RECKSON SERVICES INDUSTRIES INC, S-1, 1998-01-16

RECKSON SERVICES INDUSTRIES INC
S-1, 1998-01-16

Previous: HOLMES PRODUCTS CORP, S-4, 1998-01-16

Next: COAST FEDERAL LITIGATION CONTINGENT PAYMENT RIGHTS TRUST, 424B4, 1998-01-16

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 16, 1998
REGISTRATION NO. 333-

- ------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

_________________

FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
_________________

RECKSON SERVICES INDUSTRIES INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 6531/9999 PENDING
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD (IRS EMPLOYER
OF INDUSTRIAL IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NO.)
NUMBER)

225 BROADHOLLOW ROAD DONALD J. RECHLER
MELVILLE, NEW YORK 11747 225 BROADHOLLOW ROAD
TELEPHONE: (516) 694-6900 TELEPHONE (516) 694-6900
(ADDRESS AND TELEPHONE NUMBER (NAME, ADDRESS AND TELEPHONE NUMBER
OF REGISTRANT'S PRINCIPAL OF AGENT FOR SERVICE)
EXECUTIVE OFFICES)

-----------------------

Copies to:

THOMAS R. SMITH, JR., ESQ.
EDWARD F. PETROSKY, ESQ.
BROWN & WOOD LLP
ONE WORLD TRADE CENTER
NEW YORK, NEW YORK 10048

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as possible after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933 (the "Securities Act"), check the following box. ( )

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. ( )

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. ( )

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. ( )

If delivery of the prospectus is expected to be made pursuant to Rule
434 under the Securities Act, please check the following box. ( )

CALCULATION OF REGISTRATION FEE

PROPOSED
TITLE OF EACH PROPOSED MAXIMUM
CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO TO BE OFFERING PRICE OFFERING REGISTRATION
BE REGISTERED REGISTERED PER UNIT PRICE(1) FEE
- --------------------------------------------------------------------------

Common Stock,
$0.01 par
value (2) (3) (3) $4,262,982 $1258.00
- --------------------------------------------------------------------------

(1) Computed based on the book value as of January 13, 1998 of the net
assets contributed to the Registrant in accordance with Rule 457 under
the Securities Act.

(2) Each share of Common Stock includes a right to purchase one share of
Preferred Stock of Reckson Services Industries Inc. which, prior to the
occurrence of certain events, will not be exercisable or evidenced
separately from such share of Common Stock.

(3) Omitted pursuant to Rule 457(o) under the Securities Act.

----------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE AS SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

- -----------------------------------------------------------------------------

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION DATED JANUARY 16, 1998

PROSPECTUS

RECKSON SERVICES INDUSTRIES INC.

COMMON STOCK

This Prospectus is being furnished to both the stockholders of Reckson
Associates Realty Corp., a Maryland corporation ("Reckson"), and the limited
partners (the "Limited Partners") of Reckson Operating Partnership, L.P., a
Delaware limited partnership ("Reckson Operating Partnership"), in connection
with the distribution (the "Distribution") by Reckson Operating Partnership
and Reckson of 3,885,400 shares of common stock, par value $.01 per share
(the "RSI Common Stock"), of Reckson Services Industries Inc., a Delaware
corporation ("RSI" or the "Company"). Each share of RSI Common Stock issued
in the Distribution will be accompanied by one Preferred Stock Purchase
Right, the terms of which are described herein.

SEE "RISK FACTORS" BEGINNING ON PAGE 15 OF THIS PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS RELEVANT TO THE OWNERSHIP OF RSI COMMON STOCK.

It is expected that the Distribution will be made on _______, 1998 (the
"Distribution Effective Date"). The Distribution will be made on the basis
of one share of RSI Common Stock for (i) every 11 units of limited partner
interest (the "Units") in Reckson Operating Partnership held by the Limited
Partners on ______, 1998 (the "Record Date") and (ii) every 11 shares of
common stock, $.01 par value (the "Reckson Common Stock"), of Reckson held by
Reckson stockholders on the Record Date. No certificates representing
fractional shares of RSI Common Stock will be issued in connection with the
Distribution. In lieu of such fractional shares, American Stock Transfer &
Trust Company, as Distribution Agent, will pay to any person who would be
entitled to a fractional share of RSI Common Stock an amount of cash (without
interest) equal to $1.10 per share.

No payment need be made by, or will be accepted from, Reckson
stockholders or Limited Partners for the RSI Common Stock to be received by
them in the Distribution. Furthermore, Reckson stockholders will not be
required to surrender or exchange Reckson Common Stock, and Limited Partners
will not be required to surrender or exchange Units, in order to receive RSI
Common Stock.

As a result of certain considerations regarding Reckson's status as a
real estate investment trust under Federal tax laws, ownership by any person
of RSI Common Stock is limited to 9.9% of the number of shares or value of
the RSI Common Stock.

WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES. ANY SUCH OFFERING MAY ONLY
BE MADE BY MEANS OF A SEPARATE PROSPECTUS PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND OTHERWISE IN COMPLIANCE WITH APPLICABLE LAW.

The date of this Prospectus is ( ), 1998.

AVAILABLE INFORMATION

RSI has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to RSI Common Stock. This Prospectus does not contain
all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. For further information, reference is made
hereby to the Registration Statement, exhibits and schedules. Statements
contained herein concerning any documents are not necessarily complete and,
in each instance, reference is made to the copies of such documents filed as
exhibits to the Registration Statement. Each such statement is qualified in
its entirety by such reference. Copies of these documents may be inspected
without charge at the principal office of the Commission at 450 5th Street,
N.W., Washington, D.C. 20549, and at the Regional Offices of the Commission
at 7 World Trade Center, Suite 1300, New York, New York 10048, at Citicorp
Center, Suite 1400, 500 West Madison Street, Chicago, Illinois 60661, and at
5670 Wilshire Boulevard, Suite 1100, Los Angeles, California 90036, and
copies of all or any part thereof may be obtained from the Commission upon
payment of the charges prescribed by the Commission. Copies of such
documents may also be obtained from the Commission's Web Site
(http://www.sec.gov).

Following the Distribution, RSI will be required to comply with the
reporting requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and will file annual, quarterly and other reports with
the Commission. The Company will also be subject to the proxy solicitation
requirements of the Exchange Act and, accordingly, will furnish audited
financial statements to its stockholders in connection with its annual
meetings of stockholders.

NO PERSON IS AUTHORIZED BY RECKSON, RECKSON OPERATING PARTNERSHIP OR RSI
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.

SUMMARY

This summary is qualified by the more detailed information set forth
elsewhere in this Prospectus, which should be read in its entirety, including
the discussion of certain factors set forth under "Risk Factors." Unless the
context requires otherwise, reference to "Reckson" herein includes Reckson,
its predecessors, and its direct and indirect subsidiaries, including Reckson
Operating Partnership and, as the context requires, references to "RSI" or
the "Company" herein include RSI and its direct and indirect subsidiaries.

Distributing Entities Reckson Operating Partnership, L.P., a Delaware
limited partnership, and Reckson Associates Realty
Corp., a Maryland corporation.

Shares to be Distributed Approximately 3,885,400 shares of RSI Common Stock,
representing 95% of the outstanding shares of RSI
Common Stock (subject to reduction to the extent
that cash payments are made in lieu of the issuance
of fractional shares of RSI Common Stock).

Distribution Ratio One share of RSI Common Stock will be distributed to
(i) Reckson stockholders for every 11 shares of
Reckson Common Stock held on __________, 1998 and
(ii) Limited Partners for every 11 Units of Reckson
Operating Partnership held on _________, 1998. No
certificates representing fractional shares of RSI
Common Stock will be issued in connection with the
Distribution. In lieu of fractional shares,
American Stock Transfer & Trust Company, as
Distribution Agent, will pay to any person who would
be entitled to a fractional share of RSI Common
Stock an amount of cash (without interest) equal to
$1.10 per share. No payment need be made by, or
will be accepted from, Reckson stockholders or
Limited Partners for RSI Common Stock to be received
by them in the Distribution. Furthermore, Reckson
stockholders will not be required to surrender or
exchange Reckson Common Stock, and Limited Partners
will not be required to surrender or exchange Units,
in order to receive RSI Common Stock.

Background of, and
Reasons for, the
Distribution RSI has been formed to (i) identify and acquire
interests in operating companies that engage in
businesses that provide services primarily directed
towards occupants of office, industrial and other
property types that Reckson may not be permitted to
provide under Federal tax laws applicable to a real
estate investment trust ("REIT") or that Reckson has
traditionally not performed (collectively, "Real
Estate-Related Services") and (ii) pursue real
estate investment opportunities outside of Reckson's
traditional office and industrial sectors while
creating a "research and development" vehicle for
Reckson to explore and invest in alternative real
estate sectors and thereby providing the potential
for Reckson to incorporate one or more of these
sectors into its core business. RSI has entered
into an agreement with Reckson Operating Partnership
(the "Intercompany Agreement") pursuant to which RSI
and Reckson Operating Partnership have agreed to
provide each other with first opportunity rights in
respect of certain types of transactions and
activities, thereby reducing the potential for
conflicts of interest between the parties by
formalizing their relationship at the outset. It is
anticipated that decisions regarding first
opportunity rights of Reckson will be presented to a
committee of the board of directors of Reckson.

RSI, directly or through its affiliates, intends to
(i) provide various Real Estate-Related Services
to the Reckson Customer Base (as defined below)
and third parties, (ii) invest in and manage
Reckson Strategic Venture Partners, LLC ("RSVP"), a
real estate venture capital fund which has invested
invested, and will continue to focus its investments,
in real estate and real estate-related operating
companies outside of Reckson's traditional office
and industrial sectors and (iii) make or acquire (a)
real estate or real estate-related investments
other than REIT-Qualified Investments (as defined
below) and (b) investments satisfying the Federal
tax laws applicable to REITs ("REIT-Qualified
Investments") made available to Reckson Operating
Partnership that it has chosen not to pursue. RSI,
directly or through its affiliates, may also act as
a lessee and operator of real estate owned by
Reckson Operating Partnership and others. Due to
considerations relating to Reckson's status as a
REIT under Federal tax laws, RSI was initially
formed as a subsidiary in which Reckson Operating
Partnership owned 95% of the outstanding capital
stock in the form of non-voting common stock and
certain Reckson officers owned the remaining 5%
of the outstanding capital stock in the form of
voting common stock. The shares of capital stock
owned by Reckson Operating Partnership and Reckson
officers were acquired at the same per share price.
Immediately prior to the Distribution, the shares of
non-voting common stock owned by Reckson Operating
Partnership will be exchanged by RSI for RSI Common
Stock.

Business Strategy of
RSI SERVICE SECTOR OPERATIONS. RSI will seek to create
and manage a system of interrelated services to be
offered to the marketplace through a centralized
infrastructure. RSI will establish a platform
position in service sectors (each, a "Service
Platform") that present opportunities to provide
Real Estate-Related Services to Reckson Operating
Partnership and its tenants, and the tenants and
customers of RSVP and RSI's other affiliates
(collectively, the "Reckson Customer Base") and
other third parties. RSI's growth strategy is to
acquire primarily established businesses within each
of its targeted Service Platforms and, where
appropriate, to retain the existing management of
such businesses. RSI will seek growth in each
Service Platform by (i) accessing the Reckson
Customer Base as an anchor for growth opportunities
in Reckson's markets (ii) integrating each Service
Platform into RSI's centralized infrastructure and
(iii) acquiring similar businesses or making
additional investments within such Service Platform.

Management believes that there are significant
opportunities to provide Real Estate-Related Services
to the Reckson Customer Base and third parties that
are currently provided by third parties in a more
limited and fragmented manner or not provided at all.
Management also believes that RSI will benefit from
Reckson's relationships with its tenants and from
Reckson's reputation for providing high quality
service to its tenants. RSI will offer to the
marketplace Real Estate-Related Services at a
uniformly high quality level and on competitive
market terms which RSI shall facilitate through its
centralized infrastructure. In support of
this arrangement, the Intercompany Agreement requires
Reckson Operating Partnership to provide RSI with a
right of first opportunity in respect of Real Estate-
Related Service opportunities that it develops or
that otherwise become available to it, as well as to
provide RSI with access to its tenants so that RSI
may offer Real Estate-Related Services directly to
such tenants; provided, however, that RSI must offer
to provide such Real Estate-Related Services to
Reckson Operating Partnership at market rates and on
terms and conditions as attractive as the best
available for comparable services in the market or
those offered by RSI to third parties.

Initial Assets of
RSI RSI's initial investments are comprised of (i) a letter
of intent to acquire a 58.69% interest in On-Site
Ventures L.L.C. ("On-Site"), a company providing
advanced telecommunication systems and services within
commercial and residential buildings, (ii) an option to
acquire a majority equity interest in a privately-held
national executive office suites business, and (iii) the
assets of RSVP (currently ACLC and Dobie Center).

ON-SITE. RSI has entered into a letter of intent to
acquire a 58.69% interest in On-Site, which has been
formed as a joint venture to acquire and hold 100% of
the equity interests of OnSite Access LLC and OnSite
Access Local LLC (collectively, "OSA"). On-Site is
engaged in the business of installing state-of-the-art
telecommunications infrastructure in commercial and
residential buildings and complexes, including wiring,
cabling and transmission equipment, and providing of
telecommunication, computer and Internet services. OSA
commenced operations in February 1997. Under the terms
of the letter of intent, RSI will make an initial
capital commitment of $6.5 million for a 58.69% interest
in On-Site. An entity controlled by Jon L. Halpern, a
director of Reckson who is one of the founders of OSA,
contributed all of the assets used in the On-Site
business, including 100% of the equity interests in OSA,
and owns an interest in On-Site.

OFFICE SUITES COMPANY. RSI has obtained an option from
Reckson Management Group, Inc., a company in which
Reckson Operating Partnership owns a 97% non-voting
interest (the "Reckson Management Company"), to acquire
a majority interest in a holding company (the "Office
Suites Company"), which is currently under contract to
acquire a national office suites business. The
ROPartners Managing Directors (as defined below) each own
a minority interest in the Office Suites Company. RSI's
option to acquire Reckson Management Company's interest
in the Office Suites Company has a five-year term and is
exercisable at any time at a price equal to Reckson
Management Company's cost in acquiring the interest
(estimated to be approximately $( ) million)
plus 8% interest from the date on which Reckson
Management Company acquires its interest in the Office
Suites Company. Management has determined that RSI will
not exercise its option to acquire Reckson Management
Company's interest in the Office Suites Company unless
due diligence and an audit of such company's financial
statements have been completed to its satisfaction.

To the extent RSI exercises its option to acquire the
Office Suites Company, RSI may seek to acquire a
controlling ownership interest in Reckson Executive
Centers LLC. Reckson Executive Centers LLC currently
operates at nine of Reckson's properties encompassing
approximately 100,800 rentable square feet. Reckson
Executive Centers LLC provides tenants with furnished
office suites and on-site support services including
secretarial services, telecommunication services and
conference facilities.

REAL ESTATE VENTURE CAPITAL FUND. RSVP (formerly known
as Reckson Opportunity Partners, L.P. ("ROPartners"))
has acquired an interest in two investments: ACLC and
the Dobie Center. Jon L. Halpern, a director of
Reckson, and Martin Rabinowitz were formerly managing
directors of ROPartners (the "ROPartners Managing
Directors"). The ROPartners Managing Directors will
each own minority interests in ACLC and the Dobie Center
and have certain rights for additional investment in
that platform. The ROPartners Managing Directors will
not have any involvement in the future investments and
operations of RSVP.

ACLC. RSVP has acquired a 331/3% interest in a joint
venture that owns a 76.09% interest in American Campus
Lifestyles Companies, LLC ("ACLC"), a student housing
enterprise which develops, constructs, manages and
acquires on- and off-campus student housing projects,
for $1.51 million. RSVP is
negotiating to acquire an additional interest in such
joint venture. The ROPartners Managing Directors each
own an interest in such joint venture. ACLC currently
manages approximately 3,600 student beds in several
different projects located in Texas, Oklahoma and
Florida.

DOBIE CENTER. RSVP has acquired a 331/3% interest in a
joint venture that owns a 70% interest in the Dobie
Center (the "Dobie Center"), a 27-story off-campus
student housing project located directly opposite the
campus of the University of Texas at Austin, for $3.62
million. The ROPartners Managing Directors each own a
minority interest in such joint venture.

Funding Sources for
RSI Reckson Operating Partnership will establish a five-year
credit facility with RSI (the "RSI Facility") comprised
of two tranches: a tranche of up to $100 million for RSI
to meet its commitment to RSVP (the "RSVP Tranche") and
a $100 million tranche for RSI's other funding needs
(the "RSI Tranche"). Reckson Operating Partnership has
approved the funding of investments of up to $100
million in RSVP, through (i) any capital contributions
made to RSI prior to the Distribution, (ii) advances
under the RSVP Tranche of the RSI Facility or (iii)
joint venture investments in REIT-Qualified Investments
with RSVP.

RSI has entered into a letter of intent which provides
for PWRES to invest up to $200 million in RSVP in the
form of a preferred equity interest, subject to certain
conditions. Such investment by PWRES may be partially
funded by an investment fund that is jointly sponsored
by financier George Soros and PWRES.

Amounts advanced under the RSI Facility and the RSVP
Facility will be used primarily to fund the future
growth of RSI and its subsidiaries.

Management of RSI Donald J. Rechler, Scott H. Rechler and Michael
Maturo (collectively, the "Executive Officers") will
serve as Chairman of the Board and Chief Executive
Officer, President and Chief Operating Officer and
Executive Vice President, Treasurer and Chief
Financial Officer, respectively, of RSI. Each
currently serves in the same capacity at Reckson. In
addition, RSI will establish a management advisory
committee that will serve to assist the Executive
Officers in developing investment strategies and
evaluating investment opportunities. This committee
will consist of Roger Rechler, Mitchell D. Rechler
and Gregg M. Rechler. It is anticipated that
Executive Officers of RSI and members of the
management advisory committee initially will not
receive base salaries from RSI, but will receive
stock options under RSI's stock option plan and may
receive bonuses or other incentive-based
compensation. RSI is actively pursuing the
retention of additional senior management which will
focus on the day-to-day investment activities of
RSI.

Interests of Certain
Officers and Directors
and Affiliates As stated above, the Executive Officers will serve
in similar capacities for both Reckson and RSI. In
addition, Donald J. Rechler, Scott H. Rechler and
Roger Rechler will serve as directors of both
Reckson and RSI. The Executive Officers and the
members of the management advisory committee have a
significant interest in Reckson and RSI through
positions as officers, members of the management
advisory committee and/or directors of Reckson and
RSI and through direct and indirect ownership of
common stock of each of these entities and ownership
of Units of Reckson Operating Partnership. As of
December 31, 1997, the Executive Officers and the
members of the management advisory committee
beneficially owned approximately 11.4% of Reckson,
which interests consist of Reckson Common Stock and
Units of Reckson Operating Partnership, a portion of
which may be held by partnerships or trusts as to
which the Executive Officers and the members of the
management advisory committee have voting control.

Federal Income Tax
Consequences For Reckson stockholders, the Distribution generally
should effectively result in additional taxable
income only to the extent that the value of the RSI
Common Stock distributed by Reckson exceeds the
basis of Reckson Operating Partnership in such RSI
Common Stock. Management anticipates that the
amount of such income will be nominal. As a result,
management further anticipates that, for a typical
Reckson stockholder, the result of the Distribution
will largely be to increase such stockholder's
tax-free return of capital. However, this result
cannot be assured. The Distribution will generally
be taxable to Limited Partners of Reckson Operating
Partnership only if and to the extent that the value
of the RSI Common Stock plus any cash in lieu of
fractional shares distributed to them exceeds their
respective bases in their Units, but certain Limited
Partners may not be required to recognize gain equal
to the full amount of such excess.

Preferred Stock Purchase
Rights Plan of RSI RSI expects to adopt a Preferred Stock Purchase
Rights Plan (the "Rights Plan") on or prior to the
Distribution Effective Date. If so adopted, shares
of RSI Common Stock issued in the Distribution will
also initially represent an equivalent number of
Preferred Stock Purchase Rights of RSI (the
"Rights").

Additional Antitakeover
Provisions Certain provisions of RSI's charter and bylaws, as each
will be in effect on the Distribution Effective Date,
and of the Delaware General Corporation Law (the
"DGCL"), will have the effect of making more difficult a
change of control of RSI in a transaction not approved
by the RSI Board of Directors. These provisions include
(i) a provision for a classified Board, with only
approximately one-third of the Board to be elected in
any year, to serve for three-year terms, (ii) a
requirement that directors be removed only for cause
upon the affirmative vote of holders of at least 80% of
the total voting power, (iii) a prohibition on the
stockholders' ability to call a special meeting, (iv) a
requirement that actions of stockholders be taken at a
meeting of stockholders, rather than by written consent,
(v) an advance notice requirement for stockholders to
make nominations of candidates for directors or to bring
other business before an annual meeting of stockholders,
(vi) a requirement that two-thirds of RSI Common Stock
approve any merger or similar business combination
involving RSI, (vii) a provision that the holder of
"control shares" of RSI acquired in a control share
acquisition have no voting rights with respect to such
control shares except to the extent approved by the vote
of the holders of two-thirds of the RSI Common Stock,
(viii) a limitation on the ownership of RSI Common Stock
by any person or entity of 9.9% of the number of shares
or value of the RSI Common Stock, and (ix) a requirement
that amendments to the foregoing provisions be approved
by the affirmative vote of at least 80% of the total
voting power. The Rights Plan will also make more
difficult a change of control of RSI in a transaction
not approved by the RSI Board of Directors. The Rights
Plan and certain provisions of RSI's charter and by-laws
do not apply to Reckson and its affiliates.

Distribution Agent American Stock Transfer & Trust Company will be the
Distribution Agent for the Distribution.

Record Date ( ), 1998.

Distribution Effective
Date ( ), 1998. Commencing on or about the
Distribution Effective Date, the Distribution Agent
will begin mailing account statements reflecting
ownership of RSI Common Stock to holders of Reckson
Common Stock and Units as of the Record Date.
Reckson stockholders and Limited Partners will not
be required to make any payment or to take any other
action in order to receive the RSI Common Stock to
which they are entitled in the Distribution.

Trading Market There is currently no public market for the RSI
Common Stock. The Company intends to apply to have
the shares of RSI Common Stock approved initially
for quotation and trading on the OTC Bulletin Board
under the symbol " ". Shares of RSI Common Stock
have not been approved for listing on any national
securities exchange or for quotation on any
quotation system, and there can be no assurance that
such shares will be so approved or quoted or that a
public market will develop or provide liquidity.

Post-Distribution
Dividend Policy Following the Distribution, RSI intends to use its
available funds to pursue investment and business
opportunities and, therefore, does not anticipate the
payment of any dividends on RSI Common Stock in the
foreseeable future. Any declaration of dividends will
be subject to the discretion of the RSI Board of
Directors. In addition, payment of dividends on RSI
Common Stock is prohibited under the RSI Facility until
all amounts outstanding thereunder are paid in full and
will also be subject to such limitations as may be
imposed by any other credit facilities or debt
securities that RSI may obtain or issue, as the case may
be, from time to time.

Transfer Agent and
Registrar American Stock Transfer & Trust Company will be the
Transfer Agent and Registrar for the RSI Common
Stock after the Distribution.

Risk Factors Reckson stockholders and Limited Partners should
consider certain factors discussed under "Risk
Factors," including risks associated with the
limited assets that RSI owns, RSI's lack of
operating history, management's lack of experience
in certain sectors in which RSI is expected to
operate, potential conflicts of interest between
Reckson and its affiliates and RSI and its
affiliates, RSI's dependence on Reckson Operating
Partnership, RSI's current limited access to the
capital markets and other funding sources, the
existence of certain antitakeover provisions
applicable to RSI, the limited trading of the RSI
Common Stock and RSI's intention not to pay any
dividends in the foreseeable future.

SUMMARY CONDENSED PRO FORMA FINANCIAL INFORMATION

The following table sets forth certain unaudited summary pro forma
condensed combined financial information for RSI after giving effect to the
acquisition of (1) a 331/3% interest in a joint venture that owns a 76.09%
interest in ACLC and (2) a 58.69% interest in On-Site (collectively the
"Acquired Businesses"), as if they had been consummated, with respect to
statement of operations data, as of January 1, 1996, or, with respect to
balance sheet data as of the date presented. The information presented is
derived from, should be read in conjunction with, and is qualified in its
entirety by reference to, the historical financial statements and the notes
thereto and the unaudited pro forma condensed combined financial data and the
notes thereto appearing elsewhere in this Prospectus. The unaudited summary
pro forma condensed combined financial data have been included for
comparative purposes only and do not purport to be indicative of the results
of operations or financial position which would have been obtained if the
acquisition of the Acquired Businesses had been effected at the dates
indicated or of the financial position or results of operations which may be
obtained in the future. See "RSI Pro Forma Financial Statements."

PRO FORMA
----------------------------
NINE MONTHS
ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
----------------------------

OPERATIONS SUMMARY:
Equity in earnings of Nonconsolidated Joint
Ventures $ 6,886 $ 369,155
Equity in earnings of RO Partners 9,501 -
Management LLC
Total revenues 23,054 369,155
Corporate operating expenses 79,489 100,000
Interest expense 285,660 380,880
Net (loss) (342,095) (111,725)

AS OF
SEPTEMBER 30,
1997
----------------
FINANCIAL POSITION:
Investment in Nonconsolidated Joint $ 3,174,000
Ventures
Investments in RO Partners Management LLC 3,632,001
Total assets 7,875,005
Loan payable to stockholder and affiliate 3,280,627
Total liabilities 3,387,656
Shareholders' equity 4,487,349

RISK FACTORS

Reckson stockholders and Limited Partners should carefully consider and
evaluate all of the information set forth in this Prospectus, including the
risk factors listed below. This Prospectus includes certain statements that
may be deemed to be "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements, other than statements of historical facts, included in this
Prospectus that address activities, events or developments that RSI expects,
believes or anticipates will or may occur in the future, including such
matters as future capital expenditures, dividends, acquisitions (including
the amount and nature thereof), expansion and other development trends of the
real estate or other industries, business strategies, expansion and growth of
the operations of RSI and its affiliates and other such matters, are forward-
looking statements. These statements are based on certain assumptions and
analyses made by RSI in light of its experience and its perception of
historical trends, current conditions, expected future developments and other
factors it believes are appropriate. Such statements are subject to a number
of assumptions, risks and uncertainties, including the risk factors discussed
below, general economic and business conditions, the business opportunities
that may be presented to and pursued by RSI and its affiliates, changes in
laws or regulations and other factors, many of which are beyond the control
of RSI and its affiliates. Reckson stockholders and Limited Partners are
cautioned that any such statements are not guarantees of future performance
and that actual results or developments may differ materially from those
anticipated in the forward-looking statements.

LACK OF OPERATING HISTORY

RSI is newly formed and has no operating history. The financial
information relating to RSI and its affiliates and their respective assets
presented elsewhere in this Prospectus is not necessarily indicative of the
future financial condition or results of operations of RSI and its
affiliates.

LACK OF MANAGEMENT EXPERIENCE

RSI is likely to pursue investments in sectors, either directly or
through RSVP, in which RSI's management has little or no experience, although
it is expected that senior officers of acquired businesses will be retained.
In addition, although RSI's acquisitions of businesses may include retaining
management of such businesses, it is anticipated that in most cases RSI's
management will be actively involved in overall management and control of the
strategic direction of such businesses. With the exception of the senior
officers to be retained by RSI, RSI's management is comprised of officers of
Reckson whose primary focus, unlike that of RSI, is acquiring, developing,
and re-developing suburban office and industrial properties in the New York
"Tri-State" area.

NO ASSURANCE AS TO ABILITY TO MANAGE GROWTH

RSI intends to expand its operations through the acquisition of Real
Estate-Related Services businesses. In addition, RSVP may also expand
rapidly through the acquisition of real estate and real estate operating
companies. The success of RSI's and RSVP's growth strategies will depend, in
large part, on their ability to identify attractive business opportunities
and effectively operate and integrate any newly acquired businesses, as to
which there can be no assurance. The growth plans of RSI and RSVP will
require the participation of, and place demands upon, their management and
operating personnel. The ability to manage future growth effectively will
require the development of operational, financial and management information
systems. If RSI or RSVP is unable to manage its growth effectively, RSI's
business, results of operations and financial condition may be adversely
affected.

RISKS OF GROWTH BY ACQUISITIONS

A significant component of the growth of RSI will be through
acquisition. There can be no assurance that suitable acquisition
opportunities will be available to RSI or its affiliates or that RSI or its
affiliates will not overpay for acquisitions or that such acquisitions will
be efficiently and adequately integrated. There may be significant
competition for targeted acquisitions. Some of the companies in which RSI or
its affiliates acquire an interest may have little or no operating histories,
may have historical operating losses, and have competitors that are larger
and more well capitalized. Certain of the acquisitions of RSI or its
affiliates may be involved in sectors that are subject to increasing
competition. As a result, the costs incurred to acquire or reposition
companies may be significant and may not be recovered. Furthermore, there
can be no assurance that acquisitions will not be dilutive to RSI's earnings.

RESTRICTIONS ON BUSINESS AND FUTURE OPPORTUNITIES

So long as the Intercompany Agreement remains in effect, RSI will be
prohibited from making REIT-Qualified Investments unless Reckson Operating
Partnership has been given the right of first opportunity in respect thereof
and has failed to pursue such investments. In addition, in the event that
any such investment becomes available to an affiliate of RSI, including RSVP,
such affiliate will be required to allow Reckson Operating Partnership to
participate in such investment to the extent of RSI's interest, if any,
therein. RSI's charter provides that one of the corporate purposes of RSI is
to perform its obligations under the Intercompany Agreement. See "Business
- -- The Intercompany Agreement." RSI also has agreed to assist Reckson
Operating Partnership in structuring and consummating any REIT-Qualified
Investment presented to Reckson Operating Partnership which Reckson Operating
Partnership has elected to pursue, on terms determined by Reckson Operating
Partnership. As a result, the business and future opportunities of RSI and
its affiliates are significantly restricted.

DEPENDENCE UPON RECKSON AND RECKSON OPERATING PARTNERSHIP

Due to RSI's restricted corporate purpose and the Intercompany
Agreement, RSI will rely significantly on Reckson for the provision of
management expertise and for the financing of RSI's operations. As a result,
if Reckson was unable to access the financial markets, RSI's ability to
finance its operations would be severely restricted. The RSI Facility
prohibits advances thereunder to the extent such advances would, in the
determination of Reckson, endanger Reckson's status as a REIT. In addition,
if in the future Reckson should fail to qualify as a REIT or have a decline
in its condition (financial or other) or earnings, affairs or prospects,
there is likely to be a substantial adverse effect on RSI's business
opportunities, financial condition and results of operations.

LIMITED FINANCIAL RESOURCES; OBLIGATIONS UNDER FINANCING ARRANGEMENTS;
LIMITED FUTURE FUNDING COMMITMENTS

RSI initially will rely primarily on funds provided to it by Reckson
Operating Partnership in connection with the formation and capitalization of
RSI, including the RSI Facility, in order to finance its operations. In
connection with the formation and capitalization of RSI, RSI will obtain the
RSI Facility from Reckson Operating Partnership pursuant to which it will
have the right, subject to certain conditions, to borrow from Reckson
Operating Partnership up to an aggregate of approximately $100 million in
respect of the RSVP Tranche and $100 million in respect of the RSI Tranche.
Prior to maturity, the RSI Facility will be payable on an interest-only basis
from available cash flow. There can be no assurance that RSI will be able to
satisfy all of its obligations under the RSI Facility. RSI has entered into
a letter of intent which provides for PWRES to invest $200 million
in RSVP in the form of a preferred equity interest. RSI has not received any
commitment with respect to any additional borrowing. Other than under the
RSI Facility, Reckson Operating Partnership is not currently obligated to
provide any additional funds to RSI or to assist it in obtaining additional
financing.

POTENTIAL CONFLICTS OF INTEREST

Donald J. Rechler will serve as Chairman of the Board and Chief
Executive Officer of Reckson and RSI, Scott H. Rechler will serve as the
President and Chief Operating Officer of Reckson and RSI and Michael Maturo
will serve as Executive Vice President, Treasurer and Chief Financial Officer
of Reckson and RSI. Although each of them is committed to the success of
RSI, they are also committed to the success of Reckson. None of Donald J.
Rechler, Scott H. Rechler or Michael Maturo is committed to spending a
particular amount of time on RSI's affairs, nor will any of them devote his
full time to RSI. Six of the members of the RSI Board of Directors will also
be either insiders of RSI or members of the Reckson board of directors. In
addition, it is anticipated that the RSI Board will include one member who is
unaffiliated with RSI and Reckson.

Officers and directors of a corporation owe fiduciary duties to the
stockholders of that corporation. There is a risk that the common membership
of management and members of the Boards of Directors of RSI and Reckson will
lead to conflicts of interest in connection with transactions between the two
companies. However, RSI was formed with the specific purpose of entering
into and performing the Intercompany Agreement with Reckson Operating
Partnership in an effort to avoid conflicts of interest issues by identifying
at the outset which types of opportunities will be pursued by each company.

RISKS OF RELATED PARTY TRANSACTIONS

Jon L. Halpern, a director of Reckson, owns interests in, and may
participate in the operation of, On-Site, ACLC, Dobie and the Office Suites
Company. Management believes that RSI's participation in such investments,
or in the Office Suites Company's case, possible participation, with Mr.
Halpern has been the subject of arm's-length negotiations.

REAL ESTATE INVESTMENT RISKS

Investments in real estate are subject to the risks incident to the
ownership and operation of real estate generally. The yields available from
equity investments in real estate depend on the amount of income generated
and expenses incurred. A commercial property's revenues and value may be
adversely affected by a number of factors, including the national, state and
local economic climate and real estate conditions (such as oversupply of or
reduced demand for space and changes in market rental rates); the perceptions
of prospective tenants of the safety, convenience and attractiveness of the
properties; the ability of the owner to provide adequate management,
maintenance and insurance; the ability to collect on a timely basis all rent
from tenants; the expense of periodically renovating, repairing and reletting
spaces; and increasing operating costs (including real estate taxes and
utilities) which may not be passed through to tenants. Certain significant
expenditures associated with investments in real estate (such as mortgage
payments, real estate taxes, insurance and maintenance costs) are generally
not reduced when circumstances cause a reduction in rental revenues from the
property. If a property is mortgaged to secure the payment of indebtedness
and if the owner is unable to meet its mortgage payments, a loss could be
sustained as a result of foreclosure on the property or the exercise of other
remedies by the mortgagee. In addition, real estate values and income from
properties are also affected by such factors as compliance with laws,
including tax laws, interest rate levels and the availability of financing.
Also, the rentable square feet of commercial property is often affected by
market conditions and may therefore fluctuate over time. In addition, equity
real estate investments are relatively illiquid.

RSI and its affiliates, including RSVP, may engage in the selective
development and construction of real estate properties. Risks associated
with development and construction activities include the risks that:
development opportunities may be abandoned after expending resources to
determine feasibility; construction costs of a project may exceed original
estimates; occupancy rates and rents at a newly completed property may not be
sufficient to make the property profitable; financing may not be available on
favorable terms for development of a property; and construction and lease-up
may not be completed on schedule, resulting in increased debt service expense
and construction costs. Development activities are also subject to risks
relating to the inability to obtain, or delays in obtaining, all necessary
zoning, land-use, building, occupancy and other required governmental permits
and authorizations. In addition, new development activities, regardless of
whether or not they are ultimately successful, typically require a
substantial portion of management's time and attention.

POTENTIAL ENVIRONMENTAL LIABILITY RELATED TO REAL ESTATE

Under various Federal, state and local laws, ordinances and regulations,
an owner of real estate is liable for the costs of removal or remediation of
certain hazardous or toxic substances on or in such property. These laws
often impose such liability without regard to whether the owner knew of, or
was responsible for, the presence of such hazardous or toxic substances. The
cost of any required remediation and the owner's liability therefor as to any
property is generally not limited under such enactments and could exceed the
value of the property and/or the aggregate assets of the owner. The presence
of such substances, or the failure to properly remediate such substances, may
adversely affect the owner's ability to sell or rent such property or to
borrow, using such property as collateral. Persons who arrange for the
disposal or treatment of hazardous or toxic substances may also be liable for
the costs of removal or remediation of such substances at a disposal or
treatment facility, whether or not such facility is owned or operated by such
person. Certain environmental laws govern the removal, encapsulation or
disturbance of asbestos-containing materials ("ACMs") when such materials are
in poor condition, or in the event of renovation or demolition. Such laws
impose liability for release of ACMs into the air and third parties may seek
recovery from owners or operators of real properties for personal injury
associated with ACMs. In connection with the ownership (direct or indirect),
operation, management and development of real properties, RSI and its
affiliates may be considered an owner or operator of such properties or as
having arranged for the disposal or treatment of hazardous or toxic
substances and, therefore, potentially liable for removal or remediation
costs, as well as certain other related costs, including governmental fines
and injuries to persons and property.

RISKS OF OWNERSHIP THROUGH JOINT VENTURES

It is anticipated that RSI and RSVP may hold a significant portion of
their assets through joint ventures. Joint venture investments may, under
certain circumstances, involve risks not otherwise present, including the
possibility that the partners or co-venturer might become bankrupt, that such
partners or co-venturer might at any time have economic or other business
interests or goals which are inconsistent with the business interests or
goals of RSI and its affiliates, and that such partners or co-venturer may be
in a position to take action contrary to their instructions or their requests
and contrary to their policies or objectives. Such investments may also have
the potential risk of impasse on decisions, such as a sale, because neither
RSI or its affiliates nor the partner or co-venturer would have full control
over the partnership or joint venture. Consequently, actions by such partner
or co-venturer might result in subjecting properties owned by the partnership
or joint venture to additional risk. RSI and its affiliates will, however,
seek to maintain sufficient control of such partnerships or joint ventures to
permit their business objectives to be achieved. There is no limitation
under RSI's organizational documents as to the amount of available funds that
may be invested in partnerships or joint ventures.

RISKS ASSOCIATED WITH RSVP

RSVP is a real estate venture capital fund formed to invest in real
estate and real estate-related operating companies. RSI may invest up to
$100 million in RSVP, and a subsidiary of RSI will serve as the managing
member of RSVP. Neither Reckson nor RSI has previously sponsored a real
estate venture capital fund. Investments of RSVP may include, among other
things, investments in companies in an early stage of development that have
historical operating losses. In addition, decreases in values in the
property markets, volatility in the securities markets, interest rate
increases and unfavorable conditions in the economy generally, and in the
real estate industry in particular, may have a negative impact on the
performance of RSVP.

RSI has entered into a letter of intent for the $200 million RSVP
Facility from PWRES, which may be partially funded by an investment fund that
is jointly sponsored by financier George Soros and PWRES. Under the terms of
the RSVP Facility, RSVP will be subject to various covenants and events of
default and related remedies. Such remedies include increased control rights
of PWRES over the operation of RSVP under certain circumstances. In
addition, PWRES and such investment fund, if applicable, will receive a
priority or preferred distribution from the operations of RSVP prior to the
distribution of cash to RSI. It is anticipated that certain of RSVPs'
investment professionals will be entitled to a portion of the profits of the
managing member of RSVP after RSI has obtained a return of its capital plus a
minimum return thereon. This may cause such professionals to identify
investments involving greater risk in seeking higher profits. Any
investments identified by such professionals are subject to the approval of
RSI.

RISKS ASSOCIATED WITH THE STUDENT HOUSING SECTOR

The student housing business is a fragmented sector undergoing rapid
development and change. In addition to traditional real estate risks, risks
in respect of student housing include economic, social, governmental and
demographic factors as they relate to the number of students attending
colleges and universities in need of student housing. Student housing
facilities are to a large extent reliant upon the well-being of the colleges
or universities to which such facilities relate and may be subject to
competition from such colleges and universities as well as other providers of
student housing.

ABSENCE OF A PUBLIC MARKET FOR RSI COMMON STOCK; VOLATILE TRADING PRICES

There is currently no public market for the RSI Common Stock. The
Company intends to apply to have the shares of RSI Common Stock approved
initially for quotation and trading on the OTC Bulletin Board under the
symbol " ". Shares of RSI Common Stock have not been approved for
listing on any national securities exchange or for quotation on any quotation
system, and there can be no assurance that such shares will be so approved or
quoted, or that a public market will develop or provide liquidity.
Furthermore, there can be no assurance as to the prices at which trading in
RSI Common Stock will occur after the Distribution. Until the RSI Common
Stock is fully distributed and if and until a regular trading market
develops, the prices at which trading in the RSI Common Stock occurs may
fluctuate significantly. In the event a regular trading market fails to
develop for the RSI Common Stock, holders of the RSI Common Stock may not be
able to sell their shares promptly at a desired price. Accordingly, holders
of the RSI Common Stock should consider an investment therein to be
long-term.

ABSENCE OF DIVIDENDS ON RSI COMMON STOCK FOLLOWING THE
DISTRIBUTION

Following the Distribution, RSI intends to use its available funds to
pursue investment and business opportunities and, therefore, does not
anticipate the payment of any dividends on RSI Common Stock in the
foreseeable future.

Payment of dividends on RSI Common Stock is prohibited under the RSI
Facility until all amounts outstanding thereunder have been paid in full and
will also be subject to such limitations as may be imposed by any other
credit facilities and debt securities that RSI may obtain or issue, as the
case may be, from time to time. See "Dividend Policy."

RELIANCE ON KEY PERSONNEL

The success of RSI and its affiliates depends to a significant degree
upon the contribution of the Executive Officers, its management advisory
committee and other key personnel, including the investment professionals
employed by RSVP. None of the Executive Officers or members of the
management advisory committee has an employment agreement with RSI; two of
the investment professionals of RSVP have entered into employment contracts
with RSVP. There can be no assurance that RSI and its affiliates will be
able to retain their key managerial and other personnel or to attract
suitable replacements or additional personnel if required. Neither RSI nor
any of its affiliates has obtained key-man insurance for any of its executive
officers, members of its management advisory committee or other key
personnel.

CERTAIN ANTITAKEOVER PROVISIONS

RSI's charter and bylaws, the Rights Plan and applicable sections of the
DGCL may make more difficult the acquisition of control of RSI without the
approval of the RSI Board of Directors. Certain provisions of RSI's charter
and bylaws, among other things: (i) classify the RSI Board of Directors into
three classes, each of which serves for staggered three-year terms; (ii)
provide that a director of RSI may be removed by the affirmative vote of
stockholders having at least 80% of the total voting power only for cause;
(iii) provide that only the Chairman of the Board, President or the RSI Board
of Directors may call special meetings of the stockholders; (iv) provide that
the stockholders may take action only at a meeting of RSI stockholders, not
by written consent; (v) provide that stockholders must comply with certain
advance notice procedures in order to nominate candidates for election to the
RSI Board of Directors or to place stockholders' proposals on the agenda for
consideration at meetings of the stockholders; (vi) provide that, under
certain circumstances, the affirmative vote of the holders of two-thirds of
the RSI Common Stock is required to approve any merger or similar business
combination involving RSI; (vii) provide that the holder of "control shares"
of RSI acquired in a control share acquisition have no voting rights with
respect to such control shares except to the extent approved by the vote of
the holders of two-thirds of the RSI Common Stock (the "control shares
provision"); (viii) limit the ownership by any person of RSI Common Stock to
9.9% of the number of shares or value of the RSI Common Stock; and (ix)
provide that the stockholders may amend or repeal any of the foregoing
provisions of the charter or bylaws only by a vote of at least 80% of the
stock entitled to vote generally in the election of directors. With certain
exceptions, Section 203 of the DGCL ("Section 203") imposes certain
restrictions on mergers and other business combinations between RSI and any
holder of 15% or more of the RSI Common Stock. The charter provides that the
control shares provision, the Rights Plan and Section 203 do not apply to
Reckson and its affiliates. Accordingly, Reckson and its affiliates will be
in a position to effect a business combination or other transaction with RSI
in situations where others would be restricted from effecting a similar
transaction. RSI's charter authorizes the Board of Directors to issue up to
( ) million shares of preferred stock, par value $.01 per share, in series,
and to establish the rights and preferences (including the exchange of such
shares of preferred stock into shares of RSI Common Stock) of any series of
preferred stock so issued. The issuance of certain types of preferred stock
could have the effect of delaying or preventing a change in control of RSI,
even if such a change in control were in the best interests of some, or a
majority, of RSI's stockholders. See "Description of RSI Capital Stock" and
"Certain Antitakeover Provisions."

The Rights Plan would cause substantial dilution to a person or group
that attempts to acquire RSI on terms not approved in advance by the RSI
Board of Directors. Under the Rights Plan, until 10 business days following
such time as a person or group has acquired beneficial ownership of, or has
proposed a tender offer or exchange offer that would result in such person or
group owning, 10% or more of the outstanding shares of RSI Common Stock (the
"Rights Distribution Effective Date"), the Rights will be transferred only
with the RSI Common Stock. Following the Rights Distribution Effective Date,
separate certificates evidencing the Rights will be mailed to each holder of
record on the Rights Distribution Effective Date. Thereafter, each holder of
a Right (other than the person or group) will thereafter have the right to
receive, upon exercise of such Right, that number of shares of RSI Common
Stock having a market value equal to two times the exercise price of the
Right. Similar provisions apply in the event of a merger or other business
combination as a result of which an acquiring person or group will own 10% or
more of the outstanding shares of RSI Common Stock. Prior to the time that
any such person or group acquires 10% or more of the outstanding shares of
RSI Common Stock, the RSI Board of Directors may redeem the Rights in whole
for $.01 per Right. After the time that any such acquiring person or group
acquires 10% or more, but less than 50%, of the outstanding shares of RSI
Common Stock, the RSI Board of Directors may exchange the Rights, in whole or
in part, at an exchange ratio of one share of RSI Common Stock, or
one-hundredth of a share of Series A Junior Preferred Stock, per Right. See
"Description of RSI Capital Stock -- Series A Junior Preferred Stock."

FEDERAL INCOME TAX RISKS

On the Distribution Effective Date, in the opinion of Brown & Wood LLP,
counsel to RSI and Reckson ("Tax Counsel"), Reckson will recognize gain
measured by the difference between the value of the RSI Common Stock
distributed by Reckson and the basis of Reckson in such stock, which will
depend in turn on the basis of Reckson Operating Partnership in such stock.
Although management anticipates that any such gain will be nominal, the
Internal Revenue Service (the "Service") may be able to assert successfully
that the gain is not insubstantial. Because of its factual nature, Tax
Counsel is not able to render an opinion concerning the valuation. Under the
REIT rules, Reckson's gain, if any, will effectively be passed through to the
Reckson stockholders. The value of the RSI Common Stock distributed, plus
any cash distributed in lieu of fractional shares, will be subject to the
rules generally applicable to cash distributions. Management anticipates
that, for a typical Reckson stockholder, the result of the Distribution will
be largely to increase the stockholder's tax-free return of capital. Because
of the valuation issue, however, this result cannot be assured. With respect
to Limited Partners, the Distribution will be taxable to a Limited Partner if
and to the extent that the value of the RSI Common Stock and any cash
received in lieu of fractional shares exceeds the Limited Partner's basis in
his Units, but certain Limited Partners may not be required to recognize gain
equal to the amount of such excess. See "The Distribution -- Federal Income
Tax Consequences."

THE DISTRIBUTION

BACKGROUND OF, AND REASONS FOR, THE DISTRIBUTION

RSI has been formed to (i) identify and acquire interests in operating
companies that engage in businesses that provide Real Estate-Related Services
and (ii) pursue investment opportunities outside of Reckson's traditional
office and industrial sectors while creating a "research and development"
vehicle for Reckson to explore and invest in alternative real estate sectors
and thereby providing the potential for Reckson to incorporate one or more of
these sectors into its core business. RSI has entered into the Intercompany
Agreement pursuant to which RSI and Reckson Operating Partnership have agreed
to provide each other with first opportunity rights in respect of certain
types of transactions and activities thereby reducing the potential for
conflicts of interest between the parties by formalizing their relationship
at the outset. It is anticipated that decisions regarding such first
opportunity rights of Reckson will be presented to a committee of the board
of directors of Reckson.

RSI, directly or through its affiliates, intends to (i) provide various
Real Estate-Related Services to the Reckson Customer Base and third parties,
(ii) invest in and manage RSVP and (iii) make or acquire (a) real estate or
real estate-related investments other than REIT-Qualified Investments and (b)
REIT Qualified Investments made available to Reckson Operating Partnership
that it has chosen not to pursue. RSI, directly or through its affiliates,
may also act as a lessee and operator of real estate owned by Reckson
Operating Partnership and others.

Due to considerations relating to Reckson's status as a REIT under
Federal tax laws, RSI was initially formed as a subsidiary in which Reckson
Operating Partnership owned 95% of the outstanding capital stock in the form
of non-voting common stock and certain Reckson officers owned the remaining
5% of the outstanding capital stock in the form of voting common stock. The
shares of capital stock owned by Reckson Operating Partnership and Reckson
officers were acquired on the same dates and at the same per share price.
Immediately prior to the Distribution, the shares of non-voting common stock
owned by Reckson Operating Partnership were exchanged by RSI for RSI Common
Stock.

MANNER OF EFFECTING THE DISTRIBUTION

It is expected that the Distribution Effective Date will be (_____),
1998. At the time of the Distribution, share certificates for RSI Common
Stock will be delivered to the Distribution Agent. Commencing on or about
the date of the Distribution, the Distribution Agent will begin mailing
account statements reflecting ownership of RSI Common Stock to holders of
Reckson Common Stock and Units as of the Record Date. The Distribution will
be made on the basis of one share of RSI Common Stock for every 11 shares of
Reckson Common Stock held by Reckson stockholders on the Record Date and one
share of RSI Common Stock for every 11 Units held by Limited Partners on the
Record Date. No certificates representing fractional shares of RSI Common
Stock will be issued in connection with the Distribution. In lieu of
fractional shares, the Distribution Agent will pay to any person who would be
entitled to a fractional share of RSI Common Stock an amount of cash (without
interest) equal to $1.10 per share. All shares of RSI Common Stock will be
fully paid and nonassessable. See "Description of RSI Capital Stock."

Prior to the Distribution Effective Date, inquiries relating to the
Distribution should be directed to the Distribution Agent at (
), or by telephone at ( ), Monday through Friday, 9:00 a.m. to
5:00 p.m. (New York City time). After the Distribution Effective Date,
inquiries may be directed to the Distribution Agent or RSI Investor
Relations, at 225 Broadhollow Road, Melville, New York 11747, or by telephone
at (516) ( ), Monday through Friday, 9:00 a.m. to 5:00 p.m. (New York City
time).

NO HOLDER OF SHARES OF RECKSON COMMON STOCK OR UNITS WILL BE REQUIRED TO
MAKE ANY PAYMENT FOR THE SHARES OF RSI COMMON STOCK TO BE RECEIVED IN THE
DISTRIBUTION OR TO SURRENDER OR EXCHANGE SHARES OF RECKSON COMMON STOCK OR
UNITS OR TO TAKE ANY OTHER ACTION IN ORDER TO RECEIVE RSI COMMON STOCK TO
WHICH SUCH HOLDER IS ENTITLED IN THE DISTRIBUTION.

FEDERAL INCOME TAX CONSEQUENCES

Introduction. The following is a summary of the material federal income
tax considerations associated with the Distribution. This discussion is
based upon the laws, regulations and reported rulings and decisions in effect
as of the date of this Prospectus, all of which are subject to change,
retroactively or prospectively, and to possibly differing interpretations.
This discussion does not purport to deal with the federal income or other tax
consequences applicable to all investors in light of their particular
investment circumstances or to all categories of investors, some of whom may
be subject to special rules (including, for example, insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, foreign
corporations and persons who are not citizens or residents of the United
States). No ruling on the federal, state or local tax considerations
relevant to the operation of Reckson or RSI or to the Distribution is being
requested from the Service or from any other tax authority. Tax Counsel has
rendered certain opinions discussed herein, which Tax Counsel believes
address the material issues with respect to the Distribution and with respect
to the qualification of Reckson as a REIT which are raised by the structure
and currently anticipated activities of RSI. Tax Counsel believes that if
the Service were to challenge the conclusions of Tax Counsel, such
conclusions would prevail in court. However, opinions of counsel are not
binding on the Service or on the courts, and no assurance can be given that
the conclusions reached by Tax Counsel would be sustained in court.

ALL RECKSON STOCKHOLDERS AND RECKSON OPERATING PARTNERSHIP LIMITED PARTNERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES OF THE DISTRIBUTION TO THEM, INCLUDING THE APPLICATION OF STATE,
LOCAL AND FOREIGN TAX LAWS.

Taxation of Reckson in General. Reckson has made an election to be
treated as a real estate investment trust under Sections 856 through 860 of
the Code (as used in this section, a "REIT"), commencing with its taxable
year ended December 31, 1995. Reckson believes that it was organized and has
operated in such a manner so as to qualify as a REIT, and Reckson intends to
continue to operate in such a manner, but no assurance can be given that it
has operated in a manner so as to qualify, or will operate in a manner so as
to continue to qualify as a REIT.

The sections of the Code relating to qualification and operation as a
REIT are highly technical and complex. In the opinion of Tax Counsel,
Reckson qualified as a REIT under the Code with respect to its taxable years
ending on or before December 31, 1996, and is organized in conformity with
the requirements for qualification as a REIT, and its proposed manner of
operation will enable it to meet the requirements for qualification as a REIT
in the future. It must be emphasized that this opinion is based on various
assumptions relating to the organization and operation of Reckson and Reckson
Operating Partnership and is conditioned upon certain representations made by
Reckson as to certain relevant factual matters, including matters related to
the organization, expected operation, and assets of Reckson and Reckson
Operating Partnership. Moreover, continued qualification as a REIT will
depend upon Reckson's ability to meet, through actual annual operating
results, the distribution levels, stock ownership requirements and various
qualification tests and other requirements imposed under the Code, as
discussed below. Tax Counsel will not review Reckson's operations.
Accordingly, no assurance can be given that the actual stock ownership of
Reckson, the mix of its assets, or the results of its operations for any
particular taxable year will satisfy such requirements.

Income Recognition by Reckson as a Result of the Distribution. On the
Distribution Effective Date, Reckson will, in the opinion of Tax Counsel,
recognize gain on the Distribution to the extent that the value of the RSI
Common Stock distributed by Reckson exceeds the basis of Reckson in such
stock. Management anticipates that any such gain will be nominal, but the
Service may be able to assert successfully that the gain is not
insubstantial. Because of the factual nature of the valuation issue, Tax
Counsel is unable to render an opinion on it. The amount of gain, if any,
will increase Reckson's current or accumulated earnings and profits.

Taxation of Taxable Domestic Stockholders of Reckson as a Result of the
Distribution. The Distribution will be treated as a distribution whose
amount equals the value of the RSI Common Stock distributed plus any cash in
lieu of fractional shares. Reckson stockholders will receive a basis in RSI
Common Stock equal to the value thereof at the time of the Distribution. As
long as Reckson qualifies as a REIT in the year of the Distribution, the
portion of the Distribution made to Reckson's taxable U.S. stockholders out
of Reckson's current or accumulated earnings and profits (and not designated
as capital gain dividends) will be taken into account by such U.S.
stockholders as ordinary income and, for corporate stockholders, will not be
eligible for the dividends received deduction. The portion of the
Distribution in excess of current and accumulated earnings and profits
allocable to the Distribution will not be taxable to a stockholder to the
extent that such portion does not exceed the adjusted basis of the
stockholder's Reckson Common Stock, but rather will reduce the adjusted basis
of such shares. To the extent that the portion of the Distribution in excess
of current and accumulated earnings and profits allocable to the Distribution
exceeds the adjusted basis of a stockholder's Reckson Common Stock, the
Distribution will be included in income as capital gain (taxable at the
short-term, mid-term or long-term rates depending on the period of time that
the stockholder has held the shares) assuming the shares are a capital asset
in the hands of the stockholder.

To the extent that Reckson designates a portion of the Distribution as a
capital gain dividend, such portion will be taxable to Reckson stockholders
as gain from the sale of a capital asset held for more than one year, without
regard to the period for which the stockholder has held its Reckson Common
Stock. U.S. stockholders that are corporations may, however, be required to
treat up to 20% of certain capital gain dividends as ordinary income.

As described above under "--Income Recognition by Reckson as a Result of
the Distribution," the amount of gain, if any, to be recognized by Reckson as
a result of the Distribution will increase Reckson's earnings and profits.
Management anticipates that any such gain will be nominal. Reckson expects
that, in the absence of the Distribution, it would in any event distribute
all or substantially all of its earnings and profits in order to maintain its
status as a REIT and avoid paying federal income taxes. As a result,
management anticipates that, for a typical Reckson stockholder, the result of
the Distribution will be largely to increase the stockholder's tax-free
return of capital. However, the Service may be able to assert successfully
that the gain to be recognized by Reckson upon the Distribution is not
insubstantial. Accordingly, this result cannot be assured.

Taxation of Tax-Exempt Stockholders of Reckson as a Result of the
Distribution. Most tax-exempt employees' pension trusts are not subject to
federal income tax except to the extent of their receipt of "unrelated
business taxable income" as defined in Section 512(a) of the Code ("UBTI").
The Distribution to a stockholder that is a tax-exempt entity should not
constitute UBTI, provided that the tax-exempt entity has not financed the
acquisition of its Reckson Common Shares with "acquisition indebtedness"
within the meaning of the Code and the Reckson Common Shares are not
otherwise used in an unrelated trade or business of the tax-exempt entity.
In addition, certain pension trusts that own more than 10% of a "pension-held
REIT" must report a portion of the dividends that they receive from such a
REIT as UBTI. Reckson has not been and does not expect to be treated as a
pension-held REIT for purposes of this rule.

Taxation of Foreign Stockholders of Reckson as a Result of the
Distribution. The rules governing United States federal income taxation of
nonresident alien individuals, foreign corporations, foreign partnerships and
other foreign stockholders (collectively, "Non-U.S. Stockholders") are
complex, and no attempt will be made in this Prospectus to provide more than
a summary of such rules. Non-U.S. Stockholders should consult with their own
tax advisors to determine the impact of federal, state and local tax laws
with regard to the Distribution, including any reporting requirements. In
general, as is the case with domestic taxable stockholders of Reckson, the
Distribution is treated as a distribution whose amount equals the value of
the RSI Common Stock distributed plus any cash in lieu of fractional shares,
and Reckson stockholders will receive a basis in RSI Common Stock equal to
the fair market value thereof at the time of the Distribution.

The Distribution will be treated as an ordinary income dividend to the
extent that it is made out of current and accumulated earnings and profits of
Reckson and is neither attributable to gain from sale or exchange by Reckson
of United States real property interests nor designated by Reckson as a
capital gain dividend. The portion of the Distribution that will be treated
as an ordinary income dividend ordinarily will be subject to a withholding
tax equal to 30% of the gross amount thereof, unless an applicable tax treaty
reduces or eliminates that tax. Reckson expects to withhold U.S. income tax
at the rate of 30% on the gross amount of the Distribution made to a Non-U.S.
Stockholder unless (i) a lower treaty rate applies and the Non-U.S.
Stockholder has filed the required IRS Form 1001 with Reckson or (ii) the
Non-U.S. Stockholder files an IRS Form 4224 with Reckson claiming that the
distribution is effectively connected with the Non-U.S. Stockholder's conduct
of a U.S. trade or business. The portion of the Distribution that is in
excess of Reckson's current and accumulated earnings and profits allocable to
the Distribution will be subject to a 10% withholding requirement but will
not be taxable to a stockholder to the extent that such excess does not
exceed the adjusted basis of the stockholder's Reckson Common Shares, but
rather will reduce the adjusted basis of such shares. To the extent that the
portion of the Distributions in excess of current and accumulated earnings
and profits allocable to the Distribution exceeds the adjusted basis of a
Non-U.S. Stockholder's shares, the Distribution will give rise to tax
liability if the Non-U.S. Stockholder would otherwise be subject to tax on
any gain from the sale or disposition of the Reckson Common Shares.

Provided that Reckson is a "domestically controlled REIT" for federal
income tax purposes, a Non-U.S. Stockholder would be subject to taxation on
gain from the sale or disposition of Reckson Common Shares only if (i) the
investment in the Reckson Common Shares were treated as effectively connected
with the Non-U.S. Stockholder's U.S. trade or business, in which case the
Non-U.S. Stockholder would be subject to the same treatment as U.S.
stockholders with respect to such gain, or (ii) the Non-U.S. Stockholder were
a nonresident alien individual who was present in the United States for 183
days or more during the taxable year and either the individual has a "tax
home" in the United States or the gain is attributable to an office or other
fixed place of business maintained by the individual in the United States, in
which case the gain would be subject to a 30% tax. The Company believes that
Reckson is and will continue to be a domestically controlled REIT.

As Reckson will not be able to determine, at the time that the
Distribution is made, the portion of the Distribution, if any, that will be
in excess of the current and accumulated earnings and profits allocable to
the Distribution, the Distribution will be subject to withholding as though
the entire Distribution (apart from any portion designated as a capital gain
dividend) were an ordinary income dividend. However, a Non-U.S. Stockholder
may seek a refund of such amounts from the Service if it is subsequently
determined that a portion of the Distribution was, in fact, in excess of
Reckson's current and accumulated earnings and profits allocable to the
Distribution.

Management believes that the Company's Common Stock may constitute a
United States real property interest. However, because management
anticipates that any gain to be recognized by Reckson as a result of the
Distribution will be nominal, as described above under "--Income Recognition
by Reckson as a Result of the Distribution," management does not anticipate
that a significant portion of the Distribution will be treated as
attributable to gain upon the disposition of United States real property
interests. To the extent that a portion of the Distribution were to be
treated as attributable to gain upon the disposition of a United States real
property interest, a non-U.S. Stockholder would be subject to tax on such
portion as though it were gain that was effectively connected with a United
States trade or business of such Non-U.S. Stockholder. Thus, Non-U.S.
Stockholders would be taxed on such portion of the Distribution at the normal
capital gain rates applicable to U.S. stockholders. Reckson is required
under applicable Treasury Regulations to withhold 35% of any distribution to
a Non-U.S.Stockholder that could be designated by Reckson as a capital gain
dividend. The amount so withheld is creditable against the Non-U.S.
Stockholder's U.S. tax liability.

Amounts required to be withheld from payments to Non-U.S. Stockholders
will be collected by converting a portion of the Common Stock to be
distributed into cash.

Taxation of Limited Partners of Reckson Operating Partnership as a
Result of the Distribution. The Distribution will generally result in the
recognition of gain by a Limited Partner of the Operating Partnership to the
extent that the sum of the fair market value of the RSI Common Stock plus any
cash in lieu of fractional shares received by him exceeds his basis in his
Units. The basis of a Limited Partner in the RSI Common Stock he receives
will generally equal such fair market value. However, a Limited Partner who
has not contributed appreciated property to the Operating Partnership, or who
has contributed appreciated property where the excess of the fair market
value of such property over its basis at the time of the contribution (the
"Precontribution Gain") was less than the excess of the fair market value of
the RSI Common Stock he received in the Distribution over the Operating
Partnership's basis in such stock immediately before the Distribution
(approximately $ per share), will not recognize gain on the Distribution
in the full amount described above. Such a Limited Partner will generally
recognize gain in an amount not greater than the sum of (i) the excess of
(x) the Operating Partnership's basis in the RSI Common Stock received by him
plus the amount of any cash received by him in lieu of fractional shares over
(y) his basis in his Units and (ii) the amount of taxable gain that would
have been allocated to him as Precontribution Gain if the Operating
Partnership would have sold, in a taxable transaction prior to the
Distribution, all of the property that he had contributed to it. Such a
Limited Partner's basis in the RSI Common Stock received in the Distribution
will be equal to not less than the sum of the Operating Partnership's basis
in such stock immediately before the Distribution plus any gain recognized
by the Limited Partner upon the Distribution.

LISTING AND TRADING OF RSI COMMON STOCK

There is currently no public market for RSI Common Stock. The Company
intends to apply to have the shares of RSI Common Stock approved initially
for quotation and trading on the OTC Bulletin Board under the symbol " ".
Shares of RSI Common Stock have not been approved for listing on any national
securities exchange or for quotation on any quotation system, and there can
be no assurance that such shares will be so approved or quoted. There can be
no assurance as to the prices at which trading in RSI Common Stock will occur
after the Distribution. Until RSI Common Stock is fully distributed and if
and when a regular trading market develops, the prices at which trading in
such stock occurs may fluctuate significantly. There can be no assurance
that a regular trading market in RSI Common Stock will develop or provide
liquidity.

The prices at which RSI Common Stock trades will be determined by the
marketplace and may be influenced by many factors, including, among others,
the performance and prospects of RSI and its affiliates, the depth and
liquidity of the market for RSI Common Stock, investor perception of RSI and
its affiliates and of the sectors in which they operate and economic
conditions in general, RSI's dividend policy, and general financial and other
market conditions. In addition, financial markets have experienced extreme
price and volume fluctuations that have affected the market price of many
stocks and that, at times, could be viewed as unrelated or disproportionate
to the operating performance of such companies. Such fluctuations have also
affected the share prices of many newly public issuers. Such volatility and
other factors may materially adversely affect the market price of RSI Common
Stock.

RSI will have approximately ( ) stockholders of record, based on the
number of record holders of Reckson Common Stock and the number of Limited
Partners on the Record Date. The Transfer Agent and Registrar for the RSI
Common Stock will be American Stock Transfer & Trust Company. For certain
information regarding options and other equity-based employee benefit awards
involving RSI Common Stock that may become outstanding after the
Distribution, see "Management."

SHARES AVAILABLE FOR FUTURE SALE

RSI Common Stock distributed in the Distribution, which based on a
Record Date of ( ), 1998, is approximately 3,885,400 shares
(subject to reduction to the extent that cash payments are made in lieu of
the issuance of fractional shares of RSI Common Stock), will be freely
transferable, except for securities received by persons who may be deemed to
be "affiliates" of RSI under the Securities Act. Persons who may be deemed
to be affiliates of RSI after the Distribution generally include individuals
or entities that control, are controlled by, or are under common control
with, RSI and may include certain officers and directors of RSI as well as
principal stockholders of RSI. Persons who are affiliates of RSI will be
permitted to sell their shares of RSI Common Stock only pursuant to an
effective registration statement under the Securities Act or an exemption
from the registration requirements of the Securities Act, such as the
exemption afforded by Section 4(2) of the Securities Act (relating to private
sales) or by Rule 144 under the Securities Act. Neither Reckson nor RSI is
able to predict whether substantial amounts of RSI Common Stock will be sold
in the open market following the Distribution. Sale of substantial amounts
of RSI Common Stock in the public market, or the perception that such sales
might occur, could adversely affect the market price of RSI Common Stock.

DIVIDEND POLICY

Following the Distribution, RSI intends to use its available funds to
pursue investment and business opportunities and, therefore, does not
anticipate the payment of any cash dividends on RSI Common Stock in the
foreseeable future. The declaration of dividends will be subject to the
discretion of the RSI Board of Directors. In addition, payment of dividends
on RSI Common Stock will be prohibited under the RSI Facility provided to RSI
by Reckson Operating Partnership until all amounts outstanding thereunder are
paid in full, and will also be subject to such limitations as may be imposed
by any other credit facilities or debt securities that RSI may obtain or
issue, as the case may be, from time to time.

SELECTED FINANCIAL DATA

RECKSON SERVICES INDUSTRIES INC. SELECTED FINANCIAL INFORMATION

The selected financial information set forth below has been derived from
the historical financial statements of Reckson Services Industries Inc. The
financial information for the nine-month period is not necessarily indicative
of results for subsequent periods or the full year. This selected financial
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" of Reckson
Services Industries Inc. and the historical financial statements and related
notes thereto of Reckson Services Industries Inc. contained herein.

Nine Months Ended
OPERATIONS SUMMARY: September 30, 1997
---------------------

Equity in earnings of RO
Partners Management, LLC $ 9,501
Total revenues $ 16,168
Corporate operating expenses $ 4,489
Net income $ 7,008

FINANCIAL POSITION: SEPTEMBER 30, 1997
---------------------

Investment in RO Partners
Management LLC $ 3,632,001
Total Assets $ 4,476,988
Loan Payable to
shareholder and affiliate $ 106,627
Total liabilities $ 213,656
Shareholders' equity $ 4,263,332

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the
"Summary Condensed Pro Forma Financial Information," "Selected Financial
Data" and the financial statements appearing elsewhere in this Prospectus.

This discussion is based on an analysis of the historical financial
statements of RSI and the pro forma financial statements of RSI. The RSI
historical financial statements include RSI's investment in ROPartners
Management, LLC, which is the general partner of the predecessor to RSVP.
The RSI pro forma financial statements include the pro forma effects of the
acquisitions of interests in Dobie Center, ACLC and On-Site which are
accounted for under the equity method of accounting.

RSI was formed on July 15, 1997, to identify and acquire interests in
operating companies that engage in businesses that provide certain services
primarily directed towards occupants of office, industrial and other property
types and to invest in and manage a real estate venture capital fund. The
Company invested through RSVP approximately $3.62 million to acquire a 331/3%
interest in a joint venture which owns a 70% interest in Dobie Center, a 27-
story off-campus student housing project located directly opposite the campus
of the University of Texas at Austin. Similarly, the Company has invested
through RSVP approximately $1.51 million to acquire a 331/3% interest in a
joint venture that owns a 76.09% interest in ACLC, a student housing
enterprise which develops, constructs and acquires on- and off-campus student
housing projects.

RSI financed the acquisitions of its indirect interests in Dobie Center
and ACLC with proceeds from its initial capital contributions and loans from
Reckson Operating Partnership and anticipates financing the acquisition of
the interest in On-Site with a loan from Reckson Operating Partnership. In
addition, RSI anticipates making borrowings under the RSI Facility for
purposes of meeting its investment commitment to RSVP, making additional
investments and providing working capital for operations (see "Liquidity and
Capital Resources").

LIQUIDITY AND CAPITAL RESOURCES

In connection with the formation and capitalization of RSI, Reckson
Operating Partnership contributed $4,256,324 to RSI for a 95% non-voting
equity interest. Simultaneously, certain officers of Reckson contributed
$224,017 of Notes to RSI in exchange for a 5% voting equity
interest. In addition, RSI anticipates obtaining the RSI Facility from
Reckson Operating Partnership comprised of two tranches: a $100 million
tranche for RSI to meet its commitment to RSVP and a $100 million tranche for
RSI's service sector investment activities. The RSI Facility has a term of
five years, bears interest at a rate equal to the greater of the prime rate
plus 2% or 12% per annum, with such 12% rate increasing annually by 4% over
the prior year's rate, and is payable only to the extent of cash flow and on
an interest only basis during its term. The RSI Facility is a recourse
obligation of RSI. Additionally, RSVP has obtained a letter of intent with
respect to a commitment from PWRES to invest up to $200 million in RSVP in
the form of preferred equity, subject to certain conditions. Amounts
available under the $200 million facility from PWRES will be used by RSVP to
make investments consistent with its business objectives and to fund working
capital.

PRO FORMA CAPITAL RESOURCES

RSI has entered into a letter of intent to purchase an interest in On-
Site. Financing for this acquisition is expected to be provided through a
loan from Reckson Operating Partnership. RSI has no other external sources
of financing except as described above in "Liquidity and Capital Resources."
RSI's ability to make additional investments will be dependent upon
availability under the RSI Facility and the $200 million facility from PWRES
and securing additional financing on adequate terms as required.
The Company is not aware of any material unfavorable trends in
either capital resources or the outlook for long-term cash generation, nor
does it anticipate any material change in the availability and relative cost
of such capital resources.

PRO FORMA RESULTS OF OPERATIONS

For the nine months ended September 30, 1997 on a pro forma basis, after
giving effect to the completion of the formation and initial capitalization
of RSI, the acquisition of the Dobie Center interest, and the acquisitions of
the On-Site interest and the ACLC interest, RSI would have incurred a net
loss of $(342,095). This pro forma net loss reflects (i) the historical
operating results of RSI for the period from July 15, 1997 (inception) to
September 30, 1997, which includes RSI's equity in earnings of ROPartners
Management, LLC of $9,501, primarily attributable to RSVP's interest in Dobie
Center, (ii) $115,603 of equity in earnings related to the pro forma results
of Dobie Center for the preacquisition period, (iii) the $150,710 equity in
earnings related to RSI's indirect interest in the pro forma results of ACLC,
and (iv) the $259,427 equity in losses related to RSI's indirect interest in
the pro forma results of On-Site. The pro forma net loss also reflects the
pro forma increase in interest expense on borrowings from Reckson Operating
Partnership in connection with the financing of the acquisitions of the ACLC
interest and the On-Site interest and incremental corporate general and
administrative expenses of $75,000.

For the year ended December 31, 1996, on a pro forma basis, RSI would
have incurred a net loss of $(111,725) for the year ended December 31,
1996. This pro forma net loss reflects (i) the $151,142 equity in earnings
related to RSI's indirect interest in the pro forma results of Dobie Center,
(ii) the $254,060 equity in earnings related to RSI's indirect interest in
the pro forma results of ACLC and (iii) the $36,047 equity in losses related
to RSI's indirect interests in the pro forma results of On-Site. The pro
forma net loss also reflects the pro forma increase in interest expense on
borrowings in connection with the acquisitions of the ACLC interest and the
On-Site interest and incremental corporate general and administrative expense
of $100,000.

BUSINESS

OVERVIEW

SERVICE SECTOR OPERATIONS. RSI will seek to create and manage a system
of interrelated services to be offered to the marketplace through a
centralized infrastructure. RSI will establish a platform position in
Service Platforms that present significant opportunities to provide Real
Estate-Related Services to the Reckson Customer Base and other third parties.
RSI's growth strategy is to acquire primarily established businesses within
each of its targeted service sectors, and, where appropriate, to retain the
existing management of such businesses. RSI will seek growth in each Service
Platform by (i) accessing the Reckson Customer Base as an anchor for growth
opportunities in Reckson's markets, (ii) integrating each Service Platform
into RSI's centralized infrastructure and (iii) acquiring similar businesses
or making additional investment within such Service Platform.

Management believes that there are significant opportunities to provide
Real Estate-Related Services to the Reckson Customer Base and third parties
that are currently provided by third parties in a more limited and fragmented
manner or not provided at all. Management also believes that RSI will
benefit from Reckson's reputation relationships with its tenants and from
Reckson's reputation for providing high quality service to its tenants. RSI
will offer to the marketplace Real Estate-Related Services at a uniformly
high quality level and on competitive market terms which RSI shall
facilitate through its centralized infrastructure. In support of this
arrangement, the
Intercompany Agreement requires Reckson Operating Partnership to provide RSI
with a right of first opportunity in respect of Real Estate-Related Service
opportunities that it develops or that otherwise become available to it, as
well as to provide RSI with access to its tenants so that RSI may offer Real
Estate-Related Services directly to such tenants; provided, however, that RSI
must offer to provide such Real Estate-Related Services to Reckson Operating
Partnership at market rates and on terms and conditions as attractive as the
best available for comparable services in the market or those offered by RSI
to third parties.

REAL ESTATE VENTURE CAPITAL FUND. RSI, through a subsidiary, will be
the managing member of RSVP, a real estate venture capital fund formed to
invest in real estate and real estate-related operating companies generally
outside of Reckson's core office and industrial focus. RSVP's strategy is to
identify and acquire interests in established entrepreneurial enterprises
with experienced management teams in market sectors which are in the early
stages of their growth cycle or offer unique circumstances for attractive
investments as well as platforms for future growth. RSVP has established a
platform in the area of student housing and is targeting additional
platforms. RSVP anticipates that it will retain highly experienced
investment professionals that will source, structure and execute transactions
within each platform as well as manage the day-to-day operations of RSVP,
subject to the overall management of RSI's executive officers. RSI's
investments in RSVP will occur in the following manner: Reckson Operating
Partnership has approved the funding of investments of $100 million in RSVP.
This $100 million will be invested at the early stages of establishing
platforms in alternative sectors. Reckson Operating Partnership will fund
such investments (i) indirectly through advances under the RSI Facility or
(ii) directly in joint ventures with RSVP in REIT- Qualified Investments.
After a platform has reached its maximum investment allocation by RSVP and
Reckson has determined to incorporate that platform into its core business,
Reckson may make additional investments in other opportunities within such
platform; any such investments would be in addition to the $100 million RSVP
Facility. In addition, as further described below, RSVP has entered into a
letter of intent for the $200 million RSVP Facility from PWRES, which may be
partially funded by an investment fund that is jointly sponsored by financier
George Soros and PWRES.

INITIAL ASSETS OF RSI

RSI's initial investments are comprised of (i) a letter of intent to
acquire a 58.69% interest in On-Site, a company providing advanced
telecommunications systems and services within commercial and residential
buildings and/or building complexes, (ii) an option to acquire a majority
equity interest in a privately-held national executive office suites business
and (iii) RSI's indirect interest in the assets of RSVP (currently ACLC and
Dobie Center).

ON-SITE. RSI has entered into a letter of intent to acquire a 58.69%
interest in On-Site, which has been formed as a joint venture entity to
acquire and hold 100% of the equity interests of OnSite Access LLC and OnSite
Access Local LLC (collectively, "OSA"). On-Site is engaged in the business
of installing state-of-the-art telecommunications infrastructure in
commercial and residential buildings and complexes, including wiring, cabling
and transmission equipment, providing of telecommunication, computer and
Internet services. OSA commenced operations in February 1997. Under the
terms of the letter of intent, RSI will make an initial capital commitment of
$6.5 million for a 58.69% interest in On-Site. An entity controlled by Jon
L. Halpern, a director of Reckson who is one of the founders of OSA,
contributed all of the assets used in the On-Site business, including 100% of
the ownership interest in OSA and owns an interest in On-Site.

On-Site will be formed as a Delaware limited liability company managed
by a management committee comprised of three designees of RSI and two
designees of Veritech Ventures LLC, a New York limited liability company
which is controlled by Mr. Jon L. Halpern ("Veritech"). The Limited
Liability Company Agreement of On-Site (the "On-Site LLC Agreement") will
provide that certain significant decisions (including liquidation or
dissolution of On-Site, the issuance of equity securities, the hiring of
certain executives and incurring indebtedness above a specified limit) by the
management committee require the approval of both a representative of RSI and
an OSA Representative. The On-Site LLC Agreement will also provide RSI and
Veritech with buy/sell rights in the event of a deadlock with respect to a
significant decision. In accordance with the On-Site LLC Agreement, Veritech
will have the right, but not the obligation, to purchase all of RSI's
interest if (i) RSI authorizes the dissolution of On-Site any time after its
initial capital contribution has been spent or (ii) On-Site does not within
the first two years of its operations spend $6.5 million with respect to the
wiring of buildings or building complexes, provided that Veritech proposed
transactions in accordance with the On-Site business plan sufficient to
expend such $6.5 million. In addition, Veritech will have the right to sell
all of its membership interest to RSI at any time after the first two years
of the joint venture if RSI does not consent to an initial public offering by
On-Site proposed by Veritech. RSI also will have the right for a period of
six months to require On-Site to purchase 18.6% of the aggregate percentage
interest in On-Site for a purchase price equal to $2 million commencing two
years after the formation of the joint venture. The terms of the On-Site LLC
Agreement provides RSI and Veritech a right of first refusal with respect to
the sale of the other's membership interest, provides customary "tag-along"
and "drag-along" rights and contemplates the adoption of an employee stock
option or similar plan.

Under the terms and conditions of the On-Site LLC Agreement, On-Site
will be granted a right of first opportunity to deliver or provide
communication, wiring and other related services with respect to Reckson's
office buildings and complexes. The cost to Reckson for such services by On-
Site will be the lesser of the best price offered by On-Site to its other
customers and the lowest price otherwise available in the market, for a
period through one year after RSI no longer holds an interest in On-Site.

RSI and the entity controlled by Jon L. Halpern have also agreed to
invest an additional $300,000 and $200,000 in OnSite Commerce and Content
LLC, a newly formed Delaware Limited Liability Company which has been
established to develop and acquire various forms of software products,
content and other related computerized commercial products which may be
delivered primarily by telecommunications and computer equipment service
providers to their respective end users. The terms and conditions of the
Limited Liability Company Agreement of OnSite Commerce and Content LLC will
be substantially similar to the On-Site LLC Agreement.

OFFICE SUITES COMPANY. RSI has obtained an option from Reckson
Management Group, Inc., a company in which Reckson Operating Partnership owns
a 97% non-voting interest (the "Reckson Management Company"), to acquire a
majority equity interest in the Office Suites Company. The ROPartners
Managing Directors (as defined below) each own a minority interest in the
Office Suites Company. RSI's option to acquire Reckson Management Company's
interest in the Office Suites Company has a five-year term and is exercisable
at any time at a price equal to Reckson Management Company's cost in
acquiring the interest (estimated to be approximately $( ) million)
plus 8% interest from the date on which Reckson Management Company acquires
such interest in the Office Suites Company. Management has determined that
RSI will not exercise its option to acquire Reckson Management Company's
interest in the Office Suites Company unless significant due diligence and an
audit of such company's financial statements have been completed to its
satisfaction.

To the extent RSI exercises its option to acquire the Office Suites
Company, RSI may seek to acquire a controlling ownership interest in Reckson
Executive Centers LLC. The Reckson Executive Center business currently
operates at nine of Reckson's properties encompassing approximately 100,800
rentable square feet. Reckson Executive Centers LLC provides tenants with
furnished office suites and immediate support services, including secretarial
services, telecommunication services and conference facilities.

Reckson Operating Partnership currently owns a 9.9% interest in Reckson
Executive Centers LLC and the remaining 90.1% interest is owned by a third
party, who continues to manage the day-to-day operations of Reckson Executive
Centers LLC.

Reckson Executive Centers LLC leases space at the related Reckson
properties as well as office furniture and equipment from Reckson Operating
Partnership pursuant to five-year leases that provide for rental payments
comprised of a fixed base rent. Reckson Executive Centers LLC effectively
subleases such space to tenants on a short-term basis (generally one to five
years).

THE EXECUTIVE OFFICE SUITES INDUSTRY. The executive office suite
("EOS") business began approximately 35 years ago. There has been a
significant expansion in the business during the last decade. This growth
resulted largely from corporate downsizing and the development of technology
which decreased the need for employees to be present in large corporate
offices. Instead, more work has been outsourced to consultants, or smaller
groups, who often work closer to their homes. A wide range of services are
now offered by EOS businesses and are only paid for on an "as-used" basis.
The EOS business meets the needs of a broad range of businesses from
individual entrepreneurs to branch offices of Fortune 500 firms offering
basic telephone and clerical services, as well as more advanced services such
as teleconferencing, Internet access and virtual office concepts.

The industry combines many aspects of the real estate business - supply
and demand and location with those of a service intensive business, including
technology. The industry is currently fragmented, with only four large
participants operating on a national basis, with many operating under an
affiliation, or networking basis. The total industry revenues are estimated
at $2.4 billion. There are approximately 5,100 centers in North America,
including 4,000 in the United States.

INITIAL INVESTMENTS OF RSVP. RSVP (formerly known as Reckson
Opportunity Partners, L.P. ("ROPartners")) has acquired an interest in two
investments: ACLC and Dobie Center. Jon L. Halpern, a director of
Reckson, and Martin Rabinowitz were formerly managing directors of ROPartners
(the "ROPartners Managing Directors"). The ROPartners Managing Directors
will each own minority interests in ACLC and the Dobie Center and have
certain rights for additional investment in that platform. The ROPartners
Managing Directors will not have any involvement in the future investments
and operations of RSVP.

RSVP has acquired a 331/3% interest in a joint venture that owns a
76.09% interest in American Campus Lifestyles Companies, LLC ("ACLC"), a
student housing enterprise whichdevelops, constructs, manages and acquires
on- and off-campus student housing projects, for $1.51 million.
RSVP is negotiating to acquire an additional interest in such joint
venture. The ROPartners Managing Directors each own an interest in such
joint venture. ACLC currently manages approximately 3,600 student beds in
several different projects located in Texas, Oklahoma and Florida. ACLC
employs 11 people at its corporate offices and in excess of 250 people
carrying out responsibilities at its various projects. In addition to the
Dobie Center, ACLC owns/manages student housing at the Texas A&M University
at Prairie View (two projects), Texas A&M University at Laredo, Centennial
Court Apartments, Langston University, Oklahoma, and Southgate Campus Center
at Florida State University in Tallahassee. ACLC was acquired with an
existing management group, which includes construction, development,
marketing and accounting personnel.

RSVP has acquired a 331/3% interest in a joint venture that owns a 70%
interest in the Dobie Center, a 27-story off-campus student housing project
located directly opposite the campus of the University of Texas at Austin,
for $3.62 million. The ROPartners Managing Directors each own an interest in
such joint venture. The Dobie Center is one of the nation's largest off-
campus student housing facilities, with a student residential tower of 504
rooms accommodating approximately 950 students, a two story student oriented
retail shopping mall comprising 70,000 rentable square feet and a six story
parking garage accommodating up to 668 cars.

STUDENT HOUSING MARKET OVERVIEW. The student housing industry is a
specialized market sector that is highly fragmented and has relatively few
large participants. Management believes that student housing represents a
market sector that will maintain growth trends as the student population
increases. According to the 1994 Statistical Abstract of the United States,
8.6 million students were enrolled in higher education institutions
nationwide in 1970. This population increased to over 12.1 million in 1980.
By 1995, it was estimated that the student population was over 16.5 million
with over 18 million students projected by 2005. While the student
population has continued to increase, the rate of growth slowed somewhat
during the last several years. The U.S. Department of Education estimates
that the student housing industry is currently a $10 billion dollar industry
and could grow to a $20 billion industry in less than ten years.

While the student population and the demand for student housing has
increased, housing stock and in particular on-campus housing stock, has not
kept up with demand. Student housing is comprised of two different sub-
sectors, on-campus which accounts for approximately 25% of the housing stock
and off-campus housing which accounts for approximately 75%. Currently,
overall on-campus occupancy rates are estimated to be in excess of 90%.
However, some university-run student housing projects are experiencing
declining occupancy rates, as a direct result of age, general mismanagement,
and physical and functional obsolescence rather than due to a lack of demand.
The failure of the housing supply to keep pace with the increased demand
provides the opportunity to develop new private on- and off-campus student
housing and to improve the management and physical condition of existing
university-owned housing through privatization.

FUNDING SOURCES FOR RSI

Reckson Operating Partnership will establish a credit facility with RSI
(the "RSI Facility") comprised of two tranches: a tranche of up to $100
million for RSI to meet its commitment to RSVP (the "RSVP Tranche") and a
$100 million tranche for RSI's other funding needs (the "RSI Tranche").
Reckson Operating Partnership has approved the funding of investments of up
to $100 million in RSVP, through (i) any capital contributions made in RSI
prior to the Distribution, (ii) advances under the RSVP Tranche of the RSI
Facility or (iii) joint venture investments with RSVP in REIT Qualified
Investments. Advances under the RSVP Tranche in excess of $25 million in
respect of any single platform are subject to approval by Reckson's board of
directors, while advances under the RSI Tranche in excess of $10 million in
respect of any single investment in a Real-Estate-Related Service
Opportunity, as well as advances for investments in opportunities in non-Real
Estate Related Services, are subject to approval by Reckson's board of
directors, or a committee thereof. The RSI Facility has a term of five years
and advances thereunder are recourse obligations of RSI. Interest accrues on
advances made under the RSI Facility at a rate equal to the greater of the
prime rate plus 2% and 12% per annum, with such 12% increasing annually at a
rate of 4% of the prior year's rate, and, prior to maturity, is payable
quarterly but only to the extent of net cash flow and on an interest-only
basis and is prepayable without penalty at the option of RSI. As long as
there are outstanding advances under the RSI Facility, RSI is prohibited from
paying dividends on any shares of its capital stock. The RSI Facility
prohibits advances thereunder to the extent such advances would, in the
determination of Reckson, endanger Reckson's status as a REIT. Additional
indebtedness may be incurred by subsidiaries of RSI.

RSI has entered into a letter of intent with respect to the $200 million
RSVP Facility. Under the terms of the RSVP Facility, it is anticipated that
RSVP will be subject to various covenants and events of default and related
remedies. Such remedies include increased control rights of PWRES over the
operation of RSVP under certain circumstances. Advances under the RSVP
Facility may be partially funded by an investment fund that is jointly
sponsored by financier George Soros and PWRES. In addition, PWRES and such
investment fund, if applicable, will receive a priority or preferred
distribution from RSVP prior to the distribution of cash to RSI.

Amounts advanced under the RSI Facility and RSVP Facility will be used
primarily to fund the future growth of RSI and its direct and indirect
subsidiaries.

THE INTERCOMPANY AGREEMENT

The Operating Partnership and RSI will enter into an Intercompany
Agreement in order to reduce potential conflicts of interest by formalizing
their relationship. It is anticipated that decisions regarding first
opportunity rights of Reckson granted in the Intercompany Agreement will be
presented to a committee of the board of directors of Reckson. Pursuant to
the Intercompany Agreement, RSI has granted Reckson Operating Partnership a
right of first opportunity to make any REIT-Qualified Investment that it
develops or that otherwise becomes available to RSI. In addition, in the
event that any such investment opportunity becomes available to an affiliate
of RSI, such affiliate will be required to allow Reckson Operating
Partnership to participate in such investment opportunity to the extent of
RSI's interest, if any, therein.

Under the Intercompany Agreement, Reckson Operating Partnership has
granted RSI a right of first opportunity to provide Real Estate-Related
Services to Reckson Operating Partnership and its tenants or that are
developed by or otherwise become available to Reckson Operating Partnership.
Any services provided by RSI to Reckson Operating Partnership must be at
market rates on terms and conditions as attractive as the best available for
comparable services in the market or those offered by RSI to third parties.
In addition, Reckson Operating Partnership must give RSI access to its
tenants in respect of Real Estate-Related Services that may be provided to
such tenants.

The Intercompany Agreement also provides, subject to certain conditions,
that Reckson Operating Partnership will provide RSI with a right of first
refusal to become the lessee of any real property acquired by Reckson
Operating Partnership if Reckson Operating Partnership determines that,
consistent with Reckson's status as a REIT, it is required to enter into a
"master" lease arrangement.

As to Real Estate-Related Service opportunities provided to RSI under
the Intercompany Agreement, such Agreement requires that Reckson Operating
Partnership give RSI written notice of opportunity. During the 30 days
following such notice, RSI has a right of first refusal with regard to such
opportunity and the right to negotiate with Reckson Operating Partnership on
an exclusive basis regarding the terms and conditions of such opportunity.
If a mutually satisfactory agreement cannot be reached within the 30-day
period (or such longer period to which RSI and Reckson Operating Partnership
may agree), Reckson Operating Partnership may offer the opportunity to others
for a period of six months (or, to the extent there are ongoing discussions
with respect thereto, one year) thereafter before it must again offer the
opportunity to RSI in accordance with the procedures specified above.

Under the Intercompany Agreement, RSI has agreed not to acquire or make
any REIT-Qualified Investment unless it has provided written notice to
Reckson Operating Partnership of the material terms and conditions of such
investment, and Reckson Operating Partnership has determined not to pursue
such investment either by providing written notice to RSI rejecting the
opportunity within 10 days from the date of receipt of notice of the
opportunity or by allowing such 10-day period to lapse. RSI also has agreed
to assist Reckson Operating Partnership in structuring and consummating any
REIT-Qualified Investment which Reckson Operating Partnership elects to
pursue, on terms determined by Reckson Operating Partnership.

Due to certain considerations relating to Reckson's status as a REIT,
the Intercompany Agreement also obligates RSI to maintain the 9.9% limit on
the ownership of RSI Common Stock set forth in its charter.

PROPERTY

Reckson has agreed to make available to RSI, at Reckson's principal
office at 225 Broadhollow Road, Melville, New York, 11747, space for RSI's
principal corporate office. RSVP maintains offices in Melville, New York and
New York, New York. RSI believes that its facilities are adequate to meet
its expected requirements for the coming year.

EMPLOYEES

As of January 12, 1998, RSI had no employees.

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS OF RSI

As of January 9, 1998, Scott H. Rechler, Donald J. Rechler and Roger
Rechler were the directors of RSI. At such date, Scott H. Rechler served as
RSI's President and J. Michael Maturo served as the Treasurer, Chief
Financial Officer and Secretary. It is anticipated that RSI will appoint
four additional directors, two of whom may be officers of Reckson. The
following table sets forth certain information concerning those persons who
have agreed to serve as executive officers and directors of RSI commencing
subsequent to ( ), 1998 and prior to the Distribution.

NAME Position and Offices Held
- ---- ----------------------------------------------

Donald J. Rechler . . . . Chairman of the Board, Chief Executive
Officer and Director of RSI (term as director
expires in 199_)

Roger M. Rechler . . . . Director of RSI; member of Management
Advisory Committee (term as director expires
in 199_)

Scott H. Rechler . . . . President, Chief Operating Officer and
Director of RSI (term as director expires in
199_)

Michael Maturo . . . . . Executive Vice President, Chief Financial
Officer and Treasurer of RSI

Gregg M. Rechler . . . . Secretary of RSI

(Independent Director) .

Mitchell D. Rechler . . . Member of Management Advisory Committee

Jason M. Barnett . . . . Senior Vice President and General Counsel of
RSI

The following is a biographical summary of the experience of the above-
mentioned persons:

Donald J. Rechler, age 62, serves as Chairman of the Board, Chief
Executive Officer and Director of RSI and of Reckson. Prior to the initial
public offering of Reckson (the "Reckson IPO"), Mr. Rechler was a Co-Founder
and General Partner of Reckson Associates. As Chief Executive Officer, he
coordinates and directs all of RSI's primary functions as well as
establishing policy for RSI. He is a founder and former President and
Chairman of the Association For A Better Long Island, a founder of the Long
Island Commercial & Industrial Development Association, a member of the Board
of Directors of the Development Division of North Shore Hospital, a member of
the Council of Overseers of Long Island University, C.W. Post College. Mr.
Rechler is a graduate of the University of Miami. Mr. Rechler is the father
of Mitchell Rechler and the brother of Roger Rechler.

Roger M. Rechler, age 54, serves as Director of RSI and member of the
Management Advisory Committee and also serves as the Vice-Chairman of the
Board and a Director of Reckson. Prior to the Reckson IPO, Mr. Rechler was a
co-founder and general partner of Reckson Associates and supervised property
construction, architectural and design services, interior construction and
property management. Mr. Rechler attended the University of Miami. Mr.
Rechler is the father of Scott Rechler and Gregg Rechler and the brother of
Donald Rechler.

Scott H. Rechler, age 30, serves as the President, Chief Operating
Officer and a Director of RSI and of Reckson. Mr. Rechler has been employed
at Reckson since 1989. He is responsible for the day-to-day operations and
directing corporate policy for RSI. Prior to the Reckson IPO, he directed
the financing of approximately $200 million of mortgage debt and the
acquisition of property having a value in excess of $100 million for Reckson.
He is a member of the Board of Directors of the Long Island Children's
Museum. Mr. Rechler is a graduate of Clark University and received a Masters
Degree in Finance with a specialization in real estate from New York
University. He is the son of Roger Rechler and the brother of Gregg Rechler.

Michael Maturo, age 36, serves as an Executive Vice President, Chief
Financial Officer and Treasurer of RSI and of Reckson. He is responsible for
the supervision of all financial, treasury and reporting functions. Mr.
Maturo is also primarily responsible for banking and capital market
activities and investor relations. Prior to joining Reckson, Mr. Maturo was
a Senior Manager at E&Y Kenneth Leventhal Real Estate Group (formerly Kenneth
Leventhal & Company), a public accounting and consulting firm. He
specialized in diverse phases of real estate finance including corporate and
property debt financings and recapitalization transactions. Mr. Maturo is a
graduate of Seton Hall University with a degree in accounting and finance and
is a certified public accountant. Mr. Maturo is a member of the accounting
committee of the National Association of Real Estate Investment Trusts.

Gregg M. Rechler, age 31, serves as the Secretary of RSI and serves as
an Executive Vice President and Secretary of Reckson and as President of
Reckson Construction Group, Inc. (the "Construction Company"). Mr. Rechler
is responsible for the construction, architectural and property management
activities of Reckson. Since 1985, he has been employed by Reckson and
certain affiliates. From 1985 to 1988, Mr. Rechler held non-supervisory
roles in the construction and property management areas. Beginning in 1989,
as an Executive Vice President of Reckson, he served as the person
responsible for the construction of the Omni office building and supervised
all construction aspects of this project. In 1991, he organized the
Construction Company and has been responsible for its significant growth.
Mr. Rechler is a member of the Board of Directors of the Long Island chapter
of the Building Owners and Managers Association ("BOMA"). Mr. Rechler
attended the New York Institute of Technology. He is the son of Roger
Rechler and the brother of Scott Rechler.

Mitchell D. Rechler, age 37, serves as a member of the Management
Advisory Committee; also serves as an Executive Vice President and a Director
of Reckson and also serves as the President of Reckson Management Group, Inc.
(the "Management Company"). From 1981 to 1985, he was employed by Reckson in
various non-supervisory roles including positions in property management,
construction, acquisitions and space leasing. Since 1986, Mr. Rechler has
served as an Executive Vice President of Reckson, responsible for all leasing
activities including the coordination of leasing and marketing strategies and
overseeing tenant relations. During his career at Reckson, Mr. Rechler has
completed over 300 leasing transactions encompassing in excess of 3 million
square feet of office and industrial space. Mr. Rechler has served as
President of the Management Company, since its organization in 1991. Mr.
Rechler serves on the Executive Committee of the Children's Medical Fund of
Schneider Children's Hospital of Long Island Jewish Medical Center and as a
member of the Board of Directors of the Long Island Friends of the Arts. He
is a graduate of Emory University. He is the son of Donald Rechler.

Jason M. Barnett, age 29, serves as Senior Vice President and General
Counsel of RSI and of Reckson. Mr. Barnett joined Reckson in 1996. He is
responsible for the coordination of all legal and compliance matters for RSI.
Prior to joining Reckson, Mr. Barnett practiced law as an associate in the
REIT practice group of Brown & Wood LLP. While at Brown & Wood LLP, Mr.
Barnett participated in numerous corporate and real estate transactions
involving publicly held REITs, including initial public offerings, joint
ventures and corporate and real estate acquisitions. Mr. Barnett holds a
Bachelor of Arts degree from Clark University and Law Degree from Emory
University School of Law. Mr. Barnett is admitted to the Bar of the State of
New York.

COMMITTEES OF THE BOARD OF DIRECTORS

The RSI Board has standing Audit and Compensation Committees.
(___________________, ______________ and ______________) will serve as the
members of the Audit Committee and (_____________ and ________________) will
serve as the members of the Compensation Committee. The Audit Committee
makes recommendations concerning the engagement of independent public
accountants, reviews with the independent public accountants the plans and
results of the audit engagement, reviews the independence of the independent
public accountants, considers the range of audit and non-audit fees and
reviews the adequacy of RSI's internal controls. The Compensation Committee
is responsible for establishing compensation for RSI's officers and
administering RSI's stock option plan.

COMPENSATION OF DIRECTORS

Each director other than Donald J. Rechler, Scott H. Rechler, Roger
Rechler, ( ) and ( ) will receive from RSI an annual fee of
$7,500 or a meeting fee of $500 for each RSI Board or Committee meeting
attended and reimbursements of expenses incurred in attending meetings.

ANNUAL MEETING

RSI's Bylaws provide that its annual meeting of stockholders will be
held in (May) of each year at its principal office or on such other date and
at such other place and time as may be fixed by resolution of RSI's Board.
The first annual meeting for which proxies will be solicited from
stockholders will be held in 1999.

EMPLOYMENT AGREEMENTS

None of the Executive Officers or members of the management advisory
committee of RSI have entered into employment agreements with RSI.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AFTER THE
DISTRIBUTION

Executive officers and directors will receive shares of RSI Common Stock
in the Distribution in respect of shares of Reckson Common Stock and Units
held by them on the Record Date. The Distribution will be made on the basis
of one share of RSI Common Stock for every 11 Reckson Common Shares held on
the Record Date and one share of RSI Common Stock for every 11 Units held on
the Record Date.

For purposes of providing an indication of the beneficial ownership of
certain persons following the Distribution, the following table sets forth
the number of shares of RSI Common Stock that will be beneficially owned
immediately following the Distribution, based on a Record Date of ( ),
1998, by each person then serving as an executive officer and director of
RSI, all such executive officers and directors of RSI as a group, and persons
or entities owning 5% or more of the outstanding shares of Reckson Common
Stock and Units.

BENEFICIAL OWNERSHIP OF RSI COMMON STOCK

NAME OF BENEFICIAL OWNER NUMBER OF Percent
------------------------ SHARES/(2)/ of
---------- Total
----------

Donald J. Rechler . . . . . . . . . ( (1)(3)) ( %)

Roger M. Rechler . . . . . . . . . ( (2)(4)) ( %)

Reckson Officer Entity (5) . . . . ( ) ( %)

Scott H. Rechler . . . . . . . . . ( (6)) ( %)

J. Michael Maturo . . . . . . . . . ( ) ( %)

Mitchell D. Rechler . . . . . . . . ( (7)) ( %)

FMR Corp. (8) . . . . . . . . . . . ( ) ( %)

Cohen & Steers Capital Management
Inc. (9) . . . . . . . . . . . . . ( ) ( %)

All directors and executive officers
as a group (__ persons) . . . . . ( ) ( %)

- --------------
(1) Includes ( ) shares held by a trust for the benefit of Glenn
Rechler, the son of Donald J. Rechler, beneficial ownership of which is
disclaimed by Donald J. Rechler.

(2) Includes ( ) shares held by a trust for the benefit of Todd
Rechler, the son of Roger M. Rechler, and 1,000 shares held by the wife
of Roger M. Rechler, beneficial ownership of which is disclaimed by
Roger M. Rechler.

(3) Includes ( ) Units held by trusts for the benefit of the sons of
Donald J. Rechler, beneficial ownership of which is disclaimed by Donald
J. Rechler.

(4) Includes ( ) Units held by trusts for the benefit of the sons of
Roger M. Rechler, beneficial ownership of which is disclaimed by Roger
M. Rechler.

(5) Reckson Officer Entity is comprised of certain officers of Reckson.

(6) Includes ( ) shares held in trust for the children of Scott H.
Rechler, beneficial ownership of which is disclaimed by Scott H.
Rechler.

(7) Includes ( ) shares held by the wife of Mitchell D. Rechler and
( ) shares held in trust for the children of Mitchell D.
Rechler, beneficial ownership of which is disclaimed by Mitchell D.
Rechler.

(8) The address of FMR Corp. is 82 Devonshire Street, Boston, Massachusetts
02109.

(9) The address of Cohen & Steers Capital Management Inc. is 757 Third
Avenue, New York, New York 10019.

EXECUTIVE COMPENSATION

RSI was recently formed. None of the Company's executive officers has
received compensation from or on behalf of RSI since its formation. The
Company has no employment agreements with any person and does not currently
contemplate paying a base salary to any executive officer that is also an
executive officer of Reckson for his services in such capacity, although
options have been, and in the future may be, granted to executive officers.
Subsequent to the commencement of RSI's operations, it expects that it will
pay salaries and other compensation to such executive officers when it begins
conducting business operations material enough to warrant such compensation.

The following table provides certain information regarding options
granted to the Company's named executive officers at ( ), 1998. None
of the options is exercisable until the Distribution Effective Date. The
Company has not granted any SARs.

POTENTIAL
REALIZABLE
VALUE AT
ASSUMED
ANNUAL
RATES OF
STOCK PRICE
APPRECIATION
NUMBER OF FOR
SHARES % OF TOTAL EXERCISE OPTION/SAR
UNDERLYING OPTIONS/SARs OR BASE TERM (1)
OPTIONS IN FISCAL PRICE EXPIRATION -------------
NAME GRANTED 199 ($/sh) DATE 5% 10%
- ------------------ ---------- ------------ -------- ---------- ------ ------

Donald J. Rechler (2)
Scott H. Rechler (2)
J. Michael Maturo (2)

(1) Potential Realizable Value is based on the assumed annual growth rates
shown over their 10-year option term. For example, a 5% growth rate
compounded annually, for Scott H. Rechler's grant results in a stock
price of $( ) per share and a 10% growth rate, compounded annually,
results in a stock price of $( ) per share. These Potential
Realizable Values are listed to comply with the regulations of the
Commission, and the Company cannot predict whether these values will be
achieved. Actual gains, if any, on stock option exercises are dependent
on the future performance of the stock.

(2) The exercise or base price per share as of ( ), 19__ (the
date of grant), which the Company's board of directors has determined
represents the fair market value as of the date of grant.

RSI STOCK INCENTIVE PLAN

RSI has adopted a Stock Incentive Plan pursuant to which grants of
options ("Options") to purchase a specified number of shares of RSI Common
Stock and shares of restricted stock in RSI ("Restricted Stock") were made in
order to provide incentives to the recipient thereof. None of the Options is
exercisable until the Distribution Effective Date. Under the Stock Incentive
Plan, ( ) shares of RSI Common Stock are authorized for issuance.
Non-employee directors of RSI will receive annual grants of Options to
purchase ( ) shares of RSI Common Stock (including an initial grant of an
Option to purchase ( ) shares of RSI Common Stock upon appointment of any
non-employee director). The Stock Incentive Plan expires on ______, 2008.

The Compensation Committee of RSI has authority to determine the
employees, officers and advisors to be granted Options or Restricted Stock,
to interpret the Stock Incentive Plan, to prescribe, amend and rescind any
rules and regulations necessary or appropriate for the administration of the
Stock Incentive Plan, to determine and interpret the details and provisions
of each Option agreement and Restricted Stock agreement, to modify or amend
any Option agreement or Restricted Stock agreement or waive any conditions or
restrictions applicable to any Option (or the exercise thereof) or to
Restricted Stock, and to make all other determinations necessary or advisable
for the administration of the Stock Incentive Plan. With respect to any
provisions of the Stock Incentive Plan granting the Compensation Committee
the right to agree, in its sole discretion, to further extend the term of any
award, the Compensation Committee may exercise such right at the time of
grant, in the agreement relating to such award, or at any time or from time
to time after the grant of any award thereunder. The discretion of the
Compensation Committee under the Stock Incentive Plan does not extend to
Options granted to outside directors.

CERTAIN TRANSACTIONS

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

As of __________, Donald J. Rechler, Roger M. Rechler and Scott H.
Rechler beneficially own approximately _____%, _____% and _____%,
respectively, of Reckson, which interests consist of shares of Reckson Common
Stock and Units (including vested options to acquire shares of Reckson Common
Stock) and will own RSI Common Stock following the Distribution, as set forth
above under "Management -- Security Ownership of Certain Beneficial Owners
and Management After the Distribution."

ACQUISITION OF ASSETS

During 1997, RSI acquired its indirect interests in ACLC and Dobie
Center from a Rechler family entity for $5.13 million. Such entity had
acquired the interests in ACLC and the Dobie Center earlier in 1997 for
$5.06 million in contemplation of transferring such interests to RSI, the
difference representing interest carrying costs.

FORMATION AND EQUITY CAPITALIZATION OF RSI; OWNERSHIP OF RSI COMMON STOCK

Due to considerations relating to the Reckson's status as a REIT under
Federal tax laws, RSI was initially formed as a subsidiary in which Reckson
Operating Partnership owned 95% of the outstanding capital stock in the form
of non-voting common stock and Reckson officers owned the remaining 5% of the
outstanding capital stock in the form of common stock. The shares of capital
stock owned by Reckson Operating Partnership and Reckson officers were
acquired on the same terms. Immediately prior to the Distribution, the
shares of non-voting common stock owned by Reckson Operating Partnership were
exchanged for RSI Common Stock.

The Company has also obtained the RSI Facility from Reckson Operating
Partnership which shall bear interest at the rate equal to the greater of the
prime rate plus 2% and 12% per annum, with such 12% increasing annually at a
rate of 4% of the prior year's rate. The RSI Facility will be payable on an
interest-only basis from net cash flow during its five-year term. Advances
under the RSI Facility will be recourse obligations of RSI.

Jon L. Halpern, a director of Reckson, and affiliated parties own a
39.13% interest in On-Site, a 331/3% interest in a joint venture that owns
76.09% of ACLC, a 331/3% interest in a joint venture that owns a 70% interest
in Dobie and a 22.75% interest in the Office Suites Company, and may
participate in the management and operation of these companies. Management
believes that RSI's participation in such investments, or in the Office
Suites Company's case, possible participation, with Mr. Halpern has been the
subject of arm's-length negotiations.

THE INTERCOMPANY AGREEMENT

The Intercompany Agreement between the Company and Reckson Operating
Partnership sets forth the basis on which RSI and Reckson Operating
Partnership will allocate business opportunities among them. See "Business -
- - The Intercompany Agreement."

DESCRIPTION OF RSI CAPITAL STOCK

AUTHORIZED CAPITAL STOCK

RSI's authorized capital stock consists of ( ) shares of
preferred stock, par value $.01 per share (the "Preferred Stock"), (
) shares of RSI Common Stock and ( ) shares of excess stock,
par value $.01 per share. Immediately following the Distribution,
approximately ( ) shares of RSI Common Stock will be outstanding
(subject to reduction to the extent that cash payments are made in lieu of
the issuance of fractional shares of RSI Common Stock). All of the shares of
RSI Common Stock that will be outstanding immediately following the
Distribution will be validly issued, fully paid and nonassessable.

COMMON STOCK

The holders of RSI Common Stock will be entitled to one vote for each
share on all matters voted on by stockholders, including elections of
directors, and, except as otherwise required by law or provided in any
resolution adopted by RSI's Board with respect to any series of Preferred
Stock, the holders of such shares will possess all voting power. The Charter
does not provide for cumulative voting in the election of directors. Subject
to any preferential rights of any outstanding series of Preferred Stock
created by the RSI Board from time to time, the holders of RSI Common Stock
will be entitled to such dividends as may be declared from time to time by
the RSI Board from funds available therefor, and upon liquidation will be
entitled to receive pro rata all assets of the Company available for
distribution to such holders.

PREFERRED STOCK

The Charter authorizes the RSI Board to establish one or more series of
Preferred Stock and to determine, with respect to any series of Preferred
Stock, the terms and rights of such series, including (i) the designation of
the series, (ii) the number of shares of the series, which number the RSI
Board may thereafter (except where otherwise provided in the applicable
certificate of designation) increase or decrease (but not below the number of
shares thereof then outstanding), (iii) whether dividends, if any, will be
cumulative or noncumulative, and, in the case of shares of any series having
cumulative dividend rights, the date or dates or method of determining the
date or dates from which dividends on the shares of such series shall be
cumulative, (iv) the rate of any dividends (or method of determining such
dividends) payable to the holders of the shares of such series, any
conditions upon which such dividends will be paid and the date or dates or
the method for determining the date or dates upon which such dividends will
be payable, (v) the redemption rights and price or prices, if any, for shares
of the series, (vi) the terms and amounts of any sinking fund provided for
the purchase or redemption of shares of the series, (vii) the amounts payable
on and the preferences, if any, of shares of the series in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
affairs of RSI, (viii) whether the shares of the series will be convertible
or exchangeable into shares of any other class or series, or any other
security, of RSI or any other corporation, and, if so, the specification of
such other class or series or such other security, the conversion or exchange
price or prices or rate or rates, any adjustments thereof, the date or dates
as of which such shares will be convertible or exchangeable and all other
terms and conditions upon which such conversion or exchange may be made, (ix)
restrictions on the issuance of shares of the same series or of any other
class or series, (x) the voting rights, if any, of the holders of the shares
of the series, and (xi) any other relative rights, preferences and
limitations of such series.

RSI believes that the ability of the RSI Board to issue one or more
series of Preferred Stock will provide it with flexibility in structuring
possible future financings and acquisitions, and in meeting other corporate
needs which might arise. The authorized shares of Preferred Stock, as well
as shares of RSI Common Stock, will be available for issuance without further
action by RSI's stockholders, unless such action is required by applicable
law or the rules of any stock exchange or automated quotation system on which
RSI's securities may be listed or traded. If the approval of RSI's
stockholders is not required for the issuance of shares of Preferred Stock or
RSI Common Stock, the RSI Board may determine not to seek stockholder
approval.

Although the RSI Board has no intention at the present time of doing so,
it could issue a series of Preferred Stock that could, depending on the terms
of such series, impede the completion of a merger, tender offer or other
takeover attempt. The RSI Board will make any determination to issue such
shares based on its judgment as to the best interests of RSI and its
stockholders. The RSI Board, in so acting, could issue Preferred Stock
having terms that could discourage an acquisition attempt through which an
acquiror may be able to change the composition of the RSI Board, including a
tender offer or other transaction that some, or a majority, of RSI's
stockholders might believe to be in their best interests or in which such
stockholders might receive a premium for their stock over the then-current
market price of such stock.

SERIES A JUNIOR PREFERRED STOCK

The Company expects to reserve ( ) shares of Series A Junior
Preferred Stock for issuance upon exercise of the Rights. The Series A
Junior Preferred Stock will not be redeemable and will rank, with respect to
the payment of dividends and the distribution of assets, junior to any other
series of any other classes of Preferred Stock that may exist from time to
time. Generally, each share of Series A Junior Preferred Stock will entitle
its holder to 100 votes on all matters submitted to a vote of the Company's
stockholders.

Subject to the rights of holders of any shares of any series of
Preferred Stock ranking prior and superior to the Series A Junior Preferred
Stock with respect to dividends, holders of shares of Series A Junior
Preferred Stock, in preference to holders of RSI Common Stock and any other
junior stock, will be entitled to receive, when, as and if declared by the
RSI Board, quarterly cash dividends, in an amount per share equal to the
greater of (i) $1 or (ii) subject to adjustment as set forth herein, 100
times the aggregate per share amount of all cash dividends and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends or
other distributions (other than dividends payable in RSI Common Stock or a
subdivision of outstanding shares of RSI Common Stock) declared on the RSI
Common Stock since the immediately preceding quarterly dividend payment date,
or since the first issuance of any share of Series A Junior Preferred Stock,
in the case of the first quarterly dividend payment date. In the event the
Board declares or pays a dividend on the RSI Common Stock payable in shares
of RSI Common Stock or subdivides, combines or consolidates the outstanding
shares of RSI Common Stock into a greater or lesser number of shares of RSI
Common Stock, the amount of in-kind dividend payable to holders of Series A
Junior Preferred Stock will be adjusted for such dividend on, or subdivision,
combination or consolidation of, shares of RSI Common Stock. Dividends on
the Series A Junior Preferred Stock generally will be declared immediately
following a dividend declaration on the RSI Common Stock, and will be
cumulative. Accrued but unpaid dividends will not bear interest.

During such times as dividends payable on the Series A Junior Preferred
Stock are in arrears, and until such arrearages have been paid in full, RSI
will be prohibited from (i) declaring or paying dividends, or making other
distributions on any shares of stock ranking junior to the Series A Junior
Preferred Stock, (ii) declaring or paying dividends, or making other
distributions on any shares of stock ranking on a parity with the Series A
Junior Preferred Stock, except dividends paid ratably on the Series A Junior
Preferred Stock and all such parity stock, in proportion to the amounts to
which holders of all such shares are then entitled, (iii) redeeming or
otherwise acquiring for value any stock ranking junior to the Series A Junior
Preferred Stock, and (iv) redeeming or otherwise acquiring for value any
shares of Series A Junior Preferred Stock, or any shares of stock ranking on
a parity with the Series A Junior Preferred Stock, except in accordance with
a purchase offer made under certain limited circumstances. Redemptions and
other acquisitions of stock ranking junior to the Series A Junior Preferred
Stock will be permissible if such redemptions or acquisitions are made in
exchange for shares of any stock of RSI ranking junior to the Series A Junior
Preferred Stock.

In the event of any liquidation, dissolution or winding up of RSI, no
distribution will be made to the holders of shares of stock ranking junior to
the Series A Junior Preferred Stock unless and until the holders of the
Series A Junior Preferred Stock have received $100 per share, plus an amount
equal to accrued and unpaid dividends and distributions thereon. Holders of
Series A Junior Preferred Stock will be entitled to receive an aggregate
amount per share equal to 100 times the aggregate amount to be distributed
per share to holders of RSI Common Stock. Further, no distribution will be
made to the holders of shares of stock ranking on a parity with the Series A
Junior Preferred Stock, except distributions made ratably on the Series A
Junior Preferred Stock and all such parity stock in proportion to the totals
to which the holders are entitled upon such liquidation, dissolution or
winding up. In the event the Board declares or pays a dividend payable in
shares of RSI Common Stock or subdivides, combines or consolidates the
outstanding shares of RSI Common Stock into a greater or lesser number of
shares of RSI Common Stock, the amount of the liquidating distribution
payable to holders of Series A Junior Preferred Stock will be adjusted for
such dividend on, or subdivision, combination or consolidation of, shares of
RSI Common Stock.

In the event RSI enters into a consolidation, merger, combination or
other transaction pursuant to which shares of RSI Common Stock are exchanged
for or changed into other stock or securities, cash or other property, each
share of Series A Junior Preferred Stock must be similarly exchanged or
changed into an amount per share equal to 100 times the aggregate amount of
stock, securities, cash or other property (payable in kind) into which or for
which each share of RSI Common Stock is changed or exchanged. In the event
the Board declares or pays a dividend payable in shares of RSI Common Stock
or subdivides, combines or consolidates the outstanding shares of RSI Common
Stock into a greater or lesser number of shares of RSI Common Stock, the
amount payable to holders of Series A Junior Preferred Stock in respect of a
consolidation, merger, combination or other such transaction will be adjusted
for such dividend on, or subdivision, combination or consolidation of, shares
of RSI Common Stock.

RESTRICTION ON OWNERSHIP OF RSI CAPITAL STOCK

In order for Reckson to qualify as a REIT under the Code, it must
satisfy a variety of requirements, including annual tests with respect to the
nature of its gross income. Substantially all of Reckson's gross income
meets these requirements by qualifying as "rentals from real property" under
Section 856(d) of the Code. Under this provision, however, a REIT's real
property rentals can be disqualified if the rent is received by the REIT from
a related party or if noncustomary services are performed for the tenant
other than by an independent contractor. The characterization of a party as
a related-party tenant or as an independent contractor depends, in part, upon
the percentage of stock, assets or net profits of such party that may be
owned by the REIT or by shareholders of the REIT. Such ownership may be
direct or may be indirect under certain attribution rules prescribed by the
Code. Immediately after the Distribution, there will be a substantial
identity of ownership between stockholders of Reckson and stockholders of the
Company. It cannot be predicted how long or to what degree such identity of
ownership may continue. In order to protect Reckson from the risk that
rental income that it will earn from the Company or its affiliates and from
tenants with respect to which the Company or its affiliates may provide Real
Estate-Related Services will not be disqualified as rent from real property
for REIT qualification purposes, the ownership by any person or entity of RSI
Common Stock is limited to 9.9% of the aggregate number or value of shares of
RSI stock.

EXCESS STOCK

The Articles of Incorporation provide that the Company may issue up to
75 million shares of excess stock, par value $.01 per share ("Excess Stock").
For a description of Excess Stock, see " -- Restrictions on Ownership" below.

RESTRICTIONS ON OWNERSHIP

In order to protect Reckson against the risk of failing to satisfy
certain tax laws applicable to REITs due to common ownership among 10%
holders of RSI Common Stock and Reckson Common Stock the Certificate of
Incorporation, subject to certain exceptions, provides that no stockholder
may own, or be deemed to own by virtue of the attribution provisions of the
Code, more than 9.9% (the "Ownership Limit") of the aggregate number or value
of the Company's outstanding shares of Common Stock. In the event the
Company issues Preferred Stock, it may, in the Designating Amendment,
determine a limit on the ownership of such stock. Any direct or indirect
ownership of shares of stock in excess of the Ownership Limit or that would
result in (common ownership among 10% holders of RSI Common Stock and Reckson
Common Stock), shall be null and void, and the intended transferee will
acquire no rights to the shares of capital stock. The foregoing restrictions
on transferability and ownership will not apply if Reckson determines that it
is no longer in its best interests to attempt to qualify, or to continue to
qualify, as a REIT. Under the terms of the Intercompany Agreement, the RSI
Board of Directors may waive the Ownership Limit only if permission to do so
is granted by Reckson, in Reckson's sole discretion, and the RSI Board of
Directors otherwise decides that such action is in the best interest of the
Company.

Shares of capital stock owned, or deemed to be owned, or transferred to
a stockholder in excess of the Ownership Limit will automatically be
converted into shares of Excess Stock that will be transferred, by operation
of law, to the trustee of a trust for the exclusive benefit of one or more
charitable organizations described in Section 170(b)(1)(A) and 170(c) of the
Code (the "Charitable Beneficiary"). The trustee of the trust will be deemed
to own the Excess Stock for the benefit of the Charitable Beneficiary on the
date of the violative transfer to the original transferee-stockholder. Any
dividend or distribution paid to the original transferee-stockholder of
Excess Stock prior to the discovery by the Company that capital stock has
been transferred in violation of the provisions of the Company's Certificate
of Incorporation shall be repaid to the trustee upon demand. Any dividend or
distribution authorized and declared but unpaid shall be rescinded as void ab
initio with respect to the original transferee-stockholder and shall instead
be paid to the trustee of the trust for the benefit of the Charitable
Beneficiary. Any vote cast by an original transferee-stockholder of shares
of capital stock constituting Excess Stock prior to the discovery by the
Company that shares of capital stock have been transferred in violation of
the Company's Certificate of Incorporation shall be rescinded as void ab
initio. While the Excess Stock is held in trust, the original transferee-
stockholder will be deemed to have given an irrevocable proxy to the trustee
to vote the capital stock for the benefit of the Charitable Beneficiary. The
trustee of the trust may transfer the interest in the trust representing the
Excess Stock to any person whose ownership of the shares of capital stock
converted into such Excess Stock would be permitted under the Ownership
Limit. If such transfer is made, the interest of the Charitable Beneficiary
shall terminate and the proceeds of the sale shall be payable to the original
transferee-stockholder and to the Charitable Beneficiary as described herein.
The original transferee-stockholder shall receive the lesser of (i) the price
paid by the original transferee-stockholder for the shares of capital stock
that were converted into Excess Stock or, if the original transferee-
stockholder did not give value for such shares (e.g., the stock was received
through a gift, devise or other transaction), the average closing price for
the class of shares from which such shares of capital stock were converted
for the ten trading days immediately preceding such sale or gift, and (ii)
the price received by the trustee from the sale or other disposition of the
Excess Stock held in trust. The trustee may reduce the amount payable to the
original transferee-stockholder by the amount of dividends and distributions
relating to the shares of Excess Stock which have been paid to the original
transferee-stockholder and are owed by the original transferee-stockholder to
the trustee. Any proceeds in excess of the amount payable to the Original
transferee-stockholder shall be paid by the trustee to the Charitable
Beneficiary. Any liquidation distributions relating to Excess Stock shall be
distributed in the same manner as proceeds of a sale of Excess Stock. If the
foregoing transfer restrictions are determined to be void or invalid by
virtue of any legal decision, statute, rule or regulations, then the original
transferee-stockholder of any shares of Excess Stock may be deemed, at the
option of the Company, to have acted as an agent on behalf of the Company in
acquiring the shares of Excess Stock and to hold the shares of Excess Stock
on behalf of the Company.

In addition, the Company will have the right, for a period of 90 days
during the time any shares of Excess Stock are held in trust, to purchase all
or any portion of the shares of Excess Stock at the lesser of (i) the price
initially paid for such shares by the original transferee-stockholder, or if
the original transferee-stockholder did not give value for such shares (e.g.,
the shares were received through a gift, devise or other transaction), the
average closing price for the class of stock from which such shares of Excess
Stock were converted for the ten trading days immediately preceding such sale
or gift, and (ii) the average closing price for the class of stock from which
such shares of Excess Stock were converted for the ten trading days
immediately preceding the date the Company elects to purchase such shares.
The Company may reduce the amount payable to the original transferee-
stockholder by the amount of dividends and distributions relating to the
shares of Excess Stock which have been paid to the original transferee-
stockholder and are owned by the original transferee-stockholder to the
trustee. The Company may pay the amount of such reductions to the trustee
for the benefit of the Charitable Beneficiary. The 90-day period begins on
the later date of which notice is received of the violative transfer if the
original transferee-stockholder gives notice to the Company of the transfer
or, if no such notice is given, the date the RSI Board of Directors
determines that a violative transfer has been made.

All certificates representing shares of capital stock will bear a legend
referring to the restrictions described above.

Each stockholder shall, upon demand by the Company, be required to
disclose to the Company in writing any information with respect to the
direct, indirect and constructive ownership of capital stock of the Company
as Reckson deems necessary for Reckson to comply with the provision of the
Code applicable to REITs.

The Company is required to maintain in its charter the foregoing
Ownership Limit, Excess Stock and stock ownership disclosure requirements
under the terms of the Intercompany Agreement.

The Ownership Limit may have the effect of delaying, deferring or
preventing a change in control of the Company.

CERTAIN ANTITAKEOVER PROVISIONS

STAGGERED BOARD OF DIRECTORS

The Charter and the Bylaws provide that the RSI Board will be divided
into three classes of directors, each class constituting approximately
one-third of the total number of directors, with the classes serving
staggered three-year terms. The classification of the RSI Board will have
the effect of making it more difficult for stockholders to change the
composition of the RSI Board, because only a minority of the directors are up
for election, and the RSI Board may not be replaced by vote of the
stockholders, at any one time. RSI believes, however, that the longer terms
associated with the classified RSI Board will help to ensure continuity and
stability of the Company's management and policies.

The classification provisions also could have the effect of discouraging
a third party from accumulating a large block of RSI Common Stock or
attempting to obtain control of RSI, even though such an attempt might be
beneficial to the Company and some, or a majority, of its stockholders.
Accordingly, under certain circumstances stockholders could be deprived of
opportunities to sell their shares of RSI Common Stock at a higher price than
might otherwise be available.

NUMBER OF DIRECTORS; REMOVAL; FILLING VACANCIES

The Charter provides that, subject to any rights of holders of Preferred
Stock to elect additional directors under specified circumstances ("Preferred
Holders' Rights"), the number of directors will be fixed by the Bylaws. The
Bylaws provide that, subject to any Preferred Holders' Rights, the number of
directors will be fixed by the RSI Board, but must not be more than 25 nor
less than three. In addition, the Bylaws provide that, subject to any
Preferred Holders' Rights, and unless the RSI Board otherwise determines, any
vacancies (other than vacancies created by an increase in the total number of
directors) will be filled by the affirmative vote of a majority of the
remaining directors, though less than a quorum, and any vacancies created by
an increase in the total number of directors may be filled by a majority of
the entire RSI Board. Accordingly, the RSI Board could temporarily prevent
any stockholder from enlarging the RSI Board and then filling the new
directorships with such stockholder's own nominees.

The Charter and the Bylaws provide that, subject to any Preferred
Holders' Rights, directors may be removed only for cause upon the affirmative
vote of holders of at least 80% of the entire voting power of all the
then-outstanding shares of stock entitled to vote generally in the election
of directors, voting together as a single class.

NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS

The Charter and Bylaws provide that any action required or permitted to
be taken by the stockholders of RSI must be effected at a duly called annual
or special meeting of such holders and may not be effected by any consent in
writing by such holders. Except as otherwise required by law and subject to
the rights of the holders of any Preferred Stock, special meetings of
stockholders of RSI for any purpose or purposes may be called only by the
Chairman of the Board, Vice Chairman, President or the RSI Board pursuant to
a resolution stating the purpose or purposes thereof. No business other than
that stated in the notice shall be transacted at any special meeting. These
provisions may have the effect of delaying consideration of a stockholder
proposal until the next annual meeting unless a special meeting is called by
the Chairman of the Board, Vice Chairman, President or the RSI Board.

ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND STOCKHOLDER
PROPOSALS

The Bylaws establish an advance notice procedure for stockholders to
make nominations of candidates for directors or bring other business before
an annual meeting of stockholders of RSI (the "Stockholder Notice
Procedure").

The Stockholder Notice Procedure provides that (i) only persons who are
nominated by, or at the direction of, the RSI Board, or by a stockholder who
has given timely written notice containing specified information to the
Secretary of RSI prior to the meeting at which directors are to be elected,
will be eligible for election as directors of RSI and (ii) at an annual
meeting, only such business may be conducted as has been brought before the
meeting by, or at the direction of the Chairman or the RSI Board or by a
stockholder who has given timely written notice to the Secretary of RSI of
such stockholder's intention to bring such business before such meeting. In
general, for notice of stockholder nominations or proposed business to be
conducted at an annual meeting to be timely, such notice must be received by
the Company not less than 70 days nor more than 90 days prior to the first
anniversary of the previous year's annual meeting.

The purpose of requiring stockholders to give the Company advance notice
of nominations and other business is to afford the RSI Board a meaningful
opportunity to consider the qualifications of the proposed nominees or the
advisability of the other proposed business and, to the extent deemed
necessary or desirable by the RSI Board, to inform stockholders and make
recommendations about such nominees or business, as well as to ensure an
orderly procedure for conducting meetings of stockholders. Although the
Bylaws do not give the RSI Board power to block stockholder nominations for
the election of directors or proposal for action, they may have the effect of
discouraging a stockholder from proposing nominees or business, precluding a
contest for the election of directors or the consideration of stockholder
proposals if procedural requirements are not met, and deterring third parties
from soliciting proxies for a non-management slate of directors or proposal,
without regard to the merits of such slate or proposal.

RELEVANT FACTORS TO BE CONSIDERED BY THE RSI BOARD

The Charter, which provides that one of the purposes of RSI is to
perform the Intercompany Agreement, also provides that, in determining what
is in the best interest of RSI in evaluating a "business combination,"
"change in control" or other transaction, a director of RSI shall consider
all of the relevant factors, which may include (i) the immediate and
long-term effects of the transaction on RSI's stockholders, including
stockholders, if any, who do not participate in the transaction; (ii) the
social and economic effects of the transaction on the Company's employees,
suppliers, creditors and customers and others dealing with the Company and on
the communities in which the Company operates and is located; (iii) whether
the transaction is acceptable, based on the historical and current operating
results and financial condition of the Company; (iv) whether a more favorable
price would be obtained for the Company's stock or other securities in the
future; (v) the reputation and business practices of the other party or
parties to the proposed transaction, including its or their management and
affiliates, as they would affect employees of the Company; (vi) the future
value of the Company's securities; (vii) any legal or regulatory issues
raised by the transactions; (viii) the effect on the Intercompany Agreement;
and (ix) the business and financial condition and earnings prospects of the
other party or parties to the proposed transactions including, without
limitation, debt service and other existing financial obligations, financial
obligations to be incurred in connection with the transaction and other
foreseeable financial obligations of such other party or parties. Pursuant
to this provision, the RSI Board may consider subjective factors affecting a
proposal, including certain nonfinancial matters, and on the basis of these
considerations, may oppose a business combination or other transaction which,
evaluated only in terms of its financial merits, might be attractive to some,
or a majority, of the Company's stockholders.

AMENDMENT

The Charter provides that the affirmative vote of the holders of at
least 80% of the stock entitled to vote generally in the election of
directors (the "Voting Stock"), voting together as a single class, is
required to amend provisions of the Charter relating to stockholder action
without a meeting; the calling of special meetings; the number, election and
term of the Company's directors; the filling of vacancies and the removal of
directors. The Charter further provides that the related Bylaws described
above (including the Stockholder Notice Procedure) may be amended only by the
RSI Board or by the affirmative vote of the holders of at least 80% of the
voting power of the outstanding shares of Voting Stock, voting together as a
single class. In all cases, amendments to the charter and by-laws require
that the RSI Board determines that the proposed amendment is advisable.

RIGHTS PLAN

The RSI Board currently expects to adopt the Rights Plan on or prior to
the Distribution Effective Date. Pursuant to the Rights Plan, the RSI Board
will cause to be issued one Right for each share of RSI Common Stock
outstanding on the Distribution Effective Date. Each Right will entitle the
registered holder to purchase from RSI one one-hundredth of a share of Series
A Junior Participating Preferred Stock at a price of $__ (the "Purchase
Price"), subject to adjustment. The description and terms of the Rights will
be set forth in a Rights Agreement (the "Rights Agreement"), between RSI and
the designated Rights Agent (the "Rights Agent"). The description set forth
below is intended as a summary only and is qualified in its entirety by
reference to the form of the Rights Agreement filed as an exhibit to the
Registration Statement. See "Available Information."

Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired beneficial ownership of __% or more of the
outstanding shares of RSI Common Stock or (ii) 10 business days (or such
later date as may be determined by action of the RSI Board prior to such time
as any person becomes an Acquiring Person) following the commencement of, or
announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of __% or more of such outstanding shares of RSI Common Stock (the
earlier of such dates being called the "Rights Distribution Effective Date"),
the Rights will be evidenced by the certificates representing the RSI Common
Stock.

The Rights Agreement will provide that, until the Rights Distribution
Effective Date (or earlier redemption or expiration of the Rights), the
Rights will be transferred with and only with the RSI Common Stock. Until
the Rights Distribution Effective Date (or earlier redemption or expiration
of the Rights), the RSI Common Stock certificates will contain a notation
incorporating the Rights Agreement by reference. As soon as practicable
following the Rights Distribution Effective Date, separate certificates
evidencing the Rights ("Right Certificates") will be mailed to holders of
record of the RSI Common Stock as of the close of business on the Rights
Distribution Effective Date and such separate Right Certificates alone will
evidence the Rights.

The Rights will not be exercisable until the Rights Distribution
Effective Date. The Rights will expire on the tenth anniversary of the
Record Date (the "Final Expiration Date"), unless the Final Expiration Date
is extended or unless the Rights are earlier redeemed or exchanged by RSI, in
each case, as summarized below.

In the event that any person or group of affiliated or associated
persons becomes an Acquiring Person, proper provision shall be made so that
each holder of a Right, other than Rights beneficially owned by the Acquiring
Person (which will thereafter be void), will thereafter have the right to
receive upon exercise that number of shares of RSI Common Stock having a
market value of two times the exercise price of the Right. In the event that
RSI is acquired in a merger or other business combination transaction or 50%
or more of its consolidated assets or earning power are sold after a person
or group of affiliated or associated persons becomes an Acquiring Person,
proper provision will be made so that each holder of a Right will thereafter
have the right to receive, upon the exercise thereof at the then current
exercise price of the Right, that number of shares of common stock of the
acquiring company which at the time of such transaction will have a market
value of two times the exercise price of the Right.

At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of __% or more of the outstanding
RSI Common Stock, and prior to the acquisition by such person or group of 50%
or more of the outstanding RSI Common Stock, the RSI Board may exchange the
Rights (other than Rights owned by such person or group which have become
void), in whole or in part, at an exchange ratio of one share of RSI Common
Stock, or one one-hundredth of a share of Series A Junior Preferred Stock (or
a share of a class or series of the Preferred Stock having equivalent rights,
preference and privileges) per Right (subject to adjustment).

At any time prior to the acquisition by a person or group of affiliated
or associated persons of beneficial ownership of 10% or more of the
outstanding shares of RSI Common Stock, the RSI Board may redeem the Rights
in whole, but not in part, at the Redemption Price of $__ per Right. The
redemption of the Rights may be made effective at such time on such basis and
with such conditions as the RSI Board in its sole discretion may establish.
Immediately upon any redemption of the Rights, the right to exercise the
Rights will be terminated and the only right of the holders of Rights will be
to receive the Redemption Price.

The terms of the Rights may be amended by the RSI Board without the
consent of the holders of the Rights; provided, however, that from and after
such time as any person or group of affiliated or associated persons becomes
an Acquiring Person, no such amendment may adversely affect the interests of
the holders of the Rights.

Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of RSI, including, without limitations, the right to
vote or to receive dividends.

The number of outstanding Rights and the number of one one-hundredths of
a share of Series A Junior Preferred Stock issuable upon exercise of each
Right also will be subject to adjustment in the event of a stock split of the
RSI Common Stock, or a stock dividend on the RSI Common Stock payable in RSI
Common Stock or subdivisions, consolidations or combinations or the RSI
Common Stock occurring, in any such case, prior to the Rights Distribution
Effective Date.

The Purchase Price payable, and the number of shares of Series A Junior
Preferred Stock or other securities or property issuable, upon exercise of
the Rights will be subject to adjustment from time to time to prevent
dilution (i) in the event or a stock dividend on, or a subdivision,
combination or reclassification of, the shares of Series A Junior Preferred
Stock; (ii) upon the grant to holders of shares of Series A Junior Preferred
Stock of certain rights or warrants to subscribe for or purchase shares of
Series A Junior Preferred Stock at a price, or securities convertible into
shares of Series A Junior Preferred Stock with a conversion price, less than
the then-current market price of shares of the Series A Junior Preferred
Stock; or (iii) upon the distribution to holders of shares of Series A Junior
Preferred Stock of evidences of indebtedness or assets (excluding regular
periodic cash dividends paid out of earnings or retained earnings or
dividends payable in shares of Series A Junior Preferred Stock) or of
subscription rights or warrants (other than those referred to above).

With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least one
percent in such Purchase Price. No fractional shares of Series A Junior
Preferred Stock will be issued (other than fractions which are integral
multiples of one one-hundredth of a share of Series A Junior Preferred Stock,
which may, at the election of the Company, be evidenced by depositary
receipts) and, in lieu thereof, an adjustment in cash will be made based on
the market price of the shares of Series A Junior Preferred Stock on the last
trading day prior to the date of exercise.

Shares of Series A Junior Preferred Stock purchasable upon exercise of
the Rights will not be redeemable. Each share of Series A Junior Preferred
Stock will be entitled to a minimum preferential quarterly dividend payment
of $__ per share but will be entitled to an aggregate dividend of ___ times
the dividend declared per share of RSI Common Stock. In the event of
liquidation, the holders of the shares of Preferred Stock will be entitled to
a minimum preferential liquidation payment of $__ per share but will be
entitled to an aggregate payment of ___times the payment made per share of
RSI Common Stock. Each share of Series A Junior Preferred Stock will have
___ votes voting together with the RSI Common Stock. Finally, in the event
of any merger, consolidation or other transaction in which shares of RSI
Common Stock are exchanged, each share of Series A Junior Preferred Stock
will be entitled to receive ___ times the amount received per share of RSI
Common Stock. These rights are protected by customary anti-dilution
provisions.

Due to the nature of the shares of Series A Junior Preferred Stock's
dividend, liquidation and voting rights, the value of the one one-hundredth
interest in a share of Series A Junior Preferred Stock purchasable upon
exercise of each Right should approximate the value of one share of RSI
Common Stock.

The Rights have certain antitakeover effects. The Rights will cause
substantial dilution to a person or group of persons that attempts to acquire
RSI on terms not approved by the RSI Board. The Rights should not interfere
with any merger or other business combination approved by the RSI Board prior
to the time that a person or group has acquired beneficial ownership of 10%
or more of the RSI Common Stock since the Rights may be redeemed by RSI at
the Redemption Price until such time.

The Rights Plan contains certain provisions to exclude RSI and its
affiliates from the operative provisions thereof.

DELAWARE BUSINESS COMBINATION STATURE

Section 203 of the DGCL provides that, subject to certain exceptions
specified therein, an "interested stockholder" of a Delaware corporation
shall not engage in any business combination, including mergers or
consolidations or acquisitions of additional shares of the corporation, with
the corporation for a three-year period following the date that such
stockholder becomes an interested stockholder unless (i) prior to such date,
the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
"interested stockholder," the interested stockholder owned at least 85% of
the voting stock of the corporation outstanding at the time the transaction
commenced (excluding certain shares), or (iii) on or subsequent to such date,
the business combination is approved by the board of directors of the
corporation and authorized at an annual or special meeting of stockholders by
the affirmative vote of at least 662/3% of the outstanding voting stock which
is not owned by the interested stockholder. Except as otherwise specified in
Section 203, an interested stockholder is defined to include (x) any person
that is the owner of 15% or more of the outstanding voting stock of the
corporation, or is an affiliate or associate of the corporation and was the
owner of 15% or more of the outstanding voting stock of the corporation at
any time within three years immediately prior to the date of determination
and (y) the affiliates and associates of any such person.

Under certain circumstances, Section 203 makes it more difficult for a
person who would be an interested stockholder to effect various business
combinations with a corporation for a three-year period. RSI has not elected
to be exempt from the restrictions imposed under Section 203. However, the
Charter excludes Reckson and its affiliates from the definition of
"interested stockholder" pursuant to the terms of Section 203. The
provisions of Section 203 may encourage persons interested in acquiring RSI
to negotiate in advance with the RSI Board, since the stockholder approval
requirement would be avoided if a majority of the directors then in office
approves either the business combination or the transaction which results in
any such person becoming an interested stockholder. Such provisions also may
have the effect of preventing changes in the management of RSI. It is
possible that such provisions could make it more difficult to accomplish
transactions which the Company's stockholders may otherwise deem to be in
their best interests.

CONTROL SHARE ACQUISITIONS

The Charter provides that the holder of "control shares" of RSI acquired
in a control share acquisition have no voting rights with respect to such
control shares except to the extent approved by a vote of two-thirds of the
votes entitled to be cast by stockholders, excluding shares owned by the
acquiror, officers of RSI and employees of RSI who are also directors.
"Control shares" are shares which, if aggregated with all other shares
previously acquired which the person is entitled to vote, would entitle the
acquiror to vote (i) 20% or more but less than one-third, (ii) one-third or
more but less than a majority, or (iii) a majority of the outstanding shares.
Control shares do not include shares that the acquiring person is entitled to
vote on the basis of prior stockholder approval. A "control share
acquisition" means the acquisition of control shares subject to certain
exceptions.

The Charter provides that a person who has made or proposed to make a
control share acquisition and who has obtained a definitive financing
agreement with a responsible financial institution providing for any amount
of financing not to be provided by the acquiring person may compel the RSI
Board to call a special meeting of stockholders to be held within 50 days of
demand to consider the voting rights of the holder in respect of such control
shares. If no request for a meeting is made, the Charter permits RSI itself
to present the question at any stockholders' meeting.

Pursuant to the Charter, if voting rights are not approved at a
stockholders' meeting or if the acquiring person does not deliver an
acquiring person's statement, which would disclose certain information about
the particular control share acquisition, as required by the Charter, then,
subject to certain conditions and limitations set forth in the Charter, RSI
may redeem any or all of the control shares, except those for which voting
rights have previously been approved, for "fair value." Fair value is
determined, without regard to the absence of voting rights, as of the date of
the last control share acquisition or of any meeting of stockholders at which
the voting rights of the holder in respect of such control shares are
considered and not approved, and means, for purposes of the redemption, the
highest closing sale price during the 30-day period immediately prior to and
including the date in question, of a share of such stock on the exchange on
which the shares are listed or, if not so listed, the highest closing bid
quotation during such 30-day period or, if no such quotations are available,
the fair market value as determined by the RSI Board. Under the Charter, if
voting rights of the holder in respect of such control shares are approved at
a stockholders' meeting and, as a result, the acquiror would be entitled to
vote a majority of the shares entitled to vote, then the Charter shall be
amended to so state, and all other stockholders will have the rights of
dissenting stockholders under the DGCL. The Charter provides that the fair
value of the shares for purposes of such appraisal rights may not be less
than the highest price per share paid by the acquiror in the control share
acquisition, and that certain limitations and restrictions of the DGCL
otherwise applicable to the exercise of dissenters' rights do not apply.

The control share acquisition provisions do not apply to the holder in
respect of control shares acquired in a merger, consolidation or share
exchange if RSI is a party to the transaction, or if the acquisition is
approved or excepted by the Charter or Bylaws prior to a control share
acquisition. The control share provisions in the Charter do not apply to
Reckson and its affiliates.

LIABILITY OF DIRECTORS AND OFFICERS; INDEMNIFICATION

The Charter provides that a director of RSI will not be personally
liable to RSI or its stockholders for monetary damages for breach of
fiduciary duty as a director, except, if required by the DGCL, as amended
from time to time, for liability (i) for any breach of the director's duty of
loyalty to RSI or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the DGCL, which concerns unlawful payments of
dividends, stock purchases or redemptions, or (iv) for any transaction from
which the director derived an improper personal benefit. Neither the
amendment nor repeal of such provision will eliminate or reduce the effect of
such provision in respect of any matter occurring, or any cause of action,
suit or claim that, but for such provision, would accrue or arise prior to
such amendment or repeal.

While the Charter provides directors with protection from awards for
monetary damages for breaches of their duty of care, it does not eliminate
such duty. Accordingly, the Charter will have no effect on the availability
of equitable remedies such as an injunction or rescission based on a
director's breach of his or her duty of care.

The Charter provides that each person who was threatened to be made a
party to or is involved in any proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person, or a
person of whom such person is the legal representative, is or was a director
or officer of RSI or is or was serving at the request of RSI as a director,
officer, employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to
employee benefit plan, whether the basis of such proceeding in an alleged
action in an official capacity as a director, officer, employee or agent or
in any other capacity while serving as a director, officer, employee or
agent, will be indemnified and held harmless by RSI to the fullest extent
authorized by the DGCL, as the same exists or may hereafter be amended (but,
in the case of any such amendment, only to the extent that such amendment
permits RSI to provide broader indemnification rights than said law permitted
RSI to provide prior to such amendment), against all expense, liability and
loss reasonably incurred or suffered by such person in connection therewith.
Such right to indemnification includes the right to have RSI pay the expenses
incurred in defending any such proceeding in advance of its final
disposition, subject to the provisions of the DGCL. Such rights are not
exclusive of any other right which any person may have or thereafter acquire
under any statute, provision of the Charter, Bylaw, agreement, vote of
stockholders or disinterested directors or otherwise. No repeal or
modification of such provision will in any way diminish or adversely affect
the rights of any director, officer, employee or agent of RSI thereunder in
respect of any occurrence or matter arising prior to any such repeal or
modification. The Charter also specifically authorizes RSI to maintain
insurance and to grant similar indemnification rights to employees or agents
of RSI.

RSI has entered into indemnification agreements with each of its
executive officers and directors. The indemnification agreements require,
among other things, that RSI indemnify its officers and directors to the
fullest extent permitted by law, and advance to the officers and directors
all related expenses, subject to reimbursement if it is subsequently
determined that the indemnification is not permitted. The Company also must
indemnify and advance expenses incurred by officers and directors seeking to
enforce their rights under the indemnification agreements and cover officers
and directors under the Company's directors' and officers' liability
insurance. Although the indemnification agreements offer substantially the
same scope of coverage afforded by provisions in the Charter and Bylaws, they
provide greater assurance to directors and executive officers that
indemnification will be available, because, as contracts, they cannot be
modified unilaterally in the future by the Board of Directors or by the
stockholders to alter, limit or eliminate the rights they provide.

EXPERTS

The financial statements of RSI, Veritech Ventures, L.L.C. and American
Campus Lifestyles Company L.L.C. appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, to the extent indicated in their reports thereon also appearing
elsewhere herein and in the Registration Statement. Such financial
statements have been included herein in reliance upon such reports given upon
the authority of such firm as experts in accounting and auditing.

The financial statements and Schedule of Dobie Center as of December 31,
1996 and 1995, and for the three years in the period ended December 31, 1996,
included in this prospectus and elsewhere in this registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and
auditing in giving said reports.

The financial statements of American Campus Lifestyles Companies LLC
as of December 31, 1996 and 1995, and for the two years in the period ended
December 31, 1996, included in this prospectus and elsewhere in this
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and
are included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.

LEGAL MATTERS

The legality of the issuance of the shares of RSI Common Stock to be
distributed in the Distribution and certain legal matters relating to federal

income tax considerations will be passed upon for the Company by Brown & Wood
LLP, New York, New York.

INDEX TO FINANCIAL STATEMENTS

Page
----

Reckson Services Industries Inc.

Pro Forma Condensed Combining Balance Sheet (unaudited)
as of September 30, 1997 . . . . . . . . . . . . . . . . . . . . . . . F-4

Pro Forma Condensed Combining Statement of Operations (unaudited)
for the year ended December 31, 1996 . . . . . . . . . . . . . . . . . F-7

Pro Forma Condensed Combining Statement of Operations (unaudited)
for the nine months ended September 30, 1997 . . . . . . . . . . . . . . F-9

Reckson Services Industries Inc.

Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . F-11

Balance Sheet as of September 30, 1997 . . . . . . . . . . . . . . . . . F-12

Statement of Income for the Period July 15, 1997
(commencement of operations) to September 30, 1997 . . . . . . . . . . . F-13

Statement of Cash Flows for the Period July 15, 1997
(commencement of operations) to September 30, 1997 . . . . . . . . . . . F-14

Statement of Shareholders' Equity for the Period July 15, 1997
(commencement of operations) to September 30, 1997 . . . . . . . . . . . F-15

Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . F-16

INVESTEES ACCOUNTED FOR UNDER THE EQUITY METHOD

VERITECH VENTURES LLC

Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . F-19

Balance Sheet as of December 31, 1996 and the
unaudited Balance Sheet as of September 30, 1997 . . . . . . . . . . . . F-20

Statements of Operations for the period July 5, 1996
(date of inception) to December 31, 1996 of
Veritech Ventures LLC and the unaudited Statements of
Operations for the nine months ended September 30, 1997
and for the period July 5, 1996 (date of inception)
to September 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . F-21

Statements of Members' Equity for the period July 5, 1996
(date of inception) to December 31, 1996 and the unaudited
Statement of Members' Equity for the nine months
ended September 30, 1997 . . . . . . . . . . . . . . . . . . . . . . . . F-22

Statements of Cash Flows for the period July 5, 1996
(date of inception) to December 31, 1996 of
Veritech Ventures LLC and the unaudited Statements of
Cash Flows for the nine months ended September 30, 1997
and for the period July 5, 1996 (date of inception)
to September 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . F-23

Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . F-24

DOBIE CENTER

Report of Independent Public Accountants . . . . . . . . . . . . . . . . F-27

Balance Sheets as of December 31, 1996 and 1995 . . . . . . . . . . . . . F-28

Statement of Changes in Project Equity (Deficit) for the years
ended December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . F-30

Combined Statements of Operations for the years ended
December 31, 1996, 1995 and 1994 and the unaudited
Statement of Operations for the nine months
ended September 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . F-31

Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 and the unaudited
Statement of Cash Flows for the nine months
ended September 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . F-32

Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . F-33

Schedule III - Real Estate Investments, Accumulated
Depreciation and Amortization as of December 31, 1996 . . . . . . . . . . F-38

Notes to Schedule III . . . . . . . . . . . . . . . . . . . . . . . . . . F-39

DOBIE CENTER

Balance Sheet (unaudited) as of July 14, 1997 . . . . . . . . . . . . . . F-40

Statement of Income (unaudited) for the period January 1, 1997
through July 14, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . F-41

Statement of Changes in Members' Equity (Deficit) (unaudited)
for the period January 1, 1997 through July 14, 1997 . . . . . . . . . . F-42

Statement of Cash Flows (unaudited) for the period
January 1, 1997 through July 14, 1997 . . . . . . . . . . . . . . . . . . F-43

Notes to Financial Statements (unaudited) . . . . . . . . . . . . . . . . F-44

AMERICAN CAMPUS LIFESTYLES COMPANIES, L.L.C.

Report of Independent Public Accountants . . . . . . . . . . . . . . . . F-49

Statements of Assets, Liabilities, and Members'
Equity (Deficit) as of December 31, 1996 and 1995 . . . . . . . . . . . . F-50

Statements of Revenues and Expenses for the years
ended December 31, 1996 and 1995 and the unaudited
Statements of Revenues and Expenses for the nine
months ended September 30, 1996 . . . . . . . . . . . . . . . . . . . . . F-52

Statement of Changes in Members' Equity (Deficit)
for the years ended December 31, 1996 and 1995 . . . . . . . . . . . . . F-53

Statements of Cash Flows for the years ended
December 31, 1996 and 1995 and the unaudited
Statement of Cash Flows for the nine months
ended September 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . F-54

Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . F-55

AMERICAN CAMPUS LIFESTYLES COMPANIES, L.L.C.

Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . F-60

Balance Sheet as of September 30, 1997 . . . . . . . . . . . . . . . . . F-61

Statement of Income for the nine months
ended September 30, 1997 . . . . . . . . . . . . . . . . . . . . . . . . F-62

Statement of Changes in Members' Equity for the
nine months ended September 30, 1997 . . . . . . . . . . . . . . . . . . F-63

Statement of Cash Flows for the period
January 1, 1997 through September 30, 1997 . . . . . . . . . . . . . . . F-64

Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . F-65

RECKSON SERVICES INDUSTRIES INC.
PRO FORMA CONDENSED COMBINING BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(UNAUDITED)

The following unaudited pro forma condensed combining balance sheet is
presented as if the Company had acquired (i) a 33-1/3% interest in a joint
venture that owns a 76.09% interest in ACLC and (ii) a 58.69% interest in On-
Site (collectively, the "Acquired Businesses") on September 30, 1997.

This pro forma condensed combining balance sheet should be read in
conjunction with the pro forma condensed combining statement of operations of
the Company and the historical financial statements and notes thereto of the
Company as of and for the period ended September 30, 1997 included elsewhere
in this Registration Statement.

This pro forma condensed combining balance sheet is unaudited and is not
necessarily indicative of what the actual financial position would have been
had the Company acquired the Acquired Businesses on September 30, 1997, nor
does it purport to represent the future financial position of the Company.

<TABLE>
<CAPTION>
September 30,
Historical Capitalization ACLC On-Site 1997
(a) (b) (c) (c) Pro Forma
----------- -------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Assets

Cash $ 7,370 $ 224,017 -- -- $ 231,387
Investment in RO Partners
Management, LLC 3,632,001 -- -- 3,632,001
Investment in nonconsolidated
joint ventures -- -- $1,674,000 $1,500,000 3,174,000
Loan to affiliate 666,666 -- -- -- 666,666
Organization costs 164,284 -- -- -- 164,284
Other assets 6,667 -- -- -- 6,667
---------- -------------- ---------- ---------- -------------
Total Assets $4,476,988 $ 224,017 $1,674,000 $1,500,000 $ 7,875,005
---------- -------------- ---------- ---------- -------------

Liabilities and shareholder's
equity

Accounts payable and accrued
expenses $ 107,029 -- -- -- $ 107,029
Loan payable to shareholder
and affiliate 106,627 -- $1,674,000 $1,500,000 3,280,627
----------- ------------- ---------- ---------- -------------
Total liabilities 213,656 -- 1,674,000 1,500,000 3,387,656

Shareholder's equity

Common Stock 10 -- -- -- 10
Additional paid-in-capital 4,256,314 224,017 -- -- 4,480,331
Retained earnings 7,008 -- -- -- 7,008
----------- ------------- ---------- ---------- -------------
Total shareholder's equity 4,263,332 224,017 -- -- 4,487,349
----------- ------------- ---------- ---------- -------------
Total Liabilities and
Shareholder's Equity $4,476,988 $ 224,017 $1,674,000 $1,500,000 $ 7,875,005
----------- ------------- ---------- ---------- -------------

</TABLE>

RECKSON SERVICES INDUSTRIES INC.
NOTES TO PRO FORMA FINANCIAL STATEMENT
(UNAUDITED)

(a) Reflects the Company's historical balance sheet as of September 30,
1997.

(b) Reflects the payment on $224,017 of notes contributed by certain officers
of Reckson in exchange for a 5% voting common stock interest in the
Company.

RECKSON SERVICES INDUSTRIES INC.
PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)

The following unaudited pro forma condensed combining statement of operations
is presented as if the Company had acquired the Acquired Businesses as of
January 1, 1996.

This pro forma condensed combining statement of operations should be read in
conjunction with the pro forma condensed combining balance sheet of the
Company and the historical financial statements and notes thereto of the
Company as of and for the period ended September 30, 1997 included elsewhere
in this Registration Statement.

This pro forma condensed combining statement of operations is unaudited and
is not necessarily indicative of what the actual results of operations would
have been had the Company acquired the Acquired Businesses on January 1,
1996, nor does it purport to represent the operations of the Company for
future periods.

<TABLE>
<CAPTION>
Pro Forma December 31,
Historical Dobie ACLC On-Site Adjustments 1996
(a) (b) (c) (d) Pro Forma
----------- ---------- ---------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Equity in earnings (loss) of -- $151,142 $254,060 $(36,047) -- $369,155
nonconsolidated joint ventures ----------- ---------- ---------- ----------- ------------- -------------
Total revenues -- 151,142 254,060 (36,047) -- 369,155
----------- ---------- ---------- ----------- ------------- -------------

Expenses:
Corporate general and
administrative -- -- -- -- 100,000 100,000
Interest -- -- -- -- 380,880 380,880
----------- ---------- ---------- ----------- ------------- -------------
Total expenses -- -- -- -- 480,880 480,880
----------- ---------- ---------- ----------- ------------- -------------

Income before income taxes -- 151,142 254,060 (36,047) (480,880) (111,725)
Income tax provision -- -- -- -- -- --
----------- ---------- ---------- ----------- ------------- -------------
Net income (loss) -- $151,142 $254,060 $(36,047) $(480,880) $(111,725)
----------- ---------- ---------- ----------- ------------- -------------
Net (loss) per
common share (e) $(.03)
-------------
-------------

</TABLE>

RECKSON SERVICES INDUSTRIES INC.
NOTES TO PRO FORMA FINANCIAL STATEMENT
(UNAUDITED)

(a) Reflects the pre-acquisition equity in earnings of Dobie Center, a mixed
use student housing retail property in Austin, Texas for the year
ended December 31, 1996.

(b) Reflects the pre-acquisition equity in earnings of ACLC for the year
ended December 31, 1996.

(d) Reflects the effect of an increase in interest costs associated with
borrowings from Reckson Operating Partnership, L.P. to fund the
acquisition of the Acquired Businesses at a 12% interest rate and
incremental general and administrative costs of $100,000.

(e) Pro forma net (loss) per share of common stock is based upon
4,089,895 shares outstanding.

RECKSON SERVICES INDUSTRIES INC.
PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)

The following unaudited pro forma condensed combining statement of operations
is presented as if the Company had acquired the Acquired Businesses as of
January 1, 1997.

This pro forma condensed combining statement of operations is unaudited and
is not necessarily indicative of what the actual results of operations would
have been had the Company acquired the Acquired Businesses on January 1,
1997, nor does it purport to represent the operations of the Company for
future periods.

<TABLE>
<CAPTION>
Pro Forma September 30,
Historical Dobie ACLC On-Site Adjustments 1997
(a) (b) (c) (d) (e) Pro Forma
----------- ---------- ---------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Equity in earnings of RO
Partners Management, LLC $ 9,501 -- -- -- -- $ 9,501
Equity in earnings (loss)
of nonconsolidated joint
ventures -- $115,603 $150,710 $(259,427) -- 6,886
Interest income 6,667 -- -- -- -- 6,667
----------- ---------- ---------- ----------- ------------- -------------
Total revenues 16,168 115,603 150,710 (259,427) -- 23,054
----------- ---------- ---------- ----------- ------------- -------------

Expenses:
Corporate general and 4,489 -- -- -- 75,000 79,489
administrative
Interest -- -- -- -- 285,660 285,660
----------- ---------- ---------- ----------- ------------- -------------
Total expenses 4,489 -- -- -- 360,660 365,149
----------- ---------- ---------- ----------- ------------- -------------

Income before income taxes 11,679 115,603 150,710 (259,427) (360,660) (342,095)
Income tax provision 4,671 -- -- -- (4,671) --
----------- ---------- ---------- ----------- ------------- -------------
Net income (loss) 7,008 $115,603 $150,710 $(259,427) $(355,989) $(342,095)
----------- ---------- ---------- ----------- ------------- -------------
Net (loss) per
common share (f) $(.08)
-------------
-------------

</TABLE>

RECKSON SERVICES INDUSTRIES INC.
NOTES TO PRO FORMA FINANCIAL STATEMENT
(UNAUDITED)

(a) Reflects the Company's historical operations for the nine months ended
September 30, 1997.

(b) Reflects the pre-acquisition equity in earnings of Dobie Center, a mixed
use student housing retail property in Austin, Texas for the nine
months ended September 30, 1997, through the Company's investment
in RO Partners Management, LLC.

(d) Reflects the pre-acquisition equity in earnings of On-Site for the
nine months ended September 30, 1997.

(e) Reflects the effect of an increase in interest costs associated with
borrowings from Reckson Operating Partnership, L.P. to fund the
acquisition of the Acquired Businesses for the nine months ended
September 30, 1997 at an interest rate of 12% and incremental general
and administrative costs of $75,000.

(f) Pro forma net (loss) per share of common stock is based upon
4,089,895 shares outstanding.

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors of
Reckson Services Industries Inc.:

We have audited the accompanying balance sheet of Reckson Services Industries
Inc. (the "Company") as of September 30, 1997 and the related statements of
income, shareholders' equity and cash flows for the period from July 15, 1997
(commencement of operations) to September 30, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company at September 30,
1997, and the results of its operations and its cash flows for the period
from July 15, 1997 (commencement of operations) to September 30, 1997, in
conformity with generally accepted accounting principles.

/s/ Ernst & Young LLP
New York, New York
December 8, 1997

Reckson Services Industries Inc.

Balance Sheet

September 30, 1997

ASSETS
Cash $ 7,370
Investment in RO Partners Management, LLC - Note 3 3,632,001
Loan to affiliate - Note 5 666,666
Organization costs 164,284
Other assets 6,667
-----------
Total assets $4,476,988
-----------

LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses $ 107,029
Loan payable to shareholder and affiliate 106,627
-----------
Total liabilities 213,656

Commitments - Note 6 --

Shareholders' equity - Note 4:
Common Stock, $.01 par value 10
Additional paid-in capital 4,256,314
Retained earnings 7,008
-----------
Total shareholder's equity 4,263,332
-----------
Total liabilities and shareholders' equity $4,476,988
-----------

See accompanying notes.

Reckson Services Industries Inc.

Statement of Income

Period from July 15, 1997 (Commencement of Operations) to September 30, 1997

Revenues:
Equity in earnings of RO Partners Management, LLC $ 9,501
Interest income 6,667
-----------
Total revenues 16,168
-----------
Expenses:
General and administrative 4,489
-----------
Total expenses 4,489
-----------
Income before income taxes 11,679
Income tax provision 4,671
-----------
Net income $ 7,008
-----------

See accompanying notes.

Reckson Services Industries Inc.

Statement of Cash Flows

Period from July 15, 1997 (Commencement of Operations) to September 30, 1997

OPERATING ACTIVITIES
Net Income $ 7,008

Changes in operating assets and liabilities:
Organization costs (164,284)
Other assets (6,667)
Accounts payable and accrued expenses 107,029
-----------
Net cash used in operating activities (56,914)
-----------
INVESTING ACTIVITIES
Investment in RO Partners Management, LLC (3,632,001)
-----------
Net cash used in investing activities (3,632,001)
-----------
FINANCING ACTIVITIES
Proceeds from borrowing-shareholder 106,627
Capital contribution 4,256,324
Loan to affiliate (666,666)
-----------
Net cash provided by financing activities 3,696,285
-----------
Net increase in cash 7,370
Cash beginning of period -
-----------
Cash end of period $ 7,370
-----------

See accompanying notes.

Reckson Services Industries Inc.

Statement of Shareholders' Equity

Period from July 15, 1997 (Commencement of Operations) to September 30, 1997

ADDITIONAL TOTAL
COMMON PAID-IN RETAINED SHAREHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
---------------------------------------------
Stock issued-July 15, 1997 $ 10 $4,480,331 $4,480,341
Stock Subscriptions receivable -- (224,017) -- (224,017)
Net income -- $ 7,008 7,008
Shareholders' equity September
30, 1997 $ 10 $4,256,314 $ 7,008 $4,263,332
---------------------------------------------

See accompanying notes.

Reckson Services Industries Inc.

Notes to Financial Statements

September 30, 1997

1. SUMMARY OF SIGNIFICANT TRANSACTIONS

Reckson Services Industries Inc. ("RSI" or the "Company") was formed on July
15, 1997 to identify and acquire interests in operating companies that engage
in businesses that provide services to property tenants and their entities
and to invest in a real estate venture capital fund. The Company will
operate under an agreement between the Company and Reckson Operating
Partnership, L.P. ("ROP") whose general partner is Reckson Associates Realty
Corp. ("Reckson") (the "Intercompany Agreement"). Under the Intercompany
Agreement, the Company and ROP agree, subject to certain terms, to provide
each other with first refusal rights to participate in certain transactions.

Subsequent to the effectiveness of the Company's Registration Statement on
Form S-1, the common stock of RSI will be distributed (the "Distribution")
to holders of common shares of Reckson and unitholders of ROP. Each share of
the Company's Common Stock issued in the Distribution is expected to be
accompanied by one Preferred Share Purchase Right.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying financial statements of RSI include the Company's equity
interest in RO Partners Management, LLC ("RO").

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles 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.

CASH EQUIVALENTS

The Company considers highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.

LONG-LIVED ASSETS

At inception, the Company adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
which establishes methods of valuation for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those
assets to be held and used. The adoption of this statement had no material
impact on the accompanying financial statements.

STOCK OPTIONS

The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its employee stock options because the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," ("FAS No. 123") requires the use
of option valuation models that were not developed for use in valuing

employee stock options. Under APB 25, no compensation expense was recognized
because the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant.

EQUITY INVESTMENTS

The Company accounts for its investment of less than 50% in other entities
using the equity method.

INCOME TAXES

At inception, the Company adopted SFAS No. 109, "Accounting for Income Taxes"
("SFAS No. 109"), which prescribes an asset and liability method of
accounting for income taxes. Under SFAS No. 109, deferred tax assets are to
be recognized unless it is more likely than not that some portion or all of
the deferred tax assets will not be realized.

3. INVESTMENTS

The Company has invested $3.62 million in RO which is the general partner in
the predecessor to Reckson Strategic Venture Partners ("RSVP"), a real estate
venture capital entity in which the Company owns the managing member
interest. Such predecessor contributed approximately $10.8 million in
exchange for a 70% interest in Dobie Center, L.P., a mixed use student
housing and retail property located in Austin, Texas.

Summarized financial information and a summary of the Company's investment in
and share of income from RO follows:

SEPTEMBER 30, 1997
------------------
BALANCE SHEET
Property and equipment, less accumulated depreciation $36,623,570
Other assets 11,679,498
------------------
Total assets 48,303,068
------------------

Mortgage payable 26,032,559
Other liabilities 6,701,966
------------------
Total liabilities 32,734,525
------------------

Minority Interest 4,672,541
Members' equity 10,896,002
Less: Other members' equity (7,264,001)
------------------
Net investment in RO Partners Management, LLC $3,632,001
------------------

PERIOD FROM
JULY 15, 1997 TO
SEPTEMBER 30, 1997
------------------
STATEMENT OF OPERATIONS
Rental income $ 1,955,748
Interest income 69,854
Other income 470,915
------------------
Total income 2,496,517
------------------

Property operating expenses 959,802
General and administrative expenses 715,461
Interest expense 538,848
Depreciation and amortization 238,863
------------------
Total expenses 2,452,974
------------------

Minority interest 15,041
Net income 28,502
Less: Other members' share 19,001
------------------
Company's share $ 9,501
------------------

Reckson Services Industries Inc.

Notes to Financial Statements

4. SHAREHOLDER'S EQUITY

In connection with the initial Capitalization of RSI, ROP contributed
$4,256,324 for a 95% nonvoting equity interest and certain Reckson management
contributed notes of $224,017 to the Company in exchange for a 5% voting
ownership interest. On October 29, 1997, the $224,017 was contributed to the
Company in satisfaction of the notes.

5. TRANSACTIONS WITH RELATED PARTIES

On August 28, 1997, the Company made an unsecured loan of $666,666 to RFG
Capital Management Partners. The note bears interest at 12% per annum.

RSI acquired its indirect interests in ACLC and Dobie Center from a Rechler
family entity for $5.13 million. Such entity had acquired the interests in
ACLC and the Dobie Center in 1997 for $5.06 million in contemplation of
transferring such interest to RSI. The difference represents interest carry
costs.

6. SUBSEQUENT EVENTS

On October 17, 1997, RSVP acquired a 33-1/3% interest in a joint venture that
owns a 76.09% interest in American Campus Lifestyles Companies, L.L.C.
("ACLC"), a student housing enterprise which develops, constructs, manages
and acquires, on- and off-campus student housing projects, for $1.51 million.
The acquisition was financed with proceeds from a loan from ROP.

RSI has entered into a letter of intent to acquire a 58.69% equity interest
in On-Site Ventures L.L.C. ("On-Site"), a company that provides advanced
telecommunications systems and services within commercial and residential
buildings and/or building complexes.

RSI has obtained an option from Reckson Management Group, Inc., a company in
which ROP owns a 97% interest to acquire a majority equity interest in a
privately held national executive office suites business.

The Company has entered into a letter of intent with PaineWebber Real Estate
Securities, Inc. to invest up to $200 million in RSVP in the form of a
preferred equity interest.

REPORT OF INDEPENDENT AUDITORS

To the Board of Members of
Veritech Ventures LLC:

We have audited the accompanying balance sheet of Veritech Ventures LLC (the
"Company") (a development stage company) as of December 31, 1996, and the
related statements of operations and members' equity and cash flows for the
period from July 5, 1996 (date of inception) to December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Veritech Ventures LLC at
December 31, 1996, and the results of its operations and its cash flows for
the period from July 5, 1996 (date of inception) to December 31, 1996 in
conformity with generally accepted accounting principles.

/s/ Ernst & Young LLP
New York, New York
December 10, 1997

Veritech Ventures LLC
(A Development Stage Company)

Balance Sheets

DECEMBER 31 SEPTEMBER 30
1996 1997
(unaudited)
ASSETS
Current assets:
Cash $ - $ 1,916
Accounts receivable 11,994 3,416
Prepaid expenses - 8,500
Total current assets 11,994 13,832

Property and equipment, net of depreciation
of $477 and $5,875, respectively 2,956 167,606

Deposits - 158,431

Organization cost, net of amortization of
$514 and $771, respectively 4,625 3,854
Total assets $ 19,575 $343,723

LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 5,256 $196,303

Commitments

Members' equity:
Members' capital 75,739 650,870
Deficit accumulated during development stage (61,420) (503,450)

Total liabilities and members' equity $ 19,575 $343,723

See accompanying notes.

Veritech Ventures LLC
(A Development Stage Company)

Statements of Operations

PERIOD ENDED
PERIOD FROM FROM JULY
JULY 5, 1996 NINE MONTH 5, 1996 CUMULATIVE AMOUNTS
(DATE OF PERIOD (DATE OF FROM JULY 5, 1996
INCEPTION) ENDED INCEPTION) (DATE OF INCEPTION)
TO DECEMBER SEPTEMBER TO SEPTEMBER TO SEPTEMBER
31, 1996 30, 1997 30, 1996 30, 1997

(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>

Consulting revenue $ 20,109 $ 328,977 $ - $ 349,086

Costs of revenue - - (82,011)

General and
administrative (76,504) (528,965) (34,248) (605,469)

Sales and marketing (1,034) (130,385) - (131,419)

Depreciation and
amortization (991) (6,646) (400) (7,637)

(78,529) (748,007) (34,648) (826,536)

Other expense:
Preferred return (3,000) (23,000) (700) (26,000)

Net loss $(61,420) $(442,030) $ (35,348) $ (503,450)

</TABLE>

See accompanying notes.

Veritech Ventures LLC
(A Development Stage Company)

Statements of Members' Equity

Periods ended July 5, 1996 (date of inception) to December 31, 1996,
and the nine month period ended September 30, 1997 (unaudited)

DEFICIT
ACCUMULATED
NON- DURING
MANAGING MANAGING DEVELOPMENT
MEMBER MEMBERS STAGE TOTAL
<S> <C> <C> <C> <C>

Capital contributed $ 72,739 $ - $ - $ 72,739

Preferred return 3,000 - - 3,000

Net loss for the period July 5, 1997
(date of inception) to December 31, 1996 - - (61,420) (61,420)

Balance as of December 31, 1996 75,739 - (61,420) 14,319

Capital contributed (unaudited) 542,810 9,321 - 552,131

Preferred return (unaudited) 22,500 500 - 23,000

Net loss for the nine month period
ended September 30, 1997 (unaudited) - - (442,030) (442,030)

Balance as of September 30, 1997 $641,049 $ 9,821 $(503,450) $147,420

</TABLE>

See accompanying notes.

Veritech Ventures LLC
(A Development Stage Company)

Statements of Cash Flows

PERIOD FROM PERIOD ENDED CUMULATIVE AMOUNTS
JULY 5, 1996 NINE MONTH FROM JULY 5, 1996 FROM JULY 5, 1996
(DATE OF INCEPTION PERIOD ENDED (DATE OF INCEPTION (DATE OF INCEPTION)
TO DECEMBER 31, 1996 SEPTEMBER 30, 1997 TO SEPTEMBER 30, 1996 TO SEPTEMBER 30, 1997
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>

OPERATING ACTIVITIES
Net loss $ (61,420) $ (442,030) $ (35,348) $ (503,450)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation and amortization 991 6,646 400 7,637
Preferred return 3,000 23,000 700 26,000
Changes in operating assets and
liabilities
Accounts receivable (11,974) 8,578 - (3,416)
Prepaid expenses - (8,500) - (8,500)
Deposits - (158,430) - (158,430)
Accounts payable and accrued
expenses 5,256 191,046 217 196,302
Net cash used in operating activities (64,167) (379,690) (34,031) (443,857)

CASH USED IN INVESTING ACTIVITIES
Organization costs (5,139) - (5,139) (5,139)
Acquisition of property and equipment (3,433) (170,525) (3,433) (173,958)
Net cash used in investing activities (8,572) (170,525) (8,572) (179,097)

CASH FROM FINANCING ACTIVITIES
Members' contributions 72,739 552,131 42,603 624,870
Net cash provided by financing
activities 72,739 552,131 42,603 624,870

Increase in cash - 1,916 - 1,916
Cash at beginning of period - - - -
Cash at end of period $ - $ 1,916 $ - $ 1,916

</TABLE>

See accompanying notes.

1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

Veritech Ventures, LLC (the "Company") was formed on July 5, 1996, as a New
York Limited Liability Company, pursuant to an operating agreement (the
"Members' Agreement") executed between the Company's two founding members,
and will terminate on July 5, 2016 unless terminated by certain events, as
defined, in the Members' Agreement.

The Company has been organized for the purpose of developing and implementing
concepts related to the integration of modern technology applications within
commercial and residential real estate operations.

FINANCIAL STATEMENT PRESENTATION

The Company's efforts have been devoted substantially to financial and
organization planning, raising capital and the development of its products.
The Company has generated nominal revenue and, accordingly, the financial
statements are presented in accordance with guidance provided by the
Statement of Financial Accounting Standards No. 7, Accounting and Reporting
by Development Stage Enterprises.

EQUIPMENT

Equipment is recorded at cost and is depreciated on the straight-line method
over its estimated useful life.

INCOME TAXES

The Company is taxed as a limited liability Company and, accordingly, no
provision for federal, state or local income taxes has been made in the
accompanying financial statements.

ORGANIZATION COSTS

Organization costs are being amortized on a straight-line basis over five
years.

STATEMENTS OF CASH FLOWS

For purposes of the statements of cash flows, the Company considers all
highly liquid financial instruments purchased with a maturity of three months
or less to be cash equivalents.

USE OF ESTIMATES

2. MEMBERS' EQUITY

The Members' Agreement provides that the Company shall have two classes of
membership interest, managing and non-managing, with both classes voting
equally. The Agreement further provides governance for the maintenance of
individual member capital accounts, the allocation of profit and loss, as
defined, to such capital accounts, the accretion of a preferred return, as
defined, to certain outstanding member capital balances, and the return of
such capital from available cash flow, as defined.

The Agreement further provides for a minimum capital contribution of
approximately $840,000 and $9,000 from its managing member and its non-
managing member, respectively, and also allows the non-managing member to
acquire an additional 12.5% interest of the managing members' interest at
fair market value, as defined.

3. COMMITMENTS

LEASES

The Company has lease commitments for office rentals which expire through
July 30, 2002. These operating leases provide for basic annual rents plus
escalation charges. Minimum commitments through the life of such lease are
approximately as follows:

1997 $ 54,000
1998 102,000
1999 105,000
2000 115,000
2001 119,000
2002 71,000
Total $ 566,000

Rent expense was approximately $0 and $29,000 for the period from July 5,
1996 (date of inception) to December 31, 1996 and the nine month period ended
September 30, 1997, respectively.

EMPLOYMENT AGREEMENTS

On January 6, 1997, the Company entered into a 3 year employment agreement
which obligated the company to a minimum of $100,000 per year in guaranteed
payments.

4. RELATED PARTY TRANSACTIONS

During the nine month period ended September 30, 1997, the Company rented
temporary office space from its managing member whereby the Company paid
approximately $5,250 to such managing member.

5. SUBSEQUENT EVENTS

On February 7, 1997, the Company formed two wholly-owned subsidiaries, On-
site Access, LLC and On-site Access Local, LLC for purposes of implementing
distinct elements of its business intentions (i.e., providing Internet access
and local phone service, respectively).

In November 1997 the Company commenced negotiations with Reckson Services
Industries Inc. ("RSI") and other third parties (the "Proposed RSI
Agreement") whereby the parties would form a new company, On-site Ventures,
LLC ("OSV"). Pursuant to a draft of the Proposed RSI Agreement, the Company
would contribute all of its assets, including its two subsidiaries, in
consideration for approximately a 39% interest in OSV and RSI would
contribute $6.5 million in consideration for its approximate 59% interest in
OSV.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Management of
Dobie Center:

We have audited the accompanying balance sheets of Dobie Center as of Decem-
ber 31, 1996 and 1995, and the related combined statements of operations,
changes in project equity (deficit), and cash flows for each of the three
years in the period ending December 31, 1996. These financial statements and
the schedule referred to below are the responsibility of the Projects'
management. Our responsibility is to express an opinion on these financial
statements and the schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Dobie Center as of Decem-
ber 31, 1996 and 1995, and the results of its operations and its cash flows
for the each of the three years in the period ending December 31, 1996, in
conformity with generally accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The Schedule III attached to the
financial statements is presented for purposes of complying with the Securi-
ties and Exchange Commission's rules and is not part of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.

/s/ Arthur Andersen LLP

Dallas, Texas,
April 4, 1997

DOBIE CENTER
------------

BALANCE SHEETS-DECEMBER 31, 1996 AND 1995
-----------------------------------------

As of December 31,
ASSETS 1996 1995

CURRENT ASSETS:
Cash $ 2,678,742 $ 2,403,348
Accounts receivable-
Student contracts 553,433 578,400
Straight line rent 77,614 109,372
Other 139,625 89,280
Prepaid insurance 59,496 62,579
Total current assets 3,508,910 3,242,979

FIXED ASSETS:
Land 2,263,599 2,263,599
Building and improvements 11,826,888 10,364,362
Mall renovations and improvements 5,438,501 5,250,550
Furniture, fixture, and equipment 1,678,839 1,437,245
Less- Accumulated depreciation (2,960,020) (2,004,563)
Total fixed assets 18,247,807 17,311,193

OTHER ASSETS:
Lease commissions 235,172 214,977
Organization costs 10,195 10,195
Software 117,223 150,573
Loan fees 599,443 599,443
Less- Accumulated amortization (292,123) (165,915)
Total other assets 669,910 809,273
Total assets $22,426,627 $21,363,445

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

DOBIE CENTER
------------

BALANCE SHEETS
--------------
As of December 31,
LIABILITIES AND PROJECT EQUITY (DEFICIT) 1996 1995

CURRENT LIABILITIES:
Accounts payable and accrued expenses $908,435 $746,020
Accrued interest 126,454 259,808
Deferred income 3,240,553 3,002,908
Tenant deposits 234,609 221,005
Note payable - Landesbank Hessen 462,500 393,750
Note payable - Bayerische Landesbank 462,500 393,750
Total current liabilities 5,435,051 5,017,241

LONG-TERM LIABILITIES:
Note payable - Landesbank Hessen 8,142,500 8,105,000
Note payable - Bayerische Landesbank 8,142,500 8,105,000
Notes payable - Proeller Brothers 2,900,000 2,900,000
Total long-term liabilities 19,185,000 19,110,000
Total liabilities 24,620,051 24,127,241

PROJECT EQUITY (DEFICIT) (2,193,424) (2,763,796)
Total liabilities and project $22,426,627 $21,363,445
equity (deficit)

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

DOBIE CENTER
------------

STATEMENTS OF CHANGES IN PROJECT EQUITY (DEFICIT)
-------------------------------------------------

FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
-----------------------------------------------------

CAPITAL BALANCE, December 31, 1993 $(2,591,791)
Distributions, net (983,398)
Net income 208,761

CAPITAL BALANCE, December 31, 1994 (3,366,428)
Contributions, net 1,216,622
Net loss (613,990)

CAPITAL BALANCE, December 31, 1995 (2,763,796)
Distributions, net (77,378)
Net income 647,750

CAPITAL BALANCE, December 31, 1996 $(2,193,424)

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

DOBIE CENTER
------------

COMBINED STATEMENTS OF OPERATIONS
---------------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31,
1996 1995
Tower Mall Combined Tower Mall Combined
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Rental revenue $ 6,318,380 $ 850,001 $7,168,381 $6,026,227 $ 965,479 $6,991,706
Other revenue 297,028 313,921 610,949 308,361 247,912 556,273
Garage 498,344 - 498,344 409,110 - 409,110
Interest and other income 122,793 13,542 136,335 188,680 14,751 203,431
Total revenue 7,236,545 1,177,464 8,414,009 6,932,378 1,228,142 8,160,520

OPERATING EXPENSES:
Wages and contract labor 1,329,517 116,318 1,445,835 1,348,632 116,888 1,465,520
Food cost 746,881 - 746,881 714,029 - 714,029
Administrative 895,685 233,116 1,128,801 792,058 228,863 1,020,921
Utilities 604,157 217,165 821,322 592,312 164,468 756,780
Contract services 166,678 74,796 241,474 282,816 75,658 358,474
Maintenance 172,499 206,876 379,375 138,424 194,252 332,676
Depreciation and
amortization 807,793 273,872 1,081,665 574,667 257,276 831,943
Property tax 328,453 77,314 405,767 295,548 65,796 361,344
Nonrecurring expenses 45,238 3,345 48,583 4,282 1,427 5,709

Total operating expenses 5,096,901 1,202,802 6,299,703 4,742,768 1,104,628 5,847,396

NET OPERATING INCOME (LOSS) 2,139,644 (25,338) 2,114,306 2,189,610 123,514 2,313,124

NONOPERATING EXPENSES:
Interest 1,173,245 293,311 1,466,556 2,325,059 602,055 2,927,114

NET INCOME $ 966,399 $ (318,649) $ 647,750 $ (135,449) $ (478,541) $ (613,990)

(table continued)
For the Nine
Months Ended
For the Years Ended December 31, September 30, 1996
1994
Tower Mall Combined Combined
(unaudited)

REVENUES:
Rental revenue $5,578,081 $ 893,883 $6,471,964 $5,106,385
Other revenue 173,422 307,748 481,170 469,319
Garage 334,725 - 334,725 357,808
Interest and other income 27,664 - 27,664 102,250
Total revenue 6,113,892 1,201,631 7,315,523 6,035,762

OPERATING EXPENSES:
Wages and contract labor 1,454,214 24,022 1,478,236 1,067,388
Food cost 643,900 - 643,900 507,006
Administrative 938,195 99,343 1,037,538 847,144
Utilities 622,442 161,194 783,636 587,605
Contract services 120,692 112,194 232,886 284,836
Maintenance 209,677 115,141 324,818 208,665
Depreciation and
amortization 422,482 140,827 563,309 814,493
Property tax 281,042 70,260 351,302 299,946
Nonrecurring expenses 26,166 8,722 34,888 18,841
Total operating expenses 4,718,810 731,703 5,450,513 4,635,924

NET OPERATING INCOME (LOSS) 1,395,082 469,928 1,865,010 1,399,838

NONOPERATING EXPENSES:
Interest expense 1,242,187 414,062 1,656,249 1,076,106

NET INCOME (LOSS) $ 152,895 $ 55,866 $ 208,761 $ 323,732

</TABLE>

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

DOBIE CENTER
------------

STATEMENTS OF CASH FLOWS
------------------------

For the Nine Months Ended
For the Years Ended December 31, September 30,
1996 1995 1994 1996
(unaudited)
<S> <C> <C> <C> <C>

CASH FLOWS FROM OPERATIONS:
Net income (loss) $ 647,750 $ (613,990) $ 208,761 $ 323,732

Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Depreciation and amortization 1,081,665 831,943 563,309 814,495
Write-off of unamortized discount - 1,280,696 - -
Amortization of discount on notes payable - 220,823 655,805 (29,450)
Decrease (increase) in accounts receivable 6,380 (75,559) (55,203) (1,413,895)
Decrease (increase) in prepaid insurance 3,083 (6,370) (2,884) (21,458)
Increase in lease commissions (20,195) (44,452) (16,117) -
Increase in loan costs - (599,443) - -
Increase (decrease) in accounts payable
and accrued expenses 162,415 208,472 (75,824) (209,446)
Increase in deferred income 237,645 210,450 560,082 2,151,727
Increase (decrease) in accrued interest (133,354) 259,808 - (101,938)
Increase (decrease) in tenant deposits 13,604 13,324 12,023 (77,035)
Total adjustments 1,351,243 2,299,692 1,641,191 1,113,000
Net cash provided by operating activities 1,998,993 1,685,702 1,849,952 1,436,732

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture, fixtures and equipment (241,594) (5,687) (11,315) (45,966)
Purchase of building and improvements (1,462,526) (83,815) - (1,268,460)
Increase in mall renovations and improvements (187,951) (1,260,979) (624,457) (1,032,326)
Decrease (increase) in software 33,350 (66,473) (84,100) 33,350
Net cash used in investing activities (1,858,721) (1,416,954) (719,872) (2,313,402)

CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions, net - 1,216,622 - 27,061
Repayment of notes payable (787,500) (19,814,116) - (562,500)
Proceeds from notes payable 1,000,000 20,074,927 - 1,000,000
Distributions, net (77,378) - (983,398) -
Net cash provided by (used in)
financing activities 135,122 1,477,433 (983,398) 464,561
Net cash provided by (used in)
operating, investing and
financing activities 275,394 1,746,181 146,682 (412,109)

CASH AND CASH EQUIVALENTS, beginning of year 2,403,348 657,167 510,485 2,403,348

CASH AND CASH EQUIVALENTS, end of year $2,678,742 $2,403,348 $ 657,167 $1,991,239

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest expense $1,599,910 $1,256,836 $1,022,679 $1,076,106

</TABLE>

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

DOBIE CENTER
------------

NOTES TO FINANCIAL STATEMENTS
-----------------------------

DECEMBER 31, 1996, 1995, AND 1994
---------------------------------

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND OPERATIONS

Located immediately adjacent to The University of Texas at Austin, Dobie
Center ("Dobie" or the "Project") consists of Dobie Tower, a 932-bed,
27-story student residence hall that sits on top of Dobie Mall, a
96,000-square foot retail mall. The mall includes student-oriented tenants
such as a copy/printing shop, student bookstore, movie theater, video store,
tanning salon, hair salon, video arcade, and a 500-seat food court. The
student-residence tower includes a full service cafeteria, state-of-the-art
computer center, fitness center, junior Olympic swimming pool, Jacuzzi,
volleyball court, basketball court, mini-theater, study rooms, meeting rooms,
and a 24-hour service desk. The facility also includes a 644-car commercial
parking garage.

Dobie is wholly owned by AustInvest I, Ltd. ("AustInvest"), which was formed
on March 30, 1992, under the laws of the state of Texas. AustInvest is a
limited partnership formed for the purpose of owning, operating, and managing
Dobie.

Leasing figures for the student residence hall for the fall 1996 semester
showed that the maximum capacity of 932 spaces, or beds, were occupied by
888 students (95%) with the remaining 44 spaces primarily occupied by
resident advisors (5%). Leasing figures for the student residence halls for
the Spring 1996 semester show that the maximum capacity of 932 spaces, or
beds, will be attained. This figure reflects spaces primarily occupied by
students (95%) with their supporting resident advisors (5%). At December 31,
1996, the retail mall occupancy rate was approximately 82%. The commercial
parking garage generates revenues from both contract parking (68%) and daily
parking (32%) fees.

The facility is staffed with nearly 100 employees responsible for all areas
of operation including business administration, residence life/student
development, food service, maintenance, housekeeping, and accounting.
Student services are administered by a professional management team in
conjunction with a paraprofessional staff consisting of a resident director
and 20 student resident assistants.

BASIS OF ACCOUNTING

The accompanying financial statements have been prepared from the records of
the Project and include its assets, liabilities, revenues and expenses. The
accompanying financial statements do not include assets, liabilities, reve-
nues, or expenses pertaining solely to AustInvest.

Dobie uses the accrual method of accounting for financial reporting in
conformity with generally accepted accounting principles (GAAP). Therefore,
revenue is recorded as earned and costs and expenses are recorded as
incurred.

The allocation of income and expenses between the tower and mall are based on
actual results and estimates made by management. The income and expenses of
the garage are included with the income and expenses of the tower.

The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.

CASH AND CASH EQUIVALENTS

For purposes of preparing the statement of cash flows, unrestricted currency,
certificates of deposit, and money market accounts are considered cash, and
investments with an original maturity of one year or less are considered cash
equivalents.

Dobie maintains cash balances at two banks. Cash accounts at banks are
insured by the FDIC up to $100,000. Amounts in excess of insured limits were
approximately $2,633,741, $2,203,348, and $357,166, at December 31, 1996,
1995, and 1994, respectively.

ACCOUNTS RECEIVABLE

Accounts receivable include $553,433 of deferred student revenues. Upon
completion of dormitory contracts with students, Dobie records a receivable
for the full value of the contract with an off-setting increase to deferred
revenue. Income is then recognized over the life of the contracts from the
deferred revenue account.

Dobie generally considers all accounts receivable to be fully collectible.
Accordingly, no allowance for doubtful accounts has been recorded.

FIXED ASSETS AND DEPRECIATION

Fixed assets are recorded at cost. Repairs and maintenance of fixed assets
are charged to operations. Major improvements are capitalized. The
estimated useful lives of the assets are as follows:

Years
-----

Furniture, fixtures & equipment 5-10
Building & improvements 40
Mall renovation and improvements 5-40

Depreciation is computed using the straight-line method for financial report-
ing purposes. Depreciation expense was $955,457, $760,150, and $504,457 for
the years ended December 31, 1996, 1995, and 1994, respectively. Upon
retirement, sale, or other disposition of property and equipment, the cost
and related accumulated depreciation are removed from the related accounts
and the resulting gains or losses are included in operations. There were no
gains or losses for the years ended December 31, 1996, 1995, and 1994.

OTHER ASSETS AND AMORTIZATION

Lease commissions are being amortized over the life of the lease on a
straight-line basis. Organization costs and software are being amortized
over 60 and 36 months on a straight-line basis. Amortization expense was
$126,208, $71,793, and $58,852 for the years ended December 31, 1996, 1995,
and 1994, respectively.

FEDERAL INCOME TAXES

No income tax provision has been included in the financial statements since
profit or loss of Dobie Center is required to be reported by the respective
partners of AustInvest on their income tax returns.

2. LONG-TERM LIABILITIES

1996 1995 1994
<S> <C> <C> <C>

Note payable to Landesbank
Hessen-Thuringen Girozentrale,
stated interest at 7.25% and
7.625% at December 31, 1996 and
1995, respectively, maturing
August 30, 2002. $ 8,605,000 $ 8,498,750 $ -

Note payable to Bayerische
Landesbank Girozentrale, stated
interest at 7.25% and 7.625% at
December 31, 1996 and 1995, re-
spectively, maturing August 30, 2002. 8,605,000 8,498,750 -

Note payable to Proeller Brothers,
stated interest at 7.5%,
maturing August 30, 2002. 2,900,000 2,900,000 -

Note payable to partner, stated interest
at 10.0%, pay rate at 7.5% (at December
31, 1994), maturing May 1999. - - 2,067,231

Note payable to Lincoln National Life
Insurance Company, non-interest bearing,
maturing May 1999. - - 3,937,655

Note payable to partner, non-interest
bearing, maturing May 1999. - - 1,850,000

Note payable to Lincoln National Life
Insurance Company, stated interest at
10%, pay rate of 7.5% (at December 31,
1994), maturing May 1999. - - 11,771,730

Total debt 20,110,000 19,897,500 19,626,616

Less-

Discounts - - (1,485,605)
Current portion (925,000) (787,500) -

Net long-term debt $19,185,000 $19,110,000 $18,141,011

</TABLE>

The following is a schedule of future maturities of long-term debt at
December 31, 1996:

1997 $ 925,000
1998 1,000,000
1999 1,000,000
2000 1,000,000
2001 1,000,000
Thereafter 15,185,000

On September 1, 1995, two mortgage payable balances were paid to Lincoln
National Life Insurance Company and AustInvest I Partners, Ltd., in the
amounts of $15,709,385 and $3,917,231, respectively. These two mortgage
payable balances, comprised of four promissory notes secured by Dobie, were
executed and delivered on March 25, 1992. A portion of the mortgage payable
to AustInvest I Partners, Ltd., in the amount of $2,067,231 was made in
connection with the restructuring of the notes. The one additional note to
AustInvest I Partners, Ltd., of $1,850,000 and the two notes to Lincoln
National Life Insurance Company of $15,709,385 were given in renewal and
extension of the outstanding balance of principal left owing and unpaid by
AustInvest I, Ltd. These three additional notes were assigned to AustInvest.

Two of the four notes were noninterest bearing and were held by Lincoln
National Life Insurance Company and AustInvest I Partners, Ltd., in the
amounts of $3,937,655 and $1,850,000, respectively. The noninterest bearing
note held by Lincoln National Life Insurance Company was being discounted at
7.5%. The noninterest bearing note held by AustInvest I Partners, Ltd., was
being discounted at 7.0%. Interest expense in 1995 includes $1,280,696 of
unamortized discount on notes payable written-off in conjunction with the
refinancing of the company's notes payable.

The notes described above were all paid off on September 1, 1995, via a
refinancing transaction. The total refinancing transaction costs of $599,443
have been capitalized over the seven-year note term. At the option of
Landesbank Hessen-Thuringen Girozentrale and Bayerische Landesbank
Girozentrale, the holders of the new notes, totaling $17,210,000 and
$16,997,500 at December 31, 1996 and 1995, respectively, the entire principal
balance and accrued and unpaid interest thereon shall become due and payable
in full upon the occurrence of any of the following events:

1. default in the payment of the principal balance on the maturity date of
August 30, 2002,

2. the occurrence of any other default, as defined, which has occurred and
has continued for more than five (5) business days after written notice
from the holder of such default, or

3. the occurrence of any other default or event by which, under the terms
of the other Loan documents, shall have occurred and have continued
after the expiration of any applicable grace and/or notice period set
forth in such other Loan documents.

An additional capital improvement reserve is available on the Landesbank
Hessen and Bayerische Landesbank loans. Dobie exercised its option to draw
the advance of $1,000,000 in 1996. No funds had been drawn on this reserve
as of December 31, 1995 and 1994. An additional $2,325,073 can be drawn by
Dobie prior to September 1, 1997, after which time no additional advances are
provided for in the note agreements. This reserve is not reflected on the
corresponding Balance Sheet.

At December 31, 1996 and 1995, the interest rate on the loan is fixed at the
applicable LIBOR rate selected by Dobie in accordance with the provisions of
the notes defining the option interest period elections. Interest is payable
in arrears on each quarterly roll over date with the stated principal repay-
ment as set forth in the note agreements. A portion of the principal balance
of the notes are to repaid in twenty-eight (28) consecutive quarterly
installment payments before the maturity date of the notes. The interest
rate on this note in effect at December 31, 1996 and 1995, was 7.25% and
7.625%, respectively.

A loan of $2,900,000 was also obtained from Hubert Proeller, Arthur Proeller,
Hermann Proeller, and Manfred Proeller on September 1, 1995. The loan is due
on August 30, 2002, and is collateralized by a second mortgage on Dobie. The
interest rate is fixed at 7.5% per annum. Interest payments are to be made
quarterly, with the entire principal balance due at the maturity date.

The total cash paid for interest expense on all loans during 1996, 1995, and
1994 was $1,599,910, $1,256,836 and $1,022,679, respectively.

3. RELATED PARTIES

Management fees paid to an affiliated company were $395,677, $414,874, and
$332,707 for 1996, 1995, and 1994, respectively.

4. FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments," requires Dobie to disclose the estimated
fair values of its financial instrument assets and liabilities. The carrying
amounts approximate fair value for cash and cash equivalents and the improve-
ment reserve because of the short maturity of those instruments. For Dobie's
mortgage payable and note payable (Proeller) it is presumed that estimated
fair value approximates the recorded book balance due to the recent refinanc-
ing.

5. ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This state-
ment requires that long-lived assets and certain identifiable intangibles to
be held and used by an entity be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Dobie has adopted the principles of this statement in
1996. Its adoption did not have a material effect on the financial position
of Dobie.

SCHEDULE III
REAL ESTATE INVESTMENTS, ACCUMULATED DEPRECIATION AND AMORTIZATION
DECEMBER 31, 1996

Initial Cost Costs
Capitalized
Related Building & Subsequent to
Description Encumbrance Land Improvements Acquisition
<S> <C> <C> <C> <C>

Dobie Center $20,110,000 $2,263,599 $10,286,964 $6,978,425

(table continued)

Gross Amount at Which
Carried at Close of Period
Accumulated
Buildings & Depreciation Date of Date Depreciable
Land Improvements Totals & Amortization Construction Acquired Lives (years)

$2,263,599 $17,265,389 $19,528,988 $ (2,131,214) 1969 4/23/92 S-40

</TABLE>

See accompanying notes to Schedule III

NOTES TO SCHEDULE III

REAL ESTATE INVESTMENTS, ACCUMULATED DEPRECIATION AND AMORTIZATION

A summary of activity for the Partnership's real estate investments and
accumulated depreciation and amortization is as follows:

For Year Ended 1996

Real estate investments:

Balance at beginning of year $ 17,878,511
Improvements 1,650,477
Balance at end of year $ 19,528,988

Accumulated depreciation and amortization:

Balance at beginning of year $ (1,444,221)
Depreciation (686,993)
Balance at end of year $ (2,131,214)

Dobie Center

Balance Sheet
(unaudited)

July 14, 1997

Assets
Current assets:
Cash and equivalents $ 3,564,671

Accounts receivable - students 3,330,494
Accounts receivable - AustInvest 927,555

Accounts receivable - other 115,293
Capital replacement reserve 177,852

Other current assets 35,357

Total current assets 8,151,222

Fixed assets:
Land, building and equipment 36,600,000
Accumulated depreciation (34,247)

Total fixed assets 36,565,753

Intangible assets:
Organizational costs 152,482
Lease commissions/other 352,395
Accumulated amortization - lease (68,879)
Loan costs 599,443
Accumulated amortization - loan costs (292,124)

Total intangible assets 743,317

Total assets $45,460,292

Liabilities and members' equity (deficit)
Current liabilities:
Accounts payable and accrued expenses $553,626
Tenant security deposits 181,722
Deferred income - students 6,587,276
Other deferred income 142,174
Current portion notes payable 423,958

Total current liabilities 7,888,756

Non-current liabilities:
Notes payable 21,551,042

Total liabilities 29,439,798

Commitments and Contingencies -

Members' equity 16,020,494

Total liabilities and members' equity $45,460,292

See accompanying notes.

Dobie Center

Statement of Income
(unaudited)

For the period January 1, 1997 through July 14, 1997

Revenues:
Tower rental revenue $ 3,391,033
Mall rental revenue 670,235
Garage revenue 248,742
Other income 97,886
Interest and other revenue 63,929

Total revenues 4,471,825

Operating expenses:
Tower expenses:
Wages 589,743
Food costs 369,863
Administrative/other 497,322
Utilities 278,781
Management fee 175,206
Maintenance 26,344
Property taxes 166,202

Total tower expenses 2,103,461

Mall expenses:
Wages 55,690
Administrative/other 139,428
Utilities 117,522
Management fee 43,870
Maintenance 31,176
Property taxes 41,547
Total mall expenses 429,233

Total operating expense 2,532,694

Operating income: 1,939,131

Non-operating expense:
Depreciation/amortization - tower 392,843
Depreciation/amortization - mall 188,064
Interest expense 730,372
Nonrecurring expenses 132,358

Total non-operating expense 1,443,637

Net income $ 495,494

See accompanying notes.

Dobie Center

Statement of Changes in Members' Equity (Deficit)
(unaudited)

For the Period January 1, 1997 through July 14, 1997

Members' Equity

Members' deficit, December 31, 1996 $(2,193,424)
Elimination of deficit - purchase transaction 2,193,424
Capital contributions 15,525,000
Net income 495,494
Members' equity, July 14, 1997 16,020,494

See accompanying notes.

Dobie Center

Statement of Cash Flows
(unaudited)

For the Period January 1, 1997 through July 14, 1997

Operating activities
Net income $ 495,494

Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 570,245
Changes in operating assets and liabilities:
Accounts receivable - students (2,777,061)
Accounts receivable - AustInvest (927,555)
Other accounts receivable 101,946
Capital replacement reserve (177,852)
Other current assets 24,140
Accrued wages payable 125,337
Accrued interest payable (297)
Property taxes payable 193,203
Other accrued expenses/trade payable (799,506)
Tenant security deposits (52,887)
Deferred income-students 3,346,723
Deferred parking income 142,174
Net cash provided by operating activities 264,104

Investing activities
Increase in organizational costs (142,287)
Purchase of fixed assets (16,625,888)
Net cash used in investing activities (16,768,175)

Financing activities
Net proceeds from notes payable 1,865,000
Elimination of deficit - purchase transaction 15,525,000
Net cash provided by financing activities 17,390,000
Net increase in cash and cash equivalents 885,929
Cash and cash equivalents at beginning of period 2,678,742
Cash and cash equivalents at end of period $ 3,564,671

Supplemental cash flow disclosure
Non-cash activities:
Net decrease in fixed assets 1,233,715
Decrease in accumulated depreciation (3,427,139)
Elimination of Members' deficit - purchase 2,193,424

To appropriately state fixed assets at July 14, 1997 (See Note 1)

See accompanying notes.

Dobie Center

Notes to Financial Statements
(unaudited)

July 14, 1997

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND OPERATIONS

Located immediately adjacent to The University of Texas at Austin, Dobie
Center ("Dobie" or the "Project") consists of Dobie Tower, a 932-bed,
27-story student residence hall that sits on top of Dobie mall, a
96,000-square foot retail mall. The mall includes student-oriented tenants
such as a copy/printing shop, student bookstore, movie theater, video store,
tanning salon, hair salon, video arcade, and a 500-seat food court. The
student-residence tower includes a full service cafeteria, state-of-the-art
computer center, fitness center, junior olympic swimming pool, Jacuzzi,
volleyball court, basketball court, mini-theater, study rooms, meeting rooms,
and a 24-hour service desk. The facility also includes a 644-car commercial
parking garage.

On June 20, 1997, AustInvest I, Ltd. ("AustInvest") sold 70% of Dobie Center
to Reckson Opportunity Partners, L.P. ("ROP"), an affiliate of Reckson
Services Industries Inc. ("RSI"). Simultaneously, ROP and AustInvest
contributed their interest in Dobie Center to a new entity, Dobie Center
Properties Ltd. and on July 15, 1997, ROP contributed its 70% interest in
Dobie Center Properties, Ltd. to RSI.

BASIS OF ACCOUNTING

The accompanying financial statements include the assets, liabilities,
revenues and expenses directly related to the Project. These financial
statements do not include accounts of AustInvest or Dobie Center Properties
Ltd.

The allocation of income and expenses between the tower and mall are based on
actual results and estimates made by management. The expenses of the garage
are included with the expenses of the tower.

CASH AND CASH EQUIVALENTS

Dobie maintains cash balances at two banks. Cash accounts at banks are
insured by the FDIC up to $100,000. Amounts in excess of insured limits were
approximately $3,400,000 at July 14, 1997.

FIXED ASSETS AND DEPRECIATION

Fixed assets are recorded at cost. Repairs and maintenance of fixed assets
are charged to operations. Major improvements are capitalized. The
estimated useful lives of the assets are as follows:

Years
Furniture, fixtures & equipment 5-10
Building & improvements 40
Mall renovation and improvements 5-40

Depreciation is computed using the straight-line method for financial
reporting purposes. Depreciation expense was $512,028 for the period from
January 1, 1997 through July 14, 1997. Upon retirement, sale, or other
disposition of property and equipment, the cost and related accumulated
deprecation are removed from the related accounts and the resulting gains or
losses are included in operations.

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This
statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Dobie has adopted the principles
of this statement in 1996. Its adoption did not have a material effect on
the financial position of Dobie.

OTHER ASSETS AND AMORTIZATION

REVENUE RECOGNITION

STUDENT HOUSING

Upon execution of student dormitory contracts, Dobie records a receivable for
the full value of the contract with an off-setting increase to deferred
revenue. Income is then recognized on a straight-line basis over the life of
the contracts.

MALL TENANTS

Minimum rental revenue is recognized on a straight-line basis over the term
of the lease. The excess of rents recognized over amounts contractually due
are included in accounts receivable - other on the accompanying balance
sheet.

GARAGE REVENUES

Upon execution of semester garage contracts, Dobie records a receivable for
the full value of the contract with an offsetting increase to deferred
revenue. Income is then recognized on a straight-line basis over the life of
the contracts. Daily parking revenues are recognized as received.

FEDERAL INCOME TAXES

No income tax provision has been included in the financial statements since
profit and loss of Dobie is required to be reported by the respective
partners of AustInvest and Dobie Center Properties, Ltd. on their respective
income tax returns.

2. LONG-TERM LIABILITIES

July 14,
1997
First Mortgage Notes Payable - collateralized by the Project:
Note payable to Landesbank Hessen - Thuringen
Girozentrale, ("LH-TG") stated interest at 7.25% at July
14, 1997 maturing August 30, 2002 $ 8,928,750

Note payable to Bayerische Landesbank Girozentrale, ("BLG")
stated interest at 7.25% in July 14, 1997 maturing
August 30, 2002 8,927,750

Second Mortgage Note Payable - collateralized by the Project:

Note payable to Proeller Brothers, stated interest at
7.5% maturing August 30, 2002 2,900,000

Total long term debt $20,755,500

The following is a schedule of future maturities of long-term debt at July
14, 1997:

1997 (7/15/97 - 12/31/97) $ 925,000
1998 1,000,000
1999 1,000,000
2000 1,000,000
2001 1,000,000
Thereafter 15,830,500
$20,775,500

At the option of LH-TG and BLG, the holders of the first mortgage notes,
$17,855,000, the entire principal balance and accrued and unpaid interest
thereon is due and payable in full upon the occurrence of an event of
default, as defined.

An additional capital improvement reserve of $1,219,000 is available on the
LH-TG and BLG loans.

At July 14, 1997, the interest rate on the first mortgage notes payable to
LH-TG and BLG is fixed at the applicable LIBOR rate selected by Dobie in
accordance with the provisions of the notes defining the option interest
period elections. Interest is payable in arrears on each quarterly roll over
date with the stated principal repayment as set forth in the note agreements.
A portion of the principal balance of the notes are to repaid in twenty-eight
(28) consecutive quarterly installment payments before the maturity date of
the notes. The interest rate on this note in effect at July 14, 1997 was
7.25%.

A loan of $2,900,000 was also obtained from the Proeller Brothers on
September 1, 1995. The loan is due on August 30, 2002. The interest rate is
fixed at 7.5% per annum. Interest payments are to be made quarterly, with
the entire principal balance due at the maturity date.

3. RELATED PARTIES

Management fees paid to an affiliated company were $213,074 for the period
from January 1, 1997 through July 14, 1997.

4. FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments," requires Dobie to disclose the estimated
fair values of is financial instrument assets and liabilities. The carrying
amounts approximate fair value for cash and cash equivalents and the
improvement reserve because of the short maturity of those instruments. For
Dobie's first and second mortgage notes payable the estimated fair value
approximates the recorded balance due to the recent refinancing.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Members of
American Campus Lifestyles Companies, L.L.C.:

We have audited the accompanying statement of assets, liabilities, and
members' equity of American Campus Lifestyles Companies, L.L.C. (a Texas
limited liability company) and subsidiaries as of December 31, 1996 and 1995,
and the related statements of revenues and expenses, changes in members'
equity, and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Campus Lifestyles
Companies, L.L.C. and subsidiaries as of December 31, 1995 and 1996, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.

/s/ Arthur Andersen LLP

Dallas, Texas,
March 28, 1997

AMERICAN CAMPUS LIFESTYLES COMPANIES, L.L.C. AND SUBSIDIARIES
-------------------------------------------------------------

STATEMENTS OF ASSETS, LIABILITIES, AND MEMBERS' EQUITY (DEFICIT)
----------------------------------------------------------------

As of December 31,
ASSETS 1996 1995

CURRENT ASSETS:
Cash and cash equivalents, including
restricted cash of $74,164 as of
December 31, 1996 $ 619,754 $ 12,306
Deposits 3,315 3,415
Accounts receivable 1,153,912 141,943
Prepaid expenses - -
Contributions receivable - 1,000

Total current assets 1,776,981 158,664

INVESTMENTS:
Investment in leasehold estate - completed
contract, including restricted cash
of $175,800, as of December 31, 1996 10,277,687 -

Investment in leasehold estate - projects
under development 929,224 -

Total investments 11,206,911 -

FIXED ASSETS:
Equipment 137,140 10,377
Less-accumulated depreciation (18,456) (2,512)

Total fixed assets 118,684 7,865

Total investments and fixed assets 11,325,595 7,865

Total assets $13,102,576 166,529

AMERICAN CAMPUS LIFESTYLES COMPANIES, L.L.C. AND SUBSIDIARIES

STATEMENTS OF ASSETS, LIABILITIES, AND MEMBERS' EQUITY (DEFICIT)

LIABILITIES AND MEMBERS EQUITY (DEFICIT)

As of December 31,
1996 1995
CURRENT LIABILITIES:
Construction accounts payable -
leasehold estate $ 403,456 $ -
Accounts payable 580,424 45,125
Security deposits 31,074 -
Deferred rental income 877,536 -
Advances from members - 1,449,184
Distributions payable 50,510 -
Notes payable - leasehold estates 87,088 -
Notes payable - other 47,669 -
Total current liabilities 2,077,757 1,494,309

NONCURRENT LIABILITIES:
Notes Payable - leasehold estates 10,716,367 -

Total noncurrent liabilities 10,716,367 -

Total liabilities 12,794,124 1,494,309

MEMBERS' EQUITY:
Advances from members - 1,404,327

Members' equity:
Beginning balance (1,327,780) (2,388,000)
Contributions 1,490,000 68,034
Distributions (855,552) (5,800)
Net income (loss) 1,001,784 (406,341)

Total members' equity (deficit) 308,452 (1,327,780)

Total liabilities and members' $13,102,576 $ 166,529
equity

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

AMERICAN CAMPUS LIFESTYLES COMPANIES, L.L.C. AND SUBSIDIARIES
-------------------------------------------------------------

STATEMENTS OF REVENUES AND EXPENSES
-----------------------------------

<TABLE>
<CAPTION>
For the Nine
Months Ended
For the Years Ended December 31, September 30, 1996
1996 1995 (Unaudited)
<S> <C> <C> <C>
REVENUES:
Development/construction fees $1,727,668 - 1,504,785
Prairie View Phase I rental revenue 776,582 - 265,423
Management fees 752,374 622,911 531,361
Other income 10,383 - 1,937
Total revenues 3,267,007 622,911 2,303,506

OPERATING EXPENSES:
Personnel 821,706 397,289 592,863
Administrative 607,412 435,406 337,775
Marketing 42,222 4,894 24,655
Prairie View Phase I operating
expenses 623,354 - 265,423
Depreciation 15,944 2,058 11,021

Total operating expenses 2,110,638 839,647 1,231,737

Net operating income (loss) 1,156,369 (216,736) 1,071,769

OTHER EXPENSE:
Interest, including Prairie View
Phase I 154,585 189,605 468

NET INCOME (LOSS) $1,001,784 $(406,341 $1,071,301

</TABLE>

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

AMERICAN CAMPUS LIFESTYLES COMPANIES, L.L.C. AND SUBSIDIARIES
-------------------------------------------------------------
STATEMENTS OF CHANGES IN MEMBERS' EQUITY (DEFICIT)
--------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
----------------------------------------------

<TABLE>
<CAPTION>
Campus JHD Campus Landmark Campus
Management Ventures, Investments,
Associates, L.L.C. L.L.C. L.L.C. Adelie, L.L.C. Totals
<S> <C> <C> <C> <C> <C>

MEMBERS' DEFICIT,
December 31, 1994 (unaudited) $(597,000) $ (895,500) $ - $ (895,500) $(2,388,000)

Advances from members - 1,404,327 - - 1,404,327
Contributions - 68,034 - - 68,034
Distributions - (5,800) - - (5,800)
Net loss (101,585) (152,378) - (152,378) (406,341)

MEMBERS' (DEFICIT)
EQUITY, December 31, 1995 (698,585) 418,683 - (1,047,878) (1,327,780)

Adjustments due to
capital restructure 707,333 (341,947) (836,387) 471,001 -
Contributions - - 900,000 590,000 1,490,000
Distributions - (427,776) (427,776) - (855,552)
Net income (loss) (8,748) 505,266 518,389 (13,123) 1,001,784

MEMBERS' EQUITY,
December 31, 1996 $ - $154,226 $154,226 $ - $ 308,452

</TABLE>

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

AMERICAN CAMPUS LIFESTYLES COMPANIES, L.L.C. AND SUBSIDIARIES
-------------------------------------------------------------

STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>

For the Nine
For the Years Ended Months Ended
December 31, September 30,
1996 1995 1996
<S> <C> <C> <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,001,784 $ (406,341) $ 1,071,301
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities-
Depreciation 15,944 2,058 11,020
Decrease in deposits 100 11,586 -
Increase in accounts receivable (1,011,969) (102,289) (1,075,423)
Decrease (increase) in prepaid
expenses - 4,500 (5,808)
Decrease in contributions
receivable 1,000 - -
Increase (decrease) in accounts
payable 535,299 (222,923) 315,664
Increase in construction accounts
payable-leasehold estate 403,456 - 1,352,950
Increase in security deposits 31,074 - -
Increase in deferred rental income 877,536 - 87,754
Increase in accrued interest - 91,956 -
Increase in restricted cash (74,164) - -
Increase (decrease) in advances
from members (189,184) 483,087 (189,184)

Total adjustments 589,092 267,975 496,973

Net cash provided by (used
in) operating activities 1,590,876 (138,366) 1,568,274

CASH FLOWS USED IN INVESTING ACTIVITIES:
Investment in leasehold estate-
completed contract (10,277,687) - (10,277,687)
Investment in leasehold estate-
projects under development (929,224) - -
Purchase of equipment (126,763) (6,577) (95,111)

Net cash used in investing
activities (11,333,674) (6,577) (10,372,798)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable-
leasehold estates 10,803,455 - 8,924,736
Proceeds from notes payable 51,643 - -
Repayment of notes payable-
computer equipment (3,974) - -
Contributions 900,000 68,034 900,000
Distributions (805,042) (5,800) (205,226)
Capital restructure - cash paid
to Adelie, L.L.C. (670,000) - (670,000)

Net cash provided by financing
activities 10,276,082 62,234 8,949,510

Net cash provided by (used
in) operating, investing and
financing activities 533,284 (82,709) 144,986

CASH AND CASH EQUIVALENTS,
beginning of year 12,306 95,015 12,306

CASH AND CASH EQUIVALENTS,
end of year, net $ 545,590 $ 12,306 $ 157,292

NONCASH TRANSACTIONS:
Contribution of Adelie, L.L.C.
advances to capital $ 590,000 $ - $ 590,000

</TABLE>

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

AMERICAN CAMPUS LIFESTYLES COMPANIES, L.L.C. AND SUBSIDIARIES
-------------------------------------------------------------

NOTES TO FINANCIAL STATEMENTS
-----------------------------

DECEMBER 31, 1996 AND 1995
---------------------

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND OPERATIONS

American Campus Lifestyles Companies, L.L.C. ("the Company"), a Texas private
limited liability company, was formed on October 8, 1993. The Company is
committed to providing colleges, universities, and other educational institu-
tions with private sector assistance in financing, developing, constructing,
refurbishing, and managing on-campus and off-campus student housing.

The Company generates monthly management fees from two on-campus (one of
which was added during 1996) and two off-campus student housing projects
located in Texas, Oklahoma, and Florida. In addition, the Company generates
monthly development and construction management fees from two on-campus
student housing development projects located in Texas. Upon the scheduled
completion of these two projects in August 1997, the Company will generate
monthly management fees for the property management of these facilities.

The Company's principal owners as of December 31, 1996, are J.H. Domberger
Campus Ventures, L.L.C. ("Domberger"), Campus Management Associates, L.L.C.
("CMA"), and Landmark Campus Investments, L.L.C. ("Landmark"), an affiliate
of the Austin-based Landmark Companies.

At the end of 1995, CMA negotiated a redemption of the interest of Adelie,
L.L.C. ("Adelie"), a former owner, for the amount of $670,000 cash from the
Company to Adelie and the admission of Landmark as a member of the Company
together with a cash capital contribution from Landmark of $900,000. This
redemption, with the creation of Landmark's member interest, led to the
restructuring as of January 31, 1996, resulting in ownership of 25% by CMA,
37.5% by Domberger and 37.5% by Landmark.

Per the Second Amended and Restated Limited Liability Company Agreement (the
"Agreement"), dated January 31, 1996, net income of the Company is allocated
equally to Landmark and Domberger until the net income allocated to Landmark
and Domberger equals the sum of current and prior year distributions to
Landmark and Domberger. Additionally, the next $1,100,000 in net income is
allocated equally to Landmark and Domberger. Subsequent net income is then
allocated 25% to CMA, 37.5% to Domberger, and 37.5% to Landmark.

Net losses of the Company are allocated equally to Domberger and Landmark to
the extent that cumulative net losses of the Company do not exceed
$1,800,000. Net losses are then allocated equally to Domberger and Landmark
to the extent of previously allocated net income. Subsequent net losses are
allocated 25% to CMA, 37.5% to Domberger, and 37.5% to Landmark.

Net losses of the Company incurred prior to January 31, 1996, were allocated
under the First Amended and Restated Limited Liability Company Agreement
dated January 1, 1994. Such losses were allocated by the members' Shared
Ratios, as defined.

Excess cash flows, as defined by the Agreement, are payable equally to
Domberger and Landmark until such time as they have received $1,450,000 plus
interest at 5% per annum ("Preferred Return"), compounded annually, in
cumulative distributions. Subsequent excess cash flows will be paid 25% to
CMA, 37.5% to Domberger, and 37.5% to Landmark. As of December 31, 1996, the
cumulative Preferred Return for Domberger and Landmark was $60,119 each.

Distribution payments are computed and paid, if available, every quarter in
accordance with the allocation of excess cash flows. Distributions of
$805,042 and $5,800 were paid during the years ended December 31, 1996 and
1995. An additional $50,510 in distributions were declared in 1996 but not
yet paid at year-end.

BASIS OF ACCOUNTING

The accompanying financial statements have been prepared on the accrual basis
of accounting in conformity with generally accepted accounting principles
("GAAP"). Therefore, revenue is recorded as earned and costs and expenses
are recorded as incurred.

The consolidated financial statements include the accounts of the Company and
its subsidiaries. Intercompany balances and transactions have been
eliminated in consolidation.

CASH AND CASH EQUIVALENTS

For purposes of the statement of cash flows, the Company considers all
highly-liquid investments with a maturity of three months or less to be cash
equivalents.

As of December 31, 1996, the Company maintained its cash balance of $619,754
at two banks. Cash accounts at banks are insured by the FDIC up to $100,000.

RESTRICTED CASH

Restricted cash represents tenant security deposits included in cash and cash
equivalents and debt service and operating reserves held by Texas Commerce
Bank ("the Lender"), which is included in "Investment in leasehold estate -
completed" (see Note 3).

ACCOUNTS RECEIVABLE

Accounts receivable includes $877,536 of deferred student revenues. At the
inception of the school year, the Company records a receivable for the
respective academic year's total rent receivable with a credit to Deferred
Revenue. Income is then recognized over the course of the academic year from
the Deferred Revenue account.

FIXED ASSETS AND DEPRECIATION

Fixed assets are recorded at historical cost. Repairs and maintenance of
fixed assets are charged to operations, but major improvements are capital-
ized. The estimated useful lives of the assets are as follows:

Years
-----
Equipment 5-10

Depreciation is computed using the straight-line method for financial report-
ing purposes. Depreciation expense was $15,944 and $2,058 for the years
ended December 31, 1996 and 1995. Upon retirement, sale, or other
dispositions of the equipment, the cost and related accumulated depreciation
are removed from the related accounts and the resulting gains or losses are
included in operations. There were no gains or losses for the years ended
December 31, 1996 and 1995.

INVESTMENTS IN LEASEHOLD ESTATE

Investments in leasehold estate reflects the project costs incurred to date,
including development and construction fees, on the three student housing
development projects located in Texas. These investments in leasehold
estates are subject to ground leases (See Note 2). The investments are
reduced by an amount equal to the principal reduction of the notes payable-
leasehold estate, as payments are submitted to the Lender.

FEDERAL INCOME TAXES

No provision for income taxes has been recorded in the financial statements
as the owners are required to report their share of the Company's earnings in
their respective income tax returns. The Company's tax returns and the
amounts of the allocable income or loss are subject to examination by federal
and state taxing authorities. If such examinations result in changes to
income or loss, the tax liability of the members could be changed
accordingly.

2. INVESTMENTS IN LEASEHOLD ESTATE

The Company leases from the Texas A&M University System ("TAMUS") a tract of
land at Prairie View A&M University under a ground lease (the "Lease")
effective February 1, 1996, at a cost of $100 per year ($4,000) paid upon
inception of the Lease. The Company entered into this Lease for the purpose
of developing, constructing and maintaining a student housing project
("Prairie View Phase I" or the "Project"). Subsequent to the execution of
and in accordance with the provisions of the Lease, the Company obtained
financing (See Note 3) and constructed the Project for a total cost of
$10,277,687, including debt service and operating cash reserves. Under the
provisions of the Lease, all improvements to the land are owned fee simple by
TAMUS. The Lease expires on August 31, 2035. However, the Lease will
terminate upon repayment of all indebtedness related to the Project. The
Lease requires that all indebtedness be repaid prior to August 31, 2021.

Under the Lease, TAMUS has the option to purchase the leasehold estate at the
close of each calendar year. The purchase price is defined in the Lease as
the lesser of (1) the sum of the present cash value of the Company's
leasehold estate in Prairie View Phase I discounted at 9.5%, the Company's
leasehold estate in the equipment of Prairie View Phase I, and the amount
required to repay the debt secured by the Prairie View Phase I loan,
including principal, accrued interest, prepayment fees and any additional
obligations; or (2) the sum of the fair market value, as defined in the
Lease, of Prairie View Phase I and the equipment of Prairie View Phase I. In
no event shall the purchase price be less than the amount required to repay
the Prairie View Phase I loan.

In the event the Company were to receive a bona fide offer, acceptable to the
Company (the "Offer"), to purchase the Company's leasehold estate in Prairie
View Phase I, TAMUS has the right of first refusal to purchase the leasehold
estate under the terms of the Offer.

A development fee and a construction fee were earned by the Company for the
services it provided during construction of the Project. Additionally, the
Company manages the Project for a fee of 5% of gross receipts as defined in
the management agreement, plus 50% of net cash flow of the Project, as
defined in the Lease. No income with respect to the net cash flow has been
recognized in 1996 as the net cash flow calculation is based on year-end cash
flow which is defined by the management agreement as ending with the academic
year.

For the year ended December 31, 1996, the Company was paid a total of
$2,346,566 in development, construction and management fees.

The Company is involved in two additional projects, one each at Prairie View
A&M University ("Prairie View Phase II") and Texas A&M International
University ("Laredo"), under substantially the same terms as the original
ground lease.

3. DEVELOPMENT/CONSTRUCTION FEES

The Company receives management fees on the development and construction
("Development") of properties included in the "Investments in leasehold
estate" and on Development of properties managed in which the Company does
not hold a leasehold estate. The Development fees are paid via construction
loan proceeds by the projects during the construction and development phase
to development and construction companies affiliated with the Company.

4. NOTES PAYABLE - LEASEHOLD ESTATE

Notes payable - leasehold estate (collectively, "the Loans") reflects the
project costs incurred to date on the three student housing development
projects located in Texas. A construction loan ("the Prairie View Phase I
loan") of $10,277,687 was obtained from the Lender in March 1996 to finance
the construction of Prairie View Phase I. Upon maturity of the Prairie View
Phase I loan in February 1997, it will convert to a three-year mini-perm loan
with a balloon payment due and payable at the end of the three-year period.

Two additional construction credit facilities ("the Facilities") were
obtained from the Lender in December 1996 to finance the development and
construction of Prairie View Phase II and Laredo. The total credit available
under the Facilities is approximately $10,700,000 and $5,100,000 for Prairie
View Phase II and Laredo, respectively. No principal payments are due under
the Facilities until January 1998. Upon maturity of the Facilities in
January 1998, both will convert to three-year mini-perm loans with payments,
based on a 25 year amortization, of principal and interest due monthly. As
of December 31, 1996, the total borrowings outstanding under the Prairie View
Phase II and Laredo loans were $525,768.

The interest rate on the Loans is defined as LIBOR plus 250 basis points.
Interest is due monthly depending upon the rate and length of time offered by
the bank. Interest was capitalized for the Prairie View Phase I loan as
"Investment in leasehold estate - completed" and was 8.093% at December 31,
1996. Interest was capitalized for the Prairie View Phase II and Laredo
Facilities as the "Investments in leasehold estate - projects under develop-
ment" and was 8.125% at December 31, 1996. Capitalized interest on the Loans
for the year ended December 31, 1996 was $102,777.

The Company entered into an interest rate cap agreement ("the Cap") with the
Lender effective September 3, 1996, to hedge the floating rate cost of the
Prairie View Phase I loan. The Cap calls for a principal amount of
$10,000,000 from September 3, 1996, through September 30, 1996, and
$10,277,687 from October 1, 1996 through October 1, 1997, which is the
termination date. Under the agreement, the Company has the right to receive
payments based on the principal amount of the Cap to the extent that LIBOR
exceeds 5.5%. The Company paid a premium of $90,500 in connection with this
transaction, which is included in "Investment in leasehold estate -
completed" on the accompanying balance sheet.

Aggregate maturities of the Loans for five years subsequent to December 31,
1996, and thereafter are as follows:

Year Ending
December 31,
1997 $ 117,270
1998 140,724
1999 140,724
2000 9,878,969
10,277,687

Prairie View Phase II 309,709
Laredo 216,059

Total Notes Payable - leasehold estate $10,803,455

5. ADVANCES FROM MEMBERS

During 1994, Domberger and Adelie each advanced the Company funds to cover
operating expenses during the first year of operations, bearing interest at
the rate of 15% per annum. The Adelie advance became noninterest bearing
effective January 1, 1995. During the January 31, 1996 restructuring, the
Company negotiated the extinguishment of both advances. (See Note 1).

6. FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, "Disclosure about Fair
Value of Financial Instruments," requires the Company to disclose the
estimated fair values of its financial instrument assets and liabilities.
The carrying amount of cash and cash equivalents approximate fair value
because of the short maturity of those instruments. The carrying amount of
the Company's notes payable - leasehold estate approximates fair value.

7. ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This
statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. The Company adopted the principles of
this statement in 1996. Its adoption did not have a material effect on the
carrying value of the Company's long-lived assets.

8. RELATED-PARTY TRANSACTIONS

The Company receives monthly management fees from the management,
development, and construction companies affiliated with the Company (see
Notes 1 and 3).

REPORT OF INDEPENDENT AUDITORS

To the Members of
American Campus Lifestyles Companies, L.L.C. and Subsidiaries:

We have audited the accompanying consolidated balance sheet of American
Campus Lifestyles Companies, L.L.C. and subsidiaries (the "Company") as of
September 30, 1997, and the related consolidated statements of income,
members' equity, and cash flows for the nine months ended September 30, 1997.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the Company as
of September 30, 1997, and the results of their operations and their cash
flows for the nine months ended September 30, 1997 in conformity with
generally accepted accounting principles.

/s/ Ernst & Young LLP

New York, New York
December 5, 1997

AMERICAN CAMPUS LIFESTYLES COMPANIES, L.L.C. AND SUBSIDIARIES

Balance Sheet

September 30, 1997

Assets
Current assets:
Cash and equivalents $807,721
Deposits 2,048
Accounts receivable 3,640,290
Other assets 13,441
Other receivables 1,316
Total current assets 4,464,816

Investments:
Investment in leasehold estate - PVAMU-I 11,867,754
Investment in leasehold estate - PVAMU-II 12,257,606
Investment in leasehold estate - Laredo 5,816,927
Accumulated depreciation on leasehold estates (192,706)
Total investments 29,749,581

Fixed assets:
Equipment 143,521
Accumulated depreciation (31,096)
Total fixed assets 112,425
Total assets $34,326,822

Liabilities and members' equity
Current liabilities:
Accounts payable $270,198
Security deposits 146,379
Deferred rental income 2,886,276
Other payable 261,112
Total current liabilities 3,563,965

Non-current liabilities:
Notes payable - PVAMU - I 10,195,601
Notes payable - PVAMU - II 10,615,308
Notes payable - Laredo 5,037,236
Total non-current liabilities 25,848,145

Total liabilities 29,412,110
Commitments and Contingencies -

Members' equity 4,914,712

Total liabilities and members' equity $34,326,822

AMERICAN CAMPUS LIFESTYLES COMPANIES, L.L.C. AND SUBSIDIARIES

Statement of Income

For the Nine Months Ended September 30, 1997

Revenues
Development construction fees $ 958,098
Prairie View Phase I and II revenue 1,668,365
Laredo revenue 56,316
Management fees 566,173
Other income 2,216
Total revenues 3,251,168

Expenses:
Personnel 830,502
Administrative 419,891
Marketing 37,227
Prairie View Phase I and II expense 211,595
Laredo expense 10,758
Operating expenses 1,509,973

Operating income 1,741,195

Non-operating expenses:
Interest (including leasehold expense) 614,257
Depreciation 205,347
Professional fees 327,387
Total non-operating expenses 1,146,991

Net income $ 594,204

AMERICAN CAMPUS LIFESTYLES COMPANIES, L.L.C. AND SUBSIDIARIES

Statement of Changes in Members' Equity

For the Period Ended September 30, 1997

Domberger
Campus Landmark Campus
Ventures, Investments, William
RFG Capital L.L.C. L.L.C. Bayless Total
<S> <C> <C> <C> <C> <C>

Members' equity,
December 31, 1996 $ - $ 154,226 $ 154,226 - $ 308,452

Adjustments due to
purchase price 4,012,056 - - - 4,012,056

Net income 452,130 64,590 45,219 32,265 594,204

Members' equity,
September 30, 1997 $4,464,186 $ 218,816 $ 199,445 $ 32,265 $ 4,914,712

</TABLE>

See accompanying notes.

AMERICAN CAMPUS LIFESTYLES COMPANIES, L.L.C. AND SUBSIDIARIES

Statement of Cash Flows

For the Period January 1, 1997 through September 30, 1997

Operating activities

Net income $ 594,204
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation 205,347
Changes in operating assets and liabilities:
Deposits 1,267
Accounts receivable (2,486,378)
Other assets (13,441)
Other receivables (1,318)
Accounts payable (310,226)
Construction accounts payable (403,456)
Security deposits payable 115,305
Deferred rental income 2,008,740
Other payable 213,445
Net cash used in operating activities (76,511)

Investing activities
Investment in leasehold estate PVAMU - I (1,265,655)
Investment in leasehold estate PVAMU - II (9,756,756)
Investment in leasehold estate - Laredo (4,630,133)
Investment in leasehold estate under development 929,224
Purchase of equipment (6,381)
Net cash used in investing activities (14,729,701)

Financing activities
Distributions (50,511)
Repayment of current notes payable - leasehold estates (87,088)
Repayment of long term notes payable - leasehold estates (10,716,367)
Proceeds from notes payable - PVAMU-I 10,195,601
Proceeds from notes payable - PVAMU-II 10,615,308
Proceeds from notes payable - Laredo 5,037,236
Net cash provided by financing activities 14,994,179

Net increase in cash and cash equivalents 187,967

Cash and cash equivalents at beginning of period 619,754

Cash and cash equivalents at end of period $ 807,721

AMERICAN CAMPUS LIFESTYLES COMPANIES, L.L.C. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

For the Period January 1, 1997 through September 30, 1997

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND OPERATIONS

American Campus Lifestyles Companies, L.L.C., a Texas limited liability
company, was formed on October 8, 1993, and subsidiaries (the "Company"), to
provide colleges, universities, and other educational institutions with
private sector assistance in financing, developing, constructing,
refurbishing, and managing on-campus and off-campus student housing.

The Company is a private, limited liability company whose principal owners
are RFG Capital Management Partners L.P. ("RFG Capital"), Landmark Campus
Investments, L.L.C. ("Landmark"), William Bayless and J.H. Domberger Campus
Ventures, L.L.C. ("Domberger").

The Company currently generates monthly management fees from four on-campus
and two off-campus student housing projects located in Texas, Oklahoma, and
Florida. In addition, the Company generates monthly development and
construction management fees from two on-campus student housing development
projects located in Texas, which were completed in August 1997. The Company
now generates monthly management fees for the property management for these
facilities.

During 1997, RFG Capital acquired a interest in American Campus Lifestyles
Companies, L.L.C. by purchasing certain common units, senior preferred units
and junior preferred units from the existing members for $4,012,056. This
transaction resulted in the following ownership of the common units: 76.09%
by RFG Capital, 10.87% by Landmark, 7.61% by William Bayless and 5.43% by
Domberger.

In accordance with the purchase agreement dated May 15, 1997, net income and
loss of the Company is allocated to the partners based on their individual
ownership interest.

The capital structure of American Campus Lifestyles Companies, L.L.C. is made
up of common units, senior preferred units and junior preferred units. The
senior preferred units and junior preferred units have a liquidation
preference of $1,000 per unit. RFG Capital holds 700 common units, 50 senior
preferred units and 2,900 junior preferred units, Domberger holds 50 common
units and 1,000 senior preferred units, Landmark holds 100 common units and
846.154 senior preferred units and William Bayless holds 70 common units and
42.308 senior preferred units.

Annual distributions of cash flow, as defined by the agreement, are payable
first to the senior preferred holders in the amount of $100 per unit per year
and second to the junior preferred holders in the amount of $100 per unit per
year. The Company pays a 2% of debt guarantee per annum by a related party
to RFG Capital for the guarantee of $5.0 million of Company indebtedness.
Excess cash flow is then distributed to the common unit holders based on
their individual ownership interest.

BASIS OF ACCOUNTING

The accompanying financial statements have been prepared on the accrual basis
of accounting in conformity with generally accepted accounting principles
(GAAP). Therefore, revenue is recorded as earned and costs and expenses are
recorded as incurred.

The consolidated financial statements include the accounts of the Company and
its subsidiaries. Significant intercompany balances and transactions have
been eliminated in consolidation.

CASH AND CASH EQUIVALENTS

For purposes of the statement of cash flows, the Company considers all
highly-liquid investments with a maturity of three months or less to be cash
equivalents.

As of September 30, 1997, the Company maintained its cash balance of $807,721
at two banks. Cash accounts at banks are insured by the FDIC up to $100,000.

RESTRICTED CASH

Restricted cash represents debt service and operating reserves held by Texas
Commerce Bank ("the Lender"), which is included in "Investment in leasehold
estate - completed" (see Note 3), as well as tenant security deposits.

FIXED ASSETS AND DEPRECIATION

Fixed assets are recorded at historical cost. Repairs and maintenance of
fixed assets are charged to operations, but major improvements are
capitalized. The estimated useful lives of the assets are as follows:

Years
---------
Equipment 5-10

Depreciation is computed using the straight-line method for financial
reporting purposes. Depreciation expense was $205,347 for the nine months
ended September 30, 1997. Upon retirement, sale, or other dispositions of
the equipment, the cost and related accumulated depreciation are removed from
the related accounts and the resulting gains or losses are included in
operations.

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." This
statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. The Company adopted the principles of
this statement in 1996. Its adoption did not have a material effect on the
carrying value of the Company's long-lived assets.

OPTIONS

The Company has issued to William Bayless options to purchase 20 common units
from the Company at an initial purchase price of $3,177.30 per unit. The
options vest in the following manner: 10 units vest May 1999, 5 units vest
May 2000 and the remaining 5 units vest May 2002.

The Company has issued to Thomas Trubiana options to purchase 80 common units
from the Company at an initial purchase price of $1,588.65 per unit. The
options vest in the following manner: 20 common units vest on January 1,
1998, 20 common units vest on July 1, 1999, 20 common units vest on July 1,
2000 and the remaining 20 common units vest on July 1, 2001.

The effect on proforma net income and earnings per unit of amortizing to
expense over the options vesting period the estimated fair value of the
options, is immaterial.

INVESTMENTS IN LEASEHOLD ESTATE

Investments in leasehold estate reflects the project costs incurred to date,
including development and construction fees, on the three student housing
development projects located in Texas. These investments in leasehold
estates are subject to ground leases (see note 2). The carrying amounts of
the investments include an amount capitalized (based on the estimated fair
value of the acquired assets, principally investments in leasehold estates)
for the capital restructure. The investments are amortized on a straight
line method over the life of the lease.

STUDENT DORMITORY HOUSING REVENUES

Upon execution of student dormitory contracts, the Company records a
receivable for the full value of the contract with an offsetting increase to
deferred revenue. Income is then recognized on a straight-line basis over
the life of the contract.

DEVELOPMENT/CONSTRUCTION FEES

The Company receives management fees on the development and construction
("Development Fees") of properties included in the "Investments in leasehold
estate" and on development of properties managed in which the Company does
not hold a leasehold estate. Development Fees are paid from construction
loan proceeds related to the projects during the construction and development
phase to development and construction companies affiliated with the Company.
Development Fees income is recognized monthly as costs are incurred.

FEDERAL INCOME TAXES

2. INVESTMENTS IN LEASEHOLD ESTATE

The Company leases from the Texas A&M University System ("TAMUS") tracts of
land at both Prairie View A&M University and Texas A&M International
University under a ground lease (the "Lease") effective February 1, 1996, at
a cost of $100 per year ($4,000) paid upon inception of the Lease. The
Company entered into this Lease for the purpose of developing, constructing
and maintaining student housing projects (Prairie View Phase I, Prairie View
Phase II and Texas A&M International - Laredo) or the ("Projects").
Subsequent to the execution of and in accordance with the provisions of the
Lease, the Company obtained financing (see Note 3) and constructed the
Projects for a total cost of $25,930,231, including debt service and
operating cash reserves. Under the provisions of the Lease, all improvements
to the land are owned by TAMUS. The Lease expires on August 31, 2035.
However, the lease will terminate upon repayment of all indebtedness related
to the Projects. The Lease requires that all indebtedness be repaid prior to
August 31, 2021.

The lease provides that in the event the Company were to receive a bona fide
offer, acceptable to the Company (the "Offer"), to purchase the Company's
leasehold estate in Prairie View Phase I, Prairie View Phase II and Texas A&M
International - Laredo, TAMUS has the right of first refusal to purchase the
leasehold estate under the terms of the Offer.

Additionally the Lease provides that TAMUS has the option to purchase the
leasehold estate at the close of each calendar year. The purchase price is
defined in the Lease as the lesser of (1) the sum of the present cash value
of the Company's leasehold estate in Prairie View Phase I, Prairie View Phase
II and Texas A&M International - Laredo, and the amount required to repay the
debt secured by the Prairie View Phase I, Prairie View Phase II and Texas A&M
International - Laredo loans, including principal, accrued interest,
prepayment fees and any
additional obligations; or (2) the sum of the fair market value, as defined
in the Lease of Prairie View Phase I, Prairie View Phase II and Texas A&M
International - Laredo and the equipment of Prairie View Phase I, Prairie
View Phase II and Texas A&M International - Laredo.

A development fee and construction fee was earned by the Company for the
services it provided during construction of each project. Additionally, the
Company manages each project for a fee of 5% of gross receipts as defined in
the management agreement, plus 50% of net cash flow of the Project, as
defined in the Lease. No income with respect to the net cash flow was
recognized in 1996 as management believes such amounts could not be
reasonably estimated until the end of the first academic year of operations
(August 31, 1997). Included in Prairie View A&M Phase I revenue in 1997 is
$365,000 of revenue collected, but not recognized as earned in 1996.

For the nine months ended September 30, 1997, the Company was paid a total of
$1,524,271 in development, construction and management fees.

3. NOTES PAYABLE -- LEASEHOLD ESTATE

Notes payable -- Prairie View Phase I reflects the project costs incurred to
date on a student housing development project located in Texas. The
construction loan which was in place in 1996 converted to a three year
mini-perm in February 1997 with a balloon payment due and payable at the end
of the three-year period.

Notes payable -- Prairie View Phase II reflects the project costs incurred to
date on a student housing development project located in Texas. A
construction loan of $10,615,308 was obtained from the Lender in December
1996 to finance the construction of Prairie View Phase II. Upon maturity of
the Prairie View Phase II construction loan in December 1997 it will convert
to a three year mini-perm loan with payments, based on a 25 year amortization
of principal and interest, due monthly, with a balloon payment due and
payable at the end of the three-year period.

Note payable -- Texas A&M International-Laredo reflects the project costs
incurred to date on a student housing development project located in Texas.
A construction loan of $5,037,236 was obtained from the Lender in December
1996 to finance the construction of Texas A&M International-Laredo. Upon
maturity of the Texas A&M International-Laredo construction loan in December
1997, it will convert to a three-year mini-perm loan with payments, based on
a 25
year amortization of principal and interest, due monthly, with a balloon
payment due and payable at the end of the three-year period.

The interest rate on the Loans is defined as LIBOR plus 250 basis points.
Each loan is collateralized by a lien on the leasehold estates of each
respective Projects. Prairie View Phase II and Texas A&M International -
Laredo have a floating interest rate which calls for LIBOR plus 250 basis
points in the first year, LIBOR plus 275 basis points in the second year and
LIBOR plus 300 basis points in the third year.

Aggregate maturities of the Loans for four years subsequent to September 30,
1997 are as follows:

Year ending December 31,
1997 $ 35,184
1998 342,690
1999 359,570
2000 25,110,701
Total $25,848,145

4. FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting standards No. 107, "Disclosure about Fair
Value of Financial Instruments," requires the Company to disclose the
estimated fair values of its financial instrument assets and liabilities.
The carrying amount of cash and cash equivalents approximate fair value
because of the short maturity of those instruments. The carrying amount of
the Company's notes payable -- leasehold estate approximates fair value.

5. RELATED-PARTY TRANSACTIONS

The Company receives monthly management fees from the management,
development, and construction companies affiliated with the Company (see
Notes 1 and 3).

=============================================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY DISTRIBUTION MADE PURSUANT HERETO SHALL,
UNDER ANY CIRCUMSTANCE, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF.

TABLE OF CONTENTS

Summary
Risk Factors
The Distribution
Dividend Policy
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and
Results of
Operations
Business
Management
Certain Transactions
Description of RSI Capital
Stock
Certain Antitakeover Provisions
Experts
Legal Matters
Index to Financial Statements

(UNTIL ( ), 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK DISTRIBUTED PURSUANT
HERETO, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.)
=============================================================================

=============================================================================

RECKSON SERVICES INDUSTRIES INC.

COMMON STOCK

-----------------------------------

PROSPECTUS

-----------------------------------

, 1998

PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the expenses expected to be incurred in
connection with the issuance and distribution of the Common Stock registered
hereby, all of which expenses, except for the SEC registration fee, are
estimates:

DESCRIPTION AMOUNT
___________ _______

SEC Registration Fee . . . . . . . . . . . . $
Listing Fee . . . . . . . . . . . . . . . . . $ *
Transfer Agent's and Registrar's Fee. . . . . $ *
Printing and Engraving Fees . . . . . . . . . $ *
Legal Fees and Expenses . . . . . . . . . . . $ *
Accounting Fees and Expenses . . . . . . . . $ *
Miscellaneous . . . . . . . . . . . . . . . . $ *

Total . . . . . . . . . . . . . . . . $ *
========

- -------------------
* To be furnished by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Delaware General Corporation Law (the "Delaware Law") provides that
a corporation may limit the liability of each director to the corporation of
its stockholders for monetary damages except for liability (i) for any breach
of the director's duty of loyalty to the corporation or its stockholders;
(ii) for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law; (iii) in respect of certain
unlawful dividend payments or stock redemptions or repurchases, and (iv) for
any transaction from which the director derives an improper personal benefit.
The Certificate of Incorporation and Bylaws provide for the elimination and
limitation of the personal liability of directors of the Company for monetary
damages to the fullest extent permitted by the Delaware Law. In addition,
the Certificate of Incorporation and Bylaws provide that if the Delaware Law
is amended to authorize the further elimination or limitation of the
liability of a director, then the liability of the directors shall be
eliminated or limited to the fullest extent permitted by the Delaware Law, as
so amended. The effect of this provision is to eliminate the rights of the
Company and its stockholders (through stockholders' derivative suits on
behalf of the Company) to recover monetary damages against a director for
breach of the fiduciary duty of care as a director (including breaches
resulting from negligent or grossly negligent behavior) except in the
situations described in clauses (i) through (iv) above. The provision does
not limit or eliminate the rights of the Company or any stockholder to seek
non-monetary relief such as an injunction or rescission in the event of a
breach of a director's duty of care. In addition, the Bylaws provide that
the Company shall, to the full extent permitted by the Delaware Law, as
amended from time to time, indemnify and advance expenses to each of its
currently acting and former directors, officers, employees and agents.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Reckson Operating Partnership, L.P. has acquired 95% of the Registrant's
outstanding equity interests in the form of non-voting common stock for
$4,256,324. Certain Reckson officers have acquired the remaining 5% of the
Registrant's outstanding equity interests in the form of voting common stock
for $224,017. The foregoing issuances of unregistered securities are claimed
to be exempt from the registration provisions of the Securities Act of 1933
pursuant to Section 4(2) of the Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits.

3.1 -- Certificate of Incorporation/*/
3.2 -- Restated Certificate of Incorporation/*/
3.3 -- Bylaws/*/
4.1 -- Specimen stock certificate/*/
4.2 -- Form of Preferred Stock Purchase Rights Plan/*/
5.1 -- Opinion of Brown & Wood LLP regarding the validity of the securities
being registered/*/
8.1 -- Opinion of Brown & Wood LLP regarding certain tax matters/*/
10.1 -- Form of Intercompany Agreement between Reckson Operating
Partnership, L.P. and Reckson Services Industries Inc./*/
10.2 -- Form of Credit Agreement between Reckson Operating Partnership, L.P.
and Reckson Services Industries Inc. together with related Line
of Credit Note/*/
10.3 -- Form of Limited Liability Company Agreement of On-Site
Ventures L.L.C./*/
21.1 -- List of Subsidiaries of Reckson Services Industries Inc./*/
23.1 -- Consent of Ernst & Young LLP
23.2 -- Consent of Arthur Andersen LLP
23.3 -- Consent of Arthur Andersen LLP
23.4 -- Consent of Brown & Wood LLP (included as part of exhibit 5.1)/*/
24.1 -- Power of Attorney (set forth on page II-4 of the Registration
Statement)

- ----------
*To be filed by amendment.

(b) Financial Statement Schedules.

Dobie Center --

Schedule III Real Estate Investments, Accumulated Depreciation and
Amortization

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer of
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer of controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Melville, New York on January 15, 1998.

RECKSON SERVICES INDUSTRIES INC.

By: /s/ Scott H. Rechler
-----------------------------
Scott H. Rechler
President and Chief Operating Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Donald Rechler, Scott H. Rechler and J.
Michael Maturo, and each of them, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capabilities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement and Power of Attorney have been signed by the
following persons in the capacities and on the dates indicated.

/s/ Donald Rechler Director and Chief January 15, 1998
- -------------------------- Executive Officer
Donald Rechler

/s/ Scott H. Rechler Director, President and January 15, 1998
- -------------------------- Chief Operating Officer
Scott H. Rechler (Principal Executive Officer)

/s/ Michael Maturo Executive Vice President and January 15, 1998
- ------------------------- Chief Financial Officer
Michael Maturo (Principal Financial and
Accounting Officer)

/s/ Roger Rechler Director January 15, 1998
- -------------------------
Roger Rechler

EXHIBIT INDEX

EXHIBIT
NO. DESCRIPTION
______ ___________

23.1 -- Consent of Ernst & Young LLP
23.2 -- Consent of Arthur Andersen LLP
23.3 -- Consent of Arthur Andersen LLP
24.1 -- Power of Attorney (set forth on page II-4 of
the Registration Statement)

Exhibit 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and
to the use of our reports dated December 8, 1997, with respect to the
financial statements of RSI, December 10, 1997, with respect to Veritech
Ventures, L.L.C. and December 5, 1997, with respect to American Campus
Lifestyles Company, L.L.C. all of which are included in the Registration
Statement (Form S-1) and related Prospectus of RSI for the registration of
$4,262,982 of its common stock.

New York, New York /s/ Ernst & Young LLP
January 9, 1998

Exhibit 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
report dated April 4, 1997, on the financial statements of Dobie Center (and
to all references to our Firm), included in or made part of this Registration
Statement on Form S-1.

Dallas, Texas /s/ Arthur Andersen LLP
January 9, 1998

Exhibit 23.3

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
report dated March 28, 1997, on the financial statements of American Campus
Lifestyles Companies, L.L.C. (and to all references made to our Firm),
included in or made part of this Registration Statement on Form S-1.

Dallas, Texas /s/ Arthur Andersen LLP
January 9, 1998