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**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**Washington, D.C. 20549**

 

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**FORM 10-Q**

 

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**x****        QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF**

**THESECURITIES EXCHANGE ACT OF 1934**

 

**For the quarterly period ended June 30,2009**

 

o         **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF**

**THESECURITIES EXCHANGE ACT OF 1934**

 

**For the transition period from              to                .**

 

**Commission File Number: 1-13762**

 

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

(Exact name of registrantas specified in its charter)

 

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

 

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

(Address of principalexecutive offices) (Zip Code)

** **

**(212) 594-2700**

(Registrant’s telephonenumber, including area code)

 

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Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.  YES x   NOo

 

Indicate by check markwhether the registrant has submitted electronically and posted on its corporateWeb site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)during the preceding 12 months (or for such shorter period that the registrantwas required to submit and post such files).  YES o   NO o

 

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, a non-accelerated filer or a smallerreporting company.  See definitions of “largeaccelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2of the Exchange 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 mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).YES o   NOx

 

As of July 30, 2009, no common units of limitedpartnership interest of the Registrant were held by non-affiliates of theRegistrant.  There is no establishedtrading market for such units.

 

 

 

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**RECKSONOPERATING PARTNERSHIP, L.P.**

 

**INDEX**

 
| ** **        | **PAGE**                                                                                                                 |
|-------------------|--------------------------------------------------------------------------------------------------------------------------|
| ** **        | ** **                                                                                                               | ** ** |
| **PART I.**  | **FINANCIAL  INFORMATION**                                                                                               | ** ** |
| ** **        | ** **                                                                                                               | ** ** |
| **ITEM  1.**      | **FINANCIAL  STATEMENTS**                                                                                                | ** ** |
| ** **        | ** **                                                                                                               | ** ** |
|              | Condensed  Consolidated Balance Sheets as of June 30, 2009 (unaudited) and  December 31, 2008                  | 3 |
|              |                                                                                                                     |   |
|              | Condensed Consolidated  Statements of Income for the three and six months ended June 30, 2009  and 2008 (unaudited) | 4 |
|              |                                                                                                                     |   |
|              | Condensed Consolidated  Statements of Cash Flows for the six months ended June 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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**PART I.         FINANCIALINFORMATION**

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

###### ** **

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

**CondensedConsolidated Balance Sheets**

**(Amounts in thousands)**

 
| ** **                                                                                            | ** ** | **June 30********2009** | ** **    | **December 31,****2008** | ** ** |
|-------------------------------------------------------------------------------------------------------|------------|------------------------------|---------------|-------------------------------|------------|
| ** **                                                                                            | ** ** | **(Unaudited)**              | ** **    | ** **                    | ** ** |
| **Assets**                                                                                            |       |                         |          |                          |       |
| Commercial real  estate properties, at cost:                                                          |       |                         |          |                          |       |
| Land and land  interests                                                                              | ** ** | **$**                        | **643,387**   |                          | $          | 643,156 |   |
| Building and  improvements                                                                            | ** ** | **3,275,222**                |          | 3,264,826                     |       |
| ** **                                                                                            |       | **3,918,609**                |          | 3,907,982                     |       |
| Less:  accumulated depreciation                                                                       | ** ** | **(207,935**                 | **)**         | (162,324                      | )          |
| ** **                                                                                            |       | **3,710,674**                |          | 3,745,658                     |       |
| Cash and cash  equivalents                                                                            | ** ** | **21,268**                   |          | 23,114                        |       |
| Restricted cash                                                                                       | ** ** | **7,491**                    |          | 7,265                         |       |
| Tenant and other  receivables, net of allowance of $1,635 and $659 in 2009 and 2008,  respectively    | ** ** | **12,466**                   |          | 12,796                        |       |
| Deferred rents  receivable, net of allowance of $4,759 and $4,548 in 2009 and 2008,  respectively     | ** ** | **37,312**                   |          | 31,148                        |       |
| Structured  finance investments, net of allowance of $10,550 at both 2009 and 2008                    | ** ** | **28,039**                   |          | 90,794                        |       |
| Investment in  unconsolidated joint venture                                                           | ** ** | **53,825**                   |          | 56,291                        |       |
| Deferred costs,  net of accumulated amortization of $2,067 and $1,157 in 2009 and 2008,  respectively | ** ** | **16,313**                   |          | 15,267                        |       |
| Other assets                                                                                          | ** ** | **124,890**                  |          | 139,714                       |       |
| Total assets                                                                                          | ** ** | **$**                        | **4,012,278** |                          | $          | 4,122,047 |   |
|                                                                                                  |       |                         |          |                          |       |
| **Liabilities**                                                                                       |       |                         |          |                          |       |
| Mortgage notes  payable                                                                               | ** ** | **$**                        | **226,390**   |                          | $          | 228,046 |   |
| Senior unsecured  notes                                                                               | ** ** | **683,653**                  |          | 954,315                       |       |
| Accrued interest  payable and other liabilities                                                       | ** ** | **10,851**                   |          | 17,321                        |       |
| Accounts payable  and accrued expenses                                                                | ** ** | **30,717**                   |          | 30,883                        |       |
| Deferred revenue                                                                                      | ** ** | **295,703**                  |          | 326,227                       |       |
| Security  deposits                                                                                    | ** ** | **7,362**                    |          | 5,667                         |       |
| Total  liabilities                                                                                    | ** ** | **1,254,676**                |          | 1,562,459                     |       |
|                                                                                                  |       |                         |          |                          |       |
| Commitments and  Contingencies                                                                        | ** ** | **—**                   |          | —                        |       |
|                                                                                                  |       |                         |          |                          |       |
| **Capital**                                                                                           |       |                         |          |                          |       |
| General partner  capital - ROP                                                                        | ** ** | **2,257,630**                |          | 2,057,111                     |       |
| Limited partner  capital                                                                              | ** ** | **—**                   |          | —                        |       |
| Noncontrolling  interests in other partnerships                                                       | ** ** | **499,972**                  |          | 502,477                       |       |
| Total capital                                                                                         | ** ** | **2,757,602**                |          | 2,559,588                     |       |
| Total  liabilities and capital                                                                        | ** ** | **$**                        | **4,012,278** |                          | $          | 4,122,047 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

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** **

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

**CondensedConsolidated Statements of Income**

**(Unaudited, and amounts inthousands)**

 
| ** **                                                                                                                                                    | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------|------------|------------------------------------|------------|
| ** **                                                                                                                                                    | ** ** | **2009**                             | ** ** | **2008**                           | ** ** | **2009** | ** ** | **2008** | ** ** |
| **Revenues**                                                                                                                                                  |       |                                 |       |                               |       |   |   |   |   |
| Rental revenue, net                                                                                                                                           |       | $                                    | 71,687     |                               | $          | 67,421 |   | $ | 141,888 |   | $ | 136,106 |   |
| Escalation and  reimbursement                                                                                                                                 |       | 13,654                               |       | 12,241                             |       | 28,025 |   | 25,435 |   |
| Investment  income                                                                                                                                            |       | 488                                  |       | 1,392                              |       | 1,427 |   | 2,772 |   |
| Other income                                                                                                                                                  |       | 1,154                                |       | 4,316                              |       | 1,616 |   | 4,543 |   |
| Total revenues                                                                                                                                                |       | 86,983                               |       | 85,370                             |       | 172,956 |   | 168,856 |   |
| **Expenses**                                                                                                                                                  |       |                                 |       |                               |       |   |   |   |   |
| Operating  expenses ($2,379, $4,643, $2,893 and $5,043 paid to/ allocated from  affiliates in 2009 and 2008, respectively                                     |       | 18,411                               |       | 18,437                             |       | 37,906 |   | 37,235 |   |
| Real estate  taxes                                                                                                                                            |       | 14,228                               |       | 12,698                             |       | 28,590 |   | 25,261 |   |
| Ground rent                                                                                                                                                   |       | 2,161                                |       | 2,161                              |       | 4,322 |   | 4,322 |   |
| Interest  expense, net of interest income                                                                                                                     |       | 14,239                               |       | 19,186                             |       | 29,662 |   | 36,663 |   |
| Depreciation and  amortization                                                                                                                                |       | 23,356                               |       | 22,953                             |       | 46,897 |   | 44,039 |   |
| Loan loss  reserves                                                                                                                                           |       | 24,907                               |       | 2,000                              |       | 24,907 |   | 2,000 |   |
| Marketing,  general and administrative                                                                                                                        |       | 95                                   |       | (288                               | )          | 230 |   | 189 |   |
| Total expenses                                                                                                                                                |       | 97,397                               |       | 77,147                             |       | 172,514 |   | 149,709 |   |
| Income (loss)  from continuing operations before equity in net income from unconsolidated  joint venture, noncontrolling interest and discontinued operations |       | (10,414                              | )          | 8,223                              |       | 442 |   | 19,147 |   |
| Equity in net  income from unconsolidated joint venture                                                                                                       |       | 287                                  |       | 344                                |       | 568 |   | 292 |   |
| Gain on early  extinguishment of debt                                                                                                                         |       | 1,774                                |       | —                             |       | 3,682 |   | — |   |
| Income (loss)  from continuing operations                                                                                                                     |       | (8,353                               | )          | 8,567                              |       | 4,692 |   | 19,439 |   |
| Income (loss)  from discontinued operations                                                                                                                   |       | (16                                  | )          | 310                                |       | (42 | ) | 528 |   |
| Net income  (loss)                                                                                                                                            |       | (8,369                               | )          | 8,877                              |       | 4,650 |   | 19,967 |   |
| Net income  attributable to noncontrolling interests in other partnerships                                                                                    |       | (3,647                               | )          | (3,590                             | )          | (6,975 | ) | (8,567 | ) |
| Net income  (loss) attributable to ROP common unitholders                                                                                                     |       | $                                    | (12,016    | )                                  | $          | 5,287 |   | $ | (2,325 | ) | $ | 11,400 |   |
|                                                                                                                                                          |       |                                 |       |                               |       |   |   |   |   |
| **Amounts  attributable to ROP common unitholders:**                                                                                                          |       |                                 |       |                               |       |   |   |   |   |
| Income (loss)  from continuing operations                                                                                                                     |       | $                                    | (12,000    | )                                  | $          | 4,977 |   | $ | (2,283 | ) | $ | 10,872 |   |
| Discontinued  operations                                                                                                                                      |       | (16                                  | )          | 310                                |       | (42 | ) | 528 |   |
| Net income  (loss)                                                                                                                                            |       | $                                    | (12,016    | )                                  | $          | 5,287 |   | $ | (2,325 | ) | $ | 11,400 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

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

**CondensedConsolidated Statements of Cash Flows**

**(Unaudited, and amounts inthousands)**

 
| ** **                                                                         | ** ** | **Six Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|------------------------------------------------------------------------------------|------------|-------------------------------------|------------|-------------------------------------|------------|
| ** **                                                                         | ** ** | **2009**                            | ** ** | **2008**                            | ** ** |
| **Operating  Activities**                                                          |       |                                |       |                                |       |
| Net income                                                                         |       | $                                   | 4,650      |                                | $          | 19,967 |   |
| Adjustment to  reconcile net income to net cash provided by operating activities:  |       |                                |       |                                |       |
| Depreciation and  amortization                                                     |       | 46,897                              |       | 44,795                              |       |
| Equity in net  income from unconsolidated joint venture                            |       | (568                                | )          | (292                                | )          |
| Distributions of  cumulative earnings from unconsolidated joint venture            |       | 568                                 |       | 344                                 |       |
| Gain on early  extinguishment of debt                                              |       | (3,682                              | )          | —                              |       |
| Loan loss  reserves                                                                |       | 24,907                              |       | 2,000                               |       |
| Deferred rents  receivable                                                         |       | (6,164                              | )          | (7,030                              | )          |
| Other non-cash  adjustments                                                        |       | (7,647                              | )          | (5,414                              | )          |
| Changes in  operating assets and liabilities:                                      |       |                                |       |                                |       |
| Restricted cash  — operations                                                 |       | (219                                | )          | 809                                 |       |
| Tenant and other  receivables                                                      |       | (646                                | )          | (3,904                              | )          |
| Deferred lease  costs                                                              |       | (1,955                              | )          | (6,457                              | )          |
| Other assets                                                                       |       | 630                                 |       | (3,774                              | )          |
| Accounts  payable, accrued expenses and other liabilities                          |       | (10,125                             | )          | (13,111                             | )          |
| Net cash  provided by operating activities                                         |       | 46,646                              |       | 27,933                              |       |
| **Investing  Activities**                                                          |       |                                |       |                                |       |
| Additions to  land, buildings and improvements                                     |       | (12,926                             | )          | (5,129                              | )          |
| Restricted  cash-capital improvements                                              |       | (7                                  | )          | 64                                  |       |
| Distributions in  excess of cumulative earnings from unconsolidated joint ventures |       | 2,466                               |       | 2,622                               |       |
| Structured  finance investment redemption                                          |       | 38,616                              |       | —                              |       |
| Net cash (used  in) provided by investing activities                               |       | 28,149                              |       | (2,443                              | )          |
| **Financing  Activities**                                                          |       |                                |       |                                |       |
| Repayments of  mortgage notes payable                                              |       | (1,656                              | )          | (1,506                              | )          |
| Repayments of  senior unsecured notes                                              |       | (268,438                            | )          | —                              |       |
| Contributions  from common unitholders                                             |       | 402,737                             |       | 134,057                             |       |
| Noncontrolling  interest in other partnerships - distributions                     |       | (9,480                              | )          | (8,646                              | )          |
| Distributions to  common unitholders                                               |       | (199,804                            | )          | (149,307                            | )          |
| Net cash used in  financing activities                                             |       | (76,641                             | )          | (25,402                             | )          |
| Net (decrease)  increase in cash and cash equivalents                              |       | (1,846                              | )          | 88                                  |       |
| Cash and cash  equivalents at beginning of period                                  |       | 23,114                              |       | 16,463                              |       |
| Cash and cash  equivalents at end of period                                        |       | $                                   | 21,268     |                                | $          | 16,551 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

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**RecksonOperating Partnership, L.P.**

**Notes toCondensed Consolidated Financial Statements**

**(Unaudited)**

**June 30, 2009**

** **

**1. Organization and Basis of Presentation**

 

Reckson Operating Partnership, L.P., or ROP,commenced operations on June 2, 1995. Since consummation of the Merger on January 25, 2007, SL GreenOperating Partnership, L.P., or the operating partnership, has owned allthe economic interests in ROP either by direct ownership or by indirectownership through its wholly-owned subsidiary Wyoming Acquisition GPLLC, or WAGP.  Reckson Associates Realty Corp., or RARC, served asthe sole general partner of ROP until November 15, 2007, atwhich time RARC withdrew and WAGP succeeded it as the sole generalpartner of ROP.   Since consummation of the Merger, RARC hasbeen a wholly-owned subsidiary of SL Green Realty Corp., or SL Green.

 

**ROP is engagedin the ownership, management, operation, leasing, financing and development ofcommercial real estate properties, principally office properties and also ownsland for future development located in New York City, Westchester andConnecticut, which collectively is also known as the New York Metro Area.  At June 30, 2009, our inventory ofdevelopment parcels aggregated approximately 81 acres of land in four separateparcels on which we can, based on estimates at June 30, 2009, developapproximately 1.1 million square feet of office space and in which we hadinvested approximately $65.1 million.  Inaddition, as of June 30, 2009 ROP also held approximately $28.0 million ofstructured finance investments.**

** **

SL Green and the operating partnership wereformed in June 1997.  SL Green hasqualified, and expects to qualify in the current fiscal year as a real estateinvestment trust, or REIT, under the Internal Revenue Code of 1986, as amended,or the Code, and operates as a self-administered, self-managed REIT.  A REIT is a legal entity that holds realestate interests and, through payments of dividends to stockholders, ispermitted to reduce or avoid the payment of Federal income taxes at thecorporate level.  Unless the contextrequires otherwise, all references to “we,” “our” and “us” means ROP and allentities owned or controlled by ROP.

 

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

 

On January 25, 2007, SL Green completed the sale of certain assetsof ROP to an investment group led by certain of RARC’s former executivemanagement for a total consideration of approximately $2.0 billion.

 

As a result of the substantial change in ownership from the Merger, SLGreen has recorded the Merger in accordance with the provisions of EmergingIssues Task Force Topic D-97, “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 June 30,2009, we owned the following interests in commercial office properties in theNew York Metro area, primarily in midtown Manhattan, a borough of New YorkCity, or Manhattan.  Our investments in the New York Metro area alsoinclude investments in Queens, Westchester County and Connecticut, which arecollectively known as the Suburban assets:

 
| ** **   | ** ** | ** **                | ** ** | ** **     | ** ** | ** **      | ** ** | **Weighted**             | ** ** |
|--------------|------------|---------------------------|------------|----------------|------------|-----------------|------------|--------------------------|------------|
| ** **   | ** ** | ** **                | ** ** | **Number of**  | ** ** | ** **      | ** ** | **Average**              | ** ** |
| **Location** | ** ** | **Ownership**             | ** ** | **Properties** | ** ** | **Square Feet** | ** ** | **Occupancy********(1)** | ** ** |
| Manhattan    |       | Consolidated properties   |       | 4              |       | 3,770,000       |       | 97.0                     | %          |
|         |       |                      |       |           |       |            |       |                     |       |
| Suburban     |       | Consolidated properties   |       | 16             |       | 2,642,100       |       | 89.4                     | %          |
|         |       | Unconsolidated properties |       | 1              |       | 1,402,000       |       | 100.0                    | %          |
|         |       |                      |       | 21             |       | 7,814,100       |       | 95.0                     | %          |

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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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** **

**RecksonOperating Partnership, L.P.**

**Notes to CondensedConsolidated Financial Statements**

**(Unaudited)**

**June 30, 2009**

** **

#### **Basisof Quarterly Presentation**

#### ** **

The accompanying consolidated financial statements include theconsolidated financial position of ROP and the Service Companies (as definedbelow) at June 30, 2009 and December 31, 2008, the consolidatedresults of their operations for the three and six months ended June 30,2009 and 2008 and their cash flows for the six months ended June 30, 2009and 2008.  ROP’s investments inmajority-owned and controlled real estate joint ventures are reflected in theaccompanying financial statements on a consolidated basis with a reduction forthe noncontrolling partners’ interests. ROP’s investments in real estate joint ventures, where it owns less thana controlling interest, are reflected in the accompanying financial statementson the equity method of accounting.  TheService Companies, which provide management, development and construction servicesto ROP and to third parties, include Reckson Management Group, Inc., RANYManagement Group, Inc., Reckson Construction & Development LLCand Reckson Construction Group New York, Inc. (collectively, the “ServiceCompanies”).  All significantintercompany balances and transactions have been eliminated in the consolidatedfinancial statements.

 

The accompanying unaudited condensed consolidated financial statementshave been prepared in accordance with generally accepted accounting principlesin the United States, or U.S. GAAP, for interim financial information and withthe instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of theinformation and notes required by U.S. GAAP for complete financialstatements.  In the opinion ofmanagement, all adjustments (consisting of normal recurring accruals)considered necessary for fair presentation have been included.  The 2009 operating results for the periodspresented are not necessarily indicative of the results that may be expectedfor the year ending December 31, 2009. These financial statements should be read in conjunction with thefinancial statements and accompanying notes included in our annual report on Form 10-Kfor the year ended December 31, 2008.

 

The balance sheet at December 31, 2008 has been derived from theaudited financial statements at that date but does not include all theinformation and footnotes required by U.S. GAAP for complete financialstatements.

 

**2. Significant Accounting Policies**

 

**Principles of Consolidation**

 

The consolidated financial statements include our accounts and those ofour subsidiaries, which are wholly-owned or controlled by us or entities whichare variable interest entities, or VIEs, in which we are the primarybeneficiary under the Financial Accounting Standards Board, or FASB,Interpretation No. 46R, or FIN 46R, “Consolidation of Variable InterestEntities - an Interpretation of ARB No. 51.”  Entities which we do not control and entitieswhich are VIEs, but where we are not the primary beneficiary are accounted forunder the equity method.  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 adopted SFAS No. 160, or SFAS No. 160,“Noncontrolling Interests in Consolidated Financial Statements — an amendmentof ARB No. 51,” which defines a non-controlling interest in a consolidatedsubsidiary as “the portion of the equity (net assets) in a subsidiary notattributable, directly or indirectly, to a parent” and requires noncontrollinginterests to be presented as a separate component of equity in the consolidatedbalance sheet subject to the provisions of EITF Topic D-98, or EITF D-98, “Classificationand Measurement of Redeemable Securities.” SFAS No. 160 also modifies thepresentation of net income by requiring earnings and other comprehensive incometo be attributed to controlling and noncontrolling interests. Below are thesteps we have taken as a result of the implementation of this standard:

 

·                  We have reclassified the noncontrollinginterests of other consolidated partnerships from the mezzanine section of ourbalance sheets to equity. This reclassification totaled approximately $502.5million as of December 31, 2008.

 

·                  Net income attributable to noncontrollinginterests of other consolidated partnerships is no longer included in thedetermination of net income. We reclassified prior year amounts to reflect thisrequirement.

 

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

**Notes to Condensed ConsolidatedFinancial Statements**

**(Unaudited)**

**June 30, 2009**

** **

**Investment in Commercial Real EstateProperties**

 

On a periodic basis, we assess whether thereare any indicators that the value of our real estate properties may be impairedor that their carrying values may not be recoverable.  A property’s value is considered impaired ifmanagement’s estimate of the aggregate future cash flows (undiscounted andwithout interest charges for consolidated properties and discounted forunconsolidated properties) to be generated by the property are less than thecarrying value of the property.  To theextent impairment has occurred, the loss shall be measured as the excess of thecarrying amount of the property over the fair value of the property.  We do not believe that the value of any ofour consolidated real estate properties or equity investment in rental propertywas impaired at June 30, 2009 and December 31, 2008.

 

In accordance with SFAS No. 141, “BusinessCombinations,” we allocate the purchase price of real estate to land andbuilding and, if determined to be material, intangibles, such as the value ofabove-, below- and at-market leases and origination costs associated with thein-place leases.  We depreciate theamount allocated to building and other intangible assets over their estimateduseful lives, which generally range from three to 40 years and from one to 40years, respectively.  The values of theabove- and below-market leases are amortized and recorded as either an increase(in the case of below-market leases) or a decrease (in the case of above-marketleases) to rental income over the remaining term of the associated lease, whichrange from one to 14 years.  The valueassociated with in-place leases and tenant relationships are amortized over theexpected term of the relationship and its estimated term, which range from oneto 14 years.  If a tenant vacates itsspace prior to the contractual termination of the lease and no rental paymentsare being made on the lease, any unamortized balance of the related intangiblewill be written off.  The tenantimprovements and origination costs are amortized as an expense over theremaining life of the lease (or charged against earnings if the lease isterminated prior to its contractual expiration date).  We assess fair value of the leases based onestimated cash flow projections that utilize appropriate discount andcapitalization rates and available market information.  Estimates of future cash flows are based on anumber of factors including the historical operating results, known trends, andmarket/economic conditions that may affect the property.

 

As a result ofour evaluations, under SFAS No. 141, of acquisitions made, we recognizedan increase of approximately $5.2 million, $9.8 million, $2.8 million and $7.6million in rental revenue for the three and six months ended June 30, 2009and 2008, respectively, for the amortization of aggregate below-market rents inexcess of above-market leases 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, $2.1 million, $1.7 million and $3.4 million for thethree and six months ended June 30, 2009 and 2008, respectively.

 

The followingsummarizes our identified intangible assets (acquired above-market leases andin-place leases) and intangible liabilities (acquired below-market leases) asof June 30, 2009 and December 31, 2008 (amounts in thousands).

 
| ** **                                                        | ** ** | **June 30,********2009** | ** **  | **December 31,********2008** | ** ** |
|-------------------------------------------------------------------|------------|-------------------------------|-------------|-----------------------------------|------------|
| Identified intangible assets (included in other assets):          | ** ** | ** **                    | ** **  |                              | ** ** |
| Gross amount                                                      | ** ** | **$**                         | **167,078** |                              | $          | 167,078 |   |
| Accumulated amortization                                          | ** ** | **(50,001**                   | **)**       | (35,343                           | )          |
| Net                                                               | ** ** | **$**                         | **117,077** |                              | $          | 131,735 |   |
|                                                              | ** ** | ** **                    | ** **  |                              | ** ** |
| Identified intangible liabilities (included in deferred revenue): | ** ** | ** **                    | ** **  |                              | ** ** |
| Gross amount                                                      | ** ** | **$**                         | **373,950** |                              | $          | 373,950 |   |
| Accumulated amortization                                          | ** ** | **(81,838**                   | **)**       | (57,380                           | )          |
| Net                                                               | ** ** | **$**                         | **292,112** |                              | $          | 316,570 |   |

 

**Income Taxes**

 

No provision has been made for income taxes in the accompanyingconsolidated financial statements since such taxes, if any, are the responsibilityof the individual partners.

 

8

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Tableof Contents

 

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

**Notes to Condensed ConsolidatedFinancial Statements**

**(Unaudited)**

**June 30, 2009**

** **

**Reserve for Possible Credit Losses**

 

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

 

Where impairment is indicated, a valuation allowance is measured basedupon the excess of the recorded investment amount over the net fair value ofthe collateral, as reduced by sellingcosts.  Any deficiency between thecarrying amount of an asset and the net sales price of repossessed collateral ischarged to expense.  We recordedapproximately $24.9 million, $24.9 million, $2.0 million and $2.0 million inloan loss reserves and charge offs during the three and six months ended June 30,2009 and 2008, respectively.

 

**Use of Estimates**

 

The preparation of financial statements in conformity with U.S. GAAPrequires management to make estimates and assumptions that affect the amountsreported in the financial statements and accompanying notes. Actual resultscould differ from those estimates.

 

**Concentrations of CreditRisk**

** **

Financial instrumentsthat potentially subject us to concentrations of credit risk consist primarilyof cash investments, structured finance investments and accountsreceivable.  We place our cashinvestments in excess of insured amounts with high quality financialinstitutions.  The collateral securingour structured finance investments is primarily located in the Greater New YorkArea. See Note 4. We perform ongoing credit evaluations of our tenants andrequire certain tenants to provide security deposits or letters of credit.  Though these security deposits and letters ofcredit are insufficient to meet the total value of a tenant’s lease obligation,they are a measure of good faith and a source of funds to offset the economiccosts associated with lost rent and the costs associated with re-tenanting thespace.  Although the properties in ourreal estate portfolio are primarily located in Manhattan, we also have Suburbanproperties located in Westchester County, Connecticut and Long IslandCity.  The tenants located in ourbuildings operate in various industries. Other than two tenants who contributed approximately 6.5% and 7.0% ofour annualized rent, no other tenant in the portfolio contributed more than4.4% of our annualized rent, including our share of joint venture annualizedrent, at June 30, 2009. Approximately 14%, 16%, 27% and 12% of our annualized rent, includingour share of joint venture annualized rent, was attributable to 810 SeventhAvenue, 919 Third Avenue, 1185 Avenue of the Americas and 1350 Avenue of theAmericas, respectively, for the quarter ended June 30, 2009.  One borrower accounted for more than 10.0% ofthe revenue earned on structured finance investments during the three monthsended June 30, 2009.

 

**Reclassification**

 

Certain prior year balances have been reclassified to conform with thecurrent year presentation primarily in order to comply with SFAS No. 144for discontinued operations presentation and the adoption of FSP 14-1 and SFAS No. 160.

 

**New Accounting Pronouncements**

 

In December 2007, the FASB issued SFAS No. 141(R), “BusinessCombinations.”  This statement changes the accounting for acquisitionsspecifically eliminating the step acquisition model, changing the recognitionof contingent consideration from being recognized when it is probable to beingrecognized at the time of acquisition, disallowing the capitalization oftransaction costs and delays when restructurings related to acquisitions can berecognized. The standard is effective for fiscal years beginning after December 15,2008 and will only impact the accounting for acquisitions we make after ouradoption. The adoption of this standard on January 1, 2009 did not haveany impact on our historical financial statements.

 

9

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Tableof Contents

 

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

**Notes to Condensed ConsolidatedFinancial Statements**

**(Unaudited)**

**June 30, 2009**

** **

In May 2008, the FASB issued FASB Staff Position No. APB14-1, or FSP 14-1, “Accounting for Convertible Debt Instruments that may beSettled in Cash upon Conversion.” FSP 14-1 requires the issuer of certainconvertible debt instruments that may be settled in cash (or other assets) onconversion to separately account for the liability (debt) and equity(conversion option) components of the instrument in a manner that reflects theissuer’s nonconvertible debt borrowing rate. FSP 14-1 will significantly affectthe accounting for instruments commonly referred to as Instruments B and C inEITF No. 90-19, “Convertible Bonds with Issuer Option to Settle for Cashupon Conversion,” which is nullified by FSP 14-1, and any other convertibledebt instruments that require or permit settlement in any combination of cashand shares at the issuer’s option, such as those sometimes referred to as “InstrumentX.” The resulting debt discount will be amortized over the period during whichthe debt is expected to be outstanding (i.e., through the first optionalredemption dates) as additional non-cash interest expense.  This amount (before netting) will increase insubsequent reporting periods through the first optional redemption dates as thedebt accretes to its par value over the same period. FSP 14-1 is effective forfiscal years beginning after December 15, 2008, and interim periods withinthose fiscal years. Early adoption is not permitted. Upon adoption, FSP 14-1requires companies to retrospectively apply the requirements of thepronouncement to all periods presented. Adoption of FSP 14-1 had the following impact on our financialstatements (in thousands):

 
|                   |   |   |   | **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 June 30,  2008********As  Reported** | ** ** | **Three Months  Ended June 30,  2008********As  Restated** | ** ** | **Six Months   Ended June 30,  2008********As  Reported** | ** ** | **Six Months   Ended June 30,   2008********As  Restated** | ** ** |
|----------------------------------------------------|------------|-----------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|----------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|
| Interest expense                                   |       | $                                                               | 18,088     |                                                            | $          | 19,359                                                         |       | $                                                               | 35,476     |   | 37,998 |   |
| Net income attributable to  ROP common unitholders |       | 6,559                                                           |       | 5,287                                                           |       | 13,922                                                         |       | 11,400                                                          |       |
|                                                    |            |                                                                 |            |                                                                 |            |                                                                |            |                                                                 |            |  |  |  |

 

In April 2009, the FASB issued SFAS No. 107-1 and APB 28-1, “InterimDisclosures about Fair Value of Financial Instruments.” SFAS No. 107-1amends SFAS No. 107, “Disclosures about Fair Value of FinancialInstruments” to require disclosure about fair value of financial instruments ininterim financial statements. SFAS No. 107-1 and APB 28-1 are effectivefor interim and annual periods ending after June 15, 2009 with earlyadoption permitted for periods ending after March 15, 2009.  Wehave included the disclosures required under this standard in our June 30,2009 consolidated financial statements.

 

In April 2009, the FASB released FSP SFAS No. 157- 4, “DeterminingFair Value When the Volume and Level of Activity for the Asset or Liability hasSignificantly Decreased and Identifying Transactions that are Not Orderly,” orFSP SFAS No. 157-4. FSP SFAS No. 157-4 was issued contemporaneouslywith FSP SFAS No. 115-2 and SFAS No. 124-2, “Recognition andPresentation of Other-Than-Temporary Impairments,” or FSP SFAS 115-2 and FSPSFAS No. 107-1 and APB 28-1. FSP SFAS No. 157-4 amends FASB StatementNo. 157, “Fair Value Measurements,” or SFAS No. 157, to provideadditional guidance on estimating fair value when the volume and level oftransaction activity for an asset or liability have significantly decreased inrelation to normal market activity for the asset or liability. The FSP alsoprovides additional guidance on circumstances that may indicate that atransaction is not orderly.

 

FSP SFAS No. 157-4 also requires additional disclosures about fairvalue measurements in annual and interim reporting periods. FSP SFAS No. 157-4is effective for interim and annual reporting periods ending after June 15,2009. The adoption of the FSP did not have a material impact on ourconsolidated financial statements.

 

In June 2009, the FASB issued Statement of Financial AccountingStandards No. 166, “Accounting for Transfers of Financial Assets, anamendment of FASB Statement No. 140,” or SFAS 166. SFAS 166 amends variouscomponents of the guidance under SFAS 140 governing sale accounting, includingthe recognition of assets obtained and liabilities assumed as a result of atransfer, and considerations of effective control by a transferor overtransferred assets. In addition, SFAS 166 removes the exemption for qualifyingspecial purpose entities from the guidance of FIN 46(R), as amended by SFAS 167below. SFAS 166 is effective January 1, 2010, with early adoptionprohibited. While the amended guidance governing sale accounting is applied ona prospective basis, the removal of the qualifying special purpose entityexception will require us to evaluate certain entities for consolidation underSFAS 167, as defined below. While we are evaluating the effect of adoption ofSFAS 166, we currently believe that the adoption of SFAS 166 will not have amaterial impact on our consolidated financial statements.

 

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Tableof Contents

 

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

**Notes to Condensed ConsolidatedFinancial Statements**

**(Unaudited)**

**June 30, 2009**

** **

In June 2009, the FASB issued Statement of Financial AccountingStandards No. 167, “Amendments to FASB Interpretation No. 46(R),” orSFAS 167, which amends guidance in FIN 46(R) for determining whether anentity is a variable interest entity, or VIE, and requires the performance of aqualitative rather than a quantitative analysis to determine the primarybeneficiary of a VIE. Under this guidance, an entity would be required toconsolidate a VIE if it has (i) the power to direct the activities that mostsignificantly impact the entity’s economic performance and (ii) theobligation to absorb losses of the VIE or the right to receive benefits fromthe VIE that could be significant to the VIE. SFAS 167 is effective for thefirst annual reporting period that begins after November 15, 2009, withearly adoption prohibited. While we are currently evaluating the effect ofadoption of SFAS 167, we currently believe that the adoption of SFAS 167 willnot have a material impact on our consolidated financial statements.

 

In June 2009, the FASB issued Statement of Financial AccountingStandards No. 168, “The FASB Accounting Codification and the Hierarchy ofGenerally Accepted Accounting Principles, a replacement of FASB Statement No. 162,”or SFAS 168. SFAS 168 establishes the FASB Accounting Standards Codification,or the Codification, as the source of authoritative accounting principlesrecognized by the FASB to be applied by nongovernmental entities in thepreparation of financial statements in conformity with GAAP, and states thatall guidance contained in the Codification carries equal level ofauthority.  Rules and interpretivereleases of the Securities and Exchange Commission, 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.  SFAS 168 is effective forfinancial statements issued for interim and annual periods ending September 15,2009. We do not expect the adoption of SFAS 168 to have a material impact onour consolidated financial statements.

 

**3.  PropertyDispositions and Assets Held for Sale**

 

At June 30, 2009, discontinuedoperations included the results of operations of real estate assets sold priorto that date.  This included 100/120White Plains Road which was sold in October 2008.

 

The following table summarizes income fromdiscontinued operations for the three and six months ended June 30, 2008(in thousands).  No assets wereconsidered as held for sale during the six months ended June 30, 2009.

 
| ** **                                     | ** ** | **Three Months  Ended********June 30,** | ** ** | **Three Months  Ended********June 30,** | ** ** | **Six Months   Ended  June 30,** | ** ** | **Six Months   Ended********June 30,** | ** ** |
|------------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|---------------------------------------|------------|---------------------------------------------|------------|
| ** **                                     | ** ** | **2009**                                     | ** ** | **2008**                                     | ** ** | **2009**                              | ** ** | **2008**                                    | ** ** |
| Revenues                                       |       |                                         |       |                                         |       |                                  |       |                                        |       |
| Rental revenue                                 | ** ** | **$**                                        | **—** | ** **                                   | **$**      | **1,538**                             | ** ** | **$**                                       | —     | ** ** | **$** | 3,132 | ** ** |
| Escalation and  reimbursement revenues         | ** ** | **3**                                        | ** ** | **109**                                      |       | (3                                    | )          | 254                                         |       |
| Investment and  other income                   | ** ** | **—**                                   | ** ** | **—**                                   |       | —                                |       | 16                                          |       |
| Total revenues                                 | ** ** | **3**                                        | ** ** | **1,647**                                    |       | (3                                    | )          | 3,402                                       |       |
| Operating  expenses                            | ** ** | **19**                                       | ** ** | **346**                                      |       | 39                                    |       | 832                                         |       |
| Real estate  taxes                             | ** ** | **—**                                   | ** ** | **324**                                      |       | —                                |       | 648                                         |       |
| Depreciation and  amortization                 | ** ** | **—**                                   | ** ** | **369**                                      |       | —                                |       | 756                                         |       |
| Total expenses                                 | ** ** | **19**                                       | ** ** | **1,039**                                    |       | 39                                    |       | 2,236                                       |       |
| Noncontrolling  interest in other partnerships | ** ** | **—**                                   | ** ** | **(298**                                     | **)**      | —                                |       | (638                                        | )          |
| Income (loss)  from discontinued operations    | ** ** | **$**                                        | **(16**    | **)**                                        | **$**      | **310**                               | ** ** | **$**                                       | (42        | ) | **$** | 528 | ** ** |

 

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Tableof Contents

 

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

**Notes to Condensed ConsolidatedFinancial Statements**

**(Unaudited)**

**June 30, 2009**

** **

**4. Structured Finance Investments**

 

As of June 30, 2009 and December 31,2008, we held the following structured 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)(6)    |       | 25,000                |       | 315,218               | ** ** | **27,151**                       |       | 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     |                  | $          | 315,218                          | ** ** | **$**                            | **28,039** |                        | $          | 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) |   | As of December 31, 2007, this loan was in  default. We reached an agreement with the borrower and expect to recover the  full carrying value of our investment.                                                                                                                                                                                                      |
| (4) |   | This loan is in default. We have begun foreclosure  proceedings. Our partner 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.                                                                                                                                                                                                                |

 

At June 30, 2009 and December 31, 2008 all loans, other thanas noted above, were performing in accordance with the terms of the loan agreements.

 

**5. Investment in Unconsolidated Joint Venture**

 

In May 2005, we acquired a 1.4 million square foot, 50-story, Class Aoffice tower located at One Court Square, Long Island City, NY, forapproximately $471.0 million, inclusive of transfer taxes and transactionalcosts.  One Court Square is 100% leasedto the seller, Citibank N.A., under a 15-year net lease.  The lease contains partial cancellationoptions effective during 2011 and 2012 for up to 20% of the leased space and in2014 and 2015 for up to an additional 20% of the originally leased space,subject to notice and the payment of early termination penalties. On November 30,2005, we sold a 70% joint venture interest in One Court Square to certaininstitutional funds advised by JPMorgan Investment Management, or the JPMInvestors, for approximately $329.7 million, including the assumption of $220.5million of the property’s mortgage debt.  The operating agreement of the Court Square JV requires approvals frommembers on certain decisions including annual budgets, sale of the property,refinancing of the property’s mortgage debt and material renovations to theproperty. In addition, after September 20, 2009 the members each have theright to recommend the sale of the property, subject to the terms of themortgage debt, and to dissolve the Court Square JV. We have evaluated theimpact of FIN 46R on our accounting for the Court Square JV and have concludedthat the Court Square JV is not a VIE. We have also evaluated, under EITF 04-5, “Determining Whether a General Partner, or the General Partners as aGroup, Controls a Limited Partnership or Similar Entity When the LimitedPartners Have Certain Rights,” and concluded that the JPM Investors havesubstantive participating rights in the ordinary course of the Court Square JV’sbusiness. We account for the Court Square JV under the equity method ofaccounting.

 

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Tableof Contents

 

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

**Notes to Condensed ConsolidatedFinancial Statements**

**(Unaudited)**

**June 30, 2009**

 

**6.  Mortgage Note Payable**

** **

The first mortgage note payable collateralized by the property andassignment of leases at June 30, 2009 and December 31, 2008,respectively, was as follows (in thousands):

 
| **Property**                               | ** ** | **Interest  Rate****(1)** | ** ** | **Maturity  Date** | ** ** | **June 30,********2009** | ** **        | **December 31,********2008** | ** ** |
|--------------------------------------------|------------|---------------------------|------------|--------------------|------------|-------------------------------|-------------------|-----------------------------------|------------|
| 919 Third Avenue New York, NY (2) (3) |       | 6.87                      | %          | 8/2011             |       | $                             |  **226,390** |                              | $          |  228,046 |   |
|                                            |            |                           |            |                    |            |                               |                   |                                   |            |  |  |

----

| (1) |   | Effective interest rate for the six months ended  June 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.                                                                                                             |

 

At June 30, 2009, the gross book valueof the property collateralizing the mortgage note was approximately $1.3billion.

 

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

 
| ** **             | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|------------------------|------------|------------------------|------------|----------------------|------------|
| ** **             | ** ** | **June 30,**      | ** ** | **June 30,**    | ** ** |
| ** **             | ** ** | **2009**               | ** ** | **2008**             | ** ** | **2009** |   | **2008** |   |
| Interest expense       | ** ** | **$**                  | **14,253** |                 | $          | 19,359 | ** ** | **$** | **29,774** |   | $ | 37,998 |   |
| Interest income        | ** ** | **(14**                | **)**      | (173                 | )          | **(112** | **)** | (1,335 | ) |
| Interest  expense, net | ** ** | **$**                  | **14,239** |                 | $          | 19,186 | ** ** | **$** | **29,662** |   | $ | 36,663 |   |
| Interest  capitalized  | ** ** | **$**                  | **26**     |                 | $          | 74 | ** ** | **$** | **—** |   | $ | 172 |   |

 

At June 30, 2009, our unconsolidated joint venture had totalindebtedness of approximately $315.0 million with a fixed interest rate ofapproximately 4.91%.  The mortgagematures in June 2015.  Our aggregatepro-rata share of the unconsolidated joint venture debt was approximately $94.5million.

 

**7. Corporate Indebtedness**

 

**Senior Unsecured Notes**

 

The following table sets forth our senior unsecured notes and otherrelated disclosures by scheduled maturity date as of June 30, 2009 (inthousands):

 
| **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       |       | 274,710                |        | 6.00                   | %          | 10                   |       | March 31, 2016  |                  |
| June 27, 2005 (3)    |       | 135,336                |        | 4.00                   | %          | 20                   |       | June 15, 2025   |                  |
|                      | ** ** | **$**                  | **683,653** |                   |       |                 |       |                 |                  |   |

----

| (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 six months ended June 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 six months ended June 30, 2009, we repurchased approximately $47.1  million of these notes and realized net gains on early extinguishment of debt  of approximately $1.2 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.

 

**Restrictive Covenants**

 

The terms of the seniorunsecured notes include certain restrictions and covenants which limit, amongother things, the incurrence of additional indebtedness and liens, and whichrequire compliance with financial ratios relating to the minimum amount of debtservice coverage, the maximum amount of consolidated unsecured and securedindebtedness and the minimum amount of unencumbered assets.  As of June 30, 2009 and December 31,2008, we were in compliance with all such covenants.

 

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

**Notes to Condensed ConsolidatedFinancial Statements**

**(Unaudited)**

**June 30, 2009**

 

**Principal Maturities**

 

Combined aggregate principal maturities of mortgages and notes payable,senior unsecured notes (net of discount) and our share of joint venture debt asof June 30, 2009, excluding extension options, were as follows (inthousands):

** **
| ** ** | ** ** | **Scheduled  Amortization** | ** ** | **Principal  Repayments** | ** ** | **Unsecured Notes** | ** ** | **Total** | ** **  | **Joint  Venture  Debt** | ** ** |
|------------|------------|-----------------------------|------------|---------------------------|------------|---------------------|------------|-----------|-------------|--------------------------|------------|
| 2009       |       | $                           | 2,286      |                      | $          | —              |       | $         | —      |                     | $          | 2,286 |   | — |   |
| 2010       |       | 4,225                       |       | —                    |       | 135,336             |       | 139,561   |        | —                   |       |
| 2011       |       | 3,223                       |       | 216,656                   |       | 123,607             |       | 343,486   |        | —                   |       |
| 2012       |       | —                      |       | —                    |       | —              |       | —    |        | —                   |       |
| 2013       |       | —                      |       | —                    |       | —              |       | —    |        | —                   |       |
| Thereafter |       | —                      |       | —                    |       | 424,710             |       | 424,710   |        | 94,500                   |       |
|       | ** ** | **$**                       | **9,734**  | ** **                | **$**      | **216,656**         | ** ** | **$**     | **683,653** | ** **               | **$**      | **910,043** | ** ** | **$** | **94,500** | ** ** |
|            |            |                             |            |                           |            |                     |            |           |             |                          |            |  |  |  |  |  |

 

**8.  Partners’ Capital**

** **

Prior to the Merger, a Class A commonunit of ROP and a share of common stock of Reckson Associates RealtyCorp., or RARC, had similar economic characteristics as they effectivelyshared equally in the net income or loss and distributions of ROP. Since consummation of the Merger on January 25, 2007, SL Green OperatingPartnership, L.P., or the operating partnership, has owned all theeconomic interests in ROP either by direct ownership or by indirectownership through its wholly-owned subsidiary Wyoming Acquisition GPLLC, or WAGP.  Reckson Associates Realty Corp., or RARC, served asthe sole general partner of ROP until November 15, 2007, atwhich time RARC withdrew and  WAGP succeeded it as the sole generalpartner of ROP.   Since consummation of the Merger, RARC hasbeen a wholly-owned subsidiary of SL Green Realty Corp., or SL Green.

 

As of December 31, 2006, we had issued and outstanding 1,200preferred units of limited partnership interest, or Preferred Units, with aliquidation preference value of $1,000 per unit and a stated distribution rateof 7.0% which was subject to reduction based upon terms of their initialissuance.  The terms of the PreferredUnits provided for this reduction in distribution rate in order to address theeffect of certain mortgages with above market interest rates which were assumedby us in connection with properties contributed to us in 1998.   As a result of the aforementioned reduction,no distributions were being made on the Preferred Units.  In connection with the Merger, the holder ofthe Preferred Units transferred the Preferred Units to the operatingpartnership in exchange for the issuance of 1,200 preferred units of limitedpartnership interest in the operating partnership with substantially similarterms as the Preferred Units.

 

Intercompany transactions between SL Green and ROP are generallyrecorded as contributions and distributions.

 

**9. Commitments and Contingencies**

 

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

 

The following is a schedule of future minimum lease payments undernoncancellable operating leases with initial terms in excess of one year as of June 30,2009 (in thousands):

 
| **June 30,**             | ** ** | **Non-cancellable  operating leases** | ** ** |
|-------------------------------|------------|---------------------------------------|------------|
|                          |       |                                  |       |
| 2009 (remaining  six months)  |       | $                                     | 5,069      |   |
| 2010                          |       | 9,698                                 |       |
| 2011                          |       | 7,724                                 |       |
| 2012                          |       | 7,593                                 |       |
| 2013                          |       | 7,593                                 |       |
| Thereafter                    |       | 254,831                               |       |
| Total minimum  lease payments | ** ** | **$**                                 | 292,508    | ** ** |

 

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

**Notes to Condensed ConsolidatedFinancial Statements**

**(Unaudited)**

**June 30, 2009**

** **

**10. Environmental Matters**

 

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

 

**11.  SegmentInformation**

 

We are engaged in owning, managing and leasing commercial officeproperties in the New York Metro Area and have two reportable segments, realestate and structured finance investments. We evaluate real estate performance and allocate resources based onearnings contribution to income from continuing operations.

 

Our real estate portfolio is primarily located in the geographicalmarkets of the New York Metro Area.  Theprimary sources of revenue are generated from tenant rents and escalations andreimbursement revenue.  Real estateproperty operating expenses consist primarily of security, maintenance, utilitycosts, real estate taxes and ground rent expense (at certain applicableproperties).  See Note 4 for additionaldetails on our structured finance investments.

 

Selected resultsof operations for the three and six months ended June 30, 2009 and 2008 andselected asset information as of June 30, 2009 and December 31, 2008,regarding our operating segments are as follows (in thousands):

 
| ** **                                 | ** ** | **Real  Estate  Segment** | ** ** | **Structured  Finance  Segment** | ** ** | **Total  Company** | ** ** |
|--------------------------------------------|------------|---------------------------|------------|----------------------------------|------------|--------------------|------------|
| Total revenues:                            |       |                      |       |                             |       |               |       |
| Three months  ended June 30, 2009     |       | $                         | 86,495     |                             | $          | 488                |       | $ | 86,983 |   |
| Three months  ended June 30, 2008     |       | 83,978                    |       | 1,392                            |       | 85,370             |       |
| Six months ended  June 30, 2009       |       | 171,529                   |       | 1,427                            |       | 172,956            |       |
| Six months ended  June 30, 2008       |       | 166,084                   |       | 2,772                            |       | 168,856            |       |
|                                       |       |                      |       |                             |       |               |       |
| Income (loss)  from continuing operations: |       |                      |       |                             |       |               |       |
| Three months  ended June 30, 2009     |       | $                         | 16,263     |                             | $          | (24,616            | )          | $ | (8,353 | ) |
| Three months  ended June 30, 2008     |       | 10,162                    |       | (1,595                           | )          | 8,567              |       |
| Six months ended  June 30, 2009       |       | 29,163                    |       | (24,471                          | )          | 4,692              |       |
| Six months ended  June 30, 2008       |       | 22,935                    |       | (3,496                           | )          | 19,439             |       |
|                                       |       |                      |       |                             |       |               |       |
| Total assets                               |       |                      |       |                             |       |               |       |
| As of:                                     |       |                      |       |                             |       |               |       |
| June 30,  2009                        |       | $                         | 3,984,239  |                             | $          | 28,039             |       | $ | 4,012,278 |   |
| December 31,  2008                    |       | 4,030,724                 |       | 91,323                           |       | 4,122,047          |       |

 

Income from continuing operations represents total revenues less totalexpenses for the real estate segment and total investment income less allocatedinterest expense for the structured finance segment.  Interest costs for the structured financesegment are imputed assuming 100% leverage at SL Green’s unsecured revolvingcredit facility borrowing cost.  We donot allocate marketing, general and administrative expenses to the structuredfinance segment, since we base performance on the individual segments prior toallocating marketing, general and administrative expenses.  All other expenses, except interest, relateentirely to the real estate assets. There were no transactions between the above two segments.

 

The table belowreconciles income from continuing operations before minority interest to netincome available to common unitholders for the three and six months ended June 30,2009 and 2008 (in thousands):

 
| ** **                                                                        | ** ** | **Three Months  Ended  June 30,** | ** ** | **Three Months  Ended  June 30,** | ** ** | **Six Months  Ended  June 30,** | ** ** | **Six Months  Ended  June 30,** | ** ** |
|-----------------------------------------------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|--------------------------------------|------------|--------------------------------------|------------|
| ** **                                                                        | ** ** | **2009**                               | ** ** | **2008**                               | ** ** | **2009**                             | ** ** | **2008**                             | ** ** |
|                                                                              |       |                                   |       |                                   |       |                                 |       |                                 |       |
| Income (loss)  from continuing operations                                         |       | $                                      | (8,353     | )                                      | $          | 8,567                                |       | $                                    | 4,692      |   | $ | 19,439 |   |
| Net income  (loss) gains from discontinued operations                             |       | (16                                    | )          | 310                                    |       | (42                                  | )          | 528                                  |       |
| Net income  (loss)                                                                |       | (8,369                                 | )          | 8,877                                  |       | 4,650                                |       | 19,967                               |       |
| Net income  (loss) attributable to noncontrolling interests in other partnerships |       | (3,647                                 | )          | (3,590                                 | )          | (6,975                               | )          | (8,567                               | )          |
| Net income  (loss) attributable to ROP common unitholders                         |       | $                                      | (12,016    | )                                      | $          | 5,287                                |       | $                                    | (2,325     | ) | $ | 11,400 |   |

 

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**Tableof Contents**

** **

**RecksonOperating Partnership, L.P.**

**Notes to Condensed ConsolidatedFinancial Statements**

**(Unaudited)**

**June 30, 2009**

** **

**12. ****Related PartyTransactions**

 

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

 

Through Alliance Building Services, or Alliance, First QualityMaintenance, L.P., or First Quality, provides cleaning, extermination andrelated services, Classic Security LLC provides security services, Bright StarCouriers LLC provides messenger services, and Onyx Restoration Works provides restorationservices with respect to certain properties owned by us.  Alliance is owned by Gary Green, a son ofStephen L. Green, the chairman of our board of directors.  In addition, First Quality has thenon-exclusive opportunity to provide cleaning and related services toindividual tenants at our properties on a basis separately negotiated with anytenant seeking such additional services. We paid Alliance approximately $0.7 million, $1.3 million, $0.4 millionand $0.9 million for three and six months ended June 30, 2009 and 2008,respectively, for these services (excluding services provided directly totenants).

 

**Allocated Expenses from SL Green**

 

Subsequent to the Merger, property operating expenses include anallocation of salary and other operating costs from SL Green.  Such amount was approximately $0.9 million,$1.9 million, $0.9 million and $2.0 million for the three and six months ended June 30,2009 and 2008, respectively.

 

**Insurance**

 

Subsequent to the Merger, we obtained insurance coverage through aninsurance program administered by SL Green. In connection with this program we incurred insurance expense ofapproximately $0.7 million, $1.5 million, $0.6 million and $1.2 million for thethree and six months ended June 30, 2009 and 2008, respectively.

 

**13.  FairValue of Financial Instruments**

 

The following disclosures of estimated fair value were determined bymanagement, using available market information and appropriate valuationmethodologies.  Considerable judgment isnecessary to interpret market data and develop estimated fair value.  Accordingly, the estimates presented hereinare not necessarily indicative of the amounts we could realize on dispositionof the financial instruments.  The use ofdifferent market assumptions and/or estimation methodologies may have amaterial effect on the estimated fair value amounts.

 

Cash and cash equivalents, accounts receivable and accounts payablebalances reasonably approximate their fair values due to the short maturitiesof these items.  Mortgage note payableand the senior unsecured notes had an estimated fair value based on discountedcash flow models of approximately $0.8 billion, compared to the book value ofthe related fixed rate debt of approximately $0.9 billion.  Our structured finance investments had anestimated fair value ranging between $16.8 million and $25.2 million, which wasless than the book value at June 30, 2009.

 

Disclosure about fair value of financial instruments is based onpertinent information available to us as of June 30, 2009.  Although we are not aware of any factors thatwould significantly affect the reasonable fair value amounts, such amounts havenot been comprehensively revalued for purposes of these financial statementssince that date and current estimates of fair value may differ significantlyfrom the amounts presented herein.

 

**14. Subsequent Events**

 

We have evaluated subsequent events throughthe time of filing these consolidated financial statements with the SEC on thisQuarterly Report on Form 10-Q on August 13, 2009.

 

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

** **

**Overview**

 

Reckson Operating Partnership, L.P., or ROP,commenced operations on June 2, 1995. Since consummation of the Merger on January 25, 2007, SL GreenOperating Partnership, L.P., or the operating partnership, has owned allthe economic interests in ROP either by direct ownership or by indirectownership through its wholly-owned subsidiary Wyoming Acquisition GPLLC, or WAGP.  Reckson Associates Realty Corp., or RARC, served asthe sole general partner of ROP until November 15, 2007, atwhich time RARC withdrew and WAGP succeeded it as the sole generalpartner of ROP.   Since consummation of the Merger, RARC hasbeen a wholly-owned subsidiary of SL Green Realty Corp., or SL Green.

 

**ROP is engagedin the ownership, management, operation, leasing, financing and development ofcommercial real estate properties, principally office properties and also ownsland for future development located in the New York City, Westchester andConnecticut which collectively is also known as the New York Metro Area.  At June 30, 2009, our inventory ofdevelopment parcels aggregated approximately 81 acres of land in four separateparcels on which we can, based on estimates at June 30, 2009, developapproximately 1.1 million square feet of office space and in which we hadinvested approximately $65.1 million.  Inaddition, as of June 30, 2009, ROP also held approximately $28.0 millionof structured finance investments.**

** **

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

 

On January 25, 2007, SL Green completed the sale of certain assetsof ROP to an investment group led by certain of Reckson’s former executivemanagement for a total consideration of approximately $2.0 billion.

 

The following discussion related to our consolidated financialstatements should be read in conjunction with the financial statementsappearing in this Quarterly Report on Form 10-Q and in Item 8 of ourAnnual Report on Form 10-K for the year ended December 31, 2008.

 

As a result of the substantial change in ownership from the Merger, SLGreen has recorded the Merger in accordance with the provisions of EmergingIssues Task Force Topic D-97, “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 June 30,2009, we owned the following interests in commercial office properties in theNew York Metro Area, primarily in midtown Manhattan, a borough of New YorkCity, or Manhattan.  Our investments in the New York Metro Area alsoinclude investments in Queens, Westchester County and Connecticut, which arecollectively known as the Suburban assets:

 
| **Location** | ** ** | **Ownership**             | ** ** | **Number of  Properties** | ** ** | **Square Feet** | ** ** | **Weighted Average  Occupancy****(1)** | ** ** |
|--------------|------------|---------------------------|------------|---------------------------|------------|-----------------|------------|----------------------------------------|------------|
| Manhattan    |       | Consolidated properties   |       | 4                         |       | 3,770,000       |       | 97.0                                   | %          |
|         |       |                      |       |                      |       |            |       |                                   |       |
| Suburban     |       | Consolidated properties   |       | 16                        |       | 2,642,100       |       | 89.4                                   | %          |
|         |       | Unconsolidated properties |       | 1                         |       | 1,402,000       |       | 100.0                                  | %          |
|         |       |                      |       | 21                        |       | 7,814,100       |       | 95.0                                   | %          |

----

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

 

**Critical Accounting Policies**

 

Refer to our 2008 Annual Report on Form 10-K for a discussion ofour critical accounting policies, which include investment in commercial realestate properties, investment in unconsolidated joint ventures, revenuerecognition, allowance for doubtful accounts and reserve for possible credit losses. There have been no changes to these policies in 2009.

 

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**Results of Operations**

 

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

 

The following section compares the results ofoperations for the three months ended June 30, 2009 to the three monthsended June 30, 2008 for the 20 consolidated properties owned by ROP.

 
| **Rental Revenues (in millions)**     | ** ** | **2009** | ** ** | **2008** | ** ** | **$  Change** | ** ** | **%  Change** | ** ** |
|---------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------|------------|
| Rental revenue                        |       | $        | 71.7       |     | $          | 67.4          |       | $             | 4.3        |   | 6.4 | % |
| Escalation and reimbursement  revenue |       | 13.7     |       | 12.2     |       | 1.5           |       | 12.3          |       |
| Total                                 |       | $        | 85.4       |     | $          | 79.6          |       | $             | 5.8        |   | 7.3 | % |

 

At June 30, 2009, we estimated that thecurrent market rents on our consolidated Manhattan properties and consolidatedSuburban properties were approximately 10.1% and 1.9% higher, respectively,than then existing in-place fully escalated rents.  Approximately 2.6% of the space leased at ourconsolidated properties expires 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                          |       | 1.6      |       | 5.7      |       | (4.1          | )          | (71.9               | )          |
| Total                                                 |       | $        | 1.9        |     | $          | 6.0           |       | $                   | (4.1       | ) | (68.3 | )% |

 

Equity in net income of unconsolidated jointventure from One Court Square was flat in 2009 when compared to 2008.  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 June 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.

 

The decrease in investment and other incomeis primarily due to the average investment balance decreasing between 2008 and2009 due to the sale of certain loans. In addition, certain loans were placed on non-accrual status after June 30,2008.  There was also a reduction inlease buy-out income (approximately $3.7 million) when comparing the secondquarter of 2009 to the second quarter of 2008.

 
| **Property Operating Expenses (in millions)** | ** ** | **2009** | ** ** | **2008** | ** ** | **$  Change** | ** ** | **%  Change** | ** ** |
|-----------------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------|------------|
| Operating  expenses                           |       | $        | 18.4       |     | $          | 18.4          |       | $             | —     |   | — | % |
| Real estate  taxes                            |       | 14.2     |       | 12.7     |       | 1.5           |       | 11.8          |       |
| Ground rent                                   |       | 2.2      |       | 2.2      |       | —        |       | —        |       |
| Total                                         |       | $        | 34.8       |     | $          | 33.3          |       | $             | 1.5        |   | 4.5 | % |

 

Operating expenses were flat when compared tothe same period in the prior year.  Theincrease in real estate taxes was primarily due to higher assessed values andhigher tax rates.

 
| **Other Expenses (in millions)**               | ** ** | **2009** | ** ** | **2008** | ** ** | **$  Change** | ** ** | **%********Change** | ** ** |
|------------------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------------|------------|
| Interest  expense, net of interest income      |       | $        | 14.2       |     | $          | 19.2          |       | $                   | (5.0       | ) | (26.0 | )% |
| Depreciation and  amortization expense         |       | 23.4     |       | 23.0     |       | 0.4           |       | 1.7                 |       |
| Loan loss  reserves                            |       | 24.9     |       | 2.0      |       | 22.9          |       | 1,145.0             |       |
| Marketing,  general and administrative expense |       | 0.1      |       | (0.3     | )          | 0.4           |       | 133.3               |       |
| Total                                          |       | $        | 62.6       |     | $          | 43.9          |       | $                   | 18.7       |   | 42.6 | % |

 

The decrease in interest expense was due tothe redemption of $200.0 million of senior unsecured notes at maturity in March 2009and which bore an average interest rate of 7.75%.  We also repurchased early approximately $73.5million of certain of our senior unsecured notes since October 2008,thereby reducing our interest expense during 2009.

 

The increase in loan loss reserves wasprimarily due to the realized loss on the sale of a structured financeinvestment (approximately $24.9 million) in June 2009.

 

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***Comparison of thesix months ended June 30, 2009 to the six months ended June 30, 2008***

 

The following section compares the results ofoperations for the six months ended June 30, 2009 to the six months ended June 30,2008 for the 20 consolidated properties owned by ROP.

 
| **Rental Revenues (in millions)**     | ** ** | **2009** | ** ** | **2008** | ** ** | **$   Change** | ** ** | **%  Change** | ** ** |
|---------------------------------------|------------|----------|------------|----------|------------|---------------------|------------|---------------|------------|
| Rental revenue                        |       | $        | 141.9      |     | $          | 136.1               |       | $             | 5.8        |   | 4.3 | % |
| Escalation and  reimbursement revenue |       | 28.0     |       | 25.4     |       | 2.6                 |       | 10.2          |       |
| Total                                 |       | $        | 169.9      |     | $          | 161.5               |       | $             | 8.4        |   | 5.2 | % |

 

At June 30, 2009, we estimated that thecurrent market rents on our consolidated Manhattan properties and consolidatedSuburban properties were approximately 10.1% and 1.9% higher, respectively,than then existing in-place fully escalated rents.  Approximately 2.6% of the space leased at ourconsolidated properties expires during the remainder of 2009.

 
| **Investment and Other Income (in millions)**         | ** ** | **2009** | ** ** | **2008** | ** ** | **$  Change** | ** ** | **%********Change** | ** ** |
|-------------------------------------------------------|------------|----------|------------|----------|------------|--------------------|------------|---------------------|------------|
| Equity in net  income of unconsolidated joint venture |       | $        | 0.6        |     | $          | 0.3                |       | $                   | 0.3        |   | 100.0 | % |
| Investment and  other income                          |       | 3.0      |       | 7.3      |       | (4.3               | )          | (58.9               | )          |
| Total                                                 |       | $        | 3.6        |     | $          | 7.6                |       | $                   | (4.0       | ) | (52.6 | )% |

 

The increase in equity in net income ofunconsolidated joint venture was primarily due to higher net incomecontribution from One Court Square.  Ourjoint venture at One Court Square is net leased to a single tenant until2020.  As such, we do not anticipate muchchange in occupancy rates or net income contributions from this asset.  At June 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.

 

The decrease in investment and other incomeis primarily due to the average investment balance decreasing between 2008 and2009 due to the sale of certain loans. In addition, certain loans were placed on non-accrual status after June 30,2008.  There was also a reduction inlease buyout income (approximately $3.4 million) when comparing the six monthsended June 30, 2009 to the six months ended June 30, 2008.

 
| **Property Operating Expenses (in millions)** | ** ** | **2009** | ** ** | **2008** | ** ** | **$   Change** | ** ** | **%  Change** | ** ** |
|-----------------------------------------------|------------|----------|------------|----------|------------|---------------------|------------|---------------|------------|
| Operating  expenses                           |       | $        | 37.9       |     | $          | 37.2                |       | $             | 0.7        |   | 1.9 | % |
| Real estate  taxes                            |       | 28.6     |       | 25.3     |       | 3.3                 |       | 13.0          |       |
| Ground rent                                   |       | 4.3      |       | 4.3      |       | —              |       | —        |       |
| Total                                         |       | $        | 70.8       |     | $          | 66.8                |       | $             | 4.0        |   | 6.0 | % |

 

Operating expenses increased slightlycompared to the same period in the prior year. The increase was primarily attributable to increases in payroll, repairsand maintenance and insurance.  Theincrease in real estate taxes was primarily due to higher assessed values andhigher tax rates.

 
| **Other Expenses (in millions)**               | ** ** | **2009** | ** ** | **2008** | ** ** | **$   Change** | ** ** | **%********Change** | ** ** |
|------------------------------------------------|------------|----------|------------|----------|------------|---------------------|------------|---------------------|------------|
| Interest  expense, net of interest income      |       | $        | 29.7       |     | $          | 36.7                |       | $                   | (7.0       | ) | (19.1 | )% |
| Depreciation and  amortization expense         |       | 46.9     |       | 44.0     |       | 2.9                 |       | 6.6                 |       |
| Loan loss  reserves                            |       | 24.9     |       | 2.0      |       | 22.9                |       | 1,145.0             |       |
| Marketing,  general and administrative expense |       | 0.2      |       | 0.2      |       | —              |       | —              |       |
| Total                                          |       | $        | 101.7      |     | $          | 82.9                |       | $                   | 18.8       |   | 22.7 | % |

 

The decrease in interest expense was due tothe redemption of $200.0 million of senior unsecured notes at maturity in March 2009and which bore an average interest rate of 7.75%.  We also repurchased early approximately $73.5million of certain of our senior unsecured notes since October 2008,thereby reducing our interest expense during 2009.

 

The increase in loan loss reserves wasprimarily due to the realized loss on sale of a structured finance investment(approximately $24.9 million) in June 2009.

 

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**Liquidity and Capital Resources**

 

We are currently experiencing a globaleconomic downturn and credit crunch.  Asa result, many financial industry participants, including commercial realestate owners, operators, investors and lenders continue to find it extremelydifficult to obtain cost-effective debt capital to finance new investment activityor to refinance maturing debt.  In thefew instances in which debt is available, it is at a cost much higher than inthe 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,specifically our cash flow from operations, are adequate for us to meet ourshort-term and long-term liquidity requirements for the foreseeable future.

 

On January 25, 2007, we were acquired by SLGreen. See Item 2 “Management’s Discussion and Analysis — Liquidity andCapital Resources” in SL Green’s Quarterly Report on Form 10-Q for thequarter ended June 30, 2009 for a complete discussion of additionalsources of liquidity available to us due to our indirect ownership by SL Green.

 

#### **CashFlows**

#### ** **

**The following summary discussionof our cash flows is based on our condensed consolidated statements of cashflows in “Item 1. Financial Statements” and is not meant to be an all-inclusivediscussion of the changes in our cash flows for the periods presented below.**

** **

Cash and cash equivalents were $21.3 millionand $16.6 million at June 30, 2009 and 2008, respectively, representing anincrease of $4.7 million.  The increasewas a result of the following increases and decreases in cash flows (inthousands):

 
| ** **                                          | ** ** | **Six Months Ended June 30,** | ** ** |
|-----------------------------------------------------|------------|------------------------------------|------------|
| ** **                                          | ** ** | **2009**                           | ** ** | **2008** | ** ** | **Increase********(Decrease)** | ** ** |
| ** **                                          | ** ** | ** **                         | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net cash provided by operating activities           |       | $                                  | 46,646     |   | $ | 27,933 |   | $ | 18,713 |   |
| Net cash provided by (used in) investing activities |       | $                                  | 28,149     |   | $ | (2,443 | ) | $ | 30,592 |   |
| Net cash used in financing activities               |       | $                                  | (76,641    | ) | $ | (25,402 | ) | $ | (51,239 | ) |

 

**Our principal source of operatingcash flow is related to the leasing and operating of the properties in ourportfolio. Our properties provide a relatively consistent stream of cash flowthat provides us with resources to pay operating expenses, debt service andfund quarterly dividend and distribution payment requirements. At June 30,2009, our portfolio was 95.0% occupied. In addition, rental rates on our new leasescontinue to increase in the Manhattan and Suburban marketplaces. Our structuredfinance and joint venture investments also provide a steady stream of operatingcash flow to us.**

** **

**Cash isused in investing activities to fund acquisitions, redevelopment projects andrecurring and nonrecurring capital expenditures. We selectively invest inexisting buildings that meet our investment criteria.  During the six months ended June 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 |   | $      | (7,797 | ) |
|-----------------------------------------------|--------|--------|--------|---|
| Distributions from joint ventures             |   | (156   | )      |
| Other investing activities                    |   | (71    | )      |
| Structured finance investments                |   | 38,616 |   |

** **

**We generally fund our investmentactivity through property-level financing and asset sales.  During the six months ended June 30,2009, compared to the same period in the prior year, we used our funds tocomplete the following financing activities (in thousands):**

** **
| Repayments under our debt obligations        |   | $       | (268,588 | ) |
|----------------------------------------------|--------|---------|----------|---|
| Contributions from common unitholders        |   | 268,680 |     |
| Distributions and other financing activities |   | (51,331 | )        |

 

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**Capitalization**

** **

Prior to the Merger, a Class A common unit and a share of commonstock of RARC had similar economic characteristics as they effectively shareequally in the net income or loss and distributions of ROP.  As of January 25, 2007, all of ourissued and outstanding Class A common units were owned by RARC.  In connection with the Merger, RARC assignedall of its interest in the Class A common units to WAGP and the operatingpartnership.  On November 15, 2007,RARC withdrew, and WAGP succeeded it, as the sole general partner of ROP. Allof our issued and outstanding Class A common units were owned by WAGP orthe operating partnership.

 

As of December 31, 2006, we had issued and outstanding 1,200preferred units of limited partnership interest, or Preferred Units, with aliquidation preference value of $1,000 per unit and a stated distribution rateof 7.0% which was subject to reduction based upon terms of their initialissuance.  The terms of the PreferredUnits provided for this reduction in distribution rate in order to address theeffect of certain mortgages with above market interest rates which were assumedby us in connection 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.

 

**Contractual Obligations**

 

Combined aggregate principal maturities of mortgages payable and seniorunsecured notes (net of discount), our share of joint venture debt, excludingextension options, estimated interest expense, and our obligations under ourground leases, as of June 30, 2009 are as follows (in thousands):

 
| ** **                 | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **2013** | ** ** | **Thereafter** | ** ** | **Total** | ** ** |
|----------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------------|------------|-----------|------------|
| Property mortgages         |       | $        | 2,286      |     | $          | 4,225    |       | $        | 219,879    |     | $          | —         |       | $         | —     |   | $ | — |   | $ | 226,390 |   |
| Senior unsecured notes     |       | —   |       | 135,336  |       | 123,607  |       | —   |       | —   |       | 424,710        |       | 683,653   |       |
| Ground leases              |       | 5,069    |       | 9,698    |       | 7,724    |       | 7,593    |       | 7,593    |       | 254,831        |       | 292,508   |       |
| Estimated interest expense |       | 39,600   |       | 49,771   |       | 36,083   |       | 25,347   |       | 25,347   |       | 45,744         |       | 221,892   |       |
| Joint venture debt         |       | —   |       | —   |       | —   |       | —   |       | —   |       | 94,500         |       | 94,500    |       |
| Total                      |       | $        | 46,955     |     | $          | 199,030  |       | $        | 387,293    |     | $          | 32,940         |       | $         | 32,940     |   | $ | 819,785 |   | $ | 1,518,943 |   |

 

**Senior Unsecured Notes**

 

The following table sets forth our senior unsecured notes and otherrelated disclosures by scheduled maturity 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       |       | 274,710                    |       | 6.00                   | %          | 10                   |       | March 31, 2016  |                  |
| June 27, 2005 (3)    |       | 135,336                    |       | 4.00                   | %          | 20                   |       | June 15, 2025   |                  |
|                      | ** ** | $                          | 683,653    |                   |       |                 |       |                 |                  |   |

----

| (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 six months ended June 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 six months ended June 30, 2009, we repurchased approximately $47.1  million of these notes and realized net gains on early extinguishment of debt  of approximately $1.2 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.

 

**Restrictive Covenants**

 

The terms of our seniorunsecured notes include certain restrictions and covenants which limit, amongother things, the incurrence of additional indebtedness and liens, and whichrequire compliance with financial ratios relating to the minimum amount of debtservice coverage, the maximum amount of consolidated unsecured and securedindebtedness and the minimum amount of unencumbered assets.  As of June 30, 2009 and December 31,2008, we were in compliance with all such covenants.

 

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**Market Rate Risk**

 

We are not exposed tochanges in interest rates as we have no floating rate borrowing arrangements.

 

All of our long-term debt, totaling approximately $0.9 billion, bearsinterest at fixed rates, and therefore the fair value of these instruments isaffected by changes in the market interest rates.

 

**Off-Balance Sheet Arrangements**

 

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

 

**Capital Expenditures**

 

We estimate that for the six months ending December 31, 2009, wewill incur approximately $17.2 million of capital expenditures (includingtenant improvements and leasing commissions) on consolidated properties andnone at our joint venture property.  Weexpect to fund these capital expenditures with operating cash flow, borrowingsunder SL Green’s credit facility and cash on hand.  We believe that we will have sufficientresources to satisfy our capital needs during the next 12-month period.

 

Thereafter, we expect that our capital needs will be met through acombination of net cash provided by operations, borrowings, potential assetsales or additional equity or debt issuances by SL Green.

 

**Related Party Transactions**

 

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

 

Through Alliance Building Services, or Alliance, First QualityMaintenance, L.P., or First Quality, provides cleaning, extermination andrelated services, Classic Security LLC provides security services, Bright StarCouriers LLC provides messenger services, and Onyx Restoration Works providesrestoration services with respect to certain properties owned by us.  Alliance is owned by Gary Green, a son ofStephen L. Green, the chairman of our board of directors.  In addition, First Quality has thenon-exclusive opportunity to provide cleaning and related services toindividual tenants at our properties on a basis separately negotiated with anytenant seeking such additional services. We paid Alliance approximately $0.7 million, $1.3 million, $0.4 millionand $0.9 million for three and six months ended June 30, 2009 and 2008,respectively, for these services (excluding services provided directly totenants).

 

**Allocated Expenses from SL Green**

 

Subsequent to the Merger, property operating expenses include anallocation of salary and other operating costs from SL Green.  Such amount was approximately $0.9 million,$1.9 million, $0.9 million and $2.0 million for the three and six months ended June 30,2009 and 2008, respectively.

 

**Insurance**

 

SL Green maintains “all-risk” property and rental value coverage(including coverage regarding the perils of flood, earthquake and terrorism)within two property insurance portfolios and liability insurance. This includesthe ROP assets. The first property portfolio maintains a blanket limit of$600.0 million per occurrence for the majority of the New York Cityproperties in our portfolio with a sub-limit of $450.0 million for acts ofterrorism. The second portfolio maintains a limit of $600.0 million peroccurrence, including terrorism, for a few New York City properties and themajority of the Suburban properties.  Both property policies expire on December 31,2009.  Additional coverage may be purchased on a stand alone basis forcertain assets.  The liability policiescover all our properties and provide limits of $200.0 million perproperty.  The liability policies expire on October 31, 2009.

 

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In October 2006, SL Green formed a wholly-owned taxable REITsubsidiary, Belmont Insurance Company, or Belmont, to act as a captiveinsurance company and be one of the elements of our overall insurance program Belmontwas formed in an effort to, among other reasons, stabilize to some extent thefluctuations of insurance market conditions. Belmont is licensed in New York towrite Terrorism, NBCR (nuclear, biological, chemical, and radiological),General Liability 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 December 31,2008, Belmont increased its terrorism coverage from $50 million to $250 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 $250,000 deductible per occurrence and a$2.4 million annual aggregate stop loss limit. SL Green has secured an excessinsurer to protect against catastrophic liability losses above the $250,000deductible per occurrence and a stop loss if aggregate claims exceed $2.4million.  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.

 

·      D&O: Effective August 10, 2008, a directors and officers liabilitypolicy was added by Belmont to provide reimbursement for SEC claims reducingthe deductible from $2,500,000 to $1,000,000.

 

TRIA, which was enacted in November 2002, was renewed on December 31,2007. Congress extended TRIA, now called TRIPRA (Terrorism Risk InsuranceProgram Reauthorization and Extension Act of 2007) until December 31,2014. The law extends the federal Terrorism Insurance Program that requiresinsurance companies to offer terrorism coverage and provides for compensationfor insured losses resulting from acts of foreign and domestic terrorism. Ourdebt instruments, consisting of mortgage loans secured by our properties (whichare generally non-recourse to us), mezzanine loans, ground leases and SL Green’s2007 unsecured revolving credit facility, contain customary covenants requiringus to maintain insurance. There can be no assurance that the lenders or groundlessors under these instruments will not take the position that a total orpartial exclusion from “all-risk” insurance coverage for losses due to terroristacts is a breach of these debt and ground lease instruments that allows thelenders or ground lessors to declare an event of default and acceleraterepayment of debt or recapture of ground lease positions. In addition, iflenders insist on full coverage for these risks and prevail in asserting thatwe are required to maintain such coverage, it could result in substantiallyhigher insurance premiums.

 

Subsequent to the Merger, we obtained insurance coverage through aninsurance program administered by SL Green. In connection with this program we incurred insurance expense ofapproximately $0.7 million, $1.5 million, $0.6 million and $1.2 million for thethree and six months ended June 30, 2009 and 2008, respectively.

 

**Recently Issued AccountingPronouncements**

 

The Recently Issued Accounting Pronouncementsare discussed in Note 2, “Significant Accounting Policies-Recently IssuedAccounting Pronouncements” in the accompanying financial statements.

 

**Inflation**

 

Substantially all of the office leasesprovide for separate real estate tax and operating expense escalations as wellas operating expense recoveries based on increases in the Consumer Price Indexor other measures such as porters’ wage. In addition, many of the leases provide for fixed base rent increases.  We believe that inflationary increases may beat least partially offset by the contractual rent increases and expenseescalations described above.

 

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**Forward-Looking Statement**

 

This report includes certain statements that may be deemed to be “forward-lookingstatements” within the meaning of the Private Securities Litigation Reform Actof 1995 and are intended to be covered by the safe harbor provisionsthereof.  All statements, other thanstatements of historical facts, included in this report that addressactivities, events or developments that we expect, believe or anticipate willor may occur in the future, including such matters as future capitalexpenditures, dividends and acquisitions (including the amount and naturethereof), development trends of the real estate industry and the Manhattan,Westchester County, Connecticut, Long Island and New Jersey office markets,business strategies, expansion and growth of our operations and other similarmatters, are forward-looking statements. These forward-looking statements arebased on certain assumptions and analyses made by us in light of our experienceand our perception of historical trends, current conditions, expected futuredevelopments and other factors we believe are appropriate.

 

Forward-looking statements are not guarantees of future performance andactual results or developments may materially differ, and we caution you not toplace undue reliance on such statements. Forward-looking statements are generally identifiable by the use of thewords “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,”“project,” “continue,” or the negative of these words, or other similar wordsor terms.

 

Forward-looking statements contained in this report is subject to anumber of risks and uncertainties which may cause our actual results,performance or achievements to be materially different from future results,performance or achievements expressed or implied by forward-looking statementsmade by us.  These risks anduncertainties include:

 

·      the effect of the credit crisis ongeneral economic, business and financial conditions, and on the New York Metroreal estate market in particular;

·      dependence upon certain geographicmarkets;

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

·      risks relating to structured finance investments;

·      availability and creditworthiness ofprospective tenants and borrowers;

·      bankruptcy or insolvency of a majortenant or a significant number of smaller tenants;

·      adverse changes in the real estatemarkets, including reduced demand for office space, increasing vacancy, andincreasing availability of sublease space;

·      availability of capital (debt andequity);

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

·      our ability to comply with financial covenantsin our debt instruments;

·      our ability to maintain our status as aREIT;

·      risks of investing through joint venturestructures, including the fulfillment by our partners of their financialobligations;

·      the continuing threat of terroristattacks, in particular in the New York Metro Area and on our tenants;

·      our ability to obtain adequate insurancecoverage at a reasonable cost and the potential for losses in excess of ourinsurance coverage, including as a result of environmental contamination; and

·      legislative, regulatory and/or safetyrequirements adversely affecting REITs and the real estate business, includingcosts of compliance with the Americans with Disabilities Act, the Fair HousingAct and other similar laws and regulations.

 

Other factors and risks to our business, many of which are beyond ourcontrol, are described in our filings with the Securities and ExchangeCommission.  We undertake no obligationto publicly update or revise any forward-looking statements, whether as aresult of future events, new information or otherwise.

 

The risks included here are not exhaustive.  Other sections of this report and our AnnualReport on Form 10-K for the year ended December 31, 2008 may includeadditional factors that could adversely affect ROP’s business and financialperformance.  In addition, sections of SLGreen’s Annual Report on Form 10-K/A No. 2 for the year ended December 31,2008 contains additional factors that could adversely effect our business andfinancial performance.  Moreover, ROP operatesin a very competitive and rapidly changing environment.  New risk factors emerge from time to time andit is not possible for management to predict all such risk factors, nor can itassess the impact of all such risk factors on ROP’s business or the extent towhich any factor, or combination of factors, may cause actual results to differmaterially from those contained in any forward-looking statements.  Given these risks and uncertainties,investors should not place undue reliance on forward-looking statements as aprediction of actual results.

 

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

 

For quantitative and qualitative disclosures about market risk, seeitem 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of ourAnnual Report on Form 10-K for the year ended December 31, 2008.  Our exposures to market risk have not changedmaterially since December 31, 2008.

 

**ITEM 4T.  Controls and Procedures**

** **

**Evaluation of Disclosure Controls and Procedures**

** **

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

 

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

 

We are not currently required to comply with Section 404(Management’s Annual Report on Internal Control Over Financial Reporting) ofthe Sarbanes-Oxley Act of 2002 because we are not an “accelerated filer,” asdefined by Rule 12b-2 under the Exchange Act.  We are in the process of continuouslyimproving our internal controls over financial reporting processes andprocedures for our financial reporting so that our management can report onthese processes and procedures when required to do so.

 

**Changes in Internal Control over Financial Reporting**

** **

There have been nosignificant changes in our internal control over financial reporting during thequarter ended June 30, 2009, that has materially affected, or isreasonably likely to material affect, our internal control over financialreporting.

 
| **PART II**                                                                                                                                                                                                                                                                                                     | ** ** | **OTHER INFORMATION**                                            |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                 |       |                                                             |
| **ITEM 1.**                                                                                                                                                                                                                                                                                                          | ** ** | **LEGAL PROCEEDINGS**                                            |
|                                                                                                                                                                                                                                                                                                                 |       |                                                             |
| As of June 30, 2009, we were not involved in  any material litigation nor, to management’s knowledge, is any material  litigation threatened against us or our portfolio other than routine  litigation arising in the ordinary course of business or litigation that is  adequately covered by insurance. |
|                                                                                                                                                                                                                                                                                                                 |       |                                                             |
| **ITEM 1A.**                                                                                                                                                                                                                                                                                                         | ** ** | **RISK FACTORS**                                                 |
|                                                                                                                                                                                                                                                                                                                 |       |                                                             |
| We encourage you to read “Item 1A of  Part 1-Risk Factors” in the Annual Reports on Form 10-K for ROP and  Form 10-K/A No. 2 for SL Green Realty Corp., our 100% indirect  parent company.                                                                                             |
|                                                                                                                                                                                                                                                                                                                 |       |                                                             |
| There have been no material changes to the risk  factors disclosed in Item 1A of Part 1 in the above-mentioned Annual  Reports on Form 10-K for the year ended December 31, 2008.                                                                                                                     |
|                                                                                                                                                                                                                                                                                                                 |       |                                                             |
| **ITEM 2.**                                                                                                                                                                                                                                                                                                          | ** ** | **UNREGISTERED SALES OF EQUITY SECURITIES AND USE  OF PROCEEDS** |
|                                                                                                                                                                                                                                                                                                                 |       |                                                             |
|                                                                                                                                                                                                                                                                                                                 |       | None                                                             |
|                                                                                                                                                                                                                                                                                                                 |       |                                                             |
| **ITEM 3.**                                                                                                                                                                                                                                                                                                          | ** ** | **DEFAULTS UPON SENIOR SECURITIES**                              |
|                                                                                                                                                                                                                                                                                                                 |       |                                                             |
|                                                                                                                                                                                                                                                                                                                 |       | None                                                             |

 

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

 

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**SIGNATURES**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

 
|                                  | RECKSON OPERATING PARTNERSHIP, L.P. |
|---------------------------------------|-------------------------------------|
|                                  | By: WYOMING ACQUISITION GP LLC      |
|                                  |                                |   |
|                                  |                                |   |
|                                  | By:                                 | /s/ Gregory F. Hughes |
|                                  |                                | Gregory F. Hughes |
|                                  |                                | Treasurer |
|                                  |                                |   |
|                                  |                                |   |
| Date:  August 13, 2009 |                                |   |

 

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