UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________________________

FORM 10-Q

_________________________________________________________

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2016~~2017

☐ 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: 033-84580

_________________________________________________________

RECKSON OPERATING PARTNERSHIP, L.P.

(Exact name of registrant as specified in its charter)

_________________________________________________________



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

420 Lexington Avenue, New York, New York 10170

(Address of principal executive offices) (Zip Code)

(212) 594-2700

(Registrant’s telephone number, including area code)

_________________________________________________________

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 ý NO o

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” ~~and~~ “smaller reporting ~~company”~~company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filero	o	Accelerated filer	o
Non-accelerated filer	x
~~Non-accelerated filer~~ x	~~Smaller Reporting Company~~ o
~~(Do~~(Do not check if a smaller reporting company)
Smaller Reporting Company	o	Emerging Growth Company	o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO ý

As of ~~November~~August 14, ~~2016,~~2017, no common units of limited partnership interest of the Registrant were held by non-affiliates of the Registrant. There is no established trading market for such units.

Reckson Operating Partnership, L.P.

TABLE OF CONTENTS



PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements

	Consolidated Balance Sheets as of ~~September~~June 30, ~~2016~~2017 (unaudited) and December 31, ~~2015~~2016	2
	Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 (unaudited)	34
	Consolidated Statements of Comprehensive Income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 (unaudited)	45
	Consolidated Statement of Capital for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 (unaudited)	56
	Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 (unaudited)	67
	Notes to Consolidated Financial Statements (unaudited)	78
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3736
Item 4.	Controls and Procedures	3736
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	3837
Item 1A.	Risk Factors	3837
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3837
Item 3.	Defaults Upon Senior Securities	3837
Item 4.	Mine Safety Disclosures	3837
Item 5.	Other Information	3837
Item 6.	Exhibits	3938
	Signatures	4039

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Reckson Operating Partnership, L.P.

Consolidated Balance Sheets

(in thousands)


	September 30, 2016			December 31, 2015			June 30, 2017			December 31, 2016
	(unaudited)						(unaudited)
Assets
Commercial real estate properties, at cost:
Land and land interests	$	1,806,919		$	1,877,492		$	1,754,680		$	1,805,198
Building and improvements	4,592,396			4,477,073			4,428,461			4,629,994
Building leasehold and improvements	1,073,678			1,073,678			1,073,703			1,073,678
	7,472,993			7,428,243			7,256,844			7,508,870
Less: accumulated depreciation	(1,395,371		)	(1,267,598		)	(1,469,042		)	(1,437,222		)
	6,077,622			6,160,645			5,787,802			6,071,648
Assets held for sale							119,224			—
Cash and cash equivalents	66,196			50,026			50,978			59,930
Restricted cash	42,673			39,433			80,948			43,489
Tenant and other receivables, net of allowance of $5,423 and $5,593 in 2016 and 2015, respectively	32,622			35,256
Related party receivables	—			90,000
Deferred rents receivable, net of allowance of $17,046 and $14,788 in 2016 and 2015, respectively	231,464			217,730
Debt and preferred equity investments, net of discounts and deferred origination fees of $14,631 and $18,759 in 2016 and 2015, respectively	1,453,234			1,670,020
Tenant and other receivables, net of allowance of $6,282 and $4,879 in 2017 and 2016, respectively							25,717			30,999
Deferred rents receivable, net of allowance of $16,245 and $17,798 in 2017 and 2016, respectively							236,738			238,447
Debt and preferred equity investments, net of discounts and deferred origination fees of $16,079 and $16,705 in 2017 and 2016, respectively							1,986,413			1,640,412
Investments in unconsolidated joint ventures	173,010			100,192			132,413			174,127
Deferred costs, net of accumulated amortization of $74,736 and $64,812 in 2016 and 2015, respectively	121,890			114,449
Deferred costs, net of accumulated amortization of $73,616 and $73,673 in 2017 and 2016, respectively							112,274			121,470
Other assets	417,922			355,566			286,550			374,091
Total assets	$	8,616,633		$	8,833,317		$	8,819,057		$	8,754,613
Liabilities
Mortgages and other loans payable, net	$	626,139		$	745,728		$	921,176		$	676,068
Revolving credit facility, net	—			985,055			195,125			—
Term loan and senior unsecured notes, net	1,974,124			1,979,317
Unsecured term loan, net							1,180,217			1,179,521
Unsecured notes, net							795,942			795,260
Accrued interest payable	10,968			18,396			17,586			15,781
Other liabilities	164,509			116,088			87,190			160,982
Accounts payable and accrued expenses	60,113			70,844			56,706			60,855
Related party payables	23,808			—			23,808			23,808
Deferred revenue	176,586			180,404			144,661			161,772
Deferred land leases payable	1,772			1,558			1,842			1,795
Dividends payable	754			807			807			754
Security deposits	40,009			39,007			40,366			40,033
Liabilities related to assets held for sale							106			—
Total liabilities	3,078,782			4,137,204			3,465,532			3,116,629
Commitments and contingencies	—			—
Preferred units	109,161			109,161
Capital
General partner capital	5,040,392			4,201,872
Limited partner capital	—			—
Accumulated other comprehensive loss	(1,708		)	(2,216		)
Total ROP partner's capital	5,038,684			4,199,656
Noncontrolling interests in other partnerships	390,006			387,296
Total capital	5,428,690			4,586,952
Total liabilities and capital	$	8,616,633		$	8,833,317

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Reckson Operating Partnership, L.P.

Consolidated Balance Sheets

(in thousands)



	June 30, 2017			December 31, 2016
	(unaudited)
Commitments and contingencies	—			—
Preferred units	109,161			109,161

Capital
General partner capital	4,873,544			5,139,842
Accumulated other comprehensive loss	(1,438		)	(1,618		)
Total ROP partner's capital	4,872,106			5,138,224
Noncontrolling interests in other partnerships	372,258			390,599
Total capital	5,244,364			5,528,823
Total liabilities and capital	$	8,819,057		$	8,754,613

¹⁾ The Company's consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs"). See Note 2. The consolidated balance sheets include the following amounts related to our consolidated VIEs: $268.6 million and $297.3 million of land, $1.3 billion and $1.4 billion of building and improvements, $301.7 million and $318.4 million of accumulated depreciation, $254.3 and $160.5 of other assets included in other line items, $494.5 million and $494.0 million of real estate debt, net, $2.1 million and $2.1 million of accrued interest payable, and $53.0 million and $61.4 million of other liabilities included in other line items as of June 30, 2017 and December 31, 2016, respectively.

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

Reckson Operating Partnership, L.P.

Consolidated Statements of Operations

(unaudited, in thousands)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015			2017			2016			2017			2016
Revenues
Rental revenue, net	$	166,456		$	159,381		$	486,350		$	461,858		$	167,058		$	160,276		$	335,030		$	319,894
Escalation and reimbursement	28,158			25,870			78,173			72,080			22,897			25,699			47,442			50,015
Investment income	75,715			49,660			175,481			136,620			60,424			44,586			100,978			99,766
Other income	1,007			2,740			2,754			16,392			1,433			1,197			717			1,747
Total revenues	271,336			237,651			742,758			686,950			251,812			231,758			484,167			471,422
Expenses
Operating expenses, including related party expenses of $1,169 and $5,752 in 2016 and $2,605 and $6,530 in 2015	43,549			41,397			124,319			122,567
Operating expenses, including related party expenses of $6,649 and and $13,178 in 2017, and $7,211 and $12,974 in 2016													38,765			38,809			80,490			80,770
Real estate taxes	38,900			37,448			113,426			107,152			38,826			37,302			77,622			74,526
Ground rent	5,266			5,236			15,736			15,706			5,235			5,235			10,470			10,470
Interest expense, net of interest income	24,723			31,132			83,367			86,856			32,108			26,443			61,575			58,644
Amortization of deferred financing costs	2,081			2,418			5,953			5,674			2,039			1,732			4,126			3,872
Depreciation and amortization	57,916			51,490			159,365			151,159			50,773			50,651			102,557			101,449
Transaction related costs	98			2,887			343			2,842			2			67			2			245
Marketing, general and administrative	156			102			605			366			117			265			229			449
Total expenses	172,689			172,110			503,114			492,322			167,865			160,504			337,071			330,425
Income from continuing operations before equity in net income from unconsolidated joint ventures, gain (loss) on sale of real estate, depreciable real estate reserve, unrealized loss on embedded derivatives and loss on early extinguishment of debt	98,647			65,541			239,644			194,628
Income before equity in net income from unconsolidated joint ventures, equity in net gain on sale of interest in unconsolidated joint venture/real estate, gain (loss) on sale of real estate, and depreciable real estate reserves													83,947			71,254			147,096			140,997
Equity in net income from unconsolidated joint ventures	4,276			2,296			10,399			6,576			3,180			3,666			7,435			6,123
Equity in net gain on sale of interest in unconsolidated joint venture/real estate													—			—			3			—
Gain (loss) on sale of real estate	—			101,069			(6,899		)	101,069			4,933			(6,899		)	4,933			(6,899		)
Depreciable real estate reserves	—			(9,998		)	—			(9,998		)	(29,063		)	—			(85,328		)	—
Unrealized loss on embedded derivative	—			(1,800		)	—			(1,800		)
Loss on early extinguishment of debt	—			—			—			(49		)
Income from continuing operations	102,923			157,108			243,144			290,426
Net income from discontinued operations	—			—			—			—
Net income	102,923			157,108			243,144			290,426			62,997			68,021			74,139			140,221
Net income attributable to noncontrolling interests in other partnerships	(1,279		)	(293		)	(3,353		)	(7,223		)
Net loss (income) attributable to noncontrolling interests in other partnerships													18,134			(2,062		)	18,120			(2,074		)
Preferred units dividend	(955		)	(743		)	(2,865		)	(743		)	(955		)	(955		)	(1,908		)	(1,910		)
Net income attributable to ROP common unitholder	$	100,689		$	156,072		$	236,926		$	282,460		$	80,176		$	65,004		$	90,351		$	136,237

The accompanying notes are an integral part of these consolidated financial statements.

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Reckson Operating Partnership, L.P.

Consolidated Statements of Comprehensive Income

(unaudited, in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015		2017		2016		2017		2016
Net income attributable to ROP common unitholder	$	100,689	$	156,072	$	236,926	$	282,460	$	80,176	$	65,004	$	90,351	$	136,237
Other comprehensive income:
Change in net unrealized gain on derivative instruments	90		222		508		626
Change in net unrealized loss/gain on derivative instruments									90		198		180		418
Comprehensive income attributable to ROP common unitholder	$	100,779	$	156,294	$	237,434	$	283,086	$	80,266	$	65,202	$	90,531	$	136,655

The accompanying notes are an integral part of these consolidated financial statements.

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Reckson Operating Partnership, L.P.

Consolidated Statement of Capital

(unaudited, in thousands)


	General Partner's Capital Class A Common Units			Limited Partner's Capital		Noncontrolling Interests In Other Partnerships			Accumulated Other Comprehensive (Loss) Income			Total Capital			General Partner's Capital Class A Common Units			Limited Partner's Capital		Noncontrolling Interests In Other Partnerships			Accumulated Other Comprehensive (Loss) Income			Total Capital
Balance at December 31, 2015	$	4,201,872		$	—	$	387,296		$	(2,216	)	$	4,586,952
Balance at December 31, 2016															$	5,139,842		$	—	$	390,599		$	(1,618	)	$	5,528,823
Contributions	4,023,919			—		—			—			4,023,919			1,913,792			—		—			—			1,913,792
Distributions	(3,422,325		)	—		(643		)	—			(3,422,968		)	(2,270,441		)	—		(221		)	—			(2,270,662		)
Net income	236,926			—		3,353			—			240,279			90,351			—		(18,120		)	—			72,231
Other comprehensive income	—			—		—			508			508			—			—		—			180			180
Balance at September 30, 2016	$	5,040,392		$	—	$	390,006		$	(1,708	)	$	5,428,690
Balance at June 30, 2017															$	4,873,544		$	—	$	372,258		$	(1,438	)	$	5,244,364

The accompanying notes are an integral part of these consolidated financial statements.

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Reckson Operating Partnership, L.P.

Consolidated Statements of Cash Flows

(unaudited, in thousands)


	Nine Months Ended September 30,						Six Months Ended June 30,
	2016			2015			2017			2016
Operating Activities
Net income	$	243,144		$	290,426		$	74,139		$	140,221
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	165,318			156,833			106,683			105,321
Equity in net income from unconsolidated joint venture	(10,399		)	(6,576		)
Equity in net income from unconsolidated joint ventures							(7,435		)	(6,123		)
Distributions of cumulative earnings from unconsolidated joint ventures	7,286			6,435			9,479			4,376
Loss (gain) on sale of real estate	6,899			(101,069		)
Loss on early extinguishment of debt	—			49
Depreciable real estate reserve	—			9,998
Equity in net gain on sale of interest in unconsolidated joint venture interest/real estate							(3		)	—
(Gain) loss on sale of real estate							(4,933		)	6,899
Depreciable real estate reserves							85,328			—
Deferred rents receivable	(15,992		)	(14,613		)	(6,446		)	(10,411		)
Other non-cash adjustments	(38,249		)	(53,453		)	(24,586		)	(21,545		)
Changes in operating assets and liabilities:
Restricted cash—operations	(10,365		)	(987		)	707			(8,721		)
Tenant and other receivables	2			(10,246		)	2,949			3,560
Deferred lease costs	(22,447		)	(31,986		)	(6,713		)	(12,573		)
Other assets	(26,934		)	(26,514		)	(18,061		)	(3,855		)
Accounts payable, accrued expenses and other liabilities	(4,736		)	8,561			1,985			(4,196		)
Deferred revenue and land leases payable	9,956			9,567			(4,508		)	(7,591		)
Net cash provided by operating activities	303,483			236,425			208,585			185,362
Investing Activities
Acquisitions of real estate properties	—			(109,633		)
Additions to land, buildings and improvements	(82,895		)	(58,374		)	(51,777		)	(53,065		)
Escrowed cash—capital improvements	368			388			—			368
Investments in unconsolidated joint venture	(24,961		)	(988		)
Investments in unconsolidated joint ventures							(84		)	(797		)
Distributions in excess of cumulative earnings from unconsolidated joint ventures	1,028			28,158			48,616			615
Net proceeds from disposition of real estate/joint venture interest	42,316			216,592			20,082			42,316
Other investments	16,066			(7,177		)	28,459			4,974
Origination of debt and preferred equity investments	(555,089		)	(461,257		)	(854,577		)	(227,482		)
Repayments or redemption of preferred equity investments	667,251			372,084
Net cash provided by (used in) investing activities	64,084			(20,207		)
Repayments or redemption of debt and preferred equity investments							633,140			418,371
Net cash (used in) provided by investing activities							(176,141		)	185,300
Financing Activities
Proceeds from mortgages and other loans payable	$	383		$	300,018		$	250,000		$	—
Repayments of mortgages and other loans payable	(119,165		)	(234,510		)	—			(119,165		)
Proceeds from credit facility and senior unsecured notes	1,260,300			2,130,000
Repayments of credit facility and senior unsecured notes	(2,259,608		)	(1,466,007		)
Proceeds from revolving credit facility and senior unsecured notes							1,072,800			700,000
Repayments of revolving credit facility and senior unsecured notes							(872,800		)	(1,664,308		)
Distributions to noncontrolling interests in other partnerships	(643		)	(1,280		)	(221		)	(197		)
Contributions from noncontrolling interests in other partnerships	—			9,400
Contributions from common unitholder	4,137,727			2,338,277			1,775,488			2,797,191
Distributions to common and preferred unitholders	(3,425,243		)	(3,297,066		)	(2,272,349		)	(2,136,728		)
Other obligations related to loan participations	59,150			25,000			10,000			76,500
Deferred loan costs and capitalized lease obligation	(4,298		)	(9,025		)	(4,314		)	(838		)
Net cash used in financing activities	(351,397		)	(205,193		)
Net increase in cash and cash equivalents	16,170			11,025
Net cash provided by (used in) financing activities							(41,396		)	(347,545		)
Net (decrease) increase in cash and cash equivalents							(8,952		)	23,117
Cash and cash equivalents at beginning of period	50,026			34,691			59,930			50,026
Cash and cash equivalents at end of period	$	66,196		$	45,716		$	50,978		$	73,143

Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Tenant improvements and capital expenditures payable	$	8,973		$	5,160		$	4,986		$	8,973
Deferred leasing payable	2,949			7,668			323			677
Change in fair value of hedge	208			13,909			2			200
Transfer to assets held for sale	—			22,494			173,918			—
Transfer to liabilities related to assets held for sale	—			94			149			—
Deconsolidation of a subsidiary	—			27,435
Issuance of SL Green common stock to a consolidated joint venture	—			10,000
Contribution of notes receivable from the common unit holder	—			90,000
Issuance of preferred units through a subsidiary	—			109,161
Contributions from a noncontrolling interest in other partnerships	—			22,278
Exchange of debt investment for equity in joint venture	68,581			—			—			68,581
Removal of fully depreciated commercial real estate properties	8,516			—			202			8,281
Settlement of related party receivable with SL Green common stock	90,000			—
Issuance of related party payable for SL Green common stock	23,808			—
Contributions from Common Unitholder							138,304			—
Deconsolidation of a subsidiary							3,520			—
Proceeds from sale held in restricted cash							38,166			—

The accompanying notes are an integral part of these consolidated financial statements.

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Reckson Operating Partnership, L.P.

Notes to Consolidated Financial Statements

~~September~~June 30, ~~2016~~2017

(unaudited)

1. Organization and Basis of Presentation

Reckson Operating Partnership, L.P., or ROP, commenced operations on June 2, 1995. The sole general partner of ROP is Wyoming Acquisition GP LLC., or WAGP, a wholly-owned subsidiary of SL Green Operating Partnership, L.P., or the Operating Partnership. The sole limited partner of ROP is the Operating Partnership. The Operating Partnership is ~~95.71%~~95.57% owned by SL Green Realty Corp., or SL Green, as of ~~September~~June 30, ~~2016.~~2017. SL Green is a self-administered and self-managed real estate investment trust, and is the sole managing general partner of the Operating Partnership. Unless the context requires otherwise, all references to "we," "our," "us" and the "Company" means ROP and all entities owned or controlled by ROP.

ROP is engaged in the acquisition, ownership, management and operation of commercial and residential real estate properties, principally office properties, and also owns land for future development, located in New York City, Westchester County, Connecticut and New Jersey, which collectively is also known as the New York Metropolitan area.

In 2015, SL Green transferred two properties and SL Green's tenancy in common interest in a fee interest with a total value of $395.0 million to ROP. Additionally, in 2015, SL Green transferred one entity that held debt investments and financing receivables with an aggregate carrying value of $1.7 billion to ROP. These transfers were made to further diversify ROP's portfolio. Under the business combinations guidance (Accounting Standard Codification, or ASC, 805-50), these transfers were determined to be transfers of businesses between the indirect parent company and its wholly-owned subsidiary. As such, the assets and liabilities of the properties were transferred at their carrying values and were recorded as of the beginning of the current reporting period as though the assets and liabilities had been transferred at that date. The financial statements and financial information presented for all prior periods have been retrospectively adjusted to furnish comparative information.

As of ~~September~~June 30, ~~2016,~~2017, we owned the following interests in properties in the New York Metropolitan area, primarily in midtown Manhattan. Our investments in the New York Metropolitan area also include investments in Brooklyn, Westchester County, Connecticut and New Jersey, which are collectively known as the Suburban properties:


Location	Type	Number of Properties	Approximate Square Feet (unaudited)	Weighted Average Occupancy⁽¹⁾ (unaudited)		Type	Number of Properties	Approximate Square Feet (unaudited)	Weighted Average Occupancy⁽¹⁾ (unaudited)
Commercial:
Manhattan	Office	16	8,463,245	96.6	%	Office	16	8,463,245	95.7	%
						Retail⁽²⁾⁽³⁾	5	364,816	98.0	%
	Retail⁽²⁾⁽³⁾	5	352,892	97.6	%	Development/Redevelopment⁽⁴⁾	1	9,200	—	%
	Fee Interest	2	197,654	100.0	%	Fee Interest	1	176,530	100.0	%
		23	9,013,791	96.7	%		23	9,013,791	95.8	%
Suburban	Office	19	3,287,800	82.6	%	Office⁽⁵⁾	17	3,071,000	76.5	%
	Retail	1	52,000	100.0	%	Retail	1	52,000	100.0	%
		20	3,339,800	82.9	%		18	3,123,000	76.9	%
Total commercial properties		43	12,353,591	93.0	%		41	12,136,791	91.0	%
Residential:
Manhattan	Residential⁽²⁾	—	222,855	94.0	%	Residential⁽²⁾	—	222,855	91.9	%
Total portfolio		43	12,576,446	93.0	%		41	12,359,646	91.0	%


(1)	The weighted average occupancy for commercial properties represents the total ~~leased~~occupied square feet divided by total ~~acquisition~~ square ~~footage.~~footage at acquisition. The weighted average occupancy for residential properties represents the total occupied units divided by total available units.

(2)

As of ~~September~~June 30, ~~2016,~~2017, we owned a building at 315 West 33rd Street, also known as The Olivia, that was comprised of approximately 270,132 square feet (unaudited) of retail space and approximately 222,855 square feet (unaudited) of residential space. For the purpose of this report, we have included ~~the~~this building in the number of retail properties ~~count~~we own. However, we have included only the retail square footage in the retail approximate square footage, and have ~~bifurcated~~listed the balance of the square footage ~~into the retail and~~as residential ~~components.~~square footage.


(3)	Includes two unconsolidated joint venture retail properties at 131-137 Spring Street comprised of approximately 68,342 square feet


(4)	Includes one unconsolidated joint venture retail property at 102 Greene Street comprised of approximately 9,200 square feet.


(5)	Includes the properties at 680-750 Washington Boulevard, in Stamford, Connecticut, also known as Stamford Towers and 125 Chubb Avenue in Lyndhurst, New Jersey, which are classified as held for sale at June 30, 2017.

As of ~~September~~June 30, ~~2016,~~2017, we held debt and preferred equity investments with a book value of ~~$1.8~~$2.1 billion, including ~~$0.3~~$0.1 billion of debt and preferred equity investments and other financing receivables that are included in other balance sheet line ~~items.~~items other than the Debt and Preferred Equity Investments line item.

Net income attributable to ROP common unitholders for the three months ended June 30, 2017 includes $18.8 million relating to an adjustment of net income attributable to noncontrolling interests for the three months ended March 31, 2017. The noncash correction has no impact on net income for the three months ended June 30, 2017 or net income attributable to ROP common unitholders for the six months ended June 30, 2017.

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Reckson Operation Partnership, L.P.

Notes to Consolidated Financial Statements (cont.)

June 30, 2017

(unaudited)

Basis of Quarterly Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally

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~~Reckson Operation Partnership, L.P.~~

~~Notes to Consolidated Financial Statements (cont.)~~

~~September 30, 2016~~

~~(unaudited)~~

accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for the fair presentation of the financial position of the Company at ~~September~~June 30, ~~2016~~2017 and the results of operations for the periods presented have been included. The operating results for the period presented are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2016.~~2017. These financial statements should be read in conjunction with the financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016.

The consolidated balance sheet at December 31, ~~2015~~2016 has been derived from the audited financial statements as of that date but do not include all the information and footnotes required by accounting ~~principals~~principles generally accepted in the United States for complete financial statements.

Subsequent Events

In August 2017, we entered into an agreement to sell 16 Court Street in Brooklyn, NY, for a gross sales price of $171.0 million. The transaction is expected to close during the fourth quarter of 2017.

2. Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include our accounts and those of our subsidiaries, which are wholly-owned or controlled by us. Entities which we do not control through our voting interest and entities which are variable interest entities, but where we are not the primary beneficiary, are accounted for under the equity method. See Note 5, "Debt and Preferred Equity ~~Investments." ROP's investments~~Investments" and Note 6, "Investments in ~~majority-owned and controlled real estate joint ventures are reflected in the financial statements on a consolidated basis with a reduction for the noncontrolling partners' interests.~~Unconsolidated Joint Ventures." All significant intercompany balances and transactions have been eliminated.

We consolidate a variable interest entity, or VIE, in which we are considered the primary beneficiary. The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. Included in commercial real estate properties on our consolidated balance sheets as of September 30, 2016 and December 31, 2015 are $1.4 billion and $0.3 billion, respectively, related to our consolidated VIEs. Included in mortgages and other loans payable on our consolidated balance sheets as of September 30, 2016 and December 31, 2015 are $493.8 million and none, respectively, collateralized by the real estate assets of the related consolidated VIEs.

A noncontrolling interest in a consolidated subsidiary is defined as the portion of the equity (net assets) in a subsidiary not attributable, directly or indirectly, to us. Noncontrolling interests are required to be presented as a separate component of capital in the consolidated balance sheet and the presentation of net income is modified to present earnings and other comprehensive income attributed to controlling and noncontrolling interests.

We assess the accounting treatment for each joint venture and debt and preferred equity investment. This assessment includes a review of each joint venture or limited liability company agreement to determine which party has what rights and whether those rights are protective or participating. For all VIEs, we review such agreements in order to determine which party has the power to direct the activities that most significantly impact the entity's economic performance. In situations where we and our partner approve, among other things, the annual budget, receive a detailed monthly reporting package, meet on a quarterly basis to review the results of the joint venture, review and approve the joint venture's tax return before filing, and approve all leases that cover more than a nominal amount of space relative to the total rentable space at each property, we do not consolidate the joint venture as we consider these to be substantive participation rights that result in shared power of the activities that most significantly impact the performance of the joint venture. Our joint venture agreements typically contain certain protective rights such as requiring partner approval to sell, finance or refinance the property and the payment of capital expenditures and operating expenditures outside of the approved budget or operating plan.

Investment in Commercial Real Estate Properties

On a periodic basis, we assess whether there are any indications that the value of our real estate properties may be other than temporarily impaired or that their carrying value may not be recoverable. A property's value is considered impaired if management's estimate of the aggregate future cash flows (undiscounted) to be generated by the property is less than the carrying value of the property. To the extent impairment has occurred, the loss will be measured as the excess of the carrying amount of the property over the calculated fair value of the property.

We also evaluate our real estate properties for potential impairment when a real estate property has been classified as held for sale. Real estate assets held for sale are valued at the lower of either their carrying value or fair value less costs to sell. We do not believe that there were any indicators of impairment at any of our consolidated properties at ~~September~~June 30, ~~2016.~~2017, except for 125 Chubb Avenue in Lyndhurst, New Jersey, and Stamford Towers, for which we recorded aggregate depreciable real estate reserves of $29.1 million and $70.7 million for the three and six months ended June 30, 2017, respectively. See Note 4, "Property Dispositions".

We allocate the purchase price of real estate to land and building (inclusive of tenant improvements) and, if determined to be material, intangibles, such as the value of ~~the~~ above- and below-market leases and origination costs associated with the in-place

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~~Reckson Operation Partnership, L.P.~~

~~Notes to Consolidated Financial Statements (cont.)~~

~~September 30, 2016~~

~~(unaudited)~~

leases. We depreciate the amount allocated to building (inclusive of tenant improvements) over their estimated useful lives, which generally range from three to 40 ~~years~~.years. We amortize the amount allocated to the above- and below-market leases over the remaining term of the associated lease, which generally range from one to 14 years, and record it as either an increase (in the case of below-market leases) or a decrease (in the case of above-market leases) to rental income. We amortize the amount allocated to the values associated with in-place leases over the expected term of the associated lease, which generally ranges from one to 14 ~~years~~.years. If a tenant vacates its space prior to the contractual termination of the lease and no rental payments are being made on the lease, any unamortized balance of the related intangible will be written off. The tenant improvements and origination costs are amortized as an expense over the remaining life of the lease (or charged against earnings if the lease is terminated prior to its contractual expiration date). We assess fair value of the leases based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known trends, and market/economic conditions that may affect the property. To the extent acquired

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Reckson Operation Partnership, L.P.

Notes to Consolidated Financial Statements (cont.)

June 30, 2017

(unaudited)

leases contain fixed rate renewal options that are below-market and determined to be material, we amortize such below-market lease value into rental income over the renewal period.

We recognized ~~an increase of $8.1~~$4.2 million and ~~$15.9~~$8.4 million inof rental revenue for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016, respectively, for the amortization of aggregate below-market leases in excess of above-market leases~~2017, and ~~a reduction in lease origination costs, resulting from the allocation of the purchase price of the applicable properties. We recognized an increase of $8.3~~$3.8 million and ~~$20.9~~$7.8 million inof rental revenue for the three and ~~nine~~six months ended ~~September~~June 30, ~~2015, respectively,~~2016, for the amortization of aggregate below-market leases in excess of above-market leases and a reduction in lease origination costs, resulting from the allocation of the purchase price of the applicable properties.

The following summarizes our identified intangible assets (acquired above-market leases and in-place leases) and intangible liabilities (acquired below-market leases) as of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015~~2016 (in thousands):


	September 30, 2016			December 31, 2015			June 30, 2017			December 31, 2016
Identified intangible assets (included in other assets):
Gross amount	$	311,830		$	307,824		$	299,816		$	311,830
Accumulated amortization	(248,463		)	(235,040		)	(248,938		)	(253,064		)
Net	$	63,367		$	72,784
Net⁽¹⁾							$	50,878		$	58,766
Identified intangible liabilities (included in deferred revenue):
Gross amount	$	524,793		$	523,228		$	512,258		$	524,793
Accumulated amortization	(362,197		)	(346,857		)	(368,807		)	(368,738		)
Net	$	162,596		$	176,371
Net⁽¹⁾							$	143,451		$	156,055


(1)	As of June 30, 2017 and December 31, 2016, $0.2 million and none, respectively and $0.1 million and none, respectively, of net intangible assets and net intangible liabilities, were reclassified to assets held for sale and liabilities related to assets held for sale.

Fair Value Measurements

See Note 12, "Fair Value Measurements."

Investments in Unconsolidated Joint Ventures

We assess our investments in unconsolidated joint ventures for recoverability, and if it is determined that a loss in value of the investment is other than temporary, we write down the investment to its fair value. We evaluate our equity investments for impairment based on the joint ventures' projected discounted cash flows. We do not believe that the values of any of our equity investments were impaired at ~~September~~June 30, ~~2016.~~

We may originate loans for real estate acquisition, development and construction, where we expect to receive some or all of the residual profit from such projects. When the risk and rewards of these arrangements are essentially the same as an investor or joint venture partner, we account for these arrangements as real estate investments under the equity method of accounting for investments. Otherwise, we account for these arrangements consistent with our loan accounting for our debt and preferred equity investments.

~~Revenue Recognition~~

Rental revenue is recognized on a straight-line basis over the term of the lease. Rental revenue recognition commences when the tenant takes possession or controls the physical use of the leased space. In order for the tenant to take possession, the leased space must be substantially ready for its intended use. To determine whether the leased space is substantially ready for its intended use, management evaluates whether we are or the tenant is the owner of tenant improvements for accounting purposes. When management concludes that we are the owner of tenant improvements, rental revenue recognition begins when the tenant takes

~~Table of Contents~~

~~Reckson Operation Partnership, L.P.~~

~~Notes to Consolidated Financial Statements (cont.)~~

~~September 30, 2016~~

~~(unaudited)~~

possession of the finished space, which is when such tenant improvements are substantially complete. In certain instances, when management concludes that we are not the owner (the tenant is the owner) of tenant improvements, rental revenue recognition begins when the tenant takes possession of or controls the space. When management concludes that we are the owner of tenant improvements for accounting purposes, we record amounts funded to construct the tenant improvements as a capital asset. For these tenant improvements, we record amounts reimbursed by tenants as a reduction of the capital asset. When management concludes that the tenant is the owner of tenant improvements for accounting purposes, we record our contribution towards those improvements as a lease incentive, which is included in deferred costs, net on our consolidated balance sheets and amortized as a reduction to rental revenue on a straight-line basis over the term of the lease. The excess of rents recognized over amounts contractually due pursuant to the underlying leases are included in deferred rents receivable on the consolidated balance sheets. We establish, on a current basis, an allowance for future potential tenant credit losses, which may occur against this account. The balance reflected on the consolidated balance sheets is net of such allowance.

In addition to base rent, our tenants also generally will pay their pro rata share of increases in real estate taxes and operating expenses for the building over a base year. In some leases, in lieu of paying additional rent based upon increases in building operating expenses, the tenant will pay additional rent based upon increases in the wage rate paid to porters over the porters' wage rate in effect during a base year or increases in the consumer price index over the index value in effect during a base year. In addition, many of our leases contain fixed percentage increases over the base rent to cover escalations. Electricity is most often supplied by the landlord either on a sub-metered basis, or rent inclusion basis (i.e., a fixed fee is included in the rent for electricity, which amount may increase based upon increases in electricity rates or increases in electrical usage by the tenant). Base building services other than electricity (such as heat, air conditioning and freight elevator service during business hours, and base building cleaning) are typically provided at no additional cost, with the tenant paying additional rent only for services which exceed base building services or for services which are provided outside normal business hours. These escalations are based on actual expenses incurred in the prior calendar year. If the expenses in the current year are different from those in the prior year, then during the current year, the escalations will be adjusted to reflect the actual expenses for the current year.

We record a gain on sale of real estate when title is conveyed to the buyer, subject to the buyer's financial commitment being sufficient to provide economic substance to the sale and provided that we have no substantial economic involvement with the buyer.

Interest income on debt and preferred equity investments is accrued based on the contractual terms of the instruments and when, in the opinion of management, it is deemed collectible. Some debt and preferred equity investments provide for accrual of interest at specified rates, which differ from current payment terms. Interest is recognized on such loans at the accrual rate subject to management's determination that accrued interest is ultimately collectible, based on the underlying collateral and operations of the borrower. If management cannot make this determination, interest income above the current pay rate is recognized only upon actual receipt.

Deferred origination fees, original issue discounts and loan origination costs, if any, are recognized as an adjustment to the interest income over the terms of the related investments using the effective interest method. Fees received in connection with loan commitments are also deferred until the loan is funded and are then recognized over the term of the loan as an adjustment to yield. Discounts or premiums associated with the purchase of loans are amortized or accreted into interest income as a yield adjustment on the effective interest method based on expected cashflows through the expected maturity date of the related investment. If we purchase a debt or preferred equity investment at a discount, intend to hold it until maturity and expect to recover the full value of the investment, we accrete the discount into income as an adjustment to yield over the term of the investment. If we purchase a debt or preferred equity investment at a discount with the intention of foreclosing on the collateral, we do not accrete the discount. For debt investments acquired at a discount for credit quality, the difference between contractual cash flows and expected cash flows at acquisition is not accreted. Anticipated exit fees, the collection of which is expected, are also recognized over the term of the loan as an adjustment to yield.

~~Debt and preferred equity investments are placed on a non-accrual status at the earlier of the date at which payments become~~ ~~90 days~~ past due or when, in the opinion of management, a full recovery of interest income becomes doubtful. Interest income recognition on any non-accrual debt or preferred equity investment is resumed when such non-accrual debt or preferred equity investment becomes contractually current and performance is demonstrated to be resumed. Interest is recorded as income on impaired loans only to the extent cash is received.

We may syndicate a portion of the loans that we originate or sell the loans individually. When a transaction meets the criteria for sale accounting, we derecognize the loan sold and recognize gain or loss based on the difference between the sales price and the carrying value of the loan sold. Any related unamortized deferred origination fees, original issue discounts, loan origination costs, discounts or premiums at the time of sale are recognized as an adjustment to the gain or loss on sale, which is included in

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~~Reckson Operation Partnership, L.P.~~

~~Notes to Consolidated Financial Statements (cont.)~~

~~September 30, 2016~~

~~(unaudited)~~

~~investment income on the consolidated statement of operations. Any fees received at the time of sale or syndication are recognized as part of investment income.~~2017.

Reserve for Possible Credit Losses

The expense for possible credit losses in connection with debt and preferred equity investments is the charge to earnings to increase the allowance for possible credit losses to the level that we estimate to be adequate, based on Level 3 data (as described below), considering delinquencies, loss experience and collateral quality. Other factors considered include geographic trends, product diversification, the size of the portfolio and current economic conditions. Based upon these factors, we establish a provision for possible credit ~~losses~~loss on each individual investment. When it is probable that we will be unable to collect all amounts contractually due, the investment is considered impaired.

Where impairment is indicated on an investment that is held to maturity, a valuation allowance is measured based upon the excess of the recorded investment amount over the net fair value of the collateral. Any deficiency between the carrying amount of an asset and the calculated value of the collateral is charged to expense. We continue to assess or adjust our estimates based on circumstances of a loan and the underlying collateral. If ~~the~~ additional information ~~obtained~~ reflects increased recovery of our investment, we will adjust our reserves accordingly. There were no loan reserves recorded during the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015.~~

Debt and preferred equity investments held for sale are carried at the lower of cost or fair market value using available market information obtained through consultation with dealers or other originators of such investments as well as discounted cash flow models based on Level 3 data pursuant to ASC 820-10. As circumstances change, management may conclude not to sell an investment designated as held for sale. In such situations, the investment will be reclassified at its net carrying value to debt and preferred equity investments held to maturity. For these reclassified investments, the difference between the current carrying value and the expected cash to be collected at maturity will be accreted into income over the remaining term of the investment.2016.

Income Taxes

ROP is a ~~partnership~~disregarded entity of SL Green Operating Partnership, L.P. for federal income tax purposes, and, as a result, all income and losses of ~~the partnership~~ROP are ~~allocated to the partners for inclusion in their respective~~considered income ~~tax returns.~~and losses of SL Green Operating Partnership, L. P. No provision has been made for income taxes in the consolidated financial statements since such taxes, if any, are the responsibility of the individual ~~partners.~~partners of SL Green Operating Partnership, L.P.

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Reckson Operation Partnership, L.P.

Notes to Consolidated Financial Statements (cont.)

June 30, 2017

(unaudited)

Shares Contributed by Parent Company

We present shares of SL Green common stock as a ~~contra equity~~contra-equity account in our financial statements.

Use of Estimates

The preparation of financial statements in conformity with ~~U.S. GAAP~~accounting principles generally accepted in the United States 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.

Concentrations of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash investments, debt and preferred equity investments and accounts receivable. We place our cash investments ~~in excess of insured amounts~~ with high quality financial institutions. The collateral securing our debt and preferred equity investments is located in New York City. See Note 5, "Debt and Preferred Equity Investments." We perform ongoing credit evaluations of our tenants and require most tenants to provide security deposits or letters of credit. Though these security deposits and letters of credit are insufficient to meet the total value of a tenant's lease obligation, they are a measure of good faith and a source of funds to offset the economic costs associated with lost ~~rent~~revenue and the costs associated with re-tenanting a space. ~~Although the~~

The properties in our real estate portfolio are primarily located in ~~Manhattan, we~~Manhattan. We also have properties located in Brooklyn, Westchester County, Connecticut and New Jersey. The tenants located in our buildings operate in various industries. No tenant in ~~the~~our portfolio accounted for more than 5.0% of our share of annualized cash rent, including our share of joint venture annualized ~~cash~~ rent, at ~~September~~June 30, ~~2016.~~2017. For the three months ended ~~September~~June 30, ~~2016, 13.3%~~2017, 13.6%, ~~12.6%~~8.9%, ~~8.2%~~7.4% 7.1%, ~~6.5%~~6.9%, ~~6.3%~~6.1%, ~~5.9%~~6.1%, ~~5.7%~~ and ~~5.7%~~5.8% of our share of cash rent, including our share of joint venture annualized ~~cash~~ rent was attributable to ~~919 Third Avenue,~~ 1185 Avenue of the Americas, 625 Madison Avenue, 919 Third Avenue, 750 Third Avenue, 810 Seventh Avenue, 125 Park Avenue, 555 West 57th Street. and 1350 Avenue of the Americas, ~~555 West 57~~^th ~~Street and 125 Park Avenue~~ respectively. ~~Annualized~~Our share of annualized cash rent for all other ~~consolidated~~ properties was below 5.0%.

Reclassification

Certain prior year balances have been reclassified to conform to our current year presentation.

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~~Reckson Operation Partnership, L.P.~~

~~Notes to Consolidated Financial Statements (cont.)~~

~~September 30, 2016~~

~~(unaudited)~~

Accounting Standards Updates

In May 2017, the FASB issued Accounting Standards Update (ASU) No. 2017-09, Compensation - Stock Compensation (Topic 718), Scope of Modification Accounting. The guidance clarifies the changes to the terms or conditions of a share-based payment award that require an entity to apply modification accounting in Topic 718. The guidance is effective for fiscal years beginning after December 15, 2017 and early adoption is permitted. The Company has not yet adopted the guidance.

In February 2017, the FASB issued Accounting Standards Update (ASU) No. 2017-05 to clarify the scope of Subtopic 610-20 as well as provide guidance on accounting for partial sales of nonfinancial assets. Subtopic 610-20 was issued in May 2014 as part of ASU 2014-09. The Company anticipates adopting this guidance January 1, 2018, and applying the cumulative-effect adoption method. The Company is currently evaluating the impact of adopting this new accounting standard on the Company’s consolidated financial statements.

In January, 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business The guidance clarifies the definition of a business and provides guidance to assist with determining whether transactions should be accounted for as acquisitions of assets or businesses. The main provision is that an acquiree is not a business if substantially all of the fair value of the gross assets is concentrated in a single identifiable asset or group of assets. The Company adopted the guidance on the issuance date effective January 5, 2017. The Company expects that most of our real estate acquisitions will be considered asset acquisitions under the new guidance and that transaction costs will be capitalized to the investment basis which is then subject to a purchase price allocation based on relative fair value.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The guidance will require entities to show the changes on the total cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, entities will no longer present transfers between these items on the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The Company has not yet adopted this new guidance and is currently evaluating the impact of adopting this new accounting standard on the Company’s consolidated financial statements.

In August 2016, the FASB issued ~~Accounting Standards Update (ASU)~~ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The ASU provides final guidance on eight cash flow issues, including debt prepayment or debt

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Reckson Operation Partnership, L.P.

Notes to Consolidated Financial Statements (cont.)

June 30, 2017

(unaudited)

extinguishment costs, contingent consideration payments made after a business combination, distributions received from equity method investees, separately identifiable cash flows and application of the predominance principle, and others. The amendments in the ASU are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. ~~Early adoption is permitted, including adoption in an interim period.~~ The Company ~~has not yet~~ adopted ~~this new~~the guidance effective January 1, 2017 and ~~is currently evaluating the~~there was no impact ~~of adopting this new accounting standard~~ on the Company’s consolidated financial statements.

In June 2016, the FASB issued ~~Accounting Standards Update (ASU)~~ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The guidance changes how entities will measure credit losses for most financial assets and certain other instruments that ~~aren’t~~are not measured at fair value through net income. The guidance replaces the current ‘incurred loss’ model with an ‘expected loss’ approach. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted after December 2018. The Company has not yet adopted this new guidance and is currently evaluating the impact of adopting this new accounting standard on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The guidance simplifies the accounting for share-based payment award transactions including: income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted the guidance effective January 1, 2017 and there was no material impact on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU 2016-07, Investments Equity Method and Joint Ventures (Topic 323). The guidance eliminates the requirement that an entity retroactively adopt the equity method of accounting if an investment qualifies for use of the equity method as a result of an increase in the level of ownership or degree of influence. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. The Company adopted the guidance is effective ~~for all entities for fiscal years beginning after 15 December 2016~~January 1, 2017 and ~~interim periods within those years. Early adoption is permitted in any interim or annual period. The Company has not yet adopted this new guidance and is currently evaluating the~~there was no impact ~~of adopting this new accounting standard~~ on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases. The guidance requires lessees to recognize lease assets and lease liabilities for those leases classified as operating leases under the previous standard. Depending on the lease classification, lessees will recognize expense based on the effective interest method for finance leases or on a straight-line basis for operating leases. The accounting applied by a lessor is largely unchanged from that applied under the previous standard. One of the impacts on the Company will be the presentation and disclosure in the financial statements of non-lease components such as charges to tenants for a building’s operating expenses. The ~~Guidance~~non-lease components will be presented separately from the lease components in both the Consolidated Statements of Operations and Consolidated Balance Sheets. Another impact is the measurement and presentation of ground leases under which the Company is lessee. The Company is required to record a liability for the obligation to make payments under the lease and an asset for the right to use the underlying asset during the lease term and will also apply the new expense recognition requirements given the lease classification. The Company is currently quantifying these impacts. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company ~~has not yet adopted this new guidance and is currently evaluating the impact of~~anticipates adopting this ~~new accounting standard on~~guidance January 1, 2019 and will apply the ~~Company’s consolidated financial statements.~~modified retrospective approach.

In January 2016, the FASB issued ASU 2016-01 ~~(ASU825-10)~~(Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities. The guidance requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and to record changes in instruments-specific credit risk for financial liabilities measured under the fair value option in other comprehensive income. The guidance is effective for fiscal years beginning after December 15, 2017, and for interim periods therein. The Company has not yet adopted this new guidance and is currently evaluating the impact of adopting this new accounting standard on the Company’s consolidated financial statements.

In April 2015, the FASB issued final guidance to simplify the presentation of debt issuance costs by requiring debt issuance costs to be presented as a deduction from the corresponding debt liability (ASU 2015-03). The guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The Company adopted the guidance effective January 1, 2016. Accordingly, as of September 30, 2016 and December 31, 2015, $24.1 million and $25.4 million, respectively of deferred debt issuance costs, net of amortization are presented as a direct reduction within Mortgages and other loans payable, Revolving credit facility, Term loan and senior unsecured notes on the Company's consolidated balance sheets.

In February 2015, the FASB issued guidance that amends the current consolidation guidance, including introducing a separate consolidation analysis specific to limited partnerships and other similar entities (ASU 2015-02). Under this analysis, limited partnerships and other similar entities will be considered a VIE unless the limited partners hold substantive kick-out rights or participating rights. The Company adopted the guidance effective January 1, 2016. Under the revised guidance, certain entities, including the Operating Partnership, now qualify as variable interest entities while some of our entities originally classified as variable interest entities no longer meet the criteria. The change in designation did not have a material impact on our consolidated financial statements and did not change the consolidation conclusion on these entities.

~~Table of Contents~~

~~Reckson Operation Partnership, L.P.~~

~~Notes to Consolidated Financial Statements (cont.)~~

~~September 30, 2016~~

~~(unaudited)~~

In May 2014, the FASB issued a new comprehensive revenue recognition guidance which requires us to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods and services (ASU 2014-09). The guidance also requires enhanced disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized.

In March 2016, the FASB issued implementation guidance which clarifies principal versus agent considerations in reporting revenue gross versus net (ASU 2016-08).

In April 2016, the FASB ~~issued implementation guidance which clarifies the identification of performance obligations (ASU 2016-10).~~

~~In April 2016, the FASB~~ amended its new revenue recognition guidance on identifying performance obligations to allow entities to disregard items that are immaterial and clarify when a good or service is separately identifiable (ASU 2016-10).

Table of Contents

Reckson Operation Partnership, L.P.

Notes to Consolidated Financial Statements (cont.)

June 30, 2017

(unaudited)

In May 2016, the FASB issued implementation guidance relating to transition, collectability, noncash consideration and presentation matters (ASU 2016-12).

These ASUs are effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted but not before interim and annual reporting periods beginning after December 15, 2016. The new guidance can be applied either retrospectively to each prior reporting period presented, or as a cumulative-effect adjustment as of the date of adoption. The Company ~~has not yet adopted~~anticipates adopting this guidance January 1, 2018, and applying the cumulative-effect adoption method. Since the Company’s revenue is ~~currently evaluating~~related to leasing activities, the ~~new~~adoption of this guidance ~~to determine~~will not have a material impact on the ~~impact it may have on our~~ consolidated financial statements.

3. Property ~~Acquisition~~Acquisitions

WeDuring the six months ended June 30, 2017, we did not acquire any properties ~~during the three or nine months ended September 30, 2016.~~from a third party.

4. Properties Held for Sale and Property ~~Disposition~~Dispositions

Properties Held for Sale

During the three months ended June 30, 2017, we entered into agreements to sell the property at 125 Chubb Avenue in Lyndhurst, New Jersey, and to sell the properties at 680-750 Washington Boulevard in Stamford, Connecticut. We recorded a $26.6 million depreciable real estate reserve in connection with the sale of 125 Chubb Avenue, and a $2.1 million depreciable real estate reserve in connection with the sale of 680-750 Washington Boulevard. We closed on the sale of 680-750 Washington Boulevard in July 2017.

Property Dispositions

The following table summarizes the properties sold during the ~~nine~~six months ended ~~September~~June 30, ~~2016:~~2017:

Property

Disposition Date

Property Type

Approximate Square Feet

Sales Price⁽¹⁾

(in millions)

Loss on Sale

(in millions)

Disposition Date

Property Type

Approximate Square Feet

Sales Price⁽¹⁾

(in millions)

Gain (loss)⁽²⁾

(in millions)

7 International Drive

May 2016

Land

31 Acres

20.0

(6.9

)

520 White Plains Road

April 2017

Office

180,000

21.0

(14.6

)

102 Greene Street ⁽³⁾

April 2017

Retail

9,200

43.5

4.9


(1)	Sales price represents the gross sales price for a property or the gross asset valuation for interests in a property.


(2)	The gain on sale for 102 Greene Street is net of $0.9 million in employee compensation awards accrued in connection with the realization of the investment gain as a bonus to certain employees that were instrumental in realizing the gain on sale. Additionally, gain on sale amounts do not include adjustments for expenses recorded in subsequent periods.


(3)	In April, we closed on the sale of a 90% interest in 102 Greene Street and have subsequently accounted for our interest in the properties as an investment in unconsolidated joint ventures. See Note 6, "Investments in Unconsolidated Joint Ventures".

Table of Contents

Reckson Operation Partnership, L.P.

Notes to Consolidated Financial Statements (cont.)

June 30, 2017

(unaudited)

5. Debt and Preferred Equity Investments

During the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, our debt and preferred equity investments, net of discounts and deferred origination fees, increased ~~$590.4 million~~by $1.0 billion and ~~$464.9~~$255.0 million, respectively, due to originations, purchases, advances under future funding obligations, discount and fee amortization, and paid-in-kind interest, net of premium amortization. We recorded repayments, participations and sales of ~~$807.2~~$656.9 million and ~~$372.1~~$567.9 million during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively, which offset the increases in debt and preferred equity investments.

Certain participations in debt investments that were ~~participated out but~~sold or syndicated did not meet the conditions for sale accounting are included in other assets and other liabilities on the consolidated balance sheets.

Debt Investments

As of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, we held the following debt investments with an aggregate weighted average current yield of ~~9.29%~~9.73% at ~~September~~June 30, ~~2016~~2017 (in thousands):

Loan Type
September 30, 2016
Future Funding
Obligations

September 30, 2016 Senior
Financing

September 30, 2016
Carrying Value ⁽¹⁾

December 31, 2015
Carrying Value ⁽¹⁾

Maturity
Date ⁽²⁾
Fixed Rate Investments:
Jr. Mortgage Participation/Mezzanine Loan $ —
$ 1,109,000
$ 189,250
$ 104,661
March 2017
Mezzanine Loan ^(3a)
5,000
502,100
61,059
41,115
June 2017
Mortgage Loan ⁽⁴⁾
—
—
26,297
26,262
February 2019
Mortgage Loan —
—
414
513
August 2019

~~Table of Contents~~

~~Reckson Operation Partnership, L.P.~~

~~Notes to Consolidated Financial Statements (cont.)~~

~~September 30, 2016~~

~~(unaudited)~~


Loan Type	September 30, 2016 Future Funding Obligations		September 30, 2016 Senior Financing		September 30, 2016 Carrying Value ⁽¹⁾		December 31, 2015 Carrying Value ⁽¹⁾		Maturity Date ⁽²⁾	June 30, 2017 Future Funding Obligations		June 30, 2017 Senior Financing		June 30, 2017 Carrying Value ⁽¹⁾		December 31, 2016 Carrying Value ⁽¹⁾		Maturity Date ⁽²⁾
Mezzanine Loan	—		15,000		3,500		3,500		September 2021
Mezzanine Loan ^(3b)	—		88,944		12,691		19,936		November 2023
Mezzanine Loan ^(3c)	—		115,000		12,923		24,916		June 2024
Mezzanine Loan	—		95,000		30,000		30,000		January 2025
Mezzanine Loan ⁽⁵⁾	—		—		—		72,102
Mezzanine Loan ⁽⁶⁾	—		—		—		49,691
Jr. Mortgage Participation ⁽⁷⁾	—		—		—		49,000
Other ⁽⁷⁾⁽⁸⁾	—		—		—		23,510
Other ⁽⁷⁾⁽⁸⁾	—		—		—		66,183
Total fixed rate	$	5,000	$	1,925,044	$	336,134	$	511,389
Floating Rate Investments:
Fixed Rate Investments:
Mortgage/Jr. Mortgage Loan⁽³⁾										$	—	$	—	$	250,150	$	—	April 2017
Mortgage Loan⁽⁴⁾										—		—		26,338		26,311		February 2019
Mortgage Loan										—		—		311		380		August 2019
Mezzanine Loan^(5a)										—		1,160,000		199,533		—		March 2020
Mezzanine Loan	—		360,000		99,945		99,530		November 2016	—		15,000		3,500		3,500		September 2021
Mezzanine Loan	7,939		144,008		53,405		49,751		December 2016	—		147,000		24,905		—		April 2022
Mezzanine Loan	281		39,201		11,024		13,731		December 2016	—		87,724		12,696		12,692		November 2023
Mortgage/Mezzanine Loan ^(3d)	40,086		—		140,920		134,264		January 2017
Mezzanine Loan^(5b)										—		115,000		12,928		12,925		June 2024
Mezzanine Loan	1,127		118,949		28,834		28,551		January 2017	—		95,000		30,000		30,000		January 2025
Mezzanine Loan ^(3e)(9)	—		40,000		15,290		68,977		June 2017
Mezzanine Loan										—		340,000		15,000		15,000		November 2026
Mezzanine Loan										—		1,712,750		55,250		—		June 2027
Mezzanine Loan⁽⁶⁾										—		—		—		66,129
Jr. Mortgage Participation/Mezzanine Loan ⁽⁷⁾										—		—		—		193,422
Total fixed rate										$	—	$	3,672,474	$	630,611	$	360,359
Floating Rate Investments:
Mezzanine Loan⁽⁸⁾										—		40,000		15,442		15,369		September 2017
Mortgage/Mezzanine Loan	—		—		32,763		—		June 2017	—		—		16,989		16,960		September 2017
Mortgage/Mezzanine Loan	—		—		22,939		22,877		July 2017	1,361		—		22,602		20,423		October 2017
Mortgage/Mezzanine Loan	—		—		16,946		16,901		September 2017
Mortgage/Mezzanine Loan	4,038		—		19,834		19,282		October 2017
Mezzanine Loan^(5c)										—		85,000		15,273		15,141		December 2017
Mezzanine Loan^(5d)										—		65,000		14,773		14,656		December 2017
Mezzanine Loan^(5e)										795		—		15,105		15,051		December 2017
Mortgage/Mezzanine Loan⁽⁹⁾										—		125,000		29,934		29,998		January 2018
Mezzanine Loan	—		60,000		14,944		14,904		November 2017	—		40,000		19,947		19,913		April 2018
Mezzanine Loan ^(3f)	—		85,000		15,075		29,505		December 2017
Mezzanine Loan ^(3g)	—		65,000		14,598		28,563		December 2017
Mortgage/Mezzanine Loan ^(3h)	795		—		15,024		14,942		December 2017
Jr. Mortgage Participation	—		40,000		19,896		19,846		April 2018	—		175,000		34,903		34,844		April 2018
Mezzanine Loan	—		175,000		34,814		34,725		April 2018	523		20,523		10,898		10,863		August 2018
Mortgage/Mezzanine Loan ⁽¹⁰⁾	523		24,818		10,846		31,210		August 2018
Mortgage/Mezzanine Loan										—		—		19,889		19,840		August 2018
Mortgage Loan	—		—		19,815		—		August 2018	—		65,000		14,916		14,880		August 2018
Mezzanine Loan	—		65,000		14,862		—		August 2018	—		37,500		14,749		14,648		September 2018
Mezzanine Loan	—		—		14,599		—		September 2018	2,325		45,025		34,686		34,502		October 2018
Mezzanine Loan	2,325		45,025		34,411		—		October 2018	—		335,000		74,612		74,476		November 2018
Mezzanine Loan	—		33,000		26,831		26,777		December 2018	—		33,000		26,888		26,850		December 2018
Mezzanine Loan	4,097		156,383		55,264		52,774		December 2018
Mezzanine Loan	18,883		246,758		59,917		49,625		December 2018
Mezzanine Loan	6,383		16,383		5,387		—		January 2019
Mezzanine Loan	—		38,000		21,880		21,845		March 2019
Mezzanine Loan	—		265,000		24,677		—		April 2019
Mortgage/Jr. Mortgage Participation Loan	34,500		180,740		64,549		—		August 2019
Mezzanine Loan	2,500		187,500		37,307		—		September 2019
Mortgage/Mezzanine Loan	87,620		—		107,060		—		September 2019
Jr. Mortgage Participation/Mezzanine Loan	—		30,000		15,599		—		July 2021
Mortgage/Mezzanine Loan ⁽¹¹⁾	—		—		—		94,901

Table of Contents

Reckson Operation Partnership, L.P.

Notes to Consolidated Financial Statements (cont.)

~~September~~June 30, ~~2016~~2017

(unaudited)

Loan Type
September 30, 2016
Future Funding
Obligations

September 30, 2016 Senior
Financing

September 30, 2016
Carrying Value ⁽¹⁾

December 31, 2015
Carrying Value ⁽¹⁾

Maturity
Date ⁽²⁾
Jr. Mortgage Participation/Mezzanine Loan ⁽⁵⁾
—
—
—
20,510

Mezzanine Loan ⁽¹²⁾
—
—
—
22,625

Mezzanine Loan ⁽¹³⁾
—
—
—
74,700

Mezzanine Loan ⁽¹⁴⁾
—
—
—
66,398

Jr. Mortgage Participation/Mezzanine Loan ⁽⁷⁾
—
—
—
18,395

Mezzanine Loan ⁽¹⁵⁾
—
—
—
40,346

Total floating rate $ 211,097
$ 2,415,765
$ 1,069,255
$ 1,116,455

Total $ 216,097
$ 4,340,809
$ 1,405,389
$ 1,627,844



Loan Type	June 30, 2017 Future Funding Obligations		June 30, 2017 Senior Financing		June 30, 2017 Carrying Value ⁽¹⁾		December 31, 2016 Carrying Value ⁽¹⁾		Maturity Date ⁽²⁾
Mezzanine Loan	1,122		171,728		58,451		56,114		December 2018
Mezzanine Loan	10,758		279,563		68,437		63,137		December 2018
Mezzanine Loan	7,651		221,568		71,760		64,505		December 2018
Mezzanine Loan	—		45,000		12,138		12,104		January 2019
Mortgage/Mezzanine Loan	38,087		—		175,792		—		January 2019
Mezzanine Loan	7,277		19,733		6,588		5,410		January 2019
Mezzanine Loan	—		38,000		21,915		21,891		March 2019
Mezzanine Loan	513		172,604		36,655		—		April 2019
Mezzanine Loan	—		265,000		24,767		24,707		April 2019
Mortgage/Jr. Mortgage Participation Loan	31,628		188,664		67,655		65,554		August 2019
Mezzanine Loan	2,500		187,500		37,353		37,322		September 2019
Mortgage/Mezzanine Loan	64,691		—		130,067		111,819		September 2019
Mortgage/Mezzanine Loan	35,106		—		34,271		33,682		January 2020
Mezzanine Loan⁽¹⁰⁾	9,918		521,213		69,408		125,911		January 2020
Jr. Mortgage Participation/Mezzanine Loan	—		60,000		15,620		15,606		July 2021
Mortgage/ Mezzanine Loan⁽⁶⁾	—		—		—		32,847
Mortgage/Mezzanine Loan⁽⁶⁾	—		—		—		22,959
Mezzanine Loan⁽¹¹⁾	—		—		—		14,957
Mortgage/Mezzanine Loan⁽¹²⁾	—		—		—		145,239
Total floating rate	$	214,255	$	3,236,621	$	1,212,483	$	1,232,178
Total	$	214,255	$	6,909,095	$	1,843,094	$	1,592,537


(1)	Carrying value is net of discounts, premiums, original issue discounts and deferred origination fees.


(2)	Represents contractual maturity, excluding any unexercised extension options.

(3)

~~Carrying value is net~~These loans were purchased at par in April and May 2017 and were in maturity default at the time of acquisition. At June 30, 2017, $6.2 million of accrued interest on the ~~following amount that was participated out, which~~loan is included in other assets and other liabilities on the consolidated balance sheets as a result of the transfer not meeting the conditions for sale accounting: (a) $41.3 million, (b) $5.0 million, (c) $12.0 million, (d) $36.3 million, (e) $14.5 million, (f) $14.6 million, (g) $14.1 million, and (h) $5.1 million.assets.


(4)	In September 2014, we acquired a $26.4 million mortgage loan at a $0.2 million discount and a $5.7 million junior mortgage participation at a $5.7 million discount. The junior mortgage participation was a nonperforming loan at acquisition, ~~and~~ is currently on non-accrual ~~status.~~status and has no carrying value.


(5)	~~These loans~~Carrying value is net of the following amounts that were ~~repaid~~sold or syndicated, which are included in ~~July 2016~~other assets and other liabilities on the consolidated balance sheets as a result of the transfers not meeting the conditions for sale accounting: (a) $1.2 million, (b) $12.0 million, (c) $14.6 million, (d) $14.1 million, and (e) $5.1 million.


(6)	~~In April 2016, we closed on an option to acquire a 20% interest in the underlying asset at a previously agreed upon purchase option valuation, and our mezzanine~~This loan was ~~simultaneously repaid.~~repaid in June 2017.


(7)	~~These loans were~~This loan was repaid in March ~~2016.~~2017.


(8)	~~These loans were collateralized by defeasance securities.~~This loan was extended in June 2017.


(9)	~~In March 2016, the mortgage~~This loan was ~~sold.~~extended in January 2017.


(10)	~~In January 2016, the loans were modified. In March 2016, the mortgage~~$66.1 million of outstanding principal was ~~sold.~~syndicated in February 2017.


(11)	This loan was ~~repaid~~contributed to a joint venture in ~~September 2016.~~May 2017.


(12)	This loan was repaid in ~~June 2016.~~


~~(13)~~	~~This loan was repaid in May 2016.~~


~~(14)~~	In March 2016, we contributed our interest in the loan in exchange for a joint venture interest which is now accounted for under the equity method of accounting. It is included in unconsolidated joint ventures on the consolidated balance sheets.


~~(15)~~	~~This loan was repaid in February 2016.~~January 2017.

Table of Contents

Reckson Operation Partnership, L.P.

Notes to Consolidated Financial Statements (cont.)

June 30, 2017

(unaudited)

Preferred Equity Investments

As of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, we held the following preferred equity investments with an aggregate weighted average current yield of ~~7.32%~~6.41% at ~~September~~June 30, ~~2016~~2017 (in thousands):

Type September 30, 2016
Future Funding
Obligations September 30, 2016
Senior
Financing
September 30, 2016
Carrying Value ⁽¹⁾

December 31, 2015
Carrying Value ⁽¹⁾
Initial
Mandatory
Redemption
Preferred equity $ —
$ 71,486
$ 9,978
$ 9,967
March 2018
Preferred equity —
59,034
37,867
32,209
November 2018
$ —
$ 130,520
$ 47,845
$ 42,176



Type	June 30, 2017 Future Funding Obligations		June 30, 2017 Senior Financing		June 30, 2017 Carrying Value ⁽¹⁾		December 31, 2016 Carrying Value ⁽¹⁾		Mandatory Redemption ⁽²⁾
Preferred Equity	$	—	$	272,000	$	143,319	$	—	April 2021
Preferred Equity⁽³⁾	—		—		—		9,982
Preferred Equity⁽⁴⁾	—		—		—		37,893
Total	$	—	$	272,000	$	143,319	$	47,875


(1)	Carrying value is net of deferred origination fees.


(2)	Represents contractual maturity, excluding any unexercised extension options.


(3)	This investment was redeemed in May 2017.


(4)	This investment was redeemed in April 2017.

At ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, all debt and preferred equity investments were performing in accordance with the terms of the relevant investments, with the exception of a junior mortgage participation acquired in September 2014, which was acquired for zero and has a carrying value of ~~zero.~~zero, as further discussed in subnote 4 of the Debt Investments table above.

We have determined that we have one portfolio segment of financing receivables at ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 comprising commercial real estate which is primarily recorded in debt and preferred equity investments. Included in other assets is an additional amount of financing receivables totaling ~~$149.6~~$123.7 million and ~~$168.3~~$144.5 million at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively. No financing receivables were 90 days past due at ~~September~~June 30, ~~2016.~~2017.

~~Table of Contents~~

~~Reckson Operation Partnership, L.P.~~

~~Notes to Consolidated Financial Statements (cont.)~~

~~September 30, 2016~~

~~(unaudited)~~

6. Investments in Unconsolidated Joint Ventures

We have investments in several real estate joint ventures with various partners. As of ~~September~~June 30, ~~2016~~2017, none of our investments in unconsolidated joint ventures are VIEs. The table below provides general information on each of our joint ventures as of ~~September~~June 30, ~~2016:~~2017:


Property	Partner	Ownership Interest	Economic Interest	Approximate Square Feet	Acquisition Date	Acquisition Price ⁽¹⁾ (in thousands)		Partner	Ownership Interest ⁽¹⁾	Economic Interest⁽¹⁾	Unaudited Approximate Square Feet	Acquisition Date⁽²⁾	Acquisition Price⁽²⁾ (in thousands)
131-137 Spring Street	Invesco Real Estate	20.00%		68,342	August 2015	$	277,750	Invesco Real Estate	20.00%		68,342	August 2015	$	277,750
76 11th Avenue ⁽²⁾	Oxford/Vornado	33.33%	36.58%	764,000	March 2016	138,240
102 Greene ⁽³⁾								Private Investors	10.00%		9,200	April 2017	43,500
Mezzanine Loan ⁽⁴⁾								Private Investors	33.33%		—	May 2017	15,000


(1)	Ownership interest and economic interest represent the Company's interests in the joint venture as of June 30, 2017. Changes in ownership or economic interests, if any, within the current year are disclosed in the notes below.


(2)	Acquisition date and price ~~represents~~represent the date on which the Company initially acquired an interest in the joint venture and the actual or implied gross purchase price for the joint venture ~~which is~~on that date. Acquisition date and price are not adjusted for subsequent acquisitions or dispositions of ~~additional interests.~~interest.


~~(2)~~(3)	~~The~~In April 2017, the Company sold a 90% interest in 102 Greene Street resulting in deconsolidation of the property.

(4)

In May 2017, the Company contributed a mezzanine loan secured by a commercial property in midtown Manhattan to a joint venture ~~owns two mezzanine notes secured by interests~~and retained a 33.33% interest in the ~~entity~~venture. The carrying value is net of $10.0 million that ~~owns 76 11th Avenue. The difference between our ownership interest~~was sold, which is included in other assets and ~~our economic interest results from our right to 50%~~other liabilities on the consolidated balance sheets as a result of the ~~total exit fee while each of our partners is entitled to receive 25% of~~transfers not meeting the ~~total exit fee.~~conditions for sale accounting.

Acquisition, Development and Construction ~~Arrangement~~Arrangements

Based on the characteristics of the following arrangements, which are similar to those of an investment, combined with the expected residual profit of not greater than 50%, we have accounted for these debt and preferred equity investments under the equity method. As of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, the carrying value for acquisition, development and construction arrangements were as follows (in thousands):

Table of Contents

Reckson Operation Partnership, L.P.

Notes to Consolidated Financial Statements (cont.)

June 30, 2017

(unaudited)


Loan Type	September 30, 2016		December 31, 2015		Maturity Date	June 30, 2017		December 31, 2016		Maturity Date
Mezzanine Loan and Preferred Equity(1)	$	100,000	$	99,936	March 2017	$	100,000	$	100,000	March 2018
Mezzanine Loan(2)	24,119		—		July 2036 ⁽¹⁾	25,403		24,542		July 2036
	$	124,119	$	99,936		$	125,403	$	124,542


(1)	These loans were extended in February 2017.


(2)	The Company has the ability to convert this loan into an equity position starting in 2021 and the borrower is able to force this conversion in 2024.

Sale of Joint Venture ~~Interest~~Interests or ~~Property~~Properties

~~We did not sell any~~In May 2017, our investment in a joint venture ~~interest or property during~~that owned two mezzanine notes secured by interests in the ~~nine months ended~~ ~~September 30, 2016~~.entity that owns 76 11th Avenue was repaid after the joint venture received repayment of the underlying loans.

Joint Venture Mortgages and Other Loans Payable

We generally finance our joint ventures with non-recourse debt. ~~However, in~~In certain cases we ~~have provided~~may provide guarantees or master leases for tenant ~~space. These guarantees and master leases~~space, which terminate upon the satisfaction of specified circumstances or repayment of the underlying loans. The first mortgage notes and other loans payable collateralized by the respective joint venture properties and assignment of leases at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively, are as follows (amounts in thousands):


Property		Maturity Date	Interest Rate ⁽¹⁾		September 30, 2016			December 31, 2015				Economic Interest ⁽¹⁾		Maturity Date	Interest Rate ⁽²⁾		June 30, 2017			December 31, 2016
Floating Rate Debt:
131-137 Spring Street		August 2020	2.04	%	$	141,000		$	141,000			20.00	%	August 2020	2.56	%	$	141,000		$	141,000
Total joint venture mortgages and other loans payable	Total joint venture mortgages and other loans payable				$	141,000		$	141,000		Total joint venture mortgages and other loans payable						$	141,000		$	141,000
Deferred financing costs, net					(4,247		)	(5,077		)							(3,426		)	(3,970		)
Total joint venture mortgages and other loans payable, net	Total joint venture mortgages and other loans payable, net				$	136,753		$	135,923		Total joint venture mortgages and other loans payable, net						$	137,574		$	137,030


(1)	Economic interest represent the Company's interests in the joint venture as of June 30, 2017. Changes in ownership or economic interests, if any, within the current year are disclosed in the notes to the investment in unconsolidated joint ventures note above.


(2)	Effective weighted average interest rate for the three months ended ~~September~~June 30, ~~2016,~~2017, taking into account interest rate hedges in effect during the period.

The combined balance sheets for the unconsolidated joint ventures, at June 30, 2017 and December 31, 2016 are as follows (in thousands):



	June 30, 2017		December 31, 2016
Assets
Commercial real estate property, net	$	311,327	$	279,451
Debt and preferred equity investments, net	140,385		273,749
Other assets	15,766		18,922
Total assets	$	467,478	$	572,122
Liabilities and members' equity
Mortgages and other loans payable, net	$	137,574	$	137,030
Other liabilities	20,171		22,185
Members' equity	309,733		412,907
Total liabilities and members' equity	$	467,478	$	572,122
Company's investments in unconsolidated joint ventures	$	132,413	$	174,127

1617

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Reckson Operation Partnership, L.P.

Notes to Consolidated Financial Statements (cont.)

~~September~~June 30, ~~2016~~2017

(unaudited)

~~The combined balance sheets for the unconsolidated joint ventures, at September 30, 2016 and December 31, 2015 are as follows (in thousands):~~

September 30, 2016 December 31, 2015
Assets
Commercial real estate property, net $ 281,014
$ 285,689
Debt and preferred equity investments, net 270,831
99,936
Other assets 17,080
16,897
Total assets $ 568,925
$ 402,522
Liabilities and members' equity
Mortgages and other loans payable, net $ 136,753
$ 135,923
Other liabilities 23,080
25,462
Members' equity 409,092
241,137
Total liabilities and members' equity $ 568,925
$ 402,522
Company's investments in unconsolidated joint ventures $ 173,010
$ 100,192

The combined statements of operations for the unconsolidated joint ventures ~~from acquisition date through~~for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, are as follows (in thousands):


	Three Months Ended September 30,					Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2016			2015		2016		2015		2017		2016		2017		2016
Total revenues	$	3,707		$	6,316	$	27,590	$	10,608	$	8,347	$	16,946	$	19,594	$	23,883
Operating expenses	(175		)	380		1,003		386		243		804		454		1,178
Real estate taxes	33			530		881		530		318		565		632		848
Interest expense, net of interest income	37			421		2,144		421		909		1,409		1,734		2,107
Amortization of deferred financing costs	—			171		831		171		277		554		554		831
Transaction related costs	—			1,507		—		3,299
Depreciation and amortization	—			3,293		6,303		1,507		2,101		4,202		4,202		6,303
Total expenses	$	(105	)	$	6,302	$	11,162	$	6,314	$	3,848	$	7,534	$	7,576	$	11,267
Net income	$	3,812		$	14	$	16,428	$	4,294	$	4,499	$	9,412	$	12,018	$	12,616
Company's equity in net income from unconsolidated joint ventures	4,276			2,296		10,399		6,576		3,180		3,666		7,435		6,123

~~Table of Contents~~

~~Reckson Operation Partnership, L.P.~~

~~Notes to Consolidated Financial Statements (cont.)~~

~~September 30, 2016~~

~~(unaudited)~~

7. Mortgages and Other Loans Payable

The first mortgages and other loans payable collateralized by the respective properties and assignment of leases or debt investments at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively, were as follows (amounts in thousands):


Property	Maturity Date	Interest Rate ⁽¹⁾		September 30, 2016			December 31, 2015			Maturity Date	Interest Rate ⁽¹⁾		June 30, 2017			December 31, 2016
Fixed Rate Debt:
919 Third Avenue ⁽²⁾	June 2023	5.12	%	$	500,000		$	500,000		June 2023	5.12	%	$	500,000		$	500,000
315 West 33rd Street										February 2027	4.24	%	250,000			—
Floating Rate Debt:
Master Repurchase Agreement	July 2018	3.01	%	134,642			253,424
2016 Master Repurchase Agreement										July 2018	3.51	%	$	184,642		$	184,642
Total mortgages and other loans payable				$	634,642		$	753,424					$	934,642		$	684,642
Deferred financing costs, net of amortization				(8,503		)	(7,696		)				(13,466		)	(8,574		)
Total mortgages and other loans payable, net				$	626,139		$	745,728					$	921,176		$	676,068


(1)	Effective weighted average interest rate for the ~~three months~~quarter ended ~~September~~June 30, ~~2016.~~2017.


(2)	We own a 51.0% controlling interest in the consolidated joint venture that is the borrower on this loan.

At June 30, 2017 and December 31, 2016, the gross book value of the properties and debt and preferred equity investments collateralizing the mortgages and other loans payable, not including assets held for sale, was approximately $2.5 billion and $1.7 billion, respectively.

Master Repurchase ~~Agreement~~Agreements

The Company has entered into two Master Repurchase ~~Agreement,~~Agreements, or MRAs, known as the 2016 MRA ~~provides~~and 2017 MRA, which provide us with the ability to sell certain debt investments with a simultaneous agreement to repurchase the same at a certain date or on demand. This MRA has a maximum facility capacity of $300.0 million and bears interest ranging from 225 and 400 basis points over 30-day LIBOR depending on the pledged collateral. Since December 6, 2015, we have been required to pay monthly in arrears a 25 basis point fee on the excess of $150.0 million over the average daily balance during the period if the average daily balance is less than $150.0 million. We seek to mitigate risks associated with our repurchase agreement by managing the credit quality of our assets, early repayments, interest rate volatility, liquidity, and market value. The margin call provisions under our repurchase ~~facility~~facilities permit valuation adjustments based on capital markets activity, and are not limited to collateral-specific credit marks. To monitor credit risk associated with our debt investments, our asset management team regularly reviews our investment portfolio and is in contact with our borrowers in order to monitor the collateral and enforce our rights as necessary. The risk associated with potential margin calls is further mitigated by our ability to recollateralize the facility with additional assets from our portfolio of debt investments, our ability to satisfy margin calls with cash or cash equivalents and our access to additional liquidity through the 2012 credit facility, as defined below.

In June 2017, we entered into the 2017 MRA, with a maximum facility capacity of $300.0 million. The facility bears interest on a floating rate basis at a spread to 30-day LIBOR based on the pledged collateral and advance rate and has an initial one year term, with two one year extension options. At ~~September~~June 30, ~~2016 and December 31, 2015,~~2017, the ~~gross book~~facility had a carrying value of $(1.3) million, representing deferred financing costs presented within other liabilities.

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Reckson Operation Partnership, L.P.

Notes to Consolidated Financial Statements (cont.)

June 30, 2017

(unaudited)

In July 2016, we entered into a restated 2016 MRA, with a maximum facility capacity of $300.0 million. The facility bears interest ranging from 225 and 400 basis points over 30-day LIBOR depending on the ~~properties~~pledged collateral and ~~debt and preferred equity investments collateralizing~~has an initial two-year term, with a one year extension option. Since December 6, 2015, we have been required to pay monthly in arrears a 25 basis point fee on the ~~mortgages and other loans payable, not including assets held for sale, was approximately $1.6 billion and $2.0 billion, respectively.~~excess of $150.0 million over the average daily balance during the period when the average daily balance is less than $150.0 million.

8. Corporate Indebtedness

2012 Credit Facility

In August 2016, we entered into an amendment to the credit facility that was originally entered into by the Company in November 2012, referred to as the 2012 credit facility. As of ~~September~~June 30, ~~2016,~~2017, the 2012 credit facility, as amended, consisted of a $1.6 billion revolving credit facility and a $1.2 billion term loan, with a maturity date of March 29, 2019 and June 30, 2019, respectively. The revolving credit facility has an as-of-right extension to March 29, 2020. We also have an option, subject to customary conditions, to increase the capacity under the revolving credit facility to $3.0 billion at any time prior to the maturity date for the revolving credit facility without the consent of existing lenders, by obtaining additional commitments from our existing lenders and other financial institutions.

As of ~~September~~June 30, ~~2016,~~2017, the 2012 credit facility bore interest at a spread over LIBOR ranging from (i) 87.5 basis points to 155 basis points for loans under the revolving credit facility and (ii) 95 basis points to 190 basis points for loans under the term loan facility, in each case based on the credit rating assigned to the senior unsecured long term indebtedness of ROP.

At ~~September~~June 30, ~~2016,~~2017, the applicable spread was 125 basis points for the revolving credit facility and 140 basis points for the term loan facility. At ~~September~~June 30, ~~2016,~~2017, the effective interest rate was ~~1.73%~~2.27% for the revolving credit facility and ~~1.90%~~2.41% for the term loan facility. We are required to pay quarterly in arrears a 12.5 to 30 basis point facility fee on the total commitments under the revolving credit facility based on the credit rating assigned to the senior unsecured long term indebtedness of ROP. As of ~~September~~June 30, ~~2016,~~2017, the facility fee was 25 basis points.

~~Table of Contents~~

~~Reckson Operation Partnership, L.P.~~

~~Notes to Consolidated Financial Statements (cont.)~~

~~September 30, 2016~~

~~(unaudited)~~

As of ~~September~~June 30, ~~2016,~~2017, we had ~~$56.5~~$80.8 million of outstanding letters of credit, ~~zero~~$200.0 million drawn under the revolving credit facility and $1.2 billion outstanding under the term loan facility, with total undrawn capacity of ~~$1.5~~$1.3 billion under the 2012 credit facility. At ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, the revolving credit facility had a carrying value of ~~$(6.9)~~$195.1 million ~~representing deferred financing costs presented within other liabilities,~~ and ~~$985.1~~$(6.3) million, respectively, net of deferred financing costs. The December 31, 2016 carrying value represents deferred financing costs and is presented within other liabilities. At ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, the term loan facility had a carrying value of $1.2 billion and ~~$929.5 million,~~$1.2 billion, respectively, net of deferred financing costs.

~~We,~~ROP, SL Green, and the Operating Partnership are all borrowers jointly and severally obligated under the 2012 credit facility. None of SL Green's other subsidiaries are obligors under the 2012 credit facility.

The 2012 credit facility includes certain restrictions and covenants (see Restrictive Covenants below).

Senior Unsecured Notes

The following table sets forth our senior unsecured notes and other related disclosures as of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively, by scheduled maturity date (dollars in thousands):


Issuance	September 30, 2016 Unpaid Principal Balance		September 30, 2016 Accreted Balance			December 31, 2015 Accreted Balance			Coupon Rate ⁽¹⁾		Effective Rate		Term (in Years)	Maturity Date	June 30, 2017 Unpaid Principal Balance		June 30, 2017 Accreted Balance			December 31, 2016 Accreted Balance			Coupon Rate ⁽¹⁾		Effective Rate		Initial Term (in Years)	Maturity Date
August 5, 2011 ⁽²⁾	$	250,000	$	249,862		$	249,810		5.00	%	5.00	%	7	August 2018	$	250,000	$	249,916		$	249,880		5.00	%	5.00	%	7	August 2018
March 16, 2010 ⁽²⁾	250,000		250,000			250,000			7.75	%	7.75	%	10	March 2020	250,000		250,000			250,000			7.75	%	7.75	%	10	March 2020
November 15, 2012 ⁽²⁾	200,000		200,000			200,000			4.50	%	4.50	%	10	December 2022	200,000		200,000			200,000			4.50	%	4.50	%	10	December 2022
December 17, 2015 ⁽²⁾	100,000		100,000			100,000			4.27	%	4.27	%	10	December 2025	100,000		100,000			100,000			4.27	%	4.27	%	10	December 2025
March 31, 2006 ⁽³⁾	—		—			255,296
	$	800,000	$	799,862		$	1,055,106								$	800,000	$	799,916		$	799,880
Deferred financing costs, net			(4,942		)	(5,303		)									(3,974		)	(4,620		)
			$	794,920		$	1,049,803								$	800,000	$	795,942		$	795,260


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


(2)	Issued by SL Green, the Operating Partnership and ROP, as co-obligors.


~~(3)~~	~~This note was repaid in March 2016.~~

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Reckson Operation Partnership, L.P.

Notes to Consolidated Financial Statements (cont.)

June 30, 2017

(unaudited)

ROP also provides a guaranty of the Operating Partnership's obligations under its 3.00% Exchangeable Senior Notes due 2017.

Restrictive Covenants

The terms of the 2012 credit facility, as amended, and certain of our senior unsecured notes include certain restrictions and covenants which may limit, among other things, SL Green's ability to pay dividends, make certain types of investments, incur additional indebtedness, incur liens and enter into negative pledge agreements and dispose of assets, and which require compliance with financial ratios relating to the maximum ratio of total indebtedness to total asset value, a minimum ratio of EBITDA to fixed charges, a maximum ratio of secured indebtedness to total asset value and a maximum ratio of unsecured indebtedness to unencumbered asset value. The dividend restriction referred to above provides that SL Green will not during any time when a default is continuing, make distributions with respect to SL Green's common stock or other equity interests, except to enable SL Green to continue to qualify as a REIT for Federal income tax purposes. As of ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, we were in compliance with all such covenants.

Principal Maturities

Combined aggregate principal maturities of ~~our~~ mortgages and other loans payable, 2012 credit facility and senior unsecured notes as of ~~September~~June 30, ~~2016,~~2017, including as-of-right extension options and put options, were as follows (in thousands):

~~Table of Contents~~

~~Reckson Operation Partnership, L.P.~~

~~Notes to Consolidated Financial Statements (cont.)~~

~~September 30, 2016~~

~~(unaudited)~~


	Scheduled Amortization		Principal Repayments		Revolving Credit Facility		Unsecured Term Loan		Senior Unsecured Notes		Total		Scheduled Amortization		Principal		Revolving Credit Facility		Unsecured Term Loan		Senior Unsecured Notes		Total
Remaining 2016	$	—	$	—	$	—	$	—	$	—	$	—
2017	—		—		—		—		—		—
Remaining 2017													$	—	$	—	$	—	$	—	$	—	$	—
2018	—		134,642		—		—		250,000		384,642		—		184,642		—		—		250,000		434,642
2019	—		—		—		1,183,000		—		1,183,000		—		—		—		1,183,000		—		1,183,000
2020	—		—		—		—		250,000		250,000		—		—		200,000		—		250,000		450,000
2021													—		—		—		—		—		—
Thereafter	—		500,000		—		—		300,000		800,000		—		750,000		—		—		300,000		1,050,000
	$	—	$	634,642	$	—	$	1,183,000	$	800,000	$	2,617,642	$	—	$	934,642	$	200,000	$	1,183,000	$	800,000	$	3,117,642

Consolidated interest expense, excluding capitalized interest, was comprised of the following (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015			2017			2016			2017			2016
Interest expense	$	25,087		$	31,136		$	84,175		$	87,980
Interest expense before capitalized interest													$	32,231		$	26,773		$	62,082		$	59,087
Interest capitalized	(362		)	—			(799		)	(1,107		)	(122		)	(328		)	(502		)	(437		)
Interest income	(2		)	(4		)	(9		)	(17		)	(1		)	(2		)	(5		)	(6		)
Interest expense, net	$	24,723		$	31,132		$	83,367		$	86,856		$	32,108		$	26,443		$	61,575		$	58,644

9. Related Party Transactions

Cleaning/ Security/ Messenger and Restoration Services

Alliance Building Services, or Alliance, and its affiliates are partially owned by Gary Green, a son of Stephen L. Green, the chairman of SL Green's board of directors, and provide services to certain properties owned by us. Alliance’s affiliates include First Quality Maintenance, L.P., or First Quality, Classic Security LLC, Bright Star Couriers LLC and Onyx Restoration Works, and provide cleaning, extermination, security, messenger, and restoration services, respectively. In addition, First Quality has the non-exclusive opportunity to provide cleaning and related services to individual tenants at our properties on a basis separately negotiated with any tenant seeking such additional services. ~~An affiliate of ours~~The Service Corporation has entered into an arrangement with Alliance whereby it will receive a profit participation above a certain threshold for services provided by Alliance to certain tenants at certain buildings above the base services specified in their lease agreements.

Income earned from profit participation, which is included in other income on the consolidated statements of operations, was ~~$0.8~~$0.9 million and ~~$2.5~~$1.7 million for the three and ~~nine~~six months ended ~~September~~June 30, 2017, and was $0.8 million and $1.7 million for the three and six months ended June 30, 2016, ~~and 2015.~~respectively.

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Reckson Operation Partnership, L.P.

Notes to Consolidated Financial Statements (cont.)

June 30, 2017

(unaudited)

We also recorded expenses for these services, inclusive of capitalized expenses, of ~~$1.2~~$2.4 million and ~~$6.0~~and $4.4 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, respectively, for these services (excluding services provided directly to tenants), and ~~$2.7~~$3.1 million and ~~$6.7~~$4.8 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2015,~~2016, respectively.

Allocated Expenses from SL Green

Property operating expenses include an allocation of salary and other operating costs from SL Green based on square footage of the related properties. Such amount was approximately ~~$2.8~~$3.0 million and ~~$8.2~~$6.2 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, respectively. The amount was ~~$2.4~~$2.8 million and ~~$7.4~~$5.4 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2015,~~2016, respectively.

Insurance

We obtained insurance coverage through an insurance program administered by SL Green. In connection with this program, we incurred insurance expense of approximately ~~$1.5~~$1.4 million and ~~$4.4~~$2.8 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2017. We incurred insurance expense of approximately ~~$1.7~~$1.4 million and ~~$5.0~~$3.0 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016.

~~Table of Contents~~

~~Reckson Operation Partnership, L.P.~~

~~Notes to Consolidated Financial Statements (cont.)~~

~~September 30, 2016~~

~~(unaudited)~~

10. Preferred Units

Through a consolidated subsidiary, we have authorized up to 109,161 ~~3.5%~~3.50% Series A Preferred Units of limited partnership interest, or the Greene Series A Preferred Units, with a liquidation preference of $1,000.00 per unit. In August 2015, the Company issued 109,161 Greene Series A Preferred Units in conjunction with an acquisition. The Greene Series A Preferred unitholders receive annual dividends of $35.00 per unit paid on a quarterly basis and dividends are cumulative, subject to certain provisions. The Greene Series A Preferred Units can be redeemed at any time, at the option of the unitholder, either for cash or are convertible on a one-for-one basis, into the Series B Preferred Units of limited partnership interest, or the Greene Series B Preferred Units. The Greene Series B Preferred Units can be converted at any time, at the option of the unitholder, into a number of common stock equal to 6.71348 shares of SL Green common stock for each Greene Series B Preferred Unit. As of ~~September~~June 30, ~~2016,~~2017, no Greene Series B Preferred Units have been issued.

ASC 815 Derivatives and Hedging requires bifurcation of certain embedded derivative instruments, such as conversion features in convertible equity instruments, and their measurement at fair value for accounting purposes. The conversion feature embedded in the ~~Greene~~Subsidiary Series A Preferred Units was evaluated, and it was determined that the conversion feature should be bifurcated from its host instrument and accounted for as a freestanding derivative. The derivative is reported as a derivative liability in accrued interest and other liabilities on the accompanying consolidated balance sheet and is adjusted to its fair value at each reporting date, with a corresponding adjustment to interest expense, net of interest income. The embedded derivative for the ~~Greene~~Subsidiary Series A Preferred Units was initially recorded at a fair value of zero on July 22, 2015, the date of issuance. At December 31, ~~2015,~~2016, the carrying amount of the derivative was adjusted to its fair value of zero, with a corresponding adjustment to preferred units and interest expense, net of interest income. At ~~September~~June 30, ~~2016~~2017, the carrying amount and fair value of the derivative remained at zero.

11. Partners' Capital

Since consummation of the Merger on January 25, 2007, the Operating Partnership has owned all the economic interests in ROP either by direct ownership or by indirect ownership through our general partner, which is its wholly-owned subsidiary.

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

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Reckson Operation Partnership, L.P.

Notes to Consolidated Financial Statements (cont.)

June 30, 2017

(unaudited)

12. Fair Value Measurements

We are required to disclose fair value information with regard to our financial instruments, whether or not recognized in the consolidated balance sheets, for which it is practical to estimate fair value. The FASB guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. We measure and/or disclose the estimated fair value of financial assets and liabilities based on a hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptions. This hierarchy consists of three broad levels: Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date; Level 2 - inputs other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and Level 3 - unobservable inputs for the asset or liability that are used when little or no market data is available. We follow this hierarchy for our assets and liabilities measured at fair value on a recurring and nonrecurring basis. In instances in which the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level of input that is significant to the fair value measurement in its entirety. Our assessment of the significance of the particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

We determine other than temporary impairment in real estate investments and debt and preferred equity investments, including intangibles primarily utilizing cash flow projections that apply, among other things, estimated revenue and expense growth rates, discount rates and capitalization rates, as well as sales comparison approach, which utilizes comparable sales, listings and sales contracts. All of which are classified as Level 3 inputs.

The fair value of derivative instruments is based on current market data received from financial sources that trade such instruments and are based on prevailing market data and derived from third party proprietary models based on well-recognized financial principles and reasonable estimates about relevant future market conditions, which are classified as Level 2 inputs.

The financial assets and liabilities that are not measured at fair value on our consolidated balance sheets include cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses, debt and preferred equity investments, mortgages and other loans payable and other secured and unsecured debt. The carrying amount of cash and cash equivalents, restricted cash, accounts receivable, and accounts payable and accrued expenses reported in our consolidated balance sheets approximates fair value due to the short term nature of these instruments. The fair value of debt and preferred equity investments, which is classified as Level 3, is estimated by discounting the future cash flows using current interest rates at which similar loans with the same maturities would be made to borrowers with similar credit ratings. The fair value of borrowings, which is classified as Level 3, is estimated by discounting the contractual cash flows of each debt instrument to their present value using adjusted market interest rates, which is provided by a third-party specialist.

~~Table of Contents~~

~~Reckson Operation Partnership, L.P.~~

~~Notes to Consolidated Financial Statements (cont.)~~

~~September 30, 2016~~

~~(unaudited)~~

The following table provides the carrying value and fair value of these financial instruments as of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015~~2016 (in thousands):


	September 30, 2016				December 31, 2015				June 30, 2017				December 31, 2016
	Carrying Value ⁽¹⁾		Fair Value		Carrying Value ⁽¹⁾		Fair Value		Carrying Value ⁽¹⁾		Fair Value		Carrying Value ⁽¹⁾		Fair Value
Debt and preferred equity investments	$	1,453,234	⁽²⁾		$	1,670,020	⁽²⁾

Debt and preferred equity investments ⁽²⁾									$	1,986,413	⁽³⁾		$	1,640,412	⁽³⁾

Fixed rate debt	$	2,099,862	$	2,236,309	$	1,585,106	$	1,663,078	$	2,349,916	$	2,442,024	$	2,099,880	$	2,183,042
Variable rate debt	517,642		529,550		2,150,424		2,164,673		767,642		777,252		567,642		580,083
	$	2,617,504	$	2,765,859	$	3,735,530	$	3,827,751	$	3,117,558	$	3,219,276	$	2,667,522	$	2,763,125


(1)	Amounts exclude net deferred financing costs.


(2)	Excludes investments with a book value of $130.4 million and $174.2 million as of June 30, 2017 and December 31, 2016, respectively, which we accounted for under the equity method accounting and financing receivables with a book value of $123.7 million and $144.5 million as of June 30, 2017 and December 31, 2016, respectively.

(3)

At ~~September~~June 30, 2017, debt and preferred equity investments had an estimated fair value ranging between $2.0 billion and $2.2 billion. At December 31, 2016, debt and preferred equity investments had an estimated fair value ranging between ~~$1.5 billion and~~ $1.6 ~~billion. At December 31, 2015, debt and preferred equity investments had an estimated fair value ranging between $1.7~~ billion and $1.8 billion.

Disclosure about fair value of financial instruments was based on pertinent information available to us as of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015.~~2016. Although we are not aware of any factors that would significantly affect the reasonable fair value amounts,

Table of Contents

Reckson Operation Partnership, L.P.

Notes to Consolidated Financial Statements (cont.)

June 30, 2017

(unaudited)

such amounts have not been comprehensively revalued for purposes of these financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein.

13. Financial Instruments: Derivatives and Hedging

In the normal course of business, we use a variety of commonly used derivative instruments, such as interest rate swaps, caps, collar and floors, to manage, or hedge interest rate risk. We hedge our exposure to variability in future cash flows for forecasted transactions in addition to anticipated future interest payments on existing debt. We recognize all derivatives on the balance sheets at fair value. Derivatives that are not hedges are adjusted to fair value through earnings. If a derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedge asset, liability, or firm commitment through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. Reported net income and ~~capital~~equity may increase or decrease prospectively, depending on future levels of interest rates and other variables affecting the fair values of derivative instruments and hedged items, but will have no effect on cash flows. Currently, all of our designated derivative instruments are effective hedging instruments. As of ~~September~~June 30, ~~2016,~~2017, the Company had not designated any interest rate swap agreements on any debt investment.

Gains and losses on terminated hedges are included in ~~the~~ accumulated other comprehensive loss, and are recognized into earnings over the term of the related senior unsecured notes. As of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, the deferred net losses from these terminated hedges, which are included in accumulated other comprehensive loss relating to net unrealized loss on derivative ~~instrument,~~instruments, was approximately ~~$1.7~~$1.4 million and ~~$2.0~~$1.6 million, respectively.

Over time, the realized and unrealized gains and losses held in accumulated other comprehensive loss will be reclassified into earnings as an adjustment to interest expense in the same periods in which the hedged interest payments affect earnings. We estimate that ~~approximately~~ $0.4 million of the current balance held in accumulated other comprehensive loss will be reclassified into interest expense within the next 12 months.

The following table presents the effect of our derivative financial instruments that are designated and qualify as hedging instruments on the consolidated statements of operations for the three months ended June 30, 2017 and 2016, respectively (in thousands):



	Amount of (Loss) Recognized in Other Comprehensive Loss (Effective Portion)					Location of (Loss) Gain Reclassified from Accumulated Other Comprehensive Loss into Income	Amount of (Loss) Gain Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)					Location of Gain Recognized in Income on Derivative	Amount of Gain Recognized into Income (Ineffective Portion)
	Three Months Ended June 30,						Three Months Ended June 30,						Three Months Ended June 30,
Derivative	2017		2016				2017			2016			2017		2016
Interest Rate Swap	$	—	$	(1	)	Interest expense	$	(90	)	$	199	Interest expense	$	—	$	1

The following table presents the effect of our derivative financial instruments that are designated and qualify as hedging instruments on the consolidated statements of operations for the six months ended June 30, 2017 and 2016, respectively (in thousands):



	Amount of (Loss) Recognized in Other Comprehensive Loss (Effective Portion)					Location of (Loss) Gain Reclassified from Accumulated Other Comprehensive Loss into Income	Amount of (Loss) Gain Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)					Location of Gain Recognized in Income on Derivative	Amount of Gain Recognized into Income (Ineffective Portion)
	Six Months Ended June 30,						Six Months Ended June 30,						Six Months Ended June 30,
Derivative	2017		2016				2017			2016			2017		2016
Interest Rate Swap	$	—	$	(13	)	Interest expense	$	(180	)	$	431	Interest expense	$	—	$	3

2223

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Reckson Operation Partnership, L.P.

Notes to Consolidated Financial Statements (cont.)

~~September~~June 30, ~~2016~~2017

(unaudited)

The following table presents the effect of our derivative financial instrument that is designated and qualify as a hedging instrument on the consolidated statements of operations for the three months ended September 30, 2016 and 2015, respectively (in thousands):

Amount of Gain
Recognized in
Other Comprehensive
Loss
(Effective Portion)
Location of Loss Reclassified from Accumulated Other Comprehensive Loss into Income
Amount of Loss
Reclassified from
Accumulated Other
Comprehensive Loss into Income
(Effective Portion)
Location of Gain Recognized in Income on Derivative
Amount of Gain Recognized
into Income
(Ineffective Portion)
Three Months Ended September 30, Three Months Ended September 30, Three Months Ended September 30,
Derivative 2016 2015 2016 2015 2016 2015
Interest Rate Swap $ —
$ (30 ) Interest expense $ 90
$ 252
Interest expense $ —
$ 1

The following table presents the effect of our derivative financial instrument that is designated and qualify as a hedging instrument on the consolidated statements of operations for the nine months ended September 30, 2016 and 2015, respectively (in thousands):

Amount of Gain
Recognized in
Other Comprehensive
Loss
(Effective Portion)
Location of Loss Reclassified from Accumulated Other Comprehensive Loss into Income
Amount of Loss
Reclassified from
Accumulated Other
Comprehensive Loss into Income
(Effective Portion)
Location of Gain Recognized in Income on Derivative
Amount of Gain Recognized
into Income
(Ineffective Portion)
Nine Months Ended September 30, Nine Months Ended September 30, Nine Months Ended September 30,
Derivative 2016 2015 2016 2015 2016 2015
Interest Rate Swap $ (13 ) $ (125 ) Interest expense $ 521
$ 751
Interest expense $ 3
$ 3

14. Commitments and Contingencies

Legal Proceedings

As of ~~September~~June 30, ~~2016,~~2017, we were not involved in any material litigation nor, to management's knowledge, was any material litigation threatened against us or our portfolio which if adversely determined could have a material adverse impact on us.

Guarantees

During the year ended December 31, 2015, Belmont Insurance Company, or Belmont, a New York licensed captive insurance company and an affiliate of SL Green, became a member of the Federal Home Loan Bank of New York, or FHLBNY. As a member, Belmont ~~may~~could borrow funds from the FHLBNY in the form of secured advances. ~~Belmont’s membership will terminate in February 2017 at which point Belmont will be required to repay all funds borrowed.~~ As of ~~September 30,~~December 31, 2016 , certain commercial real estate properties and debt and preferred equity investments of the Company were pledged as collateral to secure advances under the FHLBNY facility. ~~If Belmont or SL Green are unable to repay~~In January 2017, all funds borrowed from the ~~advances upon the termination of Belmont’s~~FHLBNY were repaid and Belmont's membership ~~the maximum potential amount of future payments the Company could be required to make under the secured advances is $229.0 million. The Company incurred approximately $4.1 million of costs~~was terminated in ~~conjunction with pledging assets as collateral under the FHLBNY. These costs were reimbursed to the Company by Belmont.~~February 2017.

Environmental Matters

~~The Company~~Our management believes that ~~its~~the properties are in compliance in all material respects with applicable Federal, state and local ordinances and regulations regarding environmental issues. Management is not aware of any environmental liability that it believes would have a materially adverse impact on our financial position, results of operations or cash flows. Management is unaware of any instances in which it would incur significant environmental cost if any of our properties were sold.

~~Table of Contents~~

~~Reckson Operation Partnership, L.P.~~

~~Notes to Consolidated Financial Statements (cont.)~~

~~September 30, 2016~~

~~(unaudited)~~

Ground Leases Arrangements

The following is a schedule of future minimum lease payments under non-cancellable operating leases with initial terms in excess of one year as of ~~September~~June 30, ~~2016~~2017 (in thousands):


	Non-cancellable operating leases		Non-cancellable operating leases
Remaining 2016	$	5,147
2017	20,586
Remaining 2017			$	10,293
2018	20,586		20,586
2019	20,586		20,586
2020	20,586		20,586
2021			20,736
Thereafter	328,088		308,202
Total minimum lease payments	$	415,579	$	400,989

15. Segment Information

We are engaged in ~~all aspects of property ownership~~acquiring, owning, managing and ~~management including investment,~~ leasing ~~operations, capital improvements, development, redevelopment, financing, construction~~commercial properties in Manhattan, Brooklyn, Westchester County, Connecticut and ~~maintenance in the~~ New ~~York Metropolitan area~~Jersey and have two reportable segments, real estate and debt and preferred ~~equity.~~equity investments. We evaluate real estate performance and allocate resources based on earnings contribution to income from continuing operations.

The primary sources of revenue are generated from tenant rents and escalations and reimbursement revenue. Real estate property operating expenses consist primarily of security, maintenance, utility costs, real estate taxes and ground rent expense (at certain applicable properties). See Note 5, "Debt and Preferred Equity Investments," for additional details on our debt and preferred equity investments.

Selected consolidated results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, and selected asset information as of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, regarding our operating segments are as follows (in thousands):

Real Estate
Segment

Debt and Preferred
Equity
Segment

Total
Company
Total revenues:
Three months ended:
September 30, 2016 $ 191,494
$ 79,842
$ 271,336
September 30, 2015 182,290
55,361
237,651
Six months ended:
September 30, 2016 551,788
190,970
742,758
September 30, 2015 536,154
150,796
686,950
Income from continuing operations before gain (loss) on sale of real estate, depreciable real estate reserves, and unrealized loss on embedded derivative:
Three months ended:
September 30, 2016 $ 96,743
$ 6,180
$ 102,923
September 30, 2015 44,645
23,192
67,837
Six months ended:
September 30, 2016 229,179
20,864
250,043
September 30, 2015 159,895
41,309
201,204
Total assets
As of:
September 30, 2016 $ 6,835,004
$ 1,781,629
$ 8,616,633
December 31, 2015 6,998,477
1,834,840
8,833,317



	Real Estate Segment		Debt and Preferred Equity Segment		Total Company
Total revenues:
Three months ended:
June 30, 2017	$	191,388	$	60,424	$	251,812

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Reckson Operation Partnership, L.P.

Notes to Consolidated Financial Statements (cont.)

~~September~~June 30, ~~2016~~2017

(unaudited)



	Real Estate Segment		Debt and Preferred Equity Segment		Total Company
June 30, 2016	187,172		44,586		231,758
Six months ended:
June 30, 2017	$	383,189	$	100,978	$	484,167
June 30, 2016	371,656		99,766		471,422
Income before equity in net gain on sale of interest in unconsolidated joint venture/real estate, gain (loss) on sale of real estate, and depreciable real estate reserves
Three months ended:
June 30, 2017	$	33,374	$	53,753	$	87,127
June 30, 2016	32,646		42,274		74,920
Six months ended:
June 30, 2017	$	62,994	$	91,537	$	154,531
June 30, 2016	54,455		92,665		147,120
Total assets
As of:
June 30, 2017	$	6,666,925	$	2,152,132	$	8,819,057
December 31, 2016	6,785,305		1,969,308		8,754,613

Income from continuing operations represents total revenues less total expenses for the real estate segment and total investment income less allocated interest expense for the debt and preferred equity segment. Interest costs for the debt and preferred equity segment includes actual costs incurred for ~~investments collateralizing~~borrowings on the 2016 MRA and 2017 MRA. Interest is imputed on the ~~remaining~~ investments that do not collateralize the 2016 MRA or 2017 MRA using our ~~2012 revolving credit facility and~~ corporate borrowing cost. We also allocate loan loss reserves, net of recoveries, and transaction related costs to the debt and preferred equity segment.

We do not allocate marketing, general and administrative expenses to the debt and preferred equity segment since the use of personnel and resources is dependent on transaction volume between the two segments and varies period over period. In addition, we base performance on the individual segments prior to allocating marketing, general and administrative expenses. For the three and ~~nine~~six months ended ~~September~~June 30, 2017, and 2016, marketing, general and administrative expenses totaled ~~$0.2~~0.1 million, ~~and $0.6~~0.3 million, ~~respectively. For the three and nine months ended September 30, 2015, marketing, general and administrative expenses totaled $0.1~~$0.2 million, and $0.4 million, respectively. All other expenses, except interest, relate entirely to the real estate assets.

There were no transactions between the above two segments.

The table below reconciles income from continuing operations to net income for the three and six months ended June 30, 2017 and 2016 (in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Income before equity in net gain on sale of interest in unconsolidated joint venture/real estate, gain (loss) on sale of real estate, and depreciable real estate reserves	$	87,127		$	74,920		$	154,531		$	147,120
Equity in net gain on sale of interest in unconsolidated joint venture/real estate	—			—			3			—
Gain (loss) on sale of real estate	4,933			(6,899		)	4,933			(6,899		)
Depreciable real estate reserves	(29,063		)	—			(85,328		)	—
Net income	$	62,997		$	68,021		$	74,139		$	140,221

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

Overview

Reckson Operating Partnership, L.P., or ROP, commenced operations on June 2, 1995. The sole general partner of ROP is Wyoming Acquisition GP LLC., or WAGP, a wholly-owned subsidiary of SL Green Operating Partnership, L.P., or the Operating Partnership. The sole limited partner of ROP is the Operating Partnership. SL Green Realty Corp., or SL Green, is the general partner of the Operating Partnership. Unless the context requires otherwise, all references to "we," "our," "us" and the "Company" means ROP and all entities owned or controlled by ROP.


Location	Type	Number of Properties	Approximate Square Feet (unaudited)	Weighted Average Occupancy⁽¹⁾ (unaudited)		Type	Number of Properties	Approximate Square Feet (unaudited)	Weighted Average Occupancy⁽¹⁾ (unaudited)
Commercial:
Manhattan	Office	16	8,463,245	96.6	%	Office	16	8,463,245	95.7	%
						Retail⁽²⁾⁽³⁾	5	364,816	98.0	%
	Retail⁽²⁾⁽³⁾	5	352,892	97.6	%	Development/Redevelopment⁽⁴⁾	1	9,200	—	%
	Fee Interest	2	197,654	100.0	%	Fee Interest	1	176,530	100.0	%
		23	9,013,791	96.7	%		23	9,013,791	95.8	%
Suburban	Office	19	3,287,800	82.6	%	Office⁽⁵⁾	17	3,071,000	76.5	%
	Retail	1	52,000	100.0	%	Retail	1	52,000	100.0	%
		20	3,339,800	82.9	%		18	3,123,000	76.9	%
Total commercial properties		43	12,353,591	93.0	%		41	12,136,791	91.0	%
Residential:
Manhattan	Residential⁽²⁾	—	222,855	94.0	%	Residential⁽²⁾	—	222,855	91.9	%
Total portfolio		43	12,576,446	93.0	%		41	12,359,646	91.0	%


(1)	The weighted average occupancy for commercial properties represents the total ~~leased~~occupied square feet divided by total ~~acquisition~~ square ~~footage.~~footage at acquisition. The weighted average occupancy for residential properties represents the total occupied units divided by total available units.

(2)


(3)	Includes two unconsolidated joint venture retail properties at 131-137 Spring Street comprised of approximately 68,342 square feet ~~(unaudited).~~


(4)	Includes one unconsolidated joint venture retail property at 102 Greene Street comprised of approximately 9,200 square feet.


(5)	Includes the properties at 680-750 Washington Boulevard, in Stamford, Connecticut, also known as Stamford Towers and 125 Chubb Avenue in Lyndhurst, New Jersey, which are classified as held for sale at June 30, 2017.

Critical Accounting Policies

Refer to ~~our 2015~~the 2016 Annual Report on Form 10-K of the Company and the Operating Partnership for a discussion of our critical accounting policies, which include investment in commercial real estate properties, investment in unconsolidated joint ventures, revenue recognition, allowance for doubtful accounts, reserve for possible credit losses and derivative instruments. There have been no changes to these accounting policies during the ~~three months and nine~~six months ended ~~September~~June 30, ~~2016.~~2017.

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Results of ~~Operation~~Operations

Comparison of the three months ended ~~September~~June 30, ~~2016~~2017 to the three months ended ~~September~~June 30, ~~2015~~2016

The following ~~section compares the results of operations~~comparison for the three months ended ~~September~~June 30, ~~2016~~2017, or 2017, to the three months ended ~~September~~June 30, ~~2015. Any assets sold~~2016, or ~~held for sale are excluded from income from continuing operations.~~2016, makes reference to the effect of the following:


i.	“Same-Store Properties,” which represents all operating properties owned by us at January 1, 2016 and still owned by us in the same manner at June 30, 2017 (Same-Store Properties totaled 36 of our 38 consolidated operating properties),


ii.	“Acquisition Properties,” which represents all properties or interests in properties acquired in 2017 and 2016 and all non-Same-Store Properties, including properties that are under development, redevelopment or were deconsolidated during the period,


iii.	"Disposed Properties" which represents all properties or interests in properties sold or partially sold in 2017 and 2016, and


iv.	“Other,” which represents corporate level items not allocable to specific properties,


(in thousands)	2016			2015			$ Change			% Change		2017			2016			$ Change			% Change

Rental revenue, net	$	166,456		$	159,381		$	7,075		4.4	%	$	167,058		$	160,276		$	6,782		4.2	%
Escalation and reimbursement	28,158			25,870			2,288			8.8	%	22,897			25,699			(2,802		)	(10.9	)%
Investment income	75,715			49,660			26,055			52.5	%	60,424			44,586			15,838			35.5	%
Other income	1,007			2,740			(1,733		)	(63.2	)%	1,433			1,197			236			19.7	%
Total revenues	271,336			237,651			33,685			14.2	%	251,812			231,758			20,054			8.7	%

Property operating expenses	87,715			84,081			3,634			4.3	%	82,826			81,346			1,480			1.8	%
Transaction related costs	98			2,887			(2,789		)	(96.6	)%	2			67			(65		)	(97.0	)%
Marketing, general and administrative	156			102			54			52.9	%	117			265			(148		)	(55.8	)%
	87,969			87,070			899			1.0	%
Total expenses												82,945			81,678			1,267			1.6	%

Operating income	183,367			150,581			32,786			21.8	%	168,867			150,080			18,787			12.5	%

Interest expense and amortization of deferred financing costs, net of interest income	(26,804		)	(33,550		)	6,746			(20.1	)%
Interest expense, net of interest income												(32,108		)	(26,443		)	(5,665		)	21.4	%
Amortization of deferred financing costs												(2,039		)	(1,732		)	(307		)	17.7	%
Depreciation and amortization	(57,916		)	(51,490		)	(6,426		)	12.5	%	(50,773		)	(50,651		)	(122		)	0.2	%
Equity in net income from unconsolidated joint venture	4,276			2,296			1,980			86.2	%
Gain on sale of real estate	—			101,069			(101,069		)	(100.0	)%
Equity in net income from unconsolidated joint ventures												3,180			3,666			(486		)	(13.3	)%
Gain (loss) on sale of real estate												4,933			(6,899		)	11,832			(171.5	)%
Depreciable real estate reserves	—			(9,998		)	9,998			(100.0	)%	(29,063		)	—			(29,063		)	100.0	%
Unrealized loss on embedded derivative	—			(1,800		)	1,800			(100.0	)%
Income from continuing operations	102,923			157,108			(54,185		)	(34.5	)%
Net income from discontinued operations	—			—			—			—	%
Net income	$	102,923		$	157,108		$	(54,185	)	(34.5	)%	62,997			68,021			(5,024		)	(7.4	)%

Rental, Escalation and Reimbursement Revenues

Rental revenue increased primarily as a result of increases in rents and occupancy at our ~~same store properties~~Same-Store Properties ($~~6.6~~7.9 million), ~~the acquisition of 110 Greene Street in July of 2015~~which included 711 Third Avenue ($~~5.1~~2.7 million), 919 Third Avenue ($2.5 million), 304 Park Avenue South ($1.7 million), and ~~increased revenues at 752 Madison~~125 Park Avenue ~~resulting from a lease renewal in the fourth quarter of 2015~~ ($3.4 million). These increases were partially offset by decreased revenues at 115 Spring Street as a result of the accelerated recognition of non-cash deferred income upon terminating the retail lease at the property in August 2015 ($2.6 million), and the sale of an 80% interest in 131-137 Spring Street in the third quarter of 2015 ($1.01.1 million).

Escalation and reimbursement revenue ~~increased~~decreased primarily as a result of ~~higher~~lower operating cost ~~recoveries ($0.9 million), as well as higher real estate~~and tax recoveries (~~$0.7 million~~)at our Same-Store Properties ($2.4 million).

Occupancy in our Manhattan office operating properties increased to 96.6% at September 30, 2016 compared to 95.8% at September 30, 2015. Occupancy in our Suburban office operating properties increased to 82.6% at September 30, 2016 compared to 81.5% at September 30, 2015.

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Investment Income

For the three months ended ~~September~~June 30, ~~2016~~2017, investment income increased primarily as a result of ~~additional~~previously unrecognized income ~~recognized from~~related to our preferred equity investment in 885 Third Avenue ($9.4 million), a larger weighted average book balance and an increase in the ~~recapitalization of a debt investment ($41.0 million). This increase was~~LIBOR benchmark rate. These increases were partially offset by ~~lower weighted average yield and balance during~~repayments of high yielding loans in the ~~three months ended September 30,~~second half of 2016. For the three months ended ~~September~~June 30, ~~2016,~~2017, the weighted average debt and preferred equity investment balance outstanding and weighted average yield were ~~$1.5~~$2.1 billion and 9.4%, respectively, compared to ~~$1.6~~$1.4 billion and ~~10.1%~~9.5%, respectively, for the same period in ~~2015.~~2016. As of ~~September~~June 30, ~~2016,~~2017, the debt and preferred equity investments had a weighted average term to maturity of ~~1.6 years.~~2.4 years excluding extension options.

Other Income

Other income increased primarily as a result of a lease buy-out at one of our properties ($0.6 million).

Property Operating Expenses

Property operating expenses increased primarily as a result of higher real estate taxes resulting from higher assessed values and tax rates at our Same-Store Properties ($2.1 million), partially offset by the sale of 520 White Plains Road ($0.6 million) in 2017.

Transaction Related Costs

The decrease in transaction related costs in 2017 is primarily due to the adoption of ASU No. 2017-01 in 2017, which clarified the definition of a business and provided guidance to assist in determining whether transactions should be accounted for as acquisitions of assets or businesses. Following the adoption of the guidance, most of our real estate acquisitions are considered asset acquisitions and transaction costs are therefore capitalized to the investment basis when they would have previously been expensed under the previous guidance. Transaction costs expensed in 2017 relate primarily to deals that are not moving forward for which any costs incurred are expensed.

Interest Expense and Amortization of Deferred Financing Costs, Net of Interest Income

Interest expense and amortization of financing costs, net of interest income, increased primarily as a result of the refinance of 315 West 33rd Street in the first quarter of 2017 ($3.0 million), as well as an increase in the term loan balance in the third quarter of 2016 ($1.2 million). The weighted average consolidated debt balance outstanding decreased to $3.1 billion for the three months ended June 30, 2017 from $3.2 billion for the three months ended June 30, 2016. The weighted average interest rate was 3.85% for the three months ended June 30, 2017 as compared to 3.39% for the three months ended June 30, 2016.

Depreciation and Amortization

Depreciation and amortization increased primarily as a result of increased capitalized expenditures at our Same-Store Properties ($1.1 million), partially offset by the sale of 520 White Plains ($0.4 million) in 2017.

Equity in Net Income from Unconsolidated Joint Venture

Equity in net income from unconsolidated joint ventures decreased primarily as a result of the repayment of a debt investment early in the second quarter of 2017 ($1.2 million), partially offset by a new debt investment which was contributed to a joint venture in the third quarter of 2016 ($0.6 million).

Depreciable Real Estate Reserves

During the three months ended June 30, 2017 we recognized depreciable real estate reserves related to 125 Chubb Avenue ($26.6 million), Stamford Towers ($2.1 million), and 520 White Plains Road ($0.4 million).

Gain (loss) on Sale of Real Estate

During the three months ended June 30, 2017 we recognized a gain on the sale of 102 Greene Street ($4.9 million). During the three months ended June 30, 2016 we recognized a loss on the sale of 7 International Drive, Westchester County, NY ($6.9 million).

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Comparison of the six months ended June 30, 2017 to the six months ended June 30, 2016

The following comparison for the six months ended June 30, 2017, or 2017, to the six months ended June 30, 2016, or 2016, makes reference to the effect of the following:


i.	“Same-Store Properties,” which represents all operating properties owned by us at January 1, 2016 and still owned by us in the same manner at June 30, 2017 (Same-Store Properties totaled 36 of our 38 consolidated operating properties),


ii.	“Acquisition Properties,” which represents all properties or interests in properties acquired in 2017 and 2016 and all non-Same-Store Properties, including properties that are under development, redevelopment or were deconsolidated during the period,


iii.	"Disposed Properties" which represents all properties or interests in properties sold or partially sold in 2017 and 2016, and


iv.	“Other,” which represents corporate level items not allocable to specific properties,



(in thousands)	2017			2016			$ Change			% Change
Rental revenue, net	$	335,030		$	319,894		$	15,136		4.7	%
Escalation and reimbursement	47,442			50,015			(2,573		)	(5.1	)%
Investment income	100,978			99,766			1,212			1.2	%
Other income	717			1,747			(1,030		)	(59.0	)%
Total revenues	484,167			471,422			12,745			2.7	%

Property operating expenses	168,582			165,766			2,816			1.7	%
Transaction related costs	2			245			(243		)	(99.2	)%
Marketing, general and administrative	229			449			(220		)	(49.0	)%
Total expenses	168,813			166,460			2,353			1.4	%

Operating income	315,354			304,962			10,392			3.4	%

Interest expense, net of interest income	(61,575		)	(58,644		)	(2,931		)	5.0	%
Amortization of deferred financing costs	(4,126		)	(3,872		)	(254		)	6.6	%
Depreciation and amortization	(102,557		)	(101,449		)	(1,108		)	1.1	%
Equity in net income from unconsolidated joint ventures	7,435			6,123			1,312			21.4	%
Equity in net gain (loss) on sale of interest in unconsolidated joint venture/real estate	3			—			3			100.0	%
Gain (loss) on sale of real estate	4,933			(6,899		)	11,832			(171.5	)%
Depreciable real estate reserves	(85,328		)	—			(85,328		)	100.0	%
Net income	74,139			140,221			(66,082		)	(47.1	)%

Rental, Escalation and Reimbursement Revenues

Rental revenue increased primarily as a result of increases in rents and occupancy at our Same-Store Properties ($16.9 million), which included 919 Third Avenue ($6.0 million), 711 Third Avenue ($5.4 million), 125 Park Avenue ($2.0 million), 304 Park Avenue South ($1.7 million).

Escalation and reimbursement revenue decreased primarily as a result of lower operating cost and tax recoveries at our Same-Store Properties ($1.9 million).

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Investment Income

For the six months ended June 30, 2017, investment income increased primarily as a result of previously unrecognized income related to our preferred equity investment in 885 Third Avenue ($9.4 million), a larger weighted average balance during the period, and an increase in the LIBOR benchmark rate. These increases were partially as a result of accelerated recognition of income on the early repayment of certain debt positions in 2016 ($10.2 million). For the six months ended June 30, 2017, the weighted average debt and preferred equity investment balance outstanding and weighted average yield were $1.9 billion and 9.4%, respectively, compared to $1.5 billion and 9.9%, respectively, for the same period in 2016. As of June 30, 2017, the debt and preferred equity investments had a weighted average term to maturity of 2.4 years excluding extension options.

Other Income

Other income decreased primarily as a result of the reversal of $1.2 million of fees, which were recognized in the prior year, as a result of the Company being relieved of the obligation to perform certain services ~~lease buyout received at 125 Park Avenue in 2015 ($1.7 million), and a lease termination fee received at 919 Third Avenue in 2015 ($1.1 million)~~.

Property Operating Expenses

Property operating expenses increased primarily as a result of higher real estate taxes resulting from higher assessed values and tax rates at our Same-Store Properties ($~~1.9~~3.9 million)., partially offset by the sale of 520 White Plains Road ($0.6 million) in 2017.

Transaction Related Costs

Interest Expense and Amortization of Deferred Financing Costs, Net of Interest Income

Interest expense and amortization of financing costs, net of interest income, ~~decreased~~increased primarily as a result of the refinance of 315 West 33^rd Street in the first quarter of 2017 ($4.9 million), partially offset by a lower weighted average balance of the 2012 revolving credit facility ($~~5.6~~4.6 million). The weighted average consolidated debt balance outstanding ~~was $2.6~~decreased to $3.0 billion for the ~~three~~six months ended ~~September~~June 30, 2017 from $3.5 billion for the six months ended June 30, 2016. The weighted average interest rate was ~~3.85%~~3.87% for the ~~three~~six months ended ~~September~~June 30, 2017 as compared to 3.41% for the six months ended June 30, 2016.

Depreciation and Amortization

Depreciation and amortization increased primarily as a result of ~~the acquisition of 110 Greene Street in July of 2015~~increased capitalized expenditures at our Same-Store Properties ($~~6.9~~2.7 million), partially offset by the sale of ~~an 80% interest~~520 White Plains ($0.8 million) in ~~131-137 Spring Street in the third quarter of 2015 ($1.3 million).~~2017.

Equity in Net Income from Unconsolidated Joint Venture

Equity in net income from unconsolidated joint ventures increased primarily as a result of the contribution of a debt investment to an unconsolidated joint venture in ~~March~~the third quarter of 2016 ($~~1.5~~1.2 million).

~~Gain on sale of real estate~~Depreciable Real Estate Reserves

During the ~~three~~six months ended ~~September~~June 30, ~~2015, we recognized a gain on sale associated with the sale of an 80% interest in 131-137 Spring Street ($101.1 million).~~

~~Depreciable real estate reserves~~

~~During the three months ended September 30, 2015,~~2017, we recorded a ~~$10.0~~$85.3 million charge in connection with 520 White Plains Road in Tarrytown, NY, and 680/750 Washington Boulevard in Stamford, Connecticut. During the ~~expected sale of one of our properties.~~

~~Comparison of the nine~~six months ended ~~September~~June 30, 2016, we recognized depreciable real estate reserves related to ~~the nine months ended September 30, 2015~~

The following section compares the results of operations for the nine months ended September 30, 2016 to the nine months ended September 30, 2015. Any assets sold or held for sale are excluded from income from continuing operations.

(in thousands) 2016 2015
$
Change

%
Change

Rental revenue, net $ 486,350
$ 461,858
$ 24,492
5.3 %
Escalation and reimbursement 78,173
72,080
6,093
8.5 %
Investment income 175,481
136,620
38,861
28.4 %
Other income 2,754
16,392
(13,638 ) (83.2 )%
Total revenues 742,758
686,950
55,808
8.1 %

Property operating expenses 253,481
245,425
8,056
3.3 %
Transaction related costs 343
2,842
(2,499 ) (87.9 )%
Marketing, general and administrative 605
366
239
65.3 %
254,429
248,633
5,796
2.3 %

Operating income 488,329
438,317
50,012
11.4 %

Interest expense and amortization of financing costs, net of interest income (89,320 ) (92,530 ) 3,210
(3.5 )%
Depreciation and amortization (159,365 ) (151,159 ) (8,206 ) 5.4 %
Equity in net income from unconsolidated joint venture 10,399
6,576
3,823
58.1 %
(Loss) gain on sale of real estate (6,899 ) 101,069
(107,968 ) (106.8 )%
Depreciable real estate reserves —
(9,998 ) 9,998
(100.0 )%
Unrealized loss on embedded derivative —
(1,800 ) 1,800
(100.0 )%
Loss on early extinguishment of debt —
(49 ) 49
(100.0 )%
Income from continuing operations 243,144
290,426
(47,282 ) (16.3 )%
Net income from discontinued operations —
—
—
— %
Net income $ 243,144
$ 290,426
$ (47,282 ) (16.3 )%

~~Rental, Escalation and Reimbursement Revenues~~

~~Rental revenue increased primarily as a result of increases in rents and occupancy at our same store properties~~500 West Putnam ($26.2 million), the acquisition of 110 Greene Street in July 2015 ($10.3 million), and increased rental revenue at 752 Madison Avenue resulting from a lease renewal in the fourth quarter of 2015 ($10.1 million). These increases were partially offset by decreased revenues at 115 Spring Street as a result of the accelerated recognition of non-cash deferred income upon terminating the retail lease at the property in 2015 ($5.4 million), and the sale of 140-150 Grand Street in the fourth quarter of 2015 ($2.410.4 million).

~~Escalation and reimbursement revenue increased primarily as a result of higher real estate tax recoveries ($3.2 million), as well as operating cost recoveries ($2.0 million~~).

~~Investment Income~~

Investment income increased primarily as a result of additional income recognized from the recapitalization of a debt investment ($41.0 million). This increase was partially offset by a lower weighted average yield and balance during the first nine months of 2016. For the nine months ended September 30, 2016, the weighted average debt and preferred equity investment balance outstanding and weighted average yield were $1.5 billion and 9.8%, respectively, compared to $1.6 billion and 10.2%, respectively, for the same period in 2015. As of September 30, 2016, the debt and preferred equity investments had a weighted average term to maturity of 1.6 years.

~~Property Operating Expenses~~

~~Property operating expenses increased primarily as a result of higher real estate taxes resulting from higher assessed values and tax rates ($6.7 million).~~

~~Interest Expense and Amortization of Financing Costs, Net of Interest Income~~

Interest expense and amortization of financing costs, net of interest income, increased primarily as a result of a higher weighted average balance of the master repurchase agreement ($4.1 million), offset by a lower weighted average balance of the 2012 revolving credit facility (~~$2.6 million). The weighted average consolidated debt balance outstanding was $3.1 billion for the~~ ~~nine months ended September 30, 2016. The weighted average interest rate was 3.57% for the nine months ended September 30, 2016.~~

~~Depreciation and Amortization~~

Depreciation and amortization increased primarily as a result of the acquisition of 110 Greene Street in the third quarter of 2015 ($9.0 million), partially offset by the sale of an 80% interest in 131-137 Spring Street in the third quarter of 2015 ($2.1 million).

~~Equity in Net Income from Unconsolidated Joint Venture~~

~~Equity in net income from unconsolidated joint ventures increased primarily as a result of the contribution of a debt investment to an unconsolidated joint venture in March 2016 ($3.2 million).~~

~~(Loss)~~ Gain (loss) on Sale of Real Estate

During the ~~nine~~six months ended ~~September~~June 30, 2017, we recognized a gain on the sale of a 90% interest in 102 Greene Street ($4.9 million). During the six months ended June 30, 2016, we recognized a loss on the sale of 7 International Drive, Westchester County, NY ($6.9 million). ~~During the nine months ended September 30, 2015, we recognized a gain on sale associated with the sale of an 80% interest in 131-137 Spring Street ($101.1 million).~~

~~Depreciable Real Estate Reserves~~

~~During the nine months ended September 30, 2015, we recorded a $10.0 million charge in connection with the expected sale of one of our properties.~~

Liquidity and Capital Resources

On January 25, 2007, we were acquired by SL Green. See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" in SL Green and the Operating Partnership's Annual Report on Form 10-K for the year ended December 31, ~~2015~~2016 for a complete discussion of additional sources of liquidity available to us due to our indirect ownership by SL Green.

We currently expect that our principal sources of funds to meet our short-term and long-term liquidity requirements for working capital, ~~and funds for acquisition and~~acquisitions, development or redevelopment of properties, tenant improvements, leasing costs, repurchases or

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repayments of outstanding indebtedness (which may include exchangeable debt) and for debt and preferred equity investments will include:


(1)	~~cash~~Cash flow from operations;


(2)	~~cash~~Cash on hand;


(3)	~~borrowings~~Borrowings under the 2012 credit facility;


(4)	~~other~~Other forms of secured or unsecured financing;


(5)	~~net~~Net proceeds from divestitures of properties and redemptions, participations and dispositions of debt and preferred equity investments; and


(6)	~~proceeds~~Proceeds from debt offerings by us.

Cash flow from operations is primarily dependent upon the occupancy level of our portfolio, the net effective rental rates achieved on our leases, the collectability of rent, operating escalations and recoveries from our tenants and the level of operating and other costs. Additionally, we believe that our debt and preferred equity investment program will continue to serve as a source of operating cash flow.

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

Cash Flows

The following summary discussion of our cash flows is based on our consolidated statements of cash flows in "Item 1. Financial Statements" and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below.

Cash and cash equivalents were ~~$66.2~~$51.0 million and ~~$45.7~~$73.1 million at ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively, representing a ~~increase~~decrease of ~~20.5~~$22.2 million. The ~~increase~~decrease was a result of the following changes in cash flows (in thousands):

Nine Months Ended September 30,
2016 2015 Change
Net cash provided by operating activities $ 303,483
$ 236,425
$ 67,058
Net cash provided by (used in) investing activities $ 64,084
$ (20,207 ) $ 84,291
Net cash used in financing activities $ (351,397 ) $ (205,193 ) $ (146,204 )



	Six Months Ended June 30,
	2017			2016			Change
Net cash provided by operating activities	$	208,585		$	185,362		$	23,223
Net cash (used in) provided by investing activities	$	(176,141	)	$	185,300		$	(361,441	)
Net cash (used in) financing activities	$	(41,396	)	$	(347,545	)	$	306,149

Our principal source of operating cash flow is related to the leasing and operating of the properties in our portfolio. Our properties provide a relatively consistent stream of cash flow that provides us with resources to pay operating expenses, debt service and make distributions to SL Green. At ~~September~~June 30, ~~2016,~~2017, our operating portfolio was ~~92.7%~~91.0% occupied. Our debt and preferred investments also provide a steady stream of operating cash flow to us.

Cash is used in investing activities to fund acquisitions, development or redevelopment projects and recurring and nonrecurring capital expenditures. We selectively invest in new projects that enable us to take advantage of our development, leasing, financing and property management skills and invest in existing buildings that meet our investment criteria. During the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, when compared to the ~~nine~~six months ended ~~September~~June 30, ~~2015,~~2016, we ~~received~~used cash primarily for the following investing activities (in thousands):


Acquisitions of real estate properties	$	109,633
Additions to land, buildings and improvements	(24,521		)	$	1,288
Escrowed cash—capital improvements	(20		)	(368		)
Investments in unconsolidated joint venture	(23,973		)
Investments in unconsolidated joint ventures				713
Distributions in excess of cumulative earnings from unconsolidated joint ventures	(27,130		)	48,001
Net proceeds from disposition of real estate/joint venture interest	(174,276		)	(22,234		)
Other investments	23,243			23,485
Origination of debt and preferred equity investments	(93,832		)	(627,095		)
Repayments or redemption of preferred equity investments	295,167
Increase in net cash provided by investing activities	$	84,291
Repayments or redemption of debt and preferred equity investments				214,769
Decrease in net cash provided by investing activities				$	(361,441	)

Funds spent on capital expenditures, which comprise building and tenant improvements, ~~increased~~decreased from ~~$58.4~~$53.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015 compared~~2016 to ~~$82.9~~$51.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016 and relates~~2017, relating primarily to ~~increased~~decreased costs incurred in connection with the redevelopment of properties.

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We generally fund our investment activity through the sale of real estate, property-level financing, our 2012 credit facility, our MRA facilities, and senior unsecured ~~notes and sale of real estate.~~notes. During the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, when compared to the ~~nine~~six months ended ~~September~~June 30, ~~2015,~~2016, we used cash for the following financing activities (in thousands):


Proceeds from mortgages and other loans payable	$	(299,635	)	$	250,000
Repayments of mortgages and other loans payable	115,345			119,165
Proceeds from credit facility and senior unsecured notes	(869,700		)
Repayments of credit facility and senior unsecured notes	(793,601		)
Proceeds from revolving credit facility and senior unsecured notes				372,800
Repayments of revolving credit facility and senior unsecured notes				791,508
Distributions to noncontrolling interests in other partnerships	637			(24		)
Contributions from noncontrolling interests in other partnerships	(9,400		)
Contributions from common unitholder	1,799,450			(1,021,703		)
Distributions to common and preferred unitholders	(128,177		)	(135,621		)
Other obligations related to loan participations	34,150			(66,500		)
Deferred loan costs and capitalized lease obligation	4,727			(3,476		)
Increase in net cash used in financing activities	$	(146,204	)
Decrease in net cash used in financing activities				$	306,149

Capitalization

All of our issued and outstanding Class A common units are owned by Wyoming Acquisition GP LLC or the Operating Partnership.

~~Corporate~~ Indebtedness

2012 Credit Facility

~~In August 2016, we entered into an amendment to the credit facility that was originally entered into by the Company in November 2012, referred to as the 2012 credit facility.~~ As of ~~September 30, 2016, the 2012 credit facility, as amended, consisted of a $1.6 billion revolving credit facility and a $1.2 billion term loan, with a maturity date of March 29, 2019 and~~ June 30, 2019, respectively. The revolving credit facility has an as-of-right extension to March 29, 2020. We also have an option, subject to customary conditions, to increase the capacity under the revolving credit facility to $3.0 billion at any time prior to the maturity date for the revolving credit facility without the consent of existing lenders, by obtaining additional commitments from our existing lenders and other financial institutions.

As of September 30, 2016, the 2012 credit facility bore interest at a spread over LIBOR ranging from (i) 87.5 basis points to 155 basis points for loans under the revolving credit facility and (ii) 95 basis points to 190 basis points for loans under the term loan facility, in each case based on the credit rating assigned to the senior unsecured long term indebtedness of ROP.

At September 30, 2016, the applicable spread was 125 basis points for the revolving credit facility and 140 basis points for the term loan facility. At September 30, 2016, the effective interest rate was 1.73% for the revolving credit facility and 1.90% for the term loan facility. We are required to pay quarterly in arrears a 12.5 to 30 basis point facility fee on the total commitments under the revolving credit facility based on the credit rating assigned to the senior unsecured long term indebtedness of ROP. As of September 30, 2016, the facility fee was 25 basis points.

~~As of September 30, 2016,~~2017, we had ~~$56.5~~$80.8 million of outstanding letters of credit, ~~zero~~$200.0 million drawn under the revolving credit facility and $1.2 billion outstanding under the term loan facility, with total undrawn capacity of ~~$1.5~~$1.3 billion under the 2012 credit facility. At ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, the revolving credit facility had a carrying value of ~~$(6.9)~~$195.1 million ~~representing deferred financing costs presented within other liabilities,~~ and ~~$985.1~~$(6.3) million, respectively, net of deferred financing costs. The December 31, 2016 carrying value represents deferred financing costs and is presented within other liabilities. At ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, the term loan facility had a carrying value of $1.2 billion and ~~$929.5 million,~~$1.2 billion, respectively, net of deferred financing costs.

The 2012 credit facility includes certain restrictions and covenants (see Restrictive Covenants below).

~~Senior Unsecured Notes~~

The following table sets forth our senior unsecured notes and other related disclosures as of September 30, 2016 and December 31, 2015, respectively, by scheduled maturity date (dollars in thousands):

Issuance September 30,
2016
Unpaid
Principal
Balance September 30,
2016
Accreted
Balance
December 31,
2015
Accreted
Balance

Coupon
Rate ⁽¹⁾

Effective
Rate

Term
(in Years)
Maturity Date
August 5, 2011 ⁽²⁾
250,000
249,862
249,810
5.00 % 5.00 % 7 August 2018
March 16, 2010 ⁽²⁾
250,000
250,000
250,000
7.75 % 7.75 % 10 March 2020
November 15, 2012 ⁽²⁾
200,000
200,000
200,000
4.50 % 4.50 % 10 December 2022
December 17, 2015 ⁽²⁾
100,000
100,000
100,000
4.27 % 4.27 % 10 December 2025
March 31, 2006 ⁽³⁾
—
—
255,296

$ 800,000
$ 799,862
$ 1,055,106

Deferred financing costs, net (4,942 ) (5,303 )

$ 794,920
$ 1,049,803


~~(1)~~	~~Interest on the senior unsecured notes is payable semi-annually with principal and unpaid interest due on the scheduled maturity dates.~~


~~(2)~~	~~Issued by SL Green, the Operating Partnership and ROP, as co-obligors.~~


~~(3)~~	~~This note was repaid in March 2016.~~

~~ROP also provides a guaranty of the Operating Partnership's obligations under its 3.00% Exchangeable Senior Notes due 2017.~~

Restrictive Covenants

Interest Rate Risk

We are exposed to changes in interest rates primarily from our variable rate debt. Our exposure to interest rate ~~changes~~fluctuations are managed through either the use of interest rate derivative instruments and/or through our variable rate debt and preferred equity investments. A hypothetical 100 basis point increase in interest rates along the entire interest rate curve for ~~2016~~2017 would decrease our annual interest cost, net of interest income from variable rate debt and preferred equity investments, by approximately ~~$6.1~~$4.4 million. At ~~September~~June 30, ~~2016, $1.2 billion~~2017, 61.0% of our ~~$1.8~~$2.0 billion debt and preferred equity portfolio is indexed to LIBOR.

We recognize most derivatives on the balance sheet at fair value. Derivatives that are not hedges are adjusted to fair value through income. If a derivative is considered a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedged asset, liability, or firm commitment through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value is immediately recognized in earnings.

~~We have $2.1~~

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Our long-term debt of $2.3 billion ~~of long term debt that~~ bears interest at fixed rates, and therefore the fair value of these instruments is affected by changes in the market interest rates. Our variable rate debt as of ~~September~~June 30, ~~2016~~2017 bore interest based on a spread of LIBOR plus ~~140~~125 basis points to LIBOR plus ~~273~~313 basis points.

Contractual Obligations

Refer to our ~~2015~~2016 Annual Report on Form 10-K for a discussion of our contractual obligations. There have been no material changes, outside the ordinary course of business, to these contractual obligations during the three and ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2017.

Off-Balance Sheet Arrangements

We have off-balance sheet investments, including debt and preferred equity investments. These investments all have varying ownership structures. Our off-balance sheet arrangements are discussed in Note 5, ~~"Preferred~~"Debt and Preferred Equity ~~Investments and Other~~ Investments," in the accompanying consolidated financial statements.

Capital Expenditures

We estimate that for the remainder of the year ending December 31, ~~2016,~~2017, we expect to incur ~~$2.5~~$17.4 million of recurring capital expenditures and ~~$16.6~~$53.1 million of development or redevelopment expenditures, net of loan reserves, (including tenant improvements and leasing commissions) on existing consolidated properties. ~~We expect to fund these capital expenditures with operating cash flow, additional property level mortgage financings and cash on hand.~~ Future property acquisitions may require substantial capital investments for refurbishment and leasing costs. We expect to fund these capital expenditures with operating cash flow, existing liquidity, or incremental borrowings. We expect our capital needs over the next ~~twelve-months~~twelve months and thereafter will be met through a combination of cash on hand, net cash provided by operations, ~~borrowings,~~ potential asset sales, borrowings, or additional debt issuances.

~~Related Party Transactions~~

~~Cleaning/ Security/ Messenger and Restoration Services~~

Alliance Building Services, or Alliance, and its affiliates are partially owned by Gary Green, a son of Stephen L. Green, the chairman of SL Green's board of directors, and provide services to certain properties owned by us. Alliance’s affiliates include First Quality Maintenance, L.P., or First Quality, Classic Security LLC, Bright Star Couriers LLC and Onyx Restoration Works, and provide cleaning, extermination, security, messenger, and restoration services, respectively. In addition, First Quality has the non-exclusive opportunity to provide cleaning and related services to individual tenants at our properties on a basis separately negotiated with any tenant seeking such additional services. An affiliate of ours has entered into an arrangement with Alliance whereby it will receive a profit participation above a certain threshold for services provided by Alliance to certain tenants at certain buildings above the base services specified in their lease agreements. Income earned from profit participation, which is included in other income on the consolidated statements of operations, was $0.8 million and $2.5 million for both the three and nine months ended September 30, 2016 and 2015.

We also recorded expenses for these services, inclusive of capitalized expenses, of $1.2 million and $6.0 million for the three and nine months ended September 30, 2016, respectively, (excluding services provided directly to tenants), and $2.7 million and $6.7 million for the three and nine months ended September 30, 2015, respectively.

~~Allocated Expenses from SL Green~~

Property operating expenses include an allocation of salary and other operating costs from SL Green based on square footage of the related properties. Such amount was approximately $2.8 million and $8.2 million for the three and nine months ended September 30, 2016, respectively. The amount was $2.4 million and $7.4 million for the three and nine months ended September 30, 2015, respectively.

Insurance

ROP is insured through a program administered by SL Green. SL Green maintains “all-risk” property and rental value coverage (including coverage regarding the perils of flood, earthquake and ~~terrorism)~~terrorism, excluding nuclear, biological, chemical, and radiological terrorism ("NBCR")), within three property insurance ~~portfolios~~programs and liability insurance. ~~The first property portfolio maintains a blanket limit~~Management believes the policy specifications and insured limits are appropriate given the relative risk of ~~$950.0 million per occurrence, including terrorism, for~~loss, the ~~majority~~cost of the ~~New York City properties in our portfolio~~coverage, and ~~expires December 31, 2015. The second portfolio maintains a limit of $1.5 billion per occurrence, including terrorism, for several New York City properties~~industry practice. Separate property and the majority of the Suburban properties and expires December 31, 2016. Each of these policies includes $100.0 million of flood coverage, with a lower sublimit for locations in high hazard flood zones. A third blanket property policy covers most of our residential assets and maintains a limit of $386.0 million per occurrence, including terrorism, for our residential properties and expires January 31, 2018. We maintain two liability policies which cover all our properties and provide limits of $201.0 million per occurrence and in the aggregate per location. The liability policies expire on October 31, 2016 and January 31, 2017 and cover our commercial and residential properties, respectively. Additional coverage may be purchased on a stand-alone basis for certain assets.

~~In October 2006, SL Green formed a wholly-owned taxable REIT subsidiary, Belmont Insurance Company, or Belmont, to act as a captive insurance company and be one of~~On January 12, 2015, the elements of our overall insurance program. Belmont is a subsidiary of SL Green. Belmont was formed in an effort to, among other reasons, stabilize to some extent the fluctuations of insurance market conditions. Belmont is licensed in New York to write Terrorism ~~NBCR (nuclear, biological, chemical, and radiological), General Liability, Environmental Liability, and D&O coverage.~~

~~The Terrorism Risk Insurance Act, or TRIA, which was enacted in November 2002, was renewed December 31, 2005 and again on December 31, 2007. Congress extended TRIA, now called TRIPRA (Terrorism~~ Risk Insurance Program Reauthorization and Extension Act of ~~2007) until December 31, 2014. TRIPRA was not renewed by Congress and expired on December 31, 2014. However, on January 12, 2015, TRIPRA~~2007 ("TRIPRA") (formerly the Terrorism Risk Insurance Act) was reauthorized until December 31, 2020 ~~(Terrorism~~pursuant to the Terrorism Insurance Program Reauthorization and Extension Act of ~~2015).The law~~2015. The TRIPRA extends the federal Terrorism Insurance Program that requires insurance companies to offer terrorism coverage and provides for compensation for insured losses resulting from acts of certified terrorism, subject to the current program trigger of ~~$100.0~~$120.0 million, which will increase by ~~$20~~$20.0 million per annum, commencing December 31, ~~2015.~~ 2015 (Trigger). Coinsurance under TRIPRA is 16%, increasing 1% per annum, as of December 31, 2015 (Coinsurance). There are no assurances TRIPRA will be further extended.

In October 2006, SL Green formed a wholly-owned taxable REIT subsidiary, Belmont Insurance Company, or Belmont, to act as a captive insurance company and as one of the elements of our overall insurance program. Belmont is a subsidiary of SL Green. Belmont was formed in an effort to, among other reasons, mitigate fluctuations in the insurance marketplace. Belmont is licensed in New York to write Terrorism, NBCR (nuclear, biological, chemical, and radiological), General Liability, Environmental Liability and D&O coverage.

Our debt instruments, consisting of ~~a non-recourse~~ mortgage ~~note~~loans secured by ~~one of~~ our properties (which are generally non-recourse to us), mezzanine loans, ground leases, our 2012 credit facility, senior unsecured notes and other corporate obligations, ~~as well as ground leases,~~ contain customary covenants requiring us to maintain insurance. Although we believe that we currently maintain sufficient insurance coverage to satisfy these obligations, there is no assurance that in the future we will be able to procure coverage at a reasonable cost. In such instances, there can be no assurance that the lenders or ground lessors under these instruments will not take the position that a total or partial exclusion from “all-risk” insurance coverage for losses due to, for example, terrorist acts is a breach of these debt and ground lease instruments allowing the lenders or ground lessors to declare an event of default and accelerate repayment of debt or recapture of ground lease positions. In addition, if lenders ~~prevail in asserting~~require greater coverage that we are ~~required~~unable to ~~maintain full coverage for these risks, it could result in~~obtain at commercially reasonable rates, we may incur substantially higher insurance ~~premiums.~~premiums or our ability to finance our properties and expand our portfolio may be adversely impacted.

~~We monitor all~~Furthermore, with respect to certain of our properties, ~~where~~including properties held by joint ventures, or subject to triple net leases, insurance coverage is obtained by a ~~third party~~third-party and we do not control the ~~coverage to ensure that tenants or other~~coverage. While we may have agreements with such third parties ~~as applicable, are providing~~to maintain adequate ~~coverage. Certain joint ventures may be covered under policies separate from our policies, at~~ coverage ~~limits which~~and we ~~deem to be adequate. We continually~~ monitor these ~~policies.~~policies, such coverage ultimately may not be maintained or adequately cover our risk of loss. We may have less protection than with respect to the properties where we obtain coverage directly. Although we consider our insurance coverage to be appropriate, in the event of a major catastrophe, we may not have sufficient coverage to replace certain properties.

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We obtained insurance coverage through an insurance program administered by SL Green. In connection with this program, we incurred insurance expense of approximately ~~$1.5~~$1.4 million ~~$4.4~~and $2.8 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016, respectively.~~2017. We incurred insurance expense of approximately ~~$1.7~~$1.4 million and ~~$5.0~~$3.0 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016.

Inflation

Substantially all of our office leases provide for separate real estate tax and operating expense escalations as well as operating expense recoveries based on increases in the Consumer Price Index or other measures such as porters' wage. In addition, many of

the leases provide for fixed base rent increases. We believe that inflationary increases will be at least partially offset by the contractual rent increases and expense escalations described above.

Accounting Standards Updates

The Accounting Standards Updates are discussed in Note 2, "Significant Accounting Policies-Accounting Standards Updates" in the accompanying consolidated financial statements.

Forward-Looking Information

This report includes certain statements that may be deemed to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and are intended to be covered by the safe harbor provisions thereof. All statements, other than statements of historical facts, included in this report that address activities, events or developments that we expect, believe or anticipate will or may occur in the future, including such matters as future capital expenditures, dividends and acquisitions (including the amount and nature thereof), development trends of the real estate industry and the Manhattan, Brooklyn, Westchester County, Connecticut, Long Island and New Jersey office markets, business strategies, expansion and growth of our operations and other similar matters, are forward-looking statements. These forward-looking statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate.

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

Forward-looking statements contained in this report are subject to a number of risks and uncertainties that may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by forward-looking statements made by us. These risks and uncertainties include:

the effect of general economic, business and financial conditions, and their effect on the New York City real estate market in particular;

dependence upon certain geographic markets;

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

risks relating to debt and preferred equity investments;

availability and creditworthiness of prospective tenants and borrowers;

bankruptcy or insolvency of a major tenant or a significant number of smaller tenants;

adverse changes in the real estate markets, including reduced demand for office space, increasing vacancy, and increasing availability of sublease space;

availability of capital (debt and equity);

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

~~the Company's~~our ability to comply with financial covenants in our debt instruments;

~~SL Green's~~our ability to maintain its status as a REIT;

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

the threat of terrorist attacks;

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

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legislative, regulatory and/or safety requirements adversely affecting REITs and the real estate business including costs of compliance with the Americans with Disabilities Act, the Fair Housing Act and other similar laws and regulations.

Other factors and risks to our business, many of which are beyond our control, are described in other sections of this report and in our other filings with the SEC. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of future events, new information or otherwise.

~~The risks included here are not exhaustive. Other sections~~

Table of this report may include additional factors that could adversely affect ROP's business and financial performance. In addition, sections of SL Green and the Operating Partnership's Annual Report on Form 10-K for the year ended December 31, 2015 contain additional factors that could adversely affect our business and financial performance. Moreover, ROP operates in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on ROP's business or the extent to which any factor, or combination of factors, may cause actual results to differ materiallyContents

~~from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

For quantitative and qualitative disclosure about market risk, see Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operation-Interest Rate Risk" in this Quarterly Report on Form 10-Q for the three and six months ended ~~September~~June 30, ~~2016~~2017 and Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016. Our exposures to market risk have not changed materially since December 31, ~~2015.~~2016.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including the principal executive officer and principal financial officer of our general partner, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of "disclosure controls and procedures" in Rule 13a-15(e) of the Exchange Act. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within ROP to disclose material information otherwise required to be set forth in our periodic reports.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including the President and Treasurer of our general partner, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation as of the end of the period covered by this report, the President and Treasurer of our general partner concluded that our disclosure controls and procedures were effective to give reasonable assurances to the timely collection, evaluation and disclosure of information relating to ROP that would potentially be subject to disclosure under the Exchange Act and the rules and regulations promulgated thereunder.

Changes in Internal Control over Financial Reporting

There have been no significant changes in our internal control over financial reporting during the quarter ended ~~September~~June 30, ~~2016~~2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

As of ~~September~~June 30, ~~2016,~~2017, we were not involved in any material litigation nor, to management's knowledge, was any material litigation threatened against us or our ~~portfolio.~~portfolio which if adversely determined could have a material adverse impact on us.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in “Part I. Item 1A. Risk Factors” in our ~~2015~~2016 Annual Report on Form 10-K. We encourage you to read “Part I. Item 1A. Risk Factors” in the ~~2015~~2016 Annual Report on Form 10-K for SL Green Realty Corp., our indirect parent company.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS


(a)	Exhibits:



31.1		Certification of Marc Holliday, President of Wyoming Acquisition GP LLC, the sole general partner of the Registrant, pursuant to Rule 13a-14(a) or Rule 15(d)-14(a), filed herewith.
31.2		Certification of Matthew J. DiLiberto, Treasurer of Wyoming Acquisition GP LLC, the sole general partner of the Registrant, pursuant to Rule 13a-14(a) or Rule 15(d)-14(a), filed herewith.
32.1		Certification of Marc Holliday, President of Wyoming Acquisition GP LLC, the sole general partner of the Registrant, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, filed herewith.
32.2		Certification of Matthew J. DiLiberto, Treasurer of Wyoming Acquisition GP LLC, the sole general partner of the Registrant, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, filed herewith.
101.1		The following financial statements from Reckson Operating Partnership, L.P.’s Quarterly Report on Form 10-Q for the three months ended ~~September~~June 30, ~~2016,~~2017, formatted in XBRL: (i) Consolidated Balance Sheets (unaudited), (ii) Consolidated Statements of Operations (unaudited), (iii) Consolidated Statements of Comprehensive Income (unaudited), (iv) Consolidated Statement of Capital (unaudited), (v) Consolidated Statements of Cash Flows (unaudited), and (vi) Notes to Consolidated Financial Statements (unaudited), detail tagged and filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	RECKSON OPERATING PARTNERSHIP, L.P.

	BY: WYOMING ACQUISITION GP LLC
	By:	/s/ MATTHEW J. DILIBERTO
		Matthew J. DiLiberto Treasurer

Date: ~~November~~August 14, ~~2016~~2017

4039



Type	September 30, 2016 Future Funding Obligations		September 30, 2016 Senior Financing		September 30, 2016 Carrying Value ⁽¹⁾		December 31, 2015 Carrying Value ⁽¹⁾		Initial Mandatory Redemption
Preferred equity	$	—	$	71,486	$	9,978	$	9,967	March 2018
Preferred equity	—		59,034		37,867		32,209		November 2018
	$	—	$	130,520	$	47,845	$	42,176



	Amount of Gain Recognized in Other Comprehensive Loss (Effective Portion)					Location of Loss Reclassified from Accumulated Other Comprehensive Loss into Income	Amount of Loss Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)				Location of Gain Recognized in Income on Derivative	Amount of Gain Recognized into Income (Ineffective Portion)
	Three Months Ended September 30,						Three Months Ended September 30,					Three Months Ended September 30,
Derivative	2016		2015				2016		2015			2016		2015
Interest Rate Swap	$	—	$	(30	)	Interest expense	$	90	$	252	Interest expense	$	—	$	1