**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

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**FORM 10-Q**

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| x          | ** ** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF**  |
|------------|------------|-----------------------------------------------------------|
| ** ** |       | **THE SECURITIES EXCHANGE ACT OF 1934**                   |
| ** ** |       | ** **                                                |
| ** ** |       |                                                      | **For the  quarterly period ended June 30, 2007** |   |
| ** ** |       | ** **                                                |
| o          | ** ** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF** |
| ** ** |       | **THE SECURITIES EXCHANGE ACT OF 1934**                   |

 

**For thetransition 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  principal executive offices) (Zip Code)       |
|                                                       |       |                 |
| **(212)  594-2700**                                        |
| (Registrant’s  telephone number, including area code) |

 

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.  YES x     NO o

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer,or a non-accelerated filer.  Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2 ofthe Exchange Act.

| Large accelerated filer o | Accelerated  filer o | Non-accelerated  filer x |
|--------------------------------|---------------------------|-------------------------------|

 

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

As of June 30, 2007, nocommon units of limited partnership interest of the Registrant were held bynon-affiliates of the Registrant.  Thereis no established trading market for such units.

 

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** **

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

**INDEX**
| **PART I.**                                                                                                                                                                                                                                                                                                    | **FINANCIAL  INFORMATION**                                                                      |     | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------|----------|------------|
|                                                                                                                                                                                                                                                                                                           |                                                                                            |     | ** ** |
| **ITEM  1.**                                                                                                                                                                                                                                                                                                   | **FINANCIAL  STATEMENTS**                                                                       |     | ** ** |
|                                                                                                                                                                                                                                                                                                                |                                                                                            | **PAGE** |
|                                                                                                                                                                                                                                                                                                           |                                                                                            |     |
| Condensed Consolidated Balance Sheets as of June 30,  2007 (Successor) (unaudited) and December 31, 2006 (Predecessor)                                                                                                                                                                                         |                                                                                            | 3        |
|                                                                                                                                                                                                                                                                                                           |                                                                                            |     |
| Condensed Consolidated Statements of Operations for  the three months ended June 30, 2007 (Successor) and the period January 26,  2007 to June 30, 2007 (Successor), the period January 1, 2007 to January 25,  2007 (Predecessor) and the three and six months ended June 30, 2006  (Predecessor) (unaudited) |                                                                                            | 4        |
|                                                                                                                                                                                                                                                                                                           |                                                                                            |     |
| Condensed Consolidated Statements of Cash Flows for  the six months ended June 30, 2007 (Successor) and the six months ended June  30, 2006 (Predecessor) (unaudited)                                                                                                                                          |                                                                                            | 5        |
|                                                                                                                                                                                                                                                                                                           |                                                                                            |     |
| Notes to Condensed Consolidated Financial Statements  (unaudited)                                                                                                                                                                                                                                              |                                                                                            | 6        |
|                                                                                                                                                                                                                                                                                                           |                                                                                            |     |
| **ITEM 2.**                                                                                                                                                                                                                                                                                                    | **MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF OPERATIONS** |     | 16         |
|                                                                                                                                                                                                                                                                                                           |                                                                                            |     |
| **ITEM 3.**                                                                                                                                                                                                                                                                                                    | **QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET  RISK**                                 |     | 23         |
| ** **                                                                                                                                                                                                                                                                                                     | ** **                                                                                      |     |       |
| **ITEM 4T.**                                                                                                                                                                                                                                                                                                   | **CONTROLS AND PROCEDURES**                                                                     |     | 23         |
| ** **                                                                                                                                                                                                                                                                                                     | ** **                                                                                      |     |       |
| **PART II.**                                                                                                                                                                                                                                                                                                   | **OTHER INFORMATION**                                                                           |     | 24         |
| ** **                                                                                                                                                                                                                                                                                                     | ** **                                                                                      |     |       |
| **ITEM 1.**                                                                                                                                                                                                                                                                                                    | **LEGAL PROCEEDINGS**                                                                           |     | 24         |
| ** **                                                                                                                                                                                                                                                                                                     | ** **                                                                                      |     |       |
| **ITEM  1A.**                                                                                                                                                                                                                                                                                                  | **RISK FACTORS**                                                                                |     | 25         |
| ** **                                                                                                                                                                                                                                                                                                     | ** **                                                                                      |     |       |
| **ITEM 2.**                                                                                                                                                                                                                                                                                                    | **UNREGISTERED SALES  OF EQUITY SECURITIES AND USE OF PROCEEDS**                                |     | 32         |
| ** **                                                                                                                                                                                                                                                                                                     | ** **                                                                                      |     |       |
| **ITEM 3.**                                                                                                                                                                                                                                                                                                    | **DEFAULTS UPON SENIOR  SECURITIES**                                                            |     | 32         |
| ** **                                                                                                                                                                                                                                                                                                     | ** **                                                                                      |     |       |
| **ITEM 4.**                                                                                                                                                                                                                                                                                                    | **SUBMISSION OF  MATTERS TO A VOTE OF SECURITY HOLDERS**                                        |     | 32         |
| ** **                                                                                                                                                                                                                                                                                                     | ** **                                                                                      |     |       |
| **ITEM 5.**                                                                                                                                                                                                                                                                                                    | **OTHER INFORMATION**                                                                           |     | 32         |
| ** **                                                                                                                                                                                                                                                                                                     | ** **                                                                                      |     |       |
| **ITEM 6.**                                                                                                                                                                                                                                                                                                    | **EXHIBITS**                                                                                    |     | 32         |
| ** **                                                                                                                                                                                                                                                                                                     | ** **                                                                                      |     |       |
| **Signatures**                                                                                                                                                                                                                                                                                                 | ** **                                                                                      |     | 34         |

 

2

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**PART I.****                                                                            FINANCIALINFORMATION**

###### **ITEM1.****                                                                             FinancialStatements**

**Reckson OperatingPartnership, L.P.**

**Condensed Consolidated Balance Sheets**

**(Amounts in thousands)**
| ** **                                                                                      | ** ** | **June 30,  2007** | ** **    | ** ** | ** ** | **December 31,  2006** | ** ** |
|-------------------------------------------------------------------------------------------------|------------|-------------------------|---------------|------------|------------|-----------------------------|------------|
| ** **                                                                                      | ** ** | **(Successor)**         | ** **    | ** ** | ** ** | **(Predecessor)**           | ** ** |
| **Assets**                                                                                      | ** ** | **(Unaudited)**         | ** **    | ** ** | ** ** | ** **                  | ** ** |
| Commercial real estate  properties, at cost:                                                    |       |                    |          |       |       |                        |       |
| Land and land interests                                                                         | ** ** | **$**                   | **649,516**   |       |       |                        | $          | 559,325 |   |
| Building and  improvements                                                                      | ** ** | **3,080,967**           |          |       |       | 3,090,549                   |       |
| ** **                                                                                      | ** ** | **3,730,483**           |          |       |       | 3,649,874                   |       |
| Less: accumulated  depreciation                                                                 | ** ** | **(32,444**             | **)**         |       |       | (644,771                    | )          |
| ** **                                                                                      | ** ** | **3,698,039**           |          |       |       | 3,005,103                   |       |
| Cash and cash  equivalents                                                                      | ** ** | **12,213**              |          |       |       | 51,192                      |       |
| Restricted cash                                                                                 | ** ** | **8,449**               |          |       |       | 19,982                      |       |
| Tenant and other  receivables, net of allowance of $106 and none in 2007 and 2006, respectively | ** ** | **9,842**               |          |       |       | 13,611                      |       |
| Deferred rents  receivable                                                                      | ** ** | **9,063**               |          |       |       | 155,256                     |       |
| Structured finance  investments                                                                 | ** ** | **107,473**             |          |       |       | 198,454                     |       |
| Investments in  unconsolidated joint ventures                                                   | ** ** | **63,582**              |          |       |       | 53,390                      |       |
| Deferred costs, net                                                                             | ** ** | **827**                 |          |       |       | 88,089                      |       |
| Other assets                                                                                    | ** ** | **41,987**              |          |       |       | 161,754                     |       |
| Total assets                                                                                    | ** ** | **$**                   | **3,951,475** |       |       |                        | $          | 3,746,831 |   |
|                                                                                            | ** ** | ** **              |          |       |       |                        |       |
| **Liabilities and Partners’  Capital**                                                     |       |                    |          |       |       |                        |       |
| Mortgage notes payable                                                                          | ** ** | **$**                   | **233,359**   |       |       |                        | $          | 418,613 |   |
| Revolving credit  facility                                                                      | ** ** | **—**              |          |       |       | 269,000                     |       |
| Unsecured notes                                                                                 | ** ** | **1,056,782**           |          |       |       | 1,255,187                   |       |
| Accrued interest  payable and other liabilities                                                 | ** ** | **27,412**              |          |       |       | 20,585                      |       |
| Accounts payable and  accrued expenses                                                          | ** ** | **44,935**              |          |       |       | 142,093                     |       |
| Deferred revenue/gain                                                                           | ** ** | **—**              |          |       |       | 53,590                      |       |
| Deferred land leases  payable                                                                   | ** ** | **—**              |          |       |       | 10,457                      |       |
| Dividend and  distributions payable                                                             | ** ** | **—**              |          |       |       | 36,839                      |       |
| Security deposits                                                                               | ** ** | **5,949**               |          |       |       | 19,217                      |       |
| Total  liabilities                                                                              | ** ** | **1,368,437**           |          |       |       | 2,225,581                   |       |
|                                                                                            | ** ** | ** **              |          |       |       |                        |       |
| Commitments and  Contingencies                                                                  | ** ** | **—**              |          |       |       | —                      |       |
| Minority interests in  other partnerships                                                       | ** ** | **400,114**             |          |       |       | 259,736                     |       |
|                                                                                            | ** ** | ** **              |          |       |       |                        |       |
| **Partners’ Capital**                                                                      | ** ** | ** **              |          |       |       |                        |       |
| Preferred Capital                                                                               | ** ** | **—**              |          |       |       | 1,200                       |       |
| General Partner Capital                                                                         | ** ** | **2,182,924**           |          |       |       | 1,241,985                   |       |
| Limited Partner Capital                                                                         | ** ** | **—**              |          |       |       | 16,513                      |       |
| Accumulated other  comprehensive income                                                         | ** ** | **—**              |          |       |       | 1,816                       |       |
| Total Partners’  Capital                                                                   | ** ** | **2,182,924**           |          |       |       | 1,261,514                   |       |
| Total Liabilities and  Partners’ Capital                                                   | ** ** | **$**                   | **3,951,475** |       |       |                        | $          | 3,746,831 |   |

 

Theaccompanying notes are an integral part of these financial statements.

3

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**Reckson OperatingPartnership, L.P.**

**Condensed Consolidated Statements of Operations**

**(Unaudited, and amounts in thousands)**
| ** **                                                                                                                                                            | ** ** | **Three months  ended June 30,** | ** ** | **Period  January 26  to June 30,** | ** ** | ** ** | ** ** | **Period  January 1 to  January 25,** | ** ** | **Three months  ended June 30,** | ** ** | **Six Months  ended June 30,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|----------------------------------------------------|------------|------------|------------|------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                                                                                                            | ** ** | **2007**                                        | ** ** | **2007**                                           | ** ** | ** ** | ** ** | **2007**                                             | ** ** | **2006**                                        | ** ** | **2006**                                      | ** ** |
| **Revenues**                                                                                                                                                          | ** ** | **(Sucessor)**                                  | ** ** | **(Successor)**                                    | ** ** | ** ** | ** ** | **(Predeccessor)**                                   | ** ** | **(Predecessor)**                               | ** ** | **(Predeccessor)**                            | ** ** |
| Rental revenue,  net                                                                                                                                                  |       | $                                               | 64,439     |                                               | $          | 111,123    |       |                                                 |       | $                                               | 21,821     |                                          | $          | 66,697 |   | $ | 134,032 |   |
| Escalation and  reimbursement                                                                                                                                         |       | 12,813                                          |       | 22,532                                             |       |       |       | 3,728                                                |       | 13,800                                          |       | 26,128                                        |       |
| Investment  income                                                                                                                                                    |       | 6,495                                           |       | 9,946                                              |       |       |       | 1,201                                                |       | 4,724                                           |       | 10,330                                        |       |
| Other income                                                                                                                                                          |       | 455                                             |       | 467                                                |       |       |       | —                                               |       | 1,748                                           |       | 13,907                                        |       |
| Total revenues                                                                                                                                                        |       | 84,202                                          |       | 144,068                                            |       |       |       | 26,750                                               |       | 86,969                                          |       | 184,397                                       |       |
| **Expenses**                                                                                                                                                          |       |                                            |       |                                               |       |       |       |                                                 |       |                                            |       |                                          |       |
| Operating  expenses                                                                                                                                                   |       | 17,853                                          |       | 30,888                                             |       |       |       | 6,921                                                |       | 17,194                                          |       | 36,897                                        |       |
| Real estate  taxes                                                                                                                                                    |       | 13,061                                          |       | 22,842                                             |       |       |       | 4,744                                                |       | 14,269                                          |       | 28,312                                        |       |
| Ground rent                                                                                                                                                           |       | 2,560                                           |       | 4,418                                              |       |       |       | 699                                                  |       | 1,981                                           |       | 4,107                                         |       |
| Interest                                                                                                                                                              |       | 18,076                                          |       | 32,528                                             |       |       |       | 6,728                                                |       | 24,147                                          |       | 49,550                                        |       |
| Amortization of  deferred financing costs                                                                                                                             |       | —                                          |       | —                                             |       |       |       | 152                                                  |       | 1,017                                           |       | 2,139                                         |       |
| Depreciation and  amortization                                                                                                                                        |       | 18,637                                          |       | 32,491                                             |       |       |       | 5,311                                                |       | 19,338                                          |       | 38,292                                        |       |
| Merger related  costs                                                                                                                                                 |       | —                                          |       | —                                             |       |       |       | 8,814                                                |       | —                                          |       | —                                        |       |
| Marketing,  general and administrative                                                                                                                                |       | 252                                             |       | 283                                                |       |       |       | 5,347                                                |       | 9,570                                           |       | 20,410                                        |       |
| Total expenses                                                                                                                                                        |       | 70,439                                          |       | 123,450                                            |       |       |       | 38,716                                               |       | 87,516                                          |       | 179,707                                       |       |
| Income (loss)  from continuing operations before equity in net income from unconsolidated  joint venture, gain on sale, minority interest and discontinued operations |       | 13,763                                          |       | 20,618                                             |       |       |       | (11,966                                              | )          | (547                                            | )          | 4,690                                         |       |
| Equity in net  income from unconsolidated joint venture                                                                                                               |       | 301                                             |       | 531                                                |       |       |       | 8                                                    |       | 1,815                                           |       | 2,211                                         |       |
| Income (loss)  from continuing operations before minority interest, gain on sale and  discontinued operations                                                         |       | 14,064                                          |       | 21,149                                             |       |       |       | (11,958                                              | )          | 1,268                                           |       | 6,901                                         |       |
| Gain on sale of  real estate                                                                                                                                          |       | —                                          |       | —                                             |       |       |       | —                                               |       | —                                          |       | 35,393                                        |       |
| Minority  interest in other partnerships                                                                                                                              |       | (3,285                                          | )          | (4,166                                             | )          |       |       | (1,665                                               | )          | (3,923                                          | )          | (8,032                                        | )          |
| Income (loss)  from continuing operations                                                                                                                             |       | 10,779                                          |       | 16,983                                             |       |       |       | (13,623                                              | )          | (2,655                                          | )          | 34,262                                        |       |
| Income from  discontinued operations, net                                                                                                                             |       | —                                          |       | —                                             |       |       |       | 2,520                                                |       | 23,047                                          |       | 35,794                                        |       |
| Gain on sale of  real estate from discontinued operations                                                                                                             |       | —                                          |       | —                                             |       |       |       | —                                               |       | —                                          |       | 9,518                                         |       |
| Net income  (loss) available to common unitholders                                                                                                                    |       | $                                               | 10,779     |                                               | $          | 16,983     |       |                                                 |       | $                                               | (11,103    | )                                             | $          | 20,392 |   | $ | 79,574 |   |

 

The accompanying notes are an integral part of thesefinancial statements.

4

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**Reckson OperatingPartnership, L.P.**

**Condensed Consolidated Statements of Cash Flows**

**(Unaudited, and amounts in thousands)**
| ** **                                                                         | ** ** | **Six Months  Ended June 30,** | ** ** | **Six Months  Ended June 30,** | ** ** |
|------------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                         | ** ** | **2007**                                      | ** ** | **2006**                                      | ** ** |
| ** **                                                                         | ** ** | **(Successor)**                               | ** ** | **(Predecessor)**                             | ** ** |
| **Operating  Activities**                                                          |       |                                          |       |                                          |       |
| Net income                                                                         |       | $                                             | 5,880      |                                          | $          | 79,574 |   |
| Adjustment to  reconcile net income to net cash provided by operating activities:  |       |                                          |       |                                          |       |
| Non-cash adjustments related to income from  discontinued operations               |       | 4,032                                         |       | 31,498                                        |       |
| Depreciation and amortization                                                      |       | 37,802                                        |       | 40,431                                        |       |
| Gain on sale of real estate                                                        |       | —                                        |       | (44,982                                       | )          |
| Equity in net income from unconsolidated joint  venture                            |       | (539                                          | )          | (1,870                                        | )          |
| Distributions of cumulative earnings from  unconsolidated joint venture            |       | 539                                           |       | —                                        |       |
| Sale of option to acquire joint venture interest                                   |       | —                                        |       | (9,016                                        | )          |
| Minority interest in other partnerships                                            |       | 5,831                                         |       | 8,032                                         |       |
| Deferred rents receivable                                                          |       | (9,758                                        | )          | (7,957                                        | )          |
| Other non-cash adjustments                                                         |       | 4,707                                         |       | —                                        |       |
| Changes in  operating assets and liabilities:                                      |       |                                          |       |                                          |       |
| Restricted cash — operations                                                  |       | 11,533                                        |       | (4,016                                        | )          |
| Tenant and other receivables                                                       |       | 3,663                                         |       | 7,419                                         |       |
| Deferred lease costs                                                               |       | (714                                          | )          | (10,538                                       | )          |
| Other assets                                                                       |       | 103,765                                       |       | 13,152                                        |       |
| Accounts payable, accrued expenses and other  liabilities                          |       | (96,938                                       | )          | (13,591                                       | )          |
| Net cash  provided by operating activities                                         |       | 69,803                                        |       | 88,136                                        |       |
| **Investing Activities**                                                           |       |                                          |       |                                          |       |
| Additions to  land, buildings and improvements                                     |       | (21,309                                       | )          | (60,646                                       | )          |
| Distributions in  excess of cumulative earnings from unconsolidated joint ventures |       | 7,075                                         |       | 3,270                                         |       |
| Proceeds from  disposition of real estate/ partial interest in property            |       | —                                        |       | 191,994                                       |       |
| Proceeds from  the Asset Sale                                                      |       | 1,978,764                                     |       | —                                        |       |
| Structured  finance and other investments net of repayments/participations         |       | 33,423                                        |       | 2,303                                         |       |
| Net cash  provided by investing activities                                         |       | 1,997,953                                     |       | 136,921                                       |       |
| **Financing Activities**                                                           |       |                                          |       |                                          |       |
| Repayments of  mortgage notes payable                                              |       | (185,254                                      | )          | (77,437                                       | )          |
| Proceeds from  revolving credit facilities, term loans and unsecured notes         |       | 12,000                                        |       | 566,819                                       |       |
| Repayments of  revolving credit facilities, term loans and unsecured notes         |       | (481,000                                      | )          | (621,000                                      | )          |
| Contributions                                                                      |       | 273,379                                       |       | 1,798                                         |       |
| Minority  interest in other partnerships–distributions                        |       | (7,398                                        | )          | (8,474                                        | )          |
| Other financing  activities                                                        |       | —                                        |       | 1,767                                         |       |
| Distributions                                                                      |       | (1,718,462                                    | )          | (73,895                                       | )          |
| Net cash used in  financing activities                                             |       | (2,106,735                                    | )          | (210,422                                      | )          |
| Net increase  (decrease) in cash and cash equivalents                              |       | (38,979                                       | )          | 14,635                                        |       |
| Cash and cash  equivalents at beginning of period                                  |       | 51,192                                        |       | 17,468                                        |       |
| Cash and cash  equivalents at end of period                                        |       | $                                             | 12,213     |                                          | $          | 32,103 |   |

 

The accompanying notes are an integral part of thesefinancial statements.

5

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** **

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

**Notes to Condensed Consolidated FinancialStatements**

**(Unaudited)**

**June30, 2007**

**1.  Organization and Basis of Presentation**

**Reckson Operating Partnership,L.P., or ROP, commenced operations on June 2, 1995.  Reckson Associates Realty Corp., or RARC, isthe sole general partner of ROP.  RARC isa wholly-owned subsidiary of SL Green Realty Corp., or SL Green.  The sole limited partner of ROP is SL GreenOperating Partnership, L.P., or the operating partnership.**

**As of June 30, 2007, ROP wasengaged in the ownership, management, operation and development of commercialreal estate properties, principally office properties and also owned land forfuture development located in the New York City, Westchester and Connecticut,which collectively is also known as the Greater New York Area.  At June 30, 2007, our inventory ofdevelopment parcels aggregated approximately 81 acres of land in 4 separateparcels on which we can, based on estimates at June 30, 2007, developapproximately 1.1 million square feet of office space and in which we hadinvested approximately $63.8 million.  Inaddition, ROP also held approximately $107.5 million of structured financeinvestments.**

SL Green and the operating partnership were formedin 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 of the outstanding shares ofcommon stock of RARC pursuant to the terms of the Agreement and Plan of Merger,dated as of August 3, 2006, as amended, the Merger Agreement, among SL Green,Wyoming Acquisition Corp., or Wyoming, Wyoming Acquisition GP LLC, WyomingAcquisition Partnership LP, RARC and ROP. Pursuant to the terms of the MergerAgreement, each of the issued and outstanding shares of common stock of RARCwas converted into (i) $31.68 in cash, (ii) 0.10387 of a share of the commonstock, par value $0.01 per share, of SL Green and (iii) a pro-rated dividend inan amount equal to approximately $0.0977 in cash. SL Green also assumed anaggregate of approximately $226.3 million of ROP mortgage debt, approximately$287.5 million of ROP convertible public debt and approximately $967.8 millionof ROP public unsecured notes.  Thistransaction is referred to herein as the Merger.

OnJanuary 25, 2007, SL Green completed the sale, or Asset Sale, of certain assetsof ROP to an investment group led by certain of RARC’s former executivemanagement, or the Buyer, for a total consideration of approximately $2.0billion. SL Green caused ROP to transfer the following assets to the Buyer inthe Asset Sale: (1) certain real property assets and/or entities owning suchreal property assets, in either case, of ROP and 100% of certain loans securedby real property, all of which are located in Long Island, New York; (2)certain real property assets and/or entities owning such real property assets,in either case, of ROP located in White Plains and Harrison, New York; (3) allof the real property assets and/or entities owning 100% of the interests in suchreal property assets, in either case, of ROP located in New Jersey; (4) theentity owning a 25% interest in Reckson Australia Operating Company LLC, RARC’sformer Australian management company (including its former Australian licensedresponsible entity), and other related entities, and ROP and ROP subsidiaries’rights to and interests in, all related contracts and assets, including,without limitation, property management and leasing, construction services andasset management contracts and services contracts; (5) the direct or indirectinterest of RARC in Reckson Asset Partners, LLC, an affiliate of RSVP and allof ROP’s rights in and to certain loans made by ROP to Frontline Capital Group,the bankrupt parent of RSVP, and other related entities, which will bepurchased by a 50/50 joint venture with an affiliate of SL Green; (6) a 50%participation interest in certain loans made by a subsidiary of ROP that aresecured by four real property assets located in Long Island, New York; and (7)100% of certain loans secured by real property located in White Plains and NewRochelle, New York.

As aresult of the substantial change in ownership from the Merger, SL Green hasrecorded the Merger in accordance with the provisions of Emerging Issues TaskForce Topic D-97, “Push-Down Accounting.” The effect of applying “push-down accounting” was to restate the assetsand liabilities of ROP to fair value in the same manner as ROP’s assets andliabilities were recorded by SL Green subsequent to the Merger (See Note 2).

6

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As of June 30,2007, we owned the following interests in commercial office propertiesprimarily located in midtown Manhattan, a borough of New York City, orManhattan, as well as Long Island City, Westchester County and Connecticut,which are collectively known as the Suburban assets:
| **Location** | ** ** | **Ownership**           | ** ** | **Number of  Properties** | ** ** | **Square Feet** | ** ** | **Weighted Average  Occupancy **(1) | ** ** |
|--------------|------------|-------------------------|------------|--------------------------------|------------|----------------------|------------|-----------------------------------------------|------------|
| Manhattan    |       | Consolidated properties |       | 4                              |       | 3,770,000            |       | 98.2                                          | %          |
|         |       |                    |       |                           |       |                 |       |                                          |       |
| Suburban     |       | Consolidated properties |       | 19                             |       | 2,889,900            |       | 90.6                                          | %          |
|         |       |                    |       |                           |       |                 |       |                                          |       |
| Suburban     |       | Unconsolidated property |       | 1                              |       | 1,402,000            |       | 100.0                                         | %          |
|         |       |                    |       | 24                             |       | 8,061,900            |       |                                          |       |

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(1)      The weighted average occupancy represents the total leased square feetdivided by total available square feet.

####  

#### **Basis of QuarterlyPresentation**

The accompanyingconsolidated financial statements include the consolidated financial positionof ROP and the Service Companies (as defined below) at June 30, 2007(Successor) and December 31, 2006 (Predecessor), the consolidated results oftheir operations for the three months ended June 30, 2007 (Successor), for eachof the periods January 26, 2007 to June 30, 2007 (Successor), January 1, 2007to January 25, 2007 (Predecessor) and the three and six months ended June 30,2006 (Predecessor) and their cash flows for the period January 1, 2007 toJanuary 25, 2007 (Predecessor) and January 26, 2007 to June 30, 2007(Successor) (presented on a combined basis for the six months ended June 30,2007) and for the six months ended June 30, 2006 (Predecessor).  ROP’s investments in majority-owned andcontrolled real estate joint ventures are reflected in the accompanyingfinancial statements on a consolidated basis with a reduction for the minoritypartners’ interests.  ROP investments inreal estate joint ventures, where it owns less than a controlling interest, arereflected in the accompanying financial statements on the equity method ofaccounting.  The Service Companies, whichprovide management, development and construction services to ROP and to thirdparties, include Reckson Management Group, Inc., RANY Management Group, Inc.,Reckson Construction & Development LLC and Reckson Construction Group NewYork, Inc. (collectively, the “Service Companies”).  All significant intercompany balances andtransactions have been eliminated in the consolidated financial statements.

The accompanying unaudited condensed consolidatedfinancial statements have been prepared in accordance with accountingprinciples generally accepted in the United States for interim financialinformation and with the instructions to Form 10-Q and Article 10 of RegulationS-X.  Accordingly, they do not includeall of the information and notes required by accounting principles generallyaccepted in the United States for complete financial statements.  In the opinion of management, all adjustments(consisting of normal recurring accruals) considered necessary for fairpresentation have been included.  The2007 operating results for the period presented are not necessarily indicativeof the results that may be expected for the year ending December 31, 2007.  These financial statements should be read inconjunction with the financial statements and accompanying notes included inour annual report on Form 10-K for the year ended December 31, 2006.

The balance sheet at December 31, 2006 has been derivedfrom the audited financial statements at that date but does not include all theinformation and footnotes required by accounting principles generally acceptedin the United States for complete financial statements.

The financial position as of December 31, 2006 and theresults of operations for the period from January 1, 2007 to January 25, 2007(Predecessor) and for the three and six months ended June 30, 2006(Predecessor), have been recorded based on the historical values of the assetsand liabilities of ROP prior to the Merger. The financial position as of June 30, 2007 (Successor) and the results of operations for the three monthsended June 30, 2007 (Successor) andthe period from January 26, 2007 to June 30, 2007 (Successor) have beenrecorded based on the fair values assigned to the assets and liabilities of ROPin connection with the Merger.  As such,the information presented may not be comparable.

**2.  Significant Accounting Policies**

**Principlesof Consolidation**

Theconsolidated financial statements include our accounts and those of oursubsidiaries, which are wholly-owned or controlled by us or entities which arevariable interest entities in which we are the primary beneficiary under theFinancial Accounting Standards Board, or FASB, Interpretation No. 46, or FIN46, “Consolidation of Variable Interest Entities - an Interpretation of ARB No.51,” and FIN 46, “Interpretation No. 46R, or FIN 46R.”  Entities which we do not control and entitieswhich are variable interest entities, or VIEs, but where we are not the primarybeneficiary are accounted for under the equity method.  We consolidate VIEs in which we aredetermined to be the primary beneficiary. The interest that we do not own is included in Minority Interest inOther Partnerships on the balance sheet. All significant intercompany balances and transactions have beeneliminated.

7

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InJune 2005, the FASB ratified the consensus in EITF Issue No. 04-5, “DeterminingWhether a General Partner, or the General Partners as a Group, Controls aLimited Partnership or Similar Entity When the Limited Partners Have CertainRights,” which provides guidance in determining whether a general partnercontrols a limited partnership.  EITF04-5 states that the general partner in a limited partnership is presumed tocontrol that limited partnership.  Thepresumption may be overcome if the limited partners have either (1) thesubstantive ability to dissolve the limited partnership or otherwise remove thegeneral partner without cause or (2) substantive participating rights, whichprovide the limited partners with the ability to effectively participate insignificant decisions that would be expected to be made in the ordinary courseof the limited partnership’s and thereby preclude the general partner fromexercising unilateral control over the partnership.  Our adoption of EITF 04-5 did not have anyeffect on net income or partners’ capital.

**Investmentin Commercial Real Estate Properties**

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.  The values of the above and below marketleases are amortized and recorded as either an increase (in the case of belowmarket leases) or a decrease (in the case of above market leases) to rentalincome over the remaining term of the associated lease.  The value associated with in-place leases andtenant relationships are amortized over the expected term of the relationship,which includes an estimated probability of the lease renewal, and its estimatedterm.  If a tenant vacates its spaceprior to the contractual termination of the lease and no rental payments arebeing made on the lease, any unamortized balance of the related intangible willbe written off.  The tenant improvementsand origination costs are amortized as an expense over the remaining life ofthe lease (or charged against earnings if the lease is terminated prior to itscontractual expiration date).  We assessfair value of the leases based on estimated cash flow projections that utilizeappropriate discount and capitalization rates and available marketinformation.  Estimates of future cashflows are based on a number of factors including the historical operating results,known trends, and market/economic conditions that may affect the property.

SL Green has not yet obtained all the informationnecessary to finalize its estimates to complete the purchase price allocationsin accordance with SFAS No. 141 related to our assets in connection with theMerger.  The purchase price allocationswill be finalized once the information we identified has been received, whichshould not be longer than one year from the date of acquisition.

**FiniteLife Joint Venture Agreements**

In May 2003,the FASB issued SFAS No. 150, or SFAS No. 150, “Accounting for CertainFinancial Instruments with Characteristics of both Liabilities and Equity.”SFAS No. 150 establishes standards for classifying and measuring asliabilities certain financial instruments that embody obligations of the issuerand have characteristics of both liabilities and equity. We adopted StatementNo. 150 on July 1, 2003, which had no effect on our financialstatements. SFAS No. 150 also requires the disclosure of the estimatedsettlement values of non-controlling interests in joint ventures that havefinite lives.  Two of our consolidatedjoint ventures are subject to finite life joint venture agreements. Inaccordance with SFAS No. 150, we have estimated the settlement value of thesenon-controlling interests at June 30, 2007 and December 31, 2006 to beapproximately $94.2 million and $175.0 million, respectively. The carryingvalue of these non-controlling interests, which is included in minorityinterests in other partnerships on our consolidated balance sheets, wasapproximately $75.9 million and $134.3 million at June 30, 2007 and December31, 2006, respectively.

**IncomeTaxes**

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

**EarningsPer Unit**

Earningsper unit was not computed in 2007 as there were no outstanding common units atJune 30, 2007.  Basic earnings per unit,or EPU, excludes dilution and is computed by dividing net income available tocommon unitholders by the weighted average number of common units outstandingduring the period.  Basic EPU was $0.24and $0.93 for the three and six months ended June 30, 2006, respectively.

8

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** **

**Useof Estimates**

Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States requires management to make estimatesand assumptions that affect the amounts reported in the financial statementsand accompanying notes. Actual results could differ from those estimates.

**Concentrations of CreditRisk**

Financial instruments that potentially subject us toconcentrations of credit risk consist primarily of cash investments, structuredfinance investments and accounts receivable. We place our cash investments in excess of insured amounts with highquality financial institutions.  Thecollateral securing our structured finance investments is primarily located inthe Greater New York Area. See Note 4. We perform ongoing credit evaluations of our tenants and require certaintenants to provide security deposits or letters of credit.  Though these security deposits and letters ofcredit are insufficient to meet the total value of a tenant’s lease obligation,they are a measure of good faith and a source of funds to offset the economiccosts associated with lost rent and the costs associated with re-tenanting thespace.  Although the properties in ourreal estate portfolio are primarily located in Manhattan, we also have Suburbanproperties located in Westchester County, Connecticut and Long IslandCity.  The tenants located in ourbuildings operate in various industries. Other than two tenants who contributed approximately 6.9% and 7.2% ofour annualized rent, no other tenant in the portfolio contributed more than3.7% of our annualized rent, including our share of joint venture annualizedrent, at June 30, 2007.  Approximately15%, 16%, 24% and 11% of our annualized rent, including our share of jointventure annualized rent, was attributable to 810 Seventh Avenue, 919 ThirdAvenue, 1185 Avenue of the Americas and 1350 Avenue of the Americas,respectively, for the quarter ended June 30, 2007.  Three borrowers accounted for more than 10.0%of the revenue earned on structured finance investments during the three monthsended June 30, 2007.

**Reclassification**

Certainprior year balances have been reclassified to conform with the current yearpresentation.

**NewAccounting Pronouncements**

In July 2006, the FASB issued InterpretationNo. 48, “Accounting forUncertainty in Income Taxes,” or FIN48. This interpretation, among other things, creates a two-step approach forevaluating uncertain tax positions. Recognition (step one) occurs when anenterprise concludes that a tax position, based solely on its technical merits,is more-likely-than-not to be sustained upon examination. Measurement (steptwo) determines the amount of benefit that more-likely-than-not will berealized upon settlement. Derecognition of a tax position that was previously recognizedwould occur when a company subsequently determines that a tax position nolonger meets the more-likely-than-not threshold of being sustained. FIN 48specifically prohibits the use of a valuation allowance as a substitute forderecognition of tax positions, and it has expanded disclosurerequirements.  FIN 48 is effective forfiscal years beginning after December 15, 2006, in which the impact of adoptionshould be accounted for as a cumulative-effect adjustment to the beginningbalance of retained earnings. The adoption of FIN 48 did not have a materialimpact on our consolidated financial statements.

**3.  Property Dispositions**

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

At June 30, 2007, discontinued operations includedthe results of operations of real estate assets sold prior to that date.  This included the assets sold as part of theAsset Sale.

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The following table summarizes income from discontinuedoperations (net of minority interest) and the related realized gain on sale ofdiscontinued operations (net of minority interest) for the period January 1,2007 to January 25, 2007 (Predecessor) and the three and six months ended June30, 2006 (Predecessor) (in thousands). No assets were considered as held for sale during the Successor period.
| ** **                                                     | ** ** | **Period January 1  to January 25,** | ** ** | **Three Months  Ended June 30,** | ** ** | **Six Months  Ended June 30,** | ** ** |
|----------------------------------------------------------------|------------|----------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                     | ** ** | **2007**                                                 | ** ** | **2006**                                        | ** ** | **2006**                                      | ** ** |
| ** **                                                     | ** ** | **(Predecessor)**                                        | ** ** | **(Predecessor)**                               | ** ** | **(Predecessor)**                             | ** ** |
| Revenues                                                       |       |                                                     | ** ** | ** **                                      |       |                                          |       |
| Rental revenue                                                 | ** ** | **$**                                                    | **14,344** | ** **                                      | $          | 61,861                                        |       | $ | 112,725 |   |
| Escalation and reimbursement revenues                          | ** ** | **346**                                                  |       | 5,695                                           |       | 12,441                                        |       |
| Investment and other income                                    | ** ** | **—**                                               |       | 1,178                                           |       | 1,178                                         |       |
| Total revenues                                                 | ** ** | **14,690**                                               |       | 68,734                                          |       | 126,344                                       |       |
| Operating expenses                                             | ** ** | **3,731**                                                |       | 13,116                                          |       | 27,280                                        |       |
| Real estate  taxes                                             | ** ** | **2,658**                                                |       | 9,884                                           |       | 20,425                                        |       |
| Ground rent                                                    | ** ** | **134**                                                  |       | 611                                             |       | 1,148                                         |       |
| Interest                                                       | ** ** | **465**                                                  |       | 3,069                                           |       | 5,658                                         |       |
| Marketing,  general and administrative                         | ** ** | **1,150**                                                |       | 2,176                                           |       | 4,541                                         |       |
| Depreciation and  amortization                                 | ** ** | **3,524**                                                |       | 16,709                                          |       | 31,018                                        |       |
| Total expenses                                                 | ** ** | **11,662**                                               |       | 45,565                                          |       | 90,070                                        |       |
| Income from  discontinued operations                           | ** ** | **3,028**                                                |       | 23,169                                          |       | 36,274                                        |       |
| Gain on  disposition of discontinued operations                | ** ** | **—**                                               |       | —                                          |       | 9,518                                         |       |
| Minority  interest in other partnerships                       | ** ** | **(508**                                                 | **)**      | (122                                            | )          | (480                                          | )          |
| Income from  discontinued operations, net of minority interest | ** ** | **$**                                                    | **2,520**  | ** **                                      | $          | 23,047                                        |       | $ | 45,312 |   |

 

**4.  Structured FinanceInvestments**

As of June 30, 2007 (Successor) and December 31,2006 (Predecessor), we held the following structured finance investments, withan aggregate weighted average current yield of approximately 12.1% (inthousands):
| **Loan  Type**          | ** ** | **Gross  Investment** | ** ** | **Senior  Financing** | ** ** | **2007  Principal  Outstanding** | ** ** | **2006  Principal  Outstanding** | ** **  | **Initial  Maturity  Date** | ** ** |
|-------------------------|------------|-----------------------|------------|-----------------------|------------|----------------------------------|------------|----------------------------------|-------------|-----------------------------|------------|
| Mezzanine Loan  (1) (2) |       | $                     | 55,250     |                  | $          | 225,000                          | ** ** | **$**                            | **58,976**  |                        | $          | 57,990 |   | December 2020 | ** ** |
| Mezzanine Loan  (1)     |       | 10,000                |       | 4,500                 | ** ** | **10,000**                       |       | 10,000                           |        | October 2007                | ** ** |
| Mezzanine Loan  (1)(3)  |       | —                |       | —                | ** ** | **—**                       |       | 30,000                           |        | —                      | ** ** |
| Mezzanine Loan  (1) (2) |       | 25,000                |       | 314,830               | ** ** | **27,059**                       |       | 26,389                           |        | November 2009               | ** ** |
| Other Loan (1)          |       | 1,000                 |       | —                | ** ** | **1,000**                        |       | 1,000                            |        | January 2010                | ** ** |
| Other Loan (1)          |       | 500                   |       | —                | ** ** | **500**                          |       | 500                              |        | December 2009               | ** ** |
| Mezzanine Loan  (1)     |       | 14,189                |       | 15,661                | ** ** | **9,938**                        |       | 14,188                           |        | April 2008                  | ** ** |
| Mezzanine Loans  (4)    |       | —                |       | —                | ** ** | **—**                       |       | 58,387                           |        | —                      | ** ** |
|                    |       | $                     | 105,939    |                  | $          | 559,991                          | ** ** | **$**                            | **107,473** |                        | $          | 198,454 |   |   |   |

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(1)      This is a fixed rate loan.

(2)      The difference between the pay and accrualrates is included as an addition to the principal balance outstanding.

(3)      This loan was redeemed in May 2007.

(4)      These loans have been aggregated and weresold as part of the Asset Sale.

 

At June 30, 2007 and December 31, 2006, all loanswere performing in accordance with the terms of the loan agreements.

**5.  Investments in Unconsolidated Joint Venture**

In May 2005, weacquired a 1.4 million square foot, 50-story, Class A office tower located atOne Court Square, Long Island City, NY, for approximately $471.0 million,inclusive of transfer taxes and transactional costs.  One Court Square is 100% leased to theseller, Citibank N.A., under a 15-year net lease.  The lease contains partial cancellationoptions effective during 2011 and 2012 for up to 20% of the leased space and in2014 and 2015 for up to an additional 20% of the originally leased space,subject to notice and the payment of early termination penalties. On November30, 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

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the assumption of$220.5 million of the property’s mortgage debt.   The operating agreement of the Court SquareJV requires approvals from members on certain decisions including annualbudgets, sale of the property, refinancing of the property’s mortgage debt andmaterial renovations to the property. In addition, after September 20, 2009 themembers each have the right to recommend the sale of the property, subject tothe terms of the mortgage debt, and to dissolve the Court Square JV. We haveevaluated the impact of FIN 46R on our accounting for the Court Square JV andhave concluded that the Court Square JV is not a VIE.  We account for the Court Square JV under theequity method of accounting. We have also evaluated, under EITF 04-5, that theJPM Investors have substantive participating rights in the ordinary course ofthe Court Square JV’s business.

**6.  Mortgage Notes Payable**

Thefirst mortgage notes payable collateralized by the respective properties andassignment of leases at June 30, 2007 and December 31, 2006, respectively, wereas follows (in thousands):
| **Property**                                 | ** ** | **Interest  Rate (1)** | ** ** | **Maturity Date** | ** ** | **2007**   | ** **  | **2006** | ** ** |
|----------------------------------------------|------------|-----------------------------|------------|------------------------|------------|------------|-------------|----------|------------|
| 919 Third Avenue New  York, NY (2)           |       | 6.87                        | %          | 7/2018                 |       | **$**      | **233,359** |     | $          | 235,113 |   |
| 100 Summit Road,  Westchester, NY (3)        |       | —                      |       | —                 |       | **—** |        | 12,788   |       |
| 333 Earle Ovington  Blvd., Mitchel Field, NY | (4)(7)     | —                      |       | —                 |       | **—** |        | 49,377   |       |
| 810 Seventh Avenue, New  York, NY            | (5)(7)     | —                      |       | —                 |       | **—** |        | 75,913   |       |
| 275 Broadhollow Road,  Melville, NY          | (5)(7)     | —                      |       | —                 |       | **—** |        | 14,774   |       |
| 90 Merrick Avenue,  Merrick, NY              | (5)(7)     | —                      |       | —                 |       | **—** |        | 18,123   |       |
| 711 Westchester Avenue,  White Plains, NY    | (6)(6)     | —                      |       | —                 |       | **—** |        | 12,525   |       |
| Total mortgage notes payable                 |       | ** **                  |       |                   |       | **$**      | **233,359** |     | $          | 418,613 |   |

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(1)             Effective interestrate for the three months ended June 30, 2007.

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

(3)             This mortgage wasrepaid in May 2007 upon maturity.

(4)             At December 31, 2006,we had a 60% general partnership interest in this property and ourproportionate share of the aggregate principal amount of the mortgage wasapproximately $29.6 million.

(5)             These mortgages werecross-collateralized.

(6)             This mortgage notewas interest only through January 2007 and then amortized over a 30-yearperiod.

(7)             Thesemortgages were satisfied or assigned in connection with the Merger and theAsset Sale.

At June 30, 2007, the gross book value of theproperty collateralizing the mortgage note was approximately $1.1 billion.

For the three months ended June 30, 2007(Successor), the periods January 26, 2007 to June 30, 2007 (Successor) andJanuary 1, 2007 to January 25, 2007 (Predecessor), and the three and six monthsended June 30, 2006 (Predecessor), we incurred approximately $18.1 million,$32.5 million, $6.9 million, $25.2 million and $51.7 million of interestexpense, respectively, excluding interest which was capitalized ofapproximately $1.7 million, $2.9 million, none, $3.2 million and $6.3 million,respectively.

At June 30, 2007,our unconsolidated joint venture had total indebtedness of approximately $315.0million with a fixed interest rate of approximately 4.91%.  The mortgage matures in June 2015.  Our aggregate pro-rata share of theunconsolidated joint venture debt was approximately $94.5 million.

**7.  CorporateIndebtedness**

**UnsecuredRevolving Credit Facility**

As of December 31,2006, we maintained a $500 million unsecured revolving credit facility, or theCredit Facility.  The Credit Facility wasscheduled to mature in August 2008. Borrowings under the Credit Facility accruedinterest at a rate of LIBOR plus 80 basis points and the Credit Facilitycarried a facility fee of 20 basis points per annum.  At December 31, 2006, the outstandingborrowings under the Credit Facility aggregated $269.0 million, and carried aweighted average interest rate of 6.14% per annum.

During January2007, we incurred a net increase of $12.0 million in borrowings under theCredit Facility primarily for costs incurred

11

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or to be incurredpursuant to the Merger.  Upon the closingof the Merger on January 25, 2007, the aggregate balance of $281.0 millionoutstanding under the Credit Facility, together with accrued and unpaidinterest, was repaid and the Credit Facility was terminated.

**SeniorUnsecured Notes**

As ofJune 30, 2007, we had outstanding approximately $1.057 billion (net ofunamortized issuance discounts) of senior unsecured notes.

Thefollowing table sets forth our senior unsecured notes and other relateddisclosures by scheduled maturity date (in thousands):
| **Issuance**       | ** ** | **Face Amount** | ** ** | **Coupon Rate** | ** ** | **Term  (in Years)** | ** ** | **Maturity**     | ** **     |
|--------------------|------------|----------------------|------------|----------------------|------------|---------------------------|------------|------------------|----------------|
| March 26, 1999     |       | $                    | 200,000    |                 | 7.75       | %                         | 10         |             | March 15, 2009 |   |
| January 22, 2004   |       | 150,000              |       | 5.15                 | %          | 7                         |       | January 15, 2011 |           |
| August 13, 2004    |       | 150,000              |       | 5.875                | %          | 10                        |       | August 15, 2014  |           |
| March 31, 2006     |       | 275,000              |       | 6.00                 | %          | 10                        |       | March 31, 2016   |           |
| June 27, 2005  (1) |       | 287,500              |       | 4.00                 | %          | 20                        |       | June 15, 2025    |           |
|               | ** ** | $                    | 1,062,500  |                 |       |                      |       |             |           |   |

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(1)             Exchangeablesenior 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 June15, 2010, 2015 and 2020 and upon the occurrence of certain change of controltransactions.  As a result of the Merger,the adjusted exchange rate for the debentures is 7.7461 shares of SL Greencommon stock per $1,000 of principal amount of debentures and the adjustedreference dividend for the debentures is $1.3491.

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

Interest on the senior unsecured notes is payablesemi-annually with principal and unpaid interest due on the scheduled maturitydates. In addition, certain of the senior unsecured notes were issued atdiscounts aggregating approximately $6.1 million.  Such discounts are being amortized tointerest expense over the term of the senior unsecured notes to which theyrelate.  Through June 30, 2007,approximately $0.4 million of the aggregate discounts have been amortized.

**RestrictiveCovenants**

The terms of the senior unsecured notes include certain restrictionsand covenants which limit, among other things, the incurrence of additionalindebtedness and liens, and which require compliance with financial ratiosrelating to the minimum amount of debt service coverage, the maximum amount ofconsolidated unsecured and secured indebtedness and the minimum amount ofunencumbered assets.  As of June 30, 2007and December 31, 2006, we were in compliance with all such covenants.

**Principal Maturities**

Combinedaggregate principal maturities of mortgages and notes payable, senior unsecurednotes and our share of joint venture debt as of June 30, 2007, excludingextension options, were as follows (in thousands):
| ** ** | ** ** | **Scheduled  Amortization** | ** ** | **Principal  Repayments** | ** ** | **Unsecured  Notes** | ** ** | **Total** | ** **    | **Joint  Venture  Debt** | ** ** |
|------------|------------|-----------------------------|------------|---------------------------|------------|----------------------|------------|-----------|---------------|--------------------------|------------|
| 2007       |       | $                           | 1,680      |                      | $          | —               |       | $         | —        |                     | $          | 1,680 |   | — |   |
| 2008       |       | 3,634                       |       | —                    |       | —               |       | 3,634     |          | —                   |       |
| 2009       |       | 3,942                       |       | —                    |       | 200,000              |       | 203,942   |          | —                   |       |
| 2010       |       | 4,225                       |       | —                    |       | —               |       | 4,225     |          | —                   |       |
| 2011       |       | 3,222                       |       | 216,656                   |       | 150,000              |       | 369,878   |          | —                   |       |
| Thereafter |       | —                      |       | —                    |       | 706,782              |       | 706,782   |          | 94,500                   |       |
|       | ** ** | **$**                       | **16,703** | ** **                | **$**      | **216,656**          | ** ** | **$**     | **1,056,782** | ** **               | **$**      | **1,290,141** | ** ** | **$** | **94,500** | ** ** |
|            |            |                             |            |                           |            |                      |            |           |               |                          |            |  |  |  |  |  |

 

12

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**8. Partners’ Capital**

Prior to theMerger, a Class A OP Unit and a share of common stock of RARC had similareconomic characteristics as they effectively share equally in the net income orloss and distributions of ROP.  As ofJanuary 25, 2007 and June 30, 2007, all of our issued and outstandingClass A OP Units were owned by RARC or the operating partnership.

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

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

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

Prior to theMerger, RARC maintained a long term incentive program, or LTIP. With respect tothe LTIP units and the restricted equity awards, RARC recorded compensationexpense which has been included in marketing, general and administrativeexpenses on the accompanying consolidated statements of operations. As ofDecember 31, 2006, RARC had accrued approximately $33.7 million of compensationexpense with respect to the special outperformance pool. These costs wereincluded in accounts payable and accrued expenses on the balance sheet atDecember 31, 2006.  During January 2007,in connection with the Merger, RARC paid, in cash, approximately$35.5 million to the participants of the special outperformance pool ofwhich $1.8 million was expensed during the period January 1, 2007 to January25, 2007 (Predecessor).

On January 25,2007, in connection with the Merger, certain former executive officers of RARCwaived approximately 443,000 of their LTIP Units.  The remaining balance of LTIP Units,regardless of their vesting status, were deemed earned.

**9.  Commitments and Contingencies**

We arenot presently involved in any material litigation nor, to our knowledge, is anymaterial litigation threatened against us or our properties, other than routinelitigation arising in the ordinary course of business.  Management believes the costs, if any, incurredby us related to this litigation will not materially affect our financialposition, operating results or liquidity.

Ourproperty located at 810 7th Avenue, New York,NY is subject to certain air rights lease agreements.  These lease agreements have terms expiring in2044 and 2048, including renewal options.

Thefollowing is a schedule of future minimum lease payments under noncancellableoperating leases with initial terms in excess of one year as of June 30, 2007(in thousands):
| ** **                    | ** ** | **Air Rights** | ** ** | **Non-cancellable  operating leases** | ** ** |
|-------------------------------|------------|---------------------|------------|--------------------------------------------|------------|
|                          |       |                |       |                                       |       |
| 2007                          |       | $                   | 14         |                                       | $          | 4,762 |   |
| 2008                          |       | 29                  |       | 9,524                                      |       |
| 2009                          |       | 29                  |       | 9,524                                      |       |
| 2010                          |       | 29                  |       | 9,083                                      |       |
| 2011                          |       | 29                  |       | 7,109                                      |       |
| Thereafter                    |       | 213                 |       | 221,466                                    |       |
| Total minimum  lease payments |       | $                   | 343        | ** **                                 | $          | 261,468 | ** ** |

 

13

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**10.  Environmental Matters**

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

**11.  Segment Information**

We areengaged in owning, managing and leasing commercial office properties inManhattan, Westchester County, Connecticut and Long Island City and have tworeportable segments, real estate and structured finance investments.  We evaluate real estate performance andallocate resources based on earnings contribution to income from continuingoperations.

Ourreal estate portfolio is primarily located in the geographical markets ofManhattan, Westchester County, Connecticut and Long Island City.  The primary sources of revenue are generatedfrom tenant rents and escalations and reimbursement revenue.  Real estate property operating expensesconsist primarily of security, maintenance, utility costs, real estate taxesand ground rent expense (at certain applicable properties).  See Note 4 for additional details on ourstructured finance investments.

Selected results ofoperations for the three months ended June 30, 2007 (Successor), the periodsJanuary 26, 2007 to June 30, 2007 (Successor) and January 1, 2007 to January25, 2007 (Predecessor) and the three and six months ended June 30, 2006(Predecessor), and selected asset information as of June 30, 2007 and December31, 2006, regarding our operating segments are as follows (in thousands):
| ** **                                                                                                     | ** ** | **Real  Estate  Segment** | ** ** | **Structured  Finance  Segment** | ** ** | **Total  Company** | ** ** |
|----------------------------------------------------------------------------------------------------------------|------------|---------------------------|------------|----------------------------------|------------|--------------------|------------|
| Total revenues:                                                                                                |       |                      |       |                             |       |               |       |
| Three months ended June 30, 2007 (Successor)                                                                   |       | $                         | 77,707     |                             | $          | 6,495              |       | $ | 84,202 |   |
| Three months ended June 30, 2006 (Predecessor)                                                                 |       | 82,245                    |       | 4,724                            |       | 86,969             |       |
| January 26 to June 30, 2007 (Successor)                                                                        |       | 134,122                   |       | 9,946                            |       | 144,068            |       |
| January 1 to January 25, 2007 (Predecessor)                                                                    |       | 25,549                    |       | 1,201                            |       | 26,750             |       |
| Six months ended June 30, 2006 (Predecessor)                                                                   |       | 174,067                   |       | 10,330                           |       | 184,397            |       |
|                                                                                                           |       |                      |       |                             |       |               |       |
| Income (loss)  from continuing operations before minority interest, gain on sale and discontinued  operations: |       |                      |       |                             |       |               |       |
| Three months ended June 30, 2007 (Successor)                                                                   |       | $                         | 9,501      |                             | $          | 4,563              |       | $ | 14,064 |   |
| Three months ended June 30, 2006 (Predecessor)                                                                 |       | (902                      | )          | 2,170                            |       | 1,268              |       |
| January 26 to June 30, 2007 (Successor)                                                                        |       | 14,686                    |       | 6,463                            |       | 21,149             |       |
| January 1 to January 25, 2007 (Predecessor)                                                                    |       | (12,422                   | )          | 464                              |       | (11,958            | )          |
| Six months ended June 30, 2006 (Predecessor)                                                                   |       | 1,594                     |       | 5,307                            |       | 6,901              |       |
|                                                                                                           |       |                      |       |                             |       |               |       |
| Total assets                                                                                                   |       |                      |       |                             |       |               |       |
| As of:                                                                                                         |       |                      |       |                             |       |               |       |
| June 30, 2007 (Successor)                                                                                      |       | $                         | 3,843,743  |                             | $          | 107,732            |       | $ | 3,951,475 |   |
| December 31,  2006 (Predecessor)                                                                               |       | 3,548,377                 |       | 198,454                          |       | 3,746,831          |       |

 

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

14

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The table below reconciles income from continuing operations beforeminority interest to net income available to common unitholders for the threemonths ended June 30, 2007 (Successor), the periods January 26, 2007 to June30, 2007 (Successor) and January 1, 2007 to January 25, 2007 (Predecessor), andfor the three and six months ended June 30, 2006 (Predecessor) (in thousands):
| ** **                                                                                                     | ** ** | **Three  months  Ended  June 30,** | ** ** | **Period  January 26 to  June 30,** | ** ** | **Period  January 1 to  January 25,** | ** ** | **Three  months  Ended June 30,** | ** ** | **Six  months  Ended  June 30,** | ** ** |
|----------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|----------------------------------------------------|------------|------------------------------------------------------|------------|---------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                                                     | ** ** | **2007**                                | ** ** | **2007**                                           | ** ** | **2007**                                             | ** ** | **2006**                                    | ** ** | **2006**                              | ** ** |
| ** **                                                                                                     | ** ** | **(Successor)**                         | ** ** | **(Successor)**                                    | ** ** | **(Predecessor)**                                    | ** ** | **(Predecessor)**                           | ** ** | **(Predecessor)**                     | ** ** |
| Income (loss) from  continuing operations before minority interest, gain on sale and discontinued  operations: |       | $                                       | 14,064     |                                               | $          | 21,149                                               |       | $                                           | (11,958    | )                                     | $          | 1,268 |   | $ | 6,901 |   |
| Gain on sale of real  estate                                                                                   |       | —                                  |       | —                                             |       | —                                               |       | —                                      |       | 35,393                                |       |
| Minority interest in  other partnerships                                                                       |       | (3,285                                  | )          | (4,166                                             | )          | (1,665                                               | )          | (3,923                                      | )          | (8,032                                | )          |
| Income from  continuing operations                                                                             |       | 10,779                                  |       | 16,983                                             |       | (13,623                                              | )          | (2,655                                      | )          | 34,262                                |       |
| Net income/ gains from  discontinued operations                                                                |       | —                                  |       | —                                             |       | 2,520                                                |       | 23,047                                      |       | 45,312                                |       |
| Net income (loss)  available to common unitholders                                                             |       | $                                       | 10,779     |                                               | $          | 16,983                                               |       | $                                           | (11,103    | )                                     | $          | 20,392 |   | $ | 79,574 |   |

 

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

A summary of our non-cash investing and financingactivities for the six months ended June 30, 2007 and 2006 is presented below(in thousands):
| ** **                                                                                                               | ** ** | **Six months Ended  June 30,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                                                               | ** ** | **2007(1)**                                   | ** ** | **2006** | ** ** |
| Redemption of  preferred units                                                                                           | ** ** | $                                             | 1,200      |   | $ | — |   |
| Transfer of real  estate to the operating partnership                                                                    |       | 608,222                                       |       | — |   |
| Adjustment to  fair value of real estate, investment in unconsolidated joint venture and  structured finance investments |       | (3,131,606                                    | )          | 44,400 |   |
| Adjustments to  contributed capital                                                                                      |       | 2,327,290                                     |       | — |   |
| Other non-cash  financing                                                                                                |       | 92,017                                        |       | — |   |
| Other non-cash  adjustments-investing                                                                                    |       | 104,077                                       |       | — |   |
| Redemption of  common units                                                                                              |       | —                                        |       | 493 |   |
| Accretion of debt  discount                                                                                              |       | 1,595                                         |       | — |   |
|                                                                                                                          |            |                                               |            |  |  |  |  |

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

15

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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.  Reckson Associates Realty Corp., or RARC, isthe sole general partner of ROP.  RARC isa wholly-owned subsidiary of SL Green Realty Corp., or SL Green.  The sole limited partner of ROP is SL GreenOperating Partnership, L.P., or the operating partnership.**

**As of June 30, 2007, ROP wasengaged in the ownership, management, operation, acquisition, leasing,financing and development of commercial real estate properties, principallyoffice properties and also owned land for future development located in the NewYork City, Westchester and Connecticut which collectively is also known as theGreater New York Area.  At June 30, 2007,our inventory of development parcels aggregated approximately 81 acres of landin 4 separate parcels on which we can, based on estimates at June 30, 2007,develop approximately 1.1 million square feet of office space and in which wehad invested approximately $63.8 million. In addition, ROP also held approximately $107.5 million of structuredfinance investments.**

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

OnJanuary 25, 2007, SL Green completed the sale, or Asset Sale, of certain assetsof ROP to an investment group led by certain of Reckson’s former executivemanagement, or the Buyer, for a total consideration of approximately $2.0billion. SL Green caused ROP to transfer the following assets to the Buyer inthe Asset Sale: (1) certain real property assets and/or entities owning suchreal property assets, in either case, of ROP and 100% of certain loans securedby real property, all of which are located in Long Island, New York; (2)certain real property assets and/or entities owning such real property assets,in either case, of ROP located in White Plains and Harrison, New York; (3) allof the real property assets and/or entities owning 100% of the interests insuch real property assets, in either case, of ROP located in New Jersey; (4)the entity owning a 25% interest in Reckson Australia Operating Company LLC,RARC’s former Australian management company (including its former Australianlicensed responsible entity), and other related entities, and ROP and ROPsubsidiaries’ rights to and interests in, all related contracts and assets,including, without limitation, property management and leasing, constructionservices and asset management contracts and services contracts; (5) the director indirect interest of RARC in Reckson Asset Partners, LLC, an affiliate ofRSVP and all of ROP’s rights in and to certain loans made by ROP to FrontlineCapital Group, the bankrupt parent of RSVP, and other related entities, whichwill be purchased by a 50/50 joint venture with an affiliate of SL Green; (6) a50% participation interest in certain loans made by a subsidiary of ROP that aresecured by four real property assets located in Long Island, New York; and (7)100% of certain loans secured by real property located in White Plains and NewRochelle, New York.

Thefollowing discussion related to our consolidated financial statements should beread in conjunction with the financial statements appearing in this report andin Item 8 of our Annual Report on Form 10-K for the year ended December 31,2006.

As aresult of the substantial change in ownership from the Merger, SL Green hasrecorded the Merger in accordance with the provisions of Emerging Issues TaskForce Topic D-97, “Push-Down Accounting.” The effect of applying “push-down accounting” is to restate the assetsand liabilities of ROP to fair value in the same manner as ROP’s assets andliabilities were recorded by SL Green subsequent to the Merger.

SL Green has not yet obtained all the informationnecessary to finalize its estimates to complete the purchase price allocationsin accordance with SFAS No. 141 related to our assets in connection with theMerger.  The purchase price allocationswill be finalized once the information we identified has been received, whichshould not be longer than one year from the date of acquisition.

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As of June 30,2007, we owned the following interests in commercial office propertiesprimarily in midtown Manhattan, a borough of New York City, or Manhattan, aswell as Long Island City, 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            |       | 98.2                                          | %          |
|         |       |                    |       |                           |       |                 |       |                                          |       |
| Suburban     |       | Consolidated properties |       | 19                             |       | 2,889,900            |       | 90.6                                          | %          |
|         |       |                    |       |                           |       |                 |       |                                          |       |
| Suburban     |       | Unconsolidated property |       | 1                              |       | 1,402,000            |       | 100.0                                         | %          |
|         |       |                    |       | 24                             |       | 8,061,900            |       |                                          |       |

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(1)     The weighted average occupancyrepresents the total leased square feet divided by total available square feet.

** **

**CriticalAccounting Policies**

Referto our 2006 Annual Report on Form 10-K for a discussion of our criticalaccounting policies, which include rental property, investment inunconsolidated joint ventures, revenue recognition, allowance for doubtfulaccounts, reserve for possible credit losses and derivative instruments.  There have been no material changes to thesepolicies in 2007.

**Resultsof Operations**

***Comparison of the three months ended June30, 2007 to the three months ended June 30, 2006***

Comparisons discussed below are made using thecombined operations of the Predecessor and Successor for 2007 as compared tothe Predecessor’s operations for the same period in 2006.  The results of operations may not becomparable for the periods presented due to the change in the basis ofaccounting between the Successor and Predecessor periods resulting from theapplication of “push-down accounting.” The results of operations for 2006 include 120 West 45th Street and Landmark Square 1-6.  In connection with the Merger, theseproperties were transferred to the operating partnership and are therefore notincluded in the Successor period results of operations.
| **Rental Revenues (in millions)** | ** ** | **2007** | ** ** | **2006** | ** ** | **$  Change** | ** ** | **%  Change** | ** ** |
|--------------------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------|------------|
| Rental revenue                                   |       | $        | 64.4       |     | $          | 66.7          |       | $             | (2.3       | ) | (3.5 | )% |
| Escalation and  reimbursement revenue            |       | 12.8     |       | 13.8     |       | (1.0          | )          | (7.3          | )          |
| Total                                            |       | $        | 77.2       |     | $          | 80.5          |       | $             | (3.3       | ) | (4.1 | )% |

 

At June 30, 2007, we estimated that the currentmarket rents on our consolidated Manhattan properties and consolidated Suburbanassets were approximately 55.0% and 11.2% higher, respectively, than thenexisting in-place fully escalated rents. Approximately 4.4% of the space leased at our consolidated propertiesexpires during the remainder of 2007.
| **Investment and Other Income (in millions)** | ** ** | **2007** | ** ** | **2006** | ** ** | **$  Change** | ** ** | **%  Change** | ** ** |
|------------------------------------------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------|------------|
| Equity in net  income of unconsolidated joint ventures                 |       | $        | 0.3        |     | $          | 1.8           |       | $             | (1.5       | ) | (83.3 | )% |
| Investment and  other income                                           |       | 7.0      |       | 6.5      |       | 0.5           |       | (7.7          | )          |
| Total                                                                  |       | $        | 7.3        |     | $          | 8.3           |       | $             | (1.0       | ) | (12.1 | )% |

 

The decrease in equity in net income ofunconsolidated joint venture was primarily due to lower net income contributionfrom One Court Square resulting from additional depreciation expense related topurchase accounting adjustment to the basis of the investment in connectionwith the Merger.  Our joint venture atOne Court Square is net leased to a single tenant until 2020.  As such, we do not anticipate much change inoccupancy rates or net income contributions from this asset.  At June 30, 2007, we estimated that currentmarket rents at our Suburban joint venture asset was approximately 10.3% higherthan then existing in-place fully escalated rents.

17

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| **Property Operating Expenses (in millions)** | ** ** | **2007** | ** ** | **2006** | ** ** | **$  Change** | ** ** | **%  Change** | ** ** |
|-------------------------------------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------|------------|
| Operating  expenses                                               |       | $        | 17.9       |     | $          | 17.2          |       | $             | 0.7        |   | 4.1 | % |
| Real estate  taxes                                                |       | 13.1     |       | 14.3     |       | (1.2          | )          | (8.4          | )          |
| Ground rent                                                       |       | 2.6      |       | 2.0      |       | 0.6           |       | 30.0          |       |
| Total                                                             |       | $        | 33.6       |     | $          | 33.5          |       | $             | 0.1        |   | 0.3 | % |

 

Property operating expenses remained comparable tothe same period in the prior year.
| **Other Expenses (in millions)** | ** ** | **2007** | ** ** | **2006** | ** ** | **$  Change** | ** ** | **%  Change** | ** ** |
|-------------------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------|------------|
| Interest expense                                |       | $        | 18.1       |     | $          | 25.2          |       | $             | (7.1       | ) | (28.2 | )% |
| Depreciation and  amortization expense          |       | 18.6     |       | 19.3     |       | (0.7          | )          | (3.6          | )          |
| Marketing,  general and administrative expense  |       | 0.3      |       | 9.6      |       | (9.3          | )          | (96.9         | )          |
| Total                                           |       | $        | 37.0       |     | $          | 54.1          |       | $             | (17.1      | ) | (31.6 | )% |

 

The decrease in interest expense is due to mortgagedebt on certain properties being repaid after June 30, 2006 and thoseproperties remaining unencumbered.  Inaddition, in April 2007, we redeemed $200.0 million of unsecured notes whichbore an average interest rate of 6.9%. We incurred a $1.0 million make-whole payment in connection with theearly redemption of these bonds.

The decrease in marketing, general andadministrative expenses is primarily due to SL Green’s policy of not allocatingcorporate costs to the properties.

***Comparison of the six months ended June 30,2007 to the six months ended June 30, 2006***

Comparisons discussed below are made using thecombined operations of the Predecessor and Successor for 2007 as compared tothe Predecessor’s operations for the same period in 2006.  The results of operations may not becomparable for the periods presented due to the change in the basis ofaccounting between the Successor and Predecessor periods resulting from theapplication of “push-down accounting.” The results of operations for 2006 include 120 West 45th Street and Landmark Square 1-6.  In connection with the Merger, theseproperties were transferred to the operating partnership and are therefore notincluded in the Successor period results of operations.
| **Rental Revenues (in millions)** | ** ** | **2007** | ** ** | **2006** | ** ** | **$  Change** | ** ** | **%  Change** | ** ** |
|--------------------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------|------------|
| Rental revenue                                   |       | $        | 132.9      |     | $          | 134.0         |       | $             | (1.1       | ) | (0.8 | )% |
| Escalation and  reimbursement revenue            |       | 26.3     |       | 26.1     |       | 0.2           |       | 0.8           |       |
| Total                                            |       | $        | 159.2      |     | $          | 160.1         |       | $             | (0.9       | ) | (0.6 | )% |

 

At June 30, 2007, we estimated that the currentmarket rents on our consolidated Manhattan properties and consolidated Suburbanassets were approximately 55.0% and 11.2% higher, respectively, than thenexisting in-place fully escalated rents. Approximately 4.4% of the space leased at our consolidated propertiesexpires during the remainder of 2007.
| **Investment and Other Income (in millions)** | ** ** | **2007** | ** ** | **2006** | ** ** | **$  Change** | ** ** | **%  Change** | ** ** |
|------------------------------------------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------|------------|
| Equity in net  income of unconsolidated joint ventures                 |       | $        | 0.5        |     | $          | 2.2           |       | $             | (1.7       | ) | (77.3 | )% |
| Investment and  other income                                           |       | 11.6     |       | 24.2     |       | (12.6         | )          | (52.1         | )          |
| Total                                                                  |       | $        | 12.1       |     | $          | 26.4          |       | $             | (14.3      | ) | (54.2 | )% |

 

The decrease in equity in net income ofunconsolidated joint venture was primarily due to lower net income contributionfrom One Court Square resulting from additional depreciation expense related topurchase accounting adjustment to the basis of the investment in connectionwith the Merger.  Our joint venture atOne Court Square is net leased to a single tenant until 2020.  As such, we do not anticipate much change inoccupancy rates or net income contributions from this asset.  At June 30, 2007, we estimated that currentmarket rents at our Suburban joint venture asset was approximately 10.3% higherthan then existing in-place fully escalated rents.

18

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The decrease in investment and other income wasprimarily due to the sale in 2006 of our option to acquire the minority partner’s40% partnership interest in a property for net consideration of approximately$9.0 million.
| **Property Operating Expenses (in millions)** | ** ** | **2007** | ** ** | **2006** | ** ** | **$  Change** | ** ** | **%  Change** | ** ** |
|-------------------------------------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------|------------|
| Operating  expenses                                               |       | $        | 37.8       |     | $          | 36.9          |       | $             | 0.9        |   | 2.4 | % |
| Real estate  taxes                                                |       | 27.6     |       | 28.3     |       | (0.7          | )          | (2.5          | )          |
| Ground rent                                                       |       | 5.1      |       | 4.1      |       | 1.0           |       | 24.4          |       |
| Total                                                             |       | $        | 70.5       |     | $          | 69.3          |       | $             | 1.2        |   | 1.7 | % |

 

Property operating expenses remained comparable tothe same period in the prior year.
| **Other Expenses (in millions)** | ** ** | **2007** | ** ** | **2006** | ** ** | **$  Change** | ** ** | **%  Change** | ** ** |
|-------------------------------------------------|------------|----------|------------|----------|------------|---------------|------------|---------------|------------|
| Interest expense                                |       | $        | 39.4       |     | $          | 51.7          |       | $             | (12.3      | ) | (23.8 | )% |
| Depreciation and  amortization expense          |       | 37.8     |       | 38.3     |       | (0.5          | )          | (1.3          | )          |
| Marketing,  general and administrative expense  |       | 14.4     |       | 20.4     |       | (6.0          | )          | (29.4         | )          |
| Total                                           |       | $        | 91.6       |     | $          | 110.4         |       | $             | (18.8      | ) | (17.0 | )% |

 

The decrease in interest expense is due to mortgagedebt on certain properties being repaid after June 30, 2006 and thoseproperties remaining unencumbered.  Inaddition, in April 2007, we redeemed $200.0 million of unsecured notes whichbore an average interest rate of $6.9%. We incurred a $1.0 million make-whole payment in connection with theearly redemption of these bonds.

The decrease in marketing, general andadministrative expenses is primarily due to SL Green’s policy of not allocatingcorporate costs to the properties.  ThePredecessor 2007 period includes approximately $8.8 million related to mergercosts.

**Liquidityand Capital Resources**

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

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

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

On January 25, 2007, wewere acquired by SL Green. See Item 2 “Management’s Discussion andAnalysis — Liquidity and Capital Resources” in SL Green’s Quarterly Report onForm 10-Q for the quarter ended June 30, 2007 for a complete discussion ofadditional sources of liquidity available to us due to our indirect ownershipby SL Green.

#### **Cash Flows**

**Thefollowing summary discussion of our cash flows is based on our condensedconsolidated statements of cash flows in “Item 1. Financial Statements” and isnot meant to be an all-inclusive discussion of the changes in our cash flowsfor the periods presented below.**

For purposes of this cash flow analysis, the cash flows for the periodfrom January 1, 2007 to January 25, 2007 (Predecessor), the date of the Merger,have been combined with the cash flows for the period January 26, 2007 to June30, 2007 (Successor) to provide a reasonable comparison to the cash flows forthe six months ended June 30, 2006 (Predecessor).  Summarized cash flow information for the sixmonths ended June 30, 2007 and 2006 is as follows (in thousands):
| ** **                                 | ** ** | **Six months ended June 30,** | ** ** |
|--------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                 | ** ** | **2007**                                          | ** ** | **2006** | ** ** | **Increase  (Decrease)** | ** ** |
|                                       | ** ** | ** **                                        | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net cash  provided by operating activities |       | $                                                 | 69.8       |   | $ | 88.1 |   | $ | (18.3 | ) |
| Net cash  provided by investing activities |       | $                                                 | 1,998.0    |   | $ | 136.9 |   | $ | 1,861.1 |   |
| Net cash used in  financing activities     |       | $                                                 | (2,106.7   | ) | $ | (210.4 | ) | $ | (1,896.3 | ) |

 

19

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**Ourprincipal source of operating cash flow is related to the leasing and operatingof the properties in our portfolio. Our properties provide a relativelyconsistent stream of cash flow that provides us with resources to pay operatingexpenses, debt service and fund quarterly dividend and distribution paymentrequirements. At June 30, 2007, our portfolio was 93.7% occupied. In addition, rentalrates continue to increase and tenant concession packages decrease in theManhattan and Suburban marketplaces. Our structured finance and joint ventureinvestments also provide a steady stream of operating cash flow to us.**

**Cash is used in investing activities to fundacquisitions, redevelopment projects and recurring and nonrecurring capitalexpenditures. We selectively invest in existing buildings that meet ourinvestment criteria.  During the sixmonths ended June 30, 2007, compared to the same period in the prior year wegenerated cash primarily from the following investing activities (inthousands):**

| Capital expenditures and  capitalized interest |   | $         | 39,337 |   |
|------------------------------------------------|--------|-----------|--------|--------|
| Distributions  from joint ventures             |   | 3,805     |   |
| Proceeds from  sales of real estate            |   | (191,994  | )      |
| Structured  finance and other investments      |   | 31,120    |   |
| Proceeds from Asset  Sale                      |   | 1,978,764 |   |

** **

**Wegenerally fund our investment activity through property-level financing andasset sales.  During the six months endedJune 30, 2007, compared to the same period in the prior year the followingfinancing activities used the funds to complete the investing activity notedabove (in thousands):**

| Proceeds from our debt  obligations           |   | $          | (554,819 | ) |
|-----------------------------------------------|--------|------------|----------|---|
| Repayments under  our debt obligations        |   | 32,183     |     |
| Contributions                                 |   | 271,581    |     |
| Distributions and other  financing activities |   | (1,645,258 | )        |

** **

**Capitalization**

Prior to theMerger, a Class A OP Unit and a share of common stock of RARC had similareconomic characteristics as they effectively share equally in the net income orloss and distributions of ROP.  As ofJanuary 25, 2007, all of our issued and outstanding Class A OP Units were ownedby RARC or the operating partnership.

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

**Net income per common partnershipunit for the three and six months ended June 30, 2006 was determined byallocating net income after preferred distributions and minority partners’interest in consolidated partnerships income to the general and limitedpartners based on their weighted average distribution per common partnershipunits outstanding during the respective periods presented.**

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

 

20

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**ContractualObligations**

Combinedaggregate principal maturities of mortgages payable and senior unsecured notes,our share of joint venture debt, excluding extension options, estimatedinterest expense, and our obligations under our air rights and ground leases,as of June 30, 2007 are as follows (in thousands):
| ** **                  | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **Thereafter** | ** ** | **Total** | ** ** |
|-----------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------------|------------|-----------|------------|
| Property Mortgages          |       | $        | 1,680      |     | $          | 3,634    |       | $        | 3,942      |     | $          | 4,225          |       | $         | 219,878    |   | $ | — |   | $ | 233,359 |   |
| Senior unsecured notes      |       | —   |       | —   |       | 200,000  |       | —   |       | 150,000  |       | 706,782        |       | 1,056,782 |       |
| Ground leases               |       | 4,762    |       | 9,524    |       | 9,524    |       | 9,083    |       | 7,109    |       | 221,466        |       | 261,468   |       |
| Air rights                  |       | 14       |       | 29       |       | 29       |       | 29       |       | 29       |       | 213            |       | 343       |       |
| Estimated interest  expense |       | 38,122   |       | 76,062   |       | 68,051   |       | 60,021   |       | 48,460   |       | 254,392        |       | 545,108   |       |
| Joint venture debt          |       | —   |       | —   |       | —   |       | —   |       | —   |       | 94,500         |       | 94,500    |       |
| Total                       |       | $        | 44,578     |     | $          | 89,249   |       | $        | 281,546    |     | $          | 73,358         |       | $         | 425,476    |   | $ | 1,277,353 |   | $ | 2,191,560 |   |

 

**Corporate Indebtedness**

#### **Unsecured Revolving Credit Facility**

As of December 31,2006 we maintained a $500 million unsecured revolving credit facility, or theCredit Facility.  The Credit Facility wasscheduled to mature in August 2008.  AtDecember 31, 2006, the outstanding borrowings under the Credit Facilityaggregated $269.0 million and carried a weighted average interest rate of 6.14%per annum. In connection with the Merger on January 25, 2007, this CreditFacility was repaid and terminated.

**Senior Unsecured Notes**

As ofJune 30, 2007, we had outstanding approximately $1.057 billion (net ofunamortized issuance discounts) of senior unsecured notes.

Thefollowing table sets forth our senior unsecured notes and other relateddisclosures by scheduled maturity date (in thousands):

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

----

(1)             Exchangeablesenior 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 June15, 2010, 2015 and 2020 and upon the occurrence of certain change of controltransactions.  As a result of the Merger,the adjusted exchange rate for the debentures is 7.7461 shares of SL Greencommon stock per $1,000 of principal amount of debentures and the adjustedreference dividend for the debentures is $1.3491.

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

Interest on the senior unsecured notes is payablesemiannually with principal and unpaid interest due on the scheduled maturitydates.  In addition, certain of thesenior unsecured notes were issued at discounts aggregating approximately $6.1million.  Such discounts are being amortizedto interest expense over the term of the senior unsecured notes to which theyrelate.  Through June 30, 2007,approximately $0.4 million of the aggregate discounts have been amortized.

**RestrictiveCovenants**

The terms of our senior unsecured notes include certain restrictionsand covenants which limit, among other things, the incurrence of additionalindebtedness and liens, and which require compliance with financial ratiosrelating to the minimum amount of debt service coverage, the maximum amount ofconsolidated unsecured and secured indebtedness and the minimum amount ofunencumbered assets.  As of June 30, 2007and December 31, 2006, we were in compliance with all such covenants.

21

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**MarketRate Risk**

We are not exposed to changes in interest rates as we have no floatingrate borrowing arrangements.

All ofour long-term debt, totaling approximately $1.3 billion, bears interest atfixed rates, and therefore the fair value of these instruments is affected bychanges in the market interest rates.

**Off-BalanceSheet Arrangements**

We have a number of off-balance sheet investments, including a jointventure investment and structured finance investments.  These investments all have varying ownershipstructures.  Our joint venturearrangement is accounted for under the equity method of accounting as we havethe ability to exercise significant influence, but not control over theoperating and financial decisions of this joint venture arrangement.  Our off-balance sheet arrangements arediscussed in Note 4, “Structured Finance Investments” and Note 5, “Investmentin Unconsolidated Joint Venture” in the accompanying financial statements.

**CapitalExpenditures**

Weestimate that for the six months ending December 31, 2007, we will incurapproximately $51.8 million of capital expenditures (including tenantimprovements and leasing commissions) on consolidated properties and none atour joint venture property.  We expect tofund these capital expenditures with operating cash flow, borrowings under SLGreen’s credit facility and cash on hand. We believe that we will have sufficient resources to satisfy our capitalneeds during the next 12-month period.

Thereafter,we expect that our capital needs will be met through a combination of net cashprovided by operations, borrowings, potential asset sales or additional equityor debt issuances by SL Green.

**Related Party Transactions**

**Other**

**Insurance**

**SL Green maintains “all-risk”property and rental value coverage (including coverage regarding the perils offlood, earthquake and terrorism) and liability insurance with limits in excessof $200.0 million per location. These insurance policies cover the ROPassets.  The property policies expire onDecember 31, 2007 and the liability policies expire on October 31,2007.  SL Green now maintains twoproperty insurance portfolios. The first 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 $600.0 million per occurrence,including terrorism, for the majority of the Suburban properties. The New YorkCity portfolio incorporates SL Green’s captive, Belmont Insurance Company,which we formed in an effort to stabilize, to some extent, the fluctuations ofinsurance market conditions. Belmont is licensed to write up to$100.0 million of coverage for us, but at this time is providing$50.0 million of terrorism coverage in excess of $100.0 million andis insuring a large deductible on the liability insurance with a $250,000deductible per occurrence and a $2.4 million annual aggregate loss limit. SLGreen has secured an excess insurer to protect against catastrophic liabilitylosses (above $250,000 / occurrence) and a stop loss for aggregate claims thatexceed $2.4 million.  SL Green hasretained a third party administrator to manage all claims within the deductibleand we anticipate that direct management of liability claims will improve lossexperience and ultimately lower the cost of liability insurance in futureyears. Although SL Green considers its insurance coverage (inclusive of the ROPassets) to be appropriate, in the event of a major catastrophe, such as an actof terrorism, SL Green may not have sufficient coverage to replace certainproperties.**

The Terrorism Risk Insurance Act, or TRIA, which wasenacted in November 2002, was renewed on January 1, 2006. Congressextended TRIA, now called TRIEA (Terrorism Risk Insurance Extension Act) untilDecember 31, 2007. The law extends the federal Terrorism InsuranceProgram that requires insurance companies to offer terrorism coverage andprovides for compensation for insured losses resulting from acts of terrorism. Our debt instruments, consisting of mortgage loanssecured by our properties (which are generally non-recourse to us) groundleases and senior unsecured notes, contain customary covenants requiring us tomaintain 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 toterrorist acts is a breach of these debt and ground lease instruments thatallows the lenders or ground lessors to declare an event of default andaccelerate repayment of debt or recapture of ground lease positions. Inaddition, if lenders insist on full coverage for these risks and prevail inasserting that we are required to maintain such coverage, it could result insubstantially higher insurance premiums.

22

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**Inflation**

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

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**Forward-LookingInformation**

Thisreport includes certain statements that may be deemed to be “forward-lookingstatements” within the meaning of Section 27A of the Securities Act of1933, as amended, or the Act, and Section 21E of the Securities ExchangeAct of 1934, as amended, or the Exchange Act. Such forward-looking statements relate to, without limitation, ourfuture capital expenditures, dividends and acquisitions (including the amountand nature thereof) and other development trends of the real estate industryand the Manhattan, Westchester and Connecticut office market, businessstrategies, and the expansion and growth of our operations.  These statements are based on certainassumptions and analyses made by us in light of our experience and our perceptionof historical trends, current conditions, expected future developments andother factors we believe are appropriate. We intend such forward-looking statements to be covered by the safeharbor provisions for forward-looking statements contained in Section 27Aof the Act and Section 21E of the Exchange Act.  Such statements are subject to a number ofassumptions, risks and uncertainties which may cause our actual results,performance or achievements to be materially different from future results,performance or achievements expressed or implied by these forward-lookingstatements.  Forward-looking statementsare generally identifiable by the use of the words “may,” “will,” “should,” “expect,”“anticipate,” “estimate,” “believe,” “intend,” “project,” “continue,” or thenegative of these words, or other similar words or terms.  Readers are cautioned not to place unduereliance on these forward-looking statements. Among the factors about which we have made assumptions are:

·                  general economicor business (particularly real estate) conditions, either nationally or in NewYork City, Westchester County and Connecticut being less favorable thanexpected;

·                  reduced demandfor office space;

·                  risks of realestate acquisitions;

·                  risks ofstructured finance investments;

·                  availability andcreditworthiness of prospective tenants;

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

·                  availability ofcapital (debt and equity);

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

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

·                  our ability tosatisfy complex rules in order for us to qualify as a REIT, for federal incometax purposes, our Operating Partnership’s ability to satisfy the rules in orderfor it to qualify as a partnership for federal income tax purposes, the abilityof certain of our subsidiaries to qualify as REITs and certain of oursubsidiaries to qualify as taxable REIT subsidiaries for federal income taxpurposes and our ability and the ability of our subsidiaries to operateeffectively within the limitations imposed by these rules;

·                  accountingprinciples and policies and guidelines applicable to REITs;

·                  competition withother companies;

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

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

·                  environmental,regulatory and/or safety requirements.

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

Therisks included here are not exhaustive. Other sections of this report, our Annual Report on Form 10-K for theyear ended December 31, 2006 or our Quarterly Report on Form 10Q for thequarter ended March 31, 2007 may include additional factors that couldadversely affect our business and financial performance.  Moreover, we operate in a very competitiveand rapidly changing environment.  Newrisk factors emerge from time to time and it is not possible for management topredict all such risk factors, nor can it assess the impact of all such riskfactors on our business or the extent to which any factor, or combination offactors, may cause actual results to differ materially from those contained inany forward-looking statements.  Given theserisks and uncertainties, investors should not place undue reliance onforward-looking statements as a prediction of actual results.

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**ITEM 3.  Quantitative and Qualitative Disclosure AboutMarket Risk**

Forquantitative and qualitative disclosures about market risk, see item 7A, “Quantitativeand Qualitative Disclosures About Market Risk,” of our Annual Report on Form10-K for the year ended December 31, 2006. Our exposures to market risk have not changed materially since December31, 2006.

**ITEM 4T.  Controls and Procedures**

**Evaluation of Disclosure Controls and Procedures**

We maintaindisclosure controls and procedures that are designed to ensure that informationrequired to be disclosed in our Exchange Act reports is recorded, processed,summarized and reported within the time periods specified in the SEC’s rulesand forms, and that such information is accumulated and communicated to ourmanagement, including our Chief Executive Officer and Chief Financial Officer,as appropriate, to allow timely decisions regarding required disclosure basedclosely on the definition of “disclosure controls and procedures” in Rule13a-15(e) of the Exchange Act. Notwithstanding the foregoing, a control system, no matter how welldesigned and operated, can provide only reasonable, not absolute, assurancethat it will detect or uncover failures within the Company to disclose materialinformation otherwise required to be set forth in our periodic reports.  Also, we have investments in certainunconsolidated entities.  As we do notcontrol these entities, our disclosure controls and procedures with respect tosuch entities are necessarily substantially more limited than those we maintainwith respect to our consolidated subsidiaries.

As of the end ofthe period covered by this report, we carried out an evaluation, under thesupervision and with the participation of our management, including ourPresident and our Treasurer, of the effectiveness of the design and operationof our disclosure controls and procedures. Based upon that evaluation, our President and Treasurer concluded thatour disclosure controls and procedures were effective as of the end of theperiod covered by this report.

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

**Changes in Internal Control over Financial Reporting**

There have been nosignificant changes in our internal control over financial reporting during thequarter ended June 30, 2007, that has materially affected, or is reasonablylikely to material affect, our internal control over financial reporting.

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** **
| **PART II**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | **OTHER  INFORMATION** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------|
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | ** **             |
| **ITEM 1.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | **LEGAL  PROCEEDINGS** |
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | ** **             |
| As of December 31, 2006, 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| On December 6, 2006, SL Green announced that it and  RARC had reached an agreement in principal with the plaintiffs to settle the  previously disclosed class action lawsuits relating to the Merger. The  settlement, which remains subject to documentation and judicial review and  approval, provides (1) for certain contingent profit sharing participations  for former RARC stockholders relating to specified assets, none of which are  owned by ROP (2) for potential payments to former RARC stockholders of  amounts relating to Reckson’s interest in contingent profit sharing  participations in connection with the sale of certain Long Island industrial  properties in a prior transaction, none of which are owned by ROP and (3) for  the dismissal by the plaintiffs of all actions with prejudice and customary  releases of all defendants and related parties. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| **ITEM  1A.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | **RISK  FACTORS**      |
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | ** **             |
| We encourage you to read “Item 1A of Part 1-Risk  Factors” in the Annual Report on Form 10-K and the Quarterly Report on Form  10-Q for the quarter ended March 31, 2007 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 2 in our Quarterly Report on Form 10-Q  for the quarter ended March 31, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

 

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** **
| **ITEM 2.** | **UNREGISTERED SALES OF EQUITY SECURITIES AND USE  OF PROCEEDS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|-------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **  | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|        | None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| **ITEM 3.** | **DEFAULTS UPON SENIOR SECURITIES**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| ** **  | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|        | None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| **ITEM 4.** | **SUBMISSION OF MATTERS TO A VOTE OF SECURITY  HOLDERS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| ** **  | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|        | None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| **ITEM 5.** | **OTHER INFORMATION**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| ** **  | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|        | On January 25, 2007, SL Green completed the sale, or  Asset Sale, of certain assets of ROP to an investment group led by certain of  Reckson’s former executive management, or the Buyer, for a total  consideration of approximately $2.0 billion. SL Green caused ROP to transfer  the following assets to the Buyer in the Asset Sale: (1) certain real  property assets and/or entities owning such real property assets, in either  case, of ROP and 100% of certain loans secured by real property, all of which  are located in Long Island, New York; (2) certain real property assets and/or  entities owning such real property assets, in either case, of ROP located in  White Plains and Harrison, New York; (3) all of the real property assets  and/or entities owning 100% of the interests in such real property assets, in  either case, of ROP located in New Jersey; (4) the entity owning a 25%  interest in Reckson Australia Operating Company LLC, RARC’s former Australian  management company (including its former Australian licensed responsible  entity), and other related entities, and ROP and ROP subsidiaries’ rights to  and interests in, all related contracts and assets, including, without  limitation, property management and leasing, construction services and asset  management contracts and services contracts; (5) the direct or indirect  interest of RARC in Reckson Asset Partners, LLC, an affiliate of RSVP and all  of ROP’s rights in and to certain loans made by ROP to Frontline Capital  Group, the bankrupt parent of RSVP, and other related entities, which will be  purchased by a 50/50 joint venture with an affiliate of SL Green; (6) a 50%  participation interest in certain loans made by a subsidiary of ROP that are  secured by four real property assets located in Long Island, New York; and  (7) 100% of certain loans secured by real property located in White Plains  and New Rochelle, New York. |
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| **ITEM 6.** | **EXHIBITS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
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| (a)         | Exhibits:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
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| 31.1        | Certification by the President pursuant to Section  302 of the Sarbanes-Oxley Act of 2002 filed herewith.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
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| 31.2        | Certification by the Treasurer pursuant to Section  302 of the Sarbanes-Oxley Act of 2002 filed herewith.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
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| 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
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| 32.2        | Certification pursuant to 18 U.S.C. section 1350, as  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 filed  herewith.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

 

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**SIGNATURES**

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.
|                                              | RECKSON OPERATING PARTNERSHIP, L.P.                            |
|----------------------------------------------|----------------------------------------------------------------|
|                                         | By: Reckson Associates Realty Corp., its sole  general partner |
|                                         |                                                           |
|                                         |                                                           |
|                                         |                                                           |
|                                         | By:                                                            |      /s/ GREGORY F.  HUGHES |
|                                         |                                                           | Gregory F. Hughes |
|                                         |                                                           | Treasurer |
|                                         |                                                           |
|                                         |                                                           |
|                                         |                                                           |
| Date:    August 14, 2007 |                                                           |

 

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