RECKSON OPERATING PARTNERSHIP LP - FORM 10-Q - November 14, 2014

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________________  
FORM 10-Q
_________________________________________________________ 
 
ý      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
For the quarterly period ended September 30, 2014
 
o         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.  See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
Accelerated filer o
 
 
Non-accelerated filer x
Smaller Reporting Company o
(Do not check if a smaller reporting company)
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES o  NO ý
 
As of November 12, 2014, 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

 
 
Page
PART I.
FINANCIAL INFORMATION
 
 
 
 
 
 
 
 
 
 



1

PART I.     FINANCIAL INFORMATION
ITEM 1.     Financial Statements
Reckson Operating Partnership, L.P.
Consolidated Balance Sheets
(unaudited, in thousands)

 
September 30, 2014
 
December 31, 2013
 
 
 
(as adjusted)
Assets
 
 
 
Commercial real estate properties, at cost:
 
 
 
Land and land interests
$
1,335,812

 
$
1,086,327

Building and improvements
3,985,981

 
4,044,636

Building leasehold and improvements
781,420

 
782,260

Property under capital lease
—

 
22,866

 
6,103,213

 
5,936,089

Less: accumulated depreciation
(943,472
)
 
(857,265
)
 
5,159,741

 
5,078,824

Cash and cash equivalents
33,250

 
45,871

Restricted cash
26,464

 
27,865

Tenant and other receivables, net of allowance of $4,243 and $4,148 in 2014 and 2013, respectively
23,268

 
17,732

Deferred rents receivable, net of allowance of $14,059 and $15,587 in 2014 and 2013, respectively
156,710

 
163,902

Preferred equity and other investments, net of discounts and deferred origination fees of $1,052 and $1,772 in 2014 and 2013, respectively
396,017

 
369,364

Deferred costs, net of accumulated amortization of $60,303 and $53,254 in 2014 and 2013, respectively
98,253

 
92,164

Other assets
122,982

 
92,398

Total assets
$
6,016,685

 
$
5,888,120

Liabilities
 
 
 
Mortgage note and other loans payable
$
550,000

 
$
629,266

Revolving credit facility
244,000

 
220,000

Term loan and senior unsecured notes
1,737,973

 
1,430,792

Accrued interest payable and other liabilities
24,216

 
28,051

Accounts payable and accrued expenses
55,200

 
41,869

Deferred revenue
140,929

 
154,614

Capitalized lease obligation
—

 
27,223

Deferred land leases payable
391

 
21,621

Security deposits
24,872

 
24,590

Total liabilities
2,777,581

 
2,578,026

Commitments and contingencies
—

 
—

Capital
 
 
 
General partner capital
2,894,139

 
2,963,296

Limited partner capital
—

 
—

Accumulated other comprehensive loss
(3,313
)
 
(3,981
)
Total ROP partner's capital
2,890,826

 
2,959,315

Noncontrolling interests in other partnerships
348,278

 
350,779

Total capital
3,239,104

 
3,310,094

Total liabilities and capital
$
6,016,685

 
$
5,888,120


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

2

Reckson Operating Partnership, L.P.
Consolidated Statements of Income
(unaudited, in thousands)

 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2014
 
2013
 
2014
 
2013
 
 
 
 
(as adjusted)
 
 
 
(as adjusted)
Revenues
 
 
 
 
 
 
 
 
Rental revenue, net
 
$
119,136

 
$
111,068

 
$
354,878

 
$
329,982

Escalation and reimbursement
 
21,271

 
20,334

 
58,129

 
54,950

Investment income
 
8,702

 
9,424

 
26,754

 
28,620

Other income
 
1,104

 
624

 
2,301

 
3,613

Total revenues
 
150,213

 
141,450

 
442,062

 
417,165

Expenses
 
 
 
 
 
 
 
 
Operating expenses, including $5,121 and $14,063 (2014) and $4,687 and $13,258 (2013) of related party expenses
 
33,090

 
31,849

 
96,557

 
90,569

Real estate taxes
 
28,062

 
24,377

 
79,677

 
69,667

Ground rent
 
2,711

 
2,712

 
8,134

 
8,332

Interest expense, net of interest income
 
27,313

 
28,065

 
80,709

 
81,187

Amortization of deferred financing costs
 
1,369

 
1,379

 
4,136

 
3,984

Depreciation and amortization
 
42,267

 
37,782

 
130,334

 
111,968

Transaction related costs
 
1,218

 
6

 
2,206

 
37

Marketing, general and administrative
 
76

 
88

 
242

 
276

Total expenses
 
136,106

 
126,258

 
401,995

 
366,020

Income from continuing operations before equity in net income from unconsolidated joint ventures and loss on early extinguishment of debt
 
14,107

 
15,192

 
40,067

 
51,145

Equity in net income from unconsolidated joint ventures
 
868

 
480

 
1,962

 
1,327

Loss on early extinguishment of debt
 
—

 
—

 
(519
)
 
(76
)
Income from continuing operations
 
14,975

 
15,672

 
41,510

 
52,396

Net (loss) income from discontinued operations
 
(58
)
 
1,622

 
1,996

 
5,732

(Loss) gain on sale of discontinued operations
 
(250
)
 
13,787

 
117,579

 
13,787

Net income
 
14,667

 
31,081

 
161,085

 
71,915

Net income attributable to noncontrolling interests in other partnerships
 
(841
)
 
(1,399
)
 
(1,703
)
 
(4,511
)
Net income attributable to ROP common unitholder
 
$
13,826

 
$
29,682

 
$
159,382

 
$
67,404

Amounts attributable to ROP common unitholder:
 
 
 
 
 
 
 
 
Net income from continuing operations
 
$
14,134

 
$
14,273

 
$
39,807

 
$
47,885

Discontinued operations
 
(308
)
 
15,409

 
119,575

 
19,519

Net income attributable to ROP common unitholder
 
$
13,826

 
$
29,682

 
$
159,382

 
$
67,404


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

3

Reckson Operating Partnership, L.P.
Consolidated Statements of Comprehensive Income
(unaudited, in thousands)

 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2014
 
2013
 
2014
 
2013
 
 
 
 
(as adjusted)
 
 
 
(as adjusted)
Net income attributable to ROP common unitholder
 
$
13,826

 
$
29,682

 
$
159,382

 
$
67,404

Other comprehensive income:
 
 
 
 
 
 
 
 
Change in net unrealized gain on derivative instruments
 
275

 
85

 
668

 
755

Comprehensive income attributable to ROP common unitholder
 
$
14,101

 
$
29,767

 
$
160,050

 
$
68,159

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


4

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
 
Total
Capital
Balance at December 31, 2013, as adjusted
$
2,963,296

 
$
—

 
$
350,779

 
$
(3,981
)
 
$
3,310,094

Contributions
1,305,408

 
—

 
—

 
—

 
1,305,408

Distributions
(1,533,947
)
 
—

 
(4,204
)
 
—

 
(1,538,151
)
Net income
159,382

 
—

 
1,703

 
—

 
161,085

Other comprehensive income
—

 
—

 
—

 
668

 
668

Balance at September 30, 2014
$
2,894,139

 
$
—

 
$
348,278

 
$
(3,313
)
 
$
3,239,104


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


5

Reckson Operating Partnership, L.P.
Consolidated Statements of Cash Flows
(unaudited, in thousands)

 
Nine Months Ended September 30,
 
2014
 
2013
 
 
 
(as adjusted)
Operating Activities
 
 
 
Net income
$
161,085

 
$
71,915

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
134,903

 
120,316

Equity in net income from unconsolidated joint venture
(1,962
)
 
(1,327
)
Distributions of cumulative earnings from unconsolidated joint venture
1,773

 
591

Gain on sale of discontinued operations
(117,579
)
 
(13,787
)
Loss on early extinguishment of debt
519

 
76

Deferred rents receivable
(12,528
)
 
(13,732
)
Other non-cash adjustments
(30,431
)
 
(35,414
)
Changes in operating assets and liabilities:
 
 
 
Restricted cash—operations
1,401

 
(3,035
)
Tenant and other receivables
(5,673
)
 
(3,746
)
Deferred lease costs
(6,466
)
 
(11,177
)
Other assets
(24,208
)
 
(21,944
)
Accounts payable, accrued expenses and other liabilities and security deposits
448

 
(6,037
)
Deferred revenue and deferred land leases payable
7,725

 
9,334

Net cash provided by operating activities
109,007

 
92,033

Investing Activities
 
 
 
Acquisitions of real estate property
(202,870
)
 
—

Additions to land, buildings and improvements
(54,076
)
 
(40,529
)
Restricted cash—capital improvements/acquisitions
—

 
(211,053
)
Net proceeds from disposition of real estate
137,059

 
211,048

Other investments
(40,000
)
 
(19,831
)
Origination of preferred equity investments
—

 
(5,089
)
Redemption of preferred equity investments
25,827

 
—

Net cash used in investing activities
(134,060
)
 
(65,454
)
Financing Activities
 
 
 
Repayments of mortgage note and other loans payable
(79,243
)
 
(226
)
Proceeds from revolving credit facility, term loan and senior unsecured notes
1,136,400

 
843,938

Repayments of revolving credit facility, term loan and senior unsecured notes
(805,298
)
 
(574,000
)
Contributions from common unitholder
1,301,408

 
988,360

Distributions to noncontrolling interests in other partnerships
(4,204
)
 
(9,597
)
Distributions to common unitholder
(1,533,947
)
 
(1,276,638
)
Deferred loan costs and capitalized lease obligation
(2,684
)
 
(93
)
Net cash provided by (used in) financing activities
12,432

 
(28,256
)
Net decrease in cash and cash equivalents
(12,621
)
 
(1,677
)
Cash and cash equivalents at beginning of period
45,871

 
34,035

Cash and cash equivalents at end of period
$
33,250

 
$
32,358

 
 
 
 
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
 
 
 
Tenant improvements and capital expenditures payable
$
6,367

 
$
2,400

Deferred leasing payable
12,927

 
1,122

Change in fair value of hedge
400

 
469

Capital leased asset
—

 
10,657

Contributions from common unit holder
4,000

 
11,503

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

6

Reckson Operating Partnership, L.P.
Notes to Consolidated Financial Statements
September 30, 2014
(unaudited)

1. Organization and Basis of Presentation
Reckson Operating Partnership, L.P., or ROP, commenced operations on June 2, 1995 and became a wholly-owned subsidiary of SL Green Operating Partnership, L.P., or the Operating Partnership, on January 25, 2007. The sole general partner of ROP is a wholly-owned subsidiary of the Operating Partnership. The sole limited partner of ROP is the Operating Partnership. The Operating Partnership is 96.25% owned by SL Green Realty Corp., or SL Green, as of September 30, 2014. 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 real estate properties, principally office properties and also owns land for future development, located in New York City, Westchester County and Connecticut, which collectively is also known as the New York Metropolitan area.
SL Green transferred a property with total assets of $98.7 million in May 2014 and two additional properties with total assets of $195.4 million in September 2014 to ROP. Under the business combinations guidance (Accounting Standard Codification 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 value 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 30, 2014, we owned the following properties in the New York Metropolitan area, primarily in midtown Manhattan, a borough of New York City. Our investments in the New York Metropolitan area also include investments in Westchester County and Connecticut, which are collectively known as the Suburban properties:
Location
 
Type
 
Number of
Properties
 
 
Square Feet
 
Weighted Average Occupancy(1)
Commercial:
 
 
 
 
 
 
 
 
 
Manhattan
 
Office
 
11

 
 
6,444,400

 
94.1
%
 
 
Retail
 
3

(2) 
 
343,692

 
98.4
%
 
 
Development/Redevelopment
 
1

 
 
104,000

 
72.5
%
 
 
Fee Interest
 
1

 
 
176,530

 
100.0
%
 
 
 
 
16

 
 
7,068,622

 
94.2
%
Suburban
 
Office
 
20

 
 
3,417,900

 
80.2
%
Total commercial properties
 
 
 
36

 
 
10,486,522

 
89.6
%
Residential:
 
 
 
 
 
 
 
 
 
Manhattan
 
Residential
 
—

(2) 
 
222,855

 
96.1
%
Total portfolio
 
 
 
36

 
 
10,709,377

 
89.8
%
______________________________________________________________________
(1)
The weighted average occupancy for commercial properties represents the total occupied square feet divided by total available rentable square feet.  The weighted average occupancy for residential properties represents the total occupied units divided by total available units.
(2)
As of September 30, 2014, we owned a building that was comprised of 270,132 square feet of retail space and 222,855 square feet of residential space. For the purpose of this report, we have included the building as part of retail properties and have shown the square footage under its respective classifications.

As of September 30, 2014, we also held preferred equity investments with a book value of $355.8 million and other investments accounted for under the equity method with a book value of $40.2 million.

7
Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2014
(unaudited)

Basis of Quarterly Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, 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 U.S. GAAP 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 30, 2014 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, 2014. 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, 2013.
The consolidated balance sheet at December 31, 2013 has been derived from the audited financial statements as of that date, and adjusted for the transfer of three properties to ROP in 2014 but does not include all the information and footnotes required by U.S. GAAP for complete financial statements. Also, as a result of the transfer of these three properties to ROP, the consolidated statements of income and comprehensive income for the three and nine months ended September 30, 2013, statement of cash flow for the nine months ended September 2013 and related financial information have been adjusted to furnish comparative information.
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 or as preferred equity investments. See Note 5, "Preferred Equity and Other Investments." ROP's 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. 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.
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 was modified to present earnings and other comprehensive income attributed to controlling and noncontrolling interests.
We assess the accounting treatment for each joint venture 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 from us, 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 our joint venture. Our joint venture agreements typically contain certain protective rights such as the requirement of 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 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 and without interest charges for consolidated properties) 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 their carrying value or fair value less costs to sell. We do not believe that the values of any of our consolidated properties were impaired at September 30, 2014.

8
Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2014
(unaudited)

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 above- and below-market leases and origination costs associated with the in-place 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. 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 range from one to 14 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 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 increases of $4.9 million, $16.0 million, $6.8 million and $20.2 million in rental revenue for the three and nine months ended September 30, 2014 and 2013, respectively, 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. In March 2014, we recognized income of $0.3 million for the amortization of the remaining value of below-market rate mortgage at 16 Court Street, Brooklyn, as a result of early repayment of debt. Excluding this one-time income, we recognized an increase in interest expense for the amortization of the above-market rate mortgages assumed of $0.1 million and $0.4 million for both the three and nine months ended September 30, 2014 and 2013, respectively.
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 30, 2014 and December 31, 2013 (in thousands):
 
September 30, 2014
 
December 31, 2013
 
 
 
(as adjusted)
Identified intangible assets (included in other assets):
 
 
 
Gross amount
$
254,824

 
$
221,615

Accumulated amortization
(173,726
)
 
(147,069
)
Net
$
81,098

 
$
74,546

Identified intangible liabilities (included in deferred revenue):
 
 
 
Gross amount
$
428,100

 
$
420,261

Accumulated amortization
(295,849
)
 
(268,375
)
Net
$
132,251

 
$
151,886

Investments in Unconsolidated Joint Ventures
We may originate loans for real estate acquisition, development and construction, or ADC arrangements, where we expect to receive some or all of the residual profit. When the risk and rewards of these ADC arrangements are essentially the same as an investor or joint venture partner, we account for these ADC arrangements as real estate investments under the equity method of accounting for investments, which is included in preferred equity and other investments on the consolidated balance sheets. Otherwise, we account for these ADC arrangements consistent with our loan accounting for our debt and preferred equity investments.

9
Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2014
(unaudited)

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 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 we have no substantial economic involvement with the buyer.
Interest income on preferred equity investments is accrued based on the outstanding principal amount and contractual terms of the instruments and when, in the opinion of management, it is deemed collectible. Some of the 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 are 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 a reduction 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 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 preferred equity investment at a discount with the intention of foreclosing on the collateral, we do not accrete the discount. Anticipated exit fees, whose collection is expected, are also recognized over the term of the loan as an adjustment to yield.
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 preferred equity investment is resumed when such non-accrual 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.

10
Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2014
(unaudited)

We may syndicate a portion of the loans that we originate or sell these loans individually. When a transaction meets the criteria of 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, 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 investment income on the consolidated statement of income. Any fees received at the time of sale or syndication are recognized as part of investment income.
Income Taxes
No provision has been made for income taxes in the accompanying consolidated financial statements since such taxes, if any, are the responsibility of the individual partners.
Reserve for Possible Credit Losses
The expense for possible credit losses in connection with 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, considering delinquencies, loss experience and collateral quality. Other factors considered relate to geographic trends and product diversification, the size of the portfolio and current economic conditions. Based upon these factors, we establish the provision for possible credit 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 each of the three and nine months ended September 30, 2014 and 2013.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Fair Value Measurements
See Note 9, "Fair Value Measurements."
Concentrations of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash investments, 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 preferred equity investments is located in New York City. See Note 5, "Preferred Equity and Other 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 and the costs associated with re-tenanting a space. Although the properties in our real estate portfolio are primarily located in Manhattan, we also have Suburban properties located in Westchester County and Connecticut. The tenants located in our buildings operate in various industries. Other than two tenants who account for 5.2% and 3.5% of our share of annualized cash rent, respectively, no other tenant in our portfolio accounted for more than 3.3% of our annualized cash rent for the three months ended September 30, 2014. For the three months ended September 30, 2014, 20.6%, 10.2%, 10.2%, 9.2% and 8.7% of our annualized cash rent was attributable to 1185 Avenue of the Americas, 750 Third Avenue, 919 Third Avenue, 1350 Avenue of the Americas, and 810 Seventh Avenue, respectively.
Reclassification
Certain prior year balances have been reclassified to conform to our current year presentation primarily in order to eliminate discontinued operations from income from continuing operations and include the transfer of three properties in 2014.
Accounting Standards Updates
In May 2014, the Financial Accounting Standards Board, or 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

11
Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2014
(unaudited)

that reflects the consideration to which we expect to be entitled in exchange for those goods and services (Accounting Standards Update, or ASU, No. 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. The guidance is effective for annual and interim periods beginning after December 15, 2016 and early adoption is not permitted. 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 is currently evaluating the new guidance to determine the impact it may have on our consolidated financial statements.
In April 2014, the FASB issued new guidance on reporting discontinued operations which raises the threshold for disposals to qualify as discontinued operations (ASU No. 2014-08). The guidance also allows us to have a significant continuing involvement and continuing cash flows with the discontinued operations. Additionally, the guidance requires additional disclosures for discontinued operations and new disclosures for individually material disposal transactions that do not meet the definition of a discontinued operation. The guidance is effective for calendar year public companies beginning in the first quarter of 2015 and is to be applied on a prospective basis for new disposals. Early adoption of this guidance is permitted. The Company will adopt this standard beginning in the first quarter of 2015. The adoption of this guidance will change the presentation of discontinued operations but will not have a material impact on our consolidated financial statements.
3. Property Acquisitions
In September 2014, we acquired the fee interest at 635 Madison Avenue for $153.7 million. We are currently in the process of analyzing the purchase price allocation and, as such, we have not allocated any value to intangible assets.
In July 2014, we acquired the retail condominium at 115 Spring Street for $53.1 million. We are currently in the process of analyzing the purchase price allocation and, as such, we have not allocated any value to intangible assets.
In November 2013, we acquired a mixed-use residential and commercial property located at 315 West 33rd Street, New York, New York for $386.8 million. Based on our preliminary analysis of the purchase price, we allocated $116.0 million and $270.8 million to land and building, respectively. During the three months ended March 31, 2014, we finalized the purchase price allocation based on a third party appraisal and additional facts and circumstances that existed at the acquisition date and reclassified $33.2 million and $7.8 million to values for above-market and in-place leases and below-market leases, respectively. These adjustments did not have a material impact to our consolidated statement of income for the nine months ended September 30, 2014.

4. Property Dispositions
In May 2014, we sold our leasehold interest in 673 First Avenue for $145.0 million and recognized a gain on sale of $117.6 million.
Discontinued operations included the results of operations of real estate assets under contract or sold prior to September 30, 2014. This included 673 First Avenue, which was sold in May 2014, and 333 West 34th Street, which was sold in August 2013.

12
Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2014
(unaudited)

The following table summarizes net income from discontinued operations for the three and nine months ended September 30, 2014 and 2013 (in thousands):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2014
 
2013
 
2014
 
2013
Revenues
 
 
 
 
 
 
 
 
Rental revenue, net
 
$
—

 
$
6,137

 
$
7,853

 
$
24,122

Escalation and reimbursement revenues
 
—

 
1,358

 
1,080

 
3,299

Other income
 
—

 
11

 
—

 
15

Total revenues
 
—

 
7,506

 
8,933

 
27,436

Operating expenses
 
58

 
1,414

 
1,222

 
5,730

Real estate taxes
 
—

 
1,167

 
1,402

 
3,558

Ground rent
 
—

 
2,196

 
3,001

 
5,778

Interest expense, net of interest income
 
—

 
645

 
879

 
2,274

Depreciation and amortization
 
—

 
462

 
433

 
4,364

Total expenses
 
58

 
5,884

 
6,937

 
21,704

Net (loss) income from discontinued operations
 
$
(58
)
 
$
1,622

 
$
1,996

 
$
5,732

5. Preferred Equity and Other Investments
As of September 30, 2014 and December 31, 2013, we held the following preferred equity investments, with an aggregate weighted average current yield of 9.76% at September 30, 2014 (in thousands):
Type
 
September 30, 2014
Senior Financing
 
September 30, 2014
Carrying value(1)
 
December 31, 2013
Carrying value(1)
 
Initial
Mandatory
Redemption
Preferred equity(2)
 
$
550,000

 
$
121,158

 
$
115,198

 
July 2015
Preferred equity(2)
 
926,260

 
224,720

 
218,330

 
July 2016
Preferred equity
 
70,000

 
9,950

 
9,940

 
November 2017
Preferred equity(3)
 
—

 
—

 
25,896

 

 
 
$
1,546,260

 
$
355,828

 
$
369,364

 
 
__________________________________________________________________
(1)
Carrying value is net of discounts and deferred origination fees.
(2)
The difference between the pay and accrual rates is included as an addition to the principal balance outstanding.
(3)
This preferred equity investment was redeemed in April 2014.
At September 30, 2014 and December 31, 2013, all preferred equity investments were performing in accordance with the terms of the relevant investments.
In March 2014, we closed on a $40.0 million preferred equity investment, which has a repayment date of March 2016, subject to three one-year extension options and a two-year option for the last extension. As a result of meeting the criteria of a real estate investment under the guidance for ADC arrangements, we have accounted for this wholly owned investment under the equity method of accounting. As of September 30, 2014, the book value of this investment was $40.2 million.

In January 2013, we, along with our joint venture partner, formed a joint venture that held a preferred equity interest in an entity that owns a retail property located in Manhattan. We held a 40.0% interest or $20.0 million initial investment in the joint venture which was accounted for under the equity method of accounting. In December 2013, the preferred equity investment was redeemed and its net proceeds were distributed to us and our joint venture partner.


13
Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2014
(unaudited)

6. Mortgage Note and Other Loans Payable
The first mortgage note and other loans payable collateralized by the property, assignment of leases and investments at September 30, 2014 and December 31, 2013 were as follows (amounts in thousands):
Property
 
Maturity Date
 
Interest
Rate(1)
 
September 30, 2014
 
December 31, 2013
 
 
 
 
 
 
 
 
(as adjusted)
Other loan payable(2)
 
September 2019

 
8.00
%
 
$
50,000

 
$
50,000

919 Third Avenue(3)
 
June 2023

 
5.12
%
 
500,000

 
500,000

16 Court Street(4)
 
—

 
—

 
—

 
79,243

609 Partners, LLC(5)
 
—

 
—

 
—

 
23

 
 
 

 
 

 
$
550,000

 
$
629,266

______________________________________________________________________
(1)
Effective weighted average interest rate for the three months ended September 30, 2014.
(2)
This loan is secured by a portion of a preferred equity investment.
(3)
We own a 51.0% controlling interest in the joint venture that is the borrower on this loan.
(4)
In April 2014, we repaid the loan and incurred a loss on early extinguishment of debt of $0.5 million.
(5)
In April 2014, the remaining 22,658 Series E Preferred Units of the Operating Partnership were canceled.
The gross book value of the property and preferred equity investment collateralizing the mortgage note and other loans payable was $1.5 billion and $1.6 billion at September 30, 2014 and December 31, 2013, respectively.
7. Corporate Indebtedness
2012 Credit Facility
In March 2014, we entered into an amendment to the $1.6 billion credit facility entered into by the Company in November 2012, or the 2012 credit facility, which, among other things, increased the term loan portion of the 2012 credit facility, or the term loan facility by $383.0 million to $783.0 million, decreased the interest-rate margin applicable to the term loan facility by 25 basis points and extended the maturity of the term loan facility from March 30, 2018 to June 30, 2019. In November 2014, we entered into a further amendment to the 2012 credit facility, which increased the term loan facility by $50.0 million to $833.0 million. The 2012 credit facility, as amended, consists of a $1.2 billion revolving credit facility, or the revolving credit facility, and a $833.0 million term loan facility. The revolving credit facility matures in March 2017 and includes two six-month as-of-right extension options, subject to the payment of an extension fee of 10 basis points for each such extension. We also have an option, subject to customary conditions, without the consent of existing lenders, to increase the capacity under the revolving credit facility to $1.5 billion at any time prior to the maturity date for the revolving credit facility, by obtaining additional commitments from our existing lenders and other financial institutions.
The 2012 credit facility bears interest at a spread over LIBOR ranging from (i) 100 basis points to 175 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 our senior unsecured long term indebtedness. At September 30, 2014, the applicable spread was 145 basis points for the revolving credit facility and 140 basis points for the term loan facility. At September 30, 2014, the effective interest rate was 1.61% for the revolving credit facility and 1.64% for the term loan facility. We are required to pay quarterly in arrears a 15 to 35 basis point facility fee on the total commitments under the revolving credit facility based on the credit rating assigned to our senior unsecured long term indebtedness. As of September 30, 2014, the facility fee was 30 basis points. At September 30, 2014, we had $113.3 million of outstanding letters of credit, $244.0 million drawn under the revolving credit facility and $783.0 million outstanding under the term loan facility, with total undrawn capacity of $0.8 billion under the revolving credit facility. In November 2014, an additional $50.0 million was borrowed under the increased term loan facility described above.
In connection with the amendment of the 2012 credit facility, we incurred debt origination and other loan costs of $2.8 million. We evaluated the modification pursuant to ASC 470 and determined that the terms of the amendment were not substantially different from the terms of the previous 2012 credit facility. As a result, these deferred costs and the unamortized balance of the costs previously incurred are amortized through the extended maturity date of the term loan facility.
We, SL Green and the Operating Partnership are all borrowers jointly and severally obligated under the 2012 credit facility. No other subsidiary of SL Green is an obligor under the 2012 credit facility.

14
Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2014
(unaudited)

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, 2014 and December 31, 2013 by scheduled maturity date (amounts in thousands):
Issuance
September 30,
2014
Unpaid Principal Balance
 
September 30,
2014
Accreted Balance
 
December 31,
2013
Accreted Balance
 
Coupon
Rate(1)
 
Effective
Rate
 
Term
(in Years)
 
Maturity Date
March 31, 2006
$
255,308

 
$
255,238

 
$
255,206

 
6.00
%
 
6.00
%
 
10
 
March 31, 2016
August 5, 2011(2)
250,000

 
249,728

 
249,681

 
5.00
%
 
5.00
%
 
7
 
August 15, 2018
March 16, 2010(2)
250,000

 
250,000

 
250,000

 
7.75
%
 
7.75
%
 
10
 
March 15, 2020
November 15, 2012(2)
200,000

 
200,000

 
200,000

 
4.50
%
 
4.50
%
 
10
 
December 1, 2022
June 27, 2005(3)
7

 
7

 
7

 
4.00
%
 
4.00
%
 
20
 
June 15, 2025
August 13, 2004(4)
—

 
—

 
75,898

 


 


 

 

 
$
955,315

 
$
954,973

 
$
1,030,792

 
 

 
 

 
 
 
 
______________________________________________________________________
(1)
Interest on the senior unsecured notes is payable semi-annually with principal and unpaid interest due on the scheduled maturity dates.
(2)
We, SL Green and the Operating Partnership are co-obligors.
(3)
Exchangeable senior debentures which are currently callable at par. In addition, the debentures can be put to us, at the option of the holder at par plus accrued and unpaid interest, on June 15, 2015 and 2020 and upon the occurrence of certain change of control transactions. As a result of the Merger, the adjusted exchange rate for the debentures is 7.7461 shares of SL Green's common stock per $1,000 of principal amount of debentures and the adjusted reference dividend for the debentures is $1.3491.
(4)
In August 2014, these notes were repaid at maturity.

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 minimum amount of tangible net worth, a 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 30, 2014, we were in compliance with all such covenants.

15
Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2014
(unaudited)

Principal Maturities
Combined aggregate principal maturities of mortgage note and other loans payable and term loan and senior unsecured notes as of September 30, 2014, including as-of-right extension options, were as follows (in thousands):
 
 
Scheduled
Amortization
 
Principal
Repayments
 
Revolving Credit Facility
 
Term Loan
and Senior
Unsecured
Notes
 
Total
Remaining 2014
 
$
—

 
$
—

 
—

 
$
—

 
$
—

2015
 
—

 
—

 
—

 
7

 
7

2016
 
3,566

 
—

 
—

 
255,308

 
258,874

2017
 
7,411

 
—

 
—

 
—

 
7,411

2018
 
7,799

 
—

 
244,000

 
250,000

 
501,799

Thereafter
 
39,630

 
491,594

 
—

 
1,233,000

 
1,764,224

 
 
$
58,406

 
$
491,594

 
244,000

 
$
1,738,315

 
$
2,532,315

Consolidated interest expense, excluding capitalized interest, was comprised of the following (in thousands):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2014
 
2013
 
2014
 
2013
 
 
 
 
(as adjusted)
 
 
 
(as adjusted)
Interest expense
 
$
27,320

 
$
28,066

 
$
80,726

 
$
81,191

Interest income
 
(7
)
 
(1
)
 
(17
)
 
(4
)
Interest expense, net of interest income
 
$
27,313

 
$
28,065

 
$
80,709

 
$
81,187

Interest capitalized
 
$
937

 
$
—

 
$
2,835

 
$
—

8. Partners' Capital
Since 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.
9. Fair Value Measurements
We are required to disclose the fair value information about our financial instruments, whether or not recognized in the consolidated balance sheets, for which it is practicable to estimate fair value. 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. The Company’s 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 impairment in real estate investments and preferred equity investments, including intangibles utilizing cash flow projections that apply estimated revenue and expense growth rates, discount rates and capitalization rates, which are classified as Level 3 inputs.
We measure our derivative instruments at fair value on a recurring basis. 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

16
Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2014
(unaudited)

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, 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 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 to their present value using adjusted market interest rates, which is provided by a third-party specialist.
The following table provides the carrying value and fair value of these financial instruments as of September 30, 2014 and December 31, 2013 (in thousands):
 
September 30, 2014
 
December 31, 2013
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
 
 
 
 
 
(as adjusted)
 
(as adjusted)
Preferred equity investments
$
355,828

 
(1)

 
$
369,364

 
(1)

 
 
 
 
 
 
 
 
Fixed rate debt
$
1,534,973

 
$
1,677,881

 
$
1,610,815

 
$
1,714,721

Variable rate debt
997,000

 
1,025,320

 
669,243

 
684,871

 
$
2,531,973

 
$
2,703,201

 
$
2,280,058

 
$
2,399,592

____________________________________
(1)
Preferred equity investments had an estimated fair value ranging from $355.8 million to $391.4 million as of September 30, 2014. As of December 31, 2013, preferred equity investments had an estimated fair value of $400.0 million.
Disclosure about fair value of financial instruments was based on pertinent information available to us as of September 30, 2014 and December 31, 2013. Although we are not aware of any factors that would significantly affect the reasonable fair value amounts, 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.
10. 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 sheet 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 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 will be immediately recognized in earnings.  Reported net income and capital 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 30, 2014, the Company had designated an interest swap agreement on $30.0 million of the 2012 credit facility. The following table summarizes the notional and fair value of our derivative financial instrument at September 30, 2014 based on Level 2 inputs.  The notional value is an indication of the extent of our involvement in these instruments at that time, but does not represent exposure to credit, interest rate or market risks.
 
Notional
Value
(in thousands)
 
Strike
Rate
 
Effective
Date
 
Expiration
Date
 
Balance Sheet Location
Fair
Value
(in thousands)
Interest Rate Swap
$
30,000

 
2.295
%
 
July 2010
 
June 2016
 
Other Liabilities
$
893


17
Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2014
(unaudited)

Gains and losses on terminated hedges are included in the accumulated other comprehensive loss, and are recognized into earnings over the remaining term of the related senior unsecured notes. As of September 30, 2014 and December 31, 2013, the deferred net losses from these terminated hedges, which are included in accumulated other comprehensive loss relating to net unrealized loss on derivative instrument, was approximately $2.4 million and $2.7 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 $1.0 million of the current balance held in accumulated other comprehensive loss will be reclassified into interest expense within the next twelve 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 income for the three months ended September 30, 2014 and 2013 (in thousands):
 
 
Amount of Gain (Loss)
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
 
2014
 
2013
 
 
2014
 
2013
 
 
2014
 
2013
Interest Rate Swaps
 
$
21

 
$
(149
)
 
Interest expense
 
$
254

 
$
234

 
Interest expense
 
$
1

 
$
2

The following table presents the effect of our derivative financial instruments that are designated and qualify as hedging instruments on the consolidated statements of income for the nine months ended September 30, 2014 and 2013 (in thousands):
 
 
Amount of Gain (Loss)
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
 
2014
 
2013
 
 
2014
 
2013
 
 
2014
 
2013
Interest Rate Swaps
 
$
(88
)
 
$
44

 
Interest expense
 
$
756

 
$
711

 
Interest expense
 
$
3

 
$
2

11. Related Party Transactions
Cleaning/ Security/ Messenger and Restoration Services
Through Alliance Building Services, or Alliance, First Quality Maintenance, L.P., or First Quality, provides cleaning, extermination and related services, Classic Security LLC provides security services, Bright Star Couriers LLC provides messenger services, and Onyx Restoration Works provides restoration services with respect to certain properties owned by us. Alliance is partially owned by Gary Green, a son of Stephen L. Green, the chairman of SL Green's board of directors. 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. Our affiliate earned $0.8 million, $2.4 million, $0.7 million and $2.3 million from profit participation for the three and nine months ended September 30, 2014 and 2013, respectively. We recorded expenses of $1.8 million, $4.5 million, $1.9 million and $4.9 million for the three and nine months ended September 30, 2014 and 2013, respectively, for these services (excluding services provided directly to tenants).
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. Allocated expenses were $2.0 million, $5.8 million, $1.8 million and $5.2 million for the three and nine months ended September 30, 2014 and 2013, respectively.

18
Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2014
(unaudited)

Insurance
We obtained a portion of our insurance coverage through an insurance program administered by SL Green. In connection with this program we incurred insurance expense of $1.3 million, $3.9 million, $1.3 million and $3.7 million for the three and nine months ended September 30, 2014 and 2013, respectively.
12. Commitments and Contingencies
Legal Proceedings
We are not presently involved in any material litigation nor, to our knowledge, is any material litigation threatened against us or our properties which could have a material adverse effect on us.
Environmental Matters
Our management believes that 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.
Ground Leases Arrangements
The following is a schedule of future minimum lease payments under noncancellable operating leases with initial terms in excess of one year as of September 30, 2014 (in thousands):
 
 
Non-cancellable
operating leases
Remaining 2014
 
$
3,144

2015
 
10,474

2016
 
10,474

2017
 
10,474

2018
 
10,474

Thereafter
 
272,906

Total minimum lease payments
 
$
317,946


13. Segment Information
We are engaged in acquiring, owning, managing and leasing commercial properties in Manhattan, Westchester County, New Jersey and Connecticut and have two reportable segments, real estate and preferred equity investments. We evaluate real estate performance and allocate resources based on earnings contribution to income from continuing operations.
The primary sources of revenue from our real estate portfolio are generated from tenant rents, 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, "Preferred Equity and Other Investments," for additional details on our preferred equity investments.

19
Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2014
(unaudited)

Selected results of operations for the three and nine months ended September 30, 2014 and 2013, and selected asset information as of September 30, 2014 and December 31, 2013, regarding our operating segments are as follows (in thousands):
 
Real Estate
Segment
 
Preferred
Equity and Other Investments
Segment
 
Total
Company
Total revenues:
 
 
 
 
 
Three months ended:
 
 
 
 
 
September 30, 2014
$
141,511

 
$
8,702

 
$
150,213

September 30, 2013, as adjusted
132,026

 
9,424

 
141,450

Nine months ended:
 
 
 
 
 
September 30, 2014
$
415,308

 
$
26,754

 
$
442,062

September 30, 2013, as adjusted
388,545

 
28,620

 
417,165

Income from continuing operations:
 
 
 
 
 
Three months ended:
 
 
 
 
 
September 30, 2014
$
7,017

 
$
7,958

 
$
14,975

September 30, 2013, as adjusted
7,490

 
8,182

 
15,672

Nine months ended:
 
 
 
 
 
September 30, 2014
$
17,866

 
$
23,644

 
$
41,510

September 30, 2013, as adjusted
27,760

 
24,636

 
52,396

Total assets
 
 
 
 
 
As of:
 
 
 
 
 
September 30, 2014
$
5,619,268

 
$
397,417

 
$
6,016,685

December 31, 2013, as adjusted
5,517,588

 
370,532

 
5,888,120

Income from continuing operations represents total revenues less total expenses for the real estate segment and total investment income and equity in net income from unconsolidated joint venture less allocated interest expense for the preferred equity and other investments segment. Interest costs for the preferred equity segment are imputed assuming 100% leverage at our 2012 credit facility borrowing cost. We also allocate loan loss reserves, net of recoveries, and transaction related costs to the preferred equity and other investments segment. We do not allocate marketing, general and administrative expenses to the preferred equity and other investments segment, since we base performance on the individual segments prior to allocating marketing, general and administrative expenses. All other expenses, except interest, relate entirely to the real estate assets. There were no transactions between the above two segments.
14. Subsequent Events
In November 2014, we entered into an amendment to the 2012 credit facility which increased the term loan facility by $50.0 million to $833.0 million. That additional $50.0 million was borrowed in November 2014. See Note 7, "Corporate Indebtedness."

20

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 and became a wholly-owned subsidiary of SL Green Operating Partnership, L.P., or the Operating Partnership, on January 25, 2007. The sole general partner of ROP is a wholly-owned subsidiary of the Operating Partnership. The sole limited partner of ROP is the Operating Partnership. The Operating Partnership is 96.25% owned by SL Green Realty Corp., or SL Green, as of June 30, 2014. 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 real estate properties, principally office properties and also owns land for future development, located in New York City, Westchester County and Connecticut, which collectively is also known as the New York Metropolitan area.
SL Green transferred a property with total assets of $98.7 million in May 2014 and two additional properties with total assets of $195.4 million in September 2014 to ROP. Under the business combinations guidance (Accounting Standard Codification 805-50), the properties 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 value 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.
The following discussion related to our consolidated financial statements should be read in conjunction with the financial statements appearing in this Quarterly Report on Form 10-Q and in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2013.
As of September 30, 2014, we owned the following properties in the New York Metropolitan area, primarily in midtown Manhattan. Our investments in the New York Metropolitan area also include investments in Westchester County and Connecticut, which are collectively known as the Suburban properties:
Location
 
Type
 
Number of
Properties
 
 
Square Feet
 
Weighted Average Occupancy(1)
Commercial:
 
 
 
 
 
 
 
 
 
Manhattan
 
Office
 
11

 
 
6,444,400

 
94.1
%
 
 
Retail
 
3

(2) 
 
343,692

 
98.4
%
 
 
Development/Redevelopment
 
1

 
 
104,000

 
72.5
%
 
 
Fee Interest
 
1

 
 
176,530

 
100.0
%
 
 
 
 
16

 
 
7,068,622

 
94.2
%
Suburban
 
Office
 
20

 
 
3,417,900

 
80.2
%
Total commercial properties
 
 
 
36

 
 
10,486,522

 
89.6
%
Residential:
 
 
 
 
 
 
 
 
 
Manhattan
 
Residential
 
—

(2) 
 
222,855

 
96.1
%
Total portfolio
 
 
 
36

 
 
10,709,377

 
89.8
%
______________________________________________________________________
(1)
The weighted average occupancy for commercial properties represents the total occupied square feet divided by total available rentable square feet.  The weighted average occupancy for residential properties represents the total occupied units divided by total available units.
(2)
As of September 30, 2014, we owned a building that was comprised of 270,132 square feet of retail space and 222,855 square feet of residential space. For the purpose of this report, we have included the building as part of retail properties and have shown the square footage under its respective classifications.

As of September 30, 2014, we also held preferred equity investments with a book value of $355.8 million and other investments accounted for under the equity method with a book value of $40.2 million.

21

Critical Accounting Policies
Refer to our 2013 Annual Report on Form 10-K 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 nine months ended September 30, 2014.


Results of Operations
As a result of the transfers of three properties by SL Green to ROP in 2014, which were determined to be transfers of businesses between the indirect parent company and its wholly-owned subsidiary under the business combination guidance, prior periods have been retrospectively adjusted to furnish comparative information.
Comparison of the three months ended September 30, 2014 to the three months ended September 30, 2013
The following section compares the results of operations for the three months ended September 30, 2014 to the three months ended September 30, 2013 for the 36 consolidated properties owned by ROP. Any assets sold or held for sale are excluded from the income from continuing operations and from the following discussion.

(in thousands)
 
2014
 
2013
 
$
Change
 
%
Change
 
 
 
 
(as adjusted)
 
 
 
 
Rental revenue, net
 
$
119,136

 
$
111,068

 
$
8,068

 
7.3
 %
Escalation and reimbursement
 
21,271

 
20,334

 
937

 
4.6
 %
Investment income
 
8,702

 
9,424

 
(722
)
 
(7.7
)%
Other income
 
1,104

 
624

 
480

 
76.9
 %
Total revenues
 
150,213

 
141,450

 
8,763

 
6.2
 %
 
 
 
 
 
 
 
 
 
Property operating expenses
 
63,863

 
58,938

 
4,925

 
8.4
 %
Transaction related costs
 
1,218

 
6

 
1,212

 
20,200.0
 %
Marketing, general and administrative
 
76

 
88

 
(12
)
 
(13.6
)%
 
 
65,157

 
59,032

 
6,125

 
10.4
 %
 
 
 
 
 
 
 
 
 
Net operating income
 
85,056

 
82,418

 
2,638

 
3.2
 %
 
 
 
 
 
 
 
 
 
Interest expense and amortization of financing costs, net of interest income
 
(28,682
)
 
(29,444
)
 
762

 
(2.6
)%
Depreciation and amortization
 
(42,267
)
 
(37,782
)
 
(4,485
)
 
11.9
 %
Equity in net income from unconsolidated joint venture
 
868

 
480

 
388

 
80.8
 %
Income from continuing operations
 
14,975

 
15,672

 
(697
)
 
(4.4
)%
Net (loss) income from discontinued operations
 
(58
)
 
1,622

 
(1,680
)
 
(103.6
)%
(Loss) gain on sale of discontinued operations
 
(250
)
 
13,787

 
(14,037
)
 
(101.8
)%
Net income
 
$
14,667

 
$
31,081

 
$
(16,414
)
 
(52.8
)%
Rental, Escalation and Reimbursement Revenues
Occupancy for our Manhattan office portfolio was 94.1% at September 30, 2014 compared to 95.7% at September 30, 2013. Occupancy for our Suburban office portfolio was 80.2% at September 30, 2014 compared to 77.6% at September 30, 2013. At September 30, 2014, 1.3% and 1.4% of the space leased at our consolidated Manhattan and Suburban operating properties, respectively, is expected to expire during the remainder of 2014. Based on our estimates, the current market asking rents on these expected 2014 lease expirations at our consolidated Manhattan operating properties would be approximately 18.3% higher than the existing in-place fully escalated rents while the current market asking rents on all our consolidated Manhattan operating properties would be approximately 8.6% higher than the existing in-place fully escalated rents on leases that are scheduled to expire in all future years. Based on our estimates, the current market asking rents on these expected 2014 lease expirations at our consolidated Suburban operating properties would be approximately 1.7% lower than the existing in-place fully escalated rents

22

while the current market asking rents on all our consolidated Suburban operating properties would be approximately 3.3% higher than the existing in-place fully escalated rents on leases that are scheduled to expire in all future years.
Rental revenues depend on our ability to maintain the occupancy rates of currently leased space and to lease currently available space and space available from unscheduled lease terminations.
Rental revenue and escalation and reimbursement revenue increased primarily as a result of the acquisition of 315 West 33rd Street in November 2013 ($7.6 million).
Property Operating Expenses
Property operating expenses increased primarily as a result of the acquisition of 315 West 33rd Street ($3.7 million) and higher real estate taxes resulting from higher assessed values and tax rates from non-acquisition properties ($1.4 million).
Transaction Related Costs
Transaction related costs for the three months ended September 30, 2014 includes costs incurred relating to the acquisition of 635 Madison and 115 Spring Street in 2014.
Depreciation and Amortization
Depreciation and amortization increased primarily as a result of the acquisition of 315 West 33rd Street ($2.8 million) and 16 Court Street, Brooklyn ($0.7 million). The remaining increase was a result of increased capital expenditures at the non-acquisition properties.
Discontinued Operations
Discontinued operations for the three months ended September 30, 2014 includes post closing adjustments relating to the sale of 673 First Avenue, which was sold in April 2014. Discontinued operations for the three months ended September 30, 2013 includes the gain recognized on the sale of 333 West 34th Street ($13.8 million). Prior period's results of operations of these sold properties were included in the net income from discontinued operations to conform with the current presentation.

23

Results of Operations
Comparison of the nine months ended September 30, 2014 to the nine months ended September 30, 2013
The following section compares the results of operations for the nine months ended September 30, 2014 to the nine months ended September 30, 2013 for the 36 consolidated properties owned by ROP. Any assets sold or held for sale are excluded from the income from continuing operations and from the following discussion.
(in thousands)
 
2014
 
2013
 
$
Change
 
%
Change
 
 
 
 
(as adjusted)
 
 
 
 
Rental revenue, net
 
$
354,878

 
$
329,982

 
$
24,896

 
7.5
 %
Escalation and reimbursement
 
58,129

 
54,950

 
3,179

 
5.8
 %
Investment income
 
26,754

 
28,620

 
(1,866
)
 
(6.5
)%
Other income
 
2,301

 
3,613

 
(1,312
)
 
(36.3
)%
Total revenues
 
442,062

 
417,165

 
24,897

 
6.0
 %
 
 
 
 
 
 
 
 
 
Property operating expenses
 
184,368

 
168,568

 
15,800

 
9.4
 %
Transaction related costs
 
2,206

 
37

 
2,169

 
5,862.2
 %
Marketing, general and administrative
 
242

 
276

 
(34
)
 
(12.3
)%
 
 
186,816

 
168,881

 
17,935

 
10.6
 %
 
 
 
 
 
 
 
 
 
Net operating income
 
255,246

 
248,284

 
6,962

 
2.8
 %
 
 
 
 
 
 
 
 
 
Interest expense and amortization of financing costs, net of interest income
 
(84,845
)
 
(85,171
)
 
326

 
(0.4
)%
Depreciation and amortization
 
(130,334
)
 
(111,968
)
 
(18,366
)
 
16.4
 %
Equity in net income from unconsolidated joint venture
 
1,962

 
1,327

 
635

 
47.9
 %
Loss on early extinguishment of debt
 
(519
)
 
(76
)
 
(443
)
 
582.9
 %
Income from continuing operations
 
41,510

 
52,396

 
(10,886
)
 
(20.8
)%
Net income from discontinued operations
 
1,996

 
5,732

 
(3,736
)
 
(65.2
)%
Gain on sale of discontinued operations
 
117,579

 
13,787

 
103,792

 
752.8
 %
Net income
 
$
161,085

 
$
71,915

 
$
89,170

 
124.0
 %
Rental, Escalation and Reimbursement Revenues
Occupancy for our Manhattan office portfolio was 94.1% at September 30, 2014 compared to 95.7% at September 30, 2013. Occupancy for our Suburban office portfolio was 80.2% at September 30, 2014 compared to 77.6% at September 30, 2013. At September 30, 2014, 1.3% and 1.4% of the space leased at our consolidated Manhattan and Suburban operating properties, respectively, is expected to expire during the remainder of 2014. Based on our estimates, the current market asking rents on these expected 2014 lease expirations at our consolidated Manhattan operating properties would be approximately 18.3% higher than the existing in-place fully escalated rents while the current market asking rents on all our consolidated Manhattan operating properties would be approximately 8.6% higher than the existing in-place fully escalated rents on leases that are scheduled to expire in all future years. Based on our estimates, the current market asking rents on these expected 2014 lease expirations at our consolidated Suburban operating properties would be approximately 1.7% lower than the existing in-place fully escalated rents while the current market asking rents on all our consolidated Suburban operating properties would be approximately 3.3% higher than the existing in-place fully escalated rents on leases that are scheduled to expire in future years.
Rental revenues depend on our ability to maintain the occupancy rates of currently leased space and to lease currently available space and space available from unscheduled lease terminations.
Rental revenue increased primarily as a result of the acquisition of 315 West 33rd Street in November 2013 ($19.9 million) and 16 Court Street, Brooklyn ($3.3 million).
Escalation and reimbursement revenue increased primarily as a result of the acquisition of 315 West 33rd Street ($3.5 million).
Other Income
Other income decreased primarily as a result of lower lease buy-out income ($0.9 million).

24

Property Operating Expenses
Property operating expenses increased primarily as a result of the acquisition of 315 West 33rd Street ($11.0 million) and 16 Court Street, Brooklyn ($1.7 million) and higher real estate taxes resulting from higher assessed values and tax rates from non-acquisition properties ($3.1 million).
Transaction Related Costs
Transaction related costs increased primarily as a result of the acquisition of 635 Madison and 115 Spring Street in 2014.
Depreciation and Amortization
Depreciation and amortization increased primarily as a result of the acquisition of 315 West 33rd Street ($12.9 million) and 16 Court Street, Brooklyn ($2.9 million). The remaining increase was a result of increased capital expenditures at the non-acquisition properties.
Discontinued Operations
Discontinued operations for the nine months ended September 30, 2014 includes the gain recognized on the sale of 673 First Avenue ($117.6 million) and the results of its operations. Discontinued operations for the nine months ended September 30, 2013 includes the gain recognized on the sale of 333 West 34th Street ($13.8 million). The prior period's results of operations for these sold properties were included in the net income from discontinued operations to conform with the current presentation.
Liquidity and Capital Resources
On January 25, 2007, we were acquired by SL Green. See Item 7 "Management's Discussion and Analysis Liquidity and Capital Resources" in SL Green and the Operating Partnership's Annual Report on Form 10-K for the year ended December 31, 2013 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 redevelopment of properties, tenant improvements, leasing costs, repurchases or repayments of outstanding indebtedness (which may include exchangeable debt) and for preferred equity investments will include:
(1)
Cash flow from operations;
(2)
Cash on hand;
(3)
Borrowings under our 2012 credit facility;
(4)
Other forms of secured or unsecured financing;
(5)
Net proceeds from divestitures of properties and redemptions, participations and dispositions of preferred equity investments; and
(6)
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 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 $33.3 million and $32.4 million at September 30, 2014 and 2013, respectively, representing an increase of $0.9 million. The increase was a result of the following changes in cash flows (in thousands):
 
Nine Months Ended September 30,
 
2014
 
2013
 
Increase
(Decrease)
 
 
 
(as adjusted)
 
 
Net cash provided by operating activities
$
109,007

 
$
92,033

 
$
16,974

Net cash used in investing activities
$
(134,060
)
 
$
(65,454
)
 
$
(68,606
)
Net cash provided by (used in) financing activities
$
12,432

 
$
(28,256
)
 
$
40,688


25

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 30, 2014, our Manhattan and Suburban office portfolio were 94.1% and 80.2% occupied, respectively. Our preferred equity investments also provide a steady stream of operating cash flow to us.
Cash is used in investing activities to fund acquisitions, 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 months ended September 30, 2014, when compared to the nine months ended September 30, 2013, we used cash primarily for the following investing activities (in thousands):
Acquisitions of real estate
$
(202,870
)
Capital expenditures and capitalized interest
(13,547
)
Net proceeds from sale of real estate/joint venture interest
(73,989
)
Repayment or redemption of preferred equity and other investments, net of originations or investments
10,747

Restricted cash—capital improvements
211,053

Increase in net cash used in investing activities
$
(68,606
)
Funds spent on capital expenditures, which are comprised of building and tenant improvements, increased from $40.5 million for the nine months ended September 30, 2013 to $54.1 million for the nine months ended September 30, 2014. The increased capital expenditures relate primarily to increased costs incurred in connection with the redevelopment of properties and the build-out of space for tenants resulting from new leasing activity.
We generally fund our investment activity through property-level financing, our 2012 credit facility, senior unsecured notes and sale of real estate. During the nine months ended September 30, 2014, when compared to the nine months ended September 30, 2013, we used cash for the following financing activities (in thousands):
Repayments under our debt obligations
$
(310,315
)
Proceeds from debt obligations
292,462

Contributions from common unitholder
313,048

Distributions to common unitholder and noncontrolling interests
(251,916
)
Deferred loan costs
(2,591
)
Increase in net cash provided by financing activities
$
40,688

Capitalization

Since January 25, 2007, the Operating Partnership has owned all the economic interests in ROP either by direct ownership or by indirect ownership through 100% ownership by our general partner.

Contractual Obligations

Refer to our 2013 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 nine months ended September 30, 2014.


26

Corporate Indebtedness
2012 Credit Facility
In March 2014, we entered into an amendment to the $1.6 billion credit facility, entered into by the Company in November 2012, or the 2012 credit facility, which, among other things, increased the term loan portion of the 2012 credit facility, or the term loan facility, by $383.0 million to $783.0 million, decreased the interest-rate margin applicable to the term loan facility by 25 basis points and extended the maturity of the term loan facility from March 30, 2018 to June 30, 2019. In November 2014, we entered into a further amendment to the 2012 credit facility, which increased the term loan facility by $50.0 million to $833.0 million. The 2012 credit facility, as amended, consists of a $1.2 billion revolving credit facility, or the revolving credit facility, and a $833.0 million term loan facility. The revolving credit facility matures in March 2017 and includes two six-month as-of-right extension options, subject to the payment of an extension fee of 10 basis points for each such extension. We also have an option, subject to customary conditions, without the consent of existing lenders, to increase the capacity under the revolving credit facility to $1.5 billion at any time prior to the maturity date for the revolving credit facility, by obtaining additional commitments from our existing lenders and other financial institutions.
The 2012 credit facility bears interest at a spread over LIBOR ranging from (i) 100 basis points to 175 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 our senior unsecured long term indebtedness. At September 30, 2014, the applicable spread was 145 basis points for the revolving credit facility and 140 basis points for the term loan facility. At September 30, 2014, the effective interest rate was 1.61% for the revolving credit facility and 1.64% for the term loan facility. We are required to pay quarterly in arrears a 15 to 35 basis point facility fee on the total commitments under the revolving credit facility based on the credit rating assigned to our senior unsecured long term indebtedness. As of September 30, 2014, the facility fee was 30 basis points. At September 30, 2014, we had $113.3 million of outstanding letters of credit, $244.0 million drawn under the revolving credit facility and $783.0 million outstanding under the term loan facility, with total undrawn capacity of $0.8 billion under the revolving credit facility. In November 2014, an additional $50.0 million was borrowed under the increased term loan facility described above.
In connection with the amendment of the 2012 credit facility, we incurred debt origination and other loan costs of $2.8 million. We evaluated the modification pursuant to ASC 470 and determined that the terms of the amendment were not substantially different from the terms of the previous 2012 credit facility. As a result, these deferred costs and the unamortized balance of the costs previously incurred are amortized through the extended maturity date of the term loan facility.
We, SL Green and the Operating Partnership are all borrowers jointly and severally obligated under the 2012 credit facility. No other subsidiary of SL Green is an obligor 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 30, 2014 and December 31, 2013 by scheduled maturity date (amounts in thousands):
Issuance
September 30,
2014
Unpaid Principal Balance
 
September 30,
2014
Accreted Balance
 
December 31,
2013
Accreted Balance
 
Coupon
Rate(1)
 
Effective
Rate
 
Term
(in Years)
 
Maturity Date
March 31, 2006
$
255,308

 
$
255,238

 
$
255,206

 
6.00
%
 
6.00
%
 
10
 
March 31, 2016
August 5, 2011(2)
250,000

 
249,728

 
249,681

 
5.00
%
 
5.00
%
 
7
 
August 15, 2018
March 16, 2010(2)
250,000

 
250,000

 
250,000

 
7.75
%
 
7.75
%
 
10
 
March 15, 2020
November 15, 2012(2)
200,000

 
200,000

 
200,000

 
4.50
%
 
4.50
%
 
10
 
December 1, 2022
June 27, 2005(3)
7

 
7

 
7

 
4.00
%
 
4.00
%
 
20
 
June 15, 2025
August 13, 2004(4)
—

 
—

 
75,898

 


 


 

 

 
$
955,315

 
$
954,973

 
$
1,030,792

 
 

 
 

 
 
 
 
______________________________________________________________________
(1)
Interest on the senior unsecured notes is payable semi-annually with principal and unpaid interest due on the scheduled maturity dates.
(2)
We, SL Green and the Operating Partnership are co-obligors.
(3)
Exchangeable senior debentures which are currently callable at par. In addition, the debentures can be put to us, at the option of the holder at par plus accrued and unpaid interest, on June 15, 2015 and 2020 and upon the occurrence of certain change of control transactions. As a result of the Merger, the adjusted exchange rate for the debentures is 7.7461 shares of SL Green's common stock per $1,000 of principal amount of debentures and the adjusted reference dividend for the debentures is $1.3491.
(4)
In August 2014, these notes were repaid at maturity.

27

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 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 minimum amount of tangible net worth, a 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 30, 2014, we were in compliance with all such covenants.
Market Rate Risk
We are exposed to changes in interest rates primarily from our variable rate debt. Our exposure to interest rate changes are managed through either the use of interest rate derivative instruments and/or through our variable rate preferred equity investments. A hypothetical 100 basis point increase in interest rates along the entire interest rate curve for 2014 would increase our annual interest cost, net of interest income from variable rate preferred equity investments, by approximately $9.9 million.
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 $1.5 billion of fixed rate long-term debt, and therefore the fair value of these instruments is affected by changes in the market interest rates. The interest rate on our variable rate debt as of September 30, 2014 was based on LIBOR plus a spread ranging from 140 basis points to 145 basis points.
Off-Balance Sheet Arrangements
We have a number of off-balance sheet investments, including preferred equity investments. These investments all have varying ownership structures. Our off-balance sheet arrangements are discussed in Note 5, "Preferred Equity and Other Investments," in the accompanying consolidated financial statements.
Capital Expenditures
We estimate that for the three months ending December 31, 2014, we expect to incur $33.8 million of our share of recurring capital expenditures and $16.6 million of development expenditures, which are 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 and cash on hand. Future property acquisitions may require substantial capital investments for refurbishment and leasing costs. We expect that these financing requirements will be met in a similar fashion. We believe that we will have sufficient resources to satisfy our capital needs during the next 12-month period.
Thereafter, we expect our capital needs will be met through a combination of net cash provided by operations, borrowings, potential asset sales or additional debt issuances.
Related Party Transactions
Cleaning/ Security/ Messenger and Restoration Services
Through Alliance Building Services, or Alliance, First Quality Maintenance, L.P., or First Quality, provides cleaning, extermination and related services, Classic Security LLC provides security services, Bright Star Couriers LLC provides messenger services, and Onyx Restoration Works provides restoration services with respect to certain properties owned by us. Alliance is partially owned by Gary Green, a son of Stephen L. Green, the chairman of SL Green's board of directors. 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. Our affiliate earned $0.8 million, $2.4 million, $0.7 million and $2.3 million from profit participation for the three and nine months ended September 30, 2014 and 2013, respectively. We recorded expenses of $1.8 million, $4.5 million, $1.9 million and $4.9 million for the three and nine months ended September 30, 2014 and 2013, respectively, for these services (excluding services provided directly to tenants).

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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. Allocated expenses were $2.0 million, $5.8 million, $1.8 million and $5.2 million for the three and nine months ended September 30, 2014 and 2013, respectively.
Insurance
SL Green maintains “all-risk” property and rental value coverage (including coverage regarding the perils of flood, earthquake and terrorism) within three property insurance portfolios and liability insurance. This includes ROP assets. As of September 30, 2014, the first property portfolio maintains a blanket limit of $950.0 million per occurrence, including terrorism, for the majority of the New York City properties in our portfolio and expires December 31, 2014. The second portfolio maintains a limit of $700.0 million per occurrence, including terrorism, for several New York City properties and the majority of the Suburban properties and expires December 31, 2015. 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 $300 million per occurence, including terrorism, for our residential properties and expires January 31, 2015. SL Green maintains 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, 2015 and January 31, 2015 and cover our commercial and residential, 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 the elements of its overall insurance program. 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, Flood, Professional Liability and Employment Practices 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. The law 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 million. There is no assurance that TRIPRA will be extended. Our debt instruments, consisting of mortgage loans secured by our properties (which are generally non-recourse to us), mezzanine loans, ground leases, our 2012 credit facility, senior unsecured notes and other corporate obligations, 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 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 that we are required to maintain full coverage for these risks, it could result in substantially higher insurance premiums.
We obtained insurance coverage through an insurance program administered by SL Green. In connection with this program, we incurred insurance expense of $1.3 million, $3.9 million, $1.3 million and $3.7 million for the three and nine months ended September 30, 2014 and 2013, respectively.
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 may 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, Westchester County and Connecticut office markets, business strategies, expansion and growth of our operations and other similar matters, are forward-

29

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 metropolitan real estate market in particular;
•
dependence upon certain geographic markets;
•
risks of real estate acquisitions, dispositions and developments, including the cost of construction delays and cost overruns;
•
risks relating to 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 ability to comply with financial covenants in our debt instruments;
•
SL Green's 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 continuing threat of terrorist attacks, in particular in the New York Metropolitan area and on our tenants;
•
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 terrorist acts and environmental contamination; and,
•
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 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, 2013 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 materially 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.

30

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-Market Rate Risk" in this Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2014 and Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K for the year ended December 31, 2013. Our exposures to market risk have not changed materially since December 31, 2013.
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. Also, we have an investment in an unconsolidated joint venture. As we do not control this entity, our disclosure controls and procedures with respect to such entity are necessarily substantially more limited than those we maintain with respect to our consolidated subsidiaries.
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 three months ended September 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

31

PART II.    OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS
As of September 30, 2014, we were not involved in any material litigation nor, to management's knowledge, was any material litigation threatened against us or our portfolio other than routine litigation arising in the ordinary course of business or litigation that is adequately covered by insurance.
ITEM 1A.    RISK FACTORS
There have been no material changes to the risk factors disclosed in “Part I. Item 1A. Risk Factors” in our 2013 Annual Report on Form 10-K. We encourage you to read “Part I. Item 1A. Risk Factors” in the 2013 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.


32

ITEM 6.    EXHIBITS

(a)
Exhibits:

10.1
 
Agreement Regarding Additional Term Loan, dated as of November 10, 2014, by and among SL Green Realty Corp., SL Green Operating Partnership, L.P. and Reckson Operating Partnership, L.P., as Borrowers, The Bank of New York Mellon (as Increasing Lender) and Wells Fargo Bank, National Association, as Administrative Agent, filed with the SEC on November 12, 2014.
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 James Mead, 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 James Mead, 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 30, 2014, formatted in XBRL: (i) Consolidated Balance Sheets (unaudited), (ii) Consolidated Statements of Income (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.
 


33

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/ James Mead
 
 
 
 
James Mead
 Treasurer
 
 
 
 
 
Date: November 14, 2014
 
 
 
 


34

RECKSON OPERATING PARTNERSHIP LP Reports