-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Wh4WEPb93qSKxuMJ1uZ3YaqoN+DZL4cFTh5uA9lCVP9wyqr/HVgEX3AYD0r6/W5d JNjhnIsw0NJLiJELdMeSkg== 0001005150-00-000343.txt : 20000320 0001005150-00-000343.hdr.sgml : 20000320 ACCESSION NUMBER: 0001005150-00-000343 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000317 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RECKSON ASSOCIATES REALTY CORP CENTRAL INDEX KEY: 0000930548 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 113233650 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-13762 FILM NUMBER: 572182 BUSINESS ADDRESS: STREET 1: 225 BROADHOLLOW RD CITY: MELVILLE STATE: NY ZIP: 11747 BUSINESS PHONE: 5166946900 MAIL ADDRESS: STREET 1: 225 BROADHOLLOW RD CITY: MELVILLE STATE: NY ZIP: 11747 10-K 1 FORM 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM 10-K [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 1999 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to Commission File Number 1-13762 --------------------- RECKSON ASSOCIATES REALTY CORP. (Exact name of registrant as specified in its charter) MARYLAND 11-3233650 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 225 BROADHOLLOW ROAD, MELVILLE, NY 11747 (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code: (631) 694-6900 --------------------- Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of Each Exchange on Which Registered - ----------------------------------- ------------------------------------------ Common Stock, $.01 par value New York Stock Exchange Class B Common Stock, $.01 par value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None --------------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K, or any amendment to this Form 10-K. [ ] The aggregate market value of the shares of common stock and Class B Common Stock held by non-affiliates was approximately $894.5 million based on the closing prices on the New York Stock Exchange for such shares on March 15, 2000. The Company has two class' of common stock, issued at $.01 par value per share with 40,378,846 and 10,283,763 shares of common stock and Class B Common Stock outstanding, respectively as of March 15, 2000. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Proxy Statement for the Annual Shareholder's Meeting to be held May 18, 2000 are incorporated by reference into Part III. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS
ITEM NO. PAGE - ------- ------ PART I 1. Business ..................................................................... I-1 2. Properties ................................................................... I-8 3. Legal Proceedings ............................................................ I-17 4. Submission of Matters to a Vote of Security Holders .......................... I-17 PART II 5. Market for Registrant's Common Equity and Related Stockholder Matters ........ II-1 6. Selected Financial Data ...................................................... II-2 7. Management's Discussion and Analysis of Financial Condition and Results of II-3 Operations ................................................................... 7(a). Quantitative and Qualitative Disclosures about Market Risk ................... II-12 8. Financial Statements and Supplementary Data .................................. II-12 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ................................................................... II-12 PART III 10. Directors and Executive Officers of the Registrant ........................... III-1 11. Executive Compensation ....................................................... III-1 12. Security Ownership of Certain Beneficial Owners and Management ............... III-1 13. Certain Relationships and Related Transactions ............................... III-1 PART IV 14. Financial Statements and Schedules, Exhibits and Reports on Form 8-K ......... IV-1
PART I ITEM 1. BUSINESS GENERAL Reckson Associates Realty Corp. was incorporated in September 1994 and commenced operations effective with the completion of its initial public offering on June 2, 1995. Reckson Associates Realty Corp., together with Reckson Operating Partnership, L.P. (the "Operating Partnership"), and their affiliates (collectively, the "Company") were formed for the purpose of continuing the commercial real estate business of Reckson Associates, its affiliated partnerships and other entities ("Reckson"). For more than 40 years, Reckson has been engaged in the business of owning, developing, acquiring, constructing, managing and leasing office and industrial properties in the New York tri-state area (the "Tri-State Area"). Based on industry surveys, management believes that the Company is one of the largest owners and operators of Class A office properties and industrial properties in the Tri-State Area. The Company operates as a fully-integrated, self-administered and self-managed real estate investment trust ("REIT"). As of December 31, 1999, the Company owned 189 properties (the "Properties") (including two joint venture properties) in the Tri-State Area encompassing approximately 21.4 million rentable square feet, all of which are managed by the Company. The Properties consist of 77 Class A office properties (the "Office Properties") encompassing approximately 13.1 million square feet, 110 industrial properties (the "Industrial Properties") encompassing approximately 8.3 million square feet and two 10,000 square foot retail properties. The Company also owns a 357,000 square foot office building located in Orlando, Florida. In addition, as of December 31, 1999, the Company had approximately $315.6 million invested in certain mortgage indebtedness encumbering three Class A Office Properties encompassing approximately 1.6 million square feet, approximately 472 acres of land located in New Jersey and in a note receivable secured by a partnership interest in Omni Partners, L. P., owner of the Omni, a 575,000 square foot Class A Office Property located in Uniondale, New York (the "Mortgage Note Investments"). As of December 31, 1999, the Company also owned approximately 346 acres of land in 16 separate parcels of which the Company can develop approximately 1.9 million square feet of office space and approximately 300,000 square feet of industrial space. During 1998 and 1999, the Company made investments in joint ventures with Reckson Strategic Venture Partners, LLC ("RSVP"), a venture capital fund created as a research and development vehicle for the Company to invest in alternative real estate sectors (see Corporate Strategies and Growth Opportunities). RSVP is managed by an affiliate of Reckson Service Industries, Inc. currently D/B/A FrontLine Capital Group ("FrontLine"). The Company has committed up to $100 million for investments in the form of either (i) joint ventures with RSVP or (ii) loans to FrontLine for FrontLine's investment in RSVP. To date, the Company has invested $24.8 million in RSVP joint venture investments. During 1998, the Company spun off FrontLine, its commercial service business, to its shareholders and has provided FrontLine with a $100 million line of credit. As of December 31, 1999, $79.5 million had been drawn and is outstanding on this line. The Office Properties are Class A office buildings and are well-located, well-maintained and professionally managed. In addition, these properties are modern with high finishes or have been modernized to successfully compete with newer buildings and achieve among the highest rent, occupancy and tenant retention rates within their markets. The majority of the Office Properties are located in twelve planned office parks and are tenanted by a diverse industry group of national firms which include consumer products, telecommunication, health care, insurance and professional service firms such as accounting firms and securities brokerage houses. The Industrial Properties are utilized for distribution, warehousing, research and development and light manufacturing / assembly activities and are located primarily in three planned industrial parks developed by Reckson. All of the Company's interests in the Properties, the Mortgage Note Investments and land are held directly or indirectly by, and all of its operations are conducted through, the Operating Partnership. Reckson Associates Realty Corp. controls the Operating Partnership as the sole general partner and as of December 31, 1999, owned approximately 87% of the Operating Partnership's outstanding common units of limited partnership ("Units") and Class B common units of limited partnership interest. I-1 The Company seeks to maintain cash reserves for normal repairs, replacements, improvements, working capital and other contingencies. The Operating Partnership has established an unsecured credit facility (the "Credit Facility") with a maximum borrowing amount of $500 million scheduled to mature on July 23, 2001 and an unsecured term loan ("the "Term Loan") with a maximum borrowing capacity of $75 million scheduled to mature on June 16, 2001. The Credit Facility and the Term Loan require the Company to comply with a number of financial and other covenants on an ongoing basis. During 1999, the Operating Partnership issued $300 million of five year and ten year senior unsecured notes and the Company issued six million shares of Series B Convertible Cumulative Preferred Stock for proceeds of $150 million. The combined net proceeds of approximately $447.4 million were used to repay outstanding borrowings under the Credit Facility and as partial consideration in the acquisition of the first mortgage note secured by 919 Third Avenue located in New York City. On May 24, 1999, in conjunction with the Tower portfolio acquisition (see Corporate Strategies and Growth Opportunities below), the Company issued 11,694,567 shares of Class B Exchangeable Common Stock, par value $.01 per share, of the Company (the "Class B Common Stock") which were valued for purposes under generally accepted accounting principals ("GAAP") at $26 per share for total consideration of approximately $304.1 million. There are numerous commercial properties that compete with the Company in attracting tenants and numerous companies that compete in selecting land for development and properties for acquisition. The Company's executive offices are located at 225 Broadhollow Road, Melville, New York 11747 and its telephone number at that location is (631) 694-6900. At December 31, 1999, the Company had approximately 300 employees. RECENT DEVELOPMENTS Acquisition Activity. Set forth below is a brief description of the Company's major acquisition activity during 1999. On May 24, 1999, the Tower portfolio acquisition was completed with the Company obtaining title to all of Tower's real estate assets. Simultaneously with the closing of the Tower portfolio acquisition the Company arranged for the sale of four of Tower's Class B New York City office properties. In addition, the Company sold, with the exception of one Class A, 357,000 square foot office building located in Orlando, Florida, all of the assets located outside of the Tri-State Area. In addition to the aforementioned property in Orlando, Florida, the Company's remaining assets from the Tower portfolio acquisition include three Class A New York City Office Properties encompassing approximately 1.6 million square feet and one Class A Office Property on Long Island encompassing approximately 101,000 square feet. On June 15, 1999, the Company acquired the first mortgage note secured by 919 Third Avenue, a 47 story, 1.4 million square foot Class A Office Property located in New York City for approximately $277.5 million. The first mortgage note entitles the Company to all the net cash flow of the property and to substantial rights regarding the operations of the property. In addition, as of December 31, 1999, the Company has invested approximately $15.7 million in certain mortgage indebtedness encumbering one Class A Office Property encompassing approximately 177,000 square feet and approximately 472 acres of land located in New Jersey. The Company has also loaned approximately $17 million to its minority partner in Omni, its 575,000 square foot flagship Long Island Office Property, and effectively increased its economic interest in the property owning partnership. On January 13, 2000, the Company acquired 1350 Avenue of the Americas, a 540,000 square foot, 35 story, Class A office property, located in New York City, for a purchase price of approximately $126.5 million. This acquisition was financed through a $70 million secured debt financing and a draw under the Company's Credit Facility. I-2 On January 6, 1998, the Company made an initial investment in the Morris Companies, a New Jersey developer and owner of "Big Box" warehouse facilities. In connection with the transaction the Morris Companies contributed 100% of their interests in certain industrial properties to Reckson Morris Operating Partnership, L.P. ("RMI") in exchange for operating partnership units in RMI. During 1999, the Company executed a contract for the sale, which will take place in three stages, of its interest in RMI which consisted of 28 properties, comprising approximately 6.1 million square feet and three other big box Industrial Properties. The combined total sale price is approximately $298 million (approximately $42 million of which is payable to the Morris Companies and its affiliates). During 1999, the first stage of the RMI closing occurred and stages two and three are scheduled for April 2000. Leasing Activity During the year ended December 31, 1999, the Company leased 1.7 million square feet at the Office Properties at an average effective rent (i.e.,base rent adjusted on a straight-line basis for free rent periods, tenant improvements and leasing commissions) of $24.14 per square foot and 1.3 million square feet at the Industrial Properties at an average effective rent of $6.71 per square foot. Included in this leasing data is 388,531 square feet at the Long Island Office Properties at an average effective rent of $24.87; 707,731 square feet at the Westchester Office Properties at an average effective rent of $22.04; 109,006 square feet at the Connecticut Office Properties at an average effective rent of $26.57; 413,072 square feet at the New Jersey Office Properties at an average effective rent of $22.63 and 86,476 square feet of the New York City office properties at an average effective rent of $42.27. Also included in this leasing data is 940,315 square feet at the Long Island Industrial Properties at an average effective rent of $7.16 and 373,497 square feet at the New Jersey Industrial Properties at an average effective rent of $5.60. Financing Activities On July 23, 1998, the Company obtained its three year $500 million unsecured revolving Credit Facility from Chase Manhattan Bank, Union Bank of Switzerland and PNC Bank as co-managers of the Credit Facility bank group. Interest rates on borrowings under the Credit Facility are priced off of LIBOR plus a sliding scale ranging from 65 basis points to 90 basis points based on the Company's investment grade rating on its senior unsecured debt. On March 16, 1999, the Company received its investment grade rating on its senior unsecured debt. As a result, the pricing under the Credit Facility was adjusted to LIBOR plus 90 basis points. The Company utilizes the Credit Facility primarily to finance the acquisitions of Properties and other real estate investments, fund its development activities and for working capital purposes. At December 31, 1999, the Company had availability under the Credit Facility to borrow an additional $150.1 million (net of $52.3 million of outstanding undrawn letters of credit). As of December 31, 1999, the Company had outstanding its 18 month, $75 million unsecured Term Loan from Chase Manhattan Bank. Interest rates on borrowings under the Term Loan are priced off of LIBOR plus 150 basis points. The Term Loan replaced the Company's previous term loan which matured on December 17, 1999. Other Financing Activities On March 26, 1999, the Operating Partnership issued $100 million of 7.4% senior unsecured notes due March 15, 2004 and $200 million of 7.75% senior unsecured notes due March 15, 2009. Net proceeds of approximately $297.4 million were used to repay outstanding borrowings under the Company's Credit Facility. I-3 On May 24, 1999, in conjunction with the Tower portfolio acquisition, the Company obtained a $130 million unsecured bridge facility (The "Bridge Facility") from USB AG. Interest rates on borrowings under the Bridge Facility were priced off of LIBOR plus approximately 214 basis points. On July 23, 1999, the Bridge Facility was repaid through a long term fixed rate secured borrowing and an advance under the Credit Facility. The new mortgage note, in the amount of $125 million, is secured by two Office Properties with an aggregate carrying value of approximately $261 million, is for a term of ten years and bears interest at the rate of 7.73% per annum. Stock Offerings On May 24, 1999, in conjunction with the Tower portfolio acquisition, the Company issued 11,694,567 shares of Class B Common Stock which were valued for GAAP purposes at $26 per share for total consideration of approximately $304.1 million. The shares of Class B Common Stock are entitled to receive an initial annual dividend of $2.24 per share, which dividend is subject to adjustment annually commencing on July 1, 2000. The shares of Class B Common Stock are exchangeable at any time, at the option of the holder, into an equal number of shares of common stock, par value $.01 per share, of the Company subject to customary antidilution adjustments. The Company, at its option, may redeem any or all of the Class B Common Stock in exchange for an equal number of shares of the Company's common stock at any time following the four year, six-month anniversary of the issuance of the Class B Common Stock. On June 2, 1999 the Company issued six million shares of its Series B Preferred Stock for total proceeds of $150 million. The Series B Preferred Stock accumulate dividends at an initial rate of 7.85% per annum with such rate increasing to 8.35% per annum on April 30, 2000 and to 8.85% per annum from and after April 30, 2001. The Series B Preferred Stock is convertible into the Company's common stock at a price of $26.05 per share. Proceeds from the stock offering were used as partial consideration in the acquisition of the first mortgage note secured by 919 Third Avenue located in New York City. CORPORATE STRATEGIES AND GROWTH OPPORTUNITIES The Company's primary business objectives are to maximize current return to stockholders through increases in distributable cash flow per share and to increase stockholders' long-term total return through the appreciation in value of its common stock. The Company plans to achieve these objectives by continuing Reckson's corporate strategies and capitalizing on the internal and external growth opportunities as described below. Corporate Strategies. Management believes that throughout its 40-year operating history, Reckson has created value in its properties through a variety of market cycles by implementing the operating strategies described below. These operating strategies include the implementation of: (i) a multidisciplinary leasing approach that involves architectural design and construction personnel as well as leasing professionals, (ii) innovative property marketing programs such as the broker frequent leasing points program which was established by the Company to enhance relationships with the brokerage community and which allows brokers to accumulate points for leasing space in the Company's portfolio which can be redeemed for luxurious prizes, (iii) a comprehensive tenant service program and property amenities designed to maximize tenant satisfaction and retention, (iv) cost control management and systems that take advantage of economies of scale that arise from the Company's market position and efficiencies attributable to the state-of-the-art energy control systems at many of the Office Properties and (v) an acquisition and development strategy that is continuously adjusted in light of anticipated changes in market conditions and that seeks to capitalize on management's multidisciplinary expertise and market knowledge to modify, upgrade and reposition a property in its marketplace in order to maximize value. The Company also intends to adhere to a policy of maintaining a debt ratio (defined as the total debt of the Company as a percentage of the sum of the Company's total debt and the market value of its equity) of less than 50%. As of December 31, 1999, the Company's debt ratio was approximately 42.3%. This calculation is net of minority partners' proportionate share of debt and including the Company's share of unconsolidated joint venture debt. This debt ratio is intended to provide the Company with financial flexibility to select the optimal source of capital (whether debt or equity) with which to finance external growth. I-4 Growth Opportunities. The Company intends to achieve its primary business objectives by applying its corporate strategies to the internal and external growth opportunities described below. Internal Growth. To the extent Long Island, Westchester, New Jersey and Southern Connecticut suburban office and industrial markets continue to improve, management believes the Company is well positioned to benefit from rental revenue growth through: (i) contractual annual compounding 4% Base Rent increases (defined as fixed gross rental amounts that excludes payments on account of real estate tax, operating expense escalations and base electrical charges) on approximately 85% of existing leases at the Long Island Properties, (ii) periodic contractual increases in Base Rent on existing leases at the Westchester Properties, the New Jersey Properties and the Southern Connecticut Properties and (iii) the potential for increases to Base Rents as leases expire as a result of continued tightening of the office and industrial markets with limited new supply. In connection with the Company's acquisition and merger transaction with Tower Realty Trust, Inc. (see External Growth below) the Company entered the New York City office market. The Manhattan office market is currently experiencing favorable supply and demand characteristics similar to those currently in the Company's suburban markets and also is characterized by its similar lack of available land supply and other barriers to entry that limit our competition. The Tower portfolio includes Manhattan office buildings that offer similar potential for increase in Base Rents as described in (iii) above. External Growth. The Company seeks to acquire multi-tenant suburban Class A office and industrial properties located in the Tri-State Area. Management believes that the Tri-State Area presents opportunities to acquire or invest in properties at attractive yields. The Company believes that its (i) capital structure, in particular its Credit Facility providing for a maximum borrowing amount of up to $500 million, (ii) ability to acquire a property for Units of the Operating Partnership and thereby defer the seller's income tax on gain, (iii) operating economies of scale, (iv) relationships with financial institutions and private real estate owners, (v) fully integrated operations in its five existing divisions and (vi) its dominant position and franchise in the submarkets in which it owns properties will enhance the Company's ability to identify and capitalize on acquisition opportunities. The Company also intends to selectively develop new Class A suburban office and industrial properties and to continue to redevelop existing Office and Industrial Properties as these opportunities arise. In the near future, the Company will concentrate its development activities on industrial and Class A office properties within the Tri-State Area. The Company's expansion into the Manhattan office market and the opening of its New York City division provides it with additional opportunities to acquire an interest in properties at attractive yields. The Company also believes that the addition of its New York City division provides additional leasing and operational facilities and enhances its overall franchise value by being the only real estate operating company in the Tri-State Area with significant presence in both Manhattan and each of the surrounding sub-markets. During 1997, the Company formed FrontLine and RSVP. On June 11, 1998, the Operating Partnership distributed its 95% common stock interest in FrontLine of approximately $3 million to its owners, including the Company which, in turn, distributed the common stock of FrontLine received from the Operating Partnership to its stockholders. Additionally, during June 1998, the Operating Partnership established a credit facility with FrontLine (the "FrontLine Facility") in the amount of $100 million for FrontLine's e-commerce and e-services operations and other general corporate purposes. As of December 31, 1999, the Company had advanced $79.5 million under the FrontLine Facility. In addition, the Operating Partnership has approved the funding of investments of up to $100 million with or in RSVP (the "RSVP Commitment"), through RSVP-controlled joint venture REIT-qualified investments or advances made to FrontLine under terms similar to the FrontLine Facility. As of December 31, 1999, approximately $67.2 million had been invested through the RSVP Commitment, of which $24.8 million represents RSVP-controlled joint venture REIT-qualified investments and $42.4 million represents advances to FrontLine under the RSVP Commitment. I-5 FrontLine identifies, acquires interests in and develops a network of business to business e-commerce and e-services companies that service small to medium sized enterprises, independent professionals and entrepreneurs and the mobile workforce of larger companies. FrontLine serves as the managing member of RSVP. RSVP was formed to provide the Company with a research and development vehicle to invest in alternative real estate sectors. RSVP invests primarily in real estate and real estate related operating companies generally outside of the Company's core office and industrial focus. RSVP's strategy is to identify and acquire interests in established entrepreneurial enterprises with experienced management teams in market sectors which are in the early stages of their growth cycle or offer unique circumstances for attractive investments as well as a platform for future growth. On August 27, 1998 the Company announced the formation of a joint venture with RSVP and the Dominion Group, an Oklahoma-based, privately-owned group of companies that focuses on the development, acquisition and ownership of government occupied office buildings and correctional facilities. The new venture, Dominion Properties LLC (the "Dominion Venture"), is owned by Dominion Venture Group LLC, and by a subsidiary of the Company. The Dominion Venture is primarily engaged in acquiring, developing and/or owning government-occupied office buildings and privately operated correctional facilities. Under the Dominion Venture's operating agreement, RSVP is to invest up to $100 million, some of which may be invested by the Company (the "RSVP Capital"). The initial contribution of RSVP Capital was approximately $39 million of which approximately $10.1 million was invested by a subsidiary of the Company. The Company's investment was funded through the RSVP Commitment. In addition, the Company advanced approximately $2.9 million to FrontLine through the RSVP Commitment for an investment in RSVP which was then invested on a joint venture basis with the Dominion Group in certain service business activities related to the real estate activities. As of December 31, 1999, the Company had invested approximately $17.6 million in the Dominion Venture which had investments in 13 government office buildings and three correctional facilities. In 1999, the Company invested approximately $7.2 million, through a subsidiary, in RAP Student Housing Properties, LLC ("RAP -- SHP"), a company that engages primarily in the acquisition and development of off-campus student housing projects. The Company's investment was funded through the RSVP Commitment. In addition, the Company has advanced approximately $3.2 million to FrontLine through the RSVP Commitment for an additional investment in RSVP which was invested in certain service business activities related to student housing. As of December 31, 1999, RAP -- SHP had investments in four off-campus student housing projects. In July 1998, the Company formed a joint venture, Metropolitan Partners LLC, a Delaware limited liability company ("Metropolitan"), with Crescent Real Estate Equities Company, a Texas real estate investment trust. On December 8, 1998, the Company, Metropolitan and Tower Realty Trust, Inc. ("Tower") executed a merger agreement and on May 24, 1999 Tower was merged (the "Merger") into Metropolitan, with Metropolitan surviving the Merger. Concurrently with the Merger, Tower Realty Operating Partnership, L.P. was merged with and into a subsidiary of Metropolitan. The consideration issued in the mergers was comprised of (i) 25% cash (approximately $107.2 million) and (ii) 75% of shares of Class B Common Stock (valued for GAAP purposes at approximately $304.1 million). The Company controls Metropolitan and owns 100% of the common equity; Crescent owns a $85 million preferred equity interest in Metropolitan. Crescent's interest accrues distributions at a rate of 7.5% per annum for a two-year period (May 24, 1999 through May 24, 2001) and may be redeemed by Metropolitan at any time during that period for $85 million, plus an amount sufficient to provide a 9.5% internal rate of return. If Metropolitan does not redeem the preferred interest, upon the expiration of the two-year period, Crescent must convert its $85 million preferred interest into either (i) a common membership interest in Metropolitan or (ii) shares of the Company's common stock at a conversion price of $24.61 per share. The Tower portfolio acquired in the Merger consists of three Office Properties comprising approximately 1.6 million square feet located in New York City, one Office Property located on Long Island and certain office properties and other real estate assets located outside the Tri-State Area. I-6 Prior to the closing of the Merger, the Company arranged for the sale of four of Tower's Class B New York City properties, comprising approximately 701,000 square feet for approximately $84.5 million. Subsequent to the closing of the Merger, the Company has sold a real estate joint venture interest and all of the property located outside the Tri-State Area other than one office property located in Orlando, Florida for approximately $171.1 million. The combined consideration consisted of approximately $143.8 million in cash and approximately $27.3 million of debt relief. Net cash proceeds from the sales were used primarily to repay borrowings under the Credit Facility. As a result of incurring certain sales and closing costs in connection with the sale of the assets located outside the Tri-State Area, the Company has incurred a loss of approximately $4.4 million which has been included in gain on sales of real estate on the accompanying consolidated statements of income. ENVIRONMENTAL MATTERS Under various Federal, state and local laws, ordinances and regulations, an owner of real estate is liable for the costs of removal or remediation of certain hazardous or toxic substances on or in such property. These laws often impose such liability without regard to whether the owner knew of, or was responsible for, the presence of such hazardous or toxic substances. The cost of any required remediation and the owner's liability therefore as to any property is generally not limited under such enactments and could exceed the value of the property and/or the aggregate assets of the owner. The presence of such substances, or the failure to properly remediate such substances, may adversely affect the owner's ability to sell or rent such property or to borrow using such property as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal or remediation of such substances at a disposal or treatment facility, whether or not such facility is owned or operated by such person. Certain environmental laws govern the removal, encapsulation or disturbance of asbestos-containing materials ("ACMs") when such materials are in poor condition, or in the event of renovation or demolition. Such laws impose liability for release of ACMs into the air and third parties may seek recovery from owners or operators of real properties for personal injury associated with ACMs. In connection with the ownership (direct or indirect), operation, management and development of real properties, the Company may be considered an owner or operator of such properties or as having arranged for the disposal or treatment of hazardous or toxic substances and, therefore, potentially liable for removal or remediation costs, as well as certain other related costs, including governmental fines and injuries to persons and property. All of the Office Properties and all of the Industrial Properties have been subjected to a Phase I or similar environmental audit after April 1, 1994 (which involved general inspections without soil sampling, ground water analysis or radon testing and, for the Properties constructed in 1978 or earlier, survey inspections to ascertain the existence of ACMs were conducted) completed by independent environmental consultant companies (except for 35 Pinelawn Road which was originally developed by Reckson and subjected to a Phase 1 in April 1992). These environmental audits have not revealed any environmental liability that would have a material adverse effect on the Company's business. I-7 ITEM 2. PROPERTIES GENERAL As of December 31, 1999, the Company owned and operated 189 Properties (including two joint venture office properties but excluding the RSVP -- controlled joint ventures) in the Tri-State Area encompassing approximately 21.4 million square feet. These properties consist of 77 Class A Office Properties encompassing approximately 13.1 million rentable square feet, 110 Industrial Properties encompassing approximately 8.3 million rentable square feet and two free-standing 10,000 square foot retail properties. The Company also owns a 357,000 square foot Class A office building in Orlando, Florida. The rentable square feet of each property has been determined for these purposes based on the aggregate leased square footage specified in currently effective leases and, with respect to vacant space, management's estimate. In addition, as of December 31, 1999, the Company owned approximately 346 acres of land in 16 separate parcels of which the Company can develop approximately 1.9 million square feet of office space and approximately 300,000 square feet of industrial space. Reckson has historically emphasized the development and acquisition of properties that are part of large scale office and industrial parks and approximately 54% of the Office Properties and approximately 46% of the Industrial Properties are located in such parks (measured by rentable square footage). The Company believes that owning properties in planned office and industrial parks provides certain strategic advantages, including the following: (i) certain tenants prefer being located in a park with other high quality companies to enhance their corporate image, (ii) parks afford tenants certain aesthetic amenities such as a common landscaping plan, standardization of signage and common dining and recreational facilities, (iii) tenants may expand (or contract) their business within a park, enabling them to centralize business functions and (iv) a park provides tenants with access to other tenants and may facilitate business relationships between tenants. Also, as of December 31, 1999, the Company had invested approximately $298.6 million in certain mortgage indebtedness encumbering three Class A Office Properties encompassing approximately 1.6 million square feet and approximately 472 acres of land located in New Jersey. In addition, the Company has loaned approximately $17 million to its minority partner in Omni, its flagship Long Island Office Property and effectively increased its economic interest in the property owning partnership. Set forth below is a summary of certain information relating to the Properties, categorized by Office and Industrial Properties, as of December 31, 1999. OFFICE PROPERTIES General As of December 31, 1999, the Company owned or had an interest in 77 Tri-State Area Class A Office Properties encompassing approximately 13.1 million rentable square feet. As of December 31, 1999, these Office Properties were approximately 95% leased to approximately 1,000 tenants. The Office Properties are Class A office buildings and are well-located, well-maintained and professionally managed. In addition, these properties are modern with high finishes and achieve among the highest rent, occupancy and tenant retention rates within their sub-markets. Forty-nine of the 73 suburban Office Properties are located in the following twelve planned office parks: the North Shore Atrium, the Huntington Melville Corporate Center, the Nassau West Corporate Center, the Tarrytown Corporate Center, the Landmark Square Office Complex, the Executive Hill Office Park, the Reckson Executive Park, the University Square Office Complex, the Summit at Valhalla, the Mt. Pleasant Corporate Center, the Stamford Towers Office Center, and the Short Hills Office Complex. The buildings in these office parks offer a full array of amenities including health clubs, racquetball courts, sun decks, restaurants, computer controlled HVAC access systems and conference centers. Management believes that the location, quality of construction and amenities as well as the Company's reputation for providing a high level of tenant service have enabled the Company to attract and retain a national tenant base. The office tenants include national service companies, such as telecommunications firms, "Big Five" accounting firms, securities brokerage houses, insurance companies and health care providers. I-8 The Office Properties are leased to both national and local tenants. Leases on the Office Properties are typically written for terms ranging from five to ten years and require: (i) payment of a fixed gross rental amount that excludes payments on account of real estate tax, operating expense escalations and base electrical charges ("Base Rent"), (ii) payment of a base electrical charge, (iii) payment of real estate tax escalations over a base year, (iv) payment of compounded annual increases to Base Rent and/or payment of operating expense escalations over a base year, (v) payment of overtime HVAC and electric and (vi) payment of electric escalations over a base year. In virtually all leases, the landlord is responsible for structural repairs. Renewal provisions typically provide for renewal rates at market rates or a percentage thereof, provided that such rates are not less than the most recent renewal rates. The following table sets forth certain information as of December 31, 1999 for each of the Office Properties.
OWNERSHIP INTEREST (GROUND LEASE LAND PERCENTAGE EXPIRATION YEAR AREA PROPERTY OWNERSHIP DATE) (1) CONSTRUCTED (ACRES) - --------------------------------- ------------ ------------ --------------- --------- Office Properties: Huntington Melville Corporate Center, Melville, NY Leasehold 395 North Service Rd ............ 100% (2081) 1988 7.5 200 Broadhollow Rd. ............. 100% Fee 1981 4.6 48 South Service Rd. ............ 100% Fee 1986 7.3 35 Pinelawn Rd .................. 100% Fee 1980 6.0 275 Broadhollow Rd .............. 100% Fee 1970 5.8 1305 Old Walt Whitman Rd (3) .... 100% Fee 1998 (5) 18.1 ---- Total--Huntington Melville Corporate Center (4) ........... 49.3 ---- North Shore Atrium, Syosset, NY 6800 Jericho Turnpike (North Shore Atrium I) ................ 100% Fee 1977 13.0 6900 Jericho Turnpike (North Shore Atrium II) ............... 100% Fee 1982 5.0 ---- Total--North Shore Atrium ....... 18.0 ---- Nassau West Corporate Center, Mitchel Field, NY 50 Charles Lindbergh Blvd. (Nassau West Corporate Center Leasehold II) ............................ 100% (2082) 1984 9.1 60 Charles Lindbergh Blvd. (Nassau West Corporate Center Leasehold I) ............................. 100% (2082) 1989 7.8 Leasehold 51 Charles Lindbergh Blvd. ...... 100% (2084) 1989 6.6 Leasehold 55 Charles Lindbergh Blvd. ...... 100% (2082) 1982 10.0 333 Earl Ovington Blvd. (The Leasehold Omni) .......................... 60% (2088) 1991 30.6 Leasehold 90 Merrick Ave. ................. 100% (2084) 1985 13.2 ---- Total--Nassau West Corporate Center ......................... 77.3 ---- Tarrytown Corporate Center Tarrytown, NY 505 White Plains Road ........... 100% Fee 1974 1.4 520 White Plains Road ........... 60% Fee (6) 1981 6.8 555 White Plains Road ........... 100% Fee 1972 4.2 560 White Plains Road ........... 100% Fee 1980 4.0 580 White Plains Road ........... 100% Fee 1977 6.1 660 White Plains Road ........... 100% Fee 1983 10.9 ---- Total--Tarrytown Corporate Center ......................... 33.4 ---- Reckson Executive Park Rye Brook, NY 1 International Dr. ............. 100% Fee 1983 N/A 2 International Dr. ............. 100% Fee 1983 N/A 3 International Dr. ............. 100% Fee 1983 N/A 4 International Dr. ............. 100% Fee 1986 N/A 5 International Dr. ............. 100% Fee 1986 N/A 6 International Dr. ............. 100% Fee 1986 N/A Total--Reckson Executive Park ... 44.4 ---- ANNUAL BASE RENT NUMBER NUMBER RENTABLE PER OF OF SQUARE PERCENT ANNUAL BASE LEASED TENANT PROPERTY FLOORS FEET LEASED RENT (2) SQ. FT. LEASES - --------------------------------- -------- ------------ ----------- ------------- ----------- ------- Office Properties: Huntington Melville Corporate Center, Melville, NY 395 North Service Rd ............ 4 187,393 100.0% $ 4,620,998 $ 24.66 5 200 Broadhollow Rd. ............. 4 67,432 88.8% $ 1,298,934 $ 21.68 11 48 South Service Rd. ............ 4 125,372 95.1% $ 2,850,902 $ 23.91 7 35 Pinelawn Rd .................. 2 105,241 94.3% $ 2,088,736 $ 21.05 26 275 Broadhollow Rd .............. 4 124,441 100.0% $ 2,764,076 $ 21.39 17 1305 Old Walt Whitman Rd (3) .... 3 167,400 92.7% $ 3,649,827 $ 23.52 5 ------- ----------- -- Total--Huntington Melville Corporate Center (4) ........... 777,279 96.5% $17,273,473 $ 23.03 71 ------- ----------- -- North Shore Atrium, Syosset, NY 6800 Jericho Turnpike (North Shore Atrium I) ................ 2 209,028 79.0% $ 3,355,388 $ 20.31 37 6900 Jericho Turnpike (North Shore Atrium II) ............... 4 101,036 92.2% $ 2,054,157 $ 22.05 13 ------- ----------- -- Total--North Shore Atrium ....... 310,064 83.3% $ 5,409,545 $ 20.94 50 ------- ----------- -- Nassau West Corporate Center, Mitchel Field, NY 50 Charles Lindbergh Blvd. (Nassau West Corporate Center II) ............................ 6 211,845 100.0% $ 4,831,982 $ 22.64 22 60 Charles Lindbergh Blvd. (Nassau West Corporate Center I) ............................. 2 186,889 100.0% $ 4,004,079 $ 21.37 7 51 Charles Lindbergh Blvd. ...... 1 108,000 100.0% $ 2,167,285 $ 20.07 1 55 Charles Lindbergh Blvd. ...... 2 214,581 100.0% $ 2,535,051 $ 11,81 2 333 Earl Ovington Blvd. (The Omni) .......................... 10 575,000 87.8% $14,987,850 $ 29.68 28 90 Merrick Ave. ................. 9 221,839 96.4% $ 4,859,277 $ 22.73 21 ------- ----------- -- Total--Nassau West Corporate Center ......................... 1,518,154 95.0% $33,385,524 $ 23.15 81 --------- ----------- -- Tarrytown Corporate Center Tarrytown, NY 505 White Plains Road ........... 2 26,468 91.5% $ 461,589 $ 19.05 20 520 White Plains Road ........... 6 171,761 100.0% $ 3,192,362 $ 18.59 1 555 White Plains Road ........... 5 121,585 86.5% $ 2,274,121 $ 21.62 6 560 White Plains Road ........... 6 126,471 100.0% $ 1,758,933 $ 13.89 16 580 White Plains Road ........... 6 170,726 100.0% $ 3,236,652 $ 18.92 19 660 White Plains Road ........... 6 258,715 94.7% $ 4,728,353 $ 19.29 45 --------- ----------- -- Total--Tarrytown Corporate Center ......................... 875,726 96.4% $15,652,010 $ 18.55 107 --------- ----------- --- Reckson Executive Park Rye Brook, NY 1 International Dr. ............. 3 90,000 100.0% $ 1,170,000 $ 13.00 1 2 International Dr. ............. 3 90,000 100.0% $ 1,170,000 $ 13.00 1 3 International Dr. ............. 3 91,174 100.0% $ 1,718,469 $ 18.84 5 4 International Dr. ............. 3 86,694 83.8% $ 1,572,288 $ 21.65 9 5 International Dr. ............. 3 90,000 100.0% $ 2,416,482 $ 26.85 1 6 International Dr. ............. 3 94,016 100.0% $ 1,423,951 $ 15.15 8 --------- ----------- --- Total--Reckson Executive Park ... 541,884 97.4% $ 9,471,190 $ 17.94 25 --------- ----------- ---
I-9
OWNERSHIP INTEREST (GROUND LEASE LAND PERCENTAGE EXPIRATION YEAR AREA PROPERTY OWNERSHIP DATE) (1) CONSTRUCTED (ACRES) - ------------------------------------ ------------ ------------ --------------- --------- Summit at Valhalla Valhalla, NY 100 Summit Dr. ..................... 100% Fee 1988 11.3 200 Summit Dr. ..................... 100% Fee 1990 18.0 500 Summit Dr. ..................... 100% Fee 1986 29.1 ---- Total--Summit at Valhalla .......... 58.4 ---- Mt. Pleasant Corporate Center 115/117 Stevens Ave. ............... 100% Fee 1984 5.0 ---- Total--Mt Pleasant Corporate Center ............................ 5.0 ---- Landmark Square Stamford, CT One Landmark Square ................ 100% Fee 1973 N/A Two Landmark Square ................ 100% Fee 1976 N/A Three Landmark Square .............. 100% Fee 1978 N/A Four Landmark Square ............... 100% Fee 1977 N/A Five Landmark Square ............... 100% Fee 1976 N/A Six Landmark Square ................ 100% Fee 1984 N/A Total--Landmark Square ............. 7.2 ----- Stamford Towers Stamford, CT 680 Washington Blvd. ............... 100% Fee 1989 1.3 750 Washington Blvd. ............... 100% Fee 1989 2.4 ----- Total--Stamford Towers ............. 3.7 ----- Stand-alone Long Island Properties 400 Garden City Plaza Garden City, NY ................... 100% Fee 1989 5.7 88 Duryea Rd. Melville, NY ...................... 100% Fee 1986 1.5 310 East Shore Rd. Great Neck, NY .................... 100% Fee 1981 1.5 333 East Shore Rd. Leasehold Great Neck, NY .................... 100% (2030) 1976 1.5 520 Broadhollow Rd Melville, NY ...................... 100% Fee 1978 7.0 1660 Walt Whitman Rd. Melville, NY ...................... 100% Fee 1980 6.5 125 Baylis Rd. Melville, NY ...................... 100% Fee 1980 8.2 150 Motor Parkway Hauppauge, NY ..................... 100% Fee 1984 11.3 1979 Marcus Ave. Lake Success, NY .................. 100% Fee 1987 8.6 120 Mineola Blvd Mineola, New York ................. 100% Fee 1989 0.7 ----- Total--Stand-alone Long Island Properties ........................ 52.5 ----- Stand-alone Westchester Properties ............ 155 White Plains Road, Tarrytown, NY ..................... 100% Fee 1963 13.2 235 Main Street, White Plains, NY .................. 100% Fee 1974 (5) .4 245 Main Street White Plains, NY .................. 100% Fee 1983 .4 120 White Plains Rd. Tarrytown, NY ..................... 100% Fee 1984 9.7 80 Grasslands Elmsford, NY ...................... 100% Fee 1989 4.9 360 Hamilton Avenue White Plains, NY (3) .............. 100% Fee 1977 1.5 140 Grand Street White Plains, NY .................. 100% Fee 1991 2.2 ----- Total--Stand-alone Westchester Properties(4) ..................... 32.3 ----- Executive Hill Office Park West Orange, NJ 100 Executive Dr ................... 100% Fee 1978 10.1 200 Executive Dr ................... 100% Fee 1980 8.2 300 Executive Dr ................... 100% Fee 1984 8.7 10 Rooney Circle ................... 100% Fee 1971 5.2 ----- Total--Executive Hill Office Park .. 32.2 ----- ANNUAL BASE RENT NUMBER NUMBER RENTABLE PER OF OF SQUARE PERCENT ANNUAL BASE LEASED TENANT PROPERTY FLOORS FEET LEASED RENT (2) SQ. FT. LEASES - ------------------------------------ -------- ------------ --------- ------------- --------- ------- Summit at Valhalla Valhalla, NY 100 Summit Dr. ..................... 4 249,551 72.0% $ 1,745,495 $ 9.72 8 200 Summit Dr. ..................... 4 240,834 84.9% $ 4,890,463 $ 23.92 12 500 Summit Dr. ..................... 4 208,660 100.0% $ 5,633,820 $ 27.00 1 ------- ----------- -- Total--Summit at Valhalla .......... 699,045 84.8% $12,269,778 $ 20.70 21 ------- ----------- -- Mt. Pleasant Corporate Center 115/117 Stevens Ave. ............... 3 162,004 97.7% $ 3,029,965 $ 19.14 17 ------- ----------- -- Total--Mt Pleasant Corporate Center ............................ 162,004 97.7% $ 3,029,965 $ 19.14 17 ------- ----------- -- Landmark Square Stamford, CT One Landmark Square ................ 22 296,716 85.5% $ 5,248,069 $ 20.69 62 Two Landmark Square ................ 3 39,701 69.4% $ 588,845 $ 21.38 7 Three Landmark Square .............. 6 128,286 96.5% $ 2,119,202 $ 17.12 22 Four Landmark Square ............... 5 104,446 91.5% $ 2,243,662 $ 23.48 15 Five Landmark Square ............... 3 57,273 92.9% $ 230,185 $ 4.32 2 Six Landmark Square ................ 10 171,899 91.3% $ 3,895,234 $ 24.81 6 ------- ----------- -- Total--Landmark Square ............. 798,321 89.0% $14,325,197 $ 20.15 114 ------- ----------- --- Stamford Towers Stamford, CT 680 Washington Blvd. ............... 11 132,759 99.5% $ 3,634,757 $ 27.52 6 750 Washington Blvd. ............... 11 192,108 99.6% $ 4,565,587 $ 23.87 11 ------- ----------- --- Total--Stamford Towers ............. 324,867 99.5% $ 8,200,344 $ 25.36 17 ------- ----------- --- Stand-alone Long Island Properties 400 Garden City Plaza Garden City, NY ................... 5 176,073 98.3% $ 3,805,459 $ 21.99 25 88 Duryea Rd. Melville, NY ...................... 2 25,061 96.2% $ 489,154 $ 20.29 4 310 East Shore Rd. Great Neck, NY .................... 4 50,000 100.0% $ 1,265,128 $ 25.25 21 333 East Shore Rd. Great Neck, NY .................... 2 17,715 99.6% $ 483,504 $ 27.39 9 520 Broadhollow Rd Melville, NY ...................... 1 83,176 87.3% $ 1,486,300 $ 20.48 3 1660 Walt Whitman Rd. Melville, NY ...................... 1 73,115 99.9% $ 1,420,754 $ 19.45 5 125 Baylis Rd. Melville, NY ...................... 2 98,329 68.5% $ 1,285,253 $ 19.08 11 150 Motor Parkway Hauppauge, NY ..................... 4 191,447 96.0% $ 4,028,593 $ 21.92 23 1979 Marcus Ave. Lake Success, NY .................. 4 326,612 98.0% $ 6,313,637 $ 19.73 28 120 Mineola Blvd Mineola, New York ................. 6 101,000 88.0% $ 1,826,277 $ 20.54 14 ------- ----------- --- Total--Stand-alone Long Island Properties ........................ 1,142,528 93.7% $22,404,059 $ 20.93 143 --------- ----------- --- Stand-alone Westchester Properties ............ 155 White Plains Road, Tarrytown, NY ..................... 2 60,909 99.6% $ 1,073,536 $ 17.70 5 235 Main Street, White Plains, NY .................. 6 83,237 89.2% $ 1,310,846 $ 17.66 28 245 Main Street White Plains, NY .................. 6 73,543 92.0% $ 1,275,897 $ 18.85 17 120 White Plains Rd. Tarrytown, NY ..................... 6 197,785 100.0% $ 4,404,079 $ 22.25 10 80 Grasslands Elmsford, NY ...................... 3 85,104 92.9% $ 1,649,669 $ 20.87 5 360 Hamilton Avenue White Plains, NY (3) .............. 12 382,000 120% $ 1,054,477 $ 22.96 2 140 Grand Street White Plains, NY .................. 9 130,136 90.9% $ 2,690,489 $ 22.74 16 --------- ----------- --- Total--Stand-alone Westchester Properties(4) ..................... 1,012,714 94.8% $13,458,993 $ 20.91 83 --------- ----------- --- Executive Hill Office Park West Orange, NJ 100 Executive Dr ................... 3 92,872 97.1% $ 1,609,173 $ 17.85 10 200 Executive Dr ................... 4 102,630 99.3% $ 1,974,468 $ 19.37 17 300 Executive Dr ................... 4 126,196 100.0% $ 2,409,573 $ 19.07 11 10 Rooney Circle ................... 3 69,684 100.0% $ 1,367,232 $ 19.62 2 --------- ----------- --- Total--Executive Hill Office Park .. 391,382 99.2% $ 7,360,446 $ 18.96 40 --------- ----------- ---
I-10
OWNERSHIP INTEREST (GROUND LEASE LAND PERCENTAGE EXPIRATION YEAR AREA PROPERTY OWNERSHIP DATE) (1) CONSTRUCTED (ACRES) - -------------------------------------- ------------ ------------ ------------- --------- University Square Princeton, NJ 100 Campus Dr. ....................... 100% Fee 1987 N/A 104 Campus Dr. ....................... 100% Fee 1987 N/A 115 Campus Dr. ....................... 100% Fee 1987 N/A Total--University Square ............. 11.0 ----- Short Hills Office Complex Short Hills, NJ ..................... 101 West John F. Kennedy Parkway ............................. 100% Fee 1981 9.0 101 East John F. Kennedy Parkway 100% Fee 1981 6.0 51 John F Kennedy Parkway ............ 100% Fee 1988 11.0 ----- Total--Short Hills Office Complex 26.0 ----- Stand-alone New Jersey Properties 1 Paragon Drive Montvale, NJ ........................ 100% Fee 1980 11.0 99 Cherry Hill Road Parsippany, NJ ...................... 100% Fee 1982 8.8 119 Cherry Hill Road Parsippany, NJ ...................... 100% Fee 1982 9.3 One Eagle Rock Hanover, NJ ......................... 100% Fee 1986 10.4 155 Passaic Ave. Fairfield, NJ ....................... 100% Fee 1984 3.6 3 University Plaza Hackensack, NJ ...................... 100% Fee 1985 10.6 1255 Broad Street Clifton, NJ (3) ..................... 100% Fee 1968 11.1 ----- Total--Stand-alone New Jersey Properties (4) ...................... 64.8 ----- New York City Properties ............. 120 W. 45th Street New York, NY ........................ 100% Fee 1989 0.4 100 Wall Street New York, NY ........................ 100% Fee 1969 0.5 810 Seventh Avenue New York, NY ........................ 100% Fee 1970 0.6 919 Third Avenue New York, NY (7) .................... 100% Fee 1971 1.5 ----- Total--New York City Office Properties .......................... 3.0 ----- Total--Office Properties (4) ......... 518.5 ===== ANNUAL BASE RENT NUMBER NUMBER RENTABLE PER OF OF SQUARE PERCENT ANNUAL BASE LEASED TENANT PROPERTY FLOORS FEET LEASED RENT (2) SQ. FT. LEASES - -------------------------------------- -------- ------------ --------- --------------- ----------- ------- University Square Princeton, NJ 100 Campus Dr. ....................... 1 27,350 99.7% $ 416,230 $ 15.27 3 104 Campus Dr. ....................... 1 70,155 100.0% $ 1,110,829 $ 15.83 1 115 Campus Dr. ....................... 1 33,600 99.9% $ 574,589 $ 17.12 2 ------ ------------ - Total--University Square ............. 131,105 99.9% $ 2,101,648 $ 16.05 6 ------- ------------ - Short Hills Office Complex Short Hills, NJ ..................... 101 West John F. Kennedy Parkway ............................. 6 185,233 100.0% $ 2,963,700 $ 16.00 1 101 East John F. Kennedy Parkway 4 122,841 100.0% $ 1,965,482 $ 16.00 1 51 John F Kennedy Parkway ............ 5 248,962 96.3% $ 7,680,763 $ 32.04 19 ------- ------------ -- Total--Short Hills Office Complex 557,036 98.4% $ 12,609,945 $ 23.02 21 ------- ------------ -- Stand-alone New Jersey Properties 1 Paragon Drive Montvale, NJ ........................ 2 104,599 89.6% $ 1,547,948 $ 16.51 15 99 Cherry Hill Road Parsippany, NJ ...................... 3 93,250 99.0% $ 1,650,526 $ 17.88 16 119 Cherry Hill Road Parsippany, NJ ...................... 3 95,724 98.1% $ 1,547,521 $ 16.47 17 One Eagle Rock Hanover, NJ ......................... 3 140,000 68.2% $ 2,031,710 $ 21.28 7 155 Passaic Ave. Fairfield, NJ ....................... 4 84,500 29.4% $ 486,739 $ 19.57 3 3 University Plaza Hackensack, NJ ...................... 6 216,403 97.2% $ 3,495,272 $ 16.61 22 1255 Broad Street Clifton, NJ (3) ..................... 2 180,000 80.2% $ 4,070,161 $ 28.20 3 ------- ------------ -- Total--Stand-alone New Jersey Properties (4) ...................... 914,476 92.0% $ 14,829,877 $ 19.64 83 ------- ------------ -- New York City Properties ............. 120 W. 45th Street New York, NY ........................ 40 443,109 99.6% $ 16,734,846 $ 37.92 42 100 Wall Street New York, NY ........................ 29 458,626 97.7% $ 8,887,657 $ 19.84 31 810 Seventh Avenue New York, NY ........................ 42 692,060 95.4% $ 19,935,279 $ 30.20 35 919 Third Avenue New York, NY (7) .................... 47 1,374,966 99.1% $ 16,876,544 $ 12.38 23 --------- ------------ -- Total--New York City Office Properties .......................... 2,968,761 98.1% $ 62,434,326 $ 21.44 131 --------- ------------ --- Total--Office Properties (4) ......... 13,125,346 94.8% $254,216,320 $ 21.09 1,010 ========== ============ =====
- ------------------ (1) Ground lease expirations assume exercise of renewal options by the lessee. (2) Represents Base Rent of signed leases at December 31, 1999 adjusted for scheduled contractual increases during the 12 months ending December 31, 2000. Total Base Rent for these purposes reflects the effect of any lease expirations that occur during the 12-month period ending December 31, 2000. Amounts included in rental revenue for financial reporting purposes have been determined on a straight-line basis rather than on the basis of contractual rent as set forth in the foregoing table. (3) Property is currently under redevelopment. (4) Percent leases excludes properties under development. (5) Year renovated. (6) The actual fee interest in 520 White Plains Road is held by the County of Westchester Industrial Development Agency. The fee interest in 520 White Plains Road may be acquired if the outstanding principal under certain loan agreements and annual basic installments are prepaid in full. (7) The Company currently holds the first mortgage note secured by this property. There is a ground lease in place on a small portion of the land which expires in 2066. I-11 INDUSTRIAL PROPERTIES General. As of December 31, 1999, the Company owned or had an interest in 110 Industrial Properties that encompass approximately 8.3 million rentable square feet. As of December 31, 1999, the Industrial Properties were approximately 98% leased to approximately 250 tenants. Many of the Industrial Properties have been constructed with high ceiling heights (i.e., above 18 feet), upscale office building facades, parking in excess of zoning requirements, drive-in and/or loading dock facilities and other features which permit them to be leased for industrial and/or office purposes. The Industrial Properties are leased to both national and local tenants. These tenants utilize the Industrial Properties for distribution, warehousing, research and development and light manufacturing/assembly activities. Leases on the Industrial Properties are typically written for terms ranging from three to seven years and require: (i) payment of a Base Rent, (ii) payments of real estate tax escalations over a base year, (iii) payments of compounded annual increases to Base Rent and (iv) reimbursement of all operating expenses. Electric costs are borne and paid directly by the tenant. Certain leases are "triple net" (i.e., the tenant is required to pay in addition to annual Base Rent, all operating expenses and real estate taxes). In virtually all leases, the landlord is responsible for structural repairs. Renewal provisions typically provide for renewal rents at market rates, provided that such rates are not less than the most recent rental rates. Approximately 71% of the Industrial Properties measured by square footage are located on Long Island. Sixty five percent of these properties as measured by square footage were located in the following three Industrial Parks developed by Reckson: (i) Vanderbilt Industrial Park, (ii) Airport International Plaza and (iii) County Line Industrial Center. In addition to the Industrial Properties on Long Island, the Company owns 15 Industrial Properties in the other suburban markets. These properties encompass approximately 2.4 million square feet and were approximately 97% leased (excluding properties under redevelopment) as of December 31, 1999. The following table sets forth certain information as of December 31, 1999 for each of the Industrial Properties.
OWNERSHIP INTEREST (GROUND LEASE LAND CLEARANCE PERCENTAGE EXPIRATION YEAR AREA HEIGHT PROPERTY OWNERSHIP DATE) CONSTRUCTED (ACRES) (FEET) (1) - ------------------------------ ------------ ------------ ------------- --------- ------------ Industrial Properties: Vanderbilt Industrial Park Hauppauge, NY 360 Vanderbilt Motor Parkway ..................... 100% Fee 1967 4.2 16 410 Vanderbilt Motor Parkway ..................... 100% Fee 1965 3.0 15 595 Old Willets Path ......... 100% Fee 1968 3.5 14 611 Old Willets Path ......... 100% Fee 1963 3.0 14 631/641 Old Willets Path ..... 100% Fee 1965 1.9 14 651/661 Old Willets Path ..... 100% Fee 1966 2.0 14 681 Old Willets Path ......... 100% Fee 1961 1.3 14 740 Old Willets Path ......... 100% Fee 1965 3.5 14 325 Rabro Dr. ................ 100% Fee 1967 2.7 14 250 Kennedy Dr. .............. 100% Fee 1979 7.0 16 90 Plant Ave. ................ 100% Fee 1972 4.3 16 110 Plant Ave. ............... 100% Fee 1974 6.8 18 55 Engineers Rd. ............. 100% Fee 1968 3.0 18 65 Engineers Rd. ............. 100% Fee 1969 1.8 22 85 Engineers Rd. ............. 100% Fee 1968 2.3 18 100 Engineers Rd. ............ 100% Fee 1968 5.0 14 150 Engineers Rd. ............ 100% Fee 1969 6.8 22 20 Oser Ave. ................. 100% Fee 1979 5.0 16 30 Oser Ave. ................. 100% Fee 1978 4.4 16 40 Oser Ave. ................. 100% Fee 1974 3.1 16 50 Oser Ave. ................. 100% Fee 1975 4.1 21 60 Oser Ave. ................. 100% Fee 1975 3.3 21 63 Oser Ave. ................. 100% Fee 1974 1.2 20 65 Oser Ave. ................. 100% Fee 1975 1.2 18 73 Oser Ave. ................. 100% Fee 1974 1.2 20 PERCENTAGE ANNUAL OFFICE/ BASE RESEARCH RENT NUMBER AND RENTABLE PER OF DEVELOPMENT SQUARE PERCENT ANNUAL BASE LEASED TENANT PROPERTY FINISH FEET LEASED RENT (2) SQ. FT. LEASES - ------------------------------ ------------- ---------- ----------- ------------- --------- ------- Industrial Properties: Vanderbilt Industrial Park Hauppauge, NY 360 Vanderbilt Motor Parkway ..................... 62% 54,000 100.0% $500,580 $ 9.27 1 410 Vanderbilt Motor Parkway ..................... 7% 41,784 100.0% $207,672 $ 4.97 4 595 Old Willets Path ......... 14% 31,670 100.0% $162,100 $ 5.12 4 611 Old Willets Path ......... 11% 20,000 100.0% $147,601 $ 7.38 2 631/641 Old Willets Path ..... 31% 25,000 100.0% $161,405 $ 6.46 4 651/661 Old Willets Path ..... 45% 25,000 100.0% $156,243 $ 6.25 7 681 Old Willets Path ......... 10% 15,000 100.0% $ 98,475 $ 6.57 1 740 Old Willets Path ......... 5% 30,000 100.0% $ 2,473 $ 0.08 1 325 Rabro Dr. ................ 10% 35,000 100.0% $214,749 $ 6.05 2 250 Kennedy Dr. .............. 9% 127,980 100.0% $455,298 $ 3.56 1 90 Plant Ave. ................ 13% 75,000 99.9% $418,834 $ 5.59 3 110 Plant Ave. ............... 8% 125,000 100.0% $540,000 $ 4.32 1 55 Engineers Rd. ............. 8% 36,000 0% $ 0 $ 0.00 0 65 Engineers Rd. ............. 10% 23,000 100.0% $136,733 $ 5.94 1 85 Engineers Rd. ............. 5% 40,800 100.0% $202,785 $ 4.97 2 100 Engineers Rd. ............ 11% 88,000 100.0% $379,476 $ 4.31 1 150 Engineers Rd. ............ 11% 135,000 100.0% $407,883 $ 3.02 1 20 Oser Ave. ................. 18% 42,000 98.7% $347,517 $ 8.39 2 30 Oser Ave. ................. 21% 42,000 82.1% $221,289 $ 6.41 4 40 Oser Ave. ................. 33% 59,800 85.3% $342,103 $ 6.71 12 50 Oser Ave. ................. 15% 60,000 100.0% $240,000 $ 4.00 1 60 Oser Ave. ................. 19% 48,000 100.0% $192,000 $ 4.00 1 63 Oser Ave. ................. 9% 22,000 100.0% $112,846 $ 5.13 1 65 Oser Ave. ................. 10% 20,000 100.0% $105,263 $ 5.26 1 73 Oser Ave. ................. 15% 20,000 100.0% $113,463 $ 5.67 1
I-12
OWNERSHIP INTEREST (GROUND LEASE LAND CLEARANCE PERCENTAGE EXPIRATION YEAR AREA HEIGHT PROPERTY OWNERSHIP DATE) CONSTRUCTED (ACRES) (FEET) (1) - ------------------------------- ------------ ------------ ------------- --------- ------------ 80 Oser Ave. .................. 100% Fee 1974 1.1 18 85 Nicon Ct. .................. 100% Fee 1978 6.1 30 90 Oser Ave. .................. 100% Fee 1973 1.1 16 104 Parkway Dr. ............... 100% Fee 1985 1.8 15 110 Ricefield Ln. ............. 100% Fee 1980 2.0 15 120 Ricefield Ln. ............. 100% Fee 1983 2.0 15 125 Ricefield Ln. ............. 100% Fee 1973 2.0 14 135 Ricefield Ln. ............. 100% Fee 1981 2.1 15 85 Adams Dr. .................. 100% Fee 1980 1.8 15 395 Oser Ave .................. 100% Fee 1980 6.1 14 185 Oser Ave .................. 100% Fee 1974 2.0 18 25 Davids Dr. ................. 100% Fee 1975 3.2 20 45 Adams Ave .................. 100% Fee 1979 2.1 18 225 Oser Ave .................. 100% Fee 1977 1.2 14 180 Oser Ave .................. 100% Fee 1978 3.4 16 360 Oser Ave .................. 100% Fee 1981 1.3 18 400 Oser Ave .................. 100% Fee 1982 9.5 16 375 Oser Ave .................. 100% Fee 1981 1.2 18 425 Rabro Drive ............... 100% Fee 1980 4.0 16 390 Motor Parkway (3) ......... 100% Fee 1980 10.0 14 600 Old Willets Path .......... 100% Fee 1965 4.5 14 400 Moreland Road(3) .......... 100% Fee 1967 6.3 17 ----- Total--Vanderbilt Industrial Park (4) .......... 160.4 ----- Airport International Plaza Islip, NY 20 Orville Dr. ................ 100% Fee 1978 1.0 16 25 Orville Dr. ................ 100% Fee 1970 2.2 16 50 Orville Dr. ................ 100% Fee 1976 1.6 15 65 Orville Dr. ................ 100% Fee 1971 2.2 14 70 Orville Dr. ................ 100% Fee 1975 2.3 22 80 Orville Dr. ................ 100% Fee 1988 6.5 16 85 Orville Dr. ................ 100% Fee 1974 1.9 14 95 Orville Dr. ................ 100% Fee 1974 1.8 14 110 Orville Dr. ............... 100% Fee 1979 6.4 24 180 Orville Dr. ............... 100% Fee 1982 2.3 16 1101 Lakeland Ave. ............ 100% Fee 1983 4.9 20 1385 Lakeland Ave. ............ 100% Fee 1973 2.4 16 125 Wilbur Place .............. 100% Fee 1977 4.0 16 140 Wilbur Place .............. 100% Fee 1973 3.1 20 160 Wilbur Place .............. 100% Fee 1978 3.9 16 170 Wilbur Place .............. 100% Fee 1979 4.9 16 4040 Veterans Highway ......... 100% Fee 1972 1.0 14 120 Wilbur Place .............. 100% Fee 1972 2.8 16 2004 Orville Dr ............... 100% Fee 1998 7.4 24 2005 Orville Drive ............ 100% Fee 1999 8.7 24 ----- Total--Airport International Plaza .......... 71.3 ----- County Line Industrial Center Melville, NY 5 Hub Dr. ..................... 100% Fee 1979 6.9 20 10 Hub Dr. .................... 100% Fee 1975 6.6 20 30 Hub Drive .................. 100% Fee 1976 5.1 20 265 Spagnoli Rd. .............. 100% Fee 1978 6.0 20 ----- Total--County Line Industrial Center ............ 24.6 ----- Standalone Long Island Properties 32 Windsor Pl. Islip, NY .................... 100% Fee 1971 2.5 18 42 Windsor Pl. Islip, NY .................... 100% Fee 1972 2.4 18 208 Blydenburgh Rd. Islandia, NY ................. 100% Fee 1969 2.4 14 210 Blydenburgh Rd. Islandia, NY ................. 100% Fee 1969 1.2 14 71 Hoffman Ln. Islandia, NY ................. 100% Fee 1970 5.8 16 135 Fell Ct. Islip, NY .................... 100% Fee 1965 3.2 16 ----- Subtotal Islip/Islandia ...... 17.5 ----- PERCENTAGE ANNUAL OFFICE/ BASE RESEARCH RENT NUMBER AND RENTABLE PER OF DEVELOPMENT SQUARE PERCENT ANNUAL BASE LEASED TENANT PROPERTY FINISH FEET LEASED RENT (2) SQ. FT. LEASES - ------------------------------- ------------- ------------ ----------- ------------- ---------- ------- 80 Oser Ave. .................. 25% 19,500 100.0% $ 64,599 $ 3.31 1 85 Nicon Ct. .................. 10% 104,000 100.0% $ 500,189 $ 4.81 1 90 Oser Ave. .................. 26% 37,500 100.0% $ 125,160 $ 3.34 1 104 Parkway Dr. ............... 50% 27,600 100.0% $ 199,091 $ 7.21 1 110 Ricefield Ln. ............. 25% 32,264 100.0% $ 160,599 $ 4.98 1 120 Ricefield Ln. ............. 24% 33,060 100.0% $ 112,000 $ 3.39 1 125 Ricefield Ln. ............. 20% 30,495 100.0% $ 199,983 $ 6.56 1 135 Ricefield Ln. ............. 10% 32,340 100.0% $ 204,037 $ 6.31 1 85 Adams Dr. .................. 90% 20,000 100.0% $ 260,000 $ 13.00 1 395 Oser Ave .................. 100% 50,000 99.0% $ 429,165 $ 8.67 1 185 Oser Ave .................. 40% 30,000 100.0% $ 190,021 $ 6.33 1 25 Davids Dr. ................. 90% 40,000 100.0% $ 340,000 $ 8.50 1 45 Adams Ave .................. 90% 28,000 100.0% $ 212,333 $ 7.58 1 225 Oser Ave .................. 80% 10,000 99.6% $ 111,706 $ 11.22 1 180 Oser Ave .................. 35% 61,868 89.9% $ 379,208 $ 6.82 8 360 Oser Ave .................. 35% 23,000 100.0% $ 128,800 $ 5.60 1 400 Oser Ave .................. 30% 164,936 97.0% $ 1,090,261 $ 6.82 25 375 Oser Ave .................. 40% 20,000 100.0% $ 148,450 $ 7.42 1 425 Rabro Drive ............... 25% 65,641 99.2% $ 586,080 $ 9.00 1 390 Motor Parkway (3) ......... 4% 181,155 27.7% $ 173,916 $ 3.47 1 600 Old Willets Path .......... 25% 69,627 100.0% $ 394,590 $ 5.67 1 400 Moreland Road(3) .......... 10% 56,875 0.0% $ 0 $ 0.00 0 ------- ----------- Total--Vanderbilt Industrial Park (4) .......... 2,379,895 97.0% $11,876,976 $ 5.72 111 --------- ----------- --- Airport International Plaza Islip, NY 20 Orville Dr. ................ 50% 12,852 100.0% $ 174,731 $ 13.55 1 25 Orville Dr. ................ 100% 32,300 100.0% $ 475,065 $ 14.12 2 50 Orville Dr. ................ 20% 28,000 99.8% $ 244,538 $ 8.75 3 65 Orville Dr. ................ 13% 32,000 96.9% $ 145,018 $ 4.68 2 70 Orville Dr. ................ 7% 41,508 100.0% $ 301,684 $ 7.27 2 80 Orville Dr. ................ 21% 92,544 100.0% $ 678,929 $ 7.34 9 85 Orville Dr. ................ 20% 25,000 100.0% $ 154,393 $ 6.15 2 95 Orville Dr. ................ 10% 25,000 100.0% $ 120,875 $ 4.84 1 110 Orville Dr. ............... 15% 110,000 100.0% $ 627,733 $ 5.71 1 180 Orville Dr. ............... 18% 37,612 100.0% $ 233,291 $ 6.20 2 1101 Lakeland Ave. ............ 8% 90,411 100.0% $ 515,945 $ 5.71 1 1385 Lakeland Ave. ............ 18% 35,000 100.0% $ 178,398 $ 5.10 3 125 Wilbur Place .............. 31% 62,686 87.1% $ 279,880 $ 5.13 12 140 Wilbur Place .............. 37% 48,500 100.0% $ 290,747 $ 5.99 2 160 Wilbur Place .............. 30% 62,710 100.0% $ 501,034 $ 7.99 2 170 Wilbur Place .............. 28% 72,062 96.5% $ 230,971 $ 3.32 8 4040 Veterans Highway ......... 100% 2,800 100.0% $ 54,061 $ 19.31 1 120 Wilbur Place .............. 15% 35,000 100.0% $ 269,608 $ 7.70 4 2004 Orville Dr ............... 20% 106,515 100.0% $ 703,887 $ 6.61 1 2005 Orville Drive ............ 20% 130,010 100.0% $ 909,593 $ 7.00 1 --------- ----------- --- Total--Airport International Plaza .......... 1,082,510 99.1% $ 7,090,381 6.61 60 --------- ----------- --- County Line Industrial Center Melville, NY 5 Hub Dr. ..................... 20% 88,001 100.0% $ 403,596 $ 4.59 2 10 Hub Dr. .................... 15% 95,546 100.0% $ 585,288 $ 6.12 4 30 Hub Drive .................. 18% 73,127 100.0% $ 467,684 $ 6.40 2 265 Spagnoli Rd. .............. 28% 85,500 100.0% $ 647,702 $ 7.57 3 --------- ----------- --- Total--County Line Industrial Center ............ 342,174 100.0% $ 2,104,270 $ 6.15 11 --------- ----------- --- Standalone Long Island Properties 32 Windsor Pl. Islip, NY .................... 10% 43,000 100.0% $ 138,583 $ 3.22 1 42 Windsor Pl. Islip, NY .................... 8% 65,000 100.0% $ 230,315 $ 3.54 1 208 Blydenburgh Rd. Islandia, NY ................. 17% 24,000 100.0% $ 102,302 $ 4.26 4 210 Blydenburgh Rd. Islandia, NY ................. 16% 20,000 100.0% $ 110,922 $ 5.55 2 71 Hoffman Ln. Islandia, NY ................. 10% 30,400 100.0% $ 182,293 $ 6.00 1 135 Fell Ct. Islip, NY .................... 20% 30,000 100.0% $ 222,750 $ 7.43 1 --------- ----------- --- Subtotal Islip/Islandia ...... 212,400 100.0% $ 987,165 $ 4.65 10 --------- ----------- ---
I-13
OWNERSHIP INTEREST (GROUND LEASE LAND CLEARANCE PERCENTAGE EXPIRATION YEAR AREA HEIGHT PROPERTY OWNERSHIP DATE) CONSTRUCTED (ACRES) (FEET) (1) - ------------------------------ ------------ -------------- ------------- --------- ------------ 70 Schmitt Boulevard, Farmingdale, NY ............. 100% Fee 1975 4.4 18 105 Price Parkway, Farmingdale, NY ............. 100% Fee 1969 12.0 26 110 Bi County Blvd. Farmingdale, L.I, ........... 100% Fee 1984 9.5 19 ----- Subtotal Farmingdale ........ 25.9 ----- 70 Maxess Rd, Melville, NY ................ 100% Fee 1969 9.3 15 20 Melville Park Rd, Melville, NY ................ 100% Fee 1965 4.0 23 45 Melville Park Drive, Melville, NY ................ 100% Fee 1998 4.2 24 65 Marcus Drive. Melville, L.I., ............. 100% Fee 1968 5.0 16 50 Marcus Drive, (3) Melville, NY ................ 100% Fee 1967 7.1 22 ----- Subtotal Melville(4) ........ 29.6 ----- 300 Motor Parkway, Hauppauge, NY ............... 100% Fee 1979 4.2 14 1516 Motor Parkway, Hauppauge, NY ............... 100% Fee 1981 7.9 24 ----- Subtotal Hauppauge .......... 12.1 ----- 933 Motor Parkway Smithtown, NY ............... 100% Fee 1973 5.6 20 65 S. Service Rd. , Plainview, NY(5) ............ 100% Fee 1961 1.6 14 85 S. Service Rd. Plainview, NY ............... 100% Fee 1961 1.6 14 19 Nicholas Dr., Yaphank, NY (6) ............. 100% Fee 1989 29.6 24 48 Harbor Park Dr., Port Washington, NY ......... 100% Fee 1976 2.7 16 110 Marcus Dr., Huntington, NY .............. 100% Fee 1980 6.1 20 35 Engle St., (3) Hicksville, NY .............. 100% Leasehold(7) 1966 4.0 24 100 Andrews Rd., Hicksville, L.I.,(1) ........ 100% Fee 1954 11.7 25 ----- Subtotal other (4) .......... 62.9 ----- Total Standalone Long Island Properties (4) ...... 148.0 ----- Standalone Westchester Properties .................. 100 Grasslands Rd., (3) Elmsford, NY ................ 100% Fee 1964 3.6 16 2 Macy Rd., Harrison, NY ................ 100% Fee 1962 5.7 16 500 Saw Mill Rd., Elmsford, NY ................ 100% Fee 1968 7.3 22 ----- Total--Standalone Westchester Industrial Properties (4) .............. 16.6 ----- Standalone New Jersey Industrial Properties 40 Cragwood Rd, South Plainfield, NJ ........ 100% Fee 1965 13.5 16 400 Cabot Dr., Hamilton Township, NJ........ 100% Fee 1989 44.8 30 100 Forge Way, Rockaway, NJ ................ 100% Fee 1986 3.5 24 200 Forge Way, Rockaway, NJ ................ 100% Fee 1989 12.7 28 300 Forge Way, Rockaway, NJ ................ 100% Fee 1989 4.2 24 400 Forge Way, Rockaway, NJ ................ 100% Fee 1989 12.8 28 5 Henderson Dr.,, West Caldwell, NJ ........... 100% Fee 1967 15.2 14 492 River Rd, Nutley, NJ (3) .............. 100% Fee 1952 17.3 13 4 Applegate Drive Robbinsville, New Jersey 100% Fee 1999 10.0 30 30 Stultz Rd So. Brunswick, NJ ........... 71.8% Fee 1978 12.6 18 6 Johanna Ct.,(3) East Brunswick, NJ .......... 71.8% Fee 1978 18.4 18 ----- Total New Jersey Standalone Industrial Properties (4) .............. 165.0 ----- PERCENTAGE ANNUAL OFFICE/ BASE RESEARCH RENT NUMBER AND RENTABLE PER OF DEVELOPMENT SQUARE PERCENT ANNUAL BASE LEASED TENANT PROPERTY FINISH FEET LEASED RENT (2) SQ. FT. LEASES - ------------------------------ ------------- ------------ ----------- ------------- --------- ------- 70 Schmitt Boulevard, Farmingdale, NY ............. 10% 76,312 100.0% $ 538,147 $ 7.05 1 105 Price Parkway, Farmingdale, NY ............. 8.5% 297,000 100.0% $ 1,388,515 $ 4.68 1 110 Bi County Blvd. Farmingdale, L.I, ........... 45% 147,303 96.3% $ 1,285,683 $ 9.07 11 ------- ----------- -- Subtotal Farmingdale ........ 520,615 98.9% $ 3,212,345 $ 6.24 13 ------- ----------- -- 70 Maxess Rd, Melville, NY ................ 38% 78,000 100.0% $ 666,214 $ 8.48 1 20 Melville Park Rd, Melville, NY ................ 66% 67,922 100.0% $ 385,625 $ 5.68 1 45 Melville Park Drive, Melville, NY ................ 22% 40,247 100.0% $ 540,442 $ 13.43 1 65 Marcus Drive. Melville, L.I., ............. 50% 60,000 100.0% $ 596,328 $ 9.94 1 50 Marcus Drive, (3) Melville, NY ................ 95% 165,000 0.0% $ 0 $ 0 0 ------- ----------- -- Subtotal Melville(4) ........ 411,169 100.0% $ 2,188,609 $ 8.87 4 ------- ----------- -- 300 Motor Parkway, Hauppauge, NY ............... 100% 55,942 96.9% $ 856,895 $ 15.81 10 1516 Motor Parkway, Hauppauge, NY ............... 5% 140,000 100.0% $ 863,800 $ 6.17 1 ------- ----------- -- Subtotal Hauppauge .......... 195,942 99.1% $ 1,720,695 $ 8.86 11 ------- ----------- -- 933 Motor Parkway Smithtown, NY ............... 26% 48,000 100.0% $ 32,153 $ 0.67 1 65 S. Service Rd. , Plainview, NY(5) ............ 10% 10,000 100.0% $ 69,911 $ 6.99 1 85 S. Service Rd. Plainview, NY ............... 60% 20,000 100.0% $ 79,526 $ 3.98 2 19 Nicholas Dr., Yaphank, NY (6) ............. 5% 230,000 100.0% $ 1,222,649 $ 5.32 1 48 Harbor Park Dr., Port Washington, NY ......... 100% 35,000 100.0% $ 707,352 $ 20.21 1 110 Marcus Dr., Huntington, NY .............. 39% 78,240 100.0% $ 486,653 $ 6.22 1 35 Engle St., (3) Hicksville, NY .............. 8% 120,000 0.0% $ 0 $ 0.00 0 100 Andrews Rd., Hicksville, L.I.,(1) ........ 12% 167,500 100.0% $ 1,105,727 $ 6.59 2 ------- ----------- -- Subtotal other (4) .......... 708,740 100.0% $ 3,703,971 $ 6.29 9 ------- ----------- -- Total Standalone Long Island Properties (4) ...... 2,048,866 99.6% $11,812,785 $ 6.29 47 --------- ----------- -- Standalone Westchester Properties .................. 100 Grasslands Rd., (3) Elmsford, NY ................ 100% 45,000 0.0% $ 0 $ 0.00 0 2 Macy Rd., Harrison, NY ................ 100% 26,000 100.0% $ 422,500 $ 16.25 1 500 Saw Mill Rd., Elmsford, NY ................ 17% 92,000 100.0% $ 846,400 $ 9.20 1 --------- ----------- -- Total--Standalone Westchester Industrial Properties (4) .............. 163,000 100.0% $ 1,268,900 $ 10.75 2 --------- ----------- -- Standalone New Jersey Industrial Properties 40 Cragwood Rd, South Plainfield, NJ ........ 49% 135,000 57.5% $ 1,265,304 $ 16.30 3 400 Cabot Dr., Hamilton Township, NJ........ 10% 585,510 100.0% $ 2,739,377 $ 4.68 1 100 Forge Way, Rockaway, NJ ................ 12% 20,136 100.0% $ 166,775 $ 8.28 5 200 Forge Way, Rockaway, NJ ................ 23% 72,118 100.0% $ 453,367 $ 6.29 2 300 Forge Way, Rockaway, NJ ................ 37% 24,000 100.0% $ 180,050 $ 7.44 2 400 Forge Way, Rockaway, NJ ................ 20% 73,000 100.0% $ 407,666 $ 5.58 2 5 Henderson Dr.,, West Caldwell, NJ ........... 10% 210,000 100.0% $ 1,324,234 $ 6.29 1 492 River Rd, Nutley, NJ (3) .............. 100% 128,000 0.00% $ 0 $ 0 0 4 Applegate Drive Robbinsville, New Jersey 10% 265,000 100.0% $ 1,364,750 $ 5.15 1 30 Stultz Rd So. Brunswick, NJ ........... 10% 60,617 100.0% $ 200,248 $ 3.12 1 6 Johanna Ct.,(3) East Brunswick, NJ .......... 10% 214,000 0.0% $ 0 $ 0.00 0 --------- ----------- -- Total New Jersey Standalone Industrial Properties (4) .............. 1,787,381 94.9% $ 8,101,771 $ 5.95 18 --------- ----------- --
I-14
OWNERSHIP INTEREST (GROUND LEASE LAND CLEARANCE PERCENTAGE EXPIRATION YEAR AREA HEIGHT PROPERTY OWNERSHIP DATE) CONSTRUCTED (ACRES) (FEET) (1) - -------------------------- ------------ ------------ ------------- --------- ------------ Standalone Connecticut Industrial Property 710 Bridgeport Shelton, CT ............. 100% Fee 1971-1979 36.1 22 ----- Total Connecticut Standalone Industrial Property ................ 36.1 ----- Total-Industrial Properties (4) .......... 622.0 ===== PERCENTAGE ANNUAL OFFICE/ BASE RESEARCH RENT NUMBER AND RENTABLE PER OF DEVELOPMENT SQUARE PERCENT ANNUAL BASE LEASED TENANT PROPERTY FINISH FEET LEASED RENT (2) SQ. FT. LEASES - -------------------------- ------------- ------------ ----------- ------------- --------- ------- Standalone Connecticut Industrial Property 710 Bridgeport Shelton, CT ............. 30% 452,414 100.0% $ 2,911,020 $ 6.43 2 ------- ----------- - Total Connecticut Standalone Industrial Property ................ 452,414 100.0% $ 2,911,020 $ 6.43 2 ------- ----------- - Total-Industrial Properties (4) .......... 8,256,240 98.2% $45,166,103 $ 6.26 251 ========= =========== ===
- ---------------- (1) Calculated as the difference from the lowest beam to floor. (2) Represents Base Rent of signed leases at December 31, 1999 adjusted for scheduled contractual increases during the 12 months ending December 31, 2000. Total Base Rent for these purposes reflects the effect of any lease expirations that occur during the 12 month period ending December 31, 2000. Amounts included in rental revenue for financial reporting purposes have been determined on a straight-line basis rather than on the basis of contractual rent as set forth in the foregoing table. (3) Property under redevelopment. (4) Percent leased excludes properties under redevelopment. (5) A tenant has been granted an option exercisable after April 30, 1997 and prior to October 31, 2002 to purchase this property for $600,000. (6) The actual fee interest in 19 Nicholas Drive is currently held by the Town of Brookhaven Industrial Development Agency. The Company may acquire such fee interest by making a nominal payment to the Town of Brookhaven Industrial Development Agency. (7) The Company has entered into a 20 year lease agreement in which it has the right to sublease the premises. RETAIL PROPERTIES As of December 31, 1999, the Company owned two free-standing 10,000 square foot retail properties located in Great Neck and Huntington, New York and were 100% leased as of December 31, 1999. DEVELOPMENTS IN PROGRESS As of December 31, 1999, the Company had invested approximately $130 million in developments in progress. This amount includes approximately $64 million relating to existing buildings encompassing approximately 1.1 million square feet. The Company estimates that if these projects were to be completed, total additional development costs would be approximately $25.3 million. In addition, the Company has also invested approximately $66 million relating to approximately 346 acres of land which it can develop approximately 2.2 million square feet. The Company estimates that if these projects were to be completed, total additional development costs would be approximately $270 million. THE OPTION PROPERTIES In connection with the IPO, the Company was granted a ten year option to acquire ten properties (the "Option Properties") which were not contributed to the Operating Partnership and are either owned by Reckson or in which Reckson owns a non controlling minority interest. As of December 31, 1999, the Company has acquired four of the Option Properties for an aggregate purchase price of approximately $35 million and the issuance of approximately 475,000 Units. In addition, during 1998, one of the Option Properties was sold by Reckson to a third party. The remaining Option Properties consist of three Class A office properties encompassing approximately 311,000 square feet and two industrial properties encompassing approximately 69,000 square feet. I-15 HISTORICAL NON-INCREMENTAL REVENUE-GENERATING CAPITAL EXPENDITURES, TENANT IMPROVEMENT COSTS AND LEASING COMMISSIONS The following table sets forth annual and per square foot recurring, non-incremental revenue-generating capital expenditures and non-incremental revenue-generating tenant improvement costs and leasing commissions incurred by the Company to retain revenues attributable to existing leased space for the period 1995 through 1999 for the Office Properties and the Industrial Properties. As noted, incremental revenue-generating tenant improvement costs and leasing commissions are excluded from the table set forth immediately below. The historical capital expenditures, tenant improvement costs and leasing commissions set forth below are not necessarily indicative of future recurring, non-incremental revenue-generating capital expenditures or non-incremental revenue-generating tenant improvement costs and leasing commissions.
1995 1996 1997 1998 1999 ------------- ------------- --------------- --------------- --------------- CAPITAL EXPENDITURES Office Properties Total .................................... $ 364,545 $ 375,026 $ 1,108,675 $ 2,004,976 $ 2,298,899 Per square foot .......................... $ .19 $ .13 $ .22 $ .23 $ .23 Industrial Properties Total .................................... $ 290,457 $ 670,751 $ 733,233 $ 1,205,266 $ 1,048,688 Per square foot .......................... $ .08 $ .18 $ .15 $ .12 $ .11 NON-INCREMENTAL REVENUE-GENERATING TENANT IMPROVEMENT COSTS AND LEASING COMMISSIONS Long Island Office Properties Annual Tenant Improvement Costs .......... $ 452,057 $ 523,574 $ 784,044 $ 1,140,251 $ 1,009,357 Per square foot improved ................ 4.44 4.28 7.00 3.98 4.73 Annual Leasing Commissions .............. 144,925 119,047 415,822 418,191 551,762 Per square foot leased .................. 1.42 .97 4.83 1.46 2.59 Total per square foot ................... $ 5.86 $ 5.25 $ 11.83 $ 5.44 $ 7.32 Westchester Office Properties Annual Tenant Improvement Costs ......... N/A $ 834,764 $ 1,211,665 $ 711,160 $ 1,316,611 Per square foot improved ................ N/A 6.33 8.90 4.45 5.62 Annual Leasing Commissions .............. N/A 264,388 366,257 286,150 457,730 Per square foot leased .................. N/A 2.00 2.69 1.79 1.96 Total per square foot ................... N/A $ 8.33 $ 11.59 $ 6.24 $ 7.58 Connecticut Office Properties Annual Tenant Improvement Costs ......... N/A $ 58,000 $ 1,022,421 $ 202,880 $ 179,043 Per square foot improved ................ N/A 12.45 13.39 5.92 4.88 Annual Leasing Commissions .............. N/A 0 256,615 151,063 110,252 Per square foot leased .................. N/A 0 3.36 4.41 3.00 Total per square foot ................... N/A $ 12.45 $ 16.75 $ 10.33 $ 7.88 New Jersey Office Properties Annual Tenant Improvement Costs ......... N/A N/A N/A $ 654,877 $ 454,054 Per square foot improved ................ N/A N/A N/A 3.78 2.29 Annual Leasing Commissions .............. N/A N/A N/A 396,127 787,065 Per square foot leased .................. N/A N/A N/A 2.08 3.96 Total per square foot ................... N/A N/A N/A $ 5.86 $ 6.25 Industrial Properties Annual Tenant Improvement Costs ......... $ 210,496 $ 380,334 $ 230,466 $ 283,842 $ 375,646 Per square foot improved ................ .90 .72 .55 .76 .25 Annual Leasing Commissions .............. 107,351 436,213 81,013 200,154 835,108 Per square foot leased .................. .46 .82 .19 .44 .56 Total per square foot ................... $ 1.36 $ 1.54 $ .74 $ 1.20 $ .81
I-16 MORTGAGE INDEBTEDNESS The following table sets forth certain information regarding the mortgage debt of the Company, as of December 31, 1999.
PRINCIPAL AMOUNT AMORTIZATION PROPERTY OUTSTANDING INTEREST RATE MATURITY DATE SCHEDULE - ------------------------------------ ------------------ ----------------- --------------- ------------- (IN THOUSANDS) 6800 Jericho Turnpike (North Shore Atrium I) ............ $ 15,001 7.25% 6/10/00 -- 6900 Jericho Turnpike (North Shore Atrium II) ........... 5,279 7.25% 6/10/00 -- 200 Broadhollow Road. .............. 6,560 7.75% 6/02/02 30 year 395 North Service Road ............. 20,933 6.45% 10/26/05 (3) 50 Charles Lindbergh Blvd. ......... 15,479 7.50% 7/10/01 -- 333 Earl Ovington Blvd. (The Omni) (1) .................... 56,367 7.72% 08/14/07 25 year 310 East Shore Road. ............... 2,322 8.00% 7/01/02 -- 80 Orville Drive ................... 2,616 7.50% (2) 2/01/04 -- 580 White Plains Road .............. 8,172 7.375% 9/01/00 20 year Landmark Square .................... 47,809 8.02% 10/07/06 25 year 110 Bi-County Blvd. ................ 4,221 9.125% 11/30/12 20 year 100 Summit Lake Drive .............. 22,614 8.50% 4/01/07 15 year 200 Summit Lake Drive .............. 20,463 9.25% 1/01/06 25 year 120 West 45th Street ............... 66,933 6.82% 11/01/27 28 year 810 7th Avenue ..................... 86,822 7.73% 8/1/09 25 year 100 Wall Street .................... 37,623 7.73% 8/1/09 25 year One Orlando Center ................. 39,960 6.82% 11/01/27 28 year --------- Total .............................. $ 459,174 =========
- ---------- (1) The Company has a 60% general partnership interest in the Omni Partnership. The Company's proportionate share of the aggregate principal amount of the mortgage debt on the Omni is approximately $33.8 million. (2) Interest rate increases to 10.1% at June 2000. (3) Principal payments of $34,000 per month. ITEM 3. LEGAL PROCEEDINGS The Company is not presently subject to any material litigation nor, to the Company's knowledge, is any litigation threatened against the Company, other than routine actions for negligence or other claims and administrative proceedings arising in the ordinary course of business, some of which are expected to be covered by liability insurance and all of which collectively are not expected to have a material adverse effect on the liquidity, results of operations or business or financial condition of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of stockholders during the fourth quarter of the year ended December 31, 1999. I-17 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS COMMON STOCK The Company's common stock began trading on the New York Stock Exchange ("NYSE") on May 25, 1995, under the symbol "RA". The following table sets forth the quarterly high and low closing sales prices per share of the Company's common stock as reported on the NYSE and the distributions paid by the Company for each respective quarter ended.
HIGH LOW DISTRIBUTION ------------ ------------ ------------------ March 31, 1998 .............. $ 26.438 $ 24.125 $0.3125 June 30, 1998 ............... $ 26.375 $ 22.688 $0.4199 (1) September 30, 1998 .......... $ 26.000 $ 19.000 $0.3375 December 31, 1998 ........... $ 24.563 $ 20.188 $0.3375 March 31, 1999 .............. $ 24.000 $ 20.375 $.33750 June 30, 1999 ............... $ 26.563 $ 20.438 $.37125 (2) September 30, 1999 .......... $ 23.500 $ 19.375 $.37125 December 31, 1999 ........... $ 20.813 $ 18.000 $.37125
(1) Commencing with the distribution for the quarter ending June 30, 1998, the Board of Directors of the Company increased the quarterly distribution to $.3375 per share, which is equivalent to an annual distribution of $1.35 per share. In addition, on June 11, 1998, the Company paid a stock dividend equivalent to $.0824 per share relating to the Operating Partnership's distribution of its common stock interest in Reckson Service Industries, Inc. currently D/B/A FrontLine Capital Group to the Company. (2) Commencing with the distribution for the quarter ending June 30, 1999, the Board of Directors of the Company increased the quarterly distribution to $.37125 per share, which is equivalent to an annual distribution of $1.485 per share. CLASS B COMMON STOCK The Company's Class B Common Stock began trading on the NYSE on May 25, 1999 under the symbol "RAb". The following table sets forth the quarterly high and low closing sales prices per share of the Comapny8's Class B Common Stock as reported on the NYSE and the distributions paid by the Company for each respective quarter ended.
HIGH LOW DISTRIBUTION ------------ ------------ ----------------- March 31, 1999 .............. N/A N/A N/A June 30, 1999 ............... $ 27.688 $ 23.875 $ .2364 (1) September 30, 1999 .......... $ 24.688 $ 20.500 $ .5600 December 31, 1999 ........... $ 22.750 $ 19.438 $ .5600
(1) Represents the period May 24, 1999 through June 30, 1999 II-1 ITEM 6. SELECTED FINANCIAL DATA (in thousands except share and properties data)
RECKSON ASSOCIATES REALTY CORP. ----------------------------------------------------------- FOR THE YEAR ENDED ----------------------------------------------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1999 1998 1997 1996 -------------- -------------- -------------- -------------- OPERATING DATA: Revenues .................................................. $ 403,153 $ 266,373 $ 153,395 $ 96,141 Total expenses ............................................ 299,111 201,892 107,905 70,951 Income (before preferred dividends and distributions, minority interests and extraordinary loss) ............... 104,042 64,481 45,490 25,190 Preferred dividends and distributions ..................... 27,001 14,244 -- -- Minority interests ........................................ 16,209 10,672 8,624 6,768 Extraordinary loss (net of minority interests' share) ..... (555) (1,670) (2,230) (895) Net income available to common shareholders ............... 47,529 37,895 34,636 17,527 Net income available to Class B Common shareholders ....... 12,748 -- -- -- PER SHARE DATA -- COMMON SHAREHOLDERS: Basic: Income before extraordinary loss .......................... $ 1.19 $ 1.00 $ 1.13 $ .92 Extraordinary loss ........................................ (.01) (.04) (.07) (.04) Net income ................................................ 1.18 0.96 1.06 .88 Weighted average shares outstanding ....................... 40,270,000 39,473,000 32,727,000 19,928,000 Diluted: Income before extraordinary loss .......................... $ 1.18 $ .99 $ 1.11 $ .91 Extraordinary loss ........................................ (.01) (.04) (.07) (.04) Diluted net income ........................................ 1.17 .95 1.04 .87 Diluted weighted shares outstanding ....................... 40,676,000 40,010,000 33,260,000 20,190,000 PER SHARE DATA -- CLASS B COMMON SHAREHOLDERS: Basic: Income before extraordinary loss .......................... $ 1.91 $ -- $ -- $ -- Extraordinary loss ........................................ (.02) -- -- -- Net income ................................................ 1.89 -- -- -- Weighted average shares outstanding ....................... 6,744,000 -- -- -- Diluted: Income before extraordinary loss .......................... $ 1.26 $ -- $ -- $ -- Extraordinary loss ........................................ -- -- -- -- Diluted net income ........................................ 1.26 -- -- -- Diluted weighted shares outstanding ....................... 6,744,000 -- -- -- BALANCE SHEET DATA: (PERIOD END) Commercial real estate properties, before accumulated depreciation ............................................. $ 2,214,872 $ 1,743,223 $ 1,015,282 $ 519,504 Total assets .............................................. 2,724,235 1,854,816 1,113,257 543,758 Mortgage notes payable .................................... 459,174 253,463 180,023 161,513 Unsecured credit facility ................................. 297,600 465,850 210,250 108,500 Unsecured term loan ....................................... 75,000 20,000 -- -- Senior unsecured notes .................................... 449,313 150,000 150,000 -- Market value of equity (2) ................................ 1,726,845 1,332,882 1,141,592 653,606 Total market capitalization including debt (2 and 3) ...... 2,993,756 2,199,936 1,668,800 921,423 OTHER DATA: Funds from operations (basic) (4) ......................... $ 130,820 $ 97,697 $ 69,548 $ 41,133 Funds from operations (diluted) (4) ....................... $ 161,681 $ 99,450 $ 69,548 $ 41,133 Total square feet (at end of period) ...................... 21,385 21,000 13,645 8,800 Number of properties (at end of period) ................... 189 204 155 110 RECKSON ASSOCIATES REALTY CORP. RECKSON GROUP ----------------- ------------------- FOR THE PERIOD JUNE 3, 1995 TO FOR THE PERIOD DECEMBER 31, JANUARY 1, 1995 TO 1995 (1) JUNE 2, 1995 (1) ----------------- ------------------- OPERATING DATA: Revenues .................................................. $ 38,455 $ 20,889 Total expenses ............................................ 27,901 20,695 Income (before preferred dividends and distributions, minority interests and extraordinary loss) ............... 10,554 194 Preferred dividends and distributions ..................... -- -- Minority interests ........................................ 3,067 -- Extraordinary loss (net of minority interests' share) ..... (4,234) -- Net income available to common shareholders ............... 3,253 194 Net income available to Class B Common shareholders ....... -- -- PER SHARE DATA -- COMMON SHAREHOLDERS: Basic: Income before extraordinary loss .......................... $ .51 -- Extraordinary loss ........................................ (.29) -- Net income ................................................ .22 -- Weighted average shares outstanding ....................... 14,678,000 -- Diluted: Income before extraordinary loss .......................... $ .51 -- Extraordinary loss ........................................ (.29) -- Diluted net income ........................................ .22 -- Diluted weighted shares outstanding ....................... 14,725,000 -- PER SHARE DATA -- CLASS B COMMON SHAREHOLDERS: Basic: Income before extraordinary loss .......................... $ -- -- Extraordinary loss ........................................ -- -- Net income ................................................ -- -- Weighted average shares outstanding ....................... -- -- Diluted: Income before extraordinary loss .......................... $ -- -- Extraordinary loss ........................................ -- -- Diluted net income ........................................ -- -- Diluted weighted shares outstanding ....................... -- -- BALANCE SHEET DATA: (PERIOD END) Commercial real estate properties, before accumulated depreciation ............................................. $ 290,712 -- Total assets .............................................. 242,728 -- Mortgage notes payable .................................... 98,126 -- Unsecured credit facility ................................. 40,000 -- Unsecured term loan ....................................... -- -- Senior unsecured notes .................................... -- -- Market value of equity (2) ................................ 303,943 -- Total market capitalization including debt (2 and 3) ...... 426,798 -- OTHER DATA: Funds from operations (basic) (4) ......................... $ 17,246 -- Funds from operations (diluted) (4) ....................... $ 17,246 -- Total square feet (at end of period) ...................... 5,430 4,529 Number of properties (at end of period) ................... 81 72
(1) Represents certain financial information on a consolidated historical basis for Reckson Associates Realty Corp. and on a combined historical basis for the Reckson Group. (2) Based on the sum of: (i) the market value of the Company's common stock and operating partnership units (assuming conversion) of 48,076,648, 47,800,049, 44,988,846, 31,119,364 and 20,690,448 at December 31, 1999, 1998, 1997, 1996 and 1995, respectively (based on a per share/unit price of $20.50, $22.19, $25.38, $21.13 and $14.69 at December 31, 1999, 1998, 1997, 1996 and 1995, respectively), (ii) the market value of the Company's Class B Common Stock of 10,283,763 shares at December 31,1999 (based on a per share price of $22.75), (iii) the liquidation preference value of 15,192,000 and 9,192,000 shares of the Company's preferred stock at December 31, 1999 and 1998, respectively (based on a per share value of $25.00), (iv) the liquidation preference value of 42,518 of the operating partnership's preferred units at December 31, 1999 and 1998 (based on a per unit value of $1,000) and (v) the contributed value of Metropolitan's preferred interest of $85 million at December 31, 1999 (3) Debt amount is net of minority partners' proportionate share plus the Company's share of unconsolidated joint venture debt. (4) See "Management's Discussion and Analysis" for a discussion of funds from operations. II-2 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the historical financial statements of Reckson Associates Realty Corp. (the "Company") and related notes. The Company considers certain statements set forth herein to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to the Company's expectations for future periods. Certain forward-looking statements, including, without limitation, statements relating to the timing and success of acquisitions, the financing of the Company's operations, the ability to lease vacant space and the ability to renew or relet space under expiring leases, involve certain risks and uncertainties. Although the Company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, the actual results may differ materially from those set forth in the forward-looking statements and the Company can give no assurance that its expectation will be achieved. Certain factors that might cause the results of the Company to differ materially from those indicated by such forward-looking statements include, among other factors, general economic conditions, general real estate industry risks, tenant default and bankruptcies, loss of major tenants, the impact of competition and acquisition, redevelopment and development risks, the ability to finance business opportunities and local real estate risks such as an oversupply of space or a reduction in demand for real estate in the Company's real estate markets. Consequently, such forward-looking statements should be regarded solely as reflections of the Company's current operating and development plans and estimates. These plans and estimates are subject to revisions from time to time as additional information becomes available, and actual results may differ from those indicated in the referenced statements. OVERVIEW AND BACKGROUND The Reckson Group, the predecessor to the Company, was engaged in the ownership, management, operation, leasing and development of commercial real estate properties, principally office and industrial buildings, and also owned certain undeveloped land located primarily on Long Island, New York. In June 1995, the Company completed an Initial Public Offering (the "IPO"), succeeded to the Reckson Group's real estate business and commenced operations. The Company is a self-administered and self managed real estate investment trust ("REIT") specializing in the acquisition, leasing, financing, management and development of office and industrial properties. The Company's growth strategy is focused on the real estate markets in and around the New York tri-state area (the "Tri-State Area"). The Company owns all of the interests in its real estate properties through Reckson Operating Partnership, L.P. (the "Operating Partnership"). At December 31, 1999, the Company owned and operated 189 properties (the "Properties"), (including two joint venture properties) encompassing approximately 21.4 million square feet in the Tri-State Area. The Properties include 77 office properties (the "Office Properties") containing approximately 13.1 million square feet, 110 industrial properties (the "Industrial Properties") containing approximately 8.3 million square feet and two retail properties containing approximately 20,000 square feet. The Company also owns and operates a 357,000 square foot office property located in Orlando Florida. In addition, the Company owned approximately 346 acres of land in 16 separate parcels of which the Company can develop approximately 1.9 million square feet of office space and approximately 300,000 square feet of industrial space. The Company also has invested approximately $315.6 million in mortgage notes encumbering three Class A Office Properties encompassing approximately 1.6 million square feet, approximately 472 acres of land located in New Jersey and in a note receivable secured by a partnership interest in Omni Partners, L.P., owner of the Omni, a 575,000 square foot Class A Office Property located in Uniondale, New York. On January 6, 1998, the Company made its initial investment in the Morris Companies, a New Jersey developer and owner of "Big Box" warehouse facilities. In connection with the transaction the Morris Companies contributed 100% of their interests in certain industrial properties to Reckson Morris Operating Partnership, L. P. ("RMI") in exchange for operating partnership units in RMI. II-3 On August 9, 1999, the Company executed a contract for the sale, which will take place in three stages, of its interest in RMI which consisted of 28 properties, comprising approximately 6.1 million square feet and three other big box industrial properties to Keystone Property Trust ("KTR") (formerly American Real Estate Investment Corporation). In addition, the Company also entered into a sale agreement with the Matrix Development Group ("Matrix"), relating to a first mortgage note and certain industrial land holdings (the "Matrix Sale"). The combined total sale price is $310 million (approximately $42 million of which is payable to the Morris Companies and its affiliates) and consists of a combination of (i) cash, (ii) convertible preferred and common stock of KTR, (iii) preferred units of KTR's operating partnership, (iv) relief of debt and (v) a purchase money mortgage note secured by certain land that is being sold to Matrix. During September 1999, the Matrix Sale and the first stage of the RMI closing occurred whereby the Company sold its interest in RMI to KTR for a combined sales price of approximately $164.7 million (net of minority partner's interest). The combined consideration consisted of approximately (i) $86.3 million in cash, (ii) $40 million of preferred stock of KTR, (iii) $1.5 million in common stock of KTR, (iv) approximately $26.7 million of debt relief and (v) approximately $10.2 million in purchase money mortgages. As a result, the Company incurred a gain of approximately $10.1 million which has been included in gain on sales of real estate on the Company's consolidated statements of income. Cash proceeds from the sales were used primarily to repay borrowings under the Credit Facility. The second and third stages of the RMI closing are scheduled to be completed in April 2000. The remaining stages consist of six industrial buildings and are being sold for total consideration of approximately $98 million. In July 1998, the Company formed a joint venture, Metropolitan Partners LLC, a Delaware limited liability company ("Metropolitan"), with Crescent Real Estate Equities Company, a Texas real estate investment trust. On December 8, 1998, the Company, Metropolitan and Tower Realty Trust, Inc. ("Tower") executed a merger agreement and on May 24, 1999 Tower was merged (the "Merger") into Metropolitan, with Metropolitan surviving the Merger. Concurrently with the Merger, Tower Realty Operating Partnership, L.P. was merged with and into a subsidiary of Metropolitan. The consideration issued in the mergers was comprised of (i) 25% cash (approximately $107.2 million) and (ii) 75% of shares of Class B Exchangeable Common Stock, par value $.01 per share, of the Company (the "Class B Common Stock") (valued for generally accepted accounting principles ("GAAP") purposes at approximately $304.1 million). The Tower portfolio acquired in the Merger consists of three Office Properties comprising approximately 1.6 million square feet located in New York City, one Office Property located on Long Island and certain office properties and other real estate assets located outside the Tri-State Area. Prior to the closing of the Merger, the Company arranged for the sale of four of Tower's Class B New York City properties, comprising approximately 701,000 square feet for approximately $84.5 million. Subsequent to the closing of the Merger, the Company has sold a real estate joint venture interest and all of the property located outside the Tri-State Area other than one office property located in Orlando, Florida for approximately $171.1 million. The combined consideration consisted of approximately $143.8 million in cash and approximately $27.3 million of debt relief. Net cash proceeds from the sales were used primarily to repay borrowings under the Company's unsecured credit facility. As a result of incurring certain sales and closing costs in connection with the sale of the assets located outside the Tri-State Area, the Company has incurred a loss of approximately $4.4 million which has been included in gain on sales of real estate on the Company's consolidated statements of income. During 1997, the Company formed Reckson Service Industries, Inc. currently D/B/A FrontLine Capital Group ("FrontLine") and Reckson Strategic Venture Partners, LLC ("RSVP"). On June 11, 1998, the Operating Partnership distributed its 95% common stock interest in FrontLine of approximately $3 million to its owners, including the Company which, in turn, distributed the common stock of FrontLine received from the Operating Partnership to its stockholders. Additionally, during June II-4 1998, the Operating Partnership established a credit facility with FrontLine (the "FrontLine Facility") in the amount of $100 million for FrontLine's e-commerce and e-services operations and other general corporate purposes. As of December 31, 1999, the Company had advanced $79.5 million under the FrontLine Facility. In addition, the Operating Partnership has approved the funding of investments of up to $100 million with or in RSVP (the "RSVP Commitment"), through RSVP-controlled joint venture REIT-qualified investments or advances made to FrontLine under terms similar to the FrontLine Facility. As of December 31, 1999, approximately $67.2 million had been invested through the RSVP Commitment, of which $24.8 million represents RSVP-controlled joint venture REIT-qualified investments and $42.4 million represents advances to FrontLine under the RSVP Commitment. During November 1999, the Board of Directors of the Company approved an amendment to the FrontLine Facility and the RSVP Commitment to permit FrontLine to incur secured debt and to pay interest thereon. In consideration of the amendments, FrontLine has paid the Operating Partnership a fee of approximately $3.6 million in the form of shares of FrontLine common stock. Such fee is being amortized in income over an estimated nine month benefit period. FrontLine identifies, acquires interests in and develops a network of business to business e-commerce and e-services companies that service small to medium sized enterprises, independent professionals and entrepreneurs and the mobile workforce of larger companies. FrontLine serves as the managing member of RSVP. RSVP was formed to provide the Company with a research and development vehicle to invest in alternative real estate sectors. RSVP invests primarily in real estate and real estate related operating companies generally outside of the Company's core office and industrial focus. RSVP's strategy is to identify and acquire interests in established entrepreneurial enterprises with experienced management teams in market sectors which are in the early stages of their growth cycle or offer unique circumstances for attractive investments as well as a platform for future growth. The Operating Partnership and FrontLine have entered into an intercompany agreement (the "Reckson Intercompany Agreement") to formalize their relationship and to limit conflicts of interest. Under the Reckson Intercompany Agreement, FrontLine granted the Operating Partnership a right of first opportunity to make any REIT -qualified investment that becomes available to FrontLine. In addition, if a REIT-qualified investment opportunity becomes available to an affiliate of FrontLine, including RSVP, the Reckson Intercompany Agreement requires such affiliate to allow the Operating Partnership to participate in such opportunity to the extent of FrontLine's interest. Under the Reckson Intercompany Agreement, the Operating Partnership granted FrontLine a right of first opportunity to provide commercial services to the Operating Partnership and its tenants. FrontLine will provide services to the Operating Partnership at rates and on terms as attractive as either the best available for comparable services in the market or those offered by FrontLine to third parties. In addition, the Operating Partnership will give FrontLine access to its tenants with respect to commercial services that may be provided to such tenants and, under the Reckson Intercompany Agreement, subject to certain conditions, the Operating Partnership granted FrontLine a right of first refusal to become the lessee of any real property acquired by the Operating Partnership if the Operating Partnership determines that, consistent with the Company's status as a REIT, it is required to enter into a "master" lease agreement. On August 27, 1998 the Company announced the formation of a joint venture with RSVP and the Dominion Group, an Oklahoma-based, privately-owned group of companies that focuses on the development, acquisition and ownership of government occupied office buildings and correctional facilities. The new venture, Dominion Properties LLC (the "Dominion Venture"), is owned by Dominion Venture Group LLC, and by a subsidiary of the Company. The Dominion Venture is primarily engaging in acquiring, developing and/or owning government-occupied office buildings and privately operated correctional facilities. Under the Dominion Venture's operating agreement, RSVP is to invest up to $100 million, some of which may be invested by the Company ( the "RSVP Capital"). The initial contribution of RSVP Capital was approximately $39 million of which approximately $10.1 million was invested by a subsidiary of the Company. The Company's investment was funded through the RSVP Commitment. In addition, the Company advanced approximately $2.9 million to FrontLine through the RSVP II-5 Commitment for an investment in RSVP which was then invested on a joint venture basis with the Dominion Group in certain service business activities related to the real estate activities. As of December 31, 1999, the Company had invested approximately $17.6 million in the Dominion Venture which had investments in 13 government office buildings and three correctional facilities. In 1999 the Company invested approximately $7.2 million, through a subsidiary, in RAP Student Housing Properties, LLC ("RAP -- SHP"), a company that engages primarily in the acquisition and development of off-campus student housing projects. The Company's investment was funded through the RSVP Commitment. In addition, the Company has advanced approximately $3.2 million to FrontLine through the RSVP Commitment for an additional investment in RSVP which was invested in certain service business activities related to student housing. As of December 31, 1999, RAP -- SHP had investments in four off -- campus student housing projects. The market capitalization of the Company at December 31, 1999 was approximately $3 billion. The Company's market capitalization is based on the sum of (i) the market value of the Company's common stock and common units of limited partnership interest in the Operating Partnership ("OP Units") (assuming conversion) of $20.50 per share/unit (based on the closing price of the Company's common stock on December 31, 1999), (ii) the market value of the Company's Class B Common Stock of $22.75 per share (based on the closing price of the Company's Class B Common Stock on December 31, 1999), (iii) the liquidation preference value of the Company's Series A preferred and Series B preferred stock of $25 per share, (iv) the liquidation preference value of the Operating Partnership's preferred units, (v) the contributed value of Metropolitan's preferred interest of $85 million and (vi) the $1.3 billion (including its share of joint venture debt and net of minority partners' interests) of debt outstanding at December 31,1999. As a result, the Company's total debt to total market capitalization ratio at December 31, 1999 equaled approximately 42.3%. RESULTS OF OPERATIONS The Company's total revenues increased by $136.8 million or 51.4% from 1998 to 1999 and $113 million or 73.7% from 1997 to 1998. Property operating revenues, which include base rents and tenant escalations and reimbursements ("Property Operating Revenues") increased by $116.7 million or 46.2% from 1998 to 1999 and $108.7 million or 75.6% from 1997 to 1998. The 1999 increase in Property Operating Revenues is substantially attributable to the Tower portfolio acquisition on May 24, 1999. The revenue generated from these assets generated approximately $47.5 million of revenue in 1999. Additionally, approximately $29.1 million of revenue was generated from the Company's acquisition of the first mortgage note secured by 919 Third Avenue. Property Operating Revenues were also positively effected by approximately $9.9 million from increases in occupancies and rental rates in our "same store" properties and approximately $27.2 million in additional revenue generated from properties acquired during 1998 and new development activity. The remaining balance of the increase in total revenues in 1999 is primarily attributable to the gain on sales of real estate of $10.1 million and approximately $8.7 million in other income related to interest earned on advances made to FrontLine through the FrontLine Facility and to RSVP through the RSVP Commitment. The 1998 increase in Property Operating Revenues is comprised of $2.1 million attributable to increases in rental rates and changes in occupancies and $106.6 million attributable to acquisitions of properties. The remaining balance of the increase in total revenues in 1998 is primarily attributable to increases in interest income on the Company's investments in mortgage notes and notes receivable and income related to the Company's interest in its service companies. The Company's base rent reflects the positive impact of the straight-line rent adjustment of $ 10.7 million in 1999, $7.7 million in 1998 and $4.5 million in 1997. Property operating expenses, real estate taxes and ground rents ("Property Expenses") increased by $41.7 million or 49.5% from 1998 to 1999 and by $34.0 million or 67.5% from 1997 to 1998. These increases are primarily due to the acquisition of the properties included in the Tower portfolio acquisition on May 24, 1999 and the acquisition of the first mortgage note secured by 919 Third Avenue. Gross operating margins (defined as Property Operating Revenues less Property Expenses, taken as a percentage of Property Operating Revenues) for 1999, 1998 and 1997 were 65.9%, 66.6% and 65.0%, respectively. The slight decrease in the gross operating margin percentage from 1998 to 1999 resulted II-6 from a larger proportionate share of gross operating margin derived from office properties, which has a lower gross margin percentage, in 1999 compared to 1998. The higher proportionate share of the gross operating margin attributable to the office properties was a result of the office properties acquired in the Tower portfolio acquisition and the disposition of net leased industrial properties in the "Big Box" industrial transaction. This shift in the composition of the portfolio was offset by increases in rental rates and operating efficiencies realized as a result of operating a larger portfolio of properties with concentration on properties in office and industrial parks or in its established sub-markets. The increase from 1997 to 1998 in the gross operating margin percentage resulted from increases realized in rental rates, the Company's ability to realize certain operating efficiencies as a result of operating a larger portfolio of properties with concentrations of properties in office and industrial parks or in its established sub-markets, a stable operating cost environment and the increased ownership of net leased properties. Marketing, general and administrative expenses were $24.3 million in 1999, $16.9 million in 1998 and $8.8 million in 1997. The increase in marketing, general and administrative expenses is due to the increased costs of opening and maintaining the Company's New York City division and the increase in corporate management and administrative costs associated with the growth of the Company. The Company's business strategy has been to expand further into the Tri-State Area suburban markets and the New York City market by applying its standards for high quality office and industrial space and premier tenant service to its New Jersey, Westchester, Southern Connecticut and New York City divisions. In doing this, the Company seeks to create a superior franchise value that it enjoys in its home base of Long Island. Over the past three years the Company has supported this effort by increasing the marketing programs in the other divisions and strengthening the resources and operating systems in these divisions. The cost of these efforts are reflected in both marketing, general and administrative expenses as well as the revenue growth of the Company. Marketing, general and administrative expense as a percentage of total revenues were 6.0% in 1999, 6.3% in 1998 and 5.7% in 1997. Interest expense was $74.3 million in 1999, $47.8 million in 1998 and $21.6 million in 1997. The increase of $26.5 million from 1998 to 1999 is attributable to (i)an increase in mortgage debt including approximately $232 million relating to the Tower portfolio acquisition (ii) the issuance of $300 million of senior unsecured notes in March 1999 and (iii) an increased average balance on the Company's credit facilities and term loan. The weighted average balance outstanding on the Company's credit facilities and term loan was $423.8 million for 1999, $377.9 million for 1998 and $103.2 million for 1997. Included in amortization expense is amortized financing costs of $3.4 million in 1999, $1.6 million in 1998 and $.8 million in 1997. The increase of $1.8 million from 1998 to 1999 is primarily attributable to the increased loan costs incurred in connection with the Company increasing its unsecured term loan in January 1999 to $75 million, the issuance of $300 million of senior unsecured notes in March 1999 and the Company's $130 million unsecured bridge facility obtained in connection with the Tower portfolio acquisition in May 1999. The increase of $.8 million from 1997 to 1998 is primarily attributable to loan costs incurred in connection with the Company's obtaining a $500 million unsecured credit facility and a $50 million unsecured term loan. Extraordinary losses, net of minority interest resulted in a $555,000 loss in 1999, a $1.7 million loss in 1998 and a $2.2 million loss in 1997. The extraordinary losses were all attributed to the write-offs of certain deferred loan costs incurred in connection with the Company's restructuring of its unsecured bridge and credit facilities and term loans. LIQUIDITY AND CAPITAL RESOURCES Summary of Cash Flows Net cash provided by operating activities totaled $154.6 million in 1999, $117.5 million in 1998 and $75.8 million in 1997. Increases for each year were primarily attributable to the growth in cash flow provided by the acquisition of properties and to a lesser extent from interest income from mortgage notes and notes receivable. II-7 Net cash used in investing activities totaled $392.9 million in 1999, $612.6 million in 1998 and $549.3 million in 1997. Cash used in investing activities related primarily to investments in real estate properties including development costs and investments in mortgage notes and notes receivable. In addition, during 1998, the Company purchased $40 million of preferred stock of Tower Realty Trust, Inc. in connection with the Tower portfolio acquisition. Net cash provided by financing activities totaled $257.4 million in 1999, $475.6 million in 1998 and $482.7 million in 1997. Cash provided by financing activities during 1999, 1998 and 1997 was primarily attributable to proceeds from the issuances of preferred stock, common stock, senior unsecured notes and advances under the Company's credit facilities and term loan. Additionally, during 1999, approximately $126 million in proceeds from secured borrowings was provided by financing activities. Investing Activities On May 24, 1999, the Tower portfolio acquisition was completed with the Company obtaining title to all of Tower's real estate assets. Simultaneously with the closing of the Tower acquisition the Company arranged for the sale of four of Tower's Class B New York City office properties. In addition, the Company sold, with the exception of one Class A, 357,000 square foot office building located in Orlando, Florida, all of the assets located outside of the Tri-State Area. In addition to the aforementioned property in Orlando, Florida, the Company's remaining assets from the Tower acquisition include three Class A New York City office properties encompassing approximately 1.6 million square feet and one Class A office property on Long Island encompassing approximately 101,000 square feet. On June 15, 1999, the Company acquired the first mortgage note secured by 919 Third Avenue, a 47 story, 1.4 million square foot Class A office property located in New York City. The first mortgage note entitles the Company to all the net cash flow of the property and to substantial rights regarding the operations of the property. On January 13, 2000, the Company acquired 1350 Avenue of the Americas, a 540,000 square foot, 35 story, Class A office property, located in New York City, for a purchase price of approximately $126.5 million. This acquisition was financed through a $70 million secured debt financing and a draw under the Company's unsecured credit facility. In June 1998, the Company established the FrontLine Facility in the amount of $100 million for FrontLine's e-commerce and e-services operations and for other general corporate purposes. As of December 31, 1999, approximately $79.5 million had been advanced to FrontLine under this facility. In addition, the Company approved the commitment to fund investments of up to $100 million with or in RSVP. As of December 31, 1999, the Company has invested approximately $67.2 million under this commitment, of which $24.8 million represents RSVP -- controlled joint venture REIT -- qualified investments and $42.4 million represents advances to FrontLine under the RSVP Commitment. Financing Activities During 1999, the Company paid cash dividends on its common stock of approximately $1.42 per share and approximately $.98 per share (representing the period from May 24, 1999 through October 31, 1999) on its Class B Common Stock. On March 26, 1999, the Operating Partnership issued $100 million of 7.4% senior unsecured notes due March 15, 2004 and $200 million of 7.75% senior unsecured notes due March 15, 2009. Net proceeds of approximately $297.4 million were used to repay outstanding borrowings under the Company's unsecured credit facility. On May 24, 1999, in conjunction with the Tower portfolio acquisition, the Company issued 11,694,567 shares of Class B Common Stock which were valued for purposes under GAAP at $26 per share for total consideration of approximately $304.1 million. The shares of Class B Common Stock are entitled to receive an initial annual dividend of $2.24 per share, which dividend is subject to adjustment annually commencing on July 1, 2000. The shares of Class B Common Stock are exchangeable at any time, at the option of the holder, into an equal number of shares of common stock, par value $.01 per II-8 share, of the Company subject to customary antidilution adjustments. The Company, at its option, may redeem any or all of the Class B Common Stock in exchange for an equal number of shares of the Company's common stock at any time following the four year, six-month anniversary of the issuance of the Class B Common Stock. The Board of Directors of the Company has authorized the purchase of up to three million shares of the Company's Class B Common Stock and has also authorized the purchase of up to an additional three million shares of the Company's Class B Common Stock and/or its common stock. The buy-back program will be effected in accordance with the safe harbor provisions of the Securities Exchange Act of 1934 and may be terminated by the Company at any time. As of December 31, 1999, the Company purchased and retired 1,410,804 shares of Class B Common Stock for approximately $30.3 million. On June 2, 1999, the Company issued six million shares of Series B Convertible Cumulative Preferred Stock (the "Series B Preferred Stock") for aggregate proceeds of $150 million. The Series B Preferred Stock is redeemable by the Company on or after March 2, 2002 and is convertible into the Company's common stock at a price of $26.05 per share. The Series B Preferred Stock accumulate dividends at an initial rate of 7.85% per annum with such rate increasing to 8.35% per annum on April 30, 2000 and to 8.85% per annum from and after April 30, 2001. Proceeds from the Series B Preferred Stock offering were used as partial consideration in the acquisition of the first mortgage note secured by 919 Third Avenue located in New York City. As of December 31, 1999 the Company had a three year $500 million unsecured revolving credit facility (the "Credit Facility") with Chase Manhattan Bank, Union Bank of Switzerland and PNC Bank as co-managers of the Credit Facility bank group. Interest rates on borrowings under the Credit Facility are priced off of LIBOR plus a sliding scale ranging from 65 basis points to 90 basis points based on the Company's investment grade rating on its senior unsecured debt. On March 16, 1999, the Company received its investment grade rating on its senior unsecured debt. As a result, the pricing under the Credit Facility was adjusted to LIBOR plus 90 basis points. The Company utilizes the Credit Facility primarily to finance the acquisitions of properties and other real estate investments, fund its development activities and for working capital purposes. At December 31, 1999, the Company had availability under the Credit Facility to borrow an additional $150.1 million (net of $52.3 million of outstanding undrawn letters of credit). As of December 31, 1999, the Company had outstanding an 18 month, $75 million unsecured term loan (the "Term Loan") from Chase Manhattan Bank. Interest rates on borrowings under the Term Loan are priced off of LIBOR plus 150 basis points. The Term Loan replaced the Company's previous term loan which matured on December 17, 1999. On May 24, 1999, in conjunction with the Tower portfolio acquisition, the Company obtained a $130 million unsecured bridge facility (The "Bridge Facility") from UBS AG. Interest rates on borrowings under the Bridge Facility were priced off of LIBOR plus approximately 214 basis points. On July 23, 1999, the Bridge Facility was repaid through a long term fixed rate secured borrowing and an advance under the Credit Facility. As a result, certain deferred loan costs incurred in connection with the Bridge Facility were written off. Such amount is reflected as an extraordinary loss in the Company's consolidated statements of income. The new mortgage note, in the amount of $125 million, is secured by two office properties with an aggregate carrying value of approximately $261 million, is for a term of ten years and bears interest at the rate of 7.73% per annum. Capitalization The Company's indebtedness at December 31, 1999 totaled $1.3 billion (including its share of joint venture debt and net of minority partners' interests) and was comprised of $297.6 million outstanding under the Credit Facility, $75 million outstanding under the Term Loan, approximately $449.3 million of senior unsecured notes and approximately $445 million of mortgage indebtedness with a weighted average interest rate of approximately 7.6% and a weighted average maturity of approximately 12.1 years. Based on the Company's total market capitalization of approximately $3 billion at December 31, 1999 (calculated based on the market value of the Company's common stock and OP Units, assuming II-9 conversion , the market value of the Company's Class B Common Stock, the liquidation preference value of the Company's preferred stock, the liquidation preference value of the Operating Partnership's preferred units, the contributed value of Metropolitan's preferred interest of $85 million and the $1.3 billion of debt), the Company's debt represented approximately 42.3% of its total market capitalization. Historically, rental revenue has been the principal source of funds to pay operating expenses, debt service and capital expenditures, excluding non-recurring capital expenditures of the Company. In addition, the Company's investments in mortgage notes, RSVP and advances under the FrontLine Facility are expected to produce cash flows. The Company expects to meet its short term liquidity requirements generally through its net cash provided by operating activities along with the Credit Facility and Term Loan previously discussed. The Company expects to meet certain of its financing requirements through long-term secured and unsecured borrowings and the issuance of debt securities and additional equity securities of the Company. The Company also expects certain strategic dispositions of assets or interests in assets to generate cash flows. The Company will refinance existing mortgage indebtedness or indebtedness under the Credit Facility at maturity or retire such debt through the issuance of additional debt securities or additional equity securities. The Company anticipates that the current balance of cash and cash equivalents and cash flows from operating activities, together with cash available from borrowings and debt and equity offerings, will be adequate to meet the capital and liquidity requirements of the Company in both the short and long-term. In order to qualify as a REIT for federal income tax purposes, the Company is required to make distributions to its stockholders of at least 95% of REIT taxable income. The Company expects to use its cash flow from operating activities for distributions to stockholders and for payment of expenditures. The Company intends to invest amounts accumulated for distribution in short-term investments. INFLATION Certain office leases provide for fixed base rent increases or indexed escalations. In addition, certain office leases provide for separate escalations of real estate taxes and electric costs over a base amount. The industrial leases also generally provide for fixed base rent increases, direct pass through of certain operating expenses and separate real estate tax escalation over a base amount. The Company believes that inflationary increases in expenses will generally be offset by contractual rent increases and expense escalations described above. The Credit Facility and the Term Loan bear interest at a variable rate, which will be influenced by changes in short-term interest rates, and are sensitive to inflation. IMPACT OF YEAR 2000 During 1999, the Company discussed the nature and progress of its plans to become Year 2000 ready. In that regard, the Company has completed its assessment, remediation and testing of its systems in order for those systems to function properly with respect to dates occurring in the Year 2000 and thereafter. As a result of those efforts, the Company experienced no significant disruptions in connection with its building management, mechanical and computer systems and believes that those systems successfully responded to the Year 2000 date change. The Company has expended approximately one million dollars with upgrading, replacing or remediating its systems and is not aware of any material problems resulting from Year 2000 issues. Further, the Company will continue to monitor its critical building management, mechanical and computer systems throughout the year 2000 to ensure that any latent Year 2000 matters that may arise are addressed promptly. II-10 FUNDS FROM OPERATIONS Management believes that funds from operations ("FFO") is an appropriate measure of performance of an equity REIT. FFO is defined by the National Association of Real Estate Investment Trusts (NAREIT) as net income or loss, excluding gains or losses from debt restructurings and sales of properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. FFO does not represent cash generated from operating activities in accordance with GAAP and is not indicative of cash available to fund cash needs. FFO should not be considered as an alternative to net income as an indicator of the Company's operating performance or as an alternative to cash flow as a measure of liquidity. (See Selected Financial Data). In March 1995, NAREIT issued a "White Paper" analysis to address certain interpretive issues under its definition of FFO. The White Paper provides that amortization of deferred financing costs and depreciation of non-rental real estate assets are no longer to be added back to net income to arrive at FFO. In October 1999, NAREIT revised the definition of FFO to include gains and losses from sales of properties and non-recurring events. This revised definition is effective for all periods beginning on or after January 1, 2000. Since all companies and analysts do not calculate FFO in a similar fashion, the Company's calculation of FFO presented herein may not be comparable to similarly titled measures as reported by other companies. The following table presents the Company's FFO calculation for the years ended December 31, (in thousands):
1999 1998 1997 ---------- ---------- ---------- Income before preferred dividends and distributions, limited partners' interest in the operating partnership and extraordinary loss ............. $ 97,240 $61,718 $44,683 Less: Preferred dividends and distributions .................................... 27,001 14,244 -- Extraordinary loss, net of limited partners' interest in the operating partnership of $74, $323 and $578, respectively ........................ 555 1,670 2,230 Limited Partners' minority interest in the operating partnership ......... 9,407 7,909 7,817 -------- ------- ------- Net Income available to common shareholders ............................... 60,277 37,895 34,636 Adjustments for Funds From Operations Add: Limited Partners' minority interest in the operating partnership ......... 9,407 7,909 7,817 Real estate depreciation and amortization 72,124 51,424 26,834 Minority interests' in consolidated partnerships ......................... 6,802 2,763 807 Extraordinary loss, net of limited partners' interest in the operating partnership of $74, $323 and $578, respectively ........................ 555 1,670 2,230 Less: Gain on sales of real estate ............................................. 10,052 -- 672 Amount distributed to minority partners in consolidated partnerships ..... 8,293 3,964 2,104 -------- ------- ------- Basic Funds From Operations ............................................... 130,820 97,697 69,548 Add: Dilutive preferred dividends and distributions ........................... 30,861 1,753 -- -------- ------- ------- Diluted Fund From Operations .............................................. $161,681 $99,450 $69,548 ======== ======= ======= Weighted Average Shares/Units outstanding (1) ............................. 54,719 47,201 39,743 ======== ======= ======= Diluted Weighted Average Shares/Units outstanding (1) ..................... 70,013 48,651 40,276 ======== ======= =======
- ---------- (1) Assumes conversion of limited partnership units of the Operating Partnership. II-11 ITEM 7(A). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The primary market risk facing the Company is interest rate risk on its long term debt, mortgage notes and notes receivable. The Company does not hedge interest rate risk using financial instruments nor is the Company subject to foreign currency risk. The Company manages its exposure to interest rate risk on its variable rate indebtedness by borrowing on a short-term basis under its Credit Facility or Term Loan until such time as it is able to retire the short-term variable rate debt with a long-term fixed rate debt offering or an equity offering through accessing the capital markets on terms that are advantageous to the Company. The following table sets forth the Company's long term debt obligations by scheduled principal cash flow payments and maturity date, weighted average interest rates and estimated fair market value ("FMV") at December 31, 1999 (dollars in thousands):
FOR THE YEAR ENDED DECEMBER 31, --------------------------------------------------------------- 2000 2001 2002 2003 2004 THEREAFTER TOTAL (1) FMV ------------ ------------ ------------ ----------- ------------ ------------ ------------- ----------- Long term debt: Fixed rate .......... $ 35,145 $ 22,751 $ 16,499 $ 8,350 $ 11,769 $ 814,660 $ 909,174 $909,174 Weighted average interest rate ..... 7.37% 7.58% 7.79% 7.77% 7.73% 7.53% 7.53% -- Variable rate ....... $ -- $372,600 $ -- $ -- $ -- $ -- $ 372,600 $372,600 Weighted average interest rate ..... -- 7.27% -- -- -- -- 7.27% --
(1) Includes unamortized issuance discounts of $687,000 on the 5 and 10 year senior unsecured notes issued on March 26, 1999 which are due at maturity. In addition, the Company has assessed the market risk for its variable rate debt, which is based upon LIBOR, and believes that a one percent increase in the LIBOR rate would have an approximate $3.7 million annual increase in interest expense based on approximately $372.6 million outstanding at December 31, 1999. The following table sets forth the Company's mortgage notes and note receivables by scheduled maturity date, weighted average interest rates and estimated FMV at December 31, 1999 (dollars in thousands):
FOR THE YEAR ENDED DECEMBER 31, --------------------------------------------------------- 2000 2001 2002 2003 2004 THEREAFTER TOTAL (2) F M V ------------- ---------- ------------ ------ ------------ ------------ ------------- ----------- Mortgage notes and notes receivable: Fixed rate .............. $ 282,857 $ 15 $ 11,306 $-- $ 36,500 $ 16,990 $ 347,668 $347,668 Weighted average interest rate ......... 9.42% 9.00% 10.35% -- 10.23% 11.65% 9.64% --
(2) Excludes mortgage note receivable acquisition costs and interest receivables aggregating approximately $4.8 million. The fair value of the Company's long term debt, mortgage notes and notes receivable is estimated based on discounting future cash flows at interest rates that management believes reflects the risks associated with long term debt, mortgage notes and notes receivable of similar risk and duration. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The response to this item is included in a separate section of this Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. II-12 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information contained in the section captioned "Proposal I: Election of Directors" of the Company's definitive proxy statement for the 2000 annual meeting of stockholders is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information contained in the section captioned "Executive Compensation" of the Company's definitive proxy statement for the 2000 annual meeting of stockholders is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information contained in the section captioned "Principal and Management Stockholders" of the Company's definitive proxy statement for the 2000 annual meeting of stockholders is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information contained in the section captioned "Certain Relationships and Related Transactions" of the Company's definitive proxy statement for the 2000 annual meeting of the stockholders is incorporated herein by reference. III-1 PART IV ITEM 14. FINANCIAL STATEMENTS AND SCHEDULES, EXHIBITS AND REPORTS ON FORM 8-K (a)(1 and 2) Financial Statements and Schedules The following consolidated financial information is included as a separate section of this annual report on Form 10-K:
PAGE ------ RECKSON ASSOCIATES REALTY CORP. Report of Independent Auditors ................................................ IV-5 Consolidated Balance Sheets as of December 31, 1999 and December 31, 1998 ..... IV-6 Consolidated Statements of Income for the years ended December 31, 1999, 1998 and 1997 .................................................................... IV-7 Consolidated Statement of Stockholders' Equity for the years ended December 31, 1999, 1998 and 1997 ......................................................... IV-8 Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997 ............................................................... IV-9 Notes to Financial Statements ................................................. IV-10 Schedule III - Real Estate and Accumulated Depreciation ....................... IV-30
IV-1 All other schedules are omitted since the required information is not present in amounts sufficient to require submission of the schedule or because the information required is included in the financial statements and notes thereto. (3) Exhibits
EXHIBIT FILING NUMBER REFERENCE DESCRIPTION - --------- ---------- ----------- 3.1 a Amended and Restated Articles of Incorporation 3.1 a Amended and Restated Articles of Incorporation 3.2 Amended and Restated By-Laws of Registrant 3.3 h Articles Supplementary of the Registrant Establishing and Fixing the Rights and Preferences of a Series of Shares of Preferred Stock filed with the Maryland State Department of Assessments and Taxation on April 9, 1998 3.4 Articles Supplementary of the Registrant Establishing and Fixing the Rights and Preferences of a Class of Shares of Common Stock filed with the Maryland State Department of Assessments and Taxation on May 24, 1999. 3.5 k Articles Supplementary of the Registrant Establishing and Fixing the Rights and Preferences of a Series of Shares of Preferred Stock filed with the Maryland State Department of Assessments and Taxation on May 28, 1999 3.6 Articles of Amendment of the Registrant filed with the Maryland State Department of Assessments and Taxation on January 4, 2000. 3.7 Articles Supplementary of the Registrant filed with the Maryland State Department of Assessments and Taxation on January 11, 2000. 4.1 b Specimen Share Certificate of Common Stock 4.2 h Specimen Share Certificate of Series A Preferred Stock 4.3 j Form of 7.40% Notes due 2004 of Reckson Operating Partnership, L.P. 4.4 j Form of 7.75% Notes due 2009 of Reckson Operating Partnership, L.P. 4.5 j Indenture, dated March 26, 1999, among Reckson Operating Partnership, L.P., the Company, and The Bank of New York, as trustee 10.1 a Amended and Restated Agreement of Limited Partnership of Reckson Operating Partnership, L.P. 10.2 h Supplement to the Amended and Restated Agreement of Limited Partnership of Reckson Operating Partnership, L.P. 10.3 h Establishing Series A Preferred Units of Limited Partnership Interest Supplement to the Amended and Restated Agreement of Limited Partnership of Reckson Operating Partnership, L.P. Establishing Series B Preferred Units of Limited Partnership Interest 10.4 Supplement to the Amended and Restated Agreement of Limited Partnership of Reckson Operating Partnership, L.P. Establishing Series C Preferred Units of Limited Partnership Interest 10.5 h Supplement to the Amended and Restated Agreement of Limited Partnership of Reckson Operating Partnership, L.P. Establishing Series D Preferred Units of Limited Partnership Interest 10.6 Supplement to the Amended and Restated Agreement of Limited Partnership of Reckson Operating Partnership, L.P. Establishing Series B Common Units of Limited Partnership Interest 10.7 Supplement to the Amended and Restated Agreement of Limited Partnership of Reckson Operating Partnership, L.P. Establishing Series E Preferred Partnership Units of Limited Partnership Interest 10.8 f Third Amended and Restated Agreement of Limited Partnership of Omni Partners, L.P. 10.9 i Amendment and Restatement of Employment and Non-Competition Agreement between Registrant and Donald Rechler 10.10 i Amendment and Restatement of Employment and Non-Competition Agreement between Registrant and Scott Rechler 10.11 i Amendment and Restatement of Employment and Non-Competition Agreement between Registrant and Mitchell Rechler 10.12 i Amendment and Restatement of Employment and Non-Competition Agreement between Registrant and Gregg Rechler 10.13 i Amendment and Restatement of Employment and Non-Competition Agreement between Registrant and Roger Rechler 10.14 i Amendment and Restatement of Employment and Non-Competition Agreement between Registrant and J. Michael Maturo 10.15 a Purchase Option Agreements relating to the Reckson Option Properties 10.16 a Purchase Option Agreements relating to the Other Option Properties 10.17 c Amended 1995 Stock Option Plan 10.18 c 1996 Employee Stock Option Plan 10.19 b Ground Leases for certain of the properties 10.20 i Third Amended and Restated Agreement of Limited Partnership of Reckson FS Limited Partnership 10.21 a Indemnity Agreement relating to 100 Oser Avenue 10.22 f Amended and Restated 1997 Stock Option Plan 10.23 f 1998 Stock Option Plan 10.24 f Note Purchase Agreement for the Senior Unsecured Notes 10.25 i Amended and Restated Severance Agreement between Registrant and Donald Rechler 10.26 i Amended and Restated Severance Agreement between Registrant and Scott Rechler 10.27 i Amended and Restated Severance Agreement between Registrant and Mitchell Rechler 10.28 i Amended and Restated Severance Agreement between Registrant and Gregg Rechler 10.29 i Amended and Restated Severance Agreement between Registrant and Roger Rechler 10.30 i Amended and Restated Severance Agreement between Registrant and J. Michael Maturo 10.31 d $500 million Credit Agreement dated July 23, 1998 among Reckson Operating Partnership, L.P. and Reckson Morris Operating Partnership, L.P. and the Chase Manhattan Bank, UBS AG and PNC Bank and other lenders party thereto 10.32 g Agreement and Plan of Merger by and among Tower Realty Trust, Inc., Reckson Associates Realty Corp., Reckson Operating Partnership, L.P. and Metropolitan Partners LLC, dated December 8, 1998 10.33 g Stock Purchase Agreement by and between Tower Realty Trust, Inc. and Metropolitan Partners LLC, dated December 8, 1998 10.34 g Amended and Restated Operating Agreement of Metropolitan Partners LLC, dated December 8, 1998
IV-2
EXHIBIT FILING NUMBER REFERENCE DESCRIPTION - --------- ---------- ----------- 10.35 i Intercompany Agreement by and between Reckson Operating Partnership, L.P. and Reckson Service Industries, Inc., dated May 13, 1998 10.36 Amended and Restated Credit Agreement dated as of August 4, 1999 between Reckson Service Industries, Inc., as borrower and Reckson Operating Partnership, L.P., as Lender relating to Reckson Strategic Venture Partners, LLC ("RSVP Credit Agreement") 10.37 Amended and Restated Credit Agreement dated as of August 4, 1999 between Reckson Service Industries, Inc., as borrower and Reckson Operating Partnership, L.P., as Lender relating to the operations of Reckson Service Industries, Inc. ("RSI Credit Agreement") 10.38 Letter Agreement, dated November 30, 1999, amending the RSVP Credit Agreement and the RSI Credit Agreement 10.39 j Terms Agreement, dated March 23, 1999, between Reckson Operating Partnership, L.P. and Goldman, Sachs & Co., on behalf of itself and the other named underwriters 10.40 k $130 million Credit Agreement dated as of May 24, 1999 among Metropolitan Operating Partnership, L.P., Warburg Dillon Read and UBS AG, Stamford Branch 10.41 k Guaranty Agreement dated as of May 24, 1999 among Metropolitan Operating Partnership, L.P., Warburg Dillon Read and UBS AG, Stamford Branch 10.42 k Purchase Agreement dated as of May 27, 1999 among Stichting Pensioenfonds ABP, The Travelers Insurance Company, The Travelers Life and Annuity Company, The Standard Fire Insurance Company, Travelers Casualty and Surety Company, Reckson Associates Realty Corp. and Reckson Operating Partnership, L.P. relating to 6,000,000 shares of Series B Convertible Cumulative Preferred Stock 10.43 k Registration Rights Agreement among Stichting Pensioenfonds ABP, The Travelers Insurance Company, The Travelers Life and Annuity Company, The Standard Fire Insurance Company, Travelers Casualty and Surety Company and Reckson Associates Realty Corp. relating to 6,000,000 shares of Series B Convertible Cumulative Preferred Stock 10.44 l Consolidated, Amended and Restated Fee and Leasehold Mortgage Note relating to 919 Third Avenue 10.45 o Agreement of Purchase and Sale, between NBBRE 919 Third Avenue Associates, L.P., as Seller, and Reckson Operating Partnership, L.P., as Purchaser 10.46 l Side Letter to Agreement of Purchase and Sale, between NBBRE 919 Third Avenue Associates, L.P., as Seller, and Reckson Operating Partnership, L.P., as Purchaser 10.47 m Contribution and Exchange Agreement by and between Reckson Morris Industrial Trust, Reckson Morris Industrial Interim GP, LLC, Reckson Operating Partnership, L.P., Robert Morris, Joseph D. Morris, Ronald Schram, Mark M. Bava, The Drew Morris Trust, The Justin Morris Trust, The Keith Morris Trust, Joseph D. Morris Family Limited Partnership and Robert Morris Family Limited Partnership, and American Real Estate Investment L.P. and American Real Estate Corporation 10.48 n Agreement of Purchase and Sale by and among Black Canyon Loop Company LLC, Metropolitan Operating Partnership, L.P. and Safeway Inc. 10.49 n Purchase and Sale Agreement by and between Corporate Center Associates Limited Partnership and Transwestern Investment Company, L.L.C. 10.50 n Purchase and Sale Agreement by and between East Broadway 5151 Limited Partnership, Metropolitan Operating Partnership, L.P., 5750 Associates Limited Partnership, Maitland Associates, Ltd. and Maitland West Associates Limited Partnership and Praedium Performance Fund IV, L.P. 10.51 n Purchase and Sale Agreement by and between Metropolitan Operating Partnership, L.P. and HUB Properties Trust 10.52 o Contract and Sale Agreement between 54-55 Street Company and Reckson Operating Partnership, L.P. 10.53 p 1999 $75 million Second Amended and Restated Credit Facility Agreement dated as of December 17, 1999 10.54 p 1999 Second Amended and Restated Guaranty Agreement dated as of December 17, 1999 12.1 Statement of Ratios of Earnings to Fixed Charges 21.1 Statement of Subsidiaries 23.0 Consent of Independent Auditors 24.1 Power of Attorney (included in Part IV of the Form 10-K) 27.0 Financial Data Schedule
- -------- (a) Previously filed as an exhibit to Registration Statement Form S-11 (No. 333-1280) and incorporated herein by reference. (b) Previously filed as an exhibit to Registration Statement Form S-11 (No. 33-84324) and incorporated herein by reference. (c) Previously filed as an exhibit to the Company's Form 8-K report filed with the SEC on November 25, 1996 and incorporated herein by reference. (d) Previously filed as an exhibit to the Company's Form 8-K report filed with the SEC on August 14, 1998 and incorporated herein by reference. (e) Previously filed as an exhibit to the Company's Form 8-K report filed with the SEC on February 5, 1999 and incorporated herein by reference. (f) Previously filed as an exhibit to the Company's Form 10-K filed with the SEC on March 26, 1998 and incorporated herein by reference. (g) Previously filed as an exhibit to the Company's Form 8-K report filed with the SEC on December 22, 1998 and incorporated herein by reference. (h) Previously filed as an exhibit to the Company's Form 8-K report filed with the SEC on March 1, 1999 and incorporated herein by reference. (i) Previously filed as an exhibit to the Company's Form 10-K filed with the SEC on March 16, 1999 and incorporated herein by reference. (j) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on March 26, 1999 and incorporated herein by reference. (k) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on June 7, 1999 and incorporated herein by reference. (l) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on June 25, 1999 and incorporated herein by reference. (m) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on August 25, 1999 and incorporated herein by reference. (n) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on October 25, 1999 and incorporated herein by reference. (o) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on January 14, 2000 and incorporated herein by reference. (p) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on February 8, 2000 and incorporated herein by reference. (b) REPORTS ON FORM 8-K On October 25, 1999, the Company filed reports on Form 8-K relating to: (i) The completion of the first stage of the RMI closing and the sale of certain industrial properties to Matrix, (ii) the Company's Board of Directors authorizing the repurchase of up to three million shares of Class B Common Stock, (iii) the Company's sale and disposition of the Tower assets located outside the Tri-State Area other than one Class A office property located in Orlando, Florida and (iv) the Operating Partnership entering into a contract to acquire 1350 Avenue of the Americas, a 540,000 square foot, 35 story, Class A office property located in New York City for a purchase price of approximately $126.5 million. IV-3 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 15, 2000. RECKSON ASSOCIATES REALTY CORP. By: /s/ Donald J. Rechler ------------------------------ (Donald J. Rechler) Chairman of the Board, and Co-Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and directors of Reckson Associates Realty Corp., hereby severally constitute Scott H. Rechler, Mitchell D. Rechler and Michael Maturo, and each of them singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names in the capacities indicated below, the Form 10-K filed herewith and any and all amendments to said Form 10-K, and generally to do all such things in our names and in our capacities as officers and directors to enable Reckson Associates Realty Corp. to comply with the provisions of the Securities Exchange Act of 1934, and all requirements of the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any of them, to said Form 10-K and any and all amendments thereto. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 15, 2000.
NAME TITLE NAME TITLE - --------------------------- -------------------------------- ------------------------ --------- /s/ Donald J. Rechler Chairman of the Board, /s/ Leonard Feinstein Director ----------------------- Co-Chief Executive Officer ------------------------ (Donald J. Rechler) and Director (principal (Leonard Feinstein) executive officer) /s/ Scott Rechler President /s/ John V.N. Klein Director ----------------------- Co-Chief Executive Officer ------------------------- (Scott Rechler) and Director (John V.N. Klein) /s/ Roger M. Rechler Vice Chairman of the Board, /s/ Conrad Stephenson Director ----------------------- Executive Vice President ------------------------- (Roger M. Rechler) and Director (Conrad Stephenson) /s/ Michael Maturo Executive Vice President, /s/ Herve A. Kevenides Director ----------------------- Treasurer and Chief ------------------------- (Michael Maturo) Financial Officer (principal (Herve A. Kevenides) financial officer and principal accounting officer) /s/ Mitchell D. Rechler Executive Vice President, Co - /s/ Lewis S. Ranieri Director ------------------------ Chief Operating Officer ------------------------- (Mitchell D. Rechler) and Director (Lewis S. Ranieri) /s/ Harvey R. Blau Director ------------------------ (Harvey R. Blau)
IV-4 REPORT OF INDEPENDENT AUDITORS Board of Directors and Stockholders Reckson Associates Realty Corp. We have audited the accompanying consolidated balance sheets of Reckson Associates Realty Corp. as of December 31, 1999 and 1998, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1999. We have also audited the financial statement schedule listed in the index at item 14(a). These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Reckson Associates Realty Corp. at December 31, 1999 and 1998, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. ERNST & YOUNG LLP New York, New York February 15, 2000 IV-5 RECKSON ASSOCIATES REALTY CORP. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
DECEMBER 31, ----------------------------- 1999 1998 ------------- ------------- ASSETS Commercial real estate properties, at cost: (Notes 2, 3, 5, 6 and 8) Land ........................................................................ $ 276,204 $ 212,540 Buildings and improvements .................................................. 1,802,611 1,372,549 Developments in progress: Land ........................................................................ 60,894 69,143 Development costs ........................................................... 68,690 82,901 Furniture, fixtures and equipment ........................................... 6,473 6,090 ---------- ---------- 2,214,872 1,743,223 Less accumulated depreciation ........................................... (218,385) (159,049) ---------- ---------- 1,996,487 1,584,174 Investments in real estate joint ventures (Note 8) .......................... 31,531 15,104 Investment in mortgage notes and notes receivable (Note 6) .................. 352,466 99,268 Cash and cash equivalents (Note 12) ......................................... 21,368 2,349 Tenant receivables .......................................................... 5,117 5,159 Investments in and advances to affiliates (Note 8) .......................... 178,695 53,329 Deferred rents receivable ................................................... 22,489 22,526 Prepaid expenses and other assets (Note 6) .................................. 66,977 46,372 Contract and land deposits and pre-acquisition costs ........................ 9,585 2,253 Deferred lease and loan costs, less accumulated amortization of $24,484 and $18,170, respectively .................................................. 39,520 24,282 ---------- ---------- Total Assets ................................................................ $2,724,235 $1,854,816 ========== ========== LIABILITIES Mortgage notes payable (Note 2) ............................................. $ 459,174 $ 253,463 Unsecured credit facility (Note 3) .......................................... 297,600 465,850 Unsecured term loan (Note 3) ................................................ 75,000 20,000 Senior unsecured notes (Note 4) ............................................. 449,313 150,000 Accrued expenses and other liabilities (Note 5) ............................. 72,436 50,960 Dividends and distributions payable ......................................... 27,166 19,663 ---------- ---------- Total Liabilities ........................................................... 1,380,689 959,936 ---------- ---------- Minority interests' in consolidated partnerships ............................ 93,086 52,173 Preferred unit interest in the operating partnership (Note 6) ............... 42,518 42,518 Limited Partners' minority interest in the operating partnership ............ 90,986 94,125 ---------- ---------- 226,590 188,816 ---------- ---------- Commitments and other comments (Notes 9, 10 and 13) ......................... -- -- STOCKHOLDERS' EQUITY (Note 7) Preferred Stock, $.01 par value, 25,000,000 shares authorized Series A preferred stock, 9,192,000 shares issued and outstanding .......... 92 92 Series B preferred stock, 6,000,000 and 0 shares issued and outstanding, respectively ............................................................. 60 -- Common Stock, $.01 par value, 100,000,000 shares authorized Common stock, 40,375,506 and 40,035,419 shares issued and outstanding, respectively ................................................ 401 400 Class B Common Stock, 10,283,763 and 0 shares issued and outstanding, respectively ............................................................. 103 -- Additional paid in capital .................................................. 1,116,300 705,572 ---------- ---------- Total Stockholders' Equity .................................................. 1,116,956 706,064 ---------- ---------- Total Liabilities and Stockholders' Equity .................................. $2,724,235 $1,854,816 ========== ==========
(see accompanying notes to financial statements) IV-6 RECKSON ASSOCIATES REALTY CORP. CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
FOR THE YEAR ENDED DECEMBER 31, ------------------------------------------------ 1999 1998 1997 -------------- -------------- -------------- REVENUES (Note 10): Base rents ................................................................ $ 324,146 $ 224,703 $ 128,778 Tenant escalations and reimbursements ..................................... 44,989 27,744 14,981 Equity in earnings of service companies and real estate joint ventures 2,148 1,836 514 Interest income on mortgage notes and notes receivable .................... 7,944 7,739 5,437 Gain on sales of real estate (Note 6) ..................................... 10,052 -- 672 Investment and other income ............................................... 13,874 4,351 3,013 ----------- ----------- ----------- Total Revenues ............................................................ 403,153 266,373 153,395 ----------- ----------- ----------- EXPENSES: Property operating expenses ............................................... 125,994 84,280 50,316 Marketing, general and administrative ..................................... 24,293 16,860 8,767 Interest .................................................................. 74,320 47,795 21,585 Depreciation and amortization ............................................. 74,504 52,957 27,237 ----------- ----------- ----------- Total Expenses ............................................................ 299,111 201,892 107,905 ----------- ----------- ----------- Income before preferred dividends and distributions, minority interests and extraordinary loss ......................................... 104,042 64,481 45,490 Minority partners' interests in consolidated partnerships ................. (6,802) (2,763) (807) Distributions to preferred unit holders ................................... (2,641) (1,753) -- Limited partners' minority interest in the operating partnership .......... (9,407) (7,909) (7,817) ----------- ----------- ----------- Income before extraordinary loss and dividends to preferred shareholders ............................................................. 85,192 52,056 36,866 Extraordinary loss on extinguishment of debts, net of limited partners' minority interest share of $74, $323 and $578, respectively (Note 3) (555) (1,670) (2,230) Dividends to preferred shareholders ....................................... (24,360) (12,491) -- ----------- ----------- ----------- NET INCOME AVAILABLE TO COMMON SHAREHOLDERS ............................... $ 60,277 $ 37,895 $ 34,636 =========== =========== =========== Net Income available to: Common shareholders ...................................................... $ 47,529 $ 37,895 $ 34,636 Class B common shareholders .............................................. 12,748 -- -- ----------- ----------- ----------- Total ..................................................................... $ 60,277 $ 37,895 $ 34,636 =========== =========== =========== Basic net income per weighted average common share before extraordinary loss: Common shareholders ...................................................... $ 1.19 $ 1.00 $ 1.13 Extraordinary loss per common share ...................................... ( .01) ( .04) ( .07) ----------- ----------- ----------- Basic net income per weighted average common share ....................... $ 1.18 $ .96 $ 1.06 =========== =========== =========== Class B common shareholders .............................................. $ 1.91 $ -- $ -- Extraordinary loss per Class B common share .............................. ( .02) -- -- ----------- ----------- ----------- Basic net income per weighted average Class B common share ............... $ 1.89 $ -- $ -- =========== =========== =========== Weighted average common shares outstanding: Common shareholders ...................................................... 40,270,000 39,473,000 32,727,000 Class B common shareholders .............................................. 6,744,000 -- -- Diluted net income per weighted average common share: Common shareholders ...................................................... $ 1.17 $ .95 $ 1.04 Class B common shareholders .............................................. $ 1.26 $ -- $ -- Diluted weighted average common shares outstanding: Common shareholders ...................................................... 40,676,000 40,010,000 33,260,000 Class B common shareholders .............................................. 6,744,000 -- --
(see accompanying notes to financial statements) IV-7 RECKSON ASSOCIATES REALTY CORP. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (IN THOUSANDS)
LIMITED CLASS B SERIES A SERIES B ADDITIONAL TOTAL PARTNERS' COMMON COMMON PREFERRED PREFERRED PAID IN RETAINED STOCKHOLDERS' MINORITY STOCK STOCK STOCK STOCK CAPITAL EARNINGS EQUITY INTEREST -------- --------- ----------- ----------- -------------- ------------ --------------- ------------ Stockholder's equity, January 1, 1997 ............. $244 $ -- $-- $-- $ 186,623 $ -- $ 186,867 $ 51,879 Two for one stock split ...... 50 -- -- -- (50) -- -- -- Net proceeds from common stock offerings 80 -- -- -- 256,564 -- 256,644 33,925 Issuance of operating partnership units ........... -- -- -- -- 9,473 -- 9,473 1,236 Net proceeds from long term compensation issuances ................... 4 -- -- -- 1,706 -- 1,710 178 Net Income ................... -- -- -- -- -- 34,636 34,636 7,239 Dividends and distributions paid and payable ..................... -- -- -- -- (6,029) (34,636) (40,665) (8,707) ---- ----- --- --- ---------- ---------- ---------- ---------- Stockholders' equity, December 31, 1997 ........... 378 -- -- -- 448,287 -- 448,665 85,750 Net proceeds from preferred stock offering -- -- 92 -- 220,708 -- 220,800 -- Conversions of preferred stock ....................... -- -- -- -- (31) -- (31) 31 Net proceeds from Class B Common Stock offering .................... 21 -- -- -- 41,340 -- 41,361 8,785 Issuance of operating partnership units ........... -- -- -- -- 11,576 -- 11,576 2,458 Net proceeds from long term compensation issuances ................... 1 -- -- -- 990 -- 991 210 Net income ................... -- -- -- -- -- 37,895 37,895 7,586 Dividends and distributions paid and payable ..................... -- -- -- -- (17,298) (37,895) (55,193) (10,695) ---- ----- --- --- ---------- ---------- ---------- ---------- Stockholders' equity, December 31, 1998 ........... 400 -- 92 -- 705,572 -- 706,064 94,125 Net proceeds from preferred stock offering -- -- -- 60 149,940 -- 150,000 -- Net proceeds from Class B Common Stock offering .................... -- 117 -- -- 302,536 -- 302,653 -- Repurchases of Class B Common Stock ................ -- (14) -- -- (30,273) -- (30,287) -- Redemption of operating partnership units ........... -- -- -- -- -- -- -- (1,485) Net proceeds from long term compensation issuances ................... 1 -- -- -- 1,596 -- 1,597 -- Net income ................... -- -- -- -- -- 60,277 60,277 9,333 Dividends and distributions paid and payable ..................... -- -- -- -- (13,071) (60,277) (73,348) (10,987) ---- ----- --- --- ---------- ---------- ---------- ---------- Stockholders' equity December 31, 1999 ........... $401 $ 103 $92 $60 $1,116,300 $ -- $1,116,956 $ 90,986 ==== ===== === === ========== ========== ========== ==========
(see accompanying notes to financial statements) IV-8 RECKSON ASSOCIATES REALTY CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31, ------------------------------------------ 1999 1998 1997 ------------ --------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income available to common Shareholders .................................. $ 60,277 $ 37,895 $ 34,636 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ................................................ 74,504 52,957 27,237 Extraordinary loss, net of minority interests ................................ 555 1,670 2,230 Minority partners' interests in consolidated partnerships .................... 6,802 2,763 807 Limited partners' interest in the operating partnership ...................... 9,407 7,909 7,817 Gain on sale of interest in Reckson Executive Centers, LLC ................... -- (9) -- Gain on sales of real estate, securities and mortgage repayment .............. (9,657) (43) (672) Distribution from investments in real estate joint ventures .................. 442 470 408 Equity in earnings of service companies and real estate joint ventures ....... (2,148) (1,836) (514) Changes in operating assets and liabilities: increase (decrease) ............. Deferred rents receivable .................................................... (2,158) (7,553) (4,500) Prepaid expenses and other assets ............................................ (23,722) (7,199) (1,931) Tenant and affiliate receivables ............................................. 42 (184) (1,183) Accrued expenses and other liabilities ....................................... 40,248 30,667 11,427 ---------- ----------- ---------- Net cash provided by operating activities .................................... 154,592 117,507 75,762 ---------- ----------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of commercial real estate properties ............................... (284,741) (449,241) (429,379) Investment in mortgage notes and notes receivable ............................ (295,048) 4,072 (50,282) Interest receivables ......................................................... (692) 2,602 (2,392) (Increase) decrease in contract deposits and preacquisition costs ............ (12,650) 8,839 (1,303) Additions to developments in progress ........................................ (9,615) (97,570) (40,367) Additions to commercial real estate properties ............................... (28,135) (21,181) (12,038) Payment of leasing costs ..................................................... (16,467) (8,802) (5,417) Investments in securities .................................................... -- (42,299) (1,756) Additions to furniture, fixtures and equipment ............................... (461) (2,071) (1,159) Investments in real estate joint ventures .................................... (15,033) (7,773) (1,734) Investment in and distributions from service companies ....................... -- 15 (4,241) Proceeds from sales of real estate, securities and mortgage repayment ........ 269,916 809 725 ---------- ----------- ---------- Net cash (used in) investing activities ...................................... (392,926) (612,600) (549,343) ---------- ----------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from secured borrowings ............................................. 125,548 -- -- Principal payments on secured borrowings ..................................... (4,714) (4,735) (1,624) Proceeds from issuance of senior unsecured notes , net of issuance costs ..... 299,262 -- 150,000 Proceeds from issuance of preferred stock, net of issuance costs ............. 148,000 220,800 -- Proceeds from mortgage refinancings, net of refinancing costs ................ -- 11,458 20,134 Payment of loan and equity issuance costs .................................... (8,264) (4,738) (4,983) Investments in and advances to affiliates .................................... (125,007) (23,452) (20,513) Proceeds from unsecured credit facilities and term loans ..................... 397,500 413,100 421,000 Principal payments on unsecured credit facilities ............................ (510,750) (137,500) (319,250) Repurchases of Class B common Stock .......................................... (30,287) -- -- Proceeds from issuance of common stock and exercise of options, net of issuance costs .............................................................. 1,512 51,934 299,991 Contributions by minority partners in consolidated partnerships .............. 75,500 10,000 -- Distributions to minority partners in consolidated partnerships .............. (6,701) (3,570) (5,355) Distributions to limited partners in the operating partnership ............... (11,177) (7,576) (8,707) Distributions to preferred unit holders ...................................... (2,641) (1,312) -- Dividends to common and Class B common shareholders .......................... (68,031) (39,157) (47,972) Dividends to preferred shareholders .......................................... (22,397) (9,638) -- ---------- ----------- ---------- Net cash provided by financing activities .................................... 257,353 475,614 482,721 ---------- ----------- ---------- Net increase (decrease) in cash and cash equivalents ......................... 19,019 (19,479) 9,140 Cash and cash equivalents at beginning of period ............................. 2,349 21,828 12,688 ---------- ----------- ---------- Cash and cash equivalents at end of period ................................... $ 21,368 $ 2,349 $ 21,828 ========== =========== ========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest ..................................... $ 77,014 $ 52,622 $ 20,246 ========== =========== ==========
(see accompanying notes to financial statements) IV-9 RECKSON ASSOCIATES REALTY CORP. NOTES TO FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS Reckson Associates Realty Corp. (the "Company") is a self-administered and self managed real estate investment trust ("REIT") engaged in the ownership, management, operation, leasing and development of commercial real estate properties, principally office and industrial buildings and also owns land for future development (collectively, the "Properties") located in the New York tri-state area (the "Tri-State Area"). ORGANIZATION AND FORMATION OF THE COMPANY The Company was incorporated in Maryland in September 1994. In June 1995, the Company completed an Initial Public Offering (the "IPO") and commenced operations. The aggregate proceeds to the Company, net of underwriters' discount, advisory fees and other offering costs were approximately $162 million. The Company became the sole general partner of Reckson Operating Partnership, L.P. (the "Operating Partnership") by contributing substantially all of the net proceeds of the IPO, in exchange for an approximate 73% interest in the Operating Partnership. All Properties acquired by the Company are held by or through the Operating Partnership. In conjunction with the IPO, the Operating Partnership executed various option and purchase agreements whereby it issued common units of limited partnership interest in the Operating Partnership ("Units") to certain continuing investors in exchange for (i) interests in certain property partnerships, (ii) fee simple and leasehold interests in properties and development land, (iii) certain business assets of executive center entities and (iv) 100% of the non-voting preferred stock of the management and construction companies. During 1997, the Company formed Reckson Service Industries, Inc. currently D/B/A FrontLine Capital Group ("FrontLine") and Reckson Strategic Venture Partners, LLC ("RSVP"). On June 11, 1998, the Operating Partnership distributed its 95% common stock interest in FrontLine of approximately $3 million to its owners, including the Company which, in turn, distributed the common stock of FrontLine received from the Operating Partnership to its stockholders. Additionally, during June 1998, the Operating Partnership established a credit facility with FrontLine (the "FrontLine Facility") in the amount of $100 million for FrontLine's e-commerce and e-services operations and other general corporate purposes. As of December 31, 1999, the Company had advanced $79.5 million under the FrontLine Facility. In addition, the Operating Partnership has approved the funding of investments of up to $100 million with or in RSVP (the "RSVP Commitment"), through RSVP-controlled joint venture REIT-qualified investments or advances made to FrontLine under terms similar to the FrontLine Facility. As of December 31, 1999, approximately $67.2 million had been invested through the RSVP Commitment, of which $24.8 million represents RSVP-controlled joint venture REIT-qualified investments and $42.4 million represents advances to FrontLine under the RSVP Commitment. During November 1999, the Board of Directors of the Company approved an amendment to the FrontLine Facility and the RSVP Commitment to permit FrontLine to incur secured debt and to pay interest thereon. In consideration of the amendments, FrontLine has paid the Operating Partnership a fee of approximately $3.6 million in the form of shares of FrontLine common stock. Such fee is being recognized in income over an estimated nine month benefit period. FrontLine identifies, acquires interests in and develops a network of business to business e-commerce and e-services companies that service small to medium sized enterprises, independent professionals and entrepreneurs and the mobile workforce of larger companies. FrontLine serves as the managing member of RSVP. RSVP was formed to provide the Company with a research and development vehicle to invest in alternative real estate sectors. RSVP invests primarily in real estate and real estate related operating companies generally outside of the Company's core office and industrial IV-10 RECKSON ASSOCIATES REALTY CORP. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) 1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED) focus. RSVP's strategy is to identify and acquire interests in established entrepreneurial enterprises with experienced management teams in market sectors which are in the early stages of their growth cycle or offer unique circumstances for attractive investments as well as a platform for future growth. On January 6, 1998, the Company made its initial investment in the Morris Companies, a New Jersey developer and owner of "Big Box" warehouse facilities. In connection with the transaction the Morris Companies contributed 100% of their interests in certain industrial properties to Reckson Morris Operating Partnership, L. P. ("RMI") in exchange for operating partnership units in RMI. On September 27, 1999, the Company sold its interest in RMI to Keystone Property Trust ("KTR") (formerly American Real Estate Investment Corporation) (see note 6). During July 1998, the Company formed Metropolitan Partners, LLC ("Metropolitan") for the purpose of acquiring Tower Realty Trust, Inc. ("Tower"). On May 24, 1999 the Company completed the merger with Tower and acquired three Class A office properties located in New York City totaling 1.6 million square feet and one office property located on Long Island totaling approximately 101,000 square feet. In addition, pursuant to the merger, the Company also acquired certain office properties, a property under development and land located outside of the Tri-State Area. All of the assets acquired in the merger, located outside of the Tri-State Area, other than a 357,000 square foot office property located in Orlando, Florida, have been sold (see note 6). BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying consolidated financial statements include the consolidated financial position of the Company and the Operating Partnership at December 31, 1999 and 1998 and the results of their operations and their cash flows for each of the three years in the period ended December 31,1999. The Operating Partnership's investments in Metropolitan and Omni Partners, L. P. ("Omni") are reflected in the accompanying financial statements on a consolidated basis with a reduction for minority partners' interest. The Operating Partnership's investment in RMI was reflected in the accompanying financial statements on a consolidated basis with a reduction for minority partner's interest through September 26, 1999. On September 27, 1999, the Operating Partnership sold its interest in RMI to KTR (see note 6). The operating results of Reckson Executive Centers, L.L.C., ("REC"), a service business of the Operating Partnership were reflected in the accompanying financial statements on the equity method of accounting through March 31, 1998. On April 1, 1998, the Operating Partnership sold its 9.9% interest in REC to FrontLine. Additionally, the operating results of FrontLine were reflected in the accompanying financial statements on the equity method of accounting through June 10, 1998. On June 11, 1998 the Operating Partnership distributed its 95% common stock interest in FrontLine to its owners, including the Company which, in turn, distributed the common stock of FrontLine to its stockholders. The operating results of the service businesses currently conducted by Reckson Management Group, Inc.("RMG"), and Reckson Construction Group, Inc.("RCG"), are reflected in the accompanying financial statements on the equity method of accounting. The Operating Partnership also invests in real estate joint ventures where it may own less than a controlling interest, such investments are also reflected in the accompanying financial statements on the equity method of accounting. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements. The merger with Tower (see note 6) was accounted for as a purchase in accordance with Accounting Principles Board Opinion No. 16. Accordingly, the fair value of the consideration given by the Company, in accordance with generally accepted accounting principles ("GAAP"), was used as the valuation basis for the merger. The assets acquired and liabilities assumed by the Company were recorded at the fair value as of the closing date of the merger and the excess of the purchase price over the historical basis of the net assets acquired was allocated primarily to operating real estate properties and real estate properties which have been sold. IV-11 RECKSON ASSOCIATES REALTY CORP. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) 1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED) The minority interests at December 31, 1999 represent an approximate 13% limited partnership interest in the Operating Partnership, an approximate 28% interest in certain industrial joint venture properties formerly owned by RMI, a convertible preferred interest in Metropolitan and a 40% interest in Omni. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Real Estate Depreciation is computed utilizing the straight-line method over the estimated useful lives of ten to thirty years for buildings and improvements and five to ten years for furniture, fixtures and equipment. Tenant improvements, which are included in buildings and improvements, are amortized on a straight-line basis over the term of the related leases. Cash Equivalents The Company considers highly liquid investments with a maturity of three months or less when purchased, to be cash equivalents. Deferred Costs Tenant leasing commissions and related costs incurred in connection with leasing tenant space are capitalized and amortized over the life of the related lease. In addition, loan costs incurred are capitalized and amortized over the term of the related loan. Costs incurred in connection with stock offerings are charged to stockholders equity when incurred. Income Taxes The Company generally will not be subject to federal income taxes as long as it qualifies as a REIT. A REIT will generally not be subject to federal income taxation on that portion of income that qualifies as REIT taxable income and to the extent that it distributes such taxable income to its stockholders and complies with certain requirements. As a REIT, the Company is allowed to reduce taxable income by all or a portion of distributions to stockholders and must distribute at least 95% of its taxable income to qualify as a REIT. As distributions, for federal income tax purposes, have exceeded taxable income, no federal income tax provision has been reflected in the accompanying consolidated financial statements. State income taxes are not significant. During 1999, the Company paid cash dividends on its common stock of approximately $1.42 per share and approximately $.98 per share (representing the period from May 24, 1999 through October 31, 1999) on its Class B Common Stock. During 1998, the Company paid cash dividends on its common stock of $.99 per share (representing dividends for three quarters). In addition, on June 11, 1998, the Company paid a stock dividend equivalent to $.0824 per share relating to the Operating Partnership's distribution of its common stock interest in FrontLine to the Company. All of the dividends paid on the Company's common stock during 1998 were considered ordinary income for federal tax purposes. For 1999, approximately 92.75% of the dividends paid on the Company's common stock and Class B Common Stock were considered ordinary income for federal tax purposes. The remaining 7.25% of the dividends paid were treated as a capital gain distribution, subject to a 20% tax rate for individuals and certain other taxpayers. IV-12 RECKSON ASSOCIATES REALTY CORP. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) 1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED) Revenue Recognition Minimum rental income is recognized on a straight-line basis over the term of the lease. The excess of rents recognized over amounts contractually due are included in deferred rents receivable on the accompanying balance sheets. Contractually due but unpaid rents are included in tenant receivables on the accompanying balance sheets. Certain lease agreements provide for reimbursement of real estate taxes, insurance, common area maintenance costs and indexed rental increases, which are recorded on an accrual basis. The Company records interest income on investments in mortgage notes and notes receivable on an accrual basis of accounting. The Company does not accrue interest on impaired loans where, in the judgment of management, collection of interest according to the contractual terms is considered doubtful. Among the factors the Company considers in making an evaluation of the collectibility of interest are: the status of the loan, the value of the underlying collateral, the financial condition of the borrower and anticipated future events. Loan discounts are amortized over the life of the real estate using the constant interest method. Gains from sales of real estate are recorded when title is conveyed to the buyer, subject to the buyer's financial commitment being sufficient to provide economic substance to the sale. Earnings Per Share In 1997, the Financial Accounting Standards Board ("FASB") issued Statement No. 128, "Earnings per Share" ("Statement 128") which replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. All earnings per share amounts for all periods have been presented, and where appropriate, restated to conform to the Statement 128 requirements. The conversion of Units into common stock would not have a significant effect on per share amounts as the Units share proportionately with the common stock in the results of the Operating Partnership's operations. Stock Options The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and related interpretations in accounting for its employee stock options because, the alternative fair value accounting provided for under FASB Statement No. 123, "Accounting for Stock-Based Compensation," ("Statement 123") requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, no compensation expense was recognized because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant (see Note 7). Comprehensive Income In 1997, the FASB issued Statement No. 130, "Reporting Comprehensive Income" ("Statement 130") which is effective for fiscal years beginning after December 15, 1997. Statement 130 established standards for reporting comprehensive income and its components in a full set of general-purpose financial statements. Statement 130 requires that all components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. The adoption of this standard had no impact on the Company's financial position or results of operations. IV-13 RECKSON ASSOCIATES REALTY CORP. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) 1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED) Segment Reporting In 1997, the FASB issued Statement No. 131 "Disclosures about segments of an Enterprise and Related Information" ("Statement 131") which is effective for fiscal years beginning after December 15, 1997. Statement 131 establishes standards for reporting information about operating segments in annual financial statements and in interim financial reports. It also establishes standards for related disclosures about products and services, geographic areas and major customers. The adoption of this standard had no impact on the Company's financial position or results of operations but did affect the disclosure of segment information. See Note 11. Recent Pronouncements In June 1999, the FASB issued Statement No. 137, amending Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities", which extended the required date of adoption to the years beginning after June 15, 2000. The Statement permits early adoption as of the beginning of any fiscal quarter after its issuance. The Company expects to adopt the new Statement effective January 1, 2001. The Company does not anticipate that the adoption of this Statement will have any effect on its results of operations or financial position. Reclassifications Certain prior year amounts have been reclassified to conform to the current year presentation. 2. MORTGAGE NOTES PAYABLE At December 31, 1999, there were 17 mortgage notes payable with an aggregate outstanding principal amount of approximately $459.2 million. Properties with an aggregate carrying value at December 31, 1999 of approximately $808 million are pledged as collateral against the mortgage notes payable. In addition, $47.8 million of the $459.2 million are recourse to the Company. The mortgage notes bear interest at rates ranging from 6.45% to 9.25%, and mature between 2000 and 2027. The weighted average interest rates on the outstanding mortgage notes payable at December 31, 1999, 1998 and 1997 were approximately 7.6%, 7.8% and 7.7%, respectively. Certain of the mortgage notes payable are guaranteed by certain minority partners in the Operating Partnership. Scheduled principal repayments during the next five years and thereafter are as follows (in thousands): YEAR ENDED DECEMBER 31, - -------------------------------- 2000 ......................... $ 35,145 2001 ......................... 22,751 2002 ......................... 16,499 2003 ......................... 8,350 2004 ......................... 11,769 Thereafter ................... 364,660 -------- $459,174 ======== 3. UNSECURED CREDIT FACILITIES AND UNSECURED TERM LOAN As of December 31, 1999, the Company had a three year $500 million unsecured revolving credit facility (the "Credit Facility") from Chase Manhattan Bank, Union Bank of Switzerland and PNC Bank as co-managers of the Credit Facility bank group. Interest rates on borrowings under the Credit Facility IV-14 RECKSON ASSOCIATES REALTY CORP. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) 3. UNSECURED CREDIT FACILITIES AND UNSECURED TERM LOAN - (CONTINUED) are priced off of LIBOR plus a sliding scale ranging from 65 basis points to 90 basis points based on the Company's investment grade rating on its senior unsecured debt. On March 16, 1999, the Company received its investment grade rating on its senior unsecured debt. As a result, the pricing under the Credit Facility was adjusted to LIBOR plus 90 basis points. The Company utilizes the Credit Facility primarily to finance the acquisitions of properties and other real estate investments, fund its development activities and for working capital purposes. At December 31, 1999, the Company had availability under the Credit Facility to borrow an additional $150.1 million (net of $52.3 million of outstanding undrawn letters of credit). As of December 31, 1999, the Company had outstanding an 18 month, $75 million unsecured term loan (the "Term Loan") from Chase Manhattan Bank. Interest rates on borrowings under the Term Loan are priced off of LIBOR plus 150 basis points. The Term Loan replaced the Company's previous term loan which matured on December 17, 1999. On May 24, 1999, in conjunction with the Tower portfolio acquisition (see Note 6), the Company obtained a $130 million unsecured bridge facility (The "Bridge Facility") from UBS AG. Interest rates on borrowings under the Bridge Facility were priced off of LIBOR plus approximately 214 basis points. On July 23, 1999, the Bridge Facility was repaid through a long term fixed rate secured borrowing and an advance under the Credit Facility. As a result, certain deferred loan costs incurred in connection with the Bridge Facility were written off. Such amount is reflected as an extraordinary loss in the accompanying consolidated statements of income. The Company capitalized interest incurred on borrowings to fund certain acquisition and development costs in the amount of $9.8 million, $7.3 million and $2.4 million for the years ended December 31, 1999, 1998 and 1997, respectively. 4. SENIOR UNSECURED NOTES As of December 31, 1999, the Operating Partnership had outstanding approximately $449.3 million (net of issuance discounts) of senior unsecured notes (the "Senior Unsecured Notes"). The following table sets forth the Operating Partnership's Senior Unsecured Notes and other related disclosures (dollars in thousands):
FACE COUPON ISSUANCE AMOUNT RATE TERM MATURITY - ----------------------- ----------- ---------- ---------- ---------------- August 27, 1997 $150,000 7.20% 10 years August 28, 2007 March 26, 1999 $100,000 7.40% 5 years March 15, 2004 March 26, 1999 $200,000 7.75% 10 years March 15, 2009
Interest on the Senior Unsecured Notes is payable semiannually with principal and unpaid interest due on the scheduled maturity dates. In addition, the Senior Unsecured Notes issued on March 26, 1999 were issued at an aggregate discount of $738,000. Net proceeds of approximately $297.4 million received from the issuance of the March 26, 1999 Senior Unsecured Notes were used to repay outstanding borrowings under the Company's Credit Facility. 5. LAND LEASES The Company leases, pursuant to noncancellable operating leases, the land on which ten of its buildings were constructed. The leases, which contain renewal options, expire between 2018 and 2080. The leases either contain provisions for scheduled increases in the minimum rent at specified intervals or IV-15 RECKSON ASSOCIATES REALTY CORP. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) 5. LAND LEASES - (CONTINUED) for adjustments to rent based upon the fair market value of the underlying land or other indexes at specified intervals. Minimum ground rent is recognized on a straight-line basis over the terms of the leases. The excess of amounts recognized over amounts contractually due is approximately $2.6 million and $2.3 million at December 31, 1999 and 1998, respectively. These amounts are included in accrued expenses and other liabilities on the accompanying balance sheets. Future minimum lease commitments relating to the land leases during the next five years and thereafter are as follows (in thousands): YEAR ENDED DECEMBER 31, - -------------------------------- 2000 ......................... $ 1,833 2001 ......................... 1,850 2002 ......................... 1,869 2003 ......................... 1,818 2004 ......................... 1,942 Thereafter ................... 48,232 ------- $57,544 ======= 6. COMMERCIAL REAL ESTATE INVESTMENTS The Tower Merger In July 1998, the Company formed a joint venture, Metropolitan Partners LLC, a Delaware limited liability company ("Metropolitan"), with Crescent Real Estate Equities Company, a Texas real estate investment trust ("Crescent"). On December 8, 1998, the Company, Metropolitan and Tower Realty Trust, Inc. ("Tower") executed a merger agreement and on May 24, 1999 Tower was merged (the "Merger") into Metropolitan, with Metropolitan surviving the Merger. Concurrently with the Merger, Tower Realty Operating Partnership, L.P. ("Tower OP") was merged with and into a subsidiary of Metropolitan. The consideration issued in the mergers was comprised of (i) 25% cash (approximately $107.2 million) and (ii) 75% of shares of Class B Exchangeable Common Stock, par value $.01 per share, of the Company (the "Class B Common Stock") (valued for GAAP purposes at approximately $304.1 million). Under the terms of the transaction, Metropolitan effectively paid for each share of Tower common stock and each unit of limited partnership interest of Tower OP the sum of (i) $5.75 in cash, and (ii) 0.6273 of a share of Class B Common Stock. The shares of Class B Common Stock are entitled to receive an initial annual dividend of $2.24 per share, which dividend is subject to adjustment annually commencing on July 1, 2000. The shares of Class B Common Stock are exchangeable at any time, at the option of the holder, into an equal number of shares of common stock, par value $.01 per share, of the Company subject to customary antidilution adjustments. The Company, at its option, may redeem any or all of the Class B Common Stock in exchange for an equal number of shares of the Company's common stock at any time following the four year, six-month anniversary of the issuance of the Class B Common Stock. The Board of Directors of the Company has authorized a purchase buy back program for the Company's Class B Common Stock (see note 7). The Company controls Metropolitan and owns 100% of the common equity; Crescent owns a $85 million preferred equity interest in Metropolitan. Crescent's interest accrues distributions at a rate of 7.5% per annum for a two-year period (May 24, 1999 through May 24, 2001) and may be redeemed by IV-16 RECKSON ASSOCIATES REALTY CORP. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) 6. COMMERCIAL REAL ESTATE INVESTMENTS - (CONTINUED) Metropolitan at any time during that period for $85 million, plus an amount sufficient to provide a 9.5% internal rate of return. If Metropolitan does not redeem the preferred interest, upon the expiration of the two-year period, Crescent must convert its $85 million preferred interest into either (i) a common membership interest in Metropolitan or (ii) shares of the Company's common stock at a conversion price of $24.61 per share. The Tower portfolio acquired in the Merger consists of three office properties comprising approximately 1.6 million square feet located in New York City, one office property located on Long Island and certain office properties and other real estate assets located outside the Tri-State Area. Prior to the closing of the Merger, the Company arranged for the sale of four of Tower's Class B New York City properties, comprising approximately 701,000 square feet for approximately $84.5 million. Subsequent to the closing of the Merger, the Company has sold a real estate joint venture interest and all of the property located outside the Tri-State Area other than one office property located in Orlando, Florida for approximately $171.1 million. The combined consideration consisted of approximately $143.8 million in cash and approximately $27.3 million of debt relief. Net cash proceeds from the sales were used primarily to repay borrowings under the Credit Facility. As a result of incurring certain sales and closing costs in connection with the sale of the assets located outside the Tri-State Area, the Company has incurred a loss of approximately $4.4 million which has been included in gain on sales of real estate on the accompanying consolidated statements of income. "Big Box" Industrial Investment Activity On January 6, 1998, the Company made an initial investment in the Morris Companies, a New Jersey developer and owner of "Big Box" warehouse facilities. In connection with the transaction the Morris Companies contributed 100% of their interests in certain industrial properties to RMI in exchange for operating partnership units in RMI. During 1999, the Company purchased approximately 68.1 acres of vacant land in Northern New Jersey for approximately $2.6 million. In addition, RMI purchased 74.6 acres of vacant land for approximately $3.7 million and a 846,000 square foot industrial property located in Cranbury, New Jersey for approximately $34 million. These assets were sold to KTR and the Matrix Development Group ("Matrix") as discussed below. On August 9, 1999, the Company executed a contract for the sale, which will take place in three stages, of its interest in RMI which consisted of 28 properties, comprising approximately 6.1 million square feet and three other big box industrial properties to KTR. In addition, the Company also entered into a sale agreement with Matrix relating to a first mortgage note and certain industrial land holdings (the "Matrix Sale"). The combined total sale price is $310 million (approximately $42 million of which is payable to the Morris Companies and its affiliates) and consists of a combination of (i) cash, (ii) convertible preferred and common stock of KTR, (iii) preferred units of KTR's operating partnership, (iv) relief of debt and (v) a purchase money mortgage note secured by certain land that is being sold to Matrix. During September 1999, the Matrix Sale and the first stage of the RMI closing occurred whereby the Company sold its interest in RMI to KTR for a combined sales price of approximately $164.7 million (net of minority partner's interest). The combined consideration consisted of approximately (i) $86.3 million in cash, (ii) $40 million of preferred stock of KTR, (iii) $1.5 million in common stock of KTR, (iv) approximately $26.7 million of debt relief and (v) approximately $10.2 million in purchase money mortgages. As a result, the Company incurred a gain of approximately $10.1 million which has been included in gain on sales of real estate on the accompanying consolidated statements of income. In IV-17 RECKSON ASSOCIATES REALTY CORP. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) 6. COMMERCIAL REAL ESTATE INVESTMENTS - (CONTINUED) addition, the $41.5 million of common and preferred stock of KTR has been included in prepaid expenses and other assets on the accompanying consolidated balance sheet. Cash proceeds from the sales were used primarily to repay borrowings under the Credit Facility. The second and third stages of the RMI closing are scheduled to be completed in April 2000. The remaining stages consist of six industrial buildings and are being sold for total consideration of approximately $98 million . Other Real Estate Investment Activity During 1998, the Company acquired three office properties encompassing approximately 674,000 square feet, two industrial properties encompassing approximately 200,000 square feet and approximately 79.9 acres of vacant land which allows for approximately 816,000 square feet of future development opportunities on Long Island for an aggregate purchase price of approximately $82.8 million. During 1998, the Company acquired four office properties encompassing approximately 522,000 square feet, six industrial properties encompassing approximately 985,000 square feet and approximately 112.2 acres of vacant land which allows for approximately 815,000 square feet of future development opportunities in New Jersey for an aggregate purchase price of approximately $138.1 million. During 1998, the Company acquired Stamford Towers located in Stamford, Connecticut for approximately $61.3 million. Stamford Towers is a Class A office complex consisting of two eleven story towers totaling approximately 325,000 square feet. During 1998, the Company acquired a portfolio of six office properties encompassing approximately 980,000 square feet in Westchester County, New York from Cappelli Enterprises and affiliated entities ("Cappelli") for a purchase price of approximately $173 million. The Cappelli acquisition includes a five building, 850,000 square foot Class A office park located in Valhalla, New York and Court House Square, a 130,000 square foot Class A office building located in White Plains, New York. The Company also obtained from Cappelli the remaining 50% interest in 360 Hamilton Avenue, a 365,000 square foot vacant office tower in downtown White Plains for $10 million plus the return of his capital contributions of approximately $1.5 million. In addition, the Company received an option from Cappelli to acquire the remaining development parcels within the Valhalla office park on which up to 875,000 square feet of office space can be developed. These acquisitions were financed in part through proceeds from a draw under the Credit Facility, the issuance of 42,518 (approximately $42.5 million) preferred operating partnership units (the "Cappelli Preferred Units"), and the assumption of approximately $47.1 million of mortgage debt. Additionally, as of December 31, 1999, the Company issued and advanced to Cappelli $36.5 million under three liquidity loans (the "Cappelli Liquidity Loans"). The Cappelli Liquidity Loans bear interest at rates ranging from 10% to 10.5% per annum and are secured by Cappelli's right, title and interest in the Cappelli Preferred Units. Such amounts have been included in investments in mortgage notes and notes receivable on the accompanying balance sheets. On April 13, 1999, the Company received approximately $25.8 million from the repayment of a mortgage note receivable which had been acquired at a discount and secured three office properties located in Garden City, Long Island, encompassing approximately 400,000 square feet. As a result, the Company recognized a gain of approximately $4.3 million. Such gain has been included in gain on sales of real estate on the accompanying consolidated statements of income. On June 7, 1999 the Company sold a 24,000 square foot office property located in Ossining, New York for approximately $1.5 million. As partial consideration for the sale, the Company obtained a $1.2 million, three year purchase money mortgage. IV-18 RECKSON ASSOCIATES REALTY CORP. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) 6. COMMERCIAL REAL ESTATE INVESTMENTS - (CONTINUED) On June 15, 1999, the Company acquired the first mortgage note secured by a 47 story, 1.4 million square foot Class A office property located at 919 Third Avenue in New York City for approximately $277.5 million. The first mortgage note entitles the Company to all the net cash flow of the property and to substantial rights regarding the operations of the property, with the Company anticipating to ultimately obtain title to the property. This acquisition was financed with proceeds from the issuance of six million shares of Series B Convertible Cumulative Preferred Stock (see note 7) and through an advance under the Credit Facility. Current financial accounting guidelines provide that where a lender has virtually the same risks and potential rewards as those of a real estate owner it should recognize the full economic effect associated with the operations of the property. As such, the Company has included the real estate operations of 919 Third Avenue in the accompanying consolidated statements of income from the date of acquisition. In addition, as of December 31, 1999, the Company has invested approximately $15.7 million in certain mortgage indebtedness encumbering one Class A office property encompassing approximately 177,000 square feet and approximately 472 acres of land located in New Jersey. The Company has also loaned approximately $17 million to its minority partner in Omni, its 575,000 square foot flagship Long Island office property, and effectively increased its economic interest in the property owning partnership. 7. STOCKHOLDERS' EQUITY A Unit and a share of common stock have essentially the same economic characteristics as they effectively share equally in the net income or loss and distributions of the Operating Partnership. Subject to certain holding periods Units may either be redeemed for cash or, at the election of the Company, for shares of common stock on a one-for-one basis. On February 18, 1998, the Company sold 791,152 shares of the Company's common stock at $25.44 per share for an aggregate consideration of approximately $20.1 million before deducting offering expenses. During April 1998, the Company completed a preferred stock offering and sold 9,200,000 shares (including 1,200,000 shares related to the exercise of the underwriters over allotment option) of 7.625% Series A Convertible Cumulative Preferred Stock (the "Series A Preferred Stock") at a price of $25.00 per share for an aggregate consideration of $230 million before deducting offering expenses. The Series A Preferred Stock is convertible to the Company's common stock at a conversion rate of .8769 shares of common stock for each share of Series A Preferred Stock. As of December 31, 1999, 8,000 shares of the Series A Preferred Stock were converted into the Company's common stock. On April 29, 1998, the Company completed a common stock offering and sold 1,093,744 common shares at a price of $24.38 per share for an aggregate consideration of approximately $26.7 million before deducting offering expenses. On May 24, 1999, in conjunction with the Tower portfolio acquisition, the Company issued 11,694,567 shares of Class B Common Stock which were valued for GAAP purposes at $26 per share for total consideration of approximately $304.1 million. The shares of Class B Common Stock are entitled to receive an initial annual dividend of $2.24 per share, which dividend is subject to adjustment annually. The shares of Class B Common Stock are exchangeable at any time, at the option of the holder, into an equal number of shares of common stock, par value $.01 per share, of the Company subject to customary antidilution adjustments. The Company, at its option, may redeem any or all of the Class B Common Stock in exchange for an equal number of shares of the Company's common stock at any time following the four year, six-month anniversary of the issuance of the Class B Common Stock. On June 2, 1999, the Company issued six million shares of Series B Convertible Cumulative Preferred Stock (the "Series B Preferred Stock") for aggregate proceeds of $150 million. The Series B Preferred Stock is redeemable by the Company on or after March 2, 2002 and is convertible into the IV-19 RECKSON ASSOCIATES REALTY CORP. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) 7. STOCKHOLDERS' EQUITY - (CONTINUED) Company's common stock at a price of $26.05 per share. The Series B Preferred Stock accumulates dividends at an initial rate of 7.85% per annum with such rate increasing to 8.35% per annum on April 30, 2000 and to 8.85% per annum from and after April 30, 2001. Proceeds from the Series B Preferred Stock offering were used as partial consideration in the acquisition of the first mortgage note secured by 919 Third Avenue located in New York City. The Board of Directors of the Company has authorized the purchase of up to three million shares of the Company's Class B Common Stock and has also authorized the purchase of up to an additional three million shares of the Company's Class B Common Stock and/or its common stock. The buy-back program will be effected in accordance with the safe harbor provisions of the Securities Exchange Act of 1934 and may be terminated by the Company at any time. As of December 31, 1999, the Company purchased and retired 1,410,804 shares of its Class B Common Stock for approximately $30.3 million. The Company has made loans to certain executive officers to purchase 545,393 shares of common stock at market prices ranging from $20.56 per share to $27.13 per share. The loans bear interest at the mid-term Applicable Federal Rate and are secured by the shares purchased. Such loans including accrued interest will be forgiven each year on the annual anniversary of the grant date based upon amortization periods ranging from four to ten years. In addition, the loans which are secured by 310,834 shares of common stock are due with a balloon payment on the fifth anniversary of the grant date and loans which are secured by 47,059 and 187,500 shares of common stock are forgiven over terms of four and seven years, respectively. As of December 31, 1999, the loan balances aggregated approximately $11.1 million and have been included as a reduction of additional paid in capital on the accompanying consolidated statement of stockholders' equity. The Company has established the 1995, 1996, 1997 and 1998 Employee Stock Option Plans (the "Plans") for the purpose of attracting and retaining executive officers, directors and other key employees. As of December 31, 1999, 1,500,000, 400,000, 3,000,000 and 3,000,000 of the Company's authorized shares have been reserved for issuance under the 1995, 1996, 1997 and 1998 plans, respectively. The following table sets forth the options granted under the Plans and their corresponding exercise price range per share: EXERCISE PRICE RANGE ---------------------- OPTIONS GRANTED(1) FROM (1) TO(1) ------------ ---------- ----------- 1995 Employee Stock Option Plan 1,495,538 $ 12.04 $ 25.56 1996 Employee Stock Option Plan 182,350 $ 19.67 $ 26.13 1997 Employee Stock Option Plan 2,485,965 $ 22.67 $ 27.04 1998 Employee Stock Option Plan 1,494,001 $ 18.19 $ 25.67 --------- Total .......................... 5,657,854 ========= - ---------- (1) Exercise prices have been split adjusted, where applicable. Options granted to new employees vest in three equal installments on the first, second and third anniversaries of the date of the grant. Options granted to existing employees are generally exercisable on the date of the grant. The independent directors of the Company have been granted options to purchase 129,000 shares pursuant to the 1995 Employee Stock Option Plan at exercise prices ranging from $12.04 to $25.56 per share and options to purchase 3,000 shares pursuant to the 1997 Employee Stock Option Plan at an exercise price of $25.23 per share. The options granted to the independent directors were exercisable on the date of the grant. IV-20 RECKSON ASSOCIATES REALTY CORP. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) 7. STOCKHOLDERS' EQUITY - (CONTINUED) During 1999 and 1998, employees exercised 88,308 and 74,837 options, respectively resulting in proceeds to the Company of approximately $1.2 million and $1.1 million, respectively. Pro forma information regarding net income and earnings per share is required by Statement 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of Statement 123. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 1999, 1998 and 1997, respectively: risk-free interest rate of 5%; dividend yields of 7.25 %, 6.19% and 5.59%; volatility factors of the expected market price of the Company's common stock of .197 and a weighted-average expected life of the option of five years. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The following table sets forth the Company's pro forma information for the years ended December 31:
1999 1998 1997 ------------ ------------ ------------ Pro forma net income (in thousands) ........... $ 46,744 $ 32,846 $ 34,287 ======== ======== ======== Basic pro forma earnings per share ............ $ 1.16 $ .83 $ 1.05 ======== ======== ======== Diluted pro forma earnings per share .......... $ 1.15 $ .82 $ 1.03 ======== ======== ========
The following table summarizes the Company's stock option activity and related information:
WEIGHTED-AVERAGE OPTIONS EXERCISE PRICE(1) ------------- ------------------ Outstanding -- January 1, 1997 ........... 1,421,214 $ 14.28 Granted .................................. 1,123,300 $ 26.67 Exercised ................................ (126,429) $ 14.94 Forfeited ................................ (10,319) $ 16.33 --------- Outstanding -- December 31, 1997 ......... 2,407,766 $ 20.16 Granted .................................. 2,431,132 $ 24.03 Exercised ................................ (74,837) $ 14.76 Forfeited ................................ (30,417) $ 25.44 --------- Outstanding -- December 31, 1998 ......... 4,733,644 $ 22.22 Granted .................................. 619,217 $ 20.82 Exercised ................................ (88,308) $ 13.99 Forfeited ................................ (90,632) $ 23.44 --------- Outstanding -- December 31, 1999 ......... 5,173,921 $ 22.17 =========
- ---------- (1) Exercise prices have been split adjusted, where applicable. IV-21 RECKSON ASSOCIATES REALTY CORP. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) 7. STOCKHOLDERS' EQUITY - (CONTINUED) The weighted average fair value of options granted for the years ended December 31, 1997, 1998 and 1999 was $1.47, $2.06 and $2.10, respectively. In addition, there were 1,758,534 options at a weighted average per share exercise price of $20.16, 4,527,144 options at a weighted average per share exercise price of $22.22 and 5,137,588 options at a weighted average per share exercise price of $22.17 exercisable at December 31, 1997, 1998 and 1999, respectively. Exercise prices for options outstanding as of December 31, 1999 ranged from $12.04 per share to $27.04 per share. The weighted-average remaining contractual life of those options is approximately 7.74 years. The following table sets forth the Company's reconciliation of numerators and denominators of the basic and diluted earnings per weighted average common share and the computation of basic and diluted earnings per share for the Company's common stock as required by Statement 128 for the years ended December 31, (in thousands except for earnings per share data):
1999 1998 1997 ------------ ------------ ---------- Numerator: Income before extraordinary loss, dividends to preferred shareholders and income allocated to Class B shareholders ............................ $ 85,192 $ 52,056 $ 36,866 Dividends to preferred shareholders .............. (24,360) (12,491) -- Extraordinary loss (net of share applicable to limited partners and Class B Common shareholders) ................................... (389) (1,670) (2,230) Income allocated to Class B shareholders ......... (12,914) -- -- --------- --------- -------- Numerator for basic and diluted earnings per share ........................................... $ 47,529 $ 37,895 $ 34,636 ========= ========= ======== Denominator: Denominator for basic earnings per share- weighted-average common shares .................. 40,270 39,473 32,727 Effect of dilutive securities: Employee stock options .......................... 406 537 533 --------- --------- -------- Denominator for diluted earnings per common share adjusted weighted-average shares and assumed conversions ............................. 40,676 40,010 33,260 ========= ========= ======== Basic earnings per common share: Income before extraordinary loss ................ $ 1.19 $ 1.00 $ 1.13 Extraordinary loss .............................. ( .01) ( .04) ( .07) --------- --------- -------- Net income per common share ..................... $ 1.18 $ .96 $ 1.06 ========= ========= ======== Diluted earnings per common share: Income before extraordinary loss ................ $ 1.18 $ .99 $ 1.11 Extraordinary loss .............................. ( .01) ( .04) ( .07) --------- --------- -------- Diluted net income per common share ............. $ 1.17 $ .95 $ 1.04 ========= ========= ========
IV-22 RECKSON ASSOCIATES REALTY CORP. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) 7. STOCKHOLDERS' EQUITY - (CONTINUED) The following table sets forth the Company's reconciliation of numerators and denominators of the basic and diluted earnings per weighted average Class B common share and the computation of basic and diluted earnings per share for the Company's Class B Common Stock as required by Statement 128. (in thousands except for earnings per share data):
YEAR ENDED DECEMBER 31, 1999 ------------------ Numerator: Income before extraordinary loss, dividends to preferred shareholders and income allocated to common shareholders . $ 85,192 Dividends to preferred shareholders .............................. (24,360) Extraordinary loss (net of share applicable to limited partners and common shareholders) ....................................... (166) Income allocated to common shareholders .......................... (47,918) --------- Numerator for basic earnings per share ........................... 12,748 Add back: Income allocated to common shareholders .......................... 47,529 Limited partners' interest in the operating partnership .......... 9,407 --------- Numerator for diluted earnings per share .......................... $ 69,684 ========= Denominator: Denominator for basic earnings per share- weighted-average Class B common shares .......................................... 6,744 Effect of dilutive securities: Weighted average common shares outstanding ....................... 40,270 Weighted average limited partnership Units outstanding ........... 7,705 Employee stock options ........................................... 406 --------- Denominator for diluted earnings per Class B common share-adjusted weighted average shares and assumed conversions ...................................................... 55,125 ========= Basic earnings per Class B common share: Income before extraordinary loss ................................. $ 1.91 Extraordinary loss ............................................... ( .02) --------- Net income per Class B common share .............................. $ 1.89 ========= Diluted earnings per Class B common share: Income before extraordinary loss ................................. $ 1.26 Extraordinary loss ............................................... (--) Diluted net income per Class B common share ...................... $ 1.26 =========
The Company's computation for purposes of calculating the diluted weighted average Class B common shares outstanding is based on the assumption that the Class B Common Stock is converted to the Company's common stock. IV-23 RECKSON ASSOCIATES REALTY CORP. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) 8. RELATED PARTY TRANSACTIONS The Company, through its subsidiaries and affiliates, provides management, leasing and other tenant related services to the Properties. Certain executive officers of the Company have continuing ownership interests in the unconsolidated service companies. In connection with the IPO, the Company was granted a ten year option period to acquire ten properties which are either owned by the Reckson Group, the predecessor to the Company, or in which the Reckson Group owns a non-controlling minority interest. During 1998, one of these properties was sold by the Reckson Group to a third party. In addition, as of December 31, 1999, the Company has acquired four of these properties for a aggregate purchase price of approximately $35 million, which included the issuance of approximately 475,000 Units valued at approximately $8.8 million. The Operating Partnership and FrontLine have entered into an intercompany agreement (the "Reckson Intercompany Agreement") to formalize their relationship and to limit conflicts of interest. Under the Reckson Intercompany Agreement, FrontLine granted the Operating Partnership a right of first opportunity to make any REIT -qualified investment that becomes available to FrontLine. In addition, if a REIT-qualified investment opportunity becomes available to an affiliate of FrontLine, including RSVP, the Reckson Intercompany Agreement requires such affiliate to allow the Operating Partnership to participate in such opportunity to the extent of FrontLine's interest. Under the Reckson Intercompany Agreement, the Operating Partnership granted FrontLine a right of first opportunity to provide commercial services to the Operating Partnership and its tenants. FrontLine will provide services to the Operating Partnership at rates and on terms as attractive as either the best available for comparable services in the market or those offered by FrontLine to third parties. In addition, the Operating Partnership will give FrontLine access to its tenants with respect to commercial services that may be provided to such tenants and, under the Reckson Intercompany Agreement, subject to certain conditions, the Operating Partnership granted FrontLine a right of first refusal to become the lessee of any real property acquired by the Operating Partnership if the Operating Partnership determines that, consistent with the Company's status as a REIT, it is required to enter into a "master" lease agreement. On August 27, 1998 the Company announced the formation of a joint venture with RSVP and the Dominion Group, an Oklahoma-based, privately-owned group of companies that focuses on the development, acquisition and ownership of government occupied office buildings and correctional facilities. The new venture, Dominion Properties LLC (the "Dominion Venture"), is owned by Dominion Venture Group LLC, and by a subsidiary of the Company. The Dominion Venture is primarily engaged in acquiring, developing and/or owning government-occupied office buildings and privately operated correctional facilities. Under the Dominion Venture's operating agreement, RSVP is to invest up to $100 million, some of which may be invested by the Company ( the "RSVP Capital"). The initial contribution of RSVP Capital was approximately $39 million of which approximately $10.1 million was invested by a subsidiary of the Company. The Company's investment was funded through the RSVP Commitment. In addition, the Company advanced approximately $2.9 million to FrontLine through the RSVP Commitment for an investment in RSVP which was then invested on a joint venture basis with the Dominion Group in certain service business activities related to the real estate activities. As of December 31, 1999, the Company had invested approximately $17.6 million in the Dominion Venture which had investments in 13 government office buildings and three correctional facilities. During 1998, the Company made investments in and advances to RMG of approximately $29.5 million. Such investments and advances were used by RMG in connection with RMG's acquisition of an approximate 64% ownership interest in an executive office suite business. Concurrently with RMG's investment, FrontLine received an option to purchase RMG's interest at cost plus 8%. RMG is owned 97% by the Company and 3% by an entity owned by certain officers of the Company. On November 9, IV-24 RECKSON ASSOCIATES REALTY CORP. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) 8. RELATED PARTY TRANSACTIONS - (CONTINUED) 1998, FrontLine exercised its option and, as a result, RMG earned income during the period of ownership of approximately $707,000. In addition, FrontLine assumed the outstanding debt plus accrued interest owing to the Company. During July 1999, the Company sold its interest in a 852,000 square foot development property to RCG in exchange for a $12.3 million note. The note accrues interest annually at the rate of 12%, has a five year maturity and is prepayable in whole or in part. During October 1999, RCG made a payment to the Company, in the form of 97 shares of its preferred stock, valued at approximately $4.0 million, towards accrued interest and principal due under the note. In 1999 the Company invested approximately $7.2 million, through a subsidiary, in RAP Student Housing Properties, LLC ("RAP - SHP"), a company that engages primarily in the acquisition and development of off-campus student housing projects. The Company's investment was funded through the RSVP Commitment. In addition, the Company has advanced approximately $3.2 million to FrontLine through the RSVP Commitment for an additional investment in RSVP which was invested in certain service business activities related to student housing. As of December 31, 1999, RAP - SHP had investments in 4 off -- campus student housing projects. 9. FAIR VALUE OF FINANCIAL INSTRUMENTS In accordance with FASB Statement No. 107, "Disclosures About Fair Value of Financial Instruments", management has made the following disclosures of estimated fair value at December 31, 1999 as required by FASB Statement No. 107. Cash equivalents and variable rate debt are carried at amounts which reasonably approximate their fair values. The fair value of the Company's long term debt, mortgage notes and notes receivable is estimated based on discounting future cash flows at interest rates that management believes reflects the risks associated with long term debt, mortgage notes and notes receivable of similar risk and duration. In addition, management believes that the estimated aggregate fair value of these assets and liabilities approximates their carrying values. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. 10. RENTAL INCOME The Properties are being leased to tenants under operating leases. The minimum rental amount due under certain leases are generally either subject to scheduled fixed increases or indexed escalations. In addition, the leases generally also require that the tenants reimburse the Company for increases in certain operating costs and real estate taxes above base year costs. Included in base rents and tenant escalations and reimbursements in the accompanying statements of income are amounts from Reckson Executive Centers, LLC, a service business of the Company through March 31, 1998 and, a related party as follows (in thousands):
TENANT ESCALATIONS AND FOR THE PERIODS BASE RENTS REIMBURSEMENTS - ------------------------------------------------- ------------ ---------------- January 1 through March 31, 1998 ......... $ 597 $149 Year ended December 31, 1997 ............. $2,154 $441
IV-25 RECKSON ASSOCIATES REALTY CORP. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) 10. RENTAL INCOME - (CONTINUED) Expected future minimum rents to be received over the next five years and thereafter from leases in effect at December 31, 1999 are as follows (in thousands): 2000 ......................... $ 312,654 2001 ......................... 295,862 2002 ......................... 293,714 2003 ......................... 257,655 2004 ......................... 230,477 Thereafter ................... 1,286,533 ---------- $2,676,895 ========== 11. SEGMENT DISCLOSURE The Company's portfolio consists of Class A office properties located within the New York City metropolitan area and Class A suburban office and industrial properties located and operated within the Tri-State Area (the "Core Portfolio"). In addition, the Company's portfolio also includes one office property located in Orlando, Florida and for the period commencing January 6, 1998 and ending September 26, 1999, industrial properties which were owned by RMI. The Company has managing directors who report directly to the Chief Operating Officer and Chief Financial Officer who have been identified as the Chief Operating Decision Makers because of their final authority over resource allocation, decisions and performance assessment. In addition, as the Company expects to meet its short term liquidity requirements in part through the Credit Facility and Term Loan, interest incurred on borrowings under the Credit Facility and Term Loan is not considered as part of property operating performance. Further, the Company does not consider the property operating performance of the office property located in Orlando, Florida as a part of its Core Portfolio. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. The following tables set forth the components of the Company's revenues and expenses and other related disclosures, as required by Statement 131, for the years ended December 31, 1999 and 1998 (in thousands):
YEAR ENDED ----------------------------------------------------- DECEMBER 31, 1999 ----------------------------------------------------- CORE CONSOLIDATED PORTFOLIO RMI OTHER TOTALS ------------- ---------- ------------- -------------- REVENUES: Base rents, tenant escalations and reimbursements ........... $ 340,293 $15,394 $ 13,448 $ 369,135 Equity in earnings of real estate joint ventures and service companies ............ --- --- 2,148 2,148 Other income .................. 448 9 31,413 31,870 Total Revenues ................ 340,741 15,403 47,009 403,153 EXPENSES: Property expenses ............. 119,270 2,406 4,318 125,994 Marketing, general and administrative ............... 16,981 548 6,764 24,293 Interest ...................... 25,167 445 48,708 74,320 Depreciation and amortization 64,097 3,663 6,744 74,504 ---------- ------- --------- ---------- Total Expenses ................ 225,515 7,062 66,534 299,111 ---------- ------- --------- ---------- Income before preferred dividends and distributions, minority interests and extraordinary loss ........... $ 115,226 $ 8,341 $ (19,525) $ 104,042 ========== ======= ========= ========== Total assets .................. $2,142,696 $ 0 $ 581,539 $2,724,235 ========== ======= ========= ========== YEAR ENDED ---------------------------------------------------- DECEMBER 31, 1998 ---------------------------------------------------- CORE CONSOLIDATED PORTFOLIO RMI OTHER TOTALS ------------- ---------- ------------- ------------- REVENUES: Base rents, tenant escalations and reimbursements ........... $ 237,105 $ 15,137 $ 205 $ 252,447 Equity in earnings of real estate joint ventures and service companies ............ --- --- 1,836 1,836 Other income .................. 460 --- 11,630 12,090 Total Revenues ................ 237,565 15,137 13,671 266,373 EXPENSES: Property expenses ............. 80,489 2,587 1,204 84,280 Marketing, general and administrative ............... 11,699 456 4,705 16,860 Interest ...................... 16,651 1,101 30,043 47,795 Depreciation and amortization 43,701 3,491 5,765 52,957 ---------- -------- --------- ---------- Total Expenses ................ 152,540 7,635 41,717 201,892 ---------- -------- --------- ---------- Income before preferred dividends and distributions, minority interests and extraordinary loss ........... $ 85,025 $ 7,502 $ (28,046) $ 64,481 ========== ======== ========= ========== Total assets .................. $1,424,472 $156,430 $ 273,914 $1,854,816 ========== ======== ========= ==========
IV-26 RECKSON ASSOCIATES REALTY CORP. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) 12. NON-CASH INVESTING AND FINANCING ACTIVITIES Additional supplemental disclosures of non-cash investing and financing activities are as follows: During 1998, the Company issued 584,062 Units in connection with the acquisition of three office and two industrial properties encompassing approximately 580,000 square feet for a total non cash investment of approximately $13.7 million. In addition, in connection with the acquisitions of the Cappelli portfolio and 360 Hamilton Avenue located in White Plains, New York, the Company assumed approximately $47.1 million of indebtedness and issued 42,518 preferred units with a stated value of approximately $42.5 million for a total non cash investment of approximately $89.6 million. On June 11, 1998, the Operating Partnership distributed its 95% common stock interest in FrontLine of approximately $3 million to its owners, including the Company which, in turn, distributed the common stock of FrontLine to its shareholders. During 1998, in connection with the Company's investment in the Morris Companies, the Company assumed approximately $23 million of indebtedness ($16.9 million net of minority partners interest). In addition, the Morris Companies contributed net assets of approximately $36 million to the Company in exchange for an approximate 28.2% minority partners interest in RMI. On May 24, 1999, in conjunction with the Tower portfolio acquisition, the Company issued 11,694,567 shares of Class B Common Stock which were valued for GAAP purposes at approximately $304.1 million and assumed approximately $133.4 million of indebtedness for a total non cash investment of approximately $437.5 million. During June 1999, in connection with the sale of an office property, the Company obtained a $1.2 million purchase money mortgage as partial consideration for the sale. During July 1999, the Company sold its interest in a 852,000 square foot development property to RCG in exchange for a $12.3 million note. During October 1999, the Company accepted 97 shares of preferred stock of RCG as payment of $4.0 million of principal and interest due under the note. During September 1999, in connection with the Matrix Sale and the first stage closing of RMI, the Company received as partial consideration for the sale $41.5 million of common and preferred stock of KTR and approximately $10.2 million in purchase money mortgages from Matrix. In addition, the Company was also relieved of approximately $26.7 million of secured indebtedness. During November 1999, the Company received approximately $3.6 million of common stock of FrontLine as consideration for amending the FrontLine Facility and the RSVP Commitment. 13. COMMITMENTS AND OTHER COMMENTS The Company has entered into employment agreements with its chairman and five executive officers. The agreements are for five years and expire on May 31, 2003. The Company sponsors a defined contribution savings plan pursuant to section 401(k) of the Internal Revenue Code. Under such plan, there are no prior service costs. Employees are generally eligible to participate in the plan after six months of service. Employer contributions are based on a discretionary amount determined by the Company's management. During 1999 and 1998 the Company made no contributions. The Company had outstanding undrawn letters of credit against its Credit Facility of approximately $52.3 million and $26.1 million at December 31, 1999 and 1998, respectively. IV-27 RECKSON ASSOCIATES REALTY CORP. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) 14. QUARTERLY FINANCIAL DATA (UNAUDITED) The following summary represents the Company's results of operations for each quarter during 1999 and 1998 (in thousands, except share amounts):
1999 ---------------------------------------------------------------------- FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER --------------- ---------------- --------------- --------------- Total revenues ................................ $ 76,108 $ 91,239 $ 125,345 $ 110,461 =========== =========== =========== =========== Income before preferred dividends and distributions, minority interests and extraordinary loss ........................... $ 19,774 $ 20,626 $ 35,220 $ 28,422 Preferred dividends and distributions ......... (5,041) (5,989) (7,985) (7,986) Minority interests ............................ (3,409) (3,442) (5,164) (4,194) Extraordinary loss ............................ -- -- (555) -- ----------- ----------- ----------- ----------- Net income available to common shareholders ................................. $ 11,324 $ 11,195 $ 21,516 $ 16,242 =========== =========== =========== =========== Net Income available to: Common shareholders .......................... $ 11,324 $ 9,464 $ 15,066 $ 11,675 Class B common shareholders .................. -- 1,731 6,450 4,567 ----------- ----------- ----------- ----------- Total ......................................... $ 11,324 $ 11,195 $ 21,516 $ 16,242 =========== =========== =========== =========== Basic net income per weighted average common share before extraordinary loss: Common shareholders .......................... $ .28 $ .23 $ .38 $ .29 Extraordinary loss per common share . -- -- (.01) -- ----------- ----------- ----------- ----------- Basic net income per weighted average common share ............................... $ .28 $ .23 $ .37 $ .29 =========== =========== =========== =========== Class B common shareholders .................. $ -- $ .35 $ .57 $ .44 Extraordinary loss per Class B common share ............................... -- -- (.01) -- ----------- ----------- ----------- ----------- Basic net income per weighted average Class B common share ....................... $ -- $ .35 $ .56 $ .44 =========== =========== =========== =========== Weighted average common shares outstanding: Common shareholders .......................... 40,049,079 40,284,511 40,367,161 40,374,658 Class B common shareholders .................. -- 4,883,446 11,456,931 10,468,600 Diluted net income per weighted average common share: Common shareholders .......................... $ .28 $ .23 $ .37 $ .29 Class B common shareholders .................. $ -- $ .24 $ .41 $ .32 Diluted weighted average common shares outstanding: Common shareholders .......................... 40,450,296 40,704,147 40,796,597 40,747,826 Class B common shareholders .................. -- 4,883,446 11,456,931 10,468,600
IV-28 RECKSON ASSOCIATES REALTY CORP. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) 14. QUARTERLY FINANCIAL DATA (UNAUDITED) - (CONTINUED)
1998 ---------------------------------------------------------------------- FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER --------------- ---------------- --------------- --------------- Total revenues ................................ $ 55,063 $ 66,319 $ 71,600 $ 73,391 =========== =========== =========== =========== Income before preferred dividends and distributions, minority interests and extraordinary loss ........................... $ 12,097 $ 17,524 $ 17,143 $ 17,717 Preferred dividends and distributions ......... -- (4,168) (5,034) (5,042) Minority interests ............................ (2,524) (3,445) (1,874) (2,829) Extraordinary loss ............................ -- -- (1,670) -- ----------- ----------- ----------- ----------- Net income available to common shareholders ................................. $ 9,573 $ 9,911 $ 8,565 $ 9,846 =========== =========== =========== =========== Basic net income per weighted average common share: Income before extraordinary loss ............. $ .25 $ .25 $ .25 $ .25 Extraordinary loss ........................... -- -- (.04) -- ----------- ----------- ----------- ----------- Net income per weighted average common share ............................... $ .25 $ .25 $ .21 $ .25 =========== =========== =========== =========== Weighted average common shares outstanding .................................. 38,182,577 39,636,815 40,011,627 40,034,781 =========== =========== =========== =========== Diluted net income per common share: Income before extraordinary loss ............. $ .25 $ .25 $ .25 $ .24 Extraordinary loss ........................... -- -- (.04) -- ----------- ----------- ----------- ----------- Diluted net income per weighted average common share ....................... $ .25 $ .25 $ .21 $ .24 =========== =========== =========== =========== Diluted weighted average common shares outstanding ......................... 38,767,454 40,178,083 40,533,540 40,533,023 =========== =========== =========== ===========
15. PRO FORMA RESULTS (UNAUDITED) The following unaudited pro forma operating results of the Company for the year ended December 31, 1999 have been prepared as if the property acquisitions made during 1999 had occurred on January 1, 1999. Unaudited pro forma financial information is presented for informational purposes only and may not be indicative of what the actual results of operations of the Company would have been had the events occurred as of January 1, 1999, nor does it purport to represent the results of operations for future periods (in thousands except per share data): Total Revenues .............................................. $ 455,663 ========= Income before preferred dividends and distributions, minority interests and extraordinary loss ........................... $ 118,319 ========= Net Income available to common shareholders ................. $ 54,712 ========= Net Income per common share ................................. $ 1.36 ========= Net income available to Class B common shareholders ......... $ 14,675 ========= Net Income per Class B common share ......................... $ 2.18 =========
16. SUBSEQUENT EVENT On January 13, 2000, the Company acquired 1350 Avenue of the Americas, a 540,000 square foot, 35 story, Class A office property, located in New York City, for a purchase price of approximately $126.5 million. This acquisition was financed through a $70 million secured debt financing and a draw under the Credit Facility. IV-29 RECKSON ASSOCIATES REALTY CORP. SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1999 (IN THOUSANDS)
COLUMN A COLUMN B COLUMN C COLUMN D - ------------------------------------------------------ ---------------- ------------------------- ---------------------- COST CAPITALIZED, SUBSEQUENT TO INITIAL COST ACQUISITION ------------------------- ---------------------- BUILDINGS AND BUILDINGS AND DESCRIPTION ENCUMBRANCE LAND IMPROVEMENTS LAND IMPROVEMENTS - ------------------------------------------------------ ---------------- --------- --------------- ------ --------------- Vanderbilt Industrial Park, Hauppauge, New York (27 buildings in an industrial park) ................ B $1,940 $ 9,955 -- 10,082 Airport International Plaza, Islip, New York (17 buildings in an industrial park) .................... 2,616 (C) 1,263 13,608 -- 10,895 County Line Industrial Center, Huntington, New York (3 buildings in an industrial park) ............ B 628 3,686 -- 2,693 32 Windsor Place, Islip, New York .................... B 32 321 -- 46 42 Windsor Place, Islip, New York .................... B 48 327 -- 548 505 Walt Whitman Rd., Huntington, New York ........... B 140 42 -- 59 1170 Northern Blvd., N. Great Neck, New York ......... B 30 99 -- 34 50 Charles Lindbergh Blvd., Mitchel Field, New York ................................................ 15,479 A 12,089 -- 5,286 200 Broadhollow Road, Melville, New York ............. 6,560 338 3,354 -- 3,057 48 South Service Road, Melville, New York ............ B 1,652 10,245 -- 4,733 395 North Service Road, Melville, New York ........... 20,933 A 15,551 -- 6,852 6800 Jericho Turnpike, Syosset, New York ............. 15,001 582 6,566 -- 8,126 6900 Jericho Turnpike, Syosset, New York ............. 5,279 385 4,228 -- 3,359 300 Motor Parkway, Hauppauge, New York ............... B 276 1,136 -- 1,510 88 Duryea Road, Melville, New York ................... B 200 1,565 -- 690 210 Blydenburgh Road, Islandia, New York ............. B 11 158 -- 156 208 Blydenburgh Road, Islandia, New York ............. B 12 192 -- 147 71 Hoffman Lane, Islandia, New York .................. B 19 260 -- 172 933 Motor Parkway, Hauppauge, New York ............... B 106 375 -- 356 65 and 85 South Service Road Plainview, New York ..... B 40 218 -- 17 333 Earl Ovington Blvd., Mitchel Field, New York (Omni) .............................................. 56,367 A 67,221 -- 18,521 135 Fell Court Islip, New York ....................... B 462 1,265 -- 52 40 Cragwood Road, South Plainfield, New Jersey ....... B 725 7,131 -- 5,593 110 Marcus Drive, Huntington, New York ............... B 390 1,499 -- 107 333 East Shore Road, Great Neck, New York ............ B A 564 -- 200 310 East Shore Road, Great Neck, New York ............ 2,322 485 2,009 -- 1,458 70 Schmitt Blvd., Farmingdale, New York .............. B 727 3,408 -- 33 COLUMN A COLUMN E COLUMN F COLUMN G - ------------------------------------------------------ ---------------------------------- -------------- -------------- GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD ---------------------------------- BUILDINGS AND ACCUMULATED DATE OF DESCRIPTION LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION - ------------------------------------------------------ --------- --------------- -------- -------------- -------------- Vanderbilt Industrial Park, Hauppauge, New York (27 buildings in an industrial park) ................ $1,940 20,037 21,977 13,495 1961-1979 Airport International Plaza, Islip, New York (17 buildings in an industrial park) .................... 1,263 24,503 25,766 14,637 1970-1988 County Line Industrial Center, Huntington, New York (3 buildings in an industrial park) ............ 628 6,379 7,007 4,333 1975-1979 32 Windsor Place, Islip, New York .................... 32 367 399 336 1971 42 Windsor Place, Islip, New York .................... 48 875 923 717 1972 505 Walt Whitman Rd., Huntington, New York ........... 140 101 241 81 1950 1170 Northern Blvd., N. Great Neck, New York ......... 30 133 163 127 1947 50 Charles Lindbergh Blvd., Mitchel Field, New York ................................................ 0 17,375 17,375 9,110 1984 200 Broadhollow Road, Melville, New York ............. 338 6,411 6,749 3,774 1981 48 South Service Road, Melville, New York ............ 1,652 14,978 16,630 7,277 1986 395 North Service Road, Melville, New York ........... 0 22,403 22,403 11,094 1988 6800 Jericho Turnpike, Syosset, New York ............. 582 14,692 15,274 8,631 1977 6900 Jericho Turnpike, Syosset, New York ............. 385 7,587 7,972 3,699 1982 300 Motor Parkway, Hauppauge, New York ............... 276 2,646 2,922 1,381 1979 88 Duryea Road, Melville, New York ................... 200 2,255 2,455 1,261 1980 210 Blydenburgh Road, Islandia, New York ............. 11 314 325 297 1969 208 Blydenburgh Road, Islandia, New York ............. 12 339 351 337 1969 71 Hoffman Lane, Islandia, New York .................. 19 432 451 414 1970 933 Motor Parkway, Hauppauge, New York ............... 106 731 837 592 1973 65 and 85 South Service Road Plainview, New York ..... 40 235 275 224 1961 333 Earl Ovington Blvd., Mitchel Field, New York (Omni) .............................................. 0 85,742 85,742 19,681 1990 135 Fell Court Islip, New York ....................... 462 1,317 1,779 330 1965 40 Cragwood Road, South Plainfield, New Jersey ....... 725 12,724 13,449 6,839 1970 110 Marcus Drive, Huntington, New York ............... 390 1,606 1,996 1,190 1980 333 East Shore Road, Great Neck, New York ............ 0 764 764 525 1976 310 East Shore Road, Great Neck, New York ............ 485 3,467 3,952 1,527 1981 70 Schmitt Blvd., Farmingdale, New York .............. 727 3,441 4,168 497 1965 COLUMN A COLUMN H COLUMN I - ------------------------------------------------------ ------------ -------------- LIFE ON WHICH DATE DEPRECIATION DESCRIPTION ACQUIRED IS COMPUTED - ------------------------------------------------------ ------------ -------------- Vanderbilt Industrial Park, Hauppauge, New York (27 buildings in an industrial park) ................ 1961-1979 10-30 Years Airport International Plaza, Islip, New York (17 buildings in an industrial park) .................... 1970-1988 10-30 Years County Line Industrial Center, Huntington, New York (3 buildings in an industrial park) ............ 1975-1979 10-30 Years 32 Windsor Place, Islip, New York .................... 1971 10-30 Years 42 Windsor Place, Islip, New York .................... 1972 10-30 Years 505 Walt Whitman Rd., Huntington, New York ........... 1968 10-30 Years 1170 Northern Blvd., N. Great Neck, New York ......... 1962 10-30 Years 50 Charles Lindbergh Blvd., Mitchel Field, New York ................................................ 1984 10-30 Years 200 Broadhollow Road, Melville, New York ............. 1981 10-30 Years 48 South Service Road, Melville, New York ............ 1986 10-30 Years 395 North Service Road, Melville, New York ........... 1988 10-30 Years 6800 Jericho Turnpike, Syosset, New York ............. 1978 10-30 Years 6900 Jericho Turnpike, Syosset, New York ............. 1982 10-30 Years 300 Motor Parkway, Hauppauge, New York ............... 1979 10-30 Years 88 Duryea Road, Melville, New York ................... 1980 10-30 Years 210 Blydenburgh Road, Islandia, New York ............. 1969 10-30 Years 208 Blydenburgh Road, Islandia, New York ............. 1969 10-30 Years 71 Hoffman Lane, Islandia, New York .................. 1970 10-30 Years 933 Motor Parkway, Hauppauge, New York ............... 1973 10-30 Years 65 and 85 South Service Road Plainview, New York ..... 1961 10-30 Years 333 Earl Ovington Blvd., Mitchel Field, New York (Omni) .............................................. 1995 10-30 Years 135 Fell Court Islip, New York ....................... 1992 10-30 Years 40 Cragwood Road, South Plainfield, New Jersey ....... 1983 10-30 Years 110 Marcus Drive, Huntington, New York ............... 1980 10-30 Years 333 East Shore Road, Great Neck, New York ............ 1976 10-30 Years 310 East Shore Road, Great Neck, New York ............ 1981 10-30 Years 70 Schmitt Blvd., Farmingdale, New York .............. 1995 10-30 Years
Continued IV-30 RECKSON ASSOCIATES REALTY CORP. SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1999 (CONTINUED) (IN THOUSANDS)
COLUMN A COLUMN B COLUMN C COLUMN D - ------------------------------------------------------- ------------- ------------------------ ---------------------- COST CAPITALIZED, SUBSEQUENT TO INITIAL COST ACQUISITION ------------------------ ---------------------- BUILDINGS AND BUILDINGS AND DESCRIPTION ENCUMBRANCE LAND IMPROVEMENTS LAND IMPROVEMENTS - ------------------------------------------------------- ------------- -------- --------------- ------ --------------- 19 Nicholas Drive, Yaphank, New York .................. B 160 7,399 -- 4,731 1516 Motor Parkway, Hauppauge, New York ............... B 603 6,722 -- 127 125 Baylis Road, Melville, New York ................... B 1,601 8,626 -- 1,443 35 Pinelawn Road, Melville, New York .................. B 999 7,073 -- 2,067 520 Broadhollow Road, Melville, New York .............. B 457 5,572 -- 1,574 1660 Walt Whitman Road, Melville, New York ............ B 370 5,072 -- 350 70 Maxess Road, Melville, New York .................... B 367 1,859 95 2,879 85 Nicon Court, Hauppauge, New York ................... B 797 2,818 -- 64 104 Parkway Drive So., Hauppauge, New York ............ B 54 804 -- 136 20 Melville Park Rd., Melville, New York .............. B 391 2,650 -- 202 105 Price Parkway, Hauppauge, New York ................ B 2,030 6,327 -- 469 48 Harbor Park Drive, Hauppauge, New York ............ B 1,304 2,247 -- 89 125 Ricefield Lane, Hauppauge, New York ............... B 13 852 -- 330 110 Ricefield Lane, Hauppauge, New York ............... B 33 1,043 -- 57 120 Ricefield Lane, Hauppauge, New York ............... B 16 1,051 -- 74 135 Ricefield Lane, Hauppauge, New York ............... B 24 906 -- 473 30 Hub Drive, Huntington, New York .................... B 469 1,571 -- 312 60 Charles Lindbergh, Mitchel Field, New York ......... B A 20,800 -- 1,654 155 White Plains Rod., Tarrytown, New York ............ B 1,613 2,542 -- 874 235 Main Street, Tarrytown, New York .................. B 933 5,375 -- 881 245 Main Street, Tarrytown, New York .................. B 1,235 7,284 -- 614 505 White Plains Road, Tarrytown, New York ............ B 210 1,332 -- 209 555 White Plains Road, Tarrytown, New York ............ B 712 4,133 51 4,233 560 White Plains Road, Tarrytown, New York ............ B 1,521 8,756 -- 1,788 580 White Plains Road, Tarrytown, New York ............ 8,172 2,414 14,595 -- 2,203 660 White Plains Road, Tarrytown, New York ............ B 3,929 22,640 45 3,447 Landmark Square, Stamford, Connecticut ................ 47,809 11,603 64,466 769 20,723 110 Bi-County Blvd., Farmingdale, New York ............ 4,221 2,342 6,665 -- 170 RREEF Portfolio, Hauppauge, New York (10 additional buildings in Vanderbuilt Industrial Park) B 930 20,619 -- 2,845 275 Broadhollow Road, Melville, New York .............. B 5,250 11,761 -- 594 One Eagle Rock, East Hanover, New Jersey .............. B 803 7,563 -- 2,099 COLUMN A COLUMN E COLUMN F COLUMN G COLUMN H - ------------------------------------------------------- --------------------------------- -------------- -------------- ---------- GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD --------------------------------- BUILDINGS AND ACCUMULATED DATE OF DATE DESCRIPTION LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION ACQUIRED - ------------------------------------------------------- -------- --------------- -------- -------------- -------------- ---------- 19 Nicholas Drive, Yaphank, New York .................. 160 12,130 12,290 1,147 1989 1995 1516 Motor Parkway, Hauppauge, New York ............... 603 6,849 7,452 1,012 1981 1995 125 Baylis Road, Melville, New York ................... 1,601 10,069 11,670 1,353 1980 1995 35 Pinelawn Road, Melville, New York .................. 999 9,140 10,139 1,508 1980 1995 520 Broadhollow Road, Melville, New York .............. 457 7,146 7,603 1,461 1978 1995 1660 Walt Whitman Road, Melville, New York ............ 370 5,422 5,792 802 1980 1995 70 Maxess Road, Melville, New York .................... 462 4,738 5,200 585 1967 1995 85 Nicon Court, Hauppauge, New York ................... 797 2,882 3,679 383 1984 1995 104 Parkway Drive So., Hauppauge, New York ............ 54 940 994 124 1985 1996 20 Melville Park Rd., Melville, New York .............. 391 2,852 3,243 316 1965 1996 105 Price Parkway, Hauppauge, New York ................ 2,030 6,796 8,826 871 1969 1996 48 Harbor Park Drive, Hauppauge, New York ............ 1,304 2,336 3,640 299 1976 1996 125 Ricefield Lane, Hauppauge, New York ............... 13 1,182 1,195 229 1973 1996 110 Ricefield Lane, Hauppauge, New York ............... 33 1,100 1,133 150 1980 1996 120 Ricefield Lane, Hauppauge, New York ............... 16 1,125 1,141 125 1983 1996 135 Ricefield Lane, Hauppauge, New York ............... 24 1,379 1,403 284 1981 1996 30 Hub Drive, Huntington, New York .................... 469 1,883 2,352 269 1976 1996 60 Charles Lindbergh, Mitchel Field, New York ......... 0 22,454 22,454 3,041 1989 1996 155 White Plains Rod., Tarrytown, New York ............ 1,613 3,416 5,029 390 1963 1996 235 Main Street, Tarrytown, New York .................. 933 6,256 7,189 868 1974 1996 245 Main Street, Tarrytown, New York .................. 1,235 7,898 9,133 1,163 1983 1996 505 White Plains Road, Tarrytown, New York ............ 210 1,541 1,751 270 1974 1996 555 White Plains Road, Tarrytown, New York ............ 763 8,366 9,129 1,551 1972 1996 560 White Plains Road, Tarrytown, New York ............ 1,521 10,544 12,065 2,155 1980 1996 580 White Plains Road, Tarrytown, New York ............ 2,414 16,798 19,212 2,618 1997 1996 660 White Plains Road, Tarrytown, New York ............ 3,974 26,087 30,061 3,974 1983 1996 Landmark Square, Stamford, Connecticut ................ 12,372 85,189 97,561 8,489 1973-1984 1996 110 Bi-County Blvd., Farmingdale, New York ............ 2,342 6,835 9,177 723 1984 1997 RREEF Portfolio, Hauppauge, New York (10 additional buildings in Vanderbuilt Industrial Park) 930 23,464 24,394 2,358 1974-1982 1997 275 Broadhollow Road, Melville, New York .............. 5,250 12,355 17,605 1,191 1970 1997 One Eagle Rock, East Hanover, New Jersey .............. 803 9,662 10,465 1,077 1986 1997 COLUMN A COLUMN I - ------------------------------------------------------- -------------- LIFE ON WHICH DEPRECIATION DESCRIPTION IS COMPUTED - ------------------------------------------------------- -------------- 19 Nicholas Drive, Yaphank, New York .................. 10-30 Years 1516 Motor Parkway, Hauppauge, New York ............... 10-30 Years 125 Baylis Road, Melville, New York ................... 10-30 Years 35 Pinelawn Road, Melville, New York .................. 10-30 Years 520 Broadhollow Road, Melville, New York .............. 10-30 Years 1660 Walt Whitman Road, Melville, New York ............ 10-30 Years 70 Maxess Road, Melville, New York .................... 10-30 Years 85 Nicon Court, Hauppauge, New York ................... 10-30 Years 104 Parkway Drive So., Hauppauge, New York ............ 10-30 Years 20 Melville Park Rd., Melville, New York .............. 10-30 Years 105 Price Parkway, Hauppauge, New York ................ 10-30 Years 48 Harbor Park Drive, Hauppauge, New York ............ 10-30 Years 125 Ricefield Lane, Hauppauge, New York ............... 10-30 Years 110 Ricefield Lane, Hauppauge, New York ............... 10-30 Years 120 Ricefield Lane, Hauppauge, New York ............... 10-30 Years 135 Ricefield Lane, Hauppauge, New York ............... 10-30 Years 30 Hub Drive, Huntington, New York .................... 10-30 Years 60 Charles Lindbergh, Mitchel Field, New York ......... 10-30 Years 155 White Plains Rod., Tarrytown, New York ............ 10-30 Years 235 Main Street, Tarrytown, New York .................. 10-30 Years 245 Main Street, Tarrytown, New York .................. 10-30 Years 505 White Plains Road, Tarrytown, New York ............ 10-30 Years 555 White Plains Road, Tarrytown, New York ............ 10-30 Years 560 White Plains Road, Tarrytown, New York ............ 10-30 Years 580 White Plains Road, Tarrytown, New York ............ 10-30 Years 660 White Plains Road, Tarrytown, New York ............ 10-30 Years Landmark Square, Stamford, Connecticut ................ 10-30 Years 110 Bi-County Blvd., Farmingdale, New York ............ 10-30 Years RREEF Portfolio, Hauppauge, New York (10 additional buildings in Vanderbuilt Industrial Park) 10-30 Years 275 Broadhollow Road, Melville, New York .............. 10-30 Years One Eagle Rock, East Hanover, New Jersey .............. 10-30 Years
Continued IV-31 RECKSON ASSOCIATES REALTY CORP. SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1999 (CONTINUED) (IN THOUSANDS)
COLUMN A COLUMN B COLUMN C COLUMN D - --------------------------------------------- ------------- ------------------------ ---------------------- COST CAPITALIZED, SUBSEQUENT TO INITIAL COST ACQUISITION ------------------------ ---------------------- BUILDINGS AND BUILDINGS AND DESCRIPTION ENCUMBRANCE LAND IMPROVEMENTS LAND IMPROVEMENTS - --------------------------------------------- ------------- -------- --------------- ------ --------------- 710 Bridgeport Avenue, Shelton, Connecticut . B 5,405 21,620 7 623 101 JFK Expressway, Short Hills, New Jersey . B 7,745 43,889 -- 1,134 10 Rooney Circle, West Orange, New Jersey ... B 1,302 4,615 1 421 Executive Hill Office Park, West Orange, New Jersey ..................................... B 7,629 31,288 4 1,073 3 University Plaza, Hackensack, New Jersey .. B 7,894 11,846 --- 1,068 400 Garden City Plaza, Garden City, New York B 13,986 10,127 --- 1,275 425 Rabro Drive, Hauppauge, New York ........ B 665 3,489 --- 71 One Paragon Drive, Montvale, New Jersey ..... B 2,773 9,901 --- 533 90 Merrick Avenue, East Meadow, New York .... B A 19,193 --- 3,350 150 Motor Parkway, Hauppauge, New York ...... B 1,114 20,430 --- 2,588 390 Motor Parkway, Hauppauge, New York ...... B 240 4,459 -- 249 Reckson Executive Park, Ryebrook, New York .. B 18,343 55,028 -- 1,299 120 White Plains Road, Tarrytown, New York .. B 3,355 24,605 -- 182 University Square, Princeton, New Jersey .... B 3,288 8,888 -- 111 100 Andrews Road Hicksville, New York ....... B 2,337 1,711 155 5,707 2 Macy Road, Harrison, New York ............. B 642 2,131 -- 47 80 Grasslands, Elmsford, New York ........... B 1,208 6,728 -- 242 65 Marcus Drive, Melville, New York ......... B 295 1,966 57 885 400 Cabot Drive, Hamilton, New Jersey ....... B 2,068 18,614 -- 71 51 JFK Parkway, Short Hills, New York ....... B 8,732 58,437 -- 874 Triad V -- 1979 Marcus Ave. Lake Success, New York ....................................... B 3,528 31,786 -- 5,897 100 Forge Way, Rockaway, New Jersey ......... B 315 902 -- 89 200 Forge Way, Rockaway, New Jersey ......... B 1,128 3,228 -- 178 300 Forge Way, Rockaway, New Jersey ......... B 376 1,075 -- 254 400 Forge Way, Rockaway, New Jersey ......... B 1,142 3,267 -- 179 51-55 Charles Lindergh Blvd., Uniondale, New York ....................................... B A 27,975 -- 4,174 155 Passaic Avenue, Fairfield, New Jersey ... B 3 3,538 -- 1,418 100 Summit Drive Vahalla, New York .......... 22,614 3,007 41,351 -- 2,769 COLUMN A COLUMN E COLUMN F COLUMN G COLUMN H - --------------------------------------------- --------------------------------- -------------- -------------- ---------- GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD --------------------------------- BUILDINGS AND ACCUMULATED DATE OF DATE DESCRIPTION LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION ACQUIRED - --------------------------------------------- -------- --------------- -------- -------------- -------------- ---------- 710 Bridgeport Avenue, Shelton, Connecticut . 5,412 22,243 27,655 2,091 1971-1979 1997 101 JFK Expressway, Short Hills, New Jersey . 7,745 45,023 52,768 3,970 1981 1997 10 Rooney Circle, West Orange, New Jersey ... 1,303 5,036 6,339 505 1971 1997 Executive Hill Office Park, West Orange, New Jersey ..................................... 7,633 32,361 39,994 2,782 1978-1984 1997 3 University Plaza, Hackensack, New Jersey .. 7,894 12,914 20,808 1,157 1985 1997 400 Garden City Plaza, Garden City, New York 13,986 11,402 25,388 938 1989 1997 425 Rabro Drive, Hauppauge, New York ........ 665 3,560 4,225 305 1980 1997 One Paragon Drive, Montvale, New Jersey ..... 2,773 10,434 13,207 870 1980 1997 90 Merrick Avenue, East Meadow, New York .... 0 22,543 22,543 1,817 1985 1997 150 Motor Parkway, Hauppauge, New York ...... 1,114 23,018 24,132 1,999 1984 1997 390 Motor Parkway, Hauppauge, New York ...... 240 4,708 4,948 386 1980 1997 Reckson Executive Park, Ryebrook, New York .. 18,343 56,327 74,670 4,140 1983-1986 1997 120 White Plains Road, Tarrytown, New York .. 3,355 24,787 28,142 1,717 1984 1997 University Square, Princeton, New Jersey .... 3,288 8,999 12,287 625 1987 1997 100 Andrews Road Hicksville, New York ....... 2,492 7,418 9,910 826 1954 1996 2 Macy Road, Harrison, New York ............. 642 2,178 2,820 158 1962 1997 80 Grasslands, Elmsford, New York ........... 1,208 6,970 8,178 516 1989/1964 1997 65 Marcus Drive, Melville, New York ......... 352 2,851 3,203 310 1968 1996 400 Cabot Drive, Hamilton, New Jersey ....... 2,068 18,685 20,753 1,255 1989 1998 51 JFK Parkway, Short Hills, New York ....... 8,732 59,311 68,043 3,643 1988 1998 Triad V -- 1979 Marcus Ave. Lake Success, New York ....................................... 3,528 37,683 41,211 2,669 1987 1998 100 Forge Way, Rockaway, New Jersey ......... 315 991 1,306 67 1986 1998 200 Forge Way, Rockaway, New Jersey ......... 1,128 3,406 4,534 227 1989 1998 300 Forge Way, Rockaway, New Jersey ......... 376 1,329 1,705 101 1989 1998 400 Forge Way, Rockaway, New Jersey ......... 1,142 3,446 4,588 230 1989 1998 51-55 Charles Lindergh Blvd., Uniondale, New York ....................................... 0 32,149 32,149 3,232 1981 1998 155 Passaic Avenue, Fairfield, New Jersey ... 3 4,956 4,959 296 1984 1998 100 Summit Drive Vahalla, New York .......... 3,007 44,120 47,127 2,614 1988 1998 COLUMN A COLUMN I - --------------------------------------------- -------------- LIFE ON WHICH DEPRECIATION DESCRIPTION IS COMPUTED - --------------------------------------------- -------------- 710 Bridgeport Avenue, Shelton, Connecticut.. 10-30 Years 101 JFK Expressway, Short Hills, New Jersey... 10-30 Years 10 Rooney Circle, West Orange, New Jersey .... 10-30 Years Executive Hill Office Park, West Orange, New Jersey ..................................... 10-30 Years 3 University Plaza, Hackensack, New Jersey .. 10-30 Years 400 Garden City Plaza, Garden City, New York 10-30 Years 425 Rabro Drive, Hauppauge, New York ........ 10-30 Years One Paragon Drive, Montvale, New Jersey ..... 10-30 Years 90 Merrick Avenue, East Meadow, New York .... 10-30 Years 150 Motor Parkway, Hauppauge, New York ...... 10-30 Years 390 Motor Parkway, Hauppauge, New York ...... 10-30 Years Reckson Executive Park, Ryebrook, New York .. 10-30 Years 120 White Plains Road, Tarrytown, New York .. 10-30 Years University Square, Princeton, New Jersey .... 10-30 Years 100 Andrews Road Hicksville, New York ....... 10-30 Years 2 Macy Road, Harrison, New York ............. 10-30 Years 80 Grasslands, Elmsford, New York ........... 10-30 Years 65 Marcus Drive, Melville, New York ......... 10-30 Years 400 Cabot Drive, Hamilton, New Jersey ....... 10-30 Years 51 JFK Parkway, Short Hills, New York ....... 10-30 Years Triad V -- 1979 Marcus Ave. Lake Success, New York ....................................... 10-30 Years 100 Forge Way, Rockaway, New Jersey ......... 10-30 Years 200 Forge Way, Rockaway, New Jersey ......... 10-30 Years 300 Forge Way, Rockaway, New Jersey ......... 10-30 Years 400 Forge Way, Rockaway, New Jersey ......... 10-30 Years 51-55 Charles Lindergh Blvd., Uniondale, New York ....................................... 10-30 Years 155 Passaic Avenue, Fairfield, New Jersey ... 10-30 Years 100 Summit Drive Vahalla, New York .......... 10-30 Years
Continued IV-32 RECKSON ASSOCIATES REALTY CORP. SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1999 (CONTINUED) (IN THOUSANDS)
COLUMN A COLUMN B COLUMN C COLUMN D - -------------------------------------------------- ------------- --------------------------- ------------------------- COST CAPITALIZED, SUBSEQUENT TO INITIAL COST ACQUISITION --------------------------- ------------------------- BUILDINGS AND BUILDINGS AND DESCRIPTION ENCUMBRANCE LAND IMPROVEMENTS LAND IMPROVEMENTS - -------------------------------------------------- ------------- ----------- --------------- --------- --------------- 115/117 Stevens Avenue, Valhalla, New York ....... B 1,094 22,490 -- 628 200 Summit Lake Drive, Valhalla, New York ........ 20,463 4,343 37,305 -- 541 140 Grand Street., Valhalla, New York ............ B 1,932 18,744 -- 153 500 Summit Lake Drive, Valhalla, New York ........ B 7,052 37,309 -- 7,547 5 Henderson Drive, West Caldwell, New Jersey ..... B 2,450 6,984 4 690 Stamford Towers, Stamford, Connecticut ........... B 13,557 47,916 -- 3,377 99 Cherry Hill Road, Parsippany, New Jersey ...... B 2,360 7,508 -- 339 119 Cherry Hill Road, Parsipanny, New Jersey ..... B 2,512 7,622 -- 577 120 Wilbur Place, Bohemia, New York .............. B 202 1,154 8 114 45 Melville Park Road, Melville, New York ........ B 355 1,487 -- 1,813 500 Saw Mill River Road, Elmsford, New York ...... B 1,542 3,796 -- 178 2004 Orville Drive, No. Bohemia, New York ........ B 633 4,226 -- 1,407 2005 Orville Drive North Bohemia, New York ....... B 984 5,410 -- 489 120 W. 45th Street New York, New York ............ 66,933 28,757 162,809 -- 338 4 Appelgate Drive Robbinsville, New Jersey ....... B 544 7,623 -- 1,503 1305 Walt Whitman Road Melville, New York ........ B 2,885 15,029 -- 3,448 600 Old Willets Path Hauppauge, New York ......... B 295 3,521 -- 723 1255 Broad Street Clifton, New Jersey ............ B 1,329 15,869 -- 2,806 810 Seventh Avenue New York, New York ............ 86,822 26,984 152,767 -- 2,036 120 Mineola Blvd. Mineola, New York .............. B 1,869 10,603 -- 41 100 Wall Street, New York, New York .............. 37,623 11,749 66,517 -- 1,020 One Orlando, Orlando, Florida .................... 39,960 9,386 51,136 -- 0 Land held for development ........................ B 60,894 --- -- 0 Developments in progress ......................... --- --- 68,690 -- -- Other property ................................... B --- --- -- 5,482 ------ ------ ------- -- ----- Total ............................................ $459,174 $335,902 $1,656,797 $1,196 214,504 ======== ======== ========== ====== ======= COLUMN A COLUMN E COLUMN F COLUMN G - -------------------------------------------------- ---------------------------------------- -------------- -------------- GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD ---------------------------------------- BUILDINGS AND ACCUMULATED DATE OF DESCRIPTION LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION - -------------------------------------------------- ----------- --------------- ------------ -------------- -------------- 115/117 Stevens Avenue, Valhalla, New York ....... 1,094 23,118 24,212 1,309 1984 200 Summit Lake Drive, Valhalla, New York ........ 4,343 37,846 42,189 2,133 1990 140 Grand Street., Valhalla, New York ............ 1,932 18,897 20,829 1,059 1991 500 Summit Lake Drive, Valhalla, New York ........ 7,052 44,856 51,908 1,779 1986 5 Henderson Drive, West Caldwell, New Jersey ..... 2,454 7,674 10,128 363 1967 Stamford Towers, Stamford, Connecticut ........... 13,557 51,293 64,850 2,686 1989 99 Cherry Hill Road, Parsippany, New Jersey ...... 2,360 7,847 10,207 375 1982 119 Cherry Hill Road, Parsipanny, New Jersey ..... 2,512 8,199 10,711 385 1982 120 Wilbur Place, Bohemia, New York .............. 210 1,268 1,478 64 1972 45 Melville Park Road, Melville, New York ........ 355 3,300 3,655 229 1998 500 Saw Mill River Road, Elmsford, New York ...... 1,542 3,974 5,516 264 1968 2004 Orville Drive, No. Bohemia, New York ........ 633 5,633 6,266 522 1998 2005 Orville Drive North Bohemia, New York ....... 984 5,899 6,883 58 1999 120 W. 45th Street New York, New York ............ 28,757 163,147 191,904 3,603 1998 4 Appelgate Drive Robbinsville, New Jersey ....... 544 9,126 9,670 300 1999 1305 Walt Whitman Road Melville, New York ........ 2,885 18,477 21,362 579 1999 600 Old Willets Path Hauppauge, New York ......... 295 4,244 4,539 143 1999 1255 Broad Street Clifton, New Jersey ............ 1,329 18,675 20,004 175 1999 810 Seventh Avenue New York, New York ............ 26,984 154,803 181,787 3,398 1970 120 Mineola Blvd. Mineola, New York .............. 1,869 10,644 12,513 234 1977 100 Wall Street, New York, New York .............. 11,749 67,537 79,286 1,477 1969 One Orlando, Orlando, Florida .................... 9,386 51,136 60,522 702 1987 Land held for development ........................ 60,894 0 60,894 0 N/A Developments in progress ......................... -- 68,690 68,690 0 Other property ................................... -- 5,482 5,482 637 ------ ------- ------- ----- Total ............................................ $337,098 1,871,301 2,208,399 215,112 ======== ========= ========= =======
COLUMN A COLUMN H COLUMN I - -------------------------------------------------- ---------- -------------- LIFE ON WHICH DATE DEPRECIATION DESCRIPTION ACQUIRED IS COMPUTED - -------------------------------------------------- ---------- -------------- 115/117 Stevens Avenue, Valhalla, New York ....... 1998 10-30 Years 200 Summit Lake Drive, Valhalla, New York ........ 1998 10-30 Years 140 Grand Street., Valhalla, New York ............ 1998 10-30 Years 500 Summit Lake Drive, Valhalla, New York ........ 1998 10-30 Years 5 Henderson Drive, West Caldwell, New Jersey ..... 1998 10-30 Years Stamford Towers, Stamford, Connecticut ........... 1998 10-30 Years 99 Cherry Hill Road, Parsippany, New Jersey ...... 1998 10-30 Years 119 Cherry Hill Road, Parsipanny, New Jersey ..... 1998 10-30 Years 120 Wilbur Place, Bohemia, New York .............. 1998 10-30 Years 45 Melville Park Road, Melville, New York ........ 1998 10-30 Years 500 Saw Mill River Road, Elmsford, New York ...... 1998 10-30 Years 2004 Orville Drive, No. Bohemia, New York ........ 1998 10-30 Years 2005 Orville Drive North Bohemia, New York ....... 1999 10-30 Years 120 W. 45th Street New York, New York ............ 1999 10-30 Years 4 Appelgate Drive Robbinsville, New Jersey ....... 1999 10-30 Years 1305 Walt Whitman Road Melville, New York ........ 1999 10-30 Years 600 Old Willets Path Hauppauge, New York ......... 1999 10-30 Years 1255 Broad Street Clifton, New Jersey ............ 1999 10-30 Years 810 Seventh Avenue New York, New York ............ 1999 10-30 Years 120 Mineola Blvd. Mineola, New York .............. 1999 10-30 Years 100 Wall Street, New York, New York .............. 1999 10-30 Years One Orlando, Orlando, Florida .................... 1999 10-30 Years Land held for development ........................ Various N/A Developments in progress ......................... Other property ................................... Total ............................................
- -------------- A These land parcels are leased (see Note 4). B There are no encumbrances on these properties. C The Encumbrance of $2,616 is related to one property. The aggregate cost for Federal Income Tax purposes was approximately $1,728 million at December 31, 1999. IV-33 RECKSON ASSOCIATES REALTY CORP. SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED) (IN THOUSANDS) The changes in real estate for each of the periods in the three years ended December 31, 1999 are as follows:
1999 1998 1997 ------------- ------------- -------------- Real estate balance at beginning of period ....................... $1,737,133 $1,011,228 $ 516,768 Improvements ..................... 57,571 134,582 37,778 Disposal, including write-off of fully depreciated building improvements .................... (317,864) -- (154) Acquisitions ..................... 731,559 591,323 456,836 ---------- ---------- ---------- Balance at end of period ......... $2,208,399 $1,737,133 $1,011,228 ========== ========== ==========
The changes in accumulated depreciation, exclusive of amounts relating to equipment, autos, furniture and fixtures, for each of the periods in the three years ended December 31, 1999 are as follows:
1999 1998 1997 ----------- ----------- ------------ Balance at beginning of period ...... $156,231 $108,652 $ 86,344 Depreciation for period ............. 65,471 47,579 22,442 Disposal, including write-off of fully depreciated building improvements ....................... (6,590) -- (134) -------- -------- -------- Balance at end of period ............ $215,112 $156,231 $108,652 ======== ======== ========
IV-34
EXHIBIT FILING NUMBER REFERENCE DESCRIPTION - --------- ----------- -------------------------------------------------------------------------------- 3.1 a Amended and Restated Articles of Incorporation 3.2 Amended and Restated By-Laws of Registrant 3.3 h Articles Supplementary of the Registrant Establishing and Fixing the Rights and Preferences of a Series of Shares of Preferred Stock filed with the Maryland State Department of Assessments and Taxation on April 9, 1998 3.4 Articles Supplementary of the Registrant Establishing and Fixing the Rights and Preferences of a Class of Shares of Common Stock filed with the Maryland State Department of Assessments and Taxation on May 24, 1999. 3.5 k Articles Supplementary of the Registrant Establishing and Fixing the Rights and Preferences of a Series of Shares of Preferred Stock filed with the Maryland State Department of Assessments and Taxation on May 28, 1999 3.6 Articles of Amendment of the Registrant filed with the Maryland State Department of Assessments and Taxation on January 4, 2000. 3.7 Articles Supplementary of the Registrant filed with the Maryland State Department of Assessments and Taxation on January 11, 2000. 4.1 b Specimen Share Certificate of Common Stock 4.2 h Specimen Share Certificate of Series A Preferred Stock 4.3 j Form of 7.40% Notes due 2004 of Reckson Operating Partnership, L.P. 4.4 j Form of 7.75% Notes due 2009 of Reckson Operating Partnership, L.P. 4.5 j Indenture, dated March 26, 1999, among Reckson Operating Partnership, L.P., the Company, and The Bank of New York, as trustee 10.1 a Amended and Restated Agreement of Limited Partnership of Reckson Operating Partnership, L.P. 10.2 h Supplement to the Amended and Restated Agreement of Limited Partnership of Reckson Operating Partnership, L.P. Establishing Series A Preferred Units of Limited Partnership Interest 10.3 h Supplement to the Amended and Restated Agreement of Limited Partnership of Reckson Operating Partnership, L.P. Establishing Series B Preferred Units of Limited Partnership Interest 10.4 h Supplement to the Amended and Restated Agreement of Limited Partnership of Reckson Operating Partnership, L.P. Establishing Series C Preferred Units of Limited Partnership Interest 10.5 h Supplement to the Amended and Restated Agreement of Limited Partnership of Reckson Operating Partnership, L.P. Establishing Series D Preferred Units of Limited Partnership Interest 10.6 Supplement to the Amended and Restated Agreement of Limited Partnership of Reckson Operating Partnership, L.P. Establishing Series B Common Units of Limited Partnership Interest 10.7 Supplement to the Amended and Restated Agreement of Limited Partnership of Reckson Operating Partnership, L.P. Establishing Series E Preferred Partnership Units of Limited Partnership Interest 10.8 f Third Amended and Restated Agreement of Limited Partnership of Omni Partners, L.P. 10.9 i Amendment and Restatement of Employment and Non-Competition Agreement between Registrant and Donald Rechler 10.10 i Amendment and Restatement of Employment and Non-Competition Agreement between Registrant and Scott Rechler
EXHIBIT FILING NUMBER REFERENCE DESCRIPTION - ---------- ----------- ------------------------------------------------------------------------------ 10.11 i Amendment and Restatement of Employment and Non-Competition Agreement between Registrant and Mitchell Rechler 10.12 i Amendment and Restatement of Employment and Non-Competition Agreement between Registrant and Gregg Rechler 10.13 i Amendment and Restatement of Employment and Non-Competition Agreement between Registrant and Roger Rechler 10.14 i Amendment and Restatement of Employment and Non-Competition Agreement between Registrant and J. Michael Maturo 10.15 a Purchase Option Agreements relating to the Reckson Option Properties 10.16 a Purchase Option Agreements relating to the Other Option Properties 10.17 c Amended 1995 Stock Option Plan 10.18 c 1996 Employee Stock Option Plan 10.19 b Ground Leases for certain of the properties 10.20 i Third Amended and Restated Agreement of Limited Partnership of Reckson FS Limited Partnership 10.21 a Indemnity Agreement relating to 100 Oser Avenue 10.22 f Amended and Restated 1997 Stock Option Plan 10.23 f 1998 Stock Option Plan 10.24 f Note Purchase Agreement for the Senior Unsecured Notes 10.25 i Amended and Restated Severance Agreement between Registrant and Donald Rechler 10.26 i Amended and Restated Severance Agreement between Registrant and Scott Rechler 10.27 i Amended and Restated Severance Agreement between Registrant and Mitchell Rechler 10.28 i Amended and Restated Severance Agreement between Registrant and Gregg Rechler 10.29 i Amended and Restated Severance Agreement between Registrant and Roger Rechler 10.30 i Amended and Restated Severance Agreement between Registrant and J. Michael Maturo 10.31 d $500 million Credit Agreement dated July 23, 1998 among Reckson Operating Partnership, L.P. and Reckson Morris Operating Partnership, L.P. and the Chase Manhattan Bank, UBS AG and PNC Bank and other lenders party thereto 10.32 g Agreement and Plan of Merger by and among Tower Realty Trust, Inc., Reckson Associates Realty Corp., Reckson Operating Partnership, L.P. and Metropolitan Partners LLC, dated December 8, 1998 10.33 g Stock Purchase Agreement by and between Tower Realty Trust, Inc. and Metropolitan Partners LLC, dated December 8, 1998 10.34 g Amended and Restated Operating Agreement of Metropolitan Partners LLC, dated December 8, 1998 10.35 i Intercompany Agreement by and between Reckson Operating Partnership, L.P. and Reckson Service Industries, Inc., dated May 13, 1998 10.36 Amended and Restated Credit Agreement dated as of August 4, 1999 between Reckson Service Industries, Inc., as borrower and Reckson Operating Partnership, L.P., as Lender relating to Reckson Strategic Venture Partners, LLC ("RSVP Credit Agreement") 10.37 Amended and Restated Credit Agreement dated as of August 4, 1999 between Reckson Service Industries, Inc., as borrower and Reckson Operating Partnership, L.P., as Lender relating to the operations of Reckson Service Industries, Inc. ("RSI Credit Agreement")
EXHIBIT FILING NUMBER REFERENCE DESCRIPTION - ---------- ----------- ----------------------------------------------------------------------------------- 10.38 Letter Agreement, dated November 30, 1999, amending the RSVP Credit Agreement and the RSI Credit Agreement 10.39 j Terms Agreement, dated March 23, 1999, between Reckson Operating Partnership, L.P. and Goldman, Sachs & Co., on behalf of itself and the other named underwriters 10.40 k $130 million Credit Agreement dated as of May 24, 1999 among Metropolitan Operating Partnership, L.P., Warburg Dillon Read and UBS AG, Stamford Branch 10.41 k Guaranty Agreement dated as of May 24, 1999 among Metropolitan Operating Partnership, L.P., Warburg Dillon Read and UBS AG, Stamford Branch 10.42 k Purchase Agreement dated as of May 27, 1999 among Stichting Pensioenfonds ABP, The Travelers Insurance Company, The Travelers Life and Annuity Company, The Standard Fire Insurance Company, Travelers Casualty and Surety Company, Reckson Associates Realty Corp. and Reckson Operating Partnership, L.P. relating to 6,000,000 shares of Series B Convertible Cumulative Preferred Stock 10.43 k Registration Rights Agreement among Stichting Pensioenfonds ABP, The Travelers Insurance Company, The Travelers Life and Annuity Company, The Standard Fire Insurance Company, Travelers Casualty and Surety Company and Reckson Associates Realty Corp. relating to 6,000,000 shares of Series B Convertible Cumulative Preferred Stock 10.44 l Consolidated, Amended and Restated Fee and Leasehold Mortgage Note relating to 919 Third Avenue 10.45 o Agreement of Purchase and Sale, between NBBRE 919 Third Avenue Associates, L.P., as Seller, and Reckson Operating Partnership, L.P., as Purchaser 10.46 l Side Letter to Agreement of Purchase and Sale, between NBBRE 919 Third Avenue Associates, L.P., as Seller, and Reckson Operating Partnership, L.P., as Purchaser 10.47 m Contribution and Exchange Agreement by and between Reckson Morris Industrial Trust, Reckson Morris Industrial Interim GP, LLC, Reckson Operating Partnership, L.P., Robert Morris, Joseph D. Morris, Ronald Schram, Mark M. Bava, The Drew Morris Trust, The Justin Morris Trust, The Keith Morris Trust, Joseph D. Morris Family Limited Partnership and Robert Morris Family Limited Partnership, and American Real Estate Investment L.P. and American Real Estate Corporation 10.48 n Agreement of Purchase and Sale by and among Black Canyon Loop Company LLC, Metropolitan Operating Partnership, L.P. and Safeway Inc. 10.49 n Purchase and Sale Agreement by and between Corporate Center Associates Limited Partnership and Transwestern Investment Company, L.L.C. 10.50 n Purchase and Sale Agreement by and between East Broadway 5151 Limited Partnership, Metropolitan Operating Partnership, L.P., 5750 Associates Limited Partnership, Maitland Associates, Ltd. and Maitland West Associates Limited Partnership and Praedium Performance Fund IV, L.P. 10.51 n Purchase and Sale Agreement by and between Metropolitan Operating Partnership, L.P. and HUB Properties Trust 10.52 o Contract and Sale Agreement between 54-55 Street Company and Reckson Operating Partnership, L.P. 10.53 p 1999 $75 million Second Amended and Restated Credit Facility Agreement dated as of December 17, 1999 10.54 p 1999 Second Amended and Restated Guaranty Agreement dated as of December 17, 1999
EXHIBIT FILING NUMBER REFERENCE DESCRIPTION - -------- ----------- --------------------------------------------------------- 12.1 Statement of Ratios of Earnings to Fixed Charges 21.1 Statement of Subsidiaries 23.0 Consent of Independent Auditors 24.1 Power of Attorney (included in Part IV of the Form 10-K) 27.0 Financial Data Schedule
- ---------- (a) Previously filed as an exhibit to Registration Statement Form S-11 (No. 333-1280) and incorporated herein by reference. (b) Previously filed as an exhibit to Registration Statement Form S-11 (No. 33-84324) and incorporated herein by reference. (c) Previously filed as an exhibit to the Company's Form 8-K report filed with the SEC on November 25, 1996 and incorporated herein by reference. (d) Previously filed as an exhibit to the Company's Form 8-K report filed with the SEC on August 14, 1998 and incorporated herein by reference. (e) Previously filed as an exhibit to the Company's Form 8-K report filed with the SEC on February 5, 1999 and incorporated herein by reference. (f) Previously filed as an exhibit to the Company's Form 10-K filed with the SEC on March 26, 1998 and incorporated herein by reference. (g) Previously filed as an exhibit to the Company's Form 8-K report filed with the SEC on December 22, 1998 and incorporated herein by reference. (h) Previously filed as an exhibit to the Company's Form 8-K report filed with the SEC on March 1, 1999 and incorporated herein by reference. (i) Previously filed as an exhibit to the Company's Form 10-K filed with the SEC on March 16, 1999 and incorporated herein by reference. (j) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on March 26, 1999 and incorporated herein by reference. (k) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on June 7, 1999 and incorporated herein by reference. (l) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on June 25, 1999 and incorporated herein by reference. (m) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on August 25, 1999 and incorporated herein by reference. (n) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on October 25, 1999 and incorporated herein by reference. (o) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on January 14, 2000 and incorporated herein by reference. (p) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on February 8, 2000 and incorporated herein by reference. EX-3.2 2 EXHIBIT 3.2 EXHIBIT 3.2 RECKSON ASSOCIATES REALTY CORP. AMENDED AND RESTATED BYLAWS ARTICLE I OFFICES Section 1. PRINCIPAL OFFICE. The principal office of the Corporation shall be located at such place or places as the Board of Directors may designate. Section 2. ADDITIONAL OFFICES. The Corporation may have additional offices at such places as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. PLACE. All meetings of stockholders shall be held at the principal office of the Corporation or at such other place within the United States as shall be stated in the notice of the meeting. Section 2. ANNUAL MEETING. An annual meeting of the stockholders for the election of directors and the transaction of any business within the powers of the Corporation shall be held on a date and at the time set by the Board of Directors during the month of May in each year. Section 3. SPECIAL MEETINGS. The president, chief executive officer or Board of Directors may call special meetings of the stockholders. Special meetings of stockholders shall also be called by the secretary of the Corporation upon the written request of the holders of shares entitled to cast not less than a majority of all the votes entitled to be cast at such meeting. Such request shall state the purpose of such meeting and the matters proposed to be acted on at such meeting. The secretary shall inform such stockholders of the reasonably estimated cost of preparing and mailing notice of the meeting and, upon payment to the Corporation by such stockholders of such costs, the secretary shall give notice to each stockholder entitled to notice of the meeting. Unless requested by the stockholders entitled to cast a majority of all the votes entitled to be cast at such meeting, a special meeting need not be called to consider any matter which is substantially the same as a matter voted on at any special meeting of the stockholders held during the preceding twelve months. Section 4. NOTICE. Not less than ten nor more than 90 days before each meeting of stockholders, the secretary shall give to each stockholder entitled to vote at such meeting and to each stockholder not entitled to vote who is entitled to notice of the meeting written or printed notice stating the time and place of the meeting and, in the case of a special meeting or as otherwise may be required by any statute, the purpose for which the meeting is called, either by mail or by presenting it to such stockholder personally or by leaving it at his residence or usual place of business. If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the stockholder at his post office address as it appears on the records of the Corporation, with postage thereon prepaid. Section 5. SCOPE OF NOTICE. Any business of the Corporation may be transacted at an annual meeting of stockholders without being specifically designated in the notice, except such business as is required by any statute to be stated in such notice. No business shall be transacted at a special meeting of stockholders except as specifically designated in the notice. Section 6. ORGANIZATION. At every meeting of stockholders, the Chairman of the Board, if there be one, shall conduct the meeting or, in the case of vacancy in office or absence of the Chairman of the Board, one of the following officers present shall conduct the meeting in the order stated: the Vice Chairman of the Board, if there be one, the President, the Vice Presidents in their order of rank and seniority, or a Chairman chosen by the stockholders entitled to cast a majority of the votes which all stockholders present in person or by proxy are entitled to cast, shall act as Chairman, and the Secretary, or, in his absence, an assistant secretary, or in the absence of both the Secretary and assistant secretaries, a person appointed by the Chairman shall act as Secretary. Section 7. QUORUM. At any meeting of stockholders, the presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at such meeting shall constitute a quorum; but this section shall not affect any requirement under any statute or the charter of the Corporation for the vote necessary for the adoption of any measure. If, however, such quorum shall not be present at any meeting of the stockholders, the stockholders entitled to vote at such meeting, present in person or by proxy, shall have the power to adjourn the meeting from time to time to a date not more than 120 days after the original record date without notice other than announcement at the meeting. At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified. Section 8. VOTING. A plurality of all the votes cast at a meeting of stockholders duly called and at which a quorum is present shall be sufficient to elect a director. Each share may be voted for as many individuals as there are directors to be elected and for whose election the share is entitled to be voted. A majority of the votes cast at a meeting of stockholders duly called and at which a quorum is present shall be sufficient to approve any other matter which may properly come before the meeting, unless more than a majority of the votes cast is required by statute or by the charter of the Corporation. Unless otherwise provided in the charter, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of stockholders. Section 9. PROXIES. A stockholder may vote the stock owned of record by him, either in person or by proxy executed in writing by the stockholder or by his duly authorized attorney in fact. Such proxy shall be filed with the secretary of the Corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy. 2 Section 10. VOTING OF STOCK BY CERTAIN HOLDERS. Stock of the Corporation registered in the name of a corporation, partnership, trust or other entity, if entitled to be voted, may be voted by the president or a vice president, a general partner or trustee thereof, as the case may be, or a proxy appointed by any of the foregoing individuals, unless some other person who has been appointed to vote such stock pursuant to a bylaw or a resolution of the governing body of such corporation or other entity or agreement of the partners of a partnership presents a certified copy of such bylaw, resolution or agreement, in which case such person may vote such stock. Any director or other fiduciary may vote stock registered in his name as such fiduciary, either in person or by proxy. Shares of stock of the Corporation directly or indirectly owned by it shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares entitled to be voted at any given time, unless they are held by it in a fiduciary capacity, in which case they may be voted and shall be counted in determining the total number of outstanding shares at any given time. The Board of Directors may adopt by resolution a procedure by which a stockholder may certify in writing to the Corporation that any shares of stock registered in the name of the stockholder are held for the account of a specified person other than the stockholder. The resolution shall set forth the class of stockholders who may make the certification, the purpose for which the certification may be made, the form of certification and the information to be contained in it; if the certification is with respect to a record date or closing of the stock transfer books, the time after the record date or closing of the stock transfer books within which the certification must be received by the Corporation; and any other provisions with respect to the procedure which the Board of Directors considers necessary or desirable. On receipt of such certification, the person specified in the certification shall be regarded as, for the purposes set forth in the certification, the stockholder of record of the specified stock in place of the stockholder who makes the certification. Notwithstanding any other provision of the charter of the Corporation or these Bylaws, Title 3, Subtitle 7 of the Corporations and Associations Article of the Annotated Code of Maryland (or any successor statute) shall not apply to any acquisition by any person of shares of stock of the Corporation. This section may be repealed, in whole or in part, at any time, whether before or after an acquisition of control shares and, upon such repeal, may, to the extent provided by any successor bylaw, apply to any prior or subsequent control share acquisition. Section 11. INSPECTORS. At any meeting of stockholders, the chairman of the meeting may, or upon the request of any stockholder shall, appoint one or more persons as inspectors for such meeting. Such inspectors shall ascertain and report the number of shares represented at the meeting based upon their determination of the validity and effect of proxies, count all votes, report the results and perform such other acts as are proper to conduct the election and voting with impartiality and fairness to all the stockholders. Each report of an inspector shall be in writing and signed by him or by a majority of them if there is more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report 3 of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof. Section 12. NOMINATIONS AND STOCKHOLDER BUSINESS (a) Annual Meetings of Stockholders. (1) Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the stockholders (except for stockholder proposals included in the proxy materials pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) may be made at an annual meeting of stockholders (i) pursuant to the Corporation's notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) by any stockholder of the Corporation who was a stockholder of record at the time of giving of notice provided for in this Section 12(a), who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 12(a). (ii) (2) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of paragraph (a)(1) of this Section 12, the stockholder must have given timely notice thereof in writing to the secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to the secretary at the principal executive offices of the Corporation not less than 75 days nor more than 180 days prior to the first anniversary of the preceding year's annual meeting or special meeting in lieu thereof; provided, however, that in the event that the date of the annual meeting is advanced by more than seven calendar days or delayed by more than 60 days from such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the 180th day prior to such annual meeting and not later than the close of business on the later of the 75th day prior to such annual meeting or the twentieth day following the earlier of the day on which public announcement of the date of such meeting is first made or notice of the meeting is mailed to stockholders. Such stockholder's notice shall set forth (i) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (ii) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and of the beneficial owner, if any, on whose behalf the proposal is made; and (iii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, (x) the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner and (y) the number of shares of each class of stock of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner. (3) Notwithstanding anything in the second sentence of paragraph (a)(2) of this Section 12 to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least 85 days prior to the first anniversary of the preceding year's annual meeting, 4 a stockholder's notice required by this Section 12(a) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the secretary at the principal executive offices of the Corporation not later than the close of business on the tenth day following the day on which such public announcement is first made by the Corporation. (b) Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected (i) pursuant to the Corporation's notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) provided that the Board of Directors has determined that directors shall be elected at such special meeting, by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in this Section 12(b), who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 12(b). In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder may nominate a person or persons (as the case may be) for election to such position as specified in the Corporation's notice of meeting, if the stockholder's notice containing the information required by paragraph (a)(2) of this Section 12 shall be delivered to the secretary at the principal executive offices of the Corporation not earlier than the 180th day prior to such special meeting and not later than the close of business on the later of the 75th day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. (c) General. (1) Only such persons who are nominated in accordance with the procedures set forth in this Section 12 shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 12. The presiding officer of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Section 12 and, if any proposed nomination or business is not in compliance with this Section 12, to declare that such defective nomination or proposal be disregarded. (2) For purposes of this Section 12, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. (3) Notwithstanding the foregoing provisions of this Section 12, a stockholder shall also comply with all applicable requirements of state law and of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 12. Nothing in this Section 12 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act. 5 Section 13. VOTING BY BALLOT. Voting on any question or in any election may be viva voce unless the presiding officer shall order or any stockholder shall demand that voting be by ballot. ARTICLE III DIRECTORS Section 1. GENERAL POWERS; QUALIFICATIONS. The business and affairs of the Corporation shall be managed under the direction of its Board of Directors. Section 2. NUMBER, TENURE AND QUALIFICATIONS. At any regular meeting or at any special meeting called for that purpose, a majority of the entire Board of Directors may establish, increase or decrease the number of directors, provided that the number thereof shall never be less than the minimum number required by the Maryland General Corporation Law, nor more than 15, and further provided that the tenure of office of a director shall not be affected by any decrease in the number of directors. Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the Board of Directors shall be held immediately after and at the same place as the annual meeting of stockholders, no notice other than this Bylaw being necessary. The Board of Directors may provide, by resolution, the time and place, either within or without the State of Maryland, for the holding of regular meetings of the Board of Directors without other notice than such resolution. Section 4. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by or at the request of the chairman of the board (or any co-chairman of the board if more than one), president or by a majority of the directors then in office. The person or persons authorized to call special meetings of the Board of Directors may fix any place, either within or without the State of Maryland, as the place for holding any special meeting of the Board of Directors called by them. Section 5. NOTICE. Notice of any special meeting of the Board of Directors shall be delivered personally or by telephone, facsimile transmission, United States mail or courier to each director at his business or residence address. Notice by personal delivery, by telephone or a facsimile transmission shall be given at least two days prior to the meeting. Notice by mail shall be given at least five days prior to the meeting and shall be deemed to be given when deposited in the United States mail properly addressed, with postage thereon prepaid. Telephone notice shall be deemed to be given when the director is personally given such notice in a telephone call to which he is a party. Facsimile transmission notice shall be deemed to be given upon completion of the transmission of the message to the number given to the Corporation by the director and receipt of a completed answer-back indicating receipt. Neither the business to be transacted at, nor the purpose of, any annual, regular or special meeting of the Board of Directors need be stated in the notice, unless specifically required by statute or these Bylaws. Section 6. QUORUM. A majority of the directors shall constitute a quorum for transaction of business at any meeting of the Board of Directors, provided that, if less than a majority of such directors are present at said meeting, a majority of the directors present may 6 adjourn the meeting from time to time without further notice, and provided further that if, pursuant to the charter of the Corporation or these Bylaws, the vote of a majority of a particular group of directors is required for action, a quorum must also include a majority of such group. The Board of Directors present at a meeting which has been duly called and convened may continue to transact business until adjournment, notwithstanding the withdrawal of enough directors to leave less than a quorum. Section 7. VOTING. The action of the majority of the directors present at a meeting at which a quorum is present shall be the action of the Board of Directors, unless the concurrence of a greater proportion is required for such action by applicable statute. Section 8. TELEPHONE MEETINGS. Directors may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting. Section 9. INFORMAL ACTION BY DIRECTORS. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if a consent in writing to such action is signed by each director and such written consent is filed with the minutes of proceedings of the Board of Directors. Section 10. VACANCIES. If for any reason any or all the directors cease to be directors, such event shall not terminate the Corporation or affect these Bylaws or the powers of the remaining directors hereunder (even if fewer than three directors remain). Any vacancy on the Board of Directors for any cause other than an increase in the number of directors shall be filled by a majority of the remaining directors, although such majority is less than a quorum. Any vacancy in the number of directors created by an increase in the number of directors may be filled by a majority vote of the entire Board of Directors. Any individual so elected as director shall hold office for the unexpired term of the director he is replacing. Section 11. COMPENSATION. Directors shall not receive any stated salary for their services as directors but, by resolution of the Board of Directors, may receive fixed sums per year and/or per meeting and/or per visit to real property owned or to be acquired by the Corporation and for any service or activity they performed or engaged in as directors. Directors may be reimbursed for expenses of attendance, if any, at each annual, regular or special meeting of the Board of Directors or of any committee thereof and for their expenses, if any, in connection with each property visit and any other service or activity they performed or engaged in as directors; but nothing herein contained shall be construed to preclude any directors from serving the Corporation in any other capacity and receiving compensation therefor. Section 12. LOSS OF DEPOSITS. No director shall be liable for any loss which may occur by reason of the failure of the bank, trust company, savings and loan association, or other institution with whom moneys or stock have been deposited. Section 13. SURETY BONDS. Unless required by law, no director shall be obligated to give any bond or surety or other security for the performance of any of his duties. 7 Section 14. RELIANCE. Each director, officer, employee and agent of the Corporation shall, in the performance of his duties with respect to the Corporation, be fully justified and protected with regard to any act or failure to act in reliance in good faith upon the books of account or other records of the Corporation, upon an opinion of counsel or upon reports made to the Corporation by any of its officers or employees or by the adviser, accountants, appraisers or other experts or consultants selected by the Board of Directors or officers of the Corporation, regardless of whether such counsel or expert may also be a director. Section 15. CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. The directors shall have no responsibility to devote their full time to the affairs of the Corporation. Any director or officer, employee or agent of the Corporation, in his personal capacity or in a capacity as an affiliate, employee, or agent of any other person, or otherwise, may have business interests and engage in business activities similar to or in addition to or in competition with those of or relating to the Corporation. ARTICLE IV COMMITTEES Section 1. NUMBER, TENURE AND QUALIFICATIONS. The Board of Directors may appoint from among its members an Executive Committee, an Audit Committee, a Compensation Committee and other committees, composed of two or more directors, to serve at the pleasure of the Board of Directors. Section 2. POWERS. The Board of Directors may delegate to committees appointed under Section 1 of this Article any of the powers of the Board of Directors, except as prohibited by law. Section 3. MEETINGS. Notice of committee meetings shall be given in the same manner as notice for special meetings of the Board of Directors. A majority of the members of the committee shall constitute a quorum for the transaction of business at any meeting of the committee. The act of a majority of the committee members present at a meeting shall be the act of such committee. The Board of Directors may designate a chairman of any committee, and such chairman or any two members of any committee may fix the time and place of its meeting unless the Board shall otherwise provide. In the absence of any member of any such committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint another director to act in the place of such absent member. Each committee shall keep minutes of its proceedings. Section 4. TELEPHONE MEETINGS. Members of a committee of the Board of Directors may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting. Section 5. INFORMAL ACTION BY COMMITTEES. Any action required or permitted to be taken at any meeting of a committee of the Board of Directors may be taken 8 without a meeting, if a consent in writing to such action is signed by each member of the committee and such written consent is filed with the minutes of proceedings of such committee. Section 6. VACANCIES. Subject to the provisions hereof, the Board of Directors shall have the power at any time to change the membership of any committee, to fill all vacancies, to designate alternate members to replace any absent or disqualified member or to dissolve any such committee. ARTICLE V OFFICERS Section 1. GENERAL PROVISIONS. The officers of the Corporation shall include a chief executive officer, a president, a secretary and a treasurer and may include a chairman of the board (or one or more co-chairmen of the board), a vice chairman of the board, one or more executive vice presidents, one or more senior vice presidents, one or more vice presidents, a chief operating officer, a chief financial officer, a treasurer, one or more assistant secretaries and one or more assistant treasurers. In addition, the Board of Directors may from time to time appoint such other officers with such powers and duties as they shall deem necessary or desirable. The officers of the Corporation shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of stockholders, except that the chief executive officer may appoint one or more vice presidents, assistant secretaries and assistant treasurers. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as may be convenient. Each officer shall hold office until his successor is elected and qualifies or until his death, resignation or removal in the manner hereinafter provided. Any two or more offices except president and vice president may be held by the same person. In its discretion, the Board of Directors may leave unfilled any office except that of president, treasurer and secretary. Election of an officer or agent shall not of itself create contract rights between the Corporation and such officer or agent. Section 2. REMOVAL AND RESIGNATION. Any officer or agent of the Corporation may be removed by the Board of Directors if in its judgment the best interests of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any officer of the Corporation may resign at any time by giving written notice of his resignation to the Board of Directors, the chairman of the board (or any co-chairman of the board if more than one), the president or the secretary. Any resignation shall take effect at any time subsequent to the time specified therein or, if the time when it shall become effective is not specified therein, immediately upon its receipt. The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation. Such resignation shall be without prejudice to the contract rights, if any, of the Corporation. Section 3. VACANCIES. A vacancy in any office may be filled by the Board of Directors for the balance of the term. Section 4. CHIEF EXECUTIVE OFFICER. The Board of Directors may designate a chief executive officer. In the absence of such designation, the chairman of the board (or, if 9 more than one, the co-chairmen of the board in the order designated at the time of their election or, in the absence of any designation, then in the order of their election) shall be the chief executive officer of the Corporation. The chief executive officer shall have general responsibility for implementation of the policies of the Corporation, as determined by the Board of Directors, and for the management of the business and affairs of the Corporation. Section 5. CHIEF OPERATING OFFICER. The Board of Directors may designate a chief operating officer. The chief operating officer shall have the responsibilities and duties as set forth by the Board of Directors or the chief executive officer. Section 6. CHIEF FINANCIAL OFFICER. The Board of Directors may designate a chief financial officer. The chief financial officer shall have the responsibilities and duties as set forth by the Board of Directors or the chief executive officer. Section 7. CHAIRMAN OF THE BOARD. The Board of Directors shall designate a chairman of the board (or one or more co-chairmen of the board). The chairman of the board shall preside over the meetings of the Board of Directors and of the stockholders at which he shall be present. If there be more than one, the co-chairmen designated by the Board of Directors will perform such duties. The chairman of the board shall perform such other duties as may be assigned to him or them by the Board of Directors. Section 8. CHAIRMAN OF THE BOARD EMERITUS. The directors may elect by a majority vote, from time to time, a chairman of the board emeritus (or one or more co-chairmen of the board emeritus). The chairman of the board emeritus shall be an honorary position and shall have no vote on any matter considered by the directors. The chairman of the board emeritus shall serve for such term as determined by the Board of Directors and may be removed by a majority vote of directors with or without cause. Section 9. PRESIDENT. The president or chief executive officer, as the case may be, shall in general supervise and control all of the business and affairs of the Corporation. In the absence of a designation of a chief operating officer by the Board of Directors, the president shall be the chief operating officer. He may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the Corporation or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the office of president and such other duties as may be prescribed by the Board of Directors from time to time. Section 10. VICE PRESIDENTS. In the absence of the president or in the event of a vacancy in such office, the vice president (or in the event there be more than one vice president, the vice presidents in the order designated at the time of their election or, in the absence of any designation, then in the order of their election) shall perform the duties of the president and when so acting shall have all the powers of and be subject to all the restrictions upon the president; and shall perform such other duties as from time to time may be assigned to him by the president or by the Board of Directors. The Board of Directors may designate one or more vice presidents as executive vice president or as vice president for particular areas of responsibility. 10 Section 11. SECRETARY. The secretary shall (a) keep the minutes of the proceedings of the stockholders, the Board of Directors and committees of the Board of Directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation; (d) keep a register of the post office address of each stockholder which shall be furnished to the secretary by such stockholder; (e) have general charge of the share transfer books of the Corporation; and (f) in general perform such other duties as from time to time may be assigned to him by the chief executive officer, the president or by the Board of Directors. Section 12. TREASURER. The treasurer shall have the custody of the funds and securities of the Corporation and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. In the absence of a designation of a chief financial officer by the Board of Directors, the treasurer shall be the chief financial officer of the Corporation. The treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the president and Board of Directors, at the regular meetings of the Board of Directors or whenever it may so require, an account of all his transactions as treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, moneys and other property of whatever kind in his possession or under his control belonging to the Corporation. Section 13. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The assistant secretaries and assistant treasurers, in general, shall perform such duties as shall be assigned to them by the secretary or treasurer, respectively, or by the president or the Board of Directors. The assistant treasurers shall, if required by the Board of Directors, give bonds for the faithful performance of their duties in such sums and with such surety or sureties as shall be satisfactory to the Board of Directors. Section 14. SALARIES. The salaries and other compensation of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary or other compensation by reason of the fact that he is also a director. ARTICLE VI CONTRACTS, LOANS, CHECKS AND DEPOSITS Section 1. CONTRACTS. The Board of Directors may authorize any officer or agent to enter into any contract or to execute and deliver any instrument in the name of and on behalf 11 of the Corporation and such authority may be general or confined to specific instances. Any agreement, deed, mortgage, lease or other document executed by one or more of the directors or by an authorized person shall be valid and binding upon the Board of Directors and upon the Corporation when authorized or ratified by action of the Board of Directors. Section 2. CHECKS AND DRAFTS. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or agent of the Corporation in such manner as shall from time to time be determined by the Board of Directors. Section 3. DEPOSITS. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board of Directors may designate. ARTICLE VII STOCK Section 1. CERTIFICATES. Each stockholder shall be entitled to a certificate or certificates which shall represent and certify the number of shares of each class of stock held by him in the Corporation. Each certificate shall be signed by the chief executive officer, the president or a vice president and countersigned by the secretary or an assistant secretary or the treasurer or an assistant treasurer and may be sealed with the seal, if any, of the Corporation. The signatures may be either manual or facsimile. Certificates shall be consecutively numbered; and if the Corporation shall, from time to time, issue several classes of stock, each class may have its own number series. A certificate is valid and may be issued whether or not an officer who signed it is still an officer when it is issued. Each certificate representing shares which are restricted as to their transferability or voting powers, which are preferred or limited as to their dividends or as to their allocable portion of the assets upon liquidation or which are redeemable at the option of the Corporation, shall have a statement of such restriction, limitation, preference or redemption provision, or a summary thereof, plainly stated on the certificate. If the Corporation has authority to issue stock of more than one class, the certificate shall contain on the face or back a full statement or summary of the designations and any preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of each class of stock and, if the Corporation is authorized to issue any preferred or special class in series, the differences in the relative rights and preferences between the shares of each series to the extent they have been set and the authority of the Board of Directors to set the relative rights and preferences of subsequent series. In lieu of such statement or summary, the certificate may state that the Corporation will furnish a full statement of such information to any stockholder upon request and without charge. If any class of stock is restricted by the Corporation as to transferability, the certificate shall contain a full statement of the restriction or state that the Corporation will furnish information about the restrictions to the stockholder on request and without charge. Section 2. TRANSFERS. Upon surrender to the Corporation or the transfer agent of the Corporation of a stock certificate duly endorsed or accompanied by proper evidence of 12 succession, assignment or authority to transfer, the Corporation shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. The Corporation shall be entitled to treat the holder of record of any share of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Maryland. Notwithstanding the foregoing, transfers of shares of any class of stock will be subject in all respects to the charter of the Corporation and all of the terms and conditions contained therein. Section 3. REPLACEMENT CERTIFICATE. Any officer designated by the Board of Directors may direct a new certificate to be issued in place of any certificate previously issued by the Corporation alleged to have been lost, stolen or destroyed upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen or destroyed. When authorizing the issuance of a new certificate, an officer designated by the Board of Directors may, in his discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or the owner's legal representative to advertise the same in such manner as he shall require and/or to give bond, with sufficient surety, to the Corporation to indemnify it against any loss or claim which may arise as a result of the issuance of a new certificate. Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The Board of Directors may set, in advance, a record date for the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or determining stockholders entitled to receive payment of any dividend or the allotment of any other rights, or in order to make a determination of stockholders for any other proper purpose. Such date, in any case, shall not be prior to the close of business on the day the record date is fixed and shall be not more than 90 days and, in the case of a meeting of stockholders, not less than ten days, before the date on which the meeting or particular action requiring such determination of stockholders of record is to be held or taken. In lieu of fixing a record date, the Board of Directors may provide that the stock transfer books shall be closed for a stated period but not longer than 20 days. If the stock transfer books are closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such books shall be closed for at least ten days before the date of such meeting. If no record date is fixed and the stock transfer books are not closed for the determination of stockholders, (a) the record date for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day on which the notice of meeting is mailed or the 30th day before the meeting, whichever is the closer date to the meeting; and (b) the record date for the determination of stockholders entitled to receive payment of a dividend or an allotment of any other rights shall be 13 the close of business on the day on which the resolution of the directors, declaring the dividend or allotment of rights, is adopted. When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this section, such determination shall apply to any adjournment thereof, except when (i) the determination has been made through the closing of the transfer books and the stated period of closing has expired or (ii) the meeting is adjourned to a date more than 120 days after the record date fixed for the original meeting, in either of which case a new record date shall be determined as set forth herein. Section 5. STOCK LEDGER. The Corporation shall maintain at its principal office or at the office of its counsel, accountants or transfer agent, an original or duplicate share ledger containing the name and address of each stockholder and the number of shares of each class held by such stockholder. Section 6. FRACTIONAL STOCK; ISSUANCE OF UNITS. The Board of Directors may issue fractional stock or provide for the issuance of scrip, all on such terms and under such conditions as they may determine. Notwithstanding any other provision of the charter or these Bylaws, the Board of Directors may issue units consisting of different securities of the Corporation. Any security issued in a unit shall have the same characteristics as any identical securities issued by the Corporation, except that the Board of Directors may provide that for a specified period securities of the Corporation issued in such unit may be transferred on the books of the Corporation only in such unit. ARTICLE VIII ACCOUNTING YEAR The Board of Directors shall have the power, from time to time, to fix the fiscal year of the Corporation by a duly adopted resolution. ARTICLE IX DISTRIBUTIONS Section 1. AUTHORIZATION. Dividends and other distributions upon the stock of the Corporation may be authorized and declared by the Board of Directors, subject to the provisions of law and the charter of the Corporation. Dividends and other distributions may be paid in cash, property or stock of the Corporation, subject to the provisions of law and the charter. Section 2. CONTINGENCIES. Before payment of any dividends or other distributions, there may be set aside out of any assets of the Corporation available for dividends or other distributions such sum or sums as the Board of Directors may from time to time, in its absolute discretion, think proper as a reserve fund for contingencies, for equalizing dividends or other distributions, for repairing or maintaining any property of the Corporation or for such other purpose as the Board of Directors shall determine to be in the best interest of the Corporation, 14 and the Board of Directors may modify or abolish any such reserve in the manner in which it was created. ARTICLE X INVESTMENT POLICY Subject to the provisions of the charter of the Corporation, the Board of Directors may from time to time adopt, amend, revise or terminate any policy or policies with respect to investments by the Corporation as it shall deem appropriate in its sole discretion. ARTICLE XI SEAL Section 1. SEAL. The Board of Directors may authorize the adoption of a seal by the Corporation. The seal shall contain the name of the Corporation and the year of its incorporation and the words "Corporate Seal Maryland." The Board of Directors may authorize one or more duplicate seals and provide for the custody thereof. Section 2. AFFIXING SEAL. Whenever the Corporation is permitted or required to affix its seal to a document, it shall be sufficient to meet the requirements of any law, rule or regulation relating to a seal to place the word "(SEAL)" adjacent to the signature of the person authorized to execute the document on behalf of the Corporation. ARTICLE XII INDEMNIFICATION AND ADVANCES FOR EXPENSES To the maximum extent permitted by Maryland law in effect from time to time, the Corporation, without requiring a preliminary determination of the ultimate entitlement to indemnification, shall indemnify and shall pay or reimburse reasonable expenses in advance of final disposition of a proceeding to (a) any individual who is a present or former director or officer of the Corporation and who is made a party to the proceeding by reason of his service in that capacity or (b) any individual who, while a director of the Corporation and at the request of the Corporation, serves or has served another corporation, partnership, joint venture, trust, employee benefit plan or any other enterprise as a director, officer, partner or trustee of such corporation, partnership, joint venture, trust, employee benefit plan or other enterprise and who is made a party to the proceeding by reason of his service in that capacity. The Corporation may, with the approval of its Board of Directors, provide such indemnification and advance for expenses to a person who served a predecessor of the Corporation in any of the capacities described in (a) or (b) above and to any employee or agent of the Corporation or a predecessor of the Corporation. Neither the amendment nor repeal of this Article, nor the adoption or amendment of any other provision of the Bylaws or charter of the Corporation inconsistent with this Article, 15 shall apply to or affect in any respect the applicability of the preceding paragraph with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption. ARTICLE XIII WAIVER OF NOTICE Whenever any notice is required to be given pursuant to the charter of the Corporation or these Bylaws or pursuant to applicable law, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at nor the purpose of any meeting need be set forth in the waiver of notice, unless specifically required by statute. The attendance of any person at any meeting shall constitute a waiver of notice of such meeting, except where such person attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. ARTICLE XIV AMENDMENT OF BYLAWS The Board of Directors shall have the exclusive power to adopt, alter or repeal any provision of these Bylaws and to make new Bylaws. 16 EX-3.4 3 EXHIBIT 3.4 EXHIBIT 3.4 RECKSON ASSOCIATES REALTY CORP. ARTICLES SUPPLEMENTARY ESTABLISHING AND FIXING THE RIGHTS AND PREFERENCES OF A CLASS OF SHARES OF COMMON STOCK Reckson Associates Realty Corp., a Maryland corporation (the "Corporation"), certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Pursuant to the authority expressly vested in the board of directors of the Corporation (the "Board of Directors") by Article VI of its charter, as heretofore amended and restated (which, as hereafter restated or amended from time to time, are together with these Articles Supplementary herein called the "Articles"), the Board of Directors has, by resolution, duly designated and reclassified 12,000,000 shares of the common stock of the Corporation into a class designated Class B Exchangeable Common Stock and has provided for the issuance of such class. SECOND: The preferences, rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption of the shares of such class of common stock, which upon any restatement of the Articles shall be included as part of Article VI of the Articles, are as follows: CLASS B EXCHANGEABLE COMMON STOCK 1. Designation and Number. A class of Common Stock of the Corporation, designated the "Class B Exchangeable Common Stock" (the "Class B Common"), is hereby established. The number of shares of the Class B Common shall be 12,000,000. 2. Distributions. (a) For any quarterly period, holders of the shares of Class B Common shall be entitled to receive, if, when and as authorized by the Board of Directors out of funds legally available for the payment of distributions, cash distributions in an amount per share equal to the Class B Dividend Amount. Distributions on the Class B Common, if authorized, shall be payable quarterly in arrears on January 31, April 30, July 31 and October 31 of each year or, if not a Business Day, the next succeeding Business Day, commencing July 31, 1999 (each, a "Distribution Payment Date"). Distributions will be payable to holders of record as they appear in the stock transfer records of the Corporation at the close of business on the applicable record date, which shall be such date designated by the Board of Directors of the Corporation for the payment of distributions that is not more than 30 nor less than 10 days prior to such Distribution Payment Date (each, a "Distribution Payment Record Date"). (b) No distributions on the Class B Common shall be authorized by the Board of Directors of the Corporation or be paid or set apart for payment by the Corporation at such time as the terms and provisions of any agreement of the Corporation, including any agreement relating to its indebtedness, prohibits such authorization, payment or setting apart for payment or provides that such authorization, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such authorization or payment shall be restricted or prohibited by law. (c) Distributions on the Class B Common will be noncumulative. If the Board of Directors of the Corporation does not authorize a dividend on the Class B Common payable on any Distribution Payment Date while any Class B Common is outstanding, then holders of the Class B Common will have no right to receive a distribution for that Distribution Payment Date, and the Corporation will have no obligation to pay a distribution for that Distribution Payment Date, whether or not distributions are declared and paid for any future Distribution Payment Date with respect to either the Common Stock, the preferred stock, par value $0.01 per share, of the Corporation or any other Capital Stock. (d) No distributions, whether in cash, securities or property, will be authorized or paid or set apart for payment to holders of Common Stock for any quarterly period unless for each share of Class B Common outstanding, a distribution equal to the Class B Dividend Amount with respect to such period has been or contemporaneously is authorized and paid or authorized and a sum sufficient for the payment thereof is set apart for such payment to holders of the Class B Common for the then current distribution period. No interest, or sum of money in lieu of interest, shall be payable in respect of any distribution payment or payments on Class B Common which may be in arrears. (e) Subject to the rights and preferences of other classes or series of Capital Stock, the Corporation, at its election and as determined in the sole discretion of the Board of Directors of the Corporation, may authorize and pay a distribution to holders of Class B Common in excess of the Class B Dividend Amount. (f) Shares of Class B Common shall not entitle the holders thereof to receive any distribution made in respect of Common Stock. 3. Liquidation. Upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation (referred to herein as a "liquidation"), the holders of the Class B Common will have no liquidation preference, but will be entitled to share ratably (treating each Class B Common share as the equivalent of that number of shares of Common Stock into which it may then be exchanged) in any distribution or payment made to holders of Common Stock. 4. Redemption. Shares of Class B Common will not be redeemable; provided, however, that the foregoing shall not prohibit the Corporation from repurchasing shares of Class B Common from any holder if and to the extent such holder agrees to sell such shares. 5. Voting Rights. Holders of Class B Common shall have the right to vote on all matters submitted to a vote of the holders of Common Stock; holders of Class B Common and Common Stock shall vote together as a single class. In addition, the affirmative vote or consent of the Holders of at least 2 two-thirds of the outstanding shares of Class B Common, given in person or by proxy, either in writing or at a meeting, voting separately as a class, shall be required to amend, alter or repeal these Articles Supplementary, whether by merger, consolidation or otherwise (an "Event"), so as to materially and adversely affect any right, preference, privilege or voting power of the Class B Common or the Holders thereof; provided, however, with respect to the occurrence of any of the Events referred to above, so long as the Class B Common remains outstanding with the terms thereof materially unchanged, taking into account that upon the occurrence of an Event, the Corporation may not be the surviving entity, the occurrence of any such Event shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting power of Holders of Class B Common. In any such vote, each holder of Class B Common shall be entitled to one vote with respect to each share of Class B Common held by such holder. 6. Exchange at Holder's Election. (a) Subject to Section 10, shares of Class B Common will be exchangeable at any time, at the option of the holders thereof, into Common Stock at a rate of one share of Common Stock per share of Class B Common, subject to adjustment as described below (the "Exchange Rate"); provided, however, that the right of a holder to exchange shares of Class B Common for which the Corporation has mailed an Exchange Notice (as defined below) will terminate at the close of business on the fifth Business Day prior to the Exchange Date (as defined below). (b) To exercise the exchange right, the holder of Class B Common to be exchanged shall surrender the certificate representing such Class B Common, duly endorsed or assigned to the Corporation or in blank, at the principal office of the Transfer Agent accompanied by written notice to the Corporation that such holder elects to exchange such Class B Common. Unless the shares issuable on exchange are to be issued in the same name as the name in which such Class B Common is registered, in which case the Corporation shall bear the related taxes, each share surrendered for exchange shall be accompanied by instruments of transfer, in form satisfactory to the Corporation, duly executed by the holder or such holder's duly authorized attorney and an amount sufficient to pay any transfer or similar tax (or evidence reasonably satisfactory to the Corporation demonstrating that such taxes have been paid). (c) Each exchange consummated pursuant to this Section 6 shall be deemed to have been effected immediately prior to the close of business on the date on which the certificates representing shares of Class B Common shall have been surrendered and such notice (and if applicable, payment of an amount equal to the distribution payable on such shares) received by the Corporation as aforesaid, and the person or persons in whose name or names any certificate or certificates representing shares of Common Stock shall be issuable upon such exchange shall be deemed to have become the holder or holders of record of the shares represented thereby at such time on such date, and such exchange shall be at the Exchange Rate in effect at such time and on such date unless the stock transfer records of the Corporation shall be closed on that date, in which event such person or persons shall be deemed to have become such holder or holders of record at the close of business on the next succeeding day on which such stock transfer records are open, but such exchange shall be at the Exchange Rate in effect on the date on which such shares have been surrendered and such notice received by the Corporation. 3 (d) Holders of shares of Class B Common at the close of business on a Distribution Payment Record Date shall be entitled to receive and retain the distribution payable on such shares on the corresponding Distribution Payment Date notwithstanding the exchange of such shares following such Distribution Payment Record Date and on or prior to such Distribution Payment Date. Except as provided above, the Corporation shall make no payment or allowance for unpaid distributions, whether or not in arrears, on exchanged shares or for distribution on the Common Stock that is issued upon such exchange. As promptly as practicable after the surrender of certificates representing Class B Common as aforesaid, the Corporation shall issue and shall deliver at such office to such holder, or on his written order, a certificate or certificates for the number of full shares of Common Stock issuable upon the exchange of such shares in accordance with the provisions of this Section 6, and any fractional interest in respect of a share of Common Stock arising upon such conversion shall be settled as provided in Section 8. 7. Exchange at Corporation's Option. (a) The Class B Common shall not be exchangeable by the Corporation prior to the end of the 54-month period commencing with the Class B Issue Date. Subject to Section 10, each share of Class B Common (and each share of Class B Excess Common (as defined below)) will be exchangeable at any time after the fifty-four (54) month period immediately following the Class B Issue Date, at the option of the Corporation, into Common Stock at the Exchange Rate, plus the amounts indicated in Section 7(e). If fewer than all of the outstanding shares of Class B Common are to be exchanged, the shares to be exchanged shall be determined pro rata or by lot or in such other manner as prescribed by the Board of Directors of the Corporation to be equitable. If fewer than all the shares of Class B Common represented by any certificate are exchanged, then new certificates representing the unredeemed shares shall be issued without cost to the holder thereof. (b) At least 30 days, but no more than 60 days, prior to a date fixed for exchange of some or all of the Class B Common (the "Exchange Date") in accordance with this Section 7, written notice (the "Exchange Notice") shall be given by first class mail, to each holder of record on a date no more than three business days prior to the mailing date of such notice at such holder's address as it appears in the stock transfer records of the Corporation; provided, however, neither failure to give such notice nor any deficiency therein shall affect the validity of the procedure for the exchange of any share of Class B Common to be exchanged. The Exchange Notice shall include the following information: (i) the Exchange Rate; (ii) the number of shares of Class B Common to be exchanged and, if fewer than all the shares held by such holders are to be exchanged, the number of such shares to be exchanged from such holder; (iii) the Exchange Date; (iv) the manner in which the holder is to surrender to the Corporation or the Transfer Agent, the certificate or certificates representing the shares of Class B Common to be exchanged; 4 (v) that the holder's right to elect to exchange such holder's Class B Common for Common Stock will terminate on the fifth Business Day prior to the Exchange Date; and (vi) that dividends on the shares of Class B Common to be exchanged shall cease on the Exchange Date unless the Corporation defaults in the issuance of the Common Stock issuable upon exchange of such Class B Common. (c) Each holder shall surrender the certificate or certificates representing such shares of Class B Common so exchanged to the Corporation or the Transfer Agent, duly endorsed (or otherwise in proper form for transfer, as determined by the Corporation), in the manner and at the place designated in the Exchange Notice, and on the Exchange Date the number of full shares of Common Stock issuable upon the exchange of such shares of Class B Common shall be payable to the holder whose name appears on such certificate or certificates as the owner thereof, and each surrendered certificate shall be canceled and retired. (d) On or after the Exchange Date, unless the Corporation defaults in the issuance of the shares of Common Stock as described above and except as provided in Section 7(e), (i) all distributions on any Class B Common so called for exchange shall cease on the Exchange Date, and all rights of the holders of such shares of Class B Common as holders of Class B Common shall terminate with respect thereto on the Exchange Date, other than the right to receive the shares of Common Stock issuable upon exchange thereof, (ii) the shares of Class B Common called for exchange will not be transferred (except with the consent of the Corporation) on the Corporation's stock transfer records, and (iii) such shares shall no longer be deemed outstanding for any purpose whatsoever. Until shares of Class B Common Stock called for exchange are surrendered in the manner described in the Exchange Notice, no shares of Common Stock will be issued in respect thereof. No provision will be made in respect of distributions payable on such Common Stock prior to the Exchange Date. (e) If the Exchange Date falls after a Distribution Payment Record Date and on or prior to the corresponding Distribution Payment Date, then each holder of Class B Common at the close of business on such Distribution Payment Record Date shall be entitled to the distribution payable on such shares on the corresponding Distribution Payment Date notwithstanding the exchange of such shares prior to such Distribution Payment Date. (f) Following the Exchange Date, the Corporation shall pay all distributions payable on the Common Stock to be exchanged for the Class B Common with a record date for such distribution following the Exchange Date notwithstanding the exchange of certificates representing such shares after such the Distribution Payment Record Date. 8. No Fractional Shares. No fractional shares of Common Stock shall be issued upon exchange of Class B Common. Instead of any fractional share of Common Stock that would otherwise be deliverable upon the exchange of a share of Class B Common, the Corporation shall pay to the holder of such share an amount in cash in respect of such fractional interest based upon the Current Market Price of a share of Common Stock on the Trading Day immediately preceding the date of exchange. If more than one share of Class B Common shall be surrendered for exchange at one time by the same holder, the number of full shares of Common Stock issuable upon exchange 5 thereof shall be computed on the basis of the aggregate number of shares of Class B Common so surrendered. 9. Exchange Rate Adjustments. (a) The Exchange Rate shall be adjusted from time to time as follows: (i) If the Corporation shall after the date on which shares of Class B Common are first issued (the "Class B Issue Date") (A) pay or make a distribution to holders of Common Stock in the form of Common Stock, (B) subdivide its outstanding Common Stock into a greater number of shares, (C) combine its outstanding Common Stock into a smaller number of shares or (D) issue any equity securities by reclassification of its Common Stock (other than any reclassification by way of merger or binding share exchange that is subject to Section 9(b)), then the Exchange Rate in effect at the opening of business on the day following the record date for the determination of stockholders entitled to receive such distribution or at the opening of business on the day following the day on which such subdivision, combination or reclassification becomes effective, as the case may be, shall be adjusted so that the holder of any share of Class B Common thereafter surrendered for exchange shall be entitled to receive the number of shares of Common Stock and other equity securities issued by reclassification of Common Stock that such holder would have owned or have been entitled to receive after the happening of any of the events described above had such shares been exchanged immediately prior to the record date in the case of a distribution or the effective date in the case of a subdivision, combination or reclassification. An adjustment made pursuant to this subparagraph (i) shall become effective immediately after the opening of business on the day following such record date (except as provided in Section 9(e)) in the case of a distribution and shall become effective immediately after the opening of business on the day next following the effective date in the case of a subdivision, combination or reclassification. (ii) If the Corporation shall issue after the Class B Issue Date rights, options or warrants to all holders of Common Stock entitling them (for a period expiring within 45 days after the record date for determination of stockholders entitled to receive such rights, options or warrants) to subscribe for or purchase shares of Common Stock (or securities convertible into or exchangeable for Common Stock) at a price per share less than the Fair Market Value per share of Common Stock on the record date for the determination of stockholders entitled to receive such rights, options or warrants, then the Exchange Rate in effect at the opening of business on the day following such record date shall be adjusted to equal the amount determined by multiplying (I) the Exchange Rate in effect immediately prior to the opening of business on the day following the record date fixed for such determination by (II) a fraction, the numerator of which shall be the sum of (A) the number of shares of Common Stock outstanding on the close of business on the record date fixed for such determination and (B) the number of additional shares of Common Stock offered for subscription or purchase pursuant to such rights, options or warrants and the denominator of which shall be the sum of (A) the number of shares of Common Stock outstanding on the close of business on the record date fixed for such determination and (B) the number of shares that the aggregate proceeds to the Corporation from the exercise of such rights, options or warrants for Common Stock would purchase at such Fair Market Value. Such adjustment shall become effective immediately after the opening of business on the day following such record date (except as provided in Section 9(e)). In determining whether any rights, options or warrants entitle the holders of Common Stock to 6 subscribe for or purchase Common Stock at less than the Fair Market Value, there shall be taken into account any consideration received by the Corporation upon issuance and upon exercise of such rights, options or warrants, with the value of such consideration, if other than cash, to be determined by the Board of Directors of the Corporation. (iii) If the Corporation shall distribute to all holders of its Common Stock any equity securities of the Corporation (other than Common Stock) or evidences of its indebtedness or assets (excluding cash distributions and those rights, options and warrants referred to in and treated under subparagraph (ii) above), then the Exchange Rate shall be adjusted so that it shall equal the amount determined by multiplying (I) the Exchange Rate in effect immediately prior to the close of business on the record date fixed for the determination of stockholders entitled to receive such distribution by (II) a fraction, the numerator of which shall be the Fair Market Value per share of Common Stock on the record date for such determination and the denominator of which shall be the Fair Market Value per share of Common Stock on the record date for such determination less the then fair market value (as determined by the Board of Directors of the Corporation, whose determination shall be conclusive) of the portion of the equity securities, evidences of indebtedness or assets so distributed applicable to one share of Common Stock. Such adjustment shall become effective immediately at the opening of business on the day following such record date (except as provided in Section 9(e)). For the purposes of this subparagraph (iii), the distribution of equity securities, evidences of indebtedness or assets which are distributed not only to the holders of Common Stock on the record date fixed for the determination of stockholders entitled to such distribution, but also are distributed with each share of Common Stock delivered to a person exchanging a share of Class B Common at any time after such record date, shall not require an adjustment of the Exchange Rate pursuant to this subparagraph (iii), provided that on the date, if any, on which a person exchanging a share of Class B Common would no longer be entitled to receive such equity securities, evidences of indebtedness or assets with a share of Common Stock (other than as a result of the termination of all such equity securities, evidences of indebtedness or assets), a distribution of such equity securities, evidences of indebtedness or assets shall be deemed to have occurred, and the Exchange Rate shall be adjusted as provided in this subparagraph (iii) (and such day shall be deemed to be "the record date fixed for the determination of the stockholders entitled to receive such distribution" and the "record date" within the meaning of the two preceding sentences). (iv) The Exchange Rate may be further adjusted from time to time as described in this subparagraph (iv); provided, however, that the Exchange Rate as so adjusted shall only be applicable in the event that the exchange of Class B Common is effected pursuant to Section 6 and then, only to shares of Class B Common surrendered for exchange in accordance with Section 6(b); and all adjustments described in this subparagraph (iv) shall be disregarded in the event of any exchange pursuant to Section 7. If during any two consecutive quarters, the total distributions paid on a share of Class B Common for each such quarter and the immediately prior quarter is less than the sum of (x) 1/4th of the Unadjusted Class B Dividend Amount applicable to the current quarter plus (y) 1/4th of the Unadjusted Class B Dividend Amount applicable to the immediately prior quarter, then the Exchange Rate thereafter shall be subject to adjustment as follows. If at the time the exchange option is exercised pursuant to Section 6: (A) the Exchange Consideration Amount is equal to or greater than $27.50, then no additional adjustment is required; 7 (B) the Exchange Consideration Amount is less than $27.50, but equal to or greater than $22.00, then the Exchange Rate will be multiplied by the quotient of (I) $27.50 divided by (II) the Exchange Consideration Amount; and (C) the Exchange Consideration Amount is less than $22.00, then the Exchange Rate will be multiplied by 1.25. (v) No adjustment in the Exchange Rate shall be required other than by reason of Section 9(a)(iv) unless such adjustment would require a cumulative increase or decrease of at least 1% in the Exchange Rate; provided, however, that any adjustments that by reason of this subparagraph (v) are not required to be made shall be carried forward and taken into account in any subsequent adjustment until made; and provided, further, that any adjustment shall be required and made in accordance with the provisions of this Section 9 (other than this subparagraph (v)) not later than such time as may be required in order to preserve the tax-free nature of a distribution to the holders of Common Stock. Notwithstanding any other provisions of this Section 9, the Corporation shall not be required to make any adjustment of the Exchange Rate for the issuance of any Common Stock pursuant to any plan providing for the reinvestment of distributions or interest payable on securities of the Corporation and the investment of additional optional amounts in Common Stock under such plan. All calculations under this Section 9 shall be made to the nearest cent (with $.005 being rounded upward) or to the nearest one-tenth of a share (with .05 of a share being rounded upward), as the case may be. Anything in this subsection (a) to the contrary notwithstanding, the Corporation shall be entitled, to the extent permitted by law, to make such increases in the Exchange Rate, in addition to those required by this subsection (a), as it in its discretion shall determine to be advisable in order that any share distributions, subdivision, reclassification or combination of shares, distribution of rights, options or warrants to purchase shares or securities, or a distribution of other assets (other than cash distributions) hereafter made by the Corporation to its stockholders shall not be taxable. (b) Except as otherwise provided for in Section 9(a)(i), if the Corporation shall be a party to any transaction (including, without limitation, a merger, consolidation, statutory share exchange, tender offer for all or substantially all of the Common Stock, sale or transfer of all or substantially all of the Corporation's assets or recapitalization of the Common Stock) (each of the foregoing being referred to herein as a "Transaction"), in each case as a result of which Common Stock shall be converted into the right to receive shares, stock, securities or other property (including cash or any combination thereof), the Corporation (or its successor in such Transaction) shall make appropriate provision so that each share of Class B Common, if not converted into the right to receive shares, stock, securities or other property in connection with such Transaction in accordance with the third to last sentence of this subsection (b) shall thereafter be exchangeable into the kind and amount of shares, stock, securities and other property (including cash or any combination thereof) receivable upon the consummation of such Transaction by a holder of that number of shares of Common Stock into which one share of Class B Common was convertible immediately prior to such Transaction, assuming such holder of Common Stock (i) is not a Person with which the Corporation consolidated or into which the Corporation merged or which merged into the Corporation or to which such sale or transfer was made, as the case may be (a "Constituent Person"), or an affiliate of a Constituent Person and (ii) failed to exercise his rights of the election, if any, as to the kind or amount of shares, stock, 8 securities and other property (including cash or any combination thereof) receivable upon such Transaction (each, a "Non-Electing Share") (provided that if the kind and amount of shares, stock, securities and other property (including cash or any combination thereof) receivable upon consummation of such Transaction is not the same for each Non-Electing Share, the kind and amount of shares, stock, securities and other property (including cash or any combination thereof) receivable upon such Transaction by each Non-Electing Share shall be deemed to be the kind and amount so receivable per share by a plurality of the Non-Electing Shares). The Corporation shall not be a party to any Transaction in which any share of Class B Common is converted into the right to receive shares, stock, securities or other property (including cash or any combination thereof) with an aggregate value (as determined by the Board of Directors in good faith, whose determination shall be conclusive) less than that receivable by the number of shares of Common Stock into which shares of Class B Common were exchangeable immediately prior to such Transaction. The Corporation shall not be a party to any Transaction unless the terms of such Transaction are consistent with the provisions of this subsection (b), and it shall not consent or agree to the occurrence of any Transaction until the Corporation has entered into an agreement with the successor or purchasing entity, as the case may be, for the benefit of the holders of the Class B Common that will contain provisions enabling holders of Class B Common that remains outstanding after such Transaction to exchange their Class B Common into the consideration received by holders of Common Stock at the Exchange Rate in effect immediately prior to such Transaction. The provisions of this subsection (b) shall similarly apply to successive Transactions. (c) If: (i) the Corporation shall declare a distribution on the Common Stock (other than cash distributions which do not constitute extraordinary dividends) or there shall be a reclassification, subdivision or combination of the Common Stock; or (ii) the Corporation shall grant to the holders of the Common Stock of rights, options or warrants to subscribe for or purchase Common Stock at less than Fair Market Value; or (iii) the Corporation shall enter into a Transaction; or (iv) there shall occur the voluntary or involuntary liquidation, dissolution or winding up of the Corporation; or (v) there shall occur the circumstances described in clause (a)(iv) of Section 9 that would cause the Exchange Rate to be adjusted, then the Corporation shall cause to be filed with the Transfer Agent and shall cause to be mailed to the holders of the Class B Common at their addresses as shown on the stock transfer records of the Corporation, as promptly as possible, but at least 15 days prior to the applicable date hereinafter specified, a notice stating (i) the date on which a record is to be taken for the purpose of such distribution or rights, options or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such distribution or rights, options or warrants are to be determined or (ii) the date on which such reclassification, subdivision, combination, Transaction or liquidation, dissolution or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record 9 shall be entitled to exchange their Common Stock for securities or other property, if any, deliverable upon such reclassification, subdivision, combination, Transaction or liquidation, dissolution or winding up. Failure to give or receive such notice or any defect therein shall not affect the legality or validity of the proceedings described in this Section 9. (d) Whenever the Exchange Rate is adjusted as herein provided, the Corporation shall promptly file with the Transfer Agent an officer's certificate setting forth the Exchange Rate after such adjustment and setting forth a brief statement of the facts requiring such adjustment, which certificate shall be conclusive evidence of the correctness of such adjustment absent manifest error. Promptly after delivery of such certificate, the Corporation shall prepare a notice of such adjustment of the Exchange Rate setting forth the adjusted Exchange Rate and the effective date such adjustment becomes effective and shall mail such notice of such adjustment of the Exchange Rate to the holder of each share of Class B Common at such holder's last address as shown on the stock transfer records of the Corporation. (e) In any case in which Section 9(a) provides that an adjustment shall become effective on the day following the record date for an event, the Corporation may defer until the occurrence of such event (i) issuing to the holder of any share of Class B Common converted after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the shares of Common Stock issuable upon such conversion before giving effect to such adjustment and (ii) fractionalizing any share of Class B Common and/or paying to such holder any amount of cash in lieu of any fraction pursuant to Section 8. (f) There shall be no adjustment of the Exchange Rate in case of the issuance of any equity securities of the Corporation in a reorganization, acquisition or other similar transaction except as specifically set forth in this Section 9. If any action or transaction would require adjustment of the Exchange Rate pursuant to more than one subsection of Section 9(a), only one adjustment shall be made, and such adjustment shall be the amount of adjustment that has the highest absolute value. (g) If the Corporation shall take any action affecting the Common Stock, other than action described in this Section 9, that in the opinion of the Board of Directors of the Corporation would materially adversely affect the exchange rights of the holders of the Class B Common, the Exchange Rate for the Class B Common shall be adjusted, to the extent permitted by law, in such manner, if any, and at such time, as the Board of Directors of the Corporation, in its sole discretion, determines to be equitable in the circumstances. (h) The Corporation shall at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock, for the purpose of effecting any exchange of the Class B Common, the full number of shares of Common Stock deliverable upon the exchange of all outstanding shares of Class B Common not theretofore exchanged. For purposes of this subsection (h), the number of shares of Common Stock that shall be deliverable upon the exchange of all outstanding shares of Class B Common shall be computed as if at the time of computation all such outstanding shares were held by a single holder. The Corporation covenants that any shares of Common Stock issued upon exchange of the Class B Common shall be validly issued, fully paid and non-assessable. 10 The Corporation shall list the Common Stock required to be delivered upon exchange of the Class B Common, prior to such delivery, upon each national securities exchange, if any, upon which the outstanding Common Stock is listed at the time of such delivery. Prior to the delivery of any securities that the Corporation shall be obligated to deliver upon exchange of the Class B Common, the Corporation shall comply with all federal and state laws and regulations thereunder requiring the registration of such securities with, or any approval of or consent to the delivery thereof, by any governmental authority. (i) The Corporation shall pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of Common Stock or other securities or property on exchange of the Class B Common pursuant hereto; provided, however, that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issue or delivery of Common Stock or other securities or property in a name other than that of the record holder of the Class B Common to be exchanged, and no such issue or delivery shall be made unless and until the person requesting such issue or delivery has paid to the Corporation the amount of any such tax or established, to the reasonable satisfaction of the Corporation, that such tax has been paid. 10. Ownership Limitations. Notwithstanding Article VII of the Articles, the provisions of this Section 10 shall apply with respect to the limitations on the ownership and acquisition of shares of Class B Common. (a) Restriction on Ownership and Transfer. (i) Except as provided in Section 10(h), no Person shall Beneficially Own or Constructively Own any shares of Class B Common such that such Person would Beneficially Own or Constructively Own Capital Stock in excess of the Ownership Limit; (ii) Except as provided in Section 10(h), any Transfer (whether or not such Transfer is the result of a transaction entered into through the facilities of the New York Stock Exchange, Inc. (the "NYSE")) that, if effective, would result in any Person Beneficially Owning Class B Common in excess of the Ownership Limit shall be void ab initio as to the Transfer of such Class B Common which would be otherwise Beneficially Owned by such Person in excess of the Ownership Limit; and the intended transferee shall acquire no rights in such Class B Common; (iii) Except as provided in Section 10(h), any Transfer (whether or not such Transfer is the result of a transaction entered into through the facilities of the NYSE) that, if effective, would result in any Person Constructively Owning Class B Common in excess of the Ownership Limit shall be void ab initio as to the Transfer of such Class B Common which would be otherwise Constructively Owned by such Person in excess of the Ownership Limit; and the intended transferee shall acquire no rights in such Class B Common; and (iv) Notwithstanding any other provisions contained in this Section 10, any Transfer (whether or not such Transfer is the result of a transaction entered into through the facilities of the NYSE) or other event that, if effective, would result in the Corporation being "closely held" within the meaning of Section 856(h) of the Code, or would otherwise result in the Corporation failing to qualify as a REIT (including, but not limited to, a Transfer or other event that would result in the Corporation owning (directly or Constructively) an interest in a tenant 11 that is described in Section 856(d)(2)(B) of the Code if the income derived by the Corporation from such tenant would cause the Corporation to fail to satisfy any of the gross income requirements of Section 856(c) of the Code) shall be void ab initio as to the Transfer of the Class B Common or other event which would cause the Corporation to be "closely held" within the meaning of Section 856(h) of the Code or would otherwise result in the Corporation failing to qualify as a REIT; and the intended transferee or owner or Constructive or Beneficial Owner shall acquire or retain no rights in such Class B Common. (b) Conversion Into and Exchange For Class B Excess Common. If, notwithstanding the other provisions contained in this Section 10, at any time after the date of the Class B Issue Date, there is a purported Transfer (whether or not such Transfer is the result of a transaction entered into through the facilities of the NYSE), change in the capital structure of the Corporation or other event such that one or more of the restrictions on ownership and transfers described in Section 10(a), above, has been violated, then the Class B Common being Transferred (or in the case of an event other than a Transfer, the Class B Common owned or Constructively Owned or Beneficially Owned or, if the next sentence applies, the Class B Common identified in the next sentence) which would cause the restriction on ownership or transfer to be violated (rounded up to the nearest whole share) shall be automatically converted into an equal number of shares of Class B Common Excess Stock ("Class B Excess Common"). If at any time of such purported Transfer any of the shares of the Class B Common are then owned by a depositary to permit the trading of beneficial interests in fractional shares of Class B Common, then shares of Class B Common that shall be converted to Class B Excess Common shall be first taken from any Class B Common that is not in such depositary that is Beneficially Owned or Constructively Owned by the Person whose Beneficial Ownership or Constructive Ownership would otherwise violate the restrictions of Section 10(a) prior to converting any shares in such depositary. Any conversion pursuant to this subparagraph shall be effective as of the close of business on the Business Day prior to the date of such Transfer or other event. (c) Remedies For Breach. If the Board of Directors of the Corporation or its designee shall at any time determine in good faith that a Transfer or other event has taken place in violation of Section 10(a) or that a Person intends to Transfer or acquire, has attempted to Transfer or acquire or may Transfer or acquire direct ownership, beneficial ownership (determined without reference to any rules of attribution), Beneficial Ownership or Constructive Ownership of any shares of the Corporation in violation of Section 10(a), the Board of Directors of the Corporation or its designee shall take such action as it deems advisable to refuse to give effect to or to prevent such Transfer, acquisition or other event, including, but not limited to, causing the Corporation to purchase such shares for Fair Market Value upon the terms and conditions specified by the Board of Directors of the Corporation in its sole discretion, refusing to give effect to such Transfer, acquisition or other event on the books of the Corporation or instituting proceedings to enjoin such Transfer, acquisition or other event; provided, however, that any Transfer or acquisition (or, in the case of events other than a Transfer or acquisition, ownership or Constructive Ownership or Beneficial Ownership) in violation of Section 10(a) shall automatically result in the conversion described in Section 10(b), irrespective of any action (or non-action) by the Board of Directors of the Corporation. 12 (d) Notice of Restricted Transfer. Any Person who acquires or attempts to acquire or Beneficially Owns or Constructively Owns shares of Class B Common in excess of the aforementioned limitations, or any Person who is or attempts to become a transferee such that Class B Excess Common results under the provisions of these Articles, shall immediately give written notice or, in the event of a proposed or attempted Transfer, give at least 15 days prior written notice to the Corporation of such event and shall provide to the Corporation such other information as it may request in order to determine the effect of any such Transfer on the Corporation's status as a REIT. (e) Owners Required To Provide Information. From and after the Class B Issue Date, each Person who is a Beneficial Owner or Constructive Owner of Class B Common and each Person (including the stockholder of record) who is holding Class B Common for a Beneficial Owner or Constructive Owner shall provide to the Corporation such information with respect to the direct, indirect and constructive ownership of Class B Common as the Corporation may request, in good faith, in order to comply with the provisions of the Code applicable to REITs, to comply with the requirements of any taxing authority or governmental agency or to determine such compliance. (f) Remedies Not Limited. Nothing contained in this Section 10 (but subject to Section 10(l)) shall limit the authority of the Board of Directors of the Corporation to take such other action as it deems necessary or advisable to protect the Corporation and the interests of its stockholders by preservation of the Corporation's status as a REIT. (g) Ambiguity. In the case of an ambiguity in the application of any of the provisions of this Section 10, including any definition contained in Section 11, the Board of Directors of the Corporation shall have the power to determine the application of the provisions of this Section 10 with respect to any situation based on the facts known to it (subject, however, to the provisions of Section 10(l)). (h) Exceptions. (i) Subject to Section 10(a)(iv), the Board of Directors of the Corporation, in its sole and absolute discretion, with the advice of the Corporation's tax counsel, may exempt a Person from the limitation on a Person Beneficially Owning Class B Common in excess of the Ownership Limit if such Person is not an individual for purposes of Section 542(a)(2) of the Code and the Board of Directors obtains such representations and undertakings from such Person as are reasonably necessary to ascertain that no individual's Beneficially Owning Class B Common will violate the Ownership Limit and such Person agrees that any violation of such representations or undertaking (or other action which is contrary to the restrictions contained in this Section 10) or attempted violation will result in such Class B Common Beneficially Owned in excess of the Ownership Limit being exchanged for Class B Excess Common in accordance with Section 10(b). (ii) Subject to Section 10(a)(iv), the Board of Directors of the Corporation, in its sole and absolute discretion, with advice of the Corporation's tax counsel, may exempt a Person from the limitation on a Person Constructively Owning Class B Common in excess of the Ownership Limit if such Person does not and represents that it will not own, directly or constructively (by virtue of the application of Section 318 of the Code, as modified by Section 856(d)(5) of the Code), more than a 9% interest (as set forth in Section 856(d)(2)(B) 13 of the Code) in a tenant of the Corporation and the Board of Directors obtains such representations and undertakings from such Person as are reasonably necessary to ascertain this fact and such Person agrees that any violation or attempted violation will result in such Class B Common Constructively Owned in excess of the Ownership Limit being exchanged for Excess Stock in accordance with Section 10(b). (iii) Prior to granting any exception pursuant to Section 10(h)(i) or 10(h)(ii), the Board of Directors of this Corporation may require a ruling from the IRS, or an opinion of counsel, in either case in form and substance satisfactory to the Board of Directors, in its sole discretion as it may deem necessary or advisable in order to determine or ensure the Corporation's organization and operation in conformity with the requirements for qualification as a REIT under the Code; provided, however, that obtaining a favorable ruling or opinion shall not be required for the Board of Directors to grant an exception hereunder. (i) Increase in Ownership Limit. Notwithstanding anything herein to the contrary, Article VII, Section 9 of the charter of the Corporation shall apply to this Section 10. (j) Legend. Each certificate for Class B Common shall bear substantially the following legend: The Corporation will furnish to any stockholder, on request and without charge, a full statement of the information required by Section 2-211(d) of the Corporations and Associations Article of the Annotated Code of Maryland with respect to the designations and any preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, and terms and conditions of redemption of the shares of each class of stock which the Corporation has authority to issue and, if the Corporation is authorized to issue any preferred or special class in series, (i) the differences in the relative rights and preferences between the shares of each series to the extent set, and (ii) the authority of the Board of Directors to set such rights and preferences of subsequent series. The following summary does not purport to be complete and is subject to and qualified in its entirety by reference to the charter of the Corporation including all amendments and supplements thereto (the "Charter"), a copy of which, including restrictions on transfer, will be sent without charge to each stockholder who so requests. Such request must be made to the Secretary of the Corporation at its principal office or to the Transfer Agent. All capitalized terms in this legend have the meanings defined in the Charter. The securities represented by this certificate are subject to restrictions on ownership and transfer for the purpose of the Corporation's maintenance of its status as a real estate investment trust under the Internal Revenue Code of 1986, as amended. Except as otherwise provided pursuant to the Charter of the Corporation, no Person may Beneficially Own or Constructively Own any shares of Class B Common such that such Person would Beneficially Own or Constructively Own Common Equity in excess of 9% in value of the aggregate of the outstanding shares of Common 14 Equity of the Corporation. Any Person who acquires or attempts to acquire or Beneficially Owns or Constructively Owns shares of Class B Common in excess of the aforementioned limitation, or any Person who is or attempts to become a transferee such that Class B Excess Common would result under the provisions of the Charter, shall immediately give written notice or, in the event of a proposed or attempted Transfer, give at least 15 days prior written notice to the Corporation of such event and shall provide to the Corporation such other information as it may request in order to determine the effect of any such Transfer on the corporation's status as a REIT. Transfers in violation of the restrictions described above shall be void ab initio. If the restrictions on ownership and transfer are violated, the securities represented hereby will be designated and treated as shares of Class B Excess Common which will be transferred, by operation of law, to the trustee of a trust for the exclusive benefit of one or more charitable organizations. (k) Severability. If any provision of this Section 10 or any application of any such provision is determined to be invalid by any federal or state court having jurisdiction, the validity of the remaining provisions shall not be affected and other applications of such provision shall be affected only to the extent necessary to comply with the determination of such court. (l) Class B Excess Common. (i) Ownership In Trust. Upon any purported Transfer (whether or not such Transfer is the result of a transaction entered into through the facilities of the NYSE) that results in the issuance of Class B Excess Common pursuant to Section 10(b), such Class B Excess Common shall be deemed to have been transferred to the Trustee of a Trust for the exclusive benefit of one or more Charitable Beneficiaries. The Trustee shall be appointed by the Corporation, and shall be a person unaffiliated with the Corporation, any Purported Beneficial Transferee or any Purported Record Transferee. By written notice to the Trustee, the Corporation shall designate one or more non-profit organizations to be the Charitable Beneficiary(ies) of the interest in the Trust representing the Class B Excess Common such that (a) the shares of Class B Common from which the shares of Class B Excess Common held in the Trust were so converted would not violate the restrictions set forth in paragraph (a) of this Section 10 in the hands of such Charitable Beneficiary and (b) each Charitable Beneficiary is an organization described in Sections 170(b)(1)(a), 170(c)(2) and 501(c)(3) of the Code. The Trustee of the Trust will be deemed to own the Class B Excess Common for the benefit of the Charitable Beneficiary on the date of the purported Transfer or other event that results in Class B Excess Common pursuant to paragraph (b) of this Section 10. Class B Excess Common so held in trust shall be issued and outstanding shares of stock of the Corporation. The Purported Record Transferee shall have no rights in such Class B Excess Common except the right to designate a transferee of such Class B Excess Common upon the terms specified in Section 10(l)(v). The Purported Beneficial Transferee shall have no rights in such Class B Excess Common except as provided in this Section 10. (ii) Dividend Rights. Class B Excess Common will be entitled to dividends and distributions authorized and declared with respect to the Class B Common from which the Class B Excess Common was converted and will be payable to the Trustee of the Trust 15 in which such Class B Excess Common is held, for the benefit of the Charitable Beneficiary. Dividends and distributions will be authorized and declared with respect to each share of Class B Excess Common in an amount equal to the dividends and distributions authorized and declared on each share of Class B Common from which the Class B Excess Common was converted. Any dividend or distribution paid to a Purported Record Transferee prior to the discovery by the Corporation that Class B Common has been transferred in violation of the provisions of this Section 10 shall be repaid by the Purported Record Transferee to the Trustee upon demand. The Corporation shall rescind any dividend or distribution authorized and declared but unpaid as void ab initio with respect to the Purported Record Transferee, and the Corporation shall pay such dividend or distribution when due to the Trustee of the Trust for the benefit of the Charitable Beneficiary. (iii) Conversion Rights. Holders of shares of Class B Excess Common shall not be entitled to exchange any shares of Class B Excess Common into shares of Common Stock. Any exchange of shares of Class B Common for shares of Common Stock made prior to the discovery by the Corporation that such shares of Class B Common have been converted into Class B Excess Common shall be void ab initio and the Purported Record Transferee shall return the shares of Common Stock into which the Class B Common was exchanged upon demand to the Corporation which shares of Common Stock shall be exchanged back into Class B Excess Common and deposited into the Trust. Notwithstanding the foregoing, at any time on or after the Class B Issue Date, the Corporation may elect to exchange Class B Excess Common for Common Stock in accordance with Section 7. (iv) Rights Upon Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of, or any other distribution of all or substantially all of the assets of the Corporation, each holder of shares of Class B Excess Common shall be entitled to receive, ratably (treating each Class B Excess Common share as the equivalent of that number of shares of Common Stock into which it may then be exchanged by the Corporation pursuant to Section 7) with each other holder of Class B Common and Class B Excess Common converted from Class B Common, any distribution or payment made to all holders of Common Stock. Any liquidation distributions to be distributed with respect to Class B Excess Common shall be distributed in the same manner as proceeds from the sale of Class B Excess Common are distributed as set forth in Section 10(l)(v). (v) Non-Transferability of Excess Stock. Class B Excess Common shall not be transferable. In its sole discretion, the Trustee of the Trust may transfer the interest in the Trust representing shares of Class B Excess Common to any Person if the shares of Class B Excess Common would not be Class B Excess Common in the hands of such Person. If such transfer is made, the interest of the Charitable Beneficiary in the Class B Excess Common shall terminate and the proceeds of the sale shall be payable by the Trustee to the Purported Record Transferee and to the Charitable Beneficiary as herein set forth. The Purported Record Transferee shall receive from the Trustee the lesser of (i) the price paid by the Purported Record Transferee for its shares of Class B Common that were converted into Class B Excess Common or, if the Purported Record Transferee did not give value for such shares (e.g. the stock was received through a gift, devise or other transaction), the average closing price for the class of shares from which such shares of Class B Excess Common were converted for the ten trading 16 days immediately preceding such sale or gift, and (ii) the price received by the Trustee from the sale or other disposition of the Class B Excess Common held in trust. The Trustee may reduce the amount payable to the Purported Record Transferee by the amount of dividends and distributions which have been paid to the Purported Record Transferee and are owed by the Purported Record Transferee to the Trustee pursuant to Section 10(l)(ii). Any proceeds in excess of the amount payable to the Purported Record Transferee shall be paid by the Trustee to the Charitable Beneficiary. Upon such transfer of an interest in the Trust, the corresponding shares of Class B Excess Common in the Trust shall be automatically exchanged for an equal number of shares of Class B Common and such shares of Class B Common shall be transferred of record to the transferee of the interest in the Trust if such shares of Class B Common would not be Class B Excess Common in the hands of such transferee. Prior to any transfer of any interest in the Trust, the Corporation must have waived in writing its purchase rights under Section 10(l)(vii). (vi) Voting Rights for Class B Excess Common. Any vote cast by a Purported Record Transferee of Class B Excess Common prior to the discovery by the Corporation that Class B Common has been transferred in violation of the provisions of this Section 10 shall be void ab initio. While the Class B Excess Common is held in trust, the Purported Record Transferee will be deemed to have given an irrevocable proxy to the Trustee to vote the shares of Class B Common which have been converted into shares of Class B Excess Common for the benefit of the Charitable Beneficiary. (vii) Purchase Rights in Class B Excess Common. Notwithstanding the provisions of Section 10(l)(v), shares of Class B Excess Common shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (i) the price per share in the transaction that required the issuance of such Class B Excess Common (or, if the Transfer or other event that resulted in the issuance of Class B Excess Common was not a transaction in which the Purported Beneficial Transferee gave full value for such Class B Excess Common, a price per share equal to the Market Price on the date of the purported Transfer or other event that resulted in the issuance of Class B Excess Common) and (ii) the Market Price on the date the Corporation, or its designee, accepts such offer. The Corporation shall have the right to accept such offer for a period of ninety (90) days after the later of (i) the date of the Transfer or other event which resulted in the issuance of such shares of Class B Excess Common and (ii) the date the Board of Directors determines in good faith that a Transfer or other event resulting in the issuance of shares of Class B Excess Common has occurred, if the Corporation does not receive a notice of such Transfer or other event pursuant to Section 10(d). The Corporation may appoint a special trustee of the Trust for the purpose of consummating the purchase of Class B Excess Common by the Corporation. In the event that the Corporation's actions cause a reduction in the number of shares of Class B Common outstanding and such reduction results in the issuance of Class B Excess Common, the Corporation is required to exercise its option to repurchase such shares of Class B Excess Common if the Beneficial Owner notifies the Corporation that it is unable to sell its rights to such Class B Excess Common. (m) Settlement. Nothing in this Section 10 shall preclude the settlement of any transaction entered into through the facilities of the NYSE. 11. Definitions. For purposes of the provisions included in Article VII of the Articles as a result of the Articles Supplementary adopted and filed in connection with the designation and reclassification of the Class B Common: 17 "Aggregate FFO Growth" shall mean, with respect to any Class B Year, the fraction (expressed as a percentage), the numerator of which is the excess, if any, of FFO per share of Common Stock in such Class B Year over the FFO per share of Common Stock in the Base Year ("Base Year FFO"), in each case, calculated on a fully diluted basis and the denominator of which is the Base Year FFO, calculated on a fully diluted basis. For purposes of determining FFO per share on a fully diluted basis, the diluted weighted average number of shares shall be calculated in accordance with GAAP, except that all Class B Common Stock and Class B Excess Common will be deemed converted into Common Stock at then applicable Exchange Rate for an exchange at the election of a holder pursuant to Section 6. "Base Year" shall mean the twelve month period ending on the last day of the calendar quarter in which the Class B Issue Date occurs. "Base Year Quarterly Dividend" shall mean $.3375 per share. "Beneficial Ownership" shall mean ownership of Class B Common or Class B Excess Common by a Person who is or would be treated as an owner of such Class B Common or Class B Excess Common either directly or constructively through the application of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code. The terms "Beneficial Owner," "Beneficially Owns" and "Beneficially Owned" shall have the correlative meanings. "Business Day" shall mean any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in The City of New York are authorized or required by law, regulation or executive order to close. "Capital Stock" shall mean all classes of series of stock of the Corporation, including, without limitation, Common Stock, Class B Common, preferred stock, par value $0.01 per share and excess stock, par value $0.01 per share. "Charitable Beneficiary" shall mean a beneficiary of the Trust as determined pursuant to Section 10(l). "Class B Dividend Amount" shall mean, with respect to any quarterly period, an amount equal to 1/4th of the product of (a) the Unadjusted Class B Dividend Amount for the Class B Year in which such quarterly period occurs, multiplied by (b) the Dividend Payment Percentage for such quarterly period; provided, however that if during any Class B Year after the second Class B Year, the Unadjusted Class B Dividend Amount for the then current Class B Year is less than the Unadjusted Class B Dividend Amount for the prior Class B Year, then for each quarter during such year having a Dividend Payment Percentage of 100%, the Class B Dividend Amount for such quarter shall not be less than the sum of (i) the dividends paid on a share of Common Stock plus (ii) $0.2225. Notwithstanding the foregoing, the Class B Dividend Amount for the quarter in which the Class B Issue Date occurs shall be equal to the product of (a) $.006222, multiplied by (b) the number of days elapsed from the Class B Issue Date to the last day of the calendar quarter in which the Class B Issue Date occurs and multiplied by (c) the Dividend Payment Percentage for such quarterly period. "Class B Year" shall mean the Base Year and each consecutive twelve-month period thereafter. "Code" shall mean the Internal Revenue Code of 1986, as amended. 18 "Common Equity" shall mean all shares now or hereafter authorized of any class of common stock of the Corporation, including the Common Stock and the Class B Common Stock, and any other stock of the Corporation, howsoever designated, authorized after the Class B Issue Date, which has the right (subject always to prior rights of any class or series of preferred stock) to participate in the distribution of the assets and earnings of the Corporation without limit as to per share amount. "Constructive Ownership" shall mean ownership of Class B Common or Class B Excess Common by a Person who is or would be treated as an owner of such Class B Common or Class B Excess Common either directly or constructively through the application of Section 318 of the Code, as modified by Section 856(d)(5) of the Code. The terms "Constructive Owner," "Constructively Owns" and "Constructively Owned" shall have the correlative meanings. "Current Market Price" of publicly traded Common Stock or any other equity security of the Corporation or any other issuer for any day shall mean the last reported sales price, regular way, on such day, or, if no sale takes place on such day, the average of the reported closing bid and asked prices on such day, regular way, in either case as reported on the NYSE or, if such security is not listed or admitted for trading on the NYSE, on the principal national securities exchange on which such security is listed or admitted for trading or, if not listed or admitted for trading on any national securities exchange, on the Nasdaq National Market or, if such security is not quoted on the Nasdaq National Market, the average of the closing bid and asked prices on such day in the over-the-counter market as reported by Nasdaq or, if bid and asked prices for such security on such day shall not have been reported through Nasdaq the average of the bid and asked prices on such day as furnished by any NYSE member firm regularly making a market in such security selected for such purpose by the Corporation's Chief Executive Officer or the Board of Directors of the Corporation. "Dividend Payment Percentage" shall mean, with respect to any quarterly period, the lesser of (a) 1 and (b) the fraction (expressed as a percentage) equal to (i) the dividend paid per share on the Common Stock in such quarter over (ii) the Base Year Quarterly Dividend. "Exchange Consideration Amount" shall mean, on any date of determination, the product of (a) the Market Price of the Common Stock on such date multiplied by (b) the Exchange Rate on such date, without giving effect to the adjustment described in Section 9(a)(iv). "Fair Market Value" shall mean the average of the daily Current Market Prices per share of Common Stock during the ten consecutive Trading Days selected by the Corporation commencing not more than 20 Trading Days before, and ending not later than, the earlier of the day in question and the day before the "ex-date" with respect to the issuance or distribution requiring such computation. The term "ex-date", when used with respect to any issuance or distribution, means the first day on which the shares of Common Stock trade regular way, without the right to receive such issuance or distribution, on the exchange or in the market, as the case may be, for purposes of determining that day's Current Market Price. "FFO" shall mean "funds from operations" as defined by the National Association of Real Estate Investment Trusts from time to time and determined in good faith by the Corporation and set forth in its filings with the Securities and Exchange Commission. "GAAP" shall mean generally accepted accounting principles. 19 "IRS" shall mean the United States Internal Revenue Service. "Market Price " as to any date shall mean the average of the last sales price reported on the NYSE of the Common Stock, on the ten trading days immediately preceding the relevant date, or if not then traded on the NYSE, the average of the last reported sales price of the Class B Common on the ten trading days immediately preceding the relevant date as reported on any exchange or quotation system over which the Common Stock may be traded, or if not then traded over any exchange or quotation system, then the market price of the Common Stock on the relevant date as determined in good faith by the Board of Directors. "Ownership Limit" shall mean 9% in value of the aggregate of the outstanding shares of Common Equity. The value of shares of the outstanding shares of Common Equity shall be determined by the Board of Directors of the Corporation in good faith, which determination shall be conclusive for all purposes hereof. "Person" shall mean an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended; but does not include an underwriter which participates in a public offering of the Class B Common or any interest therein, provided that such ownership by such underwriter would not result in the Corporation being "closely held" within the meaning of Section 856(h) of the Code, or otherwise result in the Corporation failing to qualify as a REIT. "Purported Beneficial Transferee" shall mean, with respect to any purported Transfer which results in Class B Excess Common, the purported beneficial transferee or owner for whom the Purported Record Transferee would have acquired or owned shares of Class B Common if such Transfer had been valid under Section 10(a) below. "Purported Record Transferee" shall mean, with respect to any purported Transfer which results in Class B Excess Common Stock, the record holder of the Class B Common if such Transfer had been valid under Section 10(a). "Set apart for payment" shall be deemed to include, without any further action, the following: the recording by the Corporation in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to an authorization of a dividend or other distribution by the Board of Directors of the Corporation, the allocation of funds to be so paid on any series or class of shares of the Corporation. "Trading Day" shall mean any day on which the securities in question are traded on the NYSE or, if such securities are not listed or admitted for trading on the NYSE, on the principal national securities exchange on which such securities are listed or admitted or, if not listed or admitted for trading on any national securities exchange, on the Nasdaq National Market or, if such securities are not quoted on the Nasdaq National Market, on the applicable securities market in which the securities are traded. "Transfer" shall mean any sale, transfer, gift, assignment, devise or other disposition of Class B Common, including (i) the granting of any option or entering into any agreement for the 20 sale, transfer or other disposition of Class B Common or (ii) the sale, transfer, assignment or other disposition of any securities (or rights convertible into or exchangeable for Class B Common), whether voluntary or involuntary, whether of record or beneficially or Beneficially or Constructively Owned (including but not limited to Transfers of interests in other entities which result in changes in Beneficial or Constructive Ownership of Class B Common), and whether by operation of law or otherwise. The term "Transferring" and "Transferred" shall have the correlative meanings. "Transfer Agent" shall mean American Stock Transfer & Trust Company, or such other agent or agents of the Corporation as may be designated by the Board of Directors of the Corporation or its designee as the transfer agent for the Class B Common. "Trust " shall mean the trust created pursuant to Section 10(l). "Trustee " shall mean the Person that is appointed by the Corporation pursuant to Section 10(l) to serve as trustee of the Trust, and any successor thereto. "Unadjusted Class B Dividend Amount" shall mean (a) $2.24 per share for the first Class B Year after the Base Year and (b) with respect to any Class B Year thereafter, an amount equal to $2.24 multiplied by the sum of (i) one plus (ii) 70% of Aggregate FFO Growth for the prior Class B Year, but in no event shall the Unadjusted Class B Dividend Amount be less than $2.24 per share. 12. Determination by Board. Any determination by the Board of Directors pursuant to the terms of the Class B Common shall be final and binding upon the holders thereof and shall be conclusive for all purposes. THIRD: The Class B Common shares have been classified and designated by the Board of Directors under the authority contained in the Charter. FOURTH: These Articles Supplementary have been approved by the Board of Directors in the manner and by the vote required by law. FIFTH: These Articles Supplementary shall be effective at the time the State Department of Assessments and Taxation of Maryland accepts these Articles Supplementary for record. 21 IN WITNESS WHEREOF, Reckson Associates Realty Corp. has caused these presents to be signed in its name and on its behalf by its President and Chief Operating Officer and its corporate seal to be hereunto affixed and attested by its Secretary, and the said officers of the Corporation further acknowledge said instrument to be the corporate act of the Corporation, and state under the penalties of perjury that, to the best of their knowledge, information and belief, the matters and facts therein set forth with respect to approval are true in all material respects. RECKSON ASSOCIATES REALTY CORP. By:_____________________________________ Scott H. Rechler, President and Chief Operating Officer (SEAL) ATTEST: ______________________________________ Gregg Rechler, Secretary EX-3.6 4 EXHIBIT 3.6 EXHIBIT 3.6 RECKSON ASSOCIATES REALTY CORP. ARTICLES OF AMENDMENT THIS IS TO CERTIFY THAT: FIRST: The charter of Reckson Associates Realty Corp., a Maryland corporation (the "Corporation"), is hereby amended by changing the designation of the Corporation's "Common Stock" to "Class A Common Stock." SECOND: The foregoing amendments were approved by a majority of the entire Board of Directors of the Corporation and are limited to changes expressly permitted by Section 2-605(a)(2) of the Maryland General Corporation Law to be made without action by the stockholders. THIRD: The undersigned President acknowledges these Articles of Amendment to be the corporate act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned President acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties of perjury. IN WITNESS WHEREOF, the Corporation has caused these Articles to be signed in its name and on its behalf by its President and attested to by its Secretary on this _____ day of November, 1999. ATTEST: RECKSON ASSOCIATES REALTY CORP. By: - ------------------- ---------------------(SEAL) Gregg Rechler Scott Rechler Secretary President EX-3.7 5 EXHIBIT 3.7 EXHIBIT 3.7 ARTICLES SUPPLEMENTARY RECKSON ASSOCIATES REALTY CORP. Reckson Associates Realty Corp., a Maryland corporation (the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland (the "SDAT") that: FIRST: Under a power contained in Title 3, Subtitle 8 of the Maryland General Corporation Law (the "MGCL") , the Corporation, by resolutions of its Board of Directors, duly adopted at a meeting duly called and held on November 3, 1999, elected to become subject to Section 3 - 804 (a) of the MGCL, the repeal of which may be effected only by the means authorized by Section 3 - 802 (b) (3) of the MGCL. SECOND: Pursuant to the resolutions described above, notwithstanding any other lesser proportion of votes required by a provision in the charter or the Bylaws of the Corporation, the stockholders of the Corporation may remove any director by the affirmative vote of at least two-thirds of all the votes entitled to be cast by the stockholders of the Corporation generally in the election of directors. THIRD: The election to become subject to Section 3 - 804 (a) of the MGCL has been approved by the Board of Directors of the Corporation in the manner and by the vote required by law, and pursuant to Section 3 - 802 (d) (3) of the MGCL, stockholder approval is not required. FOURTH: The undersigned President of the Corporation acknowledges these Articles Supplementary to be the corporate act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned President acknowledges that to the best of his knowledge, information and belief these matters and facts are true in all material respects and that this statement is made under the penalties for perjury. IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary to be executed under seal in its name and on its behalf by its President and attested to by its Secretary on this 10th day of January, 2000. ATTEST: RECKSON ASSOCIATES REALTY CORP. /s/ Gregg Rechler By: /s/ Scott Rechler (SEAL) - -------------------------------- ------------------------- (Gregg Rechler) (Scott Rechler) Secretary President EX-10.6 6 EXHIBIT 10.6 EXHIBIT 10.6 RECKSON ASSOCIATES REALTY CORP. SUPPLEMENT TO THE AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF RECKSON OPERATING PARTNERSHIP, L.P. ESTABLISHING SERIES B COMMON UNITS OF LIMITED PARTNERSHIP INTEREST In accordance with Sections 4.2 and 14.1 B(3) of the Amended and Restated Agreement of Limited Partnership, dated as of June 2, 1995, as amended on December 6, 1995, April 13, 1998, and June 30, 1998 (the "Partnership Agreement"), the Partnership Agreement is hereby supplemented to establish a class of 11,694,567 common units of limited partnership interest of Reckson Operating Partnership, L.P. (the "Partnership") which shall be designated "Class B Common Units" having the rights, preferences, powers, privileges and restrictions, qualifications and limitations granted to or imposed upon the Class B Exchangeable Common Stock issued by Reckson Associates Realty Corp. (the "Company" or "Corporation") (the "Class B Common Stock") as set forth below and which shall be issued to the Company. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Partnership Agreement. WHEREAS, the Company, the Partnership, Metropolitan Partners LLC ("Metropolitan") and Tower Realty Trust, Inc. ("Tower") executed a merger agreement on December 8, 1998, pursuant to which Tower will be merged into Metropolitan; WHEREAS, on this date the Company is issuing 11,694,567 shares of Class B Exchangeable Common Stock pursuant to the Articles Supplementary of the Company, as filed with the Maryland State Department of Assessments and Taxation on or about May 24, 1999 (the "Articles Supplementary"); and WHEREAS, pursuant to Section 4.2 of the Partnership Agreement, the Partnership desires to issue additional Partnership Units to the Company with substantially similar designations, preferences and other rights to the Series B Exchangeable Common Stock. NOW THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: Section 1. Issuance of Class B Common Units Pursuant to Section 4.2 of the Partnership Agreement, the Partnership hereby issues 11,694,567 additional Partnership Interests (the "Class B Common Units") to the Company. The Class B Common Units will have substantially the same designations, preferences and other rights of the Class B Exchangeable Common Stock, as specified in this amendment and in Exhibit I. In consideration for the issuance of the Class B Common Units, the Company has made a Capital Contribution to the Partnership in an equal amount of shares of Class B Exchangeable Common Stock. Section 2. Amendment to Partnership Agreement Pursuant to Section 14.1.B(3) of the Partnership Agreement, the General Partner, as general partner of the Partnership and as attorney-in-fact for its Limited Partners, hereby amends the Partnership Agreement as follows: (A) Article 1 of the Partnership Agreement is hereby amended by adding the following definition of "Class B Common Units": "Class B Common Units" means the units of limited partnership interest issued to the Company on May 24, 1999, in connection with the issuance of the Class B Exchangeable Common Stock by the Company. "Common Units" means the units of limited partnership interest issued to the Company other than the Class B Common Units, the Series A Preferred Units, the Series B Preferred Units, the Series C Preferred Units, the Series D Preferred Units or any other series of units of limited partnership interest issued in the future and designated as preferred or otherwise different from the Common Units with respect to the payment of distributions, including distributions upon liquidation. Section 3. Continuation of Partnership Agreement The Partnership Agreement and this Amendment shall be read together and shall have the same force and effect as if the provisions of the Partnership Agreement and this Amendment were contained in one document. Any provisions of the Partnership Agreement not amended by this Amendment shall remain in full force and effect as provided in the Partnership Agreement immediately prior to the date hereof. 2 IN WITNESS WHEREOF, the parties hereto have executed this Supplement to the Partnership Agreement as of the 24th day of May, 1999. GENERAL PARTNER: RECKSON ASSOCIATES REALTY CORP. By:_____________________________________ Name: Title: EXISTING LIMITED PARTNERS: By: Reckson Associates Realty Corp., as Attorney-in-Fact for the Limited Partners By:____________________________ Name: Title: Class B Common Unit Holder RECKSON ASSOCIATES REALTY CORP. By:____________________________________ Name: Title: 3 EXHIBIT I RECKSON OPERATING PARTNERSHIP, L.P. DESIGNATION OF THE VOTING POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS AND QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF THE CLASS B COMMON PARTNERSHIP UNITS The following are the terms of the Class B Common Partnership Units established pursuant to this Amendment: (A) Number. The maximum number of authorized Class B Common Partnership Units (the "Class B Common Units") shall be 11,694,567. (B) Distributions. (1) For any quarterly period, the holder of the Class B Common Units shall be entitled to receive, if, when and as authorized by the General Partner out of funds legally available for the payment of distributions, cash distributions in an amount per unit equal to the Class B Dividend Amount. Distributions on the Class B Common Units, if authorized, shall be payable quarterly in arrears on January 31, April 30, July 31 and October 31 of each year or, if not a Business Day, the next succeeding Business Day, commencing July 31, 1999 (each, a "Distribution Payment Date"). Distributions will be payable to the holder of the Class B Common Units with respect to the Class B Common Units held at the close of business on the applicable record date, which shall be such date designated by the General Partner for the payment of distributions that is not more than 30 nor less than 10 days prior to such Distribution Payment Date (each, a "Distribution Payment Record Date"). (2) No distributions on the Class B Common Units shall be authorized by the General Partner or be paid or set apart for payment by the Partnership at such time as the terms and provisions of any agreement of the Partnership, including any agreement relating to its indebtedness, prohibits such authorization, payment or setting apart for payment or provides that such authorization, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such authorization or payment shall be restricted or prohibited by law. (3) Distributions on the Class B Common Units will be noncumulative. If the General Partner does not authorize a distribution on the Class B Common Units payable on any Distribution Payment Date while any Class B Common Unit is outstanding, then the holder of the Class B Common Units will have no right to receive a distribution for that Distribution Payment Date, and the Partnership will have no obligation to pay a distribution for that Distribution Payment Date with respect to the Class B Common Units. (4) No distributions, whether in cash, securities or property, will be authorized or paid or set apart for payment to holders of Common Units for any quarterly period unless for each Class B Common Unit outstanding, a distribution equal to the Class B Dividend Amount with respect to such period has been or contemporaneously is authorized and paid or authorized and a sum sufficient for the payment thereof is set apart for such payment to the holder of the Class B Common Units for the then current distribution period. (5) Subject to the rights and preferences of other classes or series of units, the Partnership, at its election, may authorize and pay a distribution to the holder of Class B Common Units in excess of the Class B Dividend Amount. (6) Class B Common Units shall not entitle the holder thereof to receive any distribution made in respect of Common Units. (C) Liquidation. Upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Partnership (referred to herein as a "liquidation"), the holder of the Class B Common Units will have no liquidation preference, but will be entitled to share ratably (treating each Class B Common Unit as the equivalent of that number of Common Units into which it may then be exchanged) in any distribution or payment made to holders of Common Units. (D) Redemption. Class B Common Units will not be redeemable; provided, however, that the foregoing shall not prohibit the Partnership from repurchasing Class B Common Units from the holder thereof if and to the extent such holder agrees to sell such Units. (E) Voting Rights. The holder of Class B Common Units shall have the right to vote on all matters submitted to a vote of the holders of Common Units; the holder of Class B Common Units and Common Units shall vote together as a single class. In any such vote, the holder of Class B Common Units shall be entitled to one vote with respect to each Class B Common Unit. (F) Exchange at Holder's Election. (1) Class B Common Units will be exchangeable at any time, at the option of the holder thereof, into Common Units at a rate of one Common Unit per Class B Common Unit, subject to adjustment as described below (the "Exchange Rate"); provided, however, that the right of the holder to exchange a Class B Common Unit for which the Partnership has mailed an Exchange Notice (as defined below) will terminate at the close of business on the fifth Business Day prior to the Exchange Date (as defined below). (2) To exercise the exchange right, the holder of Class B Common Units shall provide written notice to the Partnership that such holder elects to exchange such Class B Common Units. (3) Each exchange consummated pursuant to this Section (F) shall be deemed to have been effected immediately prior to the close of business on the date on which such notice (and if applicable, payment of an amount equal to the distribution payable on such units) 2 received by the Partnership as aforesaid, and such exchange shall be at the Exchange Rate in effect at such time and on such date. (4) The holder of Class B Common Units shall be entitled to receive and retain the distribution payable on such units held on a Distribution Payment Record Date on the corresponding Distribution Payment Date notwithstanding the exchange of such units following such Distribution Payment Record Date and on or prior to such Distribution Payment Date. Except as provided above, the Partnership shall make no payment or allowance for unpaid distributions on exchanged units or for distribution on the Common Units that are issued upon such exchange. (G) Exchange at Partnership's Option. (1) The Class B Common Units shall not be exchangeable by the Partnership prior to the end of the 54-month period commencing with the Class B Issue Date (as defined below). Subject to Section (J), each Class B Common Unit will be exchangeable at any time after the fifty-four (54) month period immediately following the Class B Issue Date, at the option of the Partnership, into Common Units at the Exchange Rate, plus the amounts indicated in Section (G)(5). (2) At least 30 days, but no more than 60 days, prior to a date fixed for exchange of some or all of the Class B Common Units (the "Exchange Date") in accordance with this Section (G), written notice (the "Exchange Notice") shall be given to the holder of the Class B Common Units; provided, however, neither failure to give such notice nor any deficiency therein shall affect the validity of the procedure for the exchange of any Class B Common Unit to be exchanged. The Exchange Notice shall include the following information: (i) the Exchange Rate; (ii) the number of Class B Common Units to be exchanged; (iii) the Exchange Date; (iv) that the holder's right to elect to exchange such holder's Class B Common Units for Common Units will terminate on the fifth Business Day prior to the Exchange Date; and (v) that dividends on the Class B Common Units to be exchanged shall cease on the Exchange Date unless the Partnership defaults in the issuance of the Common Units issuable upon exchange of such Class B Common Units. (3) On or after the Exchange Date, unless the Partnership defaults in the issuance of the Common Units as described above and except as provided in Section (G)(5), (i) all distributions on any Class B Common Units so called for exchange shall cease on the Exchange Date, and all rights of the holder of such Class B Common Units as a holder of such Class B Common Units shall terminate with respect thereto on the Exchange Date, other than the right to receive the Common Units issuable upon exchange thereof, and (ii) such units shall no longer be deemed outstanding for any purpose whatsoever. Until Class B Common Units called 3 for exchange are surrendered in the manner described in the Exchange Notice, no Common Units will be issued in respect thereof. No provision will be made in respect of distributions payable on such Common Units prior to the Exchange Date. (4) If the Exchange Date falls after a Distribution Payment Record Date and on or prior to the corresponding Distribution Payment Date, then the holder of Class B Common Units shall be entitled to the distribution payable with respect to Class B Common Units held on the Distribution Payment Record Date on the corresponding Distribution Payment Date notwithstanding the exchange of such units prior to such Distribution Payment Date. (H) No Fractional Units. No fractional Common Units shall be issued upon exchange of Class B Common Units. The Partnership will pay to the holder of the Class B Common Units (i) such number of Common Units as provided for herein less the whole number Common Units that is the quotient of the amount of cash payable in accordance with (ii) below divided by the Exchange Consideration Amount and (ii) an amount of cash equal to the cash payable by the General Partner as a result of the exchange by the General Partner of its Class B Common Stock, $0.01 per share, for shares of Common Stock. (I) Exchange Rate Adjustments. (1) The Exchange Rate shall be adjusted from time to time as follows: (i) If the Partnership shall after the date on which Class B Common Units are first issued (the "Class B Issue Date") (A) pay or make a distribution to holders of Common Units in the form of Common Units, (B) subdivide its outstanding Common Units into a greater number of units, (C) combine its outstanding Common Units into a smaller number of units or (D) issue any equity securities by reclassification of its Common Units (other than any reclassification by way of merger or binding unit exchange that is subject to Section (I)(2)), then the Exchange Rate in effect at the opening of business on the day following the record date for the determination of unitholders entitled to receive such distribution or at the opening of business on the day following the day on which such subdivision, combination or reclassification becomes effective, as the case may be, shall be adjusted so that the holder of any Class B Common Unit thereafter surrendered for exchange shall be entitled to receive the number of Common Units and other equity securities issued by reclassification of Common Units that the holder would have owned or have been entitled to receive after the happening of any of the events described above had such units been exchanged immediately prior to the record date in the case of a distribution or the effective date in the case of a subdivision, combination or reclassification. An adjustment made pursuant to this subparagraph (i) shall become effective immediately after the opening of business on the day following such record date (except as provided in Section (I)(4)) in the case of a distribution and shall become effective immediately after the opening of business on the day next following the effective date in the case of a subdivision, combination or reclassification. (ii) If the Partnership shall issue after the Class B Issue Date rights, options or warrants to all holders of Common Units entitling them (for a period expiring within 45 days after the record date for determination of unitholders entitled to receive such rights, 4 options or warrants) to subscribe for or purchase Common Units (or securities convertible into or exchangeable for Common Units) at a price per unit less than the Fair Market Value per Common Unit on the record date for the determination of unitholders entitled to receive such rights, options or warrants, then the Exchange Rate in effect at the opening of business on the day following such record date shall be adjusted to equal the amount determined by multiplying (I) the Exchange Rate in effect immediately prior to the opening of business on the day following the record date fixed for such determination by (II) a fraction, the numerator of which shall be the sum of (A) the number of Common Units outstanding on the close of business on the record date fixed for such determination and (B) the number of additional Common Units offered for subscription or purchase pursuant to such rights, options or warrants and the denominator of which shall be the sum of (A) the number of Common Units outstanding on the close of business on the record date fixed for such determination and (B) the number of units that the aggregate proceeds to the Partnership from the exercise of such rights, options or warrants for Common Units would purchase at such Fair Market Value. Such adjustment shall become effective immediately after the opening of business on the day following such record date (except as provided in Section (I)(4)). In determining whether any rights, options or warrants entitle the holders of Common Units to subscribe for or purchase Common Units at less than the Fair Market Value, there shall be taken into account any consideration received by the Partnership upon issuance and upon exercise of such rights, options or warrants, with the value of such consideration, if other than cash, to be determined by the General Partner. (iii) If the Partnership shall distribute to all holders of its Common Units any equity securities of the Partnership (other than Common Units) or evidence of its indebtedness or assets (excluding cash distributions and those rights, options and warrants referred to in and treated under subparagraph (ii) above), then the Exchange Rate shall be adjusted so that it shall equal the amount determined by multiplying (I) the Exchange Rate in effect immediately prior to the close of business on the record date fixed for the determination of unitholders entitled to receive such distribution by (II) a fraction, the numerator of which shall be the Fair Market Value per Common Unit on the record date for such determination and the denominator of which shall be the Fair Market Value per Common Unit on the record date for such determination less the then fair market value (as determined by the General Partner, whose determination shall be conclusive) of the portion of the equity securities, evidences of indebtedness or assets so distributed applicable to one Common Unit. Such adjustment shall become effective immediately at the opening of business on the day following such record date (except as provided in Section (I)(4)). For the purposes of this subparagraph (iii), the distribution of equity securities, evidences of indebtedness or assets which are distributed not only to the holders of Common Units on the record date fixed for the determination of unitholders entitled to such distribution, but also are distributed with each Common Unit delivered to the holder of the Class B Common Units at any time after such record date in respect of any Class B Common Units exchanged by such holder, shall not require an adjustment of the Exchange Rate pursuant to this subparagraph (iii), provided that on the date, if any, on which such holder would no longer be entitled to receive in respect of such exchanged Class B Common Units such equity securities, evidences of indebtedness or assets with a Common Unit (other than as a result of the termination of all such equity securities, evidences of indebtedness or assets), a distribution of such equity securities, evidences of indebtedness or assets shall be deemed to have occurred, and the Exchange Rate shall be adjusted as provided in this subparagraph (iii) (and such day shall be deemed to be "the record date fixed for the 5 determination of the unitholders entitled to receive such distribution" and the "record date" within the meaning of the two preceding sentences). (iv) The Exchange Rate may be further adjusted from time to time as described in this subparagraph (iv); provided, however, that the Exchange Rate as so adjusted shall only be applicable in the event that the exchange of Class B Common Units is effected pursuant to Section (F) and then, only to Class B Common Units surrendered for exchange in accordance with Section (F); and all adjustments described in this subparagraph (iv) shall be disregarded in the event of any exchange pursuant to Section (G). If during any quarter of any Class B Year, the total distributions paid on a Class B Common Unit for such quarter and the immediately prior quarter is less than the sum of (x) 1/4th of the Unadjusted Class B Dividend Amount applicable to the current quarter plus (y) 1/4th of the Unadjusted Class B Dividend Amount applicable to the immediately prior quarter, then the Exchange Rate thereafter shall be subject to adjustment as follows. If at the time the exchange option is exercised pursuant to Section (F): (a) the Exchange Consideration Amount is equal to or greater than $27.50, then no additional adjustment is required; (b) the Exchange Consideration Amount is less than $27.50, but equal to or greater than $22.00, then the Exchange Rate will be multiplied by the quotient of (I) $27.50 divided by (II) the Exchange Consideration Amount; (c) the Exchange Consideration Amount is less than $22.00, then the Exchange Rate will be multiplied by 1.25. (v) No adjustment in the Exchange Rate shall be required other than by reason of Section (I)(1)(iv) unless such adjustment would require a cumulative increase or decrease of at least 1% in the Exchange Rate; provided, however, that any adjustments that by reason of this subparagraph (v) are not required to be made shall be carried forward and taken into account in any subsequent adjustment until made; and provided, further, that any adjustment shall be required and made in accordance with the provisions of this Section (I) (other than this subparagraph (v)) not later than such time as may be required in order to preserve the tax-free nature of a distribution to the holders of Common Units. Notwithstanding any other provisions of this Section (I), the Partnership shall not be required to make any adjustment of the Exchange Rate for the issuance of any Common Units pursuant to any plan providing for the reinvestment of distributions or interest payable on securities of the Partnership and the investment of additional optional amounts in Common Units under such plan. All calculations under this Section (I) shall be made to the nearest cent (with $.005 being rounded upward) or to the nearest one-tenth of a unit (with .05 of a unit being rounded upward), as the case may be. Anything in this subsection (1) to the contrary notwithstanding, the Partnership shall be entitled, to the extent permitted by law, to make such increases in the Exchange Rate, in addition to those required by this subsection (1), as it in its discretion shall determine to be advisable in order that any unit distributions, subdivision, reclassification or combination of units, distribution of rights, options or warrants to purchase units or securities, or a distribution of other assets (other than cash distributions) hereafter made by the Partnership to its unitholders shall not be taxable. 6 (2) Except as otherwise provided for in Section (I)(1)(i), if the Partnership shall be a party to any transaction (including, without limitation, a merger, consolidation, statutory unit exchange, tender offer for all or substantially all of the Common Units, sale or transfer of all or substantially all of the Partnership's assets or recapitalization of the Common Units) (each of the foregoing being referred to herein as a "Transaction"), in each case as a result of which Common Units shall be converted into the right to receive units, stock, securities or other property (including cash or any combination thereof), the Partnership (or its successor in such Transaction) shall make appropriate provision so that each Class B Common Unit, if not converted into the right to receive units, stock, securities or other property in connection with such Transaction in accordance with the third to last sentence of this subsection (2) shall thereafter be exchangeable into the kind and amount of units, stock, securities and other property (including cash or any combination thereof) receivable upon the consummation of such Transaction by a holder of that number of Common Units into which one Class B Common Unit was convertible immediately prior to such Transaction, assuming such holder of Common Units (i) is not a Person (as defined below) with which the Partnership consolidated or into which the Partnership merged or which merged into the Partnership or to which such sale or transfer was made, as the case may be (a "Constituent Person"), or an affiliate of a Constituent Person and (ii) failed to exercise his rights of the election, if any, as to the kind or amount of units, stock, securities and other property (including cash or any combination thereof) receivable upon such Transaction (each, a "Non-Electing Unit") (provided that if the kind and amount of units, stock, securities and other property (including cash or any combination thereof) receivable upon consummation of such Transaction is not the same for each Non-Electing Unit, the kind and amount of units, stock, securities and other property (including cash or any combination thereof) receivable upon such Transaction by each Non-Electing Unit shall be deemed to be the kind and amount so receivable per unit by a plurality of the Non-Electing Units). The Partnership shall not be a party to any Transaction in which any Class B Common Unit is converted into the right to receive units, stock, securities or other property (including cash or any combination thereof) with an aggregate value (as determined by the General Partner in good faith, whose determination shall be conclusive) less than that receivable by the number of Common Units into which Class B Common Units were exchangeable immediately prior to such Transaction. The Partnership shall not be a party to any Transaction unless the terms of such Transaction are consistent with the provisions of this subsection (2), and it shall not consent or agree to the occurrence of any Transaction until the Partnership has entered into an agreement with the successor or purchasing entity, as the case may be, for the benefit of the holder of the Class B Common Units that will contain provisions enabling the holder of Class B Common Units that remain outstanding after such Transaction to exchange its Class B Common Units into the consideration received by holders of Common Units at the Exchange Rate in effect immediately prior to such Transaction. The provisions of this subsection (2) shall similarly apply to successive Transactions. (3) If: (i) the Partnership shall declare a distribution on the Common Units (other than cash distributions which do not constitute extraordinary dividends) or there shall be a reclassification, subdivision or combination of the Common Units; or 7 (ii) the Partnership shall grant to the holders of the Common Units of rights, options or warrants to subscribe for or purchase Common Units at less than Fair Market Value; or (iii) the Partnership shall enter into a Transaction; (iv) there shall occur the voluntary or involuntary liquidation, dissolution or winding up of the Partnership; or (v) there shall occur the circumstances described in clause (1)(iv) of Section (I) that would cause the Exchange Rate to be adjusted, then the Partnership shall notify the holder of the Class B Common Units, as promptly as possible, but at least 15 days prior to the applicable date hereinafter specified, a notice stating (i) the date on which a record is to be taken for the purpose of such distribution or rights, options or warrants, or, if a record is not to be taken, the date as of which the holders of Common Units of record to be entitled to such distribution or rights, options or warrants are to be determined or (ii) the date on which such reclassification, subdivision, combination, Transaction or liquidation, dissolution or winding up is expected to become effective, and the date as of which it is expected that holders of Common Units of record shall be entitled to exchange their Common Units for securities or other property, if any, deliverable upon such reclassification, subdivision, combination, Transaction or liquidation, dissolution or winding up. Failure to give or receive such notice or any defect therein shall not affect the legality or validity of the Proceedings described in this Section (I). (4) In any case in which Section (I)(1) provides that an adjustment shall become effective on the day following the record date for an event, the Partnership may defer until the occurrence of such event (i) issuing to the holder of any Class B Common Unit converted after such record date and before the occurrence of such event the additional Common Units issuable upon such conversion by reason of the adjustment required by such event over and above the Common Units issuable upon such conversion before giving effect to such adjustment and (ii) fractionalizing any Class B Common Units and/or paying to such holder any amount of cash in lieu of any fraction pursuant to Section (H). (5) There shall be no adjustment of the Exchange Rate in case of the issuance of any equity securities of the Partnership in a reorganization, acquisition or other similar transaction except as specifically set forth in this Section (I). If any action or transaction would require adjustment of the Exchange Rate pursuant to more than one subsection of Section (I)(1), only one adjustment shall be made, and such adjustment shall be the amount of adjustment that has the highest absolute value. (6) If the Partnership shall take any action affecting the Common Units, other than action described in this Section (I), that in the opinion of the General Partner would materially adversely affect the exchange rights of the holder of the Class B Common Units, the Exchange Rate for the Class B Common Units shall be adjusted, to the extent permitted by law, in such manner, if any, and at such time, as the Officers of the General Partner, on behalf of the 8 Operating Partnership, in their sole discretion, may determine to be equitable in the circumstances. (7) The Partnership shall at all times reserve and keep available, free from preemptive rights, for the purpose of effecting any exchange of the Class B Common Units, the full number of Common Units deliverable upon the exchange of all outstanding Class B Common Units not theretofore exchanged. (8) The Partnership shall pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of Common Units or other securities or property on exchange of the Class B Common Units pursuant hereto. (J) Ownership Limitations. The Class B Common Units shall be owned and held solely by the General Partner. (K) General. The rights of the General Partner, in its capacity as holder of the Class B Common Units, are in addition to and not in limitation on any other rights or authority of the General Partner, in any other capacity, under the Partnership Agreement. In addition, nothing contained herein shall be deemed to limit or otherwise restrict any rights or authority of the General Partner under the Partnership Agreement, other than in its capacity as the holder of the Class B Common Units. (L) Definitions. "Business Day" shall mean any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in The City of New York are authorized or required by law, regulation or executive order to close. "Class B Dividend Amount" shall have the same meaning as "Class B Dividend Amount" in the Articles Supplementary. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Current Market Price" of any equity security of the Company or the Operating Partnership or any other issuer for any day shall mean the last reported sales price, regular way, on such day, or, if no sale takes place on such day, the average of the reported closing bid and asked prices on such day, regular way, in either case as reported on the NYSE or, if such security is not listed or admitted for trading on the NYSE, on the principal national securities exchange on which such security is listed or admitted for trading or, if not listed or admitted for trading on any national securities exchange, on the Nasdaq National Market or, if such security is not quoted on the Nasdaq National Market, the average of the closing bid and asked prices on such day in the over-the-counter market as reported by Nasdaq or, if bid and asked prices for such security on such day shall not have been reported through Nasdaq the average of the bid and asked prices on such day as furnished by any NYSE member firm regularly making a market in such security selected for such purpose by the Operating Partnership's Chief Executive Officer or the General Partner; provided however, that the Current Market Price for the Common Units 9 shall be deemed to be the Current Market Price of the Company's Common Stock, par value $0.01 per share, multiplied by the Exchange Rate. "Exchange Consideration Amount" shall mean, on any date of determination, the product of (a) the Market Price of a Common Unit on such date multiplied by (b) the Exchange Rate on such date, without giving effect to the adjustment described in Section (I)(1)(iv). "Fair Market Value" shall mean the average of the daily Current Market Prices per share of the Company's Common Stock during the ten consecutive Trading Days selected by the Company commencing not more than 20 Trading Days before, and ending not later than, the earlier of the day in question and the day before the "ex-date" with respect to the issuance or distribution requiring such computation. The term "ex-date", when used with respect to any issuance or distribution, means the first day on which the shares of the Company's Common Stock trade regular way, without the right to receive such issuance or distribution, on the exchange or in the market, as the case may be, for purposes of determining that day's Current Market Price. "Market Price" as to any date shall mean the average of the last sales price reported on the NYSE of the Company's Common Stock, on the ten trading days immediately preceding the relevant date, or if not then traded on the NYSE, the average of the last reported sales price of the Company's Class B Common Stock on the ten trading days immediately preceding the relevant date as reported on any exchange or quotation system over which the Common Stock may be traded, or if not then traded over any exchange or quotation system, then the market price of the Company's Common Stock on the relevant date as determined in good faith by the General Partner. "Person" shall mean an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended; but does not include an underwriter which participates in a public offering of the Class B Common Units or any interest therein, provided that such ownership by such underwriter would not result in the Operating Partnership being "closely held" within the meaning of Section 856(h) of the Code. "Set apart for payment" shall be deemed to include, without any further action, the following: the recording by the Operating Partnership in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to an authorization of a distribution by the General Partner, the allocation of funds to be so paid on any series or class of units of the Operating Partnership. "Trading Day" shall mean any day on which the securities in question are traded on the NYSE or, if such securities are not listed or admitted for trading on the NYSE, on the principal national securities exchange on which such securities are listed or admitted or, if not listed or admitted for trading on any national securities exchange, on the Nasdaq National Market or, if 10 such securities are not quoted on the Nasdaq National Market, on the applicable securities market in which the securities are traded. 11 EX-10.7 7 EXHIBIT 10.7 EXHIBIT 10.7 RECKSON ASSOCIATES REALTY CORP. SUPPLEMENT TO THE AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF RECKSON OPERATING PARTNERSHIP, L.P. ESTABLISHING SERIES E PREFERRED PARTNERSHIP UNITS OF LIMITED PARTNERSHIP INTEREST In accordance with Sections 4.2 and 14.1 B(3) of the Amended and Restated Agreement of Limited Partnership, dated as of June 2, 1995, as amended on December 6, 1995, April 13, 1998, June 30, 1998 and May 24, 1999 (the "Partnership Agreement"), the Partnership Agreement is hereby supplemented to establish a series of up to 6,000,000 preferred units of limited partnership interest of Reckson Operating Partnership, L.P. (the "Partnership") which shall be designated "Series E Preferred Units" having the rights, preferences, powers, privileges and restrictions, qualifications and limitations granted to or imposed upon the Series B Convertible Cumulative Preferred Stock issued by Reckson Associates Realty Corp. (the "Company" or "Corporation") (the "Series B Preferred Stock") as set forth below and which shall be issued to the Company. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Partnership Agreement. WHEREAS, the Company, the Partnership, Stichting Pensioenfonds ABP, The Travelers Insurance Company, The Travelers Life and Annuity Company, The Standard Fire Insurance Company and Travelers Casualty and Surety Company (the "Initial Purchasers") executed a purchase agreement on May 27, 1999; WHEREAS, on this date the Company is issuing 6,000,000 shares of Series B Preferred Stock pursuant to the Articles Supplementary of the Company, as filed with the Maryland State Department of Assessments and Taxation on May 28, 1999 (the "Articles Supplementary"); WHEREAS, on this date the Company is making a Capital Contribution to the Partnership in an amount equal to the proceeds raised in connection with the issuance of the Series B Preferred Stock; and WHEREAS, pursuant to Section 4.2 of the Partnership Agreement, the Partnership desires to issue additional Partnership Units to the Company with substantially similar designations, preferences and other rights to the Series B Preferred Stock. NOW THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: Section 1. Issuance of Series E Preferred Units Pursuant to Section 4.2 of the Partnership Agreement, the Partnership hereby issues 6,000,000 additional Partnership Interests (the "Series E Preferred Units") to the Company. The Series E Preferred Units will have substantially the same designations, preferences and other rights of the Series B Preferred Stock, as specified in this amendment and in Exhibit I hereto. In consideration for the issuance of the Series E Preferred Units, the Company has made a Capital Contribution to the Partnership in an amount equal to the proceeds raised in connection with the issuance of the Series B Preferred Stock. Section 2. Amendment to Partnership Agreement Pursuant to Section 14.1.B(3) of the Partnership Agreement, the General Partner, as general partner of the Partnership and as attorney-in-fact for its Limited Partners, hereby amends the Partnership Agreement as follows: (a) Article 1 of the Partnership Agreement is hereby amended by adding the following definition of "Series E Preferred Units": "Series E Preferred Units" means the units of limited partnership interest issued to the Company on June 2, 1999, in connection with the issuance of the Series B Preferred Stock by the Company. Section 3. Continuation of Partnership Agreement The Partnership Agreement and this Amendment shall be read together and shall have the same force and effect as if the provisions of the Partnership Agreement and this Amendment were contained in one document. Any provisions of the Partnership Agreement not amended by this Amendment shall remain in full force and effect as provided in the Partnership Agreement immediately prior to the date hereof. 2 IN WITNESS WHEREOF, the parties hereto have executed this Supplement to the Partnership Agreement as of the 2nd day of June, 1999. GENERAL PARTNER: RECKSON ASSOCIATES REALTY CORP. By:_____________________________________ Name: Title: EXISTING LIMITED PARTNERS: By: Reckson Associates Realty Corp., as Attorney-in-Fact for the Limited Partners By:_______________________________ Name: Title: Series E Preferred Unit Holder RECKSON ASSOCIATES REALTY CORP. By:_____________________________________ Name: Title: 3 EXHIBIT I RECKSON OPERATING PARTNERSHIP, L.P. DESIGNATION OF THE VOTING POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS AND QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF THE SERIES E PREFERRED PARTNERSHIP UNITS The following are the terms of the Series E Preferred Partnership Units established pursuant to this Amendment: (1) Number. The maximum number of authorized Series E Preferred Partnership Units (the "Series E Preferred Units") shall be 6,000,000. (2) Rank. The Series E Preferred Units will, with respect to distribution rights and rights upon liquidation, dissolution or winding up of the Partnership, rank: (a) senior to all classes or series of common units of the Partnership ("Common Units") and to all equity securities issued by the Partnership the terms of which provide that such equity securities shall rank junior to such Series E Preferred Units; (b) on a parity with all equity securities issued by the Partnership other than those referred to in clauses (a) and (c); and (c) junior to all equity securities issued by the Partnership that rank senior to the Series E Preferred Units in accordance with Section 6(d). The term "equity securities" shall not include convertible debt securities. (3) Distributions. (a) For any quarterly period, holders of Series E Preferred Units shall be entitled to receive, if, when and as authorized by the General Partner, out of funds legally available for the payment of distributions, cumulative cash distributions in an amount per unit equal to (i) in the case of the period from and including the date of original issue to but excluding April 30, 2000, 7.85% per annum of the liquidation preference per unit (equivalent to $1.9625 per annum per unit), (ii) in the case of the period from and including April 30, 2000 to but excluding April 30, 2001, 8.35% per annum of the liquidation preference per unit (equivalent to $2.0875 per annum per unit) and (iii) in the case of the period from and including April 30, 2001 and thereafter until any applicable redemption or conversion, 8.85% per annum of the liquidation preference per unit (equivalent to $2.2125 per annum per unit) (the "Series E Convertible Dividend Amount"). Distributions on the Series E Preferred Units, if authorized, shall be cumulative from the date of original issue and shall be payable quarterly in arrears on January 31, April 30, July 31 and October 31 of each year or, if not a Business Day, the next succeeding Business Day, commencing July 31, 1999 (each, a "Distribution Payment Date"). Any distribution payable on the Series E Preferred Units for a partial distribution period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Distributions will be payable to holders of record of Series E Preferred Units as it appears in the records of the Partnership at the close of business on the applicable record date, which shall be such date designated by the General Partner for the payment of distributions that is not more than 30 nor less than 10 days prior to such Distribution Payment Date (each, a "Distribution Payment Record Date"). (b) No distributions on the Series E Preferred Units shall be authorized by the General Partner or be paid or set apart for payment by the Partnership at such time as the terms and provisions of any agreement of the Partnership, including any agreement relating to its indebtedness, prohibits such authorization, payment or setting apart for payment or provides that such authorization, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such authorization or payment shall be restricted or prohibited by law. (c) Distributions on the Series E Preferred Units will accumulate whether or not the Partnership has earnings, whether or not there are funds legally available for the payment of such distributions and whether or not such distributions are authorized. Accumulated but unpaid distributions on the Series E Preferred Units will not bear interest and holders of the Series E Preferred Units will not be entitled to any distributions in excess of full cumulative distributions as described above. (d) No full distributions will be authorized or paid or set apart for payment on any equity securities of the Partnership ranking, as to distributions, on a parity with or junior to the Series E Preferred Units for any period unless full distributions have been or contemporaneously are authorized and paid or authorized and a sum sufficient for the payment thereof is set apart for such payment on the Series E Preferred Units for all past distribution periods and the then current distribution period. When distributions are not paid in full or a sum sufficient for such full payment is not so set apart upon the Series E Preferred Units and the other equity securities of the Partnership ranking on a parity as to distributions with the Series E Preferred Units, all distributions authorized upon the Series E Preferred Units and any other equity securities of the Partnership ranking on a parity as to distributions with the Series E Preferred Units shall be authorized pro rata so that the amount of distributions authorized per Series E Unit and such other equity securities shall in all cases bear to each other the same ratio that accumulated distributions per Series E Unit and such other equity securities (which shall not include any accumulation in respect of unpaid distributions for prior distribution periods if such equity securities do not have cumulative distributions) bear to each other. No interest, or sum of money in lieu of interest, shall be payable in respect of any distribution payment or payments on Series E Preferred Units which may be in arrears. (e) Except as provided in Section 3(d), unless full distributions on the Series E Preferred Units have been or contemporaneously are authorized and paid or authorized and a sum sufficient for the payment thereof is set apart for payment for all past distribution periods and the then current distribution period, no distributions (other than in common units or other equity securities of the Partnership ranking junior to the Series E Preferred Units as to distributions and upon liquidation) shall be authorized or paid or set aside for payment or other distribution shall be authorized or made upon the Common Units or any other equity securities of the Partnership ranking junior to or on a parity with the Series E Preferred Units as to distributions or upon liquidation, nor shall any Common Units or any other equity securities of the Partnership ranking junior to or on a parity with the Series E Preferred Units as to distributions or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any monies be paid to or made available for a sinking fund for the redemption 2 of any such units) by the Partnership (except (1) by conversion into or exchange for other units of the Partnership ranking junior to the Series E Preferred Units as to distributions and upon liquidation or (2) redemptions for the purpose of preserving the Company's status as a real estate investment trust (a "REIT") under the Code). (f) Any distribution payment made on Series E Preferred Units shall first be credited against the earliest accumulated but unpaid distribution due with respect to such units which remains payable. (4) Liquidation Preference. (a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Partnership (referred to herein as a "liquidation"), the holders of the Series E Preferred Units will be entitled to be paid out of the assets of the Partnership legally available for distribution to its unitholders liquidating distributions, in cash or property at its fair market value as determined by the General Partner, in the amount of a liquidation preference of $25.00 per unit, plus an amount equal to any accumulated and unpaid distributions to the date of such liquidation, before any distribution or payment is made to holders of Common Units or any other equity securities of the Partnership ranking junior to the Series E Preferred Units as to the distribution of assets upon a liquidation. After payment of the full amount of the liquidating distributions to which they are entitled, the holders of Series E Preferred Units will have no right or claim to any of the remaining assets of the Partnership. (b) In the event that, upon any liquidation of the Partnership, the available assets of the Partnership are insufficient to pay the amount of the liquidating distributions on all outstanding Series E Preferred Units and the corresponding amounts payable on all other equity securities of the Partnership ranking on a parity with Series E Preferred Units in the distribution of assets upon a liquidation, then the holders of Series E Preferred Units and all other such equity securities shall share ratably in any such distribution of assets in proportion to the full liquidating distributions per unit to which they would otherwise be respectively entitled. (c) The consolidation or merger of the Partnership with or into any other entity, or the merger of another entity with or into the Partnership, or a statutory unit exchange by the Partnership, or the sale, lease or conveyance of all or substantially all of the property or business of the Partnership, shall not be deemed to constitute a liquidation of the Partnership. (d) The liquidation preference of the outstanding Series E Preferred Units will not be added to the liabilities of the Partnership for the purpose of determining whether under the Delaware Revised Uniform Limited Partnership Act a distribution may be made to unitholders of the Partnership whose preferential rights upon dissolution of the Partnership are junior to those of holders of Series E Preferred Units. This section 4(d) shall be without prejudice to the provisions of Sections 3(a) and 4(a) hereof. (5) Redemption. (a) The Partnership shall redeem the Series E Preferred Units, in such a number and at such time as Series B Preferred Stock is redeemed by the Company, at a redemption price per share in cash equal to (i) in the case of a redemption from and including March 2, 2002 to 3 and including June 2, 2003, an amount that provides an annual rate of return in respect of such unit of 15% calculated based on the timing and amount of all payments (including all distributions other than liquidated damages) made to and including the date of redemption, relative to the liquidation preference thereof, (ii) in the case of a redemption from and including June 2, 2003 to and including June 2, 2004, $25.50 and (iii) in the case of a redemption from and including June 2, 2004 and thereafter, $25.00, plus, in each case, all accumulated and unpaid distributions thereon to the date of redemption (the "Cash Redemption Right"). In addition to the Cash Redemption Right, on or after March 2, 2002, the Partnership shall redeem the Series E Preferred Units in exchange for Common Units, in such a number and at such time as Series B Preferred Stock is redeemed by the Company in exchange for shares of the Company's Common Stock pursuant to Section 5 of the Articles Supplementary establishing the Series B Preferred Stock (the "Stock Redemption Right"). (b) At its election, the Company may require that the Partnership, prior to the Series E Unit Redemption Date, deliver the redemption price to the Company so that the Company may irrevocably deposit the redemption price (including accumulated and unpaid distributions) of the Series B Preferred Stock it has called for redemption in trust for the holders thereof with a bank or trust company. Any monies so deposited which remain unclaimed by the holders of the Series B Preferred Stock at the end of two years after the Series E Unit Redemption Date will be returned by such bank or trust company to the Company and the Company shall promptly deliver such funds to the Partnership. (c) From and after the Series E Unit Redemption Date (unless the Partnership defaults in payment of the redemption price), all distributions on the Series E Preferred Units subject to such redemption will cease to accumulate and all rights of the holders thereof, except the right to receive the redemption price thereof (including all accumulated and unpaid distributions to the Series E Unit Redemption Date), will cease and terminate and such units will not thereafter be transferred (except with the consent of the Partnership) on the Partnership's records, and such units shall not be deemed to be outstanding for any purpose whatsoever. (d) Unless full distributions on all Series E Preferred Units shall have been or contemporaneously are authorized and paid or authorized and a sum sufficient for the payment thereof is set apart for payment for all past distribution periods and the then current distribution period, no Series E Preferred Units shall be redeemed unless all outstanding Series E Preferred Units are simultaneously redeemed; provided, however, that the foregoing shall not prevent the redemption of Series E Preferred Units (i) in order to preserve the REIT status of the Company or (ii) pursuant to a purchase or exchange offer made by the Company with respect to shares of the Series B Preferred Stock on the same terms to holders of all outstanding shares of Series B Preferred Stock. (e) Unless full distributions on all Series E Preferred Units have been or contemporaneously are authorized and paid or authorized and a sum sufficient for the payment thereof is set apart for payment for all past distribution periods and the then current distribution period, the Partnership shall not purchase or otherwise acquire, directly or indirectly, any Series E Preferred Units (except by conversion into or exchange for equity securities of the Partnership ranking junior to the Series E Preferred Units as to distributions and upon liquidation); provided, 4 however, that the foregoing shall not prevent the redemption of Series E Preferred Units (i) in order to preserve the REIT status of the Company or (ii) pursuant to a purchase or exchange offer made by the Company with respect to shares of the Series B Preferred Stock on the same terms to holders of all outstanding shares of Series B Preferred Stock. (f) Immediately prior to any redemption of Series E Preferred Units, the Partnership shall pay, in cash, any accumulated and unpaid distributions to the Series E Unit Redemption Date, unless such Series E Unit Redemption Date falls after a Distribution Payment Record Date and on or prior to the corresponding Distribution Payment Date, in which case each holder of Series E Preferred Units at the close of business on such Distribution Payment Record Date shall be entitled to the distribution payable on such units on the corresponding Distribution Payment Date notwithstanding the redemption of such units on or prior to such Distribution Payment Date. Except as provided above, the Partnership will make no payment or allowance for unpaid distributions, whether or not in arrears, on Series E Preferred Units for which a notice of redemption has been given. (g) Any Series E Preferred Units that have been redeemed shall, after such redemption, have the status of authorized but unissued Preferred Units, without designation as to series, until such units are once more designated as part of a particular series by the General Partner. (h) No fractional Common Units will be issued upon redemption of Series E Preferred Units pursuant to the Partnership's Stock Redemption Right. Instead of any fractional interest in a Common Unit that would otherwise be deliverable upon the redemption of Series E Preferred Units, the Partnership will pay to the holder of such Series E Preferred Units an amount in cash in respect of such fractional interest (computed to the nearest cent) based upon the Current Market Price of Common Units on the Trading Day immediately preceding the Series E Redemption Date. If more than one Series E Unit shall be surrendered for redemption at one time by the same holder, the number of full shares of Common Units issuable upon redemption thereof shall be computed on the basis of the aggregate number of Series E Preferred Units so surrendered. (i) The Series E Preferred Units will not have a stated maturity date and will not be subject to any sinking fund or mandatory redemption provisions. (6) Voting Rights. (a) Holders of the Series E Preferred Units will not have any voting rights, except as set forth below. In any matter in which the Series E Preferred Units are entitled to vote, including any action by written consent, each Series E Unit shall be entitled to one vote. (b) So long as any Series E Preferred Units remain outstanding, the Partnership shall not, without the affirmative vote or consent of the holders of record of at least two-thirds of the outstanding Series E Preferred Units given in person or by proxy, either in writing or at a meeting (such series voting separately as a class), (i) authorize or create, or increase the authorized or issued amount of, any equity securities ranking senior to the Series E Preferred Units with respect to payment of distributions or the distribution of assets upon a liquidation of 5 the Partnership or reclassify any authorized units of the Partnership into any such equity securities, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such unit or (ii) amend, alter or repeal the provisions of the Partnership Agreement, whether by merger, consolidation or otherwise (an "Event"), so as to materially and adversely affect any right, preference, privilege or voting power of the Series E Preferred Units or the holders thereof; provided, however, that the holders of the Series E Preferred Units shall not be entitled to any voting rights in connection with an Event if as a result of such Event (a) Series E Preferred Units remain outstanding with the terms thereof materially unchanged or (b) the Partnership is not the surviving entity but the surviving entity issues to the holders of the Series E Preferred Units the same number of units of a separate class of preferred units with rights, preferences, privileges and voting powers that are materially unchanged from the preferences, rights, privileges and other terms of the Series E Preferred Units; and provided, further, that (x) any increase in the amount of the authorized Series E Preferred Units or the creation or issuance of any other series of Preferred Units or (y) any increase in the amount of authorized units of such series, in each case ranking on a parity with or junior to the Series E Preferred Units with respect to payment of distributions or the distribution of assets upon a liquidation of the Partnership, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers. (c) The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding Series E Preferred Units shall have been converted, redeemed or called for redemption upon proper notice and sufficient funds shall have been deposited in trust to effect such redemption. (7) Conversion. (a) Subject to Section 8, Series E Preferred Units will be convertible at any time, at the option of the holders thereof, into Common Units at a conversion price of $26.05 per Common Unit (equivalent to a conversion rate of .9597 Common Units for each Series E Unit), subject to adjustment as described below (the "Conversion Price"); provided, however, that the right to convert Series E Preferred Units called for redemption will terminate at the close of business on the fifth Business Day prior to the Series E Unit Redemption Date. (b) Unless the units issuable on conversion are to be issued in the same name as the name in which such Series E Preferred Units are registered, in which case the Partnership shall bear the related taxes, each unit surrendered for conversion shall be accompanied by instruments of transfer, in form satisfactory to the Partnership, duly executed by the holder or such holder's duly authorized attorney and an amount sufficient to pay any transfer or similar tax (or evidence reasonably satisfactory to the Partnership demonstrating that such taxes have been paid or that such taxes are not due). (c) Each conversion shall be deemed to have been effected immediately prior to the close of business on the date on which such notice (and if applicable, payment of an amount equal to the distribution payable on such units) is received by the Partnership as aforesaid, and the person or persons in whose name or names that the Common Units shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the units 6 represented thereby at such time on such date, and such conversion shall be at the Conversion Price in effect at such time and on such date unless the records of the Partnership shall be closed on that date, in which event such person or persons shall be deemed to have become such holder or holders of record at the close of business on the next succeeding day on which such records are open, but such conversion shall be at the Conversion Price in effect on the date on which such notice is received by the Partnership. (d) Holders of Series E Preferred Units at the close of business on a Distribution Payment Record Date shall be entitled to receive the distribution payable on such units on the corresponding Distribution Payment Date notwithstanding the conversion of such units following such Distribution Payment Record Date and prior to such Distribution Payment Date. A holder of Series E Preferred Units on a Distribution Payment Record Date who (or whose transferee) tenders any such units for conversion into Common Units on such Distribution Payment Date shall receive the distribution payable by the Partnership on such Series E Preferred Units on such date, and the converting holder need not include payment of the amount of such distribution upon the conversion of the Series E Preferred Units. Except as provided above, the Partnership shall make no payment or allowance for unpaid distributions, whether or not in arrears, on converted units or for distribution on the Common Units that are issued upon such conversion. Any fractional interest in respect of a Common Unit arising upon conversion in accordance with the terms of this Section 7 shall be settled as provided in Section 7(e). (e) No fractional Common Units shall be issued upon conversion of Series E Preferred Units. Instead of any fractional Common Unit that would otherwise be issuable upon the conversion of a Series E Unit, the Partnership shall pay to the holder of such unit an amount in cash in respect of such fractional interest based upon the Current Market Price of a Common Unit on the Trading Day immediately preceding the date of conversion. If more than one Series E Unit shall be surrendered for conversion at one time by the same holder, the number of full Common Units issuable upon conversion thereof shall be computed on the basis of the aggregate number of Series E Preferred Units so surrendered. (f) The Conversion Price shall be adjusted from time to time as follows: (i) If the Partnership shall after the date on which Series E Preferred Units are first issued (the "Issue Date") (A) pay or make a distribution in Common Units to holders of its equity securities, (B) subdivide its outstanding Common Units into a greater number of units, (C) combine its outstanding Common Units into a smaller number of units or (D) issue any equity securities by reclassification of its Common Units, then the Conversion Price in effect at the opening of business on the day following the record date for the determination of unitholders entitled to receive such distribution or at the opening of business on the day following the day on which such subdivision, combination or reclassification becomes effective, as the case may be, shall be adjusted so that the holder of any Series E Unit thereafter surrendered for conversion shall be entitled to receive the number of Common Units that such holder would have owned or have been entitled to receive after the happening of any of the events 7 described above had such units been converted immediately prior to the record date in the case of a distribution or the effective date in the case of a subdivision, combination or reclassification. An adjustment made pursuant to this subsection (i) shall become effective immediately after the opening of business on the day following such record date (except as provided in Section 7(i)) in the case of a distribution and shall become effective immediately after the opening of business on the day next following the effective date in the case of a subdivision, combination or reclassification. (ii) If the Partnership shall issue after the Issue Date rights, options or warrants to all holders of Common Units entitling them to subscribe for or purchase Common Units (or securities convertible into or exchangeable for Common Units) at a price per unit less than the Fair Market Value per Common Unit on the record date for the determination of unitholders entitled to receive such rights, options or warrants, then the Conversion Price in effect at the opening of business on the day following such record date shall be adjusted to equal the price determined by multiplying (I) the Conversion Price in effect immediately prior to the opening of business on the day following the record date for such determination by (II) a fraction, the numerator of which shall be the sum of (A) the number of Common Units outstanding on the close of business on the record date for such determination and (B) the number of units that the aggregate proceeds to the Partnership from the exercise of such rights, options or warrants for Common Units would purchase at such Fair Market Value, and the denominator of which shall be the sum of (A) the number of Common Units outstanding on the close of business on the record date for such determination and (B) the number of additional Common Units offered for subscription or purchase pursuant to such rights, options or warrants. Such adjustment shall become effective immediately after the opening of business on the day following such record date (except as provided in Section 7(i)). In determining whether any rights, options or warrants entitle the holders of Common Units to subscribe for or purchase Common Units at less than the Fair Market Value, there shall be taken into account any consideration received by the Partnership upon issuance and upon exercise of such rights, options or warrants, the value of such consideration, if other than cash, to be determined by the General Partner. (iii) If the Partnership shall distribute to all holders of its Common Units any equity securities of the Partnership (other than Common Units) or evidences of its indebtedness or assets (excluding Permitted Common Unit Cash Distributions and those rights, options and warrants referred to in and treated under subsection (ii) above), then the Conversion Price shall be adjusted so that it shall equal the price determined by multiplying (I) the Conversion Price in effect immediately prior to the close of business on the record date for the determination of unitholders entitled to receive such distribution by (II) a fraction, the numerator of which shall be the Fair Market Value per Common Unit on the record date for such determination less the then fair market value (as determined by the General Partner, whose determination shall be conclusive) of the portion of the equity securities, evidences of indebtedness or assets so distributed applicable to one 8 Common Unit, and the denominator of which shall be the Fair Market Value per Common Unit on the record date for such determination. Such adjustment shall become effective immediately at the opening of business on the day following such record date (except as provided in Section 7(i)). For the purposes of this subsection (iii), the distribution of equity securities, evidences of indebtedness or assets which are distributed not only to the holders of Common Units on the record date for the determination of unitholders entitled to such distribution, but also are distributed with each Common Unit delivered to a person converting a Series E Unit after such record date, shall not require an adjustment of the Conversion Price pursuant to this subsection (iii), provided that on the date, if any, on which a person converting a Series E Unit would no longer be entitled to receive such equity securities, evidences of indebtedness or assets with a Common Unit (other than as a result of the termination of all such equity securities, evidences of indebtedness or assets), a distribution of such equity securities, evidences of indebtedness or assets shall be deemed to have occurred and the Conversion Price shall be adjusted as provided in this subsection (iii) (and such day shall be deemed to be "the record date for the determination of the unitholders entitled to receive such distribution" within the meaning of the two preceding sentences). (iv) No adjustment in the Conversion Price shall be required unless such adjustment would require a cumulative increase or decrease of at least 1% in the Conversion Price; provided, however, that any adjustments that by reason of this subsection (iv) are not required to be made shall be carried forward and taken into account in any subsequent adjustment until made; and provided, further, that any adjustment shall be required and made in accordance with the provisions of this Section 7 (other than this subsection (iv)) not later than such time as may be required in order to preserve the tax-free nature of a distribution to the holders of Common Units. Notwithstanding any other provisions of this Section 7, the Partnership shall not be required to make any adjustment of the Conversion Price for the issuance of any Common Units pursuant to any plan providing for the reinvestment of distributions or interest payable on securities of the Partnership and the investment of additional optional amounts in Common Units under such plan. All calculations under this Section 7 shall be made to the nearest cent with ($.005 being rounded upward) or to the nearest one-tenth of a unit (with .05 of a unit being rounded upward), as the case may be. Anything in this subsection (f) to the contrary notwithstanding, the Partnership shall be entitled, to the extent permitted by law, to make such reductions in the Conversion Price, in addition to those required by this subsection (f), as it in its discretion shall determine to be advisable in order that any unit distributions, subdivision, reclassification or combination of units, distribution of rights, options or warrants to purchase units or securities, or a distribution of other assets (other than cash distributions) hereafter made by the Partnership to its unitholders shall not be taxable. (g) Except as otherwise provided for in Section7(f), if the Partnership shall be a party to any transaction (including, without limitation, a merger, consolidation, statutory unit exchange, tender offer for all or substantially all of the Common Units or sale of all or 9 substantially all of the Partnership's assets), in each case as a result of which Common Units shall be converted into the right to receive units, stock, securities or other property (including cash or any combination thereof (each of the foregoing being referred to herein as a "Transaction")), each Series E Unit, if convertible after the consummation of the Transaction, which is not converted into the right to receive units, stock, securities or other property in connection with such Transaction shall thereafter be convertible into the kind and amount of units, stock, securities and other property (including cash or any combination thereof) receivable upon the consummation of such Transaction by a holder of that number of Common Units into which one Series E Unit was convertible immediately prior to such Transaction, assuming such holder of Common Units (i) is not a Person with which the Partnership consolidated or into which the Partnership merged or which merged into the Partnership or to which such sale or transfer was made, as the case may be (a "Constituent Person"), or an affiliate of a Constituent Person and (ii) failed to exercise his rights of the election, if any, as to the kind or amount of units, stock, securities and other property (including cash or any combination thereof) receivable upon such Transaction (each, a "Non-Electing Unit") (provided that if the kind and amount of units, stock, securities and other property (including cash or any combination thereof) receivable upon consummation of such Transaction is not the same for each Non-Electing Unit, the kind and amount receivable by each Non-Electing Unit shall be deemed to be the kind and amount receivable per unit by a plurality of the Non-Electing Units). The Partnership shall not be a party to any Transaction unless the terms of such Transaction are consistent with the provisions of this subsection (g), and it shall not consent or agree to the occurrence of any Transaction until the Partnership has entered into an agreement with the successor or purchasing entity, as the case may be, for the benefit of the holders of the Series E Preferred Units that will contain provisions enabling holders of Series E Preferred Units that remain outstanding after such Transaction to convert into the consideration received by holders of Common Units at the Conversion Price in effect immediately prior to such Transaction. The provisions of this subsection (g) shall similarly apply to successive Transactions. (h) If: (i) the Partnership shall declare a distribution on the Common Units (other than Permitted Common Unit Cash Distributions) or there shall be a reclassification, subdivision or combination of the Common Units; or (ii) the Partnership shall grant to the holders of the Common Units rights, options or warrants to subscribe for or purchase Common Units at less than Fair Market Value; or (iii) the Partnership shall enter into a Transaction; or (iv) there shall occur the voluntary or involuntary liquidation, dissolution or winding up of the Partnership, then the Partnership shall notify the Company and shall cause to be mailed to holders of Series E Preferred Units at their addresses as shown on the records of the Partnership, as promptly as possible, but at least 15 days prior to the applicable date hereinafter specified, a notice stating (A) the date on which a record is to be taken for the purpose of 10 such distribution or rights, options or warrants, or, if a record is not to be taken, the date as of which the holders of Common Units of record to be entitled to such distribution or rights, options or warrants are to be determined or (B) the date on which such reclassification, subdivision, combination, Transaction or liquidation, dissolution or winding up is expected to become effective, and the date as of which it is expected that holders of Common Units of record shall be entitled to exchange their Common Units for securities or other property, if any, deliverable upon such reclassification, subdivision, combination, Transaction or liquidation, dissolution or winding up. Failure to give or receive such notice or any defect therein shall not affect the legality or validity of the proceedings described in this Section 7. (i) In any case in which Section 7(f) provides that an adjustment shall become effective on the day following the record date for an event, the Partnership may defer until the occurrence of such event (A) issuing to the holder of any Series E Unit converted after such record date and before the occurrence of such event the additional Common Units issuable upon such conversion by reason of the adjustment required by such event over and above the Common Units issuable upon such conversion before giving effect to such adjustment and (B) fractionalizing any Series E Unit and/or paying to such holder any amount of cash in lieu of any fraction pursuant to Section 7(e). (j) There shall be no adjustment of the Conversion Price in case of the issuance of any equity securities of the Partnership in a reorganization, acquisition or other similar transaction except as specifically set forth in this Section 7. If any action or transaction would require adjustment of the Conversion Price pursuant to more than one subsection of Section 7(f), only one adjustment shall be made, and such adjustment shall be the amount of adjustment that has the highest absolute value. (k) If the Partnership shall take any action affecting the Common Units, other than action described in this Section 7, that in the opinion of the General Partner would materially adversely affect the conversion rights of the holders of the Series E Preferred Units, the Conversion Price for the Series E Preferred Units may be adjusted, to the extent permitted by law, in such manner, if any, and at such time, as the Officers of the Partnership, in their sole discretion, may determine to be equitable in the circumstances. (l) The Partnership shall at all times reserve and keep available, free from preemptive rights, for the purpose of effecting conversion of the Series E Preferred Units, the full number of Common Units deliverable upon the conversion of all outstanding Series E Preferred Units not theretofore converted. (m) The Partnership will pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of Common Units or other securities or property on conversion of the Series E Preferred Units pursuant hereto; provided, however, that the Partnership shall not be required to pay any tax that may be payable in respect of any transfer involved in the issue or delivery of Common Units or other securities or property in a name other than that of the record holder of the Series E Preferred Units to be converted, and no such issue or delivery shall be made unless and until the person requesting such issue or delivery has paid to the Partnership the amount of any such tax or established, to the reasonable satisfaction of the Partnership, that such tax has been paid. 11 (8) Ownership Limitations. The Series E Preferred Units shall be owned and held solely by the General Partner. (9) General. The rights of the General Partner, in its capacity as holder of the Series E Preferred Units, are in addition to and not in limitation on any other rights or authority of the General Partner, in any other capacity, under the Partnership Agreement. In addition, nothing contained herein shall be deemed to limit or otherwise restrict any rights or authority of the General Partner under the Partnership Agreement, other than in its capacity as the holder of the Series E Preferred Units. (10) Definitions. "Business Day" shall mean any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in The City of New York are authorized or required by law, regulation or executive order to close. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Current Market Price" of any equity security of the Company or the Partnership or any other issuer for any day shall mean the last reported sales price, regular way, on such day, or, if no sale takes place on such day, the average of the reported closing bid and asked prices on such day, regular way, in either case as reported on the NYSE or, if such security is not listed or admitted for trading on the NYSE, on the principal national securities exchange on which such security is listed or admitted for trading or, if not listed or admitted for trading on any national securities exchange, on the Nasdaq National Market or, if such security is not quoted on the Nasdaq National Market, the average of the closing bid and asked prices on such day in the over-the-counter market as reported by Nasdaq or, if bid and asked prices for such security on such day shall not have been reported through Nasdaq the average of the bid and asked prices on such day as furnished by any NYSE member firm regularly making a market in such security selected for such purpose by the General Partner; provided however, that the Current Market Price for the Common Units shall be deemed to be the Current Market Price of the Company's Common Stock, par value $0.01 per share, multiplied by the applicable Conversion Factor. "Fair Market Value" shall mean the average of the daily Current Market Prices per share of the Company's Common Stock during the ten consecutive Trading Days selected by the Company commencing not more than 20 Trading Days before, and ending not later than, the earlier of the day in question and the day before the "ex-date" with respect to the issuance or distribution requiring such computation. The term "ex-date," when used with respect to any issuance or distribution, means the first day on which the shares of the Company's Common Stock trade regular way, without the right to receive such issuance or distribution, on the exchange or in the market, as the case may be, for purposes of determining that day's Current Market Price. 12 "Market Price" as to any date shall mean the average of the last sales price reported on the NYSE of the Company's Common Stock, on the ten trading days immediately preceding the relevant date, or if not then traded on the NYSE, the average of the last reported sales price of the Company's Class B Common Stock on the ten trading days immediately preceding the relevant date as reported on any exchange or quotation system over which the Common Stock may be traded, or if not then traded over any exchange or quotation system, then the market price of the Company's Common Stock on the relevant date as determined in good faith by the General Partner. "Person" shall mean an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended; but does not include an underwriter which participates in a public offering of the Series E Preferred Units or any interest therein, provided that such ownership by such underwriter would not result in the Partnership being "closely held" within the meaning of Section 856(h) of the Code. "Set apart for payment" shall be deemed to include, without any further action, the following: the recording by the Partnership in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to an authorization of a distribution by the General Partner, the allocation of funds to be so paid on any series or class of units of the Partnership. "Trading Day" shall mean any day on which the securities in question are traded on the NYSE or, if such securities are not listed or admitted for trading on the NYSE, on the principal national securities exchange on which such securities are listed or admitted or, if not listed or admitted for trading on any national securities exchange, on the Nasdaq National Market or, if such securities are not quoted on the Nasdaq National Market, on the applicable securities market in which the securities are traded. 13 EX-10.36 8 EXHIBIT 10.36 EXHIBIT 10.36 RECKSON ASSOCIATES REALTY CORP. AMENDED AND RESTATED CREDIT AGREEMENT dated as of August 4, 1999 between RECKSON SERVICE INDUSTRIES, INC., as Borrower and RECKSON OPERATING PARTNERSHIP, L.P., as Lender relating to the operations of RECKSON STRATEGIC VENTURE PARTNERS, LLC Table of Contents Page ---- ARTICLE I. DEFINITIONS Section 1.1 Definitions.....................................................1 (a) Terms Generally........................................1 (b) Other Terms............................................1 ARTICLE II. THE REVOLVING CREDIT FACILITY Section 2.1 Commitment and Loans............................................7 Section 2.2 Borrowing Procedure.............................................7 Section 2.3 Termination and Reduction of Commitment.........................7 Section 2.4 Repayment.......................................................7 Section 2.5 Optional Prepayment.............................................8 ARTICLE III. INTEREST AND FEES Section 3.1 Interest Rate...................................................8 Section 3.2 Interest on Overdue Amounts.....................................8 Section 3.3 Maximum Interest Rate...........................................8 ARTICLE IV. DISBURSEMENT AND PAYMENT Section 4.1 Method and Time of Payments.....................................9 Section 4.2 Compensation for Losses.........................................9 Section 4.3 Withholding and Additional Costs...............................10 (a) Withholding...........................................10 (b) Additional Costs......................................10 (c) Certificate, Etc......................................10 Section 4.4 Expenses; Indemnity............................................11 Section 4.5 Survival.......................................................11 ARTICLE V. REPRESENTATIONS AND WARRANTIES Section 5.1 Representations and Warranties.................................12 (a) Good Standing and Power...............................12 (b) Authority.............................................12 (c) Authorizations........................................12 (d) Binding Obligation....................................12 (e) Litigation............................................12 i (f) No Conflicts..........................................13 (g) Taxes.................................................13 (h) Properties............................................13 (i) Compliance with Laws and Charter Documents............13 (j) No Material Adverse Effect............................13 (k) Disclosure............................................13 Section 5.2 Survival.......................................................13 ARTICLE VI. CONDITIONS PRECEDENT Section 6.1 Conditions to the Availability of the Commitment and Letters of Credit.....................................................14 (a) This Agreement........................................14 (b) Certificate of Incorporation and By-Laws..............14 (c) Representations and Warranties........................14 (d) Other Documents.......................................14 Section 6.2 Conditions to All Loans and Letters of Credit..................14 (a) Borrowing Request.....................................14 (b) No Default............................................15 (c) Debt-to-Equity Ratio..................................15 (d) Representations and Warranties; Covenants.............15 (e) REIT Status of Reckson................................15 (f) Certain Loans Subject to Reckson's Approval...........15 Section 6.3 Satisfaction of Conditions Precedent...........................15 ARTICLE VII. COVENANTS Section 7.1 Affirmative Covenants..........................................15 (a) Financial Statements; Compliance Certificates.........15 (b) Existence.............................................16 (c) Compliance with Law and Agreements....................16 (d) Authorizations........................................16 (e) Inspection............................................16 (f) Maintenance of Records................................17 (g) Notice of Defaults and Adverse Developments...........17 Section 7.2 Negative Covenants.............................................17 (a) Mergers, Consolidations and Sales of Assets...........17 (b) Liens.................................................17 (c) Indebtedness..........................................17 (d) Dividends.............................................18 (e) Certain Amendments....................................18 ii ARTICLE VIII. EVENTS OF DEFAULT Section 8.1 Events of Default..............................................18 ARTICLE IX. EVIDENCE OF LOANS; TRANSFERS Section 9.1 Evidence of Loans and Letters of Credit........................20 ARTICLE X. LETTERS OF CREDIT Section 10.1 Letters of Credit..............................................20 (a) Types and Amounts.....................................20 (b) Conditions............................................21 (c) Issuance of Letters of Credit.........................21 (d) Reimbursement Obligations; Duties of the Lender.......22 (e) Payment of Reimbursement Obligations..................22 (f) Letter of Credit Fee Charges..........................22 (g) Letter of Credit Reporting Requirements...............22 (h) Indemnification; Exoneration..........................23 ARTICLE XI. MISCELLANEOUS Section 11.1 Applicable Law.................................................23 Section 11.2 Waiver of Jury.................................................23 Section 11.3 Jurisdiction and Venue; Service of Process.....................24 Section 11.4 Confidentiality................................................24 Section 11.5 Amendments and Waivers.........................................24 Section 11.6 Cumulative Rights; No Waiver...................................25 Section 11.7 Notices........................................................25 Section 11.8 Certain Acknowledgments........................................25 Section 11.9 Separability...................................................25 Section 11.10 Parties in Interest............................................26 Section 11.11 Execution in Counterparts......................................26 iii AMENDED AND RESTATED CREDIT AGREEMENT, dated as of August 4, 1999, between Reckson Service Industries, Inc., a Delaware corporation, and Reckson Operating Partnership, L.P., a Delaware limited partnership, relating to the operations of Reckson Strategic Venture Partners, LLC ("RSVP"). W I T N E S S E T H: WHEREAS, the Borrower has requested the Lender to commit to lend to the Borrower up to $100 million on a revolving basis for investment in RSVP; WHEREAS, the Lender is willing to make revolving credit loans on the terms and conditions provided herein; and WHEREAS, the parties hereto desire to amend and restate their credit agreement dated June 15, 1998 to allow for the issuance of one or more Letters of Credit in favor of the Lender for the benefit of the Borrower; NOW, THEREFORE, the parties agree as follows: ARTICLE I. DEFINITIONS Section 1.1 Definitions. (a) Terms Generally. The definitions ascribed to terms in this Agreement apply equally to both the singular and plural forms of such terms. Whenever the context may require, any pronoun shall be deemed to include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be interpreted as if followed by the phrase "without limitation". The phrase "individually or in the aggregate" shall be deemed general in scope and not to refer to any specific Section or clause of this Agreement. All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. The table of contents, headings and captions herein shall not be given effect in interpreting or construing the provisions of this Agreement. Except as otherwise expressly provided herein, all references to "dollars" or "$" shall be deemed references to the lawful money of the United States of America. (b) Other Terms. The following terms have the meanings ascribed to them below or in the Sections of this Agreement indicated below: "Adjusted Indebtedness" means, with respect to the Borrower, the Borrower's Indebtedness determined without regard for any amounts described in clause (viii) of the definition of "Indebtedness." "Affiliate" means, with respect to any Person, any other Person that controls, is controlled by, or is under common control with, such Person. "Agreement" means this credit agreement, as it may be amended, modified or supplemented from time to time. "Available Commitment" means, on any day, an amount equal to (i) the Commitment on such day minus (ii) the aggregate outstanding principal amount of Loans on such day. "Borrower" means Reckson Service Industries, Inc., a Delaware corporation. "Borrowing Date" means, with respect to any Loan or Letter of Credit, the Business Day set forth in the relevant Borrowing Request as the date upon which the Borrower desires to borrow such Loan or Letter of Credit; "Borrowing Request" means a request by the Borrower for a Loan or a Letter of Credit, which shall specify (i) the requested Borrowing Date and (ii) the aggregate amount of such Loan or Letter of Credit. "Business Day" means any day that is not a Saturday, Sunday or other day on which commercial banks in The City of New York are authorized by law to close. "Capital Lease Obligations" means, with respect to any Person, the obligation of such Person to pay rent or other amounts under any lease with respect to any property (whether real, personal or mixed) acquired or leased by such Person that is required to be accounted for as a liability on a consolidated balance sheet of such Person. "Commercial Letter of Credit" means any documentary letter of credit issued by an Issuing Bank pursuant to Section 10.1 for the account of the Lender on behalf of the Borrower. "Commitment" means $100 million, less (i) the amount of loans made by the Lender to the Borrower for the funding of investments made by RSVP prior to the spin-off distribution of shares of common stock of the Borrower by Reckson and (ii) the amount of any investments made by the Lender in joint venture investments made with RSVP, and as such amount may be reduced from time to time pursuant to Section 2.3. "Commitment Termination Date" means the earlier to occur of (i) June 15, 2003 and (ii) the date, if any, on which the Commitment is terminated. "Confidential Information" means information delivered to the Lender by or on behalf of the Borrower in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is confidential or proprietary in nature at the time it is so delivered or information obtained by the Lender in the course of its review of the books or records of the Borrower contemplated herein; provided that such term shall not include information W that was publicly known or otherwise known to the Lender prior to the 2 time of such disclosure, (ii) that subsequently becomes publicly known through no act or omission by the Lender or any Person acting on the Lender's behalf, (iii) that otherwise becomes known to the Lender other than through disclosure by the Borrower or (iv) that constitutes financial information delivered to the Lender that is otherwise publicly available. "Credit Obligations" means, at any particular time, the sum of (i) the outstanding principal amount of the Loans at such time, plus (ii) the Letter of Credit Obligations at such time. "Default" means any event or circumstance which, with the giving of notice or the passage of time, or both, would be an Event of Default. "EBITDA" means for any fiscal period, the Consolidated Net Income or Consolidated Net Loss, as the case may be, for such fiscal period, after restoring thereto amounts deducted for (a) extraordinary losses (or deducting therefrom any amounts included therein on account of extraordinary gains) and special charges, (b) depreciation and amortization (including write-offs or write-downs) and special charges, (c) the amount of interest expense of the Borrower and its Subsidiaries, if any, determined on a consolidated basis in accordance with GAAP, for such period on the aggregate principal amount of their consolidated indebtedness, (d) the amount of tax expense of the Borrower and its Subsidiaries, if any, determined on a consolidated basis in accordance with GAAP, for such period and (e) the aggregate amount of fixed and contingent rentals payable by the Borrower and its Subsidiaries, if any, determined on a consolidated basis in accordance with GAAP, for such period with respect to leases of real and personal property. "Effective Date" has the meaning assigned to such term in Section 6.1. "Event of Default" has the meaning assigned to such term in Section 8.1. "GAAP" means generally accepted accounting principles, as set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entities as may be approved by a significant segment of the accounting profession of the United States of America. "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guaranty" means, with respect to any Person, any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of such Person (i) to purchase or pay (or 3 advance or supply funds for the purchase or payment of) such Indebtedness or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness, (ii) to purchase property, securities or services for the purpose of assuring the holder of such Indebtedness of the payment of such Indebtedness or (iii) to maintain working capital, equity capital or the financial condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness. The term "Guaranteed" shall have the corresponding meaning. "Indebtedness" means, with respect to any Person, (i) all obligations of such Person for borrowed money or for the deferred purchase price of property or services (including all obligations, contingent or otherwise, of such Person in connection with letters of credit, bankers' acceptances, interest rate swap agreements, interest rate cap agreements or other similar instruments, including currency swaps) other than indebtedness to trade creditors and service providers incurred in the ordinary course of business and payable on usual and customary terms, (ii) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments, (iii) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the remedies available to the seller or lender under such agreement are limited to repossession or sale of such property), (iv) all Capital Lease Obligations of such Person, (v) all obligations of the types described in clauses (i), (ii), (iii) or (iv) above secured by (or for which the obligee has an existing right, contingent or otherwise, to be secured by) any Lien upon or in any property (including accounts, contract rights and other intangibles) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness, (vi) all preferred stock issued by such Person which is redeemable, prior to full satisfaction of the Borrower's obligations under this Agreement (including repayment in full of the Loans and all interest accrued thereon), other than at the option of such Person, valued at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (vii) all Indebtedness of others Guaranteed by such Person and (viii) all Indebtedness of any partnership of which such Person is a general partner. "Indemnitee" has the meaning assigned to such term in Section 4.4(b). "Intercompany Agreement" means the intercompany agreement, dated as of the date hereof, by and between the Borrower and the Lender. "Interest Period" means, with respect to any Loan, each three-month period commencing on the date such Loan is made or at the end of the preceding Interest Period, as the case may be; provided, however, that: (i) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next Business Day, unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day; 4 (ii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (iii) below, end on the last Business Day of a calendar month; and (iii) any Interest Period that would otherwise end after the Commitment Termination Date then in effect shall end on such Commitment Termination Date. "Issuing Bank" means The Chase Manhattan Bank or such other banking institution selected by the parties hereto to issue a Letter of Credit pursuant to Section 10.1(c)(ii) hereof. "Lender" means Reckson Operating Partnership, L.P., a Delaware limited partnership. "Letter of Credit" means any Commercial Letter of Credit or Standby Letter of Credit. "Letter of Credit Fee" has the meaning set forth in Section 10.1(f). "Letter of Credit Obligations" means, at any particular time, the sum of (i) all outstanding Reimbursement Obligations, (ii) the aggregate undrawn face amount of all outstanding Letters of Credit, and (iii) the aggregate face amount of all Letters of Credit requested by the Lender but not yet issued. "Letter of Credit Reimbursement Agreement" means, with respect to a Letter of Credit, such form of application therefor and form of reimbursement agreement therefor (whether in a single or several documents, taken together) as an Issuing Bank may employ in the ordinary course of business for its own account, with such modifications thereto as may be agreed upon by such Issuing Bank and the Lender and as are not materially adverse (in the judgment of such Issuing Bank) to the interests of the Lender; provided, however, in the event of any conflict between the terms of any Letter of Credit Reimbursement Agreement and this Agreement, the terms of this Agreement shall control. "Lien" means, with respect to any asset of a Person, (i) any mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest in or on such asset, (ii) the interest of a vendor or lessor under any conditional sale agreement, capital lease or title retention agreement relating to such asset, and (iii) in the case of securities, any purchase option, call or similar right of any other Person with respect to such securities. "Loans" has the meaning assigned to such term in Section 2.1. "Material Adverse Effect" means any material and adverse effect on (i) the consolidated business, properties, condition (financial or otherwise) or operations, present or prospective, of the Borrower and its Subsidiaries, (ii) the ability of the Borrower timely to perform any of its material obligations, or of the Lender to exercise any remedy, under 5 this Agreement or (iii) the legality, validity, binding nature or enforceability of this Agreement. "Net Assets" means, with respect to the Borrower, the greater of (i) the sum of the Borrower's paid-in capital and retained earnings or (ii) the excess of the Value of all of the Borrower's assets of any kind over the Borrower's Adjusted Indebtedness. "Permitted Liens" means, collectively, the following: (i) Liens expressly approved by the Lender, which approval shall not be unreasonably withheld; (ii) Liens imposed by any Governmental Authority for taxes, assessments or charges not yet due or that are being contested in good faith by appropriate proceedings and for which adequate reserves are being maintained (in accordance with GAAP); and (iii) Liens existing on the date hereof. "Person" means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, institution, public benefit corporation, entity or government (whether Federal, state, county, city, municipal or otherwise, including any instrumentality, division, agency, body or department thereof). "Prime Rate" means the prime rate (or if a range is given, the highest prime rate) listed under "Money Rates" in The Wall Street Journal for such date or, if The Wall Street Journal is not published on such date, then in The Wall Street Journal most recently published. "Reckson" means Reckson Associates Realty Corp., a Maryland corporation. "Reimbursement Obligations" means the aggregate non-contingent reimbursement or repayment obligations of the Borrower with respect to amounts drawn under Letters of Credit. "Responsible Officer" means the chief executive officer, president, chief financial officer, chief accounting officer, treasurer or any vice president, senior vice president or executive vice president of the General Partner. "RSI Facility Agreement" means the credit agreement dated the date hereof between Borrower and Lender in respect of the operations of Reckson Service Industries, Inc. "RSVP Platform" means a particular real estate market sector in which RSVP invests. "SEC" means the Securities and Exchange Commission (or any successor Governmental Authority). "Standby Letter of Credit" means any Letter of Credit issued by the Issuing Bank pursuant to Section 10.1 for the account of the Lender, which is not a Commercial Letter of Credit. 6 "Subsidiary" means, at any time and with respect to any Person, any other Person the shares of stock or other ownership interests of which having ordinary voting power to elect a majority of the board of directors or with respect to other matters of such Person are at the time owned, or the management or policies of which is otherwise at the time controlled, directly or indirectly through one or more intermediaries (including other Subsidiaries) or both, by such first Person. Unless otherwise qualified or the context indicates clearly to the contrary, all references to a "Subsidiary" or "Subsidiaries" in this Agreement refer to a Subsidiary or Subsidiaries of the Borrower. "Taxes" has the meaning assigned to such term in Section 4.3(a). "Value" means, with respect to any asset owned by the Borrower, the present value of the net cash flow reasonably projected by the Borrower to be received with respect to its ownership of such assets, discounted at an interest rate that the Borrower reasonably determines appropriate given the risks associated with such asset and such projected net cash flow, but in no event at an interest rate lower than 2% above the Prime Rate in effect at the time that the determination of Value is made. ARTICLE II. THE REVOLVING CREDIT FACILITY Section 2.1 Commitment and Loans. Until the Commitment Termination Date, subject to the terms and conditions of this Agreement, the Lender agrees to make revolving credit loans (collectively, "Loans") in dollars to the Borrower in an aggregate principal amount at any one time outstanding, and taking into account any Letters of Credit issued pursuant to the terms of Article X, not to exceed the Commitment. Section 2.2 Borrowing Procedure. In order to borrow a Loan, the Borrower shall give a Borrowing Request to the Lender, by telephone, telex or telecopy or in writing, not later than 10:30 A.M., New York time, on the third Business Day before the Borrowing Date (or such later time or date as the Lender may in its sole discretion permit). (If any Borrowing Request is made otherwise than in writing, Borrower shall promptly confirm such Borrowing Request in writing.) Subject to satisfaction, or waiver by the Lender, of each of the applicable conditions precedent contained in Article VI, on the Borrowing Date the Lender shall make available, in immediately available funds, to the Borrower the amount of the requested Loan. Section 2.3 Termination and Reduction of Commitment. The Borrower may terminate the Commitment, or reduce the amount thereof, by giving written notice to the Lender, not later than 5:00 P.M., New York time, on the fifth Business Day prior to the date of termination or reduction (or such later time or date as the Lender may in its sole discretion permit). Section 2.4 Repayment. Loans shall be repaid, together with all accrued and unpaid interest thereon, on the Commitment Termination Date. 7 Section 2.5 Optional Prepayment. The Borrower may prepay Loans by giving notice (specifying the Loans to be prepaid in whole or in part, the principal amount thereof to be prepaid and the date of prepayment) to the Lender, by telephone, telex, telecopy or in writing not later than 12:00 noon, New York time, on the fourth Business Day preceding the proposed date of prepayment (or such later time or date as the Lender may in its sole discretion permit). (If any such prepayment notice is made otherwise than in writing, Borrower shall promptly confirm such notice in writing.) Each such prepayment shall be at the aggregate principal amount of the principal being prepaid, together with accrued interest on the principal being prepaid to the date of prepayment and the amounts required by Section 4.3. Subject to the terms and conditions of this Agreement, prepaid Loans may be reborrowed. ARTICLE III. INTEREST AND FEES Section 3.1 Interest Rate. Each Loan shall bear interest from the date made until the date repaid, payable in arrears, with respect to Interest Periods of three months or less, on the last day of such Interest Period, and with respect to Interest Periods longer than three months, on the day which is three months after the commencement of such Interest Period and on the last day of such Interest Period, at a rate per annum equal to the greater of (i) the sum of (x) 2% and (y) the Prime Rate for the applicable Interest Period and (ii) 12%. With respect to each Loan outstanding for one year or longer, such 12% rate shall increase to 12.48%, 12.98%, 13.50% and 14.04% as of the anniversary of the making of such Loan, for the second, third, fourth and fifth years that such Loan is outstanding, respectively. Notwithstanding the foregoing, if the amount of interest to be paid by the Borrower to the Lender exceeds the amount of EBITDA of the Borrower for the immediately preceding calendar quarter (ending the last day of September, December, March, or June), the Borrower shall not be obligated to repay the amount of interest in excess of EBITDA of the Borrower for such period. Any such amount of unpaid interest shall be added to principal and shall accrue interests thereon. Payments under the Notes shall be applied first to any fees, costs or expenses due under the Notes or hereunder, then to interest, and then to principal. Notwithstanding any other provision of this Agreement, all outstanding principal and interest of the Loan and all other amounts payable hereunder, if not sooner paid, shall be due and payable on the Commitment Termination Date. Section 3.2 Interest on Overdue Amounts. All overdue amounts (including principal, interest and fees) hereunder, and, during the continuance of any Event of Default that shall have occurred, each Loan, shall bear interest, payable on demand, at a rate per annum equal to the greater of (i) the sum of (x) 3% and (y) Prime Rate for the applicable Interest Period and (ii) 13%. With respect to each Loan outstanding for one year or longer, such 13% rate shall increase to 13.48%, 13.98%, 14.50% and 15.04% as of the anniversary of the making of such Loan for the second, third, fourth and fifth years that such Loan is outstanding, respectively. Section 3.3 Maximum Interest Rate. (a) Nothing in this Agreement shall require the Borrower to pay interest at a rate exceeding the maximum rate permitted by applicable law. Neither this Section nor Section 11.1 is intended to limit the rate of interest payable for the 8 account of the Lender to the maximum rate permitted by the laws of the State of New York (or any other applicable law) if a higher rate is permitted with respect to the Lender by supervening provisions of U.S. Federal law. (b) If the amount of interest payable for the account of the Lender on any interest payment date in respect of the immediately preceding interest computation period, computed pursuant to this Article III, would exceed the maximum amount permitted by applicable law to be charged by the Lender, the amount of interest payable for its account on such interest payment date shall automatically be reduced to such maximum permissible amount. (c) If the amount of interest payable for the account of the Lender in respect of any interest computation period is reduced pursuant to Section 3.3(b) and the amount of interest payable for its account in respect of any subsequent interest computation period would be less than the maximum amount permitted by law to be charged by the Lender, then the amount of interest payable for its account in respect of such subsequent interest computation period shall be automatically increased to such maximum permissible amount; provided that at no time shall the aggregate amount by which interest paid for the account of the Lender has been increased pursuant to this Section 3.3(c) exceed the aggregate amount by which interest paid for its account has theretofore been reduced pursuant to Section 3.3(b). ARTICLE IV. DISBURSEMENT AND PAYMENT Section 4.1 Method and Time of Payments. (a) All payments by the Borrower hereunder shall be made without setoff or counterclaim to the Lender, for its account, in dollars and in immediately available funds to the account of the Lender theretofore designated in writing to the Borrower not later than 12:00 noon, New York time, on the date when due or, in the case of payments pursuant to Sections 4.3 and 4. 4 or payments otherwise specified as payable upon demand, forthwith upon written demand therefor. (b) Whenever any payment from the Borrower shall be due on a day that is not a Business Day, the date of payment thereof shall be extended to the next succeeding Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. Section 4.2 Compensation for Losses. 1. If (i) the Borrower prepays Loans, (ii) the Borrower revokes any Borrowing Request or (iii) Loans (or portions thereof) shall become or be declared to be due prior to the scheduled maturity thereof, then the Borrower shall pay to the Lender an amount that will compensate the Lender for any loss (other than lost profit) or premium or penalty incurred by the Lender as a result of such prepayment, declaration or revocation in respect of funds obtained for the purpose of making or maintaining the Lender's Loans, or any portion thereof. Such compensation shall include an amount equal to the excess, if any, of (i) the amount of interest that would have accrued on the amount so paid or prepaid, or 9 not borrowed, for the period from the date of such payment or prepayment or failure to borrow to the last day of such Interest Period (or, in the case of a failure to borrow, the Interest Period that would have commenced on the expected Borrowing Date) in each case at the applicable rate of interest for such Loan over (ii) the amount of interest (as reasonably determined by the Lender) that would have accrued on such amount were it on deposit for a comparable period with leading banks in the London interbank market. (b) If requested by the Borrower, in connection with a payment due pursuant to this Section 4.2, the Lender shall provide to the Borrower a certificate setting forth in reasonable detail the amount required to be paid by the Borrower to the Lender and the computations made by the Lender to determine such amount. In the absence of manifest error, such certificate shall be conclusive as to the amount required to be paid. Section 4.3 Withholding and Additional Costs. (a) Withholding. All payments under this Agreement (including payments of principal and interest) shall be payable to the Lender free and clear of any and all present and future taxes, levies, imposts, duties, deductions, withholdings, fees, liabilities and similar charges (collectively, "Taxes"). If any Taxes are required to be withheld or deducted from any amount payable under this Agreement, then the amount payable under this Agreement shall be increased to the amount which, after deduction from such increased amount of all Taxes required to be withheld or deducted therefrom, will yield to the Lender the amount stated to be payable under this Agreement. The Borrower shall also hold the Lender harmless and indemnify it for any stamp or other taxes with respect to the preparation, execution, delivery, recording, performance or enforcement of this Agreement (all of which shall be included within "Taxes"). If any of the Taxes specified in this Section 4.3(a) are paid by the Lender, the Borrower shall, upon demand of the Lender, promptly reimburse the Lender for such payments, together with any interest, penalties and expenses incurred in connection therewith. The Borrower shall deliver to the Lender certificates or other valid vouchers for all Taxes or other charges deducted from or paid with respect to payments made by the Borrower hereunder. (b) Additional Costs. Subject to Section 4.3(c), and without duplication of any amounts payable described in Section 4.2 or 4.3(a), if after the date hereof any change in any law or regulation or in the interpretation thereof by any court or administrative or Governmental Authority charged with the administration thereof or the enactment of any law or regulation shall either (1) impose, modify or deem applicable any reserve, special deposit or similar requirement against the Lender's Commitment or Loans or (2) impose on the Lender any other condition regarding this Agreement, its Commitment or the Loans and the result of any event referred to in clause (1) or (2) shall be to increase the cost to the Lender of maintaining its Commitment or any Loans made by the Lender (which increase in cost shall be calculated in accordance with the Lender's reasonable averaging and attribution methods) by an amount which the Lender deems to be material, then, upon demand by the Lender, the Borrower shall pay to the Lender an amount equal to such increase in cost. (c) Certificate, Etc. If requested by the Borrower, in connection with any demand for payment pursuant to this Section 4.3, the Lender shall provide to the Borrower a certificate 10 setting forth in reasonable detail the basis for such demand, the amount required to be paid by the Borrower to the Lender, the computations made by the Lender to determine such amount and satisfaction of the conditions set forth in the next sentence. Anything to the contrary herein notwithstanding, the Lender shall not have the right to demand any payment or compensation under this Section 4.3 (i) with respect to any period more than 180 days prior to the date it has made a demand pursuant to this Section 4.3, and (ii) to the extent that the Lender determines in good faith that the interest rate on the relevant Loans appropriately accounts for any increased cost or reduced rate of return. In the absence of manifest error, the certificate referred to above shall be conclusive as to the amount required to be paid. Section 4.4 Expenses; Indemnity. (a) The Borrower agrees: (i) to pay or reimburse the Lender for all reasonable out-of-pocket costs and expenses incurred in connection with the preparation and execution of, and any amendment, supplement or modification to, this Agreement and any other documents prepared in connection herewith or therewith, and the consummation of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements of Brown & Wood LLP, counsel to the Lender; and (ii) to pay or reimburse the Lender for all reasonable costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement and any such other documents, including, without limitation, the reasonable fees and disbursements of counsel to the Lender. The Borrower also agrees to indemnify the Lender against any transfer taxes, documentary taxes, assessments or charges made by any Governmental Authority by reason of the execution and delivery of this Agreement. (b) The Borrower agrees to indemnify the Lender and its directors, officers, partners, employees, agents and Affiliates (for purposes of this paragraph, each, an "Indemnitee") against, and to hold each Indemnitee harmless from, any and all claims, liabilities, damages, losses, costs, charges and expenses (including fees and expenses of counsel) incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated by this Agreement, the performance by the parties thereto of their respective obligations under this Agreement or the consummation of the transactions and the other transactions contemplated by this Agreement, (ii) the use of the proceeds of the Loans or (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. (c) All amounts due under this Section 4.4 shall be payable in immediately available funds upon written demand therefor. Section 4.5 Survival. The provisions of Sections 4.2, 4.3 and 4.4 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the reduction or termination of the Commitment, the invalidity or unenforceability of any term or provision of this Agreement, or any investigation made by or on behalf of the Lender. 11 ARTICLE V. REPRESENTATIONS AND WARRANTIES Section 5.1 Representations and Warranties. In order to induce the Lender to enter into this Agreement and to make Loans and the other financial accommodations to the Borrower and to induce the Lender to obtain Letters of Credit on its behalf as described herein, the Borrower represents and warrants to the Lender as follows: (a) Good Standing and Power. The Borrower and each Subsidiary is a limited partnership or corporation, duly organized and validly existing in good standing under the laws of the jurisdiction of its organization; each has the power to own its property and to carry on its business as now being conducted; and each is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned or leased by it therein or in which the transaction of its business makes such qualification necessary, except where the failure to be so qualified, or to be in good standing, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (b) Authority. The Borrower has full power and authority to execute and deliver, and to incur and perform its obligations under, this Agreement, which has been duly authorized by all proper and necessary action. No consent or approval of limited partners is required as a condition to the validity or performance of, or the exercise by the Lender of any of its rights or remedies under, this Agreement. (c) Authorizations. All authorizations, consents, approvals, registrations, notices, exemptions and licenses with or from any Governmental Authority or other Person necessary for the execution, delivery and performance by the Borrower of, and the incurrence and performance of each of its obligations under, this Agreement, and the exercise by the Lender of its remedies under this Agreement have been effected or obtained and are in full force and effect. (d) Binding Obligation. This Agreement constitutes the valid and legally binding obligation of the Borrower enforceable in accordance with its terms, subject as to enforcement to bankruptcy, insolvency, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. (e) Litigation. There are no proceedings or investigations now pending or, to the knowledge of the Borrower, threatened before any court or arbitrator or before or by any Governmental Authority which, individually or in the aggregate, if determined adversely to the interests of the Borrower or any Subsidiary, could reasonably be expected to have a Material Adverse Effect. (f) No Conflicts. There is no statute, regulation, rule, order or judgment, and no provision of any agreement or instrument binding upon the Borrower or any 12 Subsidiary, or affecting their properties, and no provision of the certificate of limited partnership, certificate of incorporation, agreement of limited partnership or by-laws (or similar constitutive instruments) of the Borrower or any Subsidiary, that would prohibit, conflict with or in any way impair the execution or delivery of, or the incurrence or performance of any obligations of the Borrower under, this Agreement, or result in or require the creation or imposition of any Lien on property of the Borrower or any Subsidiary as a consequence of the execution, delivery and performance of this Agreement. (g) Taxes. The Borrower and the Subsidiaries each has filed or caused to be filed all tax returns that are required to be filed and paid all taxes that are required to be shown to be due and payable on said returns or on any assessment made against it or any of its property and all other taxes, assessments, fees, liabilities, penalties or other charges imposed on it or any of its property by any Governmental Authority, except for any taxes, assessments, fees, liabilities, penalties or other charges which are being contested in good faith and (unless the amount thereof is not material to the Borrower's consolidated financial condition) for which adequate reserves have been established in accordance with GAAP. (h) Properties. The Borrower and the Subsidiaries each has good and marketable title to, or valid leasehold interests in, all of its respective properties and assets. All such assets and properties are so owned or held free and clear of all Liens, except Permitted Liens. (i) Compliance with Laws and Charter Documents. Neither the Borrower nor any Subsidiary is, or as a result of performing any of its obligations under this Agreement will be, in violation of (a) any law, statute, rule, regulation or order of any Governmental Authority applicable to it or its properties or assets or (b) its certificate of limited partnership, certificate of incorporation, agreement of limited partnership, by-laws or any similar document. (j) No Material Adverse Effect. Since May 15, 1997, there has not occurred or arisen any event, condition or circumstance that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (k) Disclosure. All information relating to the Borrower or its Subsidiaries delivered in writing to the Lender in connection with the negotiation, execution and delivery of this Agreement is true and complete in all material respects. There is no material fact of which the Borrower is aware which, individually or in the aggregate, would reasonably be expected adversely to influence the Lender's credit analysis relating to the Borrower and its Subsidiaries which has not been disclosed to the Lender in writing. Section 5.2 Survival. All representations and warranties made by the Borrower in this Agreement, and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement, shall be considered to have been relied upon by the Lender, (ii) 13 survive the making of Loans and the issuance of or payment under any Letter of Credit regardless of any investigation made by, or on behalf of, the Lender and (iii) continue in full force and effect as long as the Commitment has not been terminated and, thereafter, so long as any Loan, Letter of Credit fee or other amount payable under this Agreement remains unpaid. ARTICLE VI. CONDITIONS PRECEDENT Section 6.1 Conditions to the Availability of the Commitment and Letters of Credit. The obligations of the Lender (including its obligators in respect of Letters of Credit) hereunder are subject to, and the Lender's Commitment shall not become available until the earliest date (the "Effective Date") on which each of the following conditions precedent shall have been satisfied or waived in writing by the Lender: (a) This Agreement. The Lender shall have received this Agreement duly executed and delivered by the Borrower. (b) Certificate of Incorporation and By-Laws. The Lender shall have received the following: (i) a copy of the Certificate of Incorporation of the Borrower, as in effect on the Effective Date, certified by the Secretary of State of Delaware, and a certificate from such Secretary of State as to the good standing of the Borrower, in each case as of a date reasonably close to the Effective Date; and (ii) a certificate of a Responsible Officer of the Borrower, dated the Effective Date, and stating that attached thereto is a true and complete copy of the By-Laws of the Borrower as in effect on such date. (c) Representations and Warranties. The representations and warranties contained in Section 5.1 shall be true and correct on the Effective Date, and the Lender shall have received a certificate, signed by a Responsible Officer of the Borrower, to that effect. (d) Other Documents. The Lender shall have received such other certificates, opinions and other documents as the Lender reasonably may require. Section 6.2 Conditions to All Loans and Letters of Credit. The obligations of the Lender to make each Loan and to obtain Letters of Credit are subject to the conditions precedent that, on the date of each Loan or Letter of Credit and after giving effect thereto, each of the following conditions precedent shall have been satisfied, or waived in writing by the Lender: (a) Borrowing Request. The Lender shall have received a Borrowing Request in accordance with the terms of this Agreement. 14 (b) No Default. No Default or Event of Default shall have occurred and be continuing, nor shall any Default or Event of Default occur as a result of the making of such Loan or obtaining such Letter of Credit. (c) Debt-to-Equity Ratio. The Lender shall have received from the Borrower a certificate demonstrating that the ratio of the Borrower's Adjusted Indebtedness to the Borrower's Net Assets, taking into account the requested Loan or Letter of Credit and the assets, if any, to be acquired by the Borrower with the proceeds of such Loan or Letter of Credit, shall not exceed 4-to-1. (d) Representations and Warranties; Covenants. The representations and warranties contained in Section 5. 1 shall have been true and correct when made and (except to the extent that any representation or warranty speaks as of a date certain) shall be true and correct on the Borrowing Date with the same effect as though such representations and warranties were made on such Borrowing Date; and the Borrower shall have complied with all of its covenants and agreements under this Agreement. (e) REIT Status of Reckson. The borrowing shall not, in the sole judgment of the Lender, endanger Reckson's status as a REIT. (f) Certain Loans Subject to Reckson's Approval. In respect of any Loan or Letter of Credit or Loans or Letters of Credit aggregating $25 million in a single RSVP Platform, Reckson shall have approved the Lender's making such Loan or obtaining such Letter of Credit in its sole discretion. Section 6.3 Satisfaction of Conditions Precedent. Each of (i) the delivery by the Borrower of a Borrowing Request (unless the Borrower notifies the Lender in writing to the contrary prior to the Borrowing Date) and (ii) the acceptance of the proceeds of a Loan or the delivery of the Letter of Credit shall be deemed to constitute a certification by the Borrower that, as of the Borrowing Date, each of the conditions precedent contained in Section 6. 2 has been satisfied with respect to the Loan then being made or the Letter of Credit then being issued. ARTICLE VII. COVENANTS Section 7.1 Affirmative Covenants. Until satisfaction in full of all the obligations of the Borrower under this Agreement and termination of the Commitment of the Lender hereunder, the Borrower will: (a) Financial Statements; Compliance Certificates. Furnish to the Lender: (i) as soon as available, but in no event more than 60 days following the end of each of the first three quarters of each fiscal year, copies of the Borrower's Quarterly Report on Form 10-Q being filed with the SEC, which shall include a consolidated 15 balance sheet and consolidated income statement of the Borrower and the Subsidiaries for such quarter; (ii) as soon as available, but in no event more than 120 days following the end of each fiscal year, a copy of the Borrower's Annual Report on Form 10-K being filed with the SEC, which shall include the consolidated financial statements of the Borrower and the Subsidiaries, together with a report thereon by Ernst & Young LLP (or another firm of independent certified public accountants reasonably satisfactory to the Lender), for such year; (iii) within five Business Days of any Responsible Officer of the Borrower obtaining knowledge of any Default or Event of Default, if such Default or Event of Default is then continuing, a certificate of a Responsible Officer of the Borrower stating that such certificate is a "Notice of Default" and setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; and (iv) such additional information, reports or statements, regarding the business, financial condition or results of operations of the Borrower and its Subsidiaries, as the Lender from time to time may reasonably request. (b) Existence. Except as permitted by Section 7. 2(a), maintain its existence in good standing and qualify and remain qualified to do business in each jurisdiction in which the character of the properties owned or leased by it therein or in which the transaction of its business is such that the failure to qualify, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (c) Compliance with Law and Agreements. Comply, and cause each Subsidiary to comply, with all applicable laws, ordinances, orders, rules, regulations and requirements of all Governmental Authorities and with all agreements except where the necessity of compliance therewith is contested in good faith by appropriate proceedings or where the failure to comply therewith, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (d) Authorizations. Obtain, make and keep in full force and effect all authorizations from and registrations with Governmental Authorities required for the validity or enforceability of this Agreement. (e) Inspection. Permit, and cause each Subsidiary to permit, the Lender to have one or more of its officers and employees, or any other Person designate d by the Lender, to visit and inspect any of the properties of the Borrower and the Subsidiaries and to examine the minute books, books of account and other records of the Borrower and the Subsidiaries, and to photocopy extracts from such minute books, books of account and other records, and to discuss its affairs, finances and accounts with its officers and with the Borrower's independent accountants, during normal business hours and at such other reasonable times, for the purpose of monitoring the Borrower's compliance with its obligations under this Agreement. 16 (f) Maintenance of Records. Keep, and cause each Subsidiary to keep, proper books of record and account in which full, true and correct entries will be made of all dealings or transactions of or in relation to its business and affairs. (g) Notice of Defaults and Adverse Developments. Promptly notify the Lender upon the discovery by any Responsible officer of the occurrence of (i) any Default or Event of Default; (ii) any event, development or circumstance whereby the financial statements most recently furnished to the Lender fail in any material respect to present fairly, in accordance with GAAP, the financial condition and operating results of the Borrower and the Subsidiaries as of the date of such financial statements; (iii) any material litigation or proceedings that are instituted or threatened (to the knowledge of the Borrower) against the Borrower or any Subsidiary or any of their respective assets; (iv) any event, development or circumstance which, individually or in the aggregate, could reasonably be expected to result in an event of default (or, with the giving of notice or lapse of time or both, an event of default) under any Indebtedness and the amount thereof; and (v) any other development in the business or affairs of the Borrower or any Subsidiary if the effect thereof would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; in each case describing the nature thereof and the action the Borrower proposes to take with respect thereto. Section 7.2 Negative Covenants. Until satisfaction in full of all the obligations of the Borrower under this Agreement and termination of the Commitment of the Lender hereunder, the Borrower will not: (a) Mergers, Consolidations and Sales of Assets. Wind up, liquidate or dissolve its affairs or enter into any merger, consolidation or share exchange, or convey, sell, lease or otherwise dispose of (or agree to do any of the foregoing at any future time), whether in one or a series of transactions, all or any substantial part of its assets, or permit any Subsidiary so to do, unless such transaction or series of transactions are expressly approved by the Lender, which approval shall not be unreasonably withheld. (b) Liens. Create, incur, assume or suffer to exist any Lien upon or with respect to any of its property or assets, whether now owned or hereafter acquired, or assign or otherwise convey any right to receive income, except Permitted Liens. (c) Indebtedness. Create, incur, issue, assume, guarantee or suffer to exist any Indebtedness, except: (i) Indebtedness to the Lender under this Agreement or under the RSI Facility Agreement, (ii) Non-recourse Indebtedness of the Borrower and any Subsidiary secured by mortgages, encumbrances or liens specifically permitted by Section 7. 2(b), and (iii) Indebtedness expressly approved by the Lender in writing, which approval may be withheld in the Lender's sole discretion. 17 (d) Dividends. Declare any dividends on any of its shares of capital stock unless such dividend or distribution is expressly approved in writing by the Lender. (e) Certain Amendments. Amend, modify or waive, or permit to be amended, modified or waived, any provision of its Certificate of Incorporation unless, within not less than 5 days prior to such amendment, modification or waiver (or such later time as the Lender may in its sole discretion permit), the Borrower shall have given the Lender notice thereof, including all relevant terms and conditions thereof, and the Lender shall have consented in writing thereto. ARTICLE VIII. EVENTS OF DEFAULT Section 8.1 Events of Default. If one or more of the following events (each, an "Event of Default") shall occur: (a) The Borrower shall fail duly to pay any principal of any Loan or Letter of Credit when due, whether at maturity, by notice of intention to prepay or otherwise; or (b) The Borrower shall fail duly to pay any interest, fee or any other amount payable under this Agreement within two days after the same shall be due; or (c) Borrower shall fail duly to observe or perform any term, covenant, or agreement contained in Section 7. 2; or (d) The Borrower shall fail duly to observe or perform any other term, covenant or agreement contained in this Agreement, and such failure shall have continued unremedied for a period of 30 days; or (e) Any representation or warranty made or deemed made by the Borrower in this Agreement, or any statement or representation made in any certificate, report or opinion delivered by or on behalf of the Borrower in connection with this Agreement, shall prove to have been false or misleading in any material respect when so made or deemed made; or (f) The Borrower shall fail to pay any Indebtedness (other than obligations here under) in an amount of $100,000 or more when due; or any such Indebtedness having an aggregate principal amount outstanding of $100,000 or more shall become or be declared to be due prior to the expressed maturity thereof; or (g) An involuntary case or other proceeding shall be commenced against the Borrower seeking liquidation, reorganization or other relief with respect to it or its debts under any applicable bankruptcy, insolvency, reorganization or similar law or seeking the appointment of a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of more than 60 days; or an order or decree approving or ordering any of the foregoing shall be entered and continued unstayed and in effect; or 18 (h) The Borrower shall commence a voluntary case or proceeding under any applicable bankruptcy, insolvency, reorganization or similar law or any other case or proceeding to be adjudicated a bankrupt or insolvent, or any of them shall consent to the entry of a decree or order for relief in respect of the Borrower in an involuntary case or proceeding under any applicable bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against any of them, or any of them shall file a petition or answer or consent seeking reorganization or relief under any applicable law, or any of them shall consent to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Borrower or any substantial part of its property, or the Borrower shall make an assignment for the benefit of creditors, or the Borrower shall admit in writing its inability to pay its debts generally as they become due, or the Borrower shall take corporate action in furtherance of any such action; (i) One or more judgments against the Borrower or attachments against its property, which in the aggregate exceed $100,000, or the operation or result of which could be to interfere materially and adversely with the conduct of the business of the Borrower remain unpaid, unstayed on appeal, undischarged, unbonded, or undismissed for a period of more than 30 days; or (j) Any court or governmental or regulatory authority shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, judgment, decree, injunction or other order (whether temporary, preliminary or permanent) which is in effect and which prohibits, enjoins or otherwise restricts, in a manner that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, any of the transactions contemplated under this Agreement; or (k) Any Event of Default shall occur and be continuing under the RSI Facility Agreement. then, and at any time during the continuance of such Event of Default, the Lender may, by written notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate forthwith the Commitment, Credit Obligations and any obligations of the Lender to obtain Letters of Credit pursuant to this Agreement and (ii) declare any Credit Obligations then outstanding to be due, whereupon the principal of the Credit Obligations so declared to be due, together with accrued interest thereon and any unpaid amounts accrued under this Agreement, shall become forthwith due, without presentment, demand, protest or any other notice of any kind (all of which are hereby expressly waived by the Borrower); provided that, in the case of any Event of Default described in Section 8. 1(g) or (h) occurring with respect to the Borrower, the Commitment and any obligations of the Lender to obtain Letters of Credit pursuant to this Agreement shall automatically and immediately terminate and the principal of all Loans then outstanding, together with accrued interest thereon and any unpaid amounts accrued under this Agreement, shall automatically and immediately become due without presentment, demand, protest or any other notice of any kind (all of which are hereby expressly waived by the Borrower). 19 ARTICLE IX. EVIDENCE OF LOANS; TRANSFERS Section 9.1 Evidence of Loans and Letters of Credit. (a) The Lender shall maintain accounts evidencing the indebtedness of the Borrower to the Lender resulting from each Loan made by the Lender and each Letter of Credit issued for the benefit of the Borrower from time to time, including the amounts of principal and interest payable and paid to the Lender in respect of Loans or Letters of Credit. (b) The Lender's written records described above shall be available for inspection during ordinary business hours by the Borrower from time to time upon reasonable prior notice to the Lender. (c) The entries made in the Lender's written or electronic records and the foregoing accounts shall be prima facie evidence of the existence and amounts of the indebtedness of the Borrower therein recorded; provided, however, that the failure of the Lender to maintain any such account or such records, as applicable, or any error therein, shall not in any manner affect the validity or enforceability of any obligation of the Borrower to repay any Loan actually made by the Lender in accordance with the terms of this Agreement. ARTICLE X. LETTERS OF CREDIT Section 10.1 Letters of Credit. Until the Commitment Termination Date and subject to the terms and conditions set forth in this Agreement, the Lender hereby agrees to obtain from an Issuing Bank for the account of the Borrower one or more Letters of Credit, subject to the following provisions: (a) Types and Amounts. The Lender shall not have any obligation to obtain, or cause the amendment or extension of any Letter of Credit at any time: (i) if the aggregate Letter of Credit Obligations with respect to the Issuing Bank, after giving effect to the issuance, amendment or extension of the Letter of Credit requested hereunder, shall exceed any limit imposed by law or regulation upon the Issuing Bank; (ii) if, immediately after giving effect to the issuance, amendment or extension of such Letter of Credit, (1) the Letter of Credit Obligations at such time would exceed [$10,000,000] or (2) the Credit Obligations at such time would exceed the Commitment at such time, or (3) one or more of the conditions precedent contained in Sections 6.1 or 6.2, as applicable, would not on such date be satisfied, unless such conditions are thereafter satisfied and written notice of such satisfaction is given to the Lender (and the Lender shall not otherwise be required to determine that, or take notice whether, the conditions precedent set forth in Sections 6.1 or 6.2, as applicable, have been satisfied); 20 (iii) which has an expiration date later than the earlier of (A) the date one (1) year after the date of issuance (without regard to any automatic renewal provisions thereof) or (B) the Business Day next preceding the scheduled Commitment Termination Date; or (iv) which is in a currency other than dollars. (b) Conditions. In addition to being subject to the satisfaction of the conditions precedent contained in Sections 6.1 and 6.2, as applicable, the obligation of the Lender to obtain from an Issuing Bank, or to cause the amendment or extension of any Letter of Credit is subject to the satisfaction in full of the following conditions: (i) if the Lender so requests, the Borrower shall have executed and delivered to the Lender a Letter of Credit Reimbursement Agreement and such other documents and materials as may be required pursuant to the terms thereof; and (ii) the terms of the proposed Letter of Credit shall be satisfactory to the Lender in its sole discretion. (c) Issuance of Letters of Credit. (i) The Borrower shall give the Lender written notice that it requires the issuance of a Letter of Credit not later than 11:00 a.m. (New York time) on the third (3rd) Business Day preceding the requested date for issuance thereof under this Agreement. Such notice shall be irrevocable unless and until such request is denied by the Lender and shall specify (A) that the requested Letter of Credit is either a Commercial Letter of Credit or a Standby Letter of Credit, (B) the stated amount of the Letter of Credit requested, (C) the effective date (which shall be a Business Day) of issuance of such Letter of Credit, (D) the date on which such Letter of Credit is to expire (which shall be a Business Day and no later than the Business Day immediately preceding the scheduled Commitment Termination Date), (E) that such Letter of Credit is to be issued for the benefit of the Borrower, (F) other relevant terms of such Letter of Credit, (G) the Available Commitment at such time and (H) the amount of the then outstanding Letter of Credit Obligations. (ii) The Lender shall give the Borrower written notice, or telephonic notice confirmed promptly thereafter in writing, of the issuance, amendment or extension of a Letter of Credit. (d) Reimbursement Obligations; Duties of the Lender. (i) Notwithstanding any provisions to the contrary in any Letter of Credit Reimbursement Agreement: (A) the Borrower shall reimburse the Lender for amounts drawn under its Letter of Credit, in dollars, no later than the date (the "Reimbursement Date") which is the earlier of (I) the time specified in the applicable Letter of Credit Reimbursement Agreement and (II) three (3) Business Days after the Borrower receives written notice from the Lender that payment has been made under such Letter of Credit by the Issuing Bank; and 21 (B) all Reimbursement Obligations with respect to any Letter of Credit shall bear interest at the Prime Rate in accordance with Section 3.1 from the date of the relevant drawing under such Letter of Credit until the Reimbursement Date. (ii) The Lender shall give the Borrower written notice, or telephonic notice confirmed promptly thereafter in writing, of all drawings under a Letter of Credit and the payment (or the failure to pay when due) by the Borrower, as the case may be, on account of a Reimbursement Obligation. (iii) In determining whether to pay under any Letter of Credit, it is understood that the Issuing Bank shall have no obligation other than to confirm that any documents required to be delivered under a respective Letter of Credit appear to have been delivered and that they appear on their face to comply with the requirements of such Letter of Credit. (e) Payment of Reimbursement Obligations. (i) The Borrower unconditionally agrees to pay to the Lender, in dollars, the amount of all Reimbursement Obligations, interest and other amounts payable to the Lender under or in connection with the Letters of Credit when such amounts are due and payable, irrespective of any claim, setoff, defense or other right which the Borrower may have at any time against the Lender or any other Person. (f) Letter of Credit Fee Charges. In connection with each Letter of Credit, the Borrower hereby covenants to pay to the Lender the following Letter of Credit Fee payable quarterly in arrears (on the first Banking Day of each calendar quarter following the issuance of each Letter of Credit): a fee, for the Lender's own account, computed daily on the amount of the Letter of Credit issued and outstanding at a rate per annum equal to the Lender's cost in obtaining the Letter of Credit plus a spread equal to the difference between the interest rate payable on Loans hereunder less the Lender's cost of borrowing under the Lender's credit facility (or, in the absence of a credit facility, the Prime Rate as announced by Citibank N.A.). Notwithstanding the foregoing, if amounts payable pursuant to this Section 10.1(f) together with any interest payable pursuant to Section 3.1, exceed the amount of EBITDA of the Borrower for the immediately preceding calendar quarter (ending the last day of September, December, March or June), the Borrower shall not be obligated to repay the amounts payable under this Section 10.1(f) which when added to the interest payable pursuant to Section 3.1 exceeds EBITDA of the Borrower for such period. Any such amount in excess of EBITDA shall be added to principal hereunder and shall accrue interest thereon in accordance with Section 3.1. (g) Letter of Credit Reporting Requirements. The Lender shall, upon the request of the Borrower, provide to the Borrower separate schedules for Commercial Letters of Credit and Standby Letters of Credit issued as Letters of Credit, in form and substance reasonably satisfactory to the Borrower, setting forth the aggregate Letter of Credit Obligations outstanding to it at the end of each month and any information requested by the Borrower relating to the date of issue, account party, amount, expiration date and reference number of each Letter of Credit issued as contemplated hereunder. 22 (h) Indemnification; Exoneration. (i) In addition to all other amounts payable to the Lender, the Borrower hereby agrees to defend, indemnify, and save the Lender harmless from and against any and all claims, demands, liabilities, penalties, damages, losses (other than loss of profits), reasonable costs, reasonable charges and reasonable expenses (including reasonable attorneys fees but excluding taxes) which the Lender may incur or be subject to as a consequence, direct or indirect, of (A) the issuance of any Letter of Credit other than as a result of the gross negligence or willful misconduct of the Lender, as determined by a court of competent jurisdiction, or (B) the failure of the Issuing Bank to honor a drawing under such Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Governmental Authority. (ii) As between the Borrower on the one hand and the Lender on the other hand, the Borrower assumes all risks of the acts and omissions of, or misuse of Letters of Credit by, the respective beneficiary of the Letters of Credit. In furtherance and not in limitation of the foregoing, subject to the provisions of the Letter of Credit Reimbursement Agreements, the Lender shall not be responsible for: (A) the form, validity, legality, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of the Letters of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (B) the validity, legality or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (C) failure of the Borrower to duly comply with conditions required in order to draw upon such Letter of Credit; (D) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (E) errors in interpretation of technical terms; (F) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any Letter of Credit or of the proceeds thereof; (G) the misapplication by the Borrower of the proceeds of any drawing Letter of Credit; and (H) any consequences arising from causes beyond the control of the Lender, other than of the foregoing resulting from the gross negligence or willful misconduct of the Lender. ARTICLE XI. MISCELLANEOUS Section 11.1 Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE. Section 11.2 Waiver of Jury. THE BORROWER AND THE LENDER EACH HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, 23 CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, OR THE RELATIONSHIPS ESTABLISHED HEREUNDER. Section 11.3 Jurisdiction and Venue; Service of Process. 1. The Borrower and the Lender each hereby irrevocably submits to the non-exclusive jurisdiction of any state or federal court in the Borough of Manhattan, The City of New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and to the laying of venue in the Borough of Manhattan The City of New York. The Borrower and the Lender each hereby irrevocably waives, to the fullest extent permitted by applicable law, any objection to the laying of the venue of any such suit, action or proceeding brought in the aforesaid courts and hereby irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. (b) Borrower agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower at its address set forth in subsection 11.7 or at such other address of which the Lender shall have been notified pursuant thereto. The Borrower further agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (c) The Borrower waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this subsection any special, exemplary, punitive or consequential damages. Section 11.4 Confidentiality. The Lender agrees (on behalf of itself and each of its Affiliates, partners, officers, employees and representatives) to use its best efforts to keep confidential, in accordance with their customary procedures for handling confidential information of this nature and in accordance with commercially reasonable business practices, any Confidential Information; provided that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for the Lender, (iii) to auditors or accountants, (iv) by the Lender to an Affiliate thereof, or (v) in connection with any litigation relating to enforcement of this Agreement; provided further, that, unless specifically prohibited by applicable law or court order, the Lender shall, prior to disclosure thereof, notify the Borrower of any request for disclosure of any Confidential Information (x) by any Governmental Authority or representative thereof or (y) pursuant to legal process. Section 11.5 Amendments and Waivers. (a) Any provision of this Agreement may be amended, modified, supplemented or waived, but only by a written amendment or supplement, or written waiver, signed by the Borrower and the Lender. (b) Except to the extent expressly set forth therein, any waiver shall be effective only in the specific instance and for the specific purpose for which such waiver is given. 24 Section 11.6 Cumulative Rights; No Waiver. Each and every right granted to the Lender hereunder or under any other document delivered in connection herewith, or allowed it by law or equity, shall be cumulative and not exclusive and may be exercised from time to time. No failure on the part of the Lender to exercise, and no delay in exercising, any right will operate as a waiver thereof, nor will any single or partial exercise by the Lender of any right preclude any other or future exercise thereof or the exercise of any other right. Section 11.7 Notices. Any communication, demand or notice to be given hereunder will be duly given when delivered in writing or by telecopy to a party at its address as indicated below or such other address as such party may specify in a notice to the other party hereto. A communication, demand or notice given pursuant to this Agreement shall be addressed: If to the Borrower, to: Reckson Service Industries, Inc. 225 Broadhollow Road Melville, New York 11747 Telecopy: (516) 719-7400 Attention: Chief Financial Officer If to the Lender, to: Reckson Operating Partnership, L.P. 225 Broadhollow Road Melville, New York 11747 Telecopy: (516) 694-6900 Attention: Chief Financial Officer This Section 11.7 shall not apply to notices referred to in Article II of this Agreement, except to the extent set forth therein. Section 11.8 Certain Acknowledgments. The Borrower hereby confirms and acknowledges that (a) the Lender does not have any fiduciary or similar relationship to the Borrower by virtue of this Agreement and the transactions contemplated herein and that the relationship established by this Agreement between the Lender and the Borrower is solely that of creditor and debtor and (b) no joint venture exists between the Borrower and the Lender by virtue of this Agreement and the transactions contemplated herein. Section 11.9 Separability. In case any one or more of the provisions contained in this Agreement shall be invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. 25 Section 11.10 Parties in Interest. This Agreement shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns, except that the Borrower may not assign any of its rights hereunder without the prior written consent of the Lender, and any purported assignment by the Borrower without such consent shall be void. Section 11.11 Execution in Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all the counterparts shall together constitute one and the same instrument. 26 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. RECKSON SERVICE INDUSTRIES, INC., as Borrower By:_________________________________ Name: Title: RECKSON OPERATING PARTNERSHIP, L.P., as Lender By: Reckson Associates Realty Corp., its general partner By:_________________________________ Name: Title: EX-10.37 9 EXHIBIT 10.37 EXHIBIT 10.37 RECKSON ASSOCIATES REALTY CORP. AMENDED AND RESTATED CREDIT AGREEMENT dated as of August 4, 1999 between RECKSON SERVICE INDUSTRIES, INC., as Borrower and RECKSON OPERATING PARTNERSHIP, L.P., as Lender relating to the operations of RECKSON SERVICE INDUSTRIES, INC. Table of Contents Page ARTICLE I. DEFINITIONS Section 1.1 Definitions..................................................1 (a) Terms Generally.....................................1 (b) Other Terms.........................................1 ARTICLE II. THE REVOLVING CREDIT FACILITY Section 2.1 Commitment and Loans.........................................7 Section 2.2 Borrowing Procedure..........................................7 Section 2.3 Termination and Reduction of Commitment......................7 Section 2.4 Repayment....................................................8 Section 2.5 Optional Prepayment..........................................8 ARTICLE III. INTEREST AND FEES Section 3.1 Interest Rate................................................8 Section 3.2 Interest on Overdue Amounts..................................8 Section 3.3 Maximum Interest Rate........................................9 ARTICLE IV. DISBURSEMENT AND PAYMENT Section 4.1 Method and Time of Payments..................................9 Section 4.2 Compensation for Losses......................................9 Section 4.3 Withholding and Additional Costs............................10 (a) Withholding........................................10 (b) Additional Costs...................................10 (c) Certificate, Etc...................................11 Section 4.4 Expenses; Indemnity.........................................11 Section 4.5 Survival....................................................12 ARTICLE V. REPRESENTATIONS AND WARRANTIES Section 5.1 Representations and Warranties..............................12 (a) Good Standing and Power............................12 (b) Authority..........................................12 (c) Authorizations.....................................12 (d) Binding Obligation.................................12 i (e) Litigation.........................................12 (f) No Conflicts.......................................13 (g) Taxes..............................................13 (h) Properties.........................................13 (i) Compliance with Laws and Charter Documents.........13 (j) No Material Adverse Effect.........................13 (k) Disclosure.........................................13 Section 5.2 Survival....................................................14 ARTICLE VI. CONDITIONS PRECEDENT Section 6.1 Conditions to the Availability of the Commitment and Letters of Credit.........................................14 (a) This Agreement.....................................14 (b) Certificate of Incorporation and By-Laws...........14 (c) Representations and Warranties.....................14 (d) Other Documents....................................14 Section 6.2 Conditions to All Loans and Letters of Credit...............14 (a) Borrowing Request..................................15 (b) No Default.........................................15 (c) Debt-to-Equity Ratio...............................15 (d) Representations and Warranties; Covenants..........15 (e) REIT Status of Reckson.............................15 (f) Certain Loans Subject to Reckson's Approval........15 Section 6.3 Satisfaction of Conditions Precedent........................15 ARTICLE VII. COVENANTS Section 7.1 Affirmative Covenants.......................................15 (a) Financial Statements; Compliance Certificates......15 (b) Existence..........................................16 (c) Compliance with Law and Agreements.................16 (d) Authorizations.....................................16 (e) Inspection.........................................16 (f) Maintenance of Records.............................17 (g) Notice of Defaults and Adverse Developments........17 Section 7.2 Negative Covenants..........................................17 (a) Mergers, Consolidations and Sales of Assets........17 (b) Liens..............................................17 (c) Indebtedness.......................................17 (d) Dividends..........................................18 (e) Certain Amendments.................................18 ii ARTICLE VIII. EVENTS OF DEFAULT Section 8.1 Events of Default...........................................18 ARTICLE IX. EVIDENCE OF LOANS; TRANSFERS Section 9.1 Evidence of Loans and Letters of Credit.....................20 ARTICLE X. LETTERS OF CREDIT Section 10.1 Letters of Credit...........................................20 (a) Types and Amounts..................................20 (b) Conditions.........................................21 (c) Issuance of Letters of Credit......................21 (d) Reimbursement Obligations; Duties of the Lender....21 (e) Payment of Reimbursement Obligations...............22 (f) Letter of Credit Fee Charges.......................22 (g) Letter of Credit Reporting Requirements............22 (h) Indemnification; Exoneration.......................23 ARTICLE XI. MISCELLANEOUS Section 11.1 Applicable Law..............................................23 Section 11.2 Waiver of Jury..............................................24 Section 11.3 Jurisdiction and Venue; Service of Process..................24 Section 11.4 Confidentiality.............................................24 Section 11.5 Amendments and Waivers......................................24 Section 11.6 Cumulative Rights; No Waiver................................25 Section 11.7 Notices.....................................................25 Section 11.8 Certain Acknowledgments.....................................25 Section 11.9 Separability................................................25 Section 11.10 Parties in Interest.........................................26 Section 11.11 Execution in Counterparts...................................26 iii AMENDED AND RESTATED CREDIT AGREEMENT, dated as of August 4, 1999, between Reckson Service Industries, Inc., a Delaware corporation, and Reckson Operating Partnership, L.P., a Delaware limited partnership, relating to the operations of Reckson Service Industries, Inc. W I T N E S S E T H: WHEREAS, the Borrower has requested the Lender to commit to lend to the Borrower up to $100 million on a revolving basis for acquisitions of assets and general corporate purposes; WHEREAS, the Lender is willing to make revolving credit loans on the terms and conditions provided herein; and WHEREAS, the parties hereto desire to amend and restate their credit agreement dated June 15, 1998 to allow for the issuance of one or more Letters of Credit in favor of the Lender for the benefit of the Borrower; NOW, THEREFORE, the parties agree as follows: ARTICLE I. DEFINITIONS Section 1.1 Definitions. (a) Terms Generally. The definitions ascribed to terms in this Agreement apply equally to both the singular and plural forms of such terms. Whenever the context may require, any pronoun shall be deemed to include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be interpreted as if followed by the phrase "without limitation". The phrase "individually or in the aggregate" shall be deemed general in scope and not to refer to any specific Section or clause of this Agreement. All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. The table of contents, headings and captions herein shall not be given effect in interpreting or construing the provisions of this Agreement. Except as otherwise expressly provided herein, all references to "dollars" or "$" shall be deemed references to the lawful money of the United States of America. (b) Other Terms. The following terms have the meanings ascribed to them below or in the Sections of this Agreement indicated below: "Adjusted Indebtedness" means, with respect to the Borrower, the Borrower's Indebtedness determined without regard for any amounts described in clause (viii) of the definition of "Indebtedness." "Affiliate" means, with respect to any Person, any other Person that controls, is controlled by, or is under common control with, such Person. "Agreement" means this credit agreement, as it may be amended, modified or supplemented from time to time. "Available Commitment" means, on any day, an amount equal to (i) the Commitment on such day minus (ii) the aggregate outstanding principal amount of Loans on such day. "Borrower" means Reckson Service Industries, Inc., a Delaware corporation. "Borrowing Date" means, with respect to any Loan or Letter of Credit, the Business Day set forth in the relevant Borrowing Request as the date upon which the Borrower desires to borrow such Loan or Letter of Credit; "Borrowing Request" means a request by the Borrower for a Loan or a Letter of Credit, which shall specify (i) the requested Borrowing Date and (ii) the aggregate amount of such Loan or Letter of Credit. "Business Day" means any day that is not a Saturday, Sunday or other day on which commercial banks in The City of New York are authorized by law to close. "Capital Lease Obligations" means, with respect to any Person, the obligation of such Person to pay rent or other amounts under any lease with respect to any property (whether real, personal or mixed) acquired or leased by such Person that is required to be accounted for as a liability on a consolidated balance sheet of such Person. "Commercial Letter of Credit" means any documentary letter of credit issued by an Issuing Bank pursuant to Section 10.1 for the account of the Lender on behalf of the Borrower. "Commercial Services" means businesses that provide services for occupants of office, industrial and other property types that Reckson may not be permitted to provide under Federal tax laws applicable to a real estate investment trust or that have not traditionally been provided by Reckson. "Commitment" means $100 million, as such amount may be reduced from time to time pursuant to Section 2.3. "Commitment Termination Date" means the earlier to occur of (i) June 15, 2003 and (ii) the date, if any, on which the Commitment is terminated. "Confidential Information" means information delivered to the Lender by or on behalf of the Borrower in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is confidential or proprietary in nature at the time it is so delivered or information obtained by the Lender in the course of its review of the books 2 or records of the Borrower contemplated herein; provided that such term shall not include information W that was publicly known or otherwise known to the Lender prior to the time of such disclosure, (ii) that subsequently becomes publicly known through no act or omission by the Lender or any Person acting on the Lender's behalf, (iii) that otherwise becomes known to the Lender other than through disclosure by the Borrower or (iv) that constitutes financial information delivered to the Lender that is otherwise publicly available. "Credit Obligations" means, at any particular time, the sum of (i) the outstanding principal amount of the Loans at such time, plus (ii) the Letter of Credit Obligations at such time. "Default" means any event or circumstance which, with the giving of notice or the passage of time, or both, would be an Event of Default. "EBITDA" means for any fiscal period, the Consolidated Net Income or Consolidated Net Loss, as the case may be, for such fiscal period, after restoring thereto amounts deducted for (a) extraordinary losses (or deducting therefrom any amounts included therein on account of extraordinary gains) and special charges, (b) depreciation and amortization (including write-offs or write-downs) and special charges, (c) the amount of interest expense of the Borrower and its Subsidiaries, if any, determined on a consolidated basis in accordance with GAAP, for such period on the aggregate principal amount of their consolidated indebtedness, (d) the amount of tax expense of the Borrower and its Subsidiaries, if any, determined on a consolidated basis in accordance with GAAP, for such period and (e) the aggregate amount of fixed and contingent rentals payable by the Borrower and its Subsidiaries, if any, determined on a consolidated basis in accordance with GAAP, for such period with respect to leases of real and personal property. "Effective Date" has the meaning assigned to such term in Section 6.1. "Event of Default" has the meaning assigned to such term in Section 8.1. "GAAP" means generally accepted accounting principles, as set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entities as may be approved by a significant segment of the accounting profession of the United States of America. "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guaranty" means, with respect to any Person, any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any 3 Indebtedness of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness, (ii) to purchase property, securities or services for the purpose of assuring the holder of such Indebtedness of the payment of such Indebtedness or (iii) to maintain working capital, equity capital or the financial condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness. The term "Guaranteed" shall have the corresponding meaning. "Indebtedness" means, with respect to any Person, (i) all obligations of such Person for borrowed money or for the deferred purchase price of property or services (including all obligations, contingent or otherwise, of such Person in connection with letters of credit, bankers' acceptances, interest rate swap agreements, interest rate cap agreements or other similar instruments, including currency swaps) other than indebtedness to trade creditors and service providers incurred in the ordinary course of business and payable on usual and customary terms, (ii) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments, (iii) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the remedies available to the seller or lender under such agreement are limited to repossession or sale of such property), (iv) all Capital Lease Obligations of such Person, (v) all obligations of the types described in clauses (i), (ii), (iii) or (iv) above secured by (or for which the obligee has an existing right, contingent or otherwise, to be secured by) any Lien upon or in any property (including accounts, contract rights and other intangibles) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness, (vi) all preferred stock issued by such Person which is redeemable, prior to full satisfaction of the Borrower's obligations under this Agreement (including repayment in full of the Loans and all interest accrued thereon), other than at the option of such Person, valued at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (vii) all Indebtedness of others Guaranteed by such Person and (viii) all Indebtedness of any partnership of which such Person is a general partner. "Indemnitee" has the meaning assigned to such term in Section 4.4(b). "Intercompany Agreement" means the intercompany agreement, dated as of the date hereof, by and between the Borrower and the Lender. "Interest Period" means, with respect to any Loan, each three-month period commencing on the date such Loan is made or at the end of the preceding Interest Period, as the case may be; provided, however, that: (i) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next Business Day, unless such Business Day falls 4 in another calendar month, in which case such Interest Period shall end on the next preceding Business Day; (ii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (iii) below, end on the last Business Day of a calendar month; and (iii) any Interest Period that would otherwise end after the Commitment Termination Date then in effect shall end on such Commitment Termination Date. "Issuing Bank" means The Chase Manhattan Bank or such other banking institution selected by the parties hereto to issue a Letter of Credit pursuant to Section 10.1(c)(ii) hereof. "Lender" means Reckson Operating Partnership, L.P., a Delaware limited partnership. "Letter of Credit" means any Commercial Letter of Credit or Standby Letter of Credit. "Letter of Credit Fee" has the meaning set forth in Section 10.1(f). "Letter of Credit Obligations" means, at any particular time, the sum of (i) all outstanding Reimbursement Obligations, (ii) the aggregate undrawn face amount of all outstanding Letters of Credit, and (iii) the aggregate face amount of all Letters of Credit requested by the Lender but not yet issued. "Letter of Credit Reimbursement Agreement" means, with respect to a Letter of Credit, such form of application therefor and form of reimbursement agreement therefor (whether in a single or several documents, taken together) as an Issuing Bank may employ in the ordinary course of business for its own account, with such modifications thereto as may be agreed upon by such Issuing Bank and the Lender and as are not materially adverse (in the judgment of such Issuing Bank) to the interests of the Lender; provided, however, in the event of any conflict between the terms of any Letter of Credit Reimbursement Agreement and this Agreement, the terms of this Agreement shall control. "Lien" means, with respect to any asset of a Person, (i) any mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest in or on such asset, (ii) the interest of a vendor or lessor under any conditional sale agreement, capital lease or title retention agreement relating to such asset, and (iii) in the case of securities, any purchase option, call or similar right of any other Person with respect to such securities. "Loans" has the meaning assigned to such term in Section 2.1. 5 "Material Adverse Effect" means any material and adverse effect on (i) the consolidated business, properties, condition (financial or otherwise) or operations, present or prospective, of the Borrower and its Subsidiaries, (ii) the ability of the Borrower timely to perform any of its material obligations, or of the Lender to exercise any remedy, under this Agreement or (iii) the legality, validity, binding nature or enforceability of this Agreement. "Net Assets" means, with respect to the Borrower, the greater of (i) the sum of the Borrower's paid-in capital and retained earnings or (ii) the excess of the Value of all of the Borrower's assets of any kind over the Borrower's Adjusted Indebtedness. "Permitted Liens" means, collectively, the following: (i) Liens expressly approved by the Lender, which approval shall not be unreasonably withheld; (ii) Liens imposed by any Governmental Authority for taxes, assessments or charges not yet due or that are being contested in good faith by appropriate proceedings and for which adequate reserves are being maintained (in accordance with GAAP); and (iii) Liens existing on the date hereof. "Person" means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, institution, public benefit corporation, entity or government (whether Federal, state, county, city, municipal or otherwise, including any instrumentality, division, agency, body or department thereof). "Prime Rate" means the prime rate (or if a range is given, the highest prime rate) listed under "Money Rates" in The Wall Street Journal for such date or, if The Wall Street Journal is not published on such date, then in The Wall Street Journal most recently published. "Reckson" means Reckson Associates Realty Corp., a Maryland corporation. "Reimbursement Obligations" means the aggregate non-contingent reimbursement or repayment obligations of the Borrower with respect to amounts drawn under Letters of Credit. "Responsible Officer" means the chief executive officer, president, chief financial officer, chief accounting officer, treasurer or any vice president, senior vice president or executive vice president of the General Partner. "RSVP-ROP Facility Agreement" means the credit agreement dated the date hereof between Borrower and Lender in respect of the operations of Reckson Strategic Venture Partners, LLC. "SEC" means the Securities and Exchange Commission (or any successor Governmental Authority). 6 "Standby Letter of Credit" means any Letter of Credit issued by the Issuing Bank pursuant to Section 10.1 for the account of the Lender, which is not a Commercial Letter of Credit. "Subsidiary" means, at any time and with respect to any Person, any other Person the shares of stock or other ownership interests of which having ordinary voting power to elect a majority of the board of directors or with respect to other matters of such Person are at the time owned, or the management or policies of which is otherwise at the time controlled, directly or indirectly through one or more intermediaries (including other Subsidiaries) or both, by such first Person. Unless otherwise qualified or the context indicates clearly to the contrary, all references to a "Subsidiary" or "Subsidiaries" in this Agreement refer to a Subsidiary or Subsidiaries of the Borrower. "Taxes" has the meaning assigned to such term in Section 4.3(a). "Value" means, with respect to any asset owned by the Borrower, the present value of the net cash flow reasonably projected by the Borrower to be received with respect to its ownership of such assets, discounted at an interest rate that the Borrower reasonably determines appropriate given the risks associated with such asset and such projected net cash flow, but in no event at an interest rate lower than 2% above the Prime Rate in effect at the time that the determination of Value is made. ARTICLE II. THE REVOLVING CREDIT FACILITY Section 2.1 Commitment and Loans. Until the Commitment Termination Date, subject to the terms and conditions of this Agreement, the Lender agrees to make revolving credit loans (collectively, "Loans") in dollars to the Borrower in an aggregate principal amount at any one time outstanding, and taking into account any Letters of Credit issued pursuant to the terms of Article X, not to exceed the Commitment. Section 2.2 Borrowing Procedure. In order to borrow a Loan, the Borrower shall give a Borrowing Request to the Lender, by telephone, telex or telecopy or in writing, not later than 10:30 A.M., New York time, on the third Business Day before the Borrowing Date (or such later time or date as the Lender may in its sole discretion permit). (If any Borrowing Request is made otherwise than in writing, Borrower shall promptly confirm such Borrowing Request in writing.) Subject to satisfaction, or waiver by the Lender, of each of the applicable conditions precedent contained in Article VI, on the Borrowing Date the Lender shall make available, in immediately available funds, to the Borrower the amount of the requested Loan. Section 2.3 Termination and Reduction of Commitment. The Borrower may terminate the Commitment, or reduce the amount thereof, by giving written notice to the Lender, not later than 5:00 P.M., New York time, on the fifth Business Day prior to the date of termination or reduction (or such later time or date as the Lender may in its sole discretion permit). 7 Section 2.4 Repayment. Loans shall be repaid, together with all accrued and unpaid interest thereon, on the Commitment Termination Date. Section 2.5 Optional Prepayment. The Borrower may prepay Loans by giving notice (specifying the Loans to be prepaid in whole or in part, the principal amount thereof to be prepaid and the date of prepayment) to the Lender, by telephone, telex, telecopy or in writing not later than 12:00 noon, New York time, on the fourth Business Day preceding the proposed date of prepayment (or such later time or date as the Lender may in its sole discretion permit). (If any such prepayment notice is made otherwise than in writing, Borrower shall promptly confirm such notice in writing.) Each such prepayment shall be at the aggregate principal amount of the principal being prepaid, together with accrued interest on the principal being prepaid to the date of prepayment and the amounts required by Section 4.3. Subject to the terms and conditions of this Agreement, prepaid Loans may be reborrowed. ARTICLE III. INTEREST AND FEES Section 3.1 Interest Rate. Each Loan shall bear interest from the date made until the date repaid, payable in arrears, with respect to Interest Periods of three months or less, on the last day of such Interest Period, and with respect to Interest Periods longer than three months, on the day which is three months after the commencement of such Interest Period and on the last day of such Interest Period, at a rate per annum equal to the greater of (i) the sum of (x) 2% and (y) the Prime Rate for the applicable Interest Period and (ii) 12%. With respect to each Loan outstanding for one year or longer, such 12% rate shall increase to 12.48%, 12.98%, 13.50% and 14.04% as of the anniversary of the making of such Loan, for the second, third, fourth and fifth years that such Loan is outstanding, respectively. Notwithstanding the foregoing, if the amount of interest to be paid by the Borrower to the Lender exceeds the amount of EBITDA of the Borrower for the immediately preceding calendar quarter (ending the last day of September, December, March, or June), the Borrower shall not be obligated to repay the amount of interest in excess of EBITDA of the Borrower for such period. Any such amount of unpaid interest shall be added to principal and shall accrue interests thereon. Payments under the Notes shall be applied first to any fees, costs or expenses due under the Notes or hereunder, then to interest, and then to principal. Notwithstanding any other provision of this Agreement, all outstanding principal and interest of the Loan and all other amounts payable hereunder, if not sooner paid, shall be due and payable on the Commitment Termination Date. Section 3.2 Interest on Overdue Amounts. All overdue amounts (including principal, interest and fees) hereunder, and, during the continuance of any Event of Default that shall have occurred, each Loan, shall bear interest, payable on demand, at a rate per annum equal to the greater of (i) the sum of (x) 3% and (y) Prime Rate for the applicable Interest Period and (ii) 13%. With respect to each Loan outstanding for one year or longer, such 13% rate shall increase to 13.48%, 13.98%, 14.50% and 15.04% as of the anniversary of the making of such Loan for the second, third, fourth and fifth years that such Loan is outstanding, respectively. 8 Section 3.3 Maximum Interest Rate. (a) Nothing in this Agreement shall require the Borrower to pay interest at a rate exceeding the maximum rate permitted by applicable law. Neither this Section nor Section 11.1 is intended to limit the rate of interest payable for the account of the Lender to the maximum rate permitted by the laws of the State of New York (or any other applicable law) if a higher rate is permitted with respect to the Lender by supervening provisions of U.S. Federal law. (b) If the amount of interest payable for the account of the Lender on any interest payment date in respect of the immediately preceding interest computation period, computed pursuant to this Article III, would exceed the maximum amount permitted by applicable law to be charged by the Lender, the amount of interest payable for its account on such interest payment date shall automatically be reduced to such maximum permissible amount. (c) If the amount of interest payable for the account of the Lender in respect of any interest computation period is reduced pursuant to Section 3.3(b) and the amount of interest payable for its account in respect of any subsequent interest computation period would be less than the maximum amount permitted by law to be charged by the Lender, then the amount of interest payable for its account in respect of such subsequent interest computation period shall be automatically increased to such maximum permissible amount; provided that at no time shall the aggregate amount by which interest paid for the account of the Lender has been increased pursuant to this Section 3.3(c) exceed the aggregate amount by which interest paid for its account has theretofore been reduced pursuant to Section 3.3(b). ARTICLE IV. DISBURSEMENT AND PAYMENT Section 4.1 Method and Time of Payments. (a) All payments by the Borrower hereunder shall be made without setoff or counterclaim to the Lender, for its account, in dollars and in immediately available funds to the account of the Lender theretofore designated in writing to the Borrower not later than 12:00 noon, New York time, on the date when due or, in the case of payments pursuant to Sections 4.3 and 4. 4 or payments otherwise specified as payable upon demand, forthwith upon written demand therefor. (b) Whenever any payment from the Borrower shall be due on a day that is not a Business Day, the date of payment thereof shall be extended to the next succeeding Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. Section 4.2 Compensation for Losses. (a) If (i) the Borrower prepays Loans, (ii) the Borrower revokes any Borrowing Request or (iii) Loans (or portions thereof) shall become or be declared to be due prior to the scheduled maturity thereof, then the Borrower shall pay to the Lender an amount that will compensate the Lender for any loss (other than lost profit) or premium or penalty incurred by the Lender as a result of such prepayment, declaration or 9 revocation in respect of funds obtained for the purpose of making or maintaining the Lender's Loans, or any portion thereof. Such compensation shall include an amount equal to the excess, if any, of (i) the amount of interest that would have accrued on the amount so paid or prepaid, or not borrowed, for the period from the date of such payment or prepayment or failure to borrow to the last day of such Interest Period (or, in the case of a failure to borrow, the Interest Period that would have commenced on the expected Borrowing Date) in each case at the applicable rate of interest for such Loan over (ii) the amount of interest (as reasonably determined by the Lender) that would have accrued on such amount were it on deposit for a comparable period with leading banks in the London interbank market. (b) If requested by the Borrower, in connection with a payment due pursuant to this Section 4.2, the Lender shall provide to the Borrower a certificate setting forth in reasonable detail the amount required to be paid by the Borrower to the Lender and the computations made by the Lender to determine such amount. In the absence of manifest error, such certificate shall be conclusive as to the amount required to be paid. Section 4.3 Withholding and Additional Costs. (a) Withholding. All payments under this Agreement (including payments of principal and interest) shall be payable to the Lender free and clear of any and all present and future taxes, levies, imposts, duties, deductions, withholdings, fees, liabilities and similar charges (collectively, "Taxes"). If any Taxes are required to be withheld or deducted from any amount payable under this Agreement, then the amount payable under this Agreement shall be increased to the amount which, after deduction from such increased amount of all Taxes required to be withheld or deducted therefrom, will yield to the Lender the amount stated to be payable under this Agreement. The Borrower shall also hold the Lender harmless and indemnify it for any stamp or other taxes with respect to the preparation, execution, delivery, recording, performance or enforcement of this Agreement (all of which shall be included within "Taxes"). If any of the Taxes specified in this Section 4.3(a) are paid by the Lender, the Borrower shall, upon demand of the Lender, promptly reimburse the Lender for such payments, together with any interest, penalties and expenses incurred in connection therewith. The Borrower shall deliver to the Lender certificates or other valid vouchers for all Taxes or other charges deducted from or paid with respect to payments made by the Borrower hereunder. (b) Additional Costs. Subject to Section 4.3(c), and without duplication of any amounts payable described in Section 4.2 or 4.3(a), if after the date hereof any change in any law or regulation or in the interpretation thereof by any court or administrative or Governmental Authority charged with the administration thereof or the enactment of any law or regulation shall either (1) impose, modify or deem applicable any reserve, special deposit or similar requirement against the Lender's Commitment or Loans or (2) impose on the Lender any other condition regarding this Agreement, its Commitment or the Loans and the result of any event referred to in clause (1) or (2) shall be to increase the cost to the Lender of maintaining its Commitment or any Loans made by the Lender (which increase in cost shall be calculated in accordance with the Lender's reasonable averaging and attribution methods) by an amount which the Lender deems to be material, then, upon demand by the Lender, the Borrower shall pay to the Lender an amount equal to such increase in cost. 10 (c) Certificate, Etc. If requested by the Borrower, in connection with any demand for payment pursuant to this Section 4.3, the Lender shall provide to the Borrower a certificate setting forth in reasonable detail the basis for such demand, the amount required to be paid by the Borrower to the Lender, the computations made by the Lender to determine such amount and satisfaction of the conditions set forth in the next sentence. Anything to the contrary herein notwithstanding, the Lender shall not have the right to demand any payment or compensation under this Section 4.3 (i) with respect to any period more than 180 days prior to the date it has made a demand pursuant to this Section 4.3, and (ii) to the extent that the Lender determines in good faith that the interest rate on the relevant Loans appropriately accounts for any increased cost or reduced rate of return. In the absence of manifest error, the certificate referred to above shall be conclusive as to the amount required to be paid. Section 4.4 Expenses; Indemnity. (a) The Borrower agrees: (i) to pay or reimburse the Lender for all reasonable out-of-pocket costs and expenses incurred in connection with the preparation and execution of, and any amendment, supplement or modification to, this Agreement and any other documents prepared in connection herewith or therewith, and the consummation of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements of Brown & Wood LLP, counsel to the Lender; and (ii) to pay or reimburse the Lender for all reasonable costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement and any such other documents, including, without limitation, the reasonable fees and disbursements of counsel to the Lender. The Borrower also agrees to indemnify the Lender against any transfer taxes, documentary taxes, assessments or charges made by any Governmental Authority by reason of the execution and delivery of this Agreement. (b) The Borrower agrees to indemnify the Lender and its directors, officers, partners, employees, agents and Affiliates (for purposes of this paragraph, each, an "Indemnitee") against, and to hold each Indemnitee harmless from, any and all claims, liabilities, damages, losses, costs, charges and expenses (including fees and expenses of counsel) incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated by this Agreement, the performance by the parties thereto of their respective obligations under this Agreement or the consummation of the transactions and the other transactions contemplated by this Agreement, (ii) the use of the proceeds of the Loans or (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. (c) All amounts due under this Section 4.4 shall be payable in immediately available funds upon written demand therefor. Section 4.5 Survival. The provisions of Sections 4.2, 4.3 and 4.4 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, 11 the reduction or termination of the Commitment, the invalidity or unenforceability of any term or provision of this Agreement, or any investigation made by or on behalf of the Lender. ARTICLE V. REPRESENTATIONS AND WARRANTIES Section 5.1 Representations and Warranties. In order to induce the Lender to enter into this Agreement and to make Loans and the other financial accommodations to the Borrower and to induce the Lender to obtain Letters of Credit on its behalf as described herein, the Borrower represents and warrants to the Lender as follows: (a) Good Standing and Power. The Borrower and each Subsidiary is a limited partnership or corporation, duly organized and validly existing in good standing under the laws of the jurisdiction of its organization; each has the power to own its property and to carry on its business as now being conducted; and each is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned or leased by it therein or in which the transaction of its business makes such qualification necessary, except where the failure to be so qualified, or to be in good standing, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (b) Authority. The Borrower has full power and authority to execute and deliver, and to incur and perform its obligations under, this Agreement, which has been duly authorized by all proper and necessary action. No consent or approval of limited partners is required as a condition to the validity or performance of, or the exercise by the Lender of any of its rights or remedies under, this Agreement. (c) Authorizations. All authorizations, consents, approvals, registrations, notices, exemptions and licenses with or from any Governmental Authority or other Person necessary for the execution, delivery and performance by the Borrower of, and the incurrence and performance of each of its obligations under, this Agreement, and the exercise by the Lender of its remedies under this Agreement have been effected or obtained and are in full force and effect. (d) Binding Obligation. This Agreement constitutes the valid and legally binding obligation of the Borrower enforceable in accordance with its terms, subject as to enforcement to bankruptcy, insolvency, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. (e) Litigation. There are no proceedings or investigations now pending or, to the knowledge of the Borrower, threatened before any court or arbitrator or before or by any Governmental Authority which, individually or in the aggregate, if determined adversely to the interests of the Borrower or any Subsidiary, could reasonably be expected to have a Material Adverse Effect. 12 (f) No Conflicts. There is no statute, regulation, rule, order or judgment, and no provision of any agreement or instrument binding upon the Borrower or any Subsidiary, or affecting their properties, and no provision of the certificate of limited partnership, certificate of incorporation, agreement of limited partnership or by-laws (or similar constitutive instruments) of the Borrower or any Subsidiary, that would prohibit, conflict with or in any way impair the execution or delivery of, or the incurrence or performance of any obligations of the Borrower under, this Agreement, or result in or require the creation or imposition of any Lien on property of the Borrower or any Subsidiary as a consequence of the execution, delivery and performance of this Agreement. (g) Taxes. The Borrower and the Subsidiaries each has filed or caused to be filed all tax returns that are required to be filed and paid all taxes that are required to be shown to be due and payable on said returns or on any assessment made against it or any of its property and all other taxes, assessments, fees, liabilities, penalties or other charges imposed on it or any of its property by any Governmental Authority, except for any taxes, assessments, fees, liabilities, penalties or other charges which are being contested in good faith and (unless the amount thereof is not material to the Borrower's consolidated financial condition) for which adequate reserves have been established in accordance with GAAP. (h) Properties. The Borrower and the Subsidiaries each has good and marketable title to, or valid leasehold interests in, all of its respective properties and assets. All such assets and properties are so owned or held free and clear of all Liens, except Permitted Liens. (i) Compliance with Laws and Charter Documents. Neither the Borrower nor any Subsidiary is, or as a result of performing any of its obligations under this Agreement will be, in violation of (a) any law, statute, rule, regulation or order of any Governmental Authority applicable to it or its properties or assets or (b) its certificate of limited partnership, certificate of incorporation, agreement of limited partnership, by-laws or any similar document. (j) No Material Adverse Effect. Since May 15, 1997, there has not occurred or arisen any event, condition or circumstance that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (k) Disclosure. All information relating to the Borrower or its Subsidiaries delivered in writing to the Lender in connection with the negotiation, execution and delivery of this Agreement is true and complete in all material respects. There is no material fact of which the Borrower is aware which, individually or in the aggregate, would reasonably be expected adversely to influence the Lender's credit analysis relating to the Borrower and its Subsidiaries which has not been disclosed to the Lender in writing. 13 Section 5.2 Survival. All representations and warranties made by the Borrower in this Agreement, and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement, shall be considered to have been relied upon by the Lender, (ii) survive the making of Loans and the issuance of or payment under any Letter of Credit regardless of any investigation made by, or on behalf of, the Lender and (iii) continue in full force and effect as long as the Commitment has not been terminated and, thereafter, so long as any Loan, Letter of Credit fee or other amount payable under this Agreement remains unpaid. ARTICLE VI. CONDITIONS PRECEDENT Section 6.1 Conditions to the Availability of the Commitment and Letters of Credit. The obligations of the Lender (including its obligators in respect of Letters of Credit) hereunder are subject to, and the Lender's Commitment shall not become available until the earliest date (the "Effective Date") on which each of the following conditions precedent shall have been satisfied or waived in writing by the Lender: (a) This Agreement. The Lender shall have received this Agreement duly executed and delivered by the Borrower. (b) Certificate of Incorporation and By-Laws. The Lender shall have received the following: (i) a copy of the Certificate of Incorporation of the Borrower, as in effect on the Effective Date, certified by the Secretary of State of Delaware, and a certificate from such Secretary of State as to the good standing of the Borrower, in each case as of a date reasonably close to the Effective Date; and (ii) a certificate of a Responsible Officer of the Borrower, dated the Effective Date, and stating that attached thereto is a true and complete copy of the By-Laws of the Borrower as in effect on such date. (c) Representations and Warranties. The representations and warranties contained in Section 5.1 shall be true and correct on the Effective Date, and the Lender shall have received a certificate, signed by a Responsible Officer of the Borrower, to that effect. (d) Other Documents. The Lender shall have received such other certificates, opinions and other documents as the Lender reasonably may require. Section 6.2 Conditions to All Loans and Letters of Credit. The obligations of the Lender to make each Loan and to obtain Letters of Credit are subject to the conditions precedent that, on the date of each Loan or Letter of Credit and after giving effect thereto, each of the following conditions precedent shall have been satisfied, or waived in writing by the Lender: 14 (a) Borrowing Request. The Lender shall have received a Borrowing Request in accordance with the terms of this Agreement. (b) No Default. No Default or Event of Default shall have occurred and be continuing, nor shall any Default or Event of Default occur as a result of the making of such Loan or obtaining such Letter of Credit. (c) Debt-to-Equity Ratio. The Lender shall have received from the Borrower a certificate demonstrating that the ratio of the Borrower's Adjusted Indebtedness to the Borrower's Net Assets, taking into account the requested Loan or Letter of Credit and the assets, if any, to be acquired by the Borrower with the proceeds of such Loan or Letter of Credit, shall not exceed 4-to-1. (d) Representations and Warranties; Covenants. The representations and warranties contained in Section 5. 1 shall have been true and correct when made and (except to the extent that any representation or warranty speaks as of a date certain) shall be true and correct on the Borrowing Date with the same effect as though such representations and warranties were made on such Borrowing Date; and the Borrower shall have complied with all of its covenants and agreements under this Agreement. (e) REIT Status of Reckson. The borrowing shall not, in the sole judgment of the Lender, endanger Reckson's status as a REIT. (f) Certain Loans Subject to Reckson's Approval. In respect of any Loan or Letter of Credit or Loans or Letters of Credit aggregating in excess of $10 million, any single Commercial Service, as well as any Loan or Letter of Credit relating to an investment by Borrower in any area other than Commercial Services, Reckson shall have approved the Lender's making such Loan or obtaining such Letter of Credit in its sole discretion. Section 6.3 Satisfaction of Conditions Precedent. Each of (i) the delivery by the Borrower of a Borrowing Request (unless the Borrower notifies the Lender in writing to the contrary prior to the Borrowing Date) and (ii) the acceptance of the proceeds of a Loan or the delivery of the Letter of Credit shall be deemed to constitute a certification by the Borrower that, as of the Borrowing Date, each of the conditions precedent contained in Section 6. 2 has been satisfied with respect to the Loan then being made or the Letter of Credit then being issued. ARTICLE VII. COVENANTS Section 7.1 Affirmative Covenants. Until satisfaction in full of all the obligations of the Borrower under this Agreement and termination of the Commitment of the Lender hereunder, the Borrower will: (a) Financial Statements; Compliance Certificates. Furnish to the Lender: 15 (i) as soon as available, but in no event more than 60 days following the end of each of the first three quarters of each fiscal year, copies of the Borrower's Quarterly Report on Form 10-Q being filed with the SEC, which shall include a consolidated balance sheet and consolidated income statement of the Borrower and the Subsidiaries for such quarter; (ii) as soon as available, but in no event more than 120 days following the end of each fiscal year, a copy of the Borrower's Annual Report on Form 10-K being filed with the SEC, which shall include the consolidated financial statements of the Borrower and the Subsidiaries, together with a report thereon by Ernst & Young LLP (or another firm of independent certified public accountants reasonably satisfactory to the Lender), for such year; (iii) within five Business Days of any Responsible Officer of the Borrower obtaining knowledge of any Default or Event of Default, if such Default or Event of Default is then continuing, a certificate of a Responsible Officer of the Borrower stating that such certificate is a "Notice of Default" and setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; and (iv) such additional information, reports or statements, regarding the business, financial condition or results of operations of the Borrower and its Subsidiaries, as the Lender from time to time may reasonably request. (b) Existence. Except as permitted by Section 7. 2(a), maintain its existence in good standing and qualify and remain qualified to do business in each jurisdiction in which the character of the properties owned or leased by it therein or in which the transaction of its business is such that the failure to qualify, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (c) Compliance with Law and Agreements. Comply, and cause each Subsidiary to comply, with all applicable laws, ordinances, orders, rules, regulations and requirements of all Governmental Authorities and with all agreements except where the necessity of compliance therewith is contested in good faith by appropriate proceedings or where the failure to comply therewith, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (d) Authorizations. Obtain, make and keep in full force and effect all authorizations from and registrations with Governmental Authorities required for the validity or enforceability of this Agreement. (e) Inspection. Permit, and cause each Subsidiary to permit, the Lender to have one or more of its officers and employees, or any other Person designated by the Lender, to visit and inspect any of the properties of the Borrower and the Subsidiaries and to examine the minute books, books of account and other records of the Borrower and the Subsidiaries, and to photocopy extracts from such minute books, books of account and other records, and to discuss its affairs, finances and accounts with its officers and with the Borrower's independent 16 accountants, during normal business hours and at such other reasonable times, for the purpose of monitoring the Borrower's compliance with its obligations under this Agreement. (f) Maintenance of Records. Keep, and cause each Subsidiary to keep, proper books of record and account in which full, true and correct entries will be made of all dealings or transactions of or in relation to its business and affairs. (g) Notice of Defaults and Adverse Developments. Promptly notify the Lender upon the discovery by any Responsible officer of the occurrence of (i) any Default or Event of Default; (ii) any event, development or circumstance whereby the financial statements most recently furnished to the Lender fail in any material respect to present fairly, in accordance with GAAP, the financial condition and operating results of the Borrower and the Subsidiaries as of the date of such financial statements; (iii) any material litigation or proceedings that are instituted or threatened (to the knowledge of the Borrower) against the Borrower or any Subsidiary or any of their respective assets; (iv) any event, development or circumstance which, individually or in the aggregate, could reasonably be expected to result in an event of default (or, with the giving of notice or lapse of time or both, an event of default) under any Indebtedness and the amount thereof; and (v) any other development in the business or affairs of the Borrower or any Subsidiary if the effect thereof would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; in each case describing the nature thereof and the action the Borrower proposes to take with respect thereto. Section 7.2 Negative Covenants. Until satisfaction in full of all the obligations of the Borrower under this Agreement and termination of the Commitment of the Lender hereunder, the Borrower will not: (a) Mergers, Consolidations and Sales of Assets. Wind up, liquidate or dissolve its affairs or enter into any merger, consolidation or share exchange, or convey, sell, lease or otherwise dispose of (or agree to do any of the foregoing at any future time), whether in one or a series of transactions, all or any substantial part of its assets, or permit any Subsidiary so to do, unless such transaction or series of transactions are expressly approved by the Lender, which approval shall not be unreasonably withheld. (b) Liens. Create, incur, assume or suffer to exist any Lien upon or with respect to any of its property or assets, whether now owned or hereafter acquired, or assign or otherwise convey any right to receive income, except Permitted Liens. (c) Indebtedness. Create, incur, issue, assume, guarantee or suffer to exist any Indebtedness, except: (i) Indebtedness to the Lender under this Agreement or under the RSVP-ROP Facility Agreement, (ii) Non-recourse Indebtedness of the Borrower and any Subsidiary secured by mortgages, encumbrances or liens specifically permitted by Section 7. 2(b), and 17 (iii) Indebtedness expressly approved by the Lender in writing, which approval may be withheld in the Lender's sole discretion. (d) Dividends. Declare any dividends on any of its shares of capital stock unless such dividend or distribution is expressly approved in writing by the Lender. (e) Certain Amendments. Amend, modify or waive, or permit to be amended, modified or waived, any provision of its Certificate of Incorporation unless, within not less than 5 days prior to such amendment, modification or waiver (or such later time as the Lender may in its sole discretion permit), the Borrower shall have given the Lender notice thereof, including all relevant terms and conditions thereof, and the Lender shall have consented in writing thereto. ARTICLE VIII. EVENTS OF DEFAULT Section 8.1 Events of Default. If one or more of the following events (each, an "Event of Default") shall occur: (a) The Borrower shall fail duly to pay any principal of any Loan or Letter of Credit when due, whether at maturity, by notice of intention to prepay or otherwise; or (b) The Borrower shall fail duly to pay any interest, fee or any other amount payable under this Agreement within two days after the same shall be due; or (c) Borrower shall fail duly to observe or perform any term, covenant, or agreement contained in Section 7. 2; or (d) The Borrower shall fail duly to observe or perform any other term, covenant or agreement contained in this Agreement, and such failure shall have continued unremedied for a period of 30 days; or (e) Any representation or warranty made or deemed made by the Borrower in this Agreement, or any statement or representation made in any certificate, report or opinion delivered by or on behalf of the Borrower in connection with this Agreement, shall prove to have been false or misleading in any material respect when so made or deemed made; or (f) The Borrower shall fail to pay any Indebtedness (other than obligations here under) in an amount of $100,000 or more when due; or any such Indebtedness having an aggregate principal amount outstanding of $100,000 or more shall become or be declared to be due prior to the expressed maturity thereof; or (g) An involuntary case or other proceeding shall be commenced against the Borrower seeking liquidation, reorganization or other relief with respect to it or its debts under any applicable bankruptcy, insolvency, reorganization or similar law or seeking the appointment of a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain 18 undismissed and unstayed for a period of more than 60 days; or an order or decree approving or ordering any of the foregoing shall be entered and continued unstayed and in effect; or (h) The Borrower shall commence a voluntary case or proceeding under any applicable bankruptcy, insolvency, reorganization or similar law or any other case or proceeding to be adjudicated a bankrupt or insolvent, or any of them shall consent to the entry of a decree or order for relief in respect of the Borrower in an involuntary case or proceeding under any applicable bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against any of them, or any of them shall file a petition or answer or consent seeking reorganization or relief under any applicable law, or any of them shall consent to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Borrower or any substantial part of its property, or the Borrower shall make an assignment for the benefit of creditors, or the Borrower shall admit in writing its inability to pay its debts generally as they become due, or the Borrower shall take corporate action in furtherance of any such action; (i) One or more judgments against the Borrower or attachments against its property, which in the aggregate exceed $100,000, or the operation or result of which could be to interfere materially and adversely with the conduct of the business of the Borrower remain unpaid, unstayed on appeal, undischarged, unbonded, or undismissed for a period of more than 30 days; or (j) Any court or governmental or regulatory authority shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, judgment, decree, injunction or other order (whether temporary, preliminary or permanent) which is in effect and which prohibits, enjoins or otherwise restricts, in a manner that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, any of the transactions contemplated under this Agreement; or (k) Any Event of Default shall occur and be continuing under the RSVP-ROP Facility Agreement. then, and at any time during the continuance of such Event of Default, the Lender may, by written notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate forthwith the Commitment, Credit Obligations and any obligations of the Lender to obtain Letters of Credit pursuant to this Agreement and (ii) declare any Credit Obligations then outstanding to be due, whereupon the principal of the Credit Obligations so declared to be due, together with accrued interest thereon and any unpaid amounts accrued under this Agreement, shall become forthwith due, without presentment, demand, protest or any other notice of any kind (all of which are hereby expressly waived by the Borrower); provided that, in the case of any Event of Default described in Section 8. 1(g) or (h) occurring with respect to the Borrower, the Commitment and any obligations of the Lender to obtain Letters of Credit pursuant to this Agreement shall automatically and immediately terminate and the principal of all Loans then outstanding, together with accrued interest thereon and any unpaid amounts accrued under this Agreement, shall automatically and immediately become due without presentment, 19 demand, protest or any other notice of any kind (all of which are hereby expressly waived by the Borrower). ARTICLE IX. EVIDENCE OF LOANS; TRANSFERS Section 9.1 Evidence of Loans and Letters of Credit. (a) The Lender shall maintain accounts evidencing the indebtedness of the Borrower to the Lender resulting from each Loan made by the Lender and each Letter of Credit issued for the benefit of the Borrower from time to time, including the amounts of principal and interest payable and paid to the Lender in respect of Loans or Letters of Credit. (b) The Lender's written records described above shall be available for inspection during ordinary business hours by the Borrower from time to time upon reasonable prior notice to the Lender. (c) The entries made in the Lender's written or electronic records and the foregoing accounts shall be prima facie evidence of the existence and amounts of the indebtedness of the Borrower therein recorded; provided, however, that the failure of the Lender to maintain any such account or such records, as applicable, or any error therein, shall not in any manner affect the validity or enforceability of any obligation of the Borrower to repay any Loan actually made by the Lender in accordance with the terms of this Agreement. ARTICLE X. LETTERS OF CREDIT Section 10.1 Letters of Credit. Until the Commitment Termination Date and subject to the terms and conditions set forth in this Agreement, the Lender hereby agrees to obtain from an Issuing Bank for the account of the Borrower one or more Letters of Credit, subject to the following provisions: (a) Types and Amounts. The Lender shall not have any obligation to obtain, or cause the amendment or extension of any Letter of Credit at any time: (i) if the aggregate Letter of Credit Obligations with respect to the Issuing Bank, after giving effect to the issuance, amendment or extension of the Letter of Credit requested hereunder, shall exceed any limit imposed by law or regulation upon the Issuing Bank; (ii) if, immediately after giving effect to the issuance, amendment or extension of such Letter of Credit, (1) the Letter of Credit Obligations at such time would exceed [$10,000,000] or (2) the Credit Obligations at such time would exceed the Commitment at such time, or (3) one or more of the conditions precedent contained in Sections 6.1 or 6.2, as applicable, would not on such date be satisfied, unless such conditions are 20 thereafter satisfied and written notice of such satisfaction is given to the Lender (and the Lender shall not otherwise be required to determine that, or take notice whether, the conditions precedent set forth in Sections 6.1 or 6.2, as applicable, have been satisfied); (iii) which has an expiration date later than the earlier of (A) the date one (1) year after the date of issuance (without regard to any automatic renewal provisions thereof) or (B) the Business Day next preceding the scheduled Commitment Termination Date; or (iv) which is in a currency other than dollars. (b) Conditions. In addition to being subject to the satisfaction of the conditions precedent contained in Sections 6.1 and 6.2, as applicable, the obligation of the Lender to obtain from an Issuing Bank, or to cause the amendment or extension of any Letter of Credit is subject to the satisfaction in full of the following conditions: (i) if the Lender so requests, the Borrower shall have executed and delivered to the Lender a Letter of Credit Reimbursement Agreement and such other documents and materials as may be required pursuant to the terms thereof; and (ii) the terms of the proposed Letter of Credit shall be satisfactory to the Lender in its sole discretion. (c) Issuance of Letters of Credit. (i) The Borrower shall give the Lender written notice that it requires the issuance of a Letter of Credit not later than 11:00 a.m. (New York time) on the third (3rd) Business Day preceding the requested date for issuance thereof under this Agreement. Such notice shall be irrevocable unless and until such request is denied by the Lender and shall specify (A) that the requested Letter of Credit is either a Commercial Letter of Credit or a Standby Letter of Credit, (B) the stated amount of the Letter of Credit requested, (C) the effective date (which shall be a Business Day) of issuance of such Letter of Credit, (D) the date on which such Letter of Credit is to expire (which shall be a Business Day and no later than the Business Day immediately preceding the scheduled Commitment Termination Date), (E) that such Letter of Credit is to be issued for the benefit of the Borrower, (F) other relevant terms of such Letter of Credit, (G) the Available Commitment at such time and (H) the amount of the then outstanding Letter of Credit Obligations. (ii) The Lender shall give the Borrower written notice, or telephonic notice confirmed promptly thereafter in writing, of the issuance, amendment or extension of a Letter of Credit. (d) Reimbursement Obligations; Duties of the Lender. (i) Notwithstanding any provisions to the contrary in any Letter of Credit Reimbursement Agreement: (A) the Borrower shall reimburse the Lender for amounts drawn under its Letter of Credit, in dollars, no later than the date (the "Reimbursement Date") 21 which is the earlier of (I) the time specified in the applicable Letter of Credit Reimbursement Agreement and (II) three (3) Business Days after the Borrower receives written notice from the Lender that payment has been made under such Letter of Credit by the Issuing Bank; and (B) all Reimbursement Obligations with respect to any Letter of Credit shall bear interest at the Prime Rate in accordance with Section 3.1 from the date of the relevant drawing under such Letter of Credit until the Reimbursement Date. (ii) The Lender shall give the Borrower written notice, or telephonic notice confirmed promptly thereafter in writing, of all drawings under a Letter of Credit and the payment (or the failure to pay when due) by the Borrower, as the case may be, on account of a Reimbursement Obligation. (iii) In determining whether to pay under any Letter of Credit, it is understood that the Issuing Bank shall have no obligation other than to confirm that any documents required to be delivered under a respective Letter of Credit appear to have been delivered and that they appear on their face to comply with the requirements of such Letter of Credit. (e) Payment of Reimbursement Obligations. (i) The Borrower unconditionally agrees to pay to the Lender, in dollars, the amount of all Reimbursement Obligations, interest and other amounts payable to the Lender under or in connection with the Letters of Credit when such amounts are due and payable, irrespective of any claim, setoff, defense or other right which the Borrower may have at any time against the Lender or any other Person. (f) Letter of Credit Fee Charges. In connection with each Letter of Credit, the Borrower hereby covenants to pay to the Lender the following Letter of Credit Fee payable quarterly in arrears (on the first Banking Day of each calendar quarter following the issuance of each Letter of Credit): a fee, for the Lender's own account, computed daily on the amount of the Letter of Credit issued and outstanding at a rate per annum equal to the Lender's cost in obtaining the Letter of Credit plus a spread equal to the difference between the interest rate payable on Loans hereunder and the Lender's cost of borrowing under its credit facility (or, in the absence of a credit facility, the Prime Rate as announced by Citibank NA). Notwithstanding the foregoing, if amounts payable pursuant to this Section 10.1(f), together with any interest payable pursuant to Section 3.1, exceed the amount of EBITDA of the Borrower for the immediately preceding calendar quarter (ending the last day of September, December, March or June), the Borrower shall not be obligated to repay the amounts payable under this Section 10.1(f) which, when added to the interest payable pursuant to Section 3.1 exceeds EBITDA of the Borrower for such period. Any such amount in excess of EBITDA shall be added to principal hereunder and shall accrue interest thereon in accordance with Section 3.1. (g) Letter of Credit Reporting Requirements. The Lender shall, upon the request of the Borrower, provide to the Borrower separate schedules for Commercial Letters of Credit and Standby Letters of Credit issued as Letters of Credit, in form and substance reasonably satisfactory to the Borrower, setting forth the aggregate Letter of Credit Obligations outstanding 22 to it at the end of each month and any information requested by the Borrower relating to the date of issue, account party, amount, expiration date and reference number of each Letter of Credit issued as contemplated hereunder. (h) Indemnification; Exoneration. (i) In addition to all other amounts payable to the Lender, the Borrower hereby agrees to defend, indemnify, and save the Lender harmless from and against any and all claims, demands, liabilities, penalties, damages, losses (other than loss of profits), reasonable costs, reasonable charges and reasonable expenses (including reasonable attorneys fees but excluding taxes) which the Lender may incur or be subject to as a consequence, direct or indirect, of (A) the issuance of any Letter of Credit other than as a result of the gross negligence or willful misconduct of the Lender, as determined by a court of competent jurisdiction, or (B) the failure of the Issuing Bank to honor a drawing under such Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Governmental Authority. (ii) As between the Borrower on the one hand and the Lender on the other hand, the Borrower assumes all risks of the acts and omissions of, or misuse of Letters of Credit by, the respective beneficiary of the Letters of Credit. In furtherance and not in limitation of the foregoing, subject to the provisions of the Letter of Credit Reimbursement Agreements, the Lender shall not be responsible for: (A) the form, validity, legality, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of the Letters of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (B) the validity, legality or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (C) failure of the Borrower to duly comply with conditions required in order to draw upon such Letter of Credit; (D) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (E) errors in interpretation of technical terms; (F) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any Letter of Credit or of the proceeds thereof; (G) the misapplication by the Borrower of the proceeds of any drawing Letter of Credit; and (H) any consequences arising from causes beyond the control of the Lender, other than of the foregoing resulting from the gross negligence or willful misconduct of the Lender. ARTICLE XI MISCELLANEOUS Section 11.1 Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE. 23 Section 11.2 Waiver of Jury. THE BORROWER AND THE LENDER EACH HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, OR THE RELATIONSHIPS ESTABLISHED HEREUNDER. Section 11.3 Jurisdiction and Venue; Service of Process. 1. The Borrower and the Lender each hereby irrevocably submits to the non-exclusive jurisdiction of any state or federal court in the Borough of Manhattan, The City of New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and to the laying of venue in the Borough of Manhattan The City of New York. The Borrower and the Lender each hereby irrevocably waives, to the fullest extent permitted by applicable law, any objection to the laying of the venue of any such suit, action or proceeding brought in the aforesaid courts and hereby irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. (b) Borrower agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower at its address set forth in subsection 11.7 or at such other address of which the Lender shall have been notified pursuant thereto. The Borrower further agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (c) The Borrower waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this subsection any special, exemplary, punitive or consequential damages. Section 11.4 Confidentiality. The Lender agrees (on behalf of itself and each of its Affiliates, partners, officers, employees and representatives) to use its best efforts to keep confidential, in accordance with their customary procedures for handling confidential information of this nature and in accordance with commercially reasonable business practices, any Confidential Information; provided that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for the Lender, (iii) to auditors or accountants, (iv) by the Lender to an Affiliate thereof, or (v) in connection with any litigation relating to enforcement of this Agreement; provided further, that, unless specifically prohibited by applicable law or court order, the Lender shall, prior to disclosure thereof, notify the Borrower of any request for disclosure of any Confidential Information (x) by any Governmental Authority or representative thereof or (y) pursuant to legal process. Section 11.5 Amendments and Waivers. (a) Any provision of this Agreement may be amended, modified, supplemented or waived, but only by a written amendment or supplement, or written waiver, signed by the Borrower and the Lender. 24 (b) Except to the extent expressly set forth therein, any waiver shall be effective only in the specific instance and for the specific purpose for which such waiver is given. Section 11.6 Cumulative Rights; No Waiver. Each and every right granted to the Lender hereunder or under any other document delivered in connection herewith, or allowed it by law or equity, shall be cumulative and not exclusive and may be exercised from time to time. No failure on the part of the Lender to exercise, and no delay in exercising, any right will operate as a waiver thereof, nor will any single or partial exercise by the Lender of any right preclude any other or future exercise thereof or the exercise of any other right. Section 11.7 Notices. Any communication, demand or notice to be given hereunder will be duly given when delivered in writing or by telecopy to a party at its address as indicated below or such other address as such party may specify in a notice to the other party hereto. A communication, demand or notice given pursuant to this Agreement shall be addressed: If to the Borrower, to: Reckson Service Industries, Inc. 225 Broadhollow Road Melville, New York 11747 Telecopy: (516) 719-7400 Attention: Chief Financial Officer If to the Lender, to: Reckson Operating Partnership, L.P. 225 Broadhollow Road Melville, New York 11747 Telecopy: (516) 694-6900 Attention: Chief Financial Officer This Section 11.7 shall not apply to notices referred to in Article II of this Agreement, except to the extent set forth therein. Section 11.8 Certain Acknowledgments. The Borrower hereby confirms and acknowledges that (a) the Lender does not have any fiduciary or similar relationship to the Borrower by virtue of this Agreement and the transactions contemplated herein and that the relationship established by this Agreement between the Lender and the Borrower is solely that of creditor and debtor and (b) no joint venture exists between the Borrower and the Lender by virtue of this Agreement and the transactions contemplated herein. Section 11.9 Separability. In case any one or more of the provisions contained in this Agreement shall be invalid, illegal or unenforceable in any respect under any law, the validity, 25 legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. Section 11.10 Parties in Interest. This Agreement shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns, except that the Borrower may not assign any of its rights hereunder without the prior written consent of the Lender, and any purported assignment by the Borrower without such consent shall be void. Section 11.11 Execution in Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all the counterparts shall together constitute one and the same instrument. 26 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. RECKSON SERVICE INDUSTRIES, INC., as Borrower By:______________________________ Name: Title: RECKSON OPERATING PARTNERSHIP, L.P., as Lender By: Reckson Associates Realty Corp., its general partner By:______________________________ Name: Title: 27 EX-10.38 10 EXHIBIT 10.38 EXHIBIT 10.38 RECKSON ASSOCIATES REALTY CORP. SECOND AMENDED AND RESTATED LETTER AGREEMENT November 30, 1999 Reckson Service Industries Inc. 10 East 53rd Street New York, New York 10022 Re: Second Amended and Restated Credit Agreements Dear Sirs: Reference is made to the Amended and Restated Credit Agreement, dated as of August 4, 1999, between Reckson Service Industries, Inc., as Borrower (the "Borrower") and Reckson Operating Partnership, L.P., as Lender (the "Lender") relating to the operations of the Borrower (the "RSI Facility"), and the Amended and Restated Credit Agreement, dated as of August 4, 1999, between the Borrower and the Lender relating to Reckson Strategic Venture Partners LLC (together with the RSI Facility, the "Credit Facilities"). Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to such terms in the Credit Facilities. You have advised us of your proposal to obtain (i) a $60 million secured loan from Warburg Dillon Read and UBS AG (or other lenders) substantially on the terms set forth on the term sheet attached hereto as Exhibit A (the "Secured $60 million Loan") and (ii) a $75 million secured loan from Reckson Strategic Venture Partners LLC (or other lenders) substantially on the terms set forth in the term sheet attached hereto as Exhibit B (the "Secured $75 million Loan" and, together with the Secured $60 million Loan, the "Secured Loans"). You have also advised us of your proposal to issue up to $200 million in preferred stock (the "Preferred Stock"). 1. Amendments. We hereby agree to the following amendments to the Credit Facilities: a. Section 1.1(b) is hereby amended to add the following definition: "Adjusted EBITDA" shall mean, for any fiscal quarter, EBITDA less any amounts payable (i) by any subsidiary in respect of the Indebtedness of such Subsidiary (including, but not limited to, Indebtedness of VANTAS Incorporated and the Secured $75 million Loan) and (ii) by the Borrower in respect of the Secured $60 million Loan. b. The third sentence of Section 3.1 of the Credit Agreements is hereby amended by deleting the references to "EBITDA" and replacing such references with the term "Adjusted EBITDA." 2. Consents. We hereby consent to the following: a. The Liens to be granted under the Secured Loans shall be deemed to be Permitted Liens for purposes of the Credit Facilities. b. In accordance with Section 7.2(c)(iii) of the Credit Facilities, the incurrence of Indebtedness under the Secured Loans and the payment of interest thereon is hereby approved. c. In accordance with Sections 7.2(d) and 7.2(e) of the Credit Facilities, the filing of one or more Certificates of Designation and any amendments thereto in respect of the Preferred Stock, and the payment by the Borrower of dividends to the holders of the Preferred Stock, is hereby approved. 3. Fees. It is understood that a fee equal to shares of common stock, par value $.01 per share, of the Borrower shall be paid to us upon delivery of this letter in consideration of the matters covered in this letter. Very truly yours, RECKSON OPERATING PARTNERSHIP, L.P. By: Reckson Associates Realty Corp., general partner By:___________________________________ Name: Title: Confirmed and Accepted: RECKSON SERVICE INDUSTRIES, INC. By:_________________________ Name: Title: EX-12.1 11 EXHIBIT 12.1 EXHIBIT 12.1 RECKSON ASSOCIATES REALTY CORP. RATIOS OF EARNINGS TO FIXED CHARGES The following table sets forth the Company's consolidated ratios of earnings to fixed charges for the periods shown:
FOR THE YEARS ENDED DECEMBER 31, - -------------------------------------------- JUNE 3, 1995 JANUARY 1, 1995 TO TO 1999 1998 1997 1996 DECEMBER 31, 1995 JUNE 2, 1995 - ----------- ---------- ---------- ---------- ------------------- ---------------- 2.06 1.98x 2.68x 2.72x 2.71x 1.02x (1)
(1) Prior to completion of the IPO on June 2, 1995, the Company's predecessors operated in a manner as to minimize net taxable income to the owners. The IPO and the related formation transactions permitted the Company to deleverage its properties significantly, resulting in a significantly improved ratio of earnings to fixed charges. The Company's consolidated ratio of earnings to fixed charges and preferred dividends and distributions for the year ended December 31, 1999 and 1998 was 1.52x and 1.59x, respectively. The Company had no preferred capital outstanding prior to April 1998. EX-21.1 12 EXHIBIT 21.1 EXHIBIT 21.1 RECKSON ASSOCIATES REALTY CORP. STATEMENT OF SUBSIDIARIES NAME STATE OF ORGANIZATION - ------------------------------------------------- ---------------------- Reckson Operating Partnership, L.P. Maryland Omni Partners, L.P. Delaware Reckson FS Limited Partnership Delaware Metropolitan Partners, LLC Delaware Reckson Management Group, Inc. New York Reckson Construction Group, Inc New York Reckson Short Hills, LLC Delaware Reckson / Stamford Towers, LLC Delaware EX-23.0 13 EXHIBIT 23.0 EXHIBIT 23.0 RECKSON ASSOCIATES REALTY CORP. CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements Forms S-3 (No. 333-91915, No. 333-67129, No. 333-46883, No 333-29003 and No. 333-28015) and in the related Prospectus and Forms S-8 (No. 333-87235, No. 333-66283, No. 333-66273, No. 333-45359, and No. 333-04526) pertaining to the Stock Option Plans, of Reckson Associates Realty Corp., of our report dated February 15, 2000, with respect to the consolidated financial statements and schedule of Reckson Associates Realty Corp., included in this Annual Report Form 10-K for the year ended December 31, 1999. Ernst & Young, LLP New York, New York March 14, 2000 EX-27 14 FDS
5 0000930548 RECKSON ASSOCIATES REALTY CORP. 1,000 U.S. DOLLARS 12-MOS DEC-31-1999 JAN-01-1999 DEC-31-1999 1 21,368 0 206,301 0 0 227,669 2,214,872 (218,385) 2,724,235 99,602 1,281,087 0 152 504 1,116,300 2,724,235 369,135 403,153 0 150,287 0 0 74,320 85,192 0 85,192 0 (389) 0 47,529 1.18 1.17
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