 

·                  Net income attributable to noncontrolling interests of otherconsolidated partnerships is no longer included in the determination of netincome. We reclassified prior year amounts to reflect this requirement.

 

7

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Table ofContents

 

**RecksonOperating Partnership, L.P.**

**Notes toCondensed Consolidated Financial Statements**

**(Unaudited)**

**September 30, 2009**

** **

**Investmentin Commercial Real Estate Properties**

 

Ona periodic basis, we assess whether there are any indicators that the value ofour real estate properties may be impaired or that their carrying values maynot be recoverable.  A property’s valueis considered impaired if management’s estimate of the aggregate future cash flows(undiscounted and without interest charges for consolidated properties anddiscounted for unconsolidated properties) to be generated by the property areless than the carrying value of the property. To the extent impairment has occurred, the loss shall be measured as theexcess of the carrying amount of the property over the fair value of theproperty.  We do not believe that thevalue of any of our consolidated real estate properties or equity investment inrental property was impaired at September 30, 2009 and December 31,2008.

 

Weallocate the purchase price of real estate to land and building and, ifdetermined to be material, intangibles, such as the value of above-, below- andat-market leases and origination costs associated with the in-place leases.  We depreciate the amount allocated tobuilding and other intangible assets over their estimated useful lives, whichgenerally range from three to 40 years and from one to 40 years, respectively.  The values of the above- and below-marketleases are amortized and recorded as either an increase (in the case ofbelow-market leases) or a decrease (in the case of above-market leases) torental income over the remaining term of the associated lease, which range fromone to 14 years.  The value associated within-place leases and tenant relationships are amortized over the expected termof the relationship 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.

 

Asa result of our evaluations of acquisitions made, we recognized an increase ofapproximately $4.9 million, $14.7 million, $4.9 million and $12.5 million inrental revenue for the three and nine months ended September 30, 2009 and2008, respectively, for the amortization of aggregate below-market rents inexcess of above-market rents and a reduction in lease origination costs,resulting from the reallocation of the purchase price of the applicableproperties.  We recognized a reduction ininterest expense for the amortization of above-market rate mortgages ofapproximately $0.3 million, $2.4 million, $1.7 million and $5.1 million for thethree and nine months ended September 30, 2009 and 2008, respectively.

 

Thefollowing summarizes our identified intangible assets (acquired above-marketleases and in-place leases) and intangible liabilities (acquired below-marketleases) as of September 30, 2009 and December 31, 2008 (amounts inthousands).

 
| ** **                                                         | ** ** | **September 30,********2009** | ** **  | **December 31,********2008** | ** ** |
|--------------------------------------------------------------------|------------|------------------------------------|-------------|-----------------------------------|------------|
| Identified intangible assets (included in other  assets):          | ** ** | ** **                         | ** **  | ** **                        |       |
| Gross amount                                                       | ** ** | **$**                              | **167,078** |                              | $          | 167,078 |   |
| Accumulated amortization                                           | ** ** | **(56,531**                        | **)**       | (35,343                           | )          |
| Net                                                                | ** ** | **$**                              | **110,547** |                              | $          | 131,735 |   |
|                                                               | ** ** | ** **                         | ** **  | ** **                        |       |
| Identified intangible liabilities (included in  deferred revenue): | ** ** | ** **                         | ** **  | ** **                        |       |
| Gross amount                                                       | ** ** | **$**                              | **373,950** |                              | $          | 373,950 |   |
| Accumulated amortization                                           | ** ** | **(93,286**                        | **)**       | (57,380                           | )          |
| Net                                                                | ** ** | **$**                              | **280,664** |                              | $          | 316,570 |   |

 

**IncomeTaxes**

 

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

 

8

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Table of Contents

 

**RecksonOperating Partnership, L.P.**

**Notes toCondensed Consolidated Financial Statements**

**(Unaudited)**

**September 30, 2009**

** **

**Reserve for Possible CreditLosses**

 

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

 

Where impairment isindicated, a valuation allowance is measured based upon the excess of therecorded investment amount over the net fair value of the collateral, as reduced by sellingcosts.  Any deficiency between thecarrying amount of an asset and the net sales price of repossessed collateralis charged to expense.  We recordedapproximately none, $24.9 million, none and $2.0 million in loan loss reservesand charge offs during the three and nine months ended September 30, 2009and 2008, respectively, on investments being held to maturity.

 

**Use ofEstimates**

 

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

 

**Concentrations of CreditRisk**

 

Financialinstruments that potentially subject us to concentrations of credit riskconsist primarily of cash investments, structured finance investments andaccounts receivable.  We place our cashinvestments in excess of insured amounts with high quality financial institutions.  The collateral securing our structuredfinance investments is primarily located in the Greater New York Area. See Note4. We perform ongoing credit evaluations of our tenants and require certaintenants to provide security deposits or letters of credit.  Though these security deposits and letters ofcredit are insufficient to meet the total value of a tenant’s lease obligation,they are a measure of good faith and a source of funds to offset the economiccosts associated with lost rent and the costs associated with re-tenanting thespace.  Although the properties in ourreal estate portfolio are primarily located in Manhattan, we also have Suburbanproperties located in Westchester County, Connecticut and Long Island City.  The tenants located in our buildings operatein various industries.  Other than twotenants who contributed approximately 6.5% and 7.0% of our annualized rent, noother tenant in the portfolio contributed more than 4.4% of our annualizedrent, including our share of joint venture annualized rent, at September 30,2009.  Approximately 14%, 16%, 27% and12% of our annualized rent, including our share of joint venture annualizedrent, was attributable to 810 Seventh Avenue, 919 Third Avenue, 1185 Avenue ofthe Americas and 1350 Avenue of the Americas, respectively, for the quarterended September 30, 2009.  Oneborrower accounted for more than 10.0% of the revenue earned on structuredfinance investments during the three months ended September 30, 2009.

 

**Reclassification**

 

Certain prior yearbalances have been reclassified to conform with the current year presentationprimarily in order to eliminate discontinued operations from income fromcontinuing operations as well as to apply the revised interpretation ofaccounting for convertible debt instruments (see below) and the presentation ofnoncontrolling interests.

 

**AccountingStandards Updates**

 

In December 2007,the FASB amended the accounting for acquisitions specifically eliminating thestep acquisition model, changing the recognition of contingent considerationfrom being recognized when it is probable to being recognized at the time ofacquisition, disallowing the capitalization of transaction costs and delayswhen restructurings related to acquisitions can be recognized. The standard iseffective for fiscal years beginning after December 15, 2008 and will onlyimpact the accounting for acquisitions we make after our adoption. The adoptionof this standard on January 1, 2009 did not have a material impact on ourhistorical consolidated financial statements.

 

9

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Table of Contents

 

**RecksonOperating Partnership, L.P.**

**Notes toCondensed Consolidated Financial Statements**

**(Unaudited)**

**September 30, 2009**

** **

In May 2008, theFASB clarified its guidance on accounting for convertible debt instruments thatmay be settled in cash upon conversion. The issuer of certain convertible debtinstruments that may be settled in cash (or other assets) on conversion isrequired to separately account for the liability (debt) and equity (conversionoption) components of the instrument in a manner that reflects the issuer’snonconvertible debt borrowing rate.  Theresulting debt discount will be amortized over the period during which the debtis expected to be outstanding (i.e., through the first optional redemptiondate) as additional non-cash interest expense. This amount (before netting) will increase in subsequent reportingperiods through the first optional redemption date as the debt accretes to itspar value over the same period. This amendment is effective for fiscal yearsbeginning after December 15, 2008, and interim periods within those fiscalyears. Early adoption was not permitted. Upon adoption, companies are requiredto retrospectively apply the requirements of the pronouncement to all periodspresented.  Adoption of this amendmenthad the following impact on our consolidated financial statements (inthousands):

 
| ** **             | ** ** | **December 31,  2008********As Reported** | ** ** | **December 31,  2008********As Restated** | ** ** |
|------------------------|------------|------------------------------------------------|------------|------------------------------------------------|------------|
| Senior unsecured notes |       | $                                              | 956,540    |                                           | $          | 954,315 |   |
| Total liabilities      |       | 1,564,684                                      |       | 1,562,459                                      |       |
| Total capital          |       | 2,054,886                                      |       | 2,057,711                                      |       |
|                        |            |                                                |            |                                                |            |  |  |

 
| ** **                                        | ** ** | **Three  Months  Ended  September 30,  2008********As  Reported** | ** ** | **Three  Months  Ended********September 30,  2008********As  Restated** | ** ** | **Nine  Months  Ended********September 30,  2008********As  Reported** | ** ** | **Nine  Months  Ended  September 30,  2008********As  Restated** | ** ** |
|---------------------------------------------------|------------|------------------------------------------------------------------------|------------|------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|
| Interest expense                                  |       | $                                                                      | 17,293     |                                                                         | $          | 18,584                                                                      |       | $                                                                     | 52,768     |   | $ | 56,581 |   |
| Net income attributable to ROP common unitholders |       | 5,554                                                                  |       | 4,263                                                                        |       | 19,476                                                                      |       | 15,660                                                                |       |
|                                                   |            |                                                                        |            |                                                                              |            |                                                                             |            |                                                                       |            |  |  |  |  |

 

TheFASB provided guidance to address whether instruments granted in share-based payment transactionsare participating securities prior to vesting and, therefore, need to beincluded in the earnings allocation in computing earnings per share, or EPS,under the two-class method.  We adoptedthis guidance on January 1, 2009. It did not have a material effect on ourconsolidated financial statements.

 

In April 2009, theFASB updated its disclosure requirements to require disclosure about fair valueof financial instruments in interim financial statements. This revision waseffective for interim and annual periods ending after June 15, 2009 withearly adoption permitted for periods ending after March 15,2009.  We included the disclosures required under this standard inNote 16.

 

In April 2009, theFASB provided additional guidance on estimating fair value when the volume andlevel of transaction activity for an asset or liability have significantlydecreased in relation to normal market activity for the asset or liability.This update also provides additional guidance on circumstances that mayindicate that a transaction is not orderly. Additional disclosures about fairvalue measurements in annual and interim reporting periods are also required.This guidance was effective for interim and annual reporting periods endingafter June 15, 2009. The adoption of this guidance did not have a materialimpact on our consolidated financial statements.

 

In March 2008, theFASB issued guidance which requires entities to provide greater transparencyabout (a) how and why and entity uses derivative instruments, (b) howderivative instruments and related hedged items are accounted, and (c) howderivative instruments and related hedged items affect an entity’s financialposition, results of operations, and cash flows.  This guidance was effective on January 1,2009.  The adoption of this guidance didnot have a material impact on our consolidated financial statements.

 

In June 2009, theFASB issued guidance on accounting for transfers of financial assets. This guidanceamends various components of the existing guidance governing sale accounting,including the recognition of assets obtained and liabilities assumed as aresult of a transfer, and considerations of effective control by a transferorover transferred assets. In addition, this guidance removes the exemption forqualifying special purpose entities from the consolidation guidance. Thisguidance is effective January 1, 2010, with early adoption prohibited.While the amended guidance governing sale accounting is applied on aprospective basis, the removal of the qualifying special purpose entityexception will require us to evaluate certain entities for consolidation. Whilewe are evaluating the effect of adoption of this guidance, we currently believethat its adoption will not have a material impact on our consolidated financialstatements.

 

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**RecksonOperating Partnership, L.P.**

**Notes toCondensed Consolidated Financial Statements**

**(Unaudited)**

**September 30, 2009**

** **

In June 2009, theFASB amended the guidance for determining whether an entity is a variableinterest entity, or VIE, and requires the performance of a qualitative ratherthan a quantitative analysis to determine the primary beneficiary of a VIE.Under this guidance, an entity would be required to consolidate a VIE if it has(i) the power to direct the activities that most significantly impact theentity’s economic performance and (ii) the obligation to absorb losses ofthe VIE or the right to receive benefits from the VIE that could be significantto the VIE. This guidance is effective for the first annual reporting periodthat begins after November 15, 2009, with early adoption prohibited. Whilewe are currently evaluating the effect of adoption of this guidance, wecurrently believe that its adoption will not have a material impact on ourconsolidated financial statements.

 

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

 

AtSeptember 30, 2009, discontinued operations included the results ofoperations of real estate assets sold prior to that date.  This included 100/120 White Plains Road whichwas sold in October 2008.

 

Thefollowing table summarizes income from discontinued operations for the threeand nine months ended September 30, 2008 (in thousands).  No assets were considered as held for saleduring the nine months ended September 30, 2009.

 
| ** **                                     | ** ** | **Three Months  Ended********September 30,** | ** ** | **Three Months  Ended********September 30,** | ** ** | **Nine Months  Ended********September 30,** | ** ** | **Nine Months  Ended********September 30,** | ** ** |
|------------------------------------------------|------------|---------------------------------------------------|------------|---------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                     | ** ** | **2009**                                          | ** ** | **2008**                                          | ** ** | **2009**                                         | ** ** | **2008**                                         | ** ** |
| Revenues                                       |       |                                              |       |                                              |       |                                             |       |                                             |       |
| Rental revenue                                 | ** ** | **$**                                             | **—** | ** **                                        | **$**      | **1,530**                                        | ** ** | **$**                                            | —     | ** ** | **$** | 4,662 | ** ** |
| Escalation  and reimbursement revenues         | ** ** | **—**                                        | ** ** | **233**                                           |       | (3                                               | )          | 486                                              |       |
| Investment  and other income                   | ** ** | **—**                                        | ** ** | **301**                                           |       | —                                           |       | 321                                              |       |
| Total  revenues                                | ** ** | **—**                                        | ** ** | **2,064**                                         |       | (3                                               | )          | 5,469                                            |       |
| Operating  expenses                            | ** ** | **—**                                        | ** ** | **641**                                           |       | 39                                               |       | 1,476                                            |       |
| Real  estate taxes                             | ** ** | **—**                                        | ** ** | **337**                                           |       | —                                           |       | 985                                              |       |
| Depreciation  and amortization                 | ** ** | **—**                                        | ** ** | **296**                                           |       | —                                           |       | 1,052                                            |       |
| Total  expenses                                | ** ** | **—**                                        | ** ** | **1,274**                                         |       | 39                                               |       | 3,513                                            |       |
| Noncontrolling  interest in other partnerships | ** ** | **—**                                        | ** ** | **(387**                                          | **)**      | —                                           |       | (1,026                                           | )          |
| Loss  on sale of discontinued operations       | ** ** | **—**                                        | ** ** | **(260**                                          | **)**      | —                                           |       | (260                                             | )          |
| Income  (loss) from discontinued operations    | ** ** | **$**                                             | **—** | ** **                                        | **$**      | **143**                                          | ** ** | $                                                | (42        | ) | **$** | 670 | ** ** |

 

**4.  Structured Finance Investments**

 

Asof September 30, 2009 and December 31, 2008, we held the followingstructured finance investments (in thousands):

 
| **Loan  Type**                                | ** ** | **Gross  Investment** | ** ** | **Senior  Financing** | ** ** | **2009  Principal  Outstanding** | ** ** | **2008  Principal  Outstanding** | ** ** | **Initial  Maturity  Date** | ** ** |
|-----------------------------------------------|------------|-----------------------|------------|-----------------------|------------|----------------------------------|------------|----------------------------------|------------|-----------------------------|------------|
| Mezzanine Loan (1)(2)(7)                      |       | $                     | —     |                  | $          | —                           | ** ** | **$**                            | **—** |                        | $          | 62,164 |   | December 2020 |   |
| Mezzanine Loan (1) (2)(3)(5)             |       | 25,000                |       | 314,319               | ** ** | **25,933**                       |       | 27,742                           |       | January 2013           |       |
| Other Loan (1)                                |       | 1,000                 |       | —                | ** ** | **1,000**                        |       | 1,000                            |       | January 2010           |       |
| Other Loan (1)                                |       | 500                   |       | —                | ** ** | **500**                          |       | 500                              |       | December 2009          |       |
| Junior Participation (1) (4)(5) (6) |       | 14,189                |       | —                | ** ** | **9,938**                        |       | 9,938                            |       | April 2008             |       |
| Loan loss reserves (5)                        |       | —                |       | —                | ** ** | **(10,550**                      | **)**      | (10,550                          | )          | ** **                  |       |
|                                          |       | $                     | 40,689     |                  | $          | 314,319                          | ** ** | **$**                            | **26,821** |                        | $          | 90,794 |   |   |   |

----

| (1) | This is a fixed rate loan.                                                                                                                                                                                                                                                                                                                                                |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | The difference between the pay and accrual rates is  included as an addition to the principal balance outstanding.                                                                                                                                                                                                                                                        |
| (3) | This loan had been in default since  December 2007. We reached an agreement with the borrower to, amongst  other things, extended the maturity date to January 2013.                                                                                                                                                                                            |
| (4) | This loan is in default. The lender has begun  foreclosure proceedings. Another participant holds a $12.2 million pari-pasu  interest in this loan.                                                                                                                                                                                                                       |
| (5) | This represents specifically allocated loan loss  reserves recorded during the year ended December 31, 2008. Our reserves  reflect management’s judgment of the probability and severity of losses. We  cannot be certain that our judgment will prove to be correct and that  reserves will be adequate over time to protect against potential future  losses. |
| (6) | This loan is on non-accrual status.                                                                                                                                                                                                                                                                                                                                       |
| (7) | This loan was sold in June 2009, resulting in a  realized loss of approximately $24.9 million. This realized loss is included  in loan loss reserves in our consolidated statement of income.                                                                                                                                                                        |

 

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**RecksonOperating Partnership, L.P.**

**Notes toCondensed Consolidated Financial Statements**

**(Unaudited)**

**September 30, 2009**

** **

At September 30,2009 and December 31, 2008 all loans, other than as noted above, wereperforming in accordance with the terms of the loan agreements.

 

**5.  Investment in Unconsolidated Joint Venture**

 

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

 

**6.  Mortgage Note Payable**

** **

The first mortgage notepayable collateralized by the property and assignment of leases at September 30,2009 and December 31, 2008, respectively, was as follows (in thousands):

 
| **Property**                                | ** ** | **Interest  Rate****(1)** | ** ** | **Maturity  Date** | ** ** | **September 30,********2009** | ** **  | **December 31,********2008** | ** ** |
|---------------------------------------------|------------|---------------------------|------------|--------------------|------------|------------------------------------|-------------|-----------------------------------|------------|
| 919 Third Avenue New  York, NY (2) (3) |       | 6.87                      | %          | 8/2011             |       | $                                  | **225,434** |                              | $          | 228,046 |   |
|                                             |            |                           |            |                    |            |                                    |             |                                   |            |  |  |

----

| (1) | Effective interest rate  for the nine months ended September 30, 2009.                                                                                      |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | We  own a 51% controlling interest in the joint venture that is the borrower on  this loan. This loan is non-recourse to us. We consolidate this joint  venture. |
| (3) | Held in a bankruptcy  remote special purpose entity.                                                                                                             |

 

AtSeptember 30, 2009, the gross book value of the property collateralizingthe mortgage note was approximately $1.3 billion.

 

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

 
| ** **             | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended**  | ** ** |
|------------------------|------------|------------------------|------------|------------------------|------------|
| ** **             | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **             | ** ** | **2009**               | ** ** | **2008**               | ** ** | **2009** | ** ** | **2008** | ** ** |
| Interest  expense      | ** ** | **$**                  | **13,398** |                   | $          | 18,584 | ** ** | **$** | **43,171** |   | $ | 56,581 |   |
| Interest  income       | ** ** | **(11**                | **)**      | (98                    | )          | **(123** | **)** | (1,432 | ) |
| Interest  expense, net | ** ** | **$**                  | **13,387** |                   | $          | 18,486 | ** ** | **$** | **43,048** |   | $ | 55,149 |   |
| Interest  capitalized  | ** ** | **$**                  | **—** |                   | $          | 73 | ** ** | **$** | **54** |   | $ | 245 |   |

 

At September 30,2009, our unconsolidated joint venture had total indebtedness of approximately$315.0 million 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.

 

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

**Notes toCondensed Consolidated Financial Statements**

**(Unaudited)**

**September 30, 2009**

** **

**7.  Corporate Indebtedness**

 

**SeniorUnsecured Notes**

 

The following table setsforth our senior unsecured notes and other related disclosures by scheduledmaturity date as of September 30, 2009 (in thousands):

 
| **Issuance**              | ** ** | **Accreted  Balance** | ** **  | **Coupon Rate****(1)** | ** ** | **Term  (in Years)** | ** ** | **Maturity**         | ** **            |
|---------------------------|------------|-----------------------|-------------|------------------------|------------|----------------------|------------|----------------------|-----------------------|
| January 22, 2004 (2) |       | $                     | 123,607     |                   | 5.15       | %                    | 7          |                 | January 15, 2011 |   |
| August 13, 2004      |       | 150,000               |        | 5.875                  | %          | 10                   |       | August 15, 2014 |                  |
| March 31, 2006       |       | 274,719               |        | 6.00                   | %          | 10                   |       | March 31, 2016  |                  |
| June 27, 2005 (3)    |       | 114,236               |        | 4.00                   | %          | 20                   |       | June 15, 2025   |                  |
|                      | ** ** | **$**                 | **662,562** |                   |       |                 |       |                 |                  |   |

----

| (1) | Interest on the senior  unsecured notes is payable semi-annually with principal and unpaid interest  due on the scheduled maturity dates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | During the nine months ended September 30, 2009, we repurchased  approximately $26.4 million of these notes and realized net gains on early  extinguishment of debt of approximately $2.5 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (3) | Exchangeable senior  debentures which 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 control transactions. As a result of  the Merger, the adjusted exchange rate for the debentures is 7.7461 shares of  SL Green common stock per $1,000 of principal amount of debentures and the  adjusted reference dividend for the debentures is $1.3491. During the nine months ended September 30,  2009, we repurchased approximately $69.1 million of these notes and realized  net gains on early extinguishment of debt of approximately $1.0 million. |

 

On March 16, 2009,the $200.0 million, 7.75% unsecured notes, assumed as part of the Merger,matured and were redeemed at par.

 

**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 September 30, 2009and December 31, 2008, 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 September 30,2009, excluding extension options, were as follows (in thousands):

** **
| ** ** | ** ** | **Scheduled  Amortization** | ** ** | **Principal  Repayments** | ** ** | **Unsecured  Notes** | ** ** | **Total** | ** **  | **Joint  Venture  Debt** | ** ** |
|------------|------------|-----------------------------|------------|---------------------------|------------|----------------------|------------|-----------|-------------|--------------------------|------------|
| 2009       |       | $                           | 1,330      |                      | $          | —               |       | $         | —      |                     | $          | 1,330 |   | — |   |
| 2010       |       | 4,225                       |       | —                    |       | 114,236              |       | 118,461   |        | —                   |       |
| 2011       |       | 3,223                       |       | 216,656                   |       | 123,607              |       | 343,486   |        | —                   |       |
| 2012       |       | —                      |       | —                    |       | —               |       | —    |        | —                   |       |
| 2013       |       | —                      |       | —                    |       | —               |       | —    |        | —                   |       |
| Thereafter |       | —                      |       | —                    |       | 424,719              |       | 424,719   |        | 94,500                   |       |
|       | ** ** | **$**                       | **8,778**  | ** **                | **$**      | **216,656**          | ** ** | **$**     | **662,562** | ** **               | **$**      | **887,996** | ** ** | **$** | **94,500** |   |
|            |            |                             |            |                           |            |                      |            |           |             |                          |            |  |  |  |  |  |

 

**8.  Partners’ Capital**

** **

Priorto the Merger, a Class A common unit of ROP and a share ofcommon stock of Reckson Associates Realty Corp., or RARC, had similareconomic characteristics as they effectively shared equally in the netincome or loss and distributions of ROP.  Since consummation of the Mergeron January 25, 2007, SL Green Operating Partnership, L.P., or the operatingpartnership, has owned all the economic interests in ROP either by directownership or by indirect ownership through its wholly-ownedsubsidiary Wyoming Acquisition GP LLC, or WAGP.  RecksonAssociates Realty Corp., or RARC, served as the sole general partner ofROP until November 15, 2007, at which time RARC withdrew and WAGP succeededit as the sole general partner of ROP.   Since consummation ofthe Merger, RARC has been a wholly-owned subsidiary of SL Green Realty Corp.,or SL Green.

 

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**RecksonOperating Partnership, L.P.**

**Notes toCondensed Consolidated Financial Statements**

**(Unaudited)**

**September 30, 2009**

** **

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 operating partnershipin exchange for the issuance of 1,200 preferred units of limited partnershipinterest in the operating partnership with substantially similar terms as thePreferred Units.

 

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, are any materiallitigation threatened against us or our properties, other than routinelitigation arising in the ordinary course of business.  Management believes the costs, if any,incurred by us related to this litigation will not materially affect ourfinancial position, operating results or liquidity.

 

The following is aschedule of future minimum lease payments under noncancellable operatingleases with initial terms in excess of one year as of September 30, 2009(in thousands):

 
| **September 30,**         | ** ** | **Non-cancellable  operating leases** | ** ** |
|--------------------------------|------------|---------------------------------------|------------|
|                           |       |                                  |       |
| 2009  (remaining three months) |       | $                                     | 2,535      |   |
| 2010                           |       | 9,698                                 |       |
| 2011                           |       | 7,724                                 |       |
| 2012                           |       | 7,593                                 |       |
| 2013                           |       | 7,593                                 |       |
| Thereafter                     |       | 254,831                               |       |
| Total  minimum lease payments  | ** ** | **$**                                 | 289,974    | ** ** |

 

**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 the 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 expensesconsist primarily of security, maintenance, utility costs, real estate taxesand ground rent expense (at certain applicable properties).  See Note 4 for additional details on ourstructured finance investments.

 

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Table of Contents

 

**RecksonOperating Partnership, L.P.**

**Notes toCondensed Consolidated Financial Statements**

**(Unaudited)**

**September 30, 2009**

** **

Selected results of operations for the three and ninemonths ended September 30, 2009 and 2008 and selected asset information asof September 30, 2009 and December 31, 2008, regarding our operatingsegments are as follows (in thousands):

 
| ** **                                  | ** ** | **Real  Estate  Segment** | ** ** | **Structured  Finance  Segment** | ** ** | **Total  Company** | ** ** |
|---------------------------------------------|------------|---------------------------|------------|----------------------------------|------------|--------------------|------------|
| Total  revenues:                            |       |                      |       |                             |       |               |       |
| Three  months ended September 30, 2009 |       | $                         | 85,226     |                             | $          | 330                |       | $ | 85,556 |   |
| Three  months ended September 30, 2008 |       | 86,239                    |       | 1,433                            |       | 87,672             |       |
| Nine  months ended September 30, 2009  |       | 256,752                   |       | 1,757                            |       | 258,509            |       |
| Nine  months ended September 30, 2008  |       | 252,323                   |       | 4,205                            |       | 256,528            |       |
|                                        |       |                      |       |                             |       |               |       |
| Income  (loss) from continuing operations:  |       |                      |       |                             |       |               |       |
| Three  months ended September 30, 2009 |       | $                         | 9,128      |                             | $          | 131                |       | $ | 9,259 |   |
| Three  months ended September 30, 2008 |       | 7,349                     |       | 524                              |       | 7,873              |       |
| Nine  months ended September 30, 2009  |       | 37,921                    |       | (23,972                          | )          | 13,949             |       |
| Nine  months ended September 30, 2008  |       | 29,167                    |       | (1,856                           | )          | 27,311             |       |
|                                        |       |                      |       |                             |       |               |       |
| Total  assets                               |       |                      |       |                             |       |               |       |
| As  of:                                     |       |                      |       |                             |       |               |       |
| September 30,  2009                    |       | $                         | 3,971,926  |                             | $          | 26,821             |       | $ | 3,998,747 |   |
| December 31,  2008                     |       | 4,030,724                 |       | 91,323                           |       | 4,122,047          |       |

 

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, general andadministrative expenses.  All other expenses,except interest, relate entirely to the real estate assets.  There were no transactions between the abovetwo segments.

 

Thetable below reconciles income from continuing operations before minorityinterest to net income available to common unitholders for the three and ninemonths ended September 30, 2009 and 2008 (in thousands):

 
| ** **                                                                 | ** ** | **Three Months  Ended  September 30,** | ** ** | **Three Months  Ended  September 30,** | ** ** | **Nine Months  Ended  September 30,** | ** ** | **Nine Months  Ended  September 30,** | ** ** |
|----------------------------------------------------------------------------|------------|---------------------------------------------|------------|---------------------------------------------|------------|--------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                 | ** ** | **2009**                                    | ** ** | **2008**                                    | ** ** | **2009**                                   | ** ** | **2008**                                   | ** ** |
|                                                                       |       |                                        |       |                                        |       |                                       |       |                                       |       |
| Income  from continuing operations                                         |       | $                                           | 9,259      |                                        | $          | 7,873                                      |       | $                                          | 13,949     |   | $ | 27,311 |   |
| Net  income/ gains from discontinued operations                            |       | —                                      |       | 143                                         |       | (42                                        | )          | 670                                        |       |
| Net  income                                                                |       | 9,259                                       |       | 8,016                                       |       | 13,907                                     |       | 27,981                                     |       |
| Net  income attributable to noncontrolling interests in other partnerships |       | (2,904                                      | )          | (3,753                                      | )          | (9,879                                     | )          | (12,321                                    | )          |
| Net  income attributable to ROP common unitholders                         |       | $                                           | 6,355      |                                        | $          | 4,263                                      |       | $                                          | 4,028      |   | $ | 15,660 |   |

 

**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 $0.4 million,$1.7 million, $0.5 million and $1.4 million for three and nine months ended September 30,2009 and 2008, respectively, for these services (excluding services provideddirectly 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 $0.9 million, $2.8 million, $0.9 million and $3.0 million for thethree and nine months ended September 30, 2009 and 2008, respectively.

 

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Table of Contents

 

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

**Notes toCondensed Consolidated Financial Statements**

**(Unaudited)**

**September 30, 2009**

** **

**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 $0.7 million, $2.2 million, $0.7million and $1.8 million for the three and nine months ended September 30,2009 and 2008, respectively.

 

**13.  Fair Value of Financial Instruments**

 

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

 

Cash and cashequivalents, accounts receivable and accounts payable balances reasonablyapproximate their fair values due to the short maturities of these items.  Mortgage note payable and the seniorunsecured notes had an estimated fair value based on discounted cash flowmodels of approximately $0.8 billion, compared to the book value of the relatedfixed rate debt of approximately $0.9 billion. Our structured finance investments had an estimated fair value rangingbetween $16.1 million and $24.1 million, compared to the book value of therelated investments of approximately $26.8 million at September 30, 2009.

 

Disclosure about fairvalue of financial instruments is based on pertinent information available tous as of September 30, 2009. Although we are not aware of any factors that would significantly affectthe reasonable fair value amounts, such amounts have not been comprehensivelyrevalued for purposes of these financial statements since that date and currentestimates of fair value may differ significantly from the amounts presentedherein.

 

**14.  Subsequent Events**

 

Wehave evaluated subsequent events through the time of filing these consolidatedfinancial statements with the SEC on this Quarterly Report on Form 10-Q onNovember 12, 2009.

 

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**Table of Contents**

** **

**ITEM 2.  Management’s Discussion and Analysis of Financial Condition and Resultsof Operations**

** **

**Overview**

 

RecksonOperating Partnership, L.P., or ROP, commenced operations on June 2,1995.  Since consummation of the Mergeron January 25, 2007, SL Green Operating Partnership, L.P., or theoperating partnership, has owned all the economic interests in ROP eitherby direct ownership or by indirect ownership through its wholly-ownedsubsidiary Wyoming Acquisition GP LLC, or WAGP.  RecksonAssociates Realty Corp., or RARC, served as the sole general partner ofROP until November 15, 2007, at which time RARC withdrewand WAGP succeeded it as the sole general partner of ROP.   Sinceconsummation of the Merger, RARC has been a wholly-owned subsidiary of SL GreenRealty Corp., or SL Green.

 

**ROP is engaged in the ownership,management, operation, leasing, financing and development of commercial realestate properties, principally office properties and also owns land for futuredevelopment located in the New York City, Westchester and Connecticut whichcollectively is also known as the New York Metro Area.  At September 30, 2009, our inventory ofdevelopment parcels aggregated approximately 81 acres of land in four separateparcels on which we can, based on estimates at September 30, 2009, developapproximately 1.1 million square feet of office space and in which we hadinvested approximately $65.1 million.  Inaddition, as of September 30, 2009, ROP also held approximately $26.8million of 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. We paid approximately $6.0 billion,inclusive of transaction costs, for Reckson. This transaction is referred to herein as the Merger.

 

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

 

The following discussionrelated to our consolidated financial statements should be read in conjunctionwith the financial statements appearing in this Quarterly Report on Form 10-Qand in Item 8 of our Annual Report on Form 10-K for the year ended December 31,2008.

 

As a result of thesubstantial change in ownership from the Merger, SL Green has recorded theMerger in accordance with the provisions of “push-down accounting.”  The application of “push-down accounting”resulted in the adjustment of the carrying values of the assets and liabilitiesof ROP to fair value in the same manner as ROP’s assets and liabilities wererecorded by SL Green subsequent to the Merger. The net impact of such adjustments was approximately $3.0 billion.

 

As of September 30, 2009, we owned the followinginterests in commercial office properties in the New York Metro Area, primarilyin midtown Manhattan, a borough of New York City, or Manhattan.  Ourinvestments in the New York Metro Area also include investments in Queens,Westchester County and Connecticut, which are collectively known as theSuburban assets:

 
| **Location** | ** ** | **Ownership**             | ** ** | **Number  of  Properties** | ** ** | **Square  Feet** | ** ** | **Weighted  Average  Occupancy****(1)** | ** ** |
|--------------|------------|---------------------------|------------|----------------------------|------------|------------------|------------|-----------------------------------------|------------|
| Manhattan    |       | Consolidated properties   |       | 4                          |       | 3,770,000        |       | 97.2                                    | %          |
|         |       |                      |       |                       |       |             |       |                                    |       |
| Suburban     |       | Consolidated properties   |       | 16                         |       | 2,642,100        |       | 89.5                                    | %          |
|         |       | Unconsolidated properties |       | 1                          |       | 1,402,000        |       | 100.0                                   | %          |
|         |       |                      |       | 21                         |       | 7,814,100        |       | 95.1                                    | %          |

----

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

 

**CriticalAccounting Policies**

 

Refer to our 2008 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 2009.

 

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**ITEM 2.  Management’s Discussion and Analysis of Financial Condition and Resultsof Operations**

 

**Results of Operations**

 

***Comparison of the three months ended September 30, 2009to the three months ended September 30, 2008***

 

Thefollowing section compares the results of operations for the three months endedSeptember 30, 2009 to the three months ended September 30, 2008 forthe 20 consolidated properties owned by ROP.

 
| **Rental Revenues (in millions)**     | ** ** | **2009** | ** ** | **2008** | ** ** | **$  Change** | ** ** | **%  Change** | ** ** |
|---------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------|------------|
| Rental  revenue                       |       | $        | 71.6       |     | $          | 71.0          |       | $             | 0.6        |   | 0.9 | % |
| Escalation  and reimbursement revenue |       | 13.1     |       | 14.3     |       | (1.2          | )          | (8.4          | )          |
| Total                                 |       | $        | 84.7       |     | $          | 85.3          |       | $             | (0.6       | ) | (0.7 | )% |

 

AtSeptember 30, 2009, we estimated that the current market rents on ourconsolidated Manhattan properties and consolidated Suburban properties wereapproximately 3.4% higher and 0.9% lower, respectively, than then existingin-place fully escalated rents. Approximately 2.2% of the space leased at our consolidated propertiesexpires during the remainder of 2009.

 
| **Investment and Other Income (in  millions)**        | ** ** | **2009** | ** ** | **2008** | ** ** | **$  Change** | ** ** | **%********Change** | ** ** |
|-------------------------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------------|------------|
| Equity  in net income of unconsolidated joint venture |       | $        | 0.3        |     | $          | 0.3           |       | $                   | —     |   | — | % |
| Investment  and other income                          |       | 0.5      |       | 0.9      |       | (0.4          | )          | (44.4               | )          |
| Total                                                 |       | $        | 0.8        |     | $          | 1.2           |       | $                   | (0.4       | ) | (33.3 | )% |

 

Equityin net income of unconsolidated joint venture from One Court Square was flat in2009 when compared to 2008.  Our jointventure at One Court Square is net leased to a single tenant until 2020.  As such, we do not anticipate much change inoccupancy rates or net income contributions from this asset.  At September 30, 2009, we estimated thatcurrent market rents at our Suburban joint venture asset was approximately 9.2%higher than then existing in-place fully escalated rents.

 

Thedecrease in investment and other income is primarily due to the averageinvestment balance decreasing between 2008 and 2009 due to the sale of certainloans.  In addition, certain loans wereplaced on non-accrual status after September 30, 2008.  This was partially offset by an increase inlease buy-out income (approximately $0.3 million) when comparing the thirdquarter of 2009 to the third quarter of 2008.

 
| **Property Operating Expenses (in  millions)** | ** ** | **2009** | ** ** | **2008** | ** ** | **$  Change** | ** ** | **%  Change** | ** ** |
|------------------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------|------------|
| Operating  expenses                            |       | $        | 19.1       |     | $          | 22.3          |       | $             | (3.2       | ) | (14.4 | )% |
| Real  estate taxes                             |       | 13.6     |       | 12.5     |       | 1.1           |       | 8.8           |       |
| Ground  rent                                   |       | 2.2      |       | 2.2      |       | —        |       | —        |       |
| Total                                          |       | $        | 34.9       |     | $          | 37.0          |       | $             | (2.1       | ) | (5.7 | )% |

 

Operatingexpenses decreased when compared to the same period in the prior year.  This was primarily driven by a decrease inutilities ($2.7 million), payroll ($0.2 million) and repairs and maintenance($0.2 million).The increase in real estate taxes was primarily due to higherassessed values and higher tax rates.

 
| **Other Expenses (in millions)**               | ** ** | ******2009** | ** ** | ******2008** | ** ** | **$  Change** | ** ** | **%********Change** | ** ** |
|------------------------------------------------|------------|--------------|------------|--------------|------------|---------------|------------|---------------------|------------|
| Interest  expense, net of interest income      |       | $            | 13.4       |         | $          | 18.5          |       | $                   | (5.1       | ) | (27.6 | )% |
| Depreciation  and amortization expense         |       | 28.1         |       | 22.5         |       | 5.6           |       | 24.9                |       |
| Loan  loss reserves                            |       | —       |       | —       |       | —        |       | —              |       |
| Marketing,  general and administrative expense |       | 0.1          |       | 2.1          |       | (2.0          | )          | (95.2               | )          |
| Total                                          |       | $            | 41.6       |         | $          | 43.1          |       | $                   | (1.5       | ) | (3.5 | )% |

 

Thedecrease in interest expense was due to the redemption of $200.0 million ofsenior unsecured notes at maturity in March 2009 and which bore an averageinterest rate of 7.75%.  We also repurchasedearly approximately $197.9 million of certain of our senior unsecured notessince October 2008, thereby reducing our interest expense during 2009.

 

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**ITEM 2.  Management’s Discussion and Analysis of Financial Condition and Resultsof Operations**

 

***Comparison of the nine months ended September 30, 2009to the nine months ended September 30, 2008***

 

Thefollowing section compares the results of operations for the nine months ended September 30,2009 to the nine months ended September 30, 2008 for the 20 consolidatedproperties owned by ROP.

 
| **Rental Revenues (in millions)**     | ** ** | **2009** | ** ** | **2008** | ** ** | **$  Change** | ** ** | **%  Change** | ** ** |
|---------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------|------------|
| Rental  revenue                       |       | $        | 213.5      |     | $          | 207.1         |       | $             | 6.4        |   | 3.1 | % |
| Escalation  and reimbursement revenue |       | 41.1     |       | 39.8     |       | 1.3           |       | 3.3           |       |
| Total                                 |       | $        | 254.6      |     | $          | 246.9         |       | $             | 7.7        |   | 3.1 | % |

 

AtSeptember 30, 2009, we estimated that the current market rents on ourconsolidated Manhattan properties and consolidated Suburban properties wereapproximately 3.4% higher and 0.9% lower, respectively, than then existingin-place fully escalated rents. Approximately 2.2% of the space leased at our consolidated propertiesexpires during the remainder of 2009.

 
| **Investment and Other Income (in  millions)**        | ** ** | **2009** | ** ** | **2008** | ** ** | **$  Change** | ** ** | **%********Change** | ** ** |
|-------------------------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------------|------------|
| Equity  in net income of unconsolidated joint venture |       | $        | 0.8        |     | $          | 0.6           |       | $                   | 0.2        |   | 33.3 | % |
| Investment  and other income                          |       | 2.1      |       | 5.5      |       | (3.4          | )          | (61.8               | )          |
| Total                                                 |       | $        | 2.9        |     | $          | 6.1           |       | $                   | (3.2       | ) | (52.5 | )% |

 

Theincrease in equity in net income of unconsolidated joint venture was primarilydue to higher net income contribution from One Court Square.  Our joint venture at One Court Square is netleased to a single tenant until 2020.  Assuch, we do not anticipate much change in occupancy rates or net incomecontributions from this asset.  At September 30,2009, we estimated that current market rents at our Suburban joint ventureasset was approximately 9.2% higher than then existing in-place fully escalatedrents.

 

Thedecrease in investment and other income is primarily due to the averageinvestment balance decreasing between 2008 and 2009 due to the sale of certainloans.  In addition, certain loans wereplaced on non-accrual status after September 30, 2008.  There was also a reduction in lease buyoutincome (approximately $3.1 million) when comparing the nine months ended September 30,2009 to the nine months ended September 30, 2008.

 
| **Property Operating Expenses (in  millions)** | ** ** | **2009** | ** ** | **2008** | ** ** | **$  Change** | ** ** | **%  Change** | ** ** |
|------------------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------|------------|
| Operating  expenses                            |       | $        | 57.0       |     | $          | 59.6          |       | $             | (2.6       | ) | (4.4 | )% |
| Real  estate taxes                             |       | 42.2     |       | 37.8     |       | 4.4           |       | 11.6          |       |
| Ground  rent                                   |       | 6.5      |       | 6.5      |       | —        |       | —        |       |
| Total                                          |       | $        | 105.7      |     | $          | 103.9         |       | $             | 1.8        |   | 1.7 | % |

 

Operatingexpenses decreased compared to the same period in the prior year.  The decrease was primarily attributable todecreases in utilities ($3.4 million). This was offset by increases in payroll, ($0.4 million) and insurance($0.4 million).   The increase in realestate taxes was primarily due to higher assessed values and higher tax rates.

 
| **Other Expenses (in millions)**               | ** ** | **2009** | ** ** | **2008** | ** ** | **$  Change** | ** ** | **%********Change** | ** ** |
|------------------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------------|------------|
| Interest  expense, net of interest income      |       | $        | 43.0       |     | $          | 55.1          |       | $                   | (12.1      | ) | (22.0 | )% |
| Depreciation  and amortization expense         |       | 75.0     |       | 66.6     |       | 8.4           |       | 12.6                |       |
| Loan  loss reserves                            |       | 24.9     |       | 2.0      |       | 22.9          |       | 1,145.0             |       |
| Marketing,  general and administrative expense |       | 0.4      |       | 2.2      |       | (1.8          | )          | (81.8               | )          |
| Total                                          |       | $        | 143.3      |     | $          | 125.9         |       | $                   | 17.4       |   | 13.8 | % |

 

Thedecrease in interest expense was due to the redemption of $200.0 million ofsenior unsecured notes at maturity in March 2009 and which bore an averageinterest rate of 7.75%.  We alsorepurchased early approximately $197.9 million of certain of our seniorunsecured notes since October 2008, thereby reducing our interest expenseduring 2009.

 

Theincrease in loan loss reserves was primarily due to the realized loss on saleof a structured finance investment (approximately $24.9 million) in June 2009.

 

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

 

**Liquidityand Capital Resources**

 

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

 

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 collectability 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, specificallyour cash flow from operations, are adequate for us to meet our short-term andlong-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 September 30, 2009 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.**

** **

Cashand cash equivalents were $20.9 million and $12.5 million at September 30,2009 and 2008, respectively, representing an increase of $8.4 million.  The increase was a result of the followingincreases and decreases in cash flows (in thousands):

 
| ** **                                          | ** ** | **Nine Months Ended September 30,** | ** ** |
|-----------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                          | ** ** | **2009**                                 | ** ** | **2008** | ** ** | **Increase********(Decrease)** | ** ** |
| ** **                                          | ** ** | ** **                               | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net cash provided by operating activities           |       | $                                        | 68,443     |   | $ | 34,695 |   | $ | 33,748 |   |
| Net cash provided by (used in) investing activities |       | $                                        | 21,563     |   | $ | (6,380 | ) | $ | 27,943 |   |
| Net cash used in financing activities               |       | $                                        | (92,268    | ) | $ | (32,296 | ) | $ | (59,972 | ) |

 

**Our principal source of operating cash flow is related to the leasing andoperating of the properties in our portfolio. Our properties provide arelatively consistent stream of cash flow that provides us with resources topay operating expenses, debt service and fund quarterly dividend anddistribution payment requirements. At September 30, 2009, our portfoliowas 95.1% occupied. In addition, rental rates on our new leases continue toincrease 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 nine months ended September 30,2009, compared to the same period in the prior year, we generated cashprimarily from the following investing activities (in thousands):**

 
| Capital expenditures and capitalized interest |   | $      | (12,074 | ) |
|-----------------------------------------------|--------|--------|---------|---|
| Distributions from joint ventures             |   | (105   | )       |
| Structured finance investments                |   | 40,122 |    |

** **

**We generally fund our investment activity through property-levelfinancing and asset sales.  During thenine months ended September 30, 2009, compared to the same period in theprior year, we used our funds to complete the following financing activities(in thousands):**

** **
| Repayments under our debt obligations        |   | $       | (290,545 | ) |
|----------------------------------------------|--------|---------|----------|---|
| Contributions from common unitholders        |   | 281,959 |     |
| Distributions and other financing activities |   | (51,386 | )        |

 

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**ITEM 2.  Management’s Discussion and Analysis of Financial Condition and Resultsof Operations**

 

**Capitalization**

 

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

 

As of December 31,2006, we had issued and outstanding 1,200 preferred units of 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 September 30,2009 are as follows (in thousands):

 
| ** **                 | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **2013** | ** ** | **Thereafter** | ** ** | **Total** | ** ** |
|----------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------------|------------|-----------|------------|
| Property mortgages         |       | $        | 1,330      |     | $          | 4,225    |       | $        | 219,879    |     | $          | —         |       | $         | —     |   | $ | — |   | $ | 225,434 |   |
| Senior unsecured notes     |       | —   |       | 114,236  |       | 123,607  |       | —   |       | —   |       | 424,719        |       | 662,562   |       |
| Ground leases              |       | 2,535    |       | 9,698    |       | 7,724    |       | 7,593    |       | 7,593    |       | 254,831        |       | 289,974   |       |
| Estimated interest expense |       | 38,920   |       | 49,334   |       | 36,084   |       | 25,348   |       | 25,348   |       | 45,745         |       | 220,779   |       |
| Joint venture debt         |       | —   |       | —   |       | —   |       | —   |       | —   |       | 94,500         |       | 94,500    |       |
| Total                      |       | $        | 42,785     |     | $          | 177,493  |       | $        | 387,294    |     | $          | 32,941         |       | $         | 32,941     |   | $ | 819,795 |   | $ | 1,493,249 |   |

 

**SeniorUnsecured Notes**

 

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

 
| **Issuance**              | ** ** | **Accreted  Balance** | ** **  | **Coupon Rate****(1)** | ** ** | **Term  (in Years)** | ** ** | **Maturity**         | ** **            |
|---------------------------|------------|-----------------------|-------------|------------------------|------------|----------------------|------------|----------------------|-----------------------|
| January 22, 2004 (2) |       | $                     | 123,607     |                   | 5.15       | %                    | 7          |                 | January 15, 2011 |   |
| August 13, 2004      |       | 150,000               |        | 5.875                  | %          | 10                   |       | August 15, 2014 |                  |
| March 31, 2006       |       | 274,719               |        | 6.00                   | %          | 10                   |       | March 31, 2016  |                  |
| June 27, 2005 (3)    |       | 114,236               |        | 4.00                   | %          | 20                   |       | June 15, 2025   |                  |
|                      | ** ** | **$**                 | **662,562** |                   |       |                 |       |                 |                  |   |

----

| (1) | Interest on the senior  unsecured notes is payable semi-annually with principal and unpaid interest  due on the scheduled maturity dates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | During the nine months ended September 30, 2009, we repurchased  approximately $26.4 million of these notes and realized net gains on early  extinguishment of debt of approximately $2.5 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (3) | Exchangeable senior  debentures which 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 control transactions. As a result of  the Merger, the adjusted exchange rate for the debentures is 7.7461 shares of  SL Green common stock per $1,000 of principal amount of debentures and the  adjusted reference dividend for the debentures is $1.3491. During the nine months ended  September 30, 2009, we repurchased approximately $69.1 million of these  notes and realized net gains on early extinguishment of debt of approximately  $1.0 million. |

 

On March 16, 2009,the $200.0 million, 7.75% unsecured notes, assumed as part of the Merger,matured and were redeemed at par.

 

**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 September 30, 2009and December 31, 2008, we were in compliance with all such covenants.

 

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

 

**MarketRate Risk**

 

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

 

All of our long-termdebt, totaling approximately $0.9 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 thethree months ending December 31, 2009, we will incur approximately $6.3million 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.

 

**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 $0.4 million,$1.7 million, $0.5 million and $1.4 million for three and nine months ended September 30,2009 and 2008, respectively, for these services (excluding services provideddirectly 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 $0.9 million, $2.8 million, $0.9 million and $3.0 million for thethree and nine months ended September 30, 2009 and 2008, respectively.

 

**Insurance**

 

SL Green maintains “all-risk”property and rental value coverage (including coverage regarding the perils offlood, earthquake and terrorism) within two property insurance portfolios andliability insurance. This includes the ROP assets. The first property portfoliomaintains a blanket limit of $600.0 million per occurrence for themajority of the New York City properties in our portfolio with a sub-limit of$450.0 million for acts of terrorism. This policy was extended to December 31,2010.  The second portfolio maintains alimit of $600.0 million per occurrence, including terrorism, for a few New YorkCity properties and the majority of the Suburban properties.  The secondproperty policy expires on December 31, 2009.  Additional coveragemay be purchased on a stand alone basis for certain assets.  The liability policies cover all ourproperties and provide limits of $200.0 million per property.  Theliability policies expire on October 31, 2010.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Subsequent to the Merger,we obtained insurance coverage through an insurance program administered by SLGreen.  In connection with this programwe incurred insurance expense of approximately $0.7 million, $2.2 million, $0.7million and $1.8 million for the three and nine months ended September 30,2009 and 2008, respectively.

 

**AccountingStandards Updates**

 

TheRecently Issued Accounting Pronouncements are discussed in Note 2, “SignificantAccounting Policies-Accounting Standards Updates” in the accompanying financialstatements.

 

**Inflation**

 

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

 

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

 

**Forward-Looking Statement**

 

This report includescertain statements that may be deemed to be “forward-looking statements” withinthe meaning of the Private Securities Litigation Reform Act of 1995 and areintended to be covered by the safe harbor provisions thereof.  All statements, other than statements ofhistorical facts, included in this report that address activities, events ordevelopments that we expect, believe or anticipate will or may occur in thefuture, including such matters as future capital expenditures, dividends andacquisitions (including the amount and nature thereof), development trends ofthe real estate industry and the Manhattan, Westchester County, Connecticut,Long Island and New Jersey office markets, business strategies, expansion andgrowth of our operations and other similar matters, are forward-lookingstatements. These forward-looking statements are based on certain assumptionsand analyses made by us in light of our experience and our perception ofhistorical trends, current conditions, expected future developments and otherfactors we believe are appropriate.

 

Forward-lookingstatements are not guarantees of future performance and actual results ordevelopments may materially differ, and we caution you not to place unduereliance on such statements.  Forward-lookingstatements are generally identifiable by the use of the words “may,” “will,” “should,”“expect,” “anticipate,” “estimate,” “believe,” “intend,” “project,” “continue,”or the negative of these words, or other similar words or terms.

 

Forward-looking statementscontained in this report is subject to a number of risks and uncertaintieswhich may cause our actual results, performance or achievements to bematerially different from future results, performance or achievements expressedor implied by forward-looking statements made by us.  These risks and uncertainties include:

 

·                  the effect of the credit crisis on general economic, business andfinancial conditions, and on the New York Metro real estate market inparticular;

·                  dependence upon certain geographic markets;

·                  risks of real estate acquisitions, dispositions and developments,including the cost of construction delays and cost overruns;

·                  risks relating to structured finance investments;

·                  availability and creditworthiness of prospective tenants and borrowers;

·                  bankruptcy or insolvency of a major tenant or a significant number ofsmaller tenants;

·                  adverse changes in the real estate markets, including reduced demandfor office space, increasing vacancy, and increasing availability of subleasespace;

·                  availability of capital (debt and equity);

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

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

·                  our ability to maintain our status as a REIT;

·                  risks of investing through joint venture structures, including the fulfillmentby our partners of their financial obligations;

·                  the continuing threat of terrorist attacks, in particular in the NewYork Metro Area and on our tenants;

·                  our ability to obtain adequate insurance coverage at a reasonable costand the potential for losses in excess of our insurance coverage, including asa result of environmental contamination; and

·                  legislative, regulatory and/or safety requirements adversely affectingREITs and the real estate business, including costs of compliance with the Americanswith Disabilities Act, the Fair Housing Act and other similar laws andregulations.

 

Other factors and risksto our business, many of which are beyond our control, are described in ourfilings with the Securities and Exchange Commission.  We undertake no obligation to publicly updateor revise any forward-looking statements, whether as 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 31,2008 may include additional factors that could adversely affect ROP’s businessand financial performance.  In addition,sections of SL Green’s Annual Report on Form 10-K/A No. 2 for theyear ended December 31, 2008 contains additional factors that couldadversely effect our business and financial performance.  Moreover, ROP operates in a very competitiveand rapidly changing environment.  New riskfactors emerge from time to time and it is not possible for management to predictall such risk factors, nor can it assess the impact of all such risk factors onROP’s business or the extent to which any factor, or combination of factors,may cause actual results to differ materially from those contained in anyforward-looking statements.  Given theserisks and uncertainties, investors should not place undue reliance onforward-looking statements as a prediction of actual results.

 

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

 

For quantitative andqualitative disclosures about market risk, see item 7A, “Quantitative andQualitative Disclosures About Market Risk,” of our Annual Report on Form 10-Kfor the year ended December 31, 2008. Our exposures to market risk have not changed materially since December 31,2008.

 

**ITEM 4T.  Controls and Procedures**

** **

**Evaluation of Disclosure Controls and Procedures**

** **

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

 

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

 

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

 

**Changes in Internal Control over Financial Reporting**

** **

Therehave been no significant changes in our internal control over financialreporting during the quarter ended September 30, 2009, that has materiallyaffected, or is reasonably likely to material affect, our internal control overfinancial reporting.

 

**PART II****              ****OTHER INFORMATION**

 

##### **ITEM 1.**                LEGAL PROCEEDINGS

##### ** **

As of September 30,2009, we were not involved in any material litigation nor, to management’sknowledge, is any material litigation threatened against us or our portfolioother than routine litigation arising in the ordinary course of business orlitigation that is adequately covered by insurance.

 

##### **ITEM 1A.**             RISK FACTORS

##### ** **

## We encourage you to read “Item 1A of Part 1-RiskFactors” in the Annual Reports on Form 10-K for ROP and Form 10-K/A No. 2for SL 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 31,2008.

 

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

##### ** **

None

 

#### **ITEM 3.**                DEFAULTS UPON SENIOR SECURITIES

#### ** **

None

 

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#### **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 pursuantto Section 302 of the Sarbanes-Oxley Act of 2002 filed herewith.

 

31.2                          Certification by the Treasurer pursuantto 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 Actof 2002 filed herewith.

 

32.2                          Certification pursuant to 18 U.S.C.section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Actof 2002 filed herewith.

 

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**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 

** **
|                          | RECKSON OPERATING  PARTNERSHIP, L.P. |
|-------------------------------|--------------------------------------|
|                          | By: WYOMING ACQUISITION  GP LLC      |
|                          |                                 |
|                          |                                 |
|                          | By:                                  | /s/ Gregory F.  Hughes |
|                          |                                 | Gregory F. Hughes |
|                          |                                 | Treasurer |
|                          |                                 |
|                          |                                 |
| Date: November 12,  2009 |                                 |

 

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