SEC Filing | SL Green Realty Corp.

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As Filed Pursuant to Rule 424(b)(4)
Registration No. 333-50311
PROSPECTUS
4,000,000 SHARES

[LOGO]
8.0% PREFERRED INCOME EQUITY REDEEMABLE SHARES(SM) ("PIERS(SM)")
(LIQUIDATION PREFERENCE $25.00 PER SHARE)
--------------------

Distributions on the 8.0% Preferred Income Equity Redeemable Shares(SM), a
series of preferred stock, $.01 par value per share (the "PIERS"), offered
hereby (the "PIERS Offering"), of SL Green Realty Corp. (the "Company"), a
Maryland corporation which qualifies for federal income tax purposes as a real
estate investment trust (a "REIT"), are cumulative from the date of issue and
are payable quarterly on or about the fifteenth day of January, April, July and
October of each year, commencing on July 15, 1998 (each a "Distribution Payment
Date"), in an amount per share equal to the greater of (i) 8.0% of the
liquidation preference per annum (equivalent to $2.00 per annum per PIERS) or
(ii) the cash dividends paid or payable (determined on each of the Distribution
Payment Dates referred to above) on a number of shares of common stock, $.01 par
value per share of the Company ("Common Stock") equal to the number of shares of
Common Stock (or portion thereof) into which a PIERS is convertible. See
"Capital Stock -- PIERS -- Distributions."

The PIERS are convertible at any time, at the option of the holder, unless
previously redeemed, into Common Stock at a conversion price of $24.475 per
share of Common Stock (equivalent to a conversion rate of 1.0215 shares of
Common Stock for each PIERS) (the "Conversion Price"), subject to adjustment in
certain circumstances described herein. Except in certain circumstances relating
to the preservation of the Company's status as a REIT for federal income tax
purposes, the PIERS are not redeemable prior to July 15, 2003. On and after July
15, 2003, the PIERS will be redeemable by the Company, in whole or in part, at
the option of the Company, for such number of shares of Common Stock as are
issuable at the Conversion Price, provided that the Company may exercise this
option only if for 20 trading days within any 30 consecutive trading days,
including the last day of such period, the closing price of the Common Stock on
the New York Stock Exchange ("NYSE") exceeds $28.146 per share, subject to
adjustment in certain circumstances. On and after July 15, 2003, the PIERS may
also be redeemed at the option of the Company, in whole or in part, initially at
$25.889 per PIERS and thereafter at prices declining to $25.00 per share on and
after July 15, 2007, plus in each case accumulated and unpaid distributions, if
any, to the redemption date, provided that the Company may exercise this option
only if the redemption price (other than the portion thereof consisting of
accumulated and unpaid distributions) is paid solely out of the sale proceeds of
other shares of stock of the Company, which may include other series of
preferred stock, and from no other source. The PIERS are subject to mandatory
redemption on April 15, 2008 at a price of $25 per PIERS, plus accumulated and
unpaid distributions to the redemption date.

Application has been made to list the PIERS and the Common Stock issuable
upon conversion or redemption of the PIERS on the NYSE. The PIERS will be listed
under the Symbol "SLGPrA," and the Common Stock will be listed under the symbol
"SLG." Trading of the PIERS is expected to commence on the NYSE within 30 days
from the closing of the PIERS Offering. On May 12, 1998, the last reported sale
price of the Common Stock on the NYSE was $22.25 per share. See "Capital Stock
- -- Restrictions on Transfer."
--------------------------

Concurrent with this offering of PIERS by the Company (the "PIERS Offering")
the Company is offering an aggregate of 10,000,000 shares of Common Stock
(11,500,000 shares if the over-allotment option to the underwriters is exercised
in full) by a separate Prospectus (the "Common Offering" and, together with the
PIERS Offering, the "Offerings"). The consummation of the Common Offering is not
contingent upon consummation of the PIERS Offering or vice versa.
--------------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN THE PIERS, INCLUDING, AMONG OTHERS:

- CONCENTRATION OF ALL OF THE COMPANY'S PROPERTIES IN MANHATTAN (PRIMARILY
IN MIDTOWN MANHATTAN), AND THE DEPENDENCE OF SUCH PROPERTIES ON THE
CONDITIONS OF THE NEW YORK METROPOLITAN ECONOMY AND THE MIDTOWN MANHATTAN
OFFICE MARKET;

- THE POSSIBILITY THAT ONE OR MORE OF THE PENDING ACQUISITIONS WILL NOT
CLOSE;

- RISKS ASSOCIATED WITH RAPID GROWTH;

- AN AFFILIATE OF LEHMAN BROTHERS INC. ("LEHMAN BROTHERS") THE LEAD MANAGER
OF THE OFFERINGS, WILL RECEIVE $240 MILLION OF THE NET PROCEEDS OF THE
OFFERINGS IN REPAYMENT OF A LOAN MADE TO ACQUIRE PROPERTIES, IN ADDITION
TO UNDERWRITING DISCOUNTS AND COMMISSIONS;

- THE POSSIBILITY THAT THE BOARD OF DIRECTORS OF THE COMPANY MAY IN THE
FUTURE AMEND OR REVISE THE INVESTMENT, FINANCING, BORROWING, DISTRIBUTION
AND CONFLICTS OF INTEREST POLICIES OF THE COMPANY, WITHOUT A VOTE OF THE
COMPANY'S STOCKHOLDERS; AND

- LIMITATIONS ON THE STOCKHOLDERS' ABILITY TO CHANGE CONTROL OF THE COMPANY,
INCLUDING RESTRICTIONS ON OWNERSHIP OF MORE THAN 9.0% OF THE OUTSTANDING
SHARES OF COMMON STOCK.
----------------------------------

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

PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC (1) COMMISSIONS (2) COMPANY (3)

Per Share............................................. $25.00 $1.00 $24.00
Total (4)............................................. $100,000,000 $4,000,000 $96,000,000

(1) Plus accumulated distributions, if any, from the date of original issuance.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at approximately
$700,000.
(4) The Company has granted the Underwriters an option to purchase up to an
aggregate of 600,000 PIERS to cover over-allotments. If all of such shares
are purchased, the total Price to Public, Discounts and Commissions and
Proceeds to Company will be $115,000,000, $4,600,000 and $110,400,000,
respectively. See "Underwriting."
------------------------------

The PIERS offered by this Prospectus are offered by the Underwriters subject
to prior sale, withdrawal, cancellation or modification of the offer without
notice to, delivery to and acceptance by the Underwriters and to certain further
conditions. It is expected that delivery of the PIERS offered hereby will be
made through the facilities of The Depository Trust Company, in New York, New
York, on or about May 18, 1998.
--------------------------

LEHMAN BROTHERS PRUDENTIAL SECURITIES INCORPORATED

May 12, 1998

[MAP AND PHOTOS]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE PIERS. SUCH
TRANSACTIONS MAY INCLUDE THE PURCHASE OF PIERS TO COVER A SYNDICATE SHORT
POSITION IN THE PIERS OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE PIERS
AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."

TABLE OF CONTENTS

PROSPECTUS SUMMARY.................... 1
The Company........................... 1
Risk Factors.......................... 2
Recent Developments................... 4
Business and Growth Strategies........ 6
The Properties........................ 8
The PIERS Offering.................... 10
Tax Status of the Company............. 12
Summary Selected Financial
Information......................... 12

RISK FACTORS.......................... 16
The Company's Dependence on the
Midtown Markets Due to Limited
Geographic Diversification Could
Adversely Affect the Company's
Financial Performance............... 16
Risk that Pending Acquisitions Will
Not Close........................... 16
Risks Associated with Rapid Growth,
the Recent Acquisition of Many of
the New Propeties and the Lack of
Operating History................... 16
The Managing Underwriter will Receive
$240 Million from the Net Proceeds
of the Offerings.................... 17
The Company's Performance and Value
are Subject to Risks Associated with
the Real Estate Industry............ 17
The Company's ability to make
distributions is dependent upon
the ability of its office
properties to generate income in
excess of operating expenses...... 17
Tenant defaults and bankruptcies
could adversely affect the
Company's cash flow............... 17
Lease expirations could adversely
affect the Company's cash flow.... 18
Illiquidity of real estate
investments could adversely affect
the Company's financial
condition......................... 18
Operating costs could adversely
affect the Company's cash flow.... 18
Investments in mortgage loans could
cause expenses which could
adversely affect the Company's
financial condition............... 18
Joint investments could be adversely
affected by the Company's lack of
sole decision-making authority and
reliance upon a co-venturer's
financial condition............... 19
The expiration of net leases and
operating subleases could
adversely affect the Company's
financial condition............... 19
The Company's financial condition
could be adversely affected due to
its reliance on major tenants..... 20
The Company's Use of Debt Financing,
Increases in Interest Rates,
Financial Covenants and Absence of
Limitation on Debt Could Adversely
Affect the Company.................. 20
The required repayment of debt or
interest thereon could adversely
affect the Company's financial
condition......................... 20
Rising interest rates could
adversely affect the Company's
cash flow......................... 20
The Company's policy of no
limitation on debt could adversely
affect the Company's cash flow.... 21
The Ability of Stockholders to Effect
a Change of Control of the Company
is Limited.......................... 21
Stock ownership limits in the
Charter could inhibit changes in
control........................... 21
Potential effects of staggered board
could inhibit changes in
control........................... 22
Future issuances of common stock
could dilute existing
stockholders' interests........... 22
Issuances of preferred stock could
inhibit changes in control........ 22
Certain provisions of Maryland law
could inhibit changes in
control........................... 22
Dependence on Smaller and Growth-
Oriented Businesses to Rent Class B
Office Space Could Adversely Affect
the Company's Cash Flow............. 22
Conflicts of Interest in Connection
with the Formation Transactions and
the Business of the Company......... 22
A sale of, or a reduction in
mortgage indebtedness on, any of
the Properties will have different
effects on holders of Units than
on stockholders................... 22
Failure to enforce terms of
contribution and other
agreements........................ 23
Conflicts of interest with
affiliates of the Company......... 23
Outside interests of officers and
directors could conflict with the
Company's interests............... 23

Limitations on Ability to Sell or
Reduce the Mortgage Indebtedness on
Certain Properties Could Adversely
Affect the Value of the Common Stock
and the PIERS....................... 23
Failure to Qualify as a REIT Would
Cause the Company to be Taxed as a
Corporation......................... 25
Competition in its Marketplace Could
Have an Adverse Impact on the
Company's Results of Operations..... 25
The Financial Condition of Third-Party
Property Management, Leasing and
Construction Businesses Could
Adversely Affect the Company's
Financial Condition................. 26
Liability for Environmental Matters
Could Adversely Affect the Company's
Financial Condition................. 27
Lack of a Public Market for the
PIERS............................... 28
Other Risks of Ownership of Common
Stock Could Adversely Affect the
Trading Price of the Common Stock
and the PIERS....................... 28
Availability of shares for future
sale could adversely affect the
Common Stock price................ 28
Changes in market interest rates
could adversely affect the price
of the Common Stock and the
PIERS............................. 28
Unrelated events could adversely
affect the price of the Common
Stock and the PIERS............... 28
The officers, directors and
significant stockholders of the
Company have substantial
influence......................... 28
The Company Relies on Key Personnel
Whose Continued Service is Not
Guaranteed.......................... 29
Stockholder Approval is Not Required
to Change Policies of the Company... 29
Uninsured Losses Could Adversely
Affect the Company's Cash Flow...... 29
The Costs of Compliance with the
Americans with Disabilities Act and
Similar Laws Could Adversely Affect
the Company's Cash Flow............. 29
Americans with Disabilities Act..... 29
Other Laws.......................... 30
THE COMPANY........................... 31
RECENT DEVELOPMENTS................... 32
Acquired Properties................... 32
Pending Acquisitions.................. 32
Leasing Activity...................... 33
Credit Facilities..................... 33
BUSINESS AND GROWTH STRATEGIES........ 34
The Market Opportunity................ 34
Growth Strategies..................... 35
USE OF PROCEEDS....................... 39
RATIO OF EARNINGS TO FIXED CHARGES.... 39
PRICE RANGE OF COMMON STOCK AND
DISTRIBUTION HISTORY................ 40
CAPITALIZATION........................ 41
SELECTED FINANCIAL INFORMATION........ 42
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS....................... 45
Overview.............................. 45
Results of Operations................. 45
Pro Forma Results of Operations....... 48
Liquidity and Capital Resources....... 50
Cash Flows............................ 51
Funds from Operations................. 51
Inflation............................. 52
Recently Issued Accounting
Pronouncements...................... 52
Year 2000............................. 52
MARKET OVERVIEW....................... 53
New York Economy...................... 53
Manhattan Office Market............... 55
THE PROPERTIES........................ 61
The Portfolio......................... 61
673 First Avenue...................... 67
470 Park Avenue South................. 70
36 West 44th Street (The Bar
Building)........................... 72
70 West 36th Street................... 73
1414 Avenue of the Americas........... 76
29 West 35th Street................... 78
1372 Broadway......................... 80
1140 Avenue of the Americas........... 82
50 West 23rd Street................... 84
17 Battery Place...................... 85
110 East 42nd Street.................. 88
633 Third Avenue (partial interest)... 88
1466 Broadway......................... 88
420 Lexington Avenue (the Graybar
Building)........................... 90
321 West 44th Street.................. 92
Pending Acquisitions:
440 Ninth Avenue...................... 92
38 East 30th Street................... 92
116 Nassau Street..................... 92
711 Third Avenue...................... 93
General Terms of Leases in the Midtown
Markets............................. 95

Mortgage Indebtedness................. 95
Credit Facilities..................... 96
Environmental Matters................. 96
Property Management and Leasing
Services............................ 97
Construction Services................. 98
Employees............................. 98
Competition........................... 98
Regulation............................ 99
Insurance............................. 99
Legal Proceedings..................... 99
MANAGEMENT............................ 100
Directors and Executive Officers...... 100
Committees of the Board of
Directors........................... 102
Compensation of Directors............. 103
Executive Compensation................ 103
Employment and Noncompetition
Agreements.......................... 104
Stock Option and Incentive Plan....... 105
Incentive Compensation Plan........... 106
401(k) Plan........................... 106
Limitation of Liability and
Indemnification..................... 106
STRUCTURE AND FORMATION OF THE
COMPANY............................. 108
The Operating Entities of the
Company............................. 108
Formation Transactions................ 109
Benefits to Related Parties........... 110
POLICIES WITH RESPECT TO CERTAIN
ACTIVITIES.......................... 111
Investment Policies................... 111
Disposition Policies.................. 112
Financing Policies.................... 113
Conflict of Interest Policies......... 113
Interested Director and Officer
Transactions........................ 114
Business Opportunities................ 114
Policies with Respect to Other
Activities.......................... 114
CERTAIN RELATIONSHIPS AND
TRANSACTIONS........................ 116
Formation Transactions................ 116
Cleaning Services..................... 116
Security Services..................... 116
Related Party Transactions............ 116
PARTNERSHIP AGREEMENT................. 116
Operational Matters................... 116
Liability and Indemnification......... 120
Transfers of Interests................ 120
Issuance of Additional Units and/or
Preference Units.................... 121
Fiduciary Duty........................ 122

PRINCIPAL STOCKHOLDERS................ 123
CAPITAL STOCK......................... 125
General............................... 125
Common Stock.......................... 125
Preferred Stock....................... 125
PIERS................................. 126
Excess Stock.......................... 132
Power to Issue Additional Shares of
Common Stock and Preferred Stock.... 132
Restrictions on Transfer.............. 133
Transfer Agent, Registrar, Conversion
Agent and Distribution Disbursing
Agent............................... 135
Global Securities..................... 135
CERTAIN PROVISIONS OF MARYLAND LAW AND
THE COMPANY'S CHARTER AND BYLAWS.... 137
Classification and Removal of Board of
Directors; Other Provisions......... 137
Business Combination Statute.......... 138
Control Share Acquisition Statute..... 138
Amendments to the Charter............. 139
Advance Notice of Director Nominations
and New Business.................... 139
Anti-takeover Effect of Certain
Provisions of Maryland Law and of
the Charter and Bylaws.............. 139
Rights to Purchase Securities and
Other Property...................... 139
SHARES AVAILABLE FOR FUTURE SALE...... 139
General............................... 139
Registration Rights................... 140
MATERIAL FEDERAL INCOME TAX
CONSEQUENCES........................ 141
General............................... 141
Taxation of the Company............... 141
Taxation of Stockholders Generally.... 147
Taxation of Holders of PIERS.......... 151
Other Tax Considerations.............. 153
State and Local Tax................... 154
UNDERWRITING.......................... 155
EXPERTS............................... 157
LEGAL MATTERS......................... 157
ADDITIONAL INFORMATION................ 157
GLOSSARY OF SELECTED TERMS............ 159
INDEX TO FINANCIAL STATEMENTS......... F-1

iii

CAUTIONARY STATEMENT

INFORMATION CONTAINED IN THIS PROSPECTUS CONTAINS "FORWARD-LOOKING
STATEMENTS" RELATING TO, WITHOUT LIMITATION, FUTURE ECONOMIC PERFORMANCE, PLANS
AND OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS AND PROJECTIONS OF REVENUE
AND OTHER FINANCIAL ITEMS, WHICH CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING
TERMINOLOGY SUCH AS "MAY," "WILL," "SHOULD," "EXPECT," "ANTICIPATE," "ESTIMATE"
OR "CONTINUE" OR THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE
TERMINOLOGY. THE CAUTIONARY STATEMENTS SET FORTH UNDER THE CAPTION "RISK
FACTORS" AND ELSEWHERE IN THE PROSPECTUS IDENTIFY IMPORTANT FACTORS WITH RESPECT
TO SUCH FORWARD- LOOKING STATEMENTS, INCLUDING CERTAIN RISKS AND UNCERTAINTIES
THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN SUCH FORWARD-
LOOKING STATEMENTS.

PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION INCLUDED ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED,
THE INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES THAT (I) THE OFFERING PRICE
PER SHARE FOR COMMON STOCK OFFERED BY THE COMMON OFFERING IS $22.25 AND (II) THE
UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED. AS USED HEREIN, (I) THE
"COMPANY" MEANS SL GREEN REALTY CORP., A MARYLAND CORPORATION, AND ONE OR MORE
OF ITS SUBSIDIARIES (INCLUDING SL GREEN OPERATING PARTNERSHIP, L.P.), AND THE
PREDECESSORS THEREOF OR, AS THE CONTEXT MAY REQUIRE, SL GREEN REALTY CORP. ONLY
OR SL GREEN OPERATING PARTNERSHIP, L.P. ONLY AND (II) "SL GREEN" MEANS SL GREEN
PROPERTIES, INC., A NEW YORK CORPORATION, AS WELL AS THE AFFILIATED PARTNERSHIPS
AND OTHER ENTITIES THROUGH WHICH STEPHEN L. GREEN HAS HISTORICALLY CONDUCTED
COMMERCIAL REAL ESTATE ACTIVITIES. SEE "GLOSSARY OF SELECTED TERMS" FOR THE
DEFINITIONS OF CERTAIN TERMS USED IN THIS PROSPECTUS.

THE COMPANY

SL Green Realty Corp. (together with its subsidiaries, the "Company") is the
first fully integrated, self-administered and self-managed equity real estate
investment trust ("REIT") solely engaged in owning, managing, leasing, acquiring
and repositioning Class B office properties in Manhattan. The Company continues
to be the only Class B office REIT in New York City. The Company currently owns
interests in 15 Class B office properties (the "Properties") containing
approximately 5.0 million rentable square feet located in Manhattan. As of
December 31, 1997, the Properties were 90% leased. In addition, the Company acts
as leasing agent and/or manages 27 properties (including the Properties owned by
the Company) encompassing approximately 8.2 million rentable square feet.

The term "Class B" is generally used in the Manhattan office market to
describe office properties which are more than 25 years old but which are in
good physical condition, enjoy widespread acceptance by high-quality tenants and
are situated in desirable locations in Manhattan. Class B office properties can
be distinguished from Class A properties in that Class A properties are
generally newer properties with higher finishes and obtain the highest rental
rates within their markets.

A variety of tenants who do not require, desire or cannot afford Class A
space are attracted to Class B office properties due to their prime locations,
excellent amenities, distinguished architecture and relatively less expensive
rental rates. Class B office space has historically attracted many smaller
growth oriented firms (many of which have fueled the recent growth in the New
York metropolitan economy) and has played a critical role in satisfying the
space requirements of particular industry groups in Manhattan, such as the
advertising, apparel, business services, engineering, not-for-profit, "new
media" and publishing industries. In addition, several areas of Manhattan,
including many in which particular trades or industries traditionally
congregate, are dominated by Class B office space and contain no or very limited
Class A office space. Examples of such areas include the Garment District (where
three of the Properties are located), the Flatiron District (where one Property
is located), the areas immediately south and north of Houston Street ("Soho" and
"Noho", respectively), Chelsea (where one Property is located), and the area
surrounding the United Nations (where one Property is located). Businesses
significantly concentrated in certain of these areas include those in the
following industries: new media, garment, apparel, toy, jewelry, interior
decoration, antiques, giftware, contract furnishing and UN-related businesses.
The concentration of businesses creates strong demand for the available Class B
office space in those locations.

A description of the structure of the Company is set forth below under
"Structure and Formation of the Company."

The Company believes that current developments in the New York metropolitan
economy provide an attractive environment for owning, operating and acquiring
Class B office properties in Manhattan. The combined vacancy rate for Class A
and Class B office space in the Midtown Markets (as defined herein) declined to
9.1% at March 31, 1998 from a 1990s high of 16.8% at year-end 1991. The Class B
segment of this market tightened to a vacancy rate of 9.8% at March 31, 1998
from its 1990s high of 17.2% at year-end

1992, a 43.0% decline. Rosen Consulting Group, a national real estate consulting
group, projects vacancy rates in the Class B Midtown Markets to further drop to
7.0% by 2002, resulting in projected average asking market rents of $34.14 per
square foot, a 23.1% increase over average asking rents as of December 31, 1997
of $27.74 per square foot. See "Business and Growth Strategies--The Market
Opportunity" and "Risk Factors--The Company's Dependence on the Midtown Markets
Due to Limited Geographic Diversification Could Adversely Affect The Company's
Financial Performance" below. The Company seeks to capitalize on growth
opportunities in its marketplace by acquiring Class B office properties on a
selective basis and, when necessary, enhancing their value after acquisition
through repositioning of the properties in their respective submarkets. See
"Business and Growth Strategies--Growth Strategies."

The Company operates from its Manhattan headquarters and is a fully
integrated real estate company with approximately 331 employees and in-house
expertise in acquisitions, finance, asset management, leasing and construction.
The Company's founder, Stephen L. Green, along with the other six senior
officers of the Company, have an average of more than 20 years of experience in
the real estate industry. See "Management--Directors and Executive Officers."
Upon completion of the Offerings, approximately 9.5% of the equity of the
Company, on a fully diluted basis, will be beneficially owned by officers and
directors of the Company.

HIGHLIGHTS OF RECENT DEVELOPMENTS

Since its initial public offering in August 1997 (the "IPO"), the Company
has acquired interests in six of the Properties (collectively, the "Acquired
Properties"), containing approximately 2.8 million rentable square feet. The
Acquired Properties include, among others, 110 East 42nd Street (formerly known
as the Bowery Savings Bank Building), and the Graybar Building at 420 Lexington
Avenue. The Acquired Properties were purchased for an aggregate purchase price
of approximately $259 million. As of April 24, 1998, the Company had entered
into agreements to purchase four additional office properties (the "Pending
Acquisitions") containing an aggregate of approximately 1,055,000 rentable
square feet for an aggregate purchase price of $111.0 million.

RISK FACTORS

An investment in the Common Stock involves various risks, and prospective
investors should carefully consider the matters discussed under "Risk Factors"
prior to making an investment in the Company. Such risks include, among others:

- concentration of the Properties in Manhattan (primarily in the Midtown
Markets), and the dependence of the Properties on the conditions of the
New York metropolitan economy and the Midtown Markets (as defined herein),
which increases the risk of the Company's being adversely affected by a
downturn in the New York metropolitan economy or the Midtown Markets;

- the possibility that one or more of the Pending Acquisitions will not
close and that the Company may be unable to apply proceeds from the
Offerings toward other suitable acquisitions;

- integration of recent or expected acquisitions, including the risk that
certain of these properties may have characteristics or deficiencies
unknown to the Company that affect their valuation or revenue potential;

- an affiliate of Lehman Brothers, the lead managing underwriter of the
Offerings, will receive $240 million of the net proceeds of the Offerings
in repayment of a loan made to the Company to acquire properties, in
addition to underwriting discounts and commissions;

- conflicts of interest involving officers and directors of the Company in
business decisions regarding the Company, including conflicts associated
with sales and refinancings of the Properties and the prepayment of debt
secured by the Properties and conflicts associated with the provision of
cleaning and security services with respect to the Properties by entities
controlled by related parties;

- limitations on the ability of the Company to sell, or reduce the amount of
mortgage indebtedness on, two of the Properties (673 First Avenue and 470
Park Avenue South) for up to 12 years following the completion of the IPO
(the "Lock-out Period"), except in certain circumstances (the "Lock-out
Provisions"), which limitations could benefit certain participants in the
Formation Transactions (as defined herein) (including Stephen L. Green,
members of his immediate family and unaffiliated partners in the
Property-owning entities), even if any such sale or reduction in mortgage
indebtedness would be in the best interests of the Company's stockholders,
and the possibility that future property acquisitions in which the Company
uses partnership interests as consideration will include comparable
limitations;

- the anti-takeover effect of limiting actual or constructive ownership of
Common Stock to 9.0% of the number of outstanding shares, subject to
certain exceptions, and of certain other provisions contained in the
organizational documents of the Company and the Operating Partnership,
which could have the effect of delaying, deferring or preventing a
transaction or change in control of the Company that might involve a
premium price for the Common Stock or otherwise would be in the best
interests of the Company's stockholders;

- dependence on smaller and growth-oriented businesses to rent Class B
office space;

- office real estate investment risks, such as the effect of the large
number of competitive office properties in the Midtown Markets, the need
to renew leases or re-lease space upon lease expirations and to pay
renovation and re-leasing costs in connection therewith, the effect of
economic and other conditions on office property cash flows and values,
the ability of tenants to make lease payments, the ability of a property
to generate revenue sufficient to meet operating expenses (including
future debt service), potential environmental liabilities, the illiquidity
of real estate investments and the possibility that acquired properties
fail to perform as expected;

- the possibility that the Board of Directors of the Company may in the
future amend or revise the investment, financing, borrowing, distribution
and conflicts of interest policies of the Company without a vote of the
Company's stockholders;

- the absence of limitations in the Company's organizational documents on
the incurrence of debt;

- taxation of the Company as a corporation if it fails to qualify as a REIT
for Federal income tax purposes, the Company's liability for certain
Federal, state and local income taxes in such event and the resulting
decrease in cash available for distribution; and

- possible environmental liability in connection with the Company's
ownership and/or operation of the Properties.

RECENT DEVELOPMENTS

ACQUIRED PROPERTIES

Since the closing of the IPO on August 20, 1997 through April 24, 1998, the
Company has acquired interests in six additional properties in Manhattan
containing approximately 2.8 million rentable square feet for an aggregate
purchase price of approximately $259 million. The following table sets forth
certain data regarding the Acquired Properties:

APPROXIMATE PERCENT PURCHASE
ACQUIRED RENTABLE LEASED AT PRICE MONTH
PROPERTIES SUBMARKET SQUARE FEET DECEMBER 31, 1997 (MILLIONS) ACQUIRED
- -------------------------------------- ------------------- ----------- --------------------- ------------- --------------

110 East 42nd Street(1)............... Grand Central North 251,000 92% $ 30.0 September 1997
17 Battery Place(1)................... World Trade/Battery 811,000 79 59.0 December 1997
633 Third Avenue (partial interest)... Grand Central North 41,000 100 10.5 December 1997
1466 Broadway(2)...................... Times Square 289,000 87 64.0 March 1998
420 Lexington Avenue
(the Graybar Building)(2)........... Grand Central North 1,188,000 86 78.0 March 1998
321 West 44th Street.................. Times Square 203,000 96 17.5 March 1998
----------- --- ------
Total/Weighted Average.............. 2,783,000 86% $ 259.0
----------- ------
----------- ------

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

(1) Identified as an Option Property in the IPO.

(2) Property acquired from the Helmsley organization (the "Helmsley
Properties").

PENDING ACQUISITIONS

As of April 24, 1998, the Company had executed contracts to acquire four
additional office properties containing approximately 1,055,000 rentable square
feet for an aggregate purchase price of approximately $111.0 million. The
Company intends to use a portion of the net proceeds from the Offerings to
complete the Pending Acquisitions within 60 days after the closing of the
Offerings; however, purchase of the Pending Acquisitions is subject to the
Company's completion of due diligence and the satisfaction of other customary
conditions to closing, and there can be no assurance that any of the Pending
Acquisitions will be completed. See "Risk Factors--Risk that Pending
Acquisitions Will Not Close." In addition to the Pending Acquisitions, as part
of its ongoing business, the Company continually engages in discussions with
various property owners regarding possible portfolio or single asset
acquisitions. No assurance can be made that the Company will acquire any of the
property opportunities currently under review. The following table sets forth
certain data regarding the Pending Acquisitions:

APPROXIMATE PERCENT PURCHASE
RENTABLE LEASED AT PRICE
PENDING ACQUISITIONS SUBMARKET SQUARE FEET DECEMBER 31, 1997 (MILLIONS)
- ------------------------------------ ------------------------------ ----------- --------------------- -----------

440 Ninth Avenue.................... Garment 340,000 76% $ 29.0
38 East 30th Street................. Park Avenue South/Flatiron 91,000 80 10.5
116 Nassau Street (Brooklyn)........ Northwest Brooklyn 100,000 93 10.5
711 Third Avenue(1)................. Grand Central North 524,000 79(1) 61.0
----------- --- -----------
Total/Weighted Average.......... 1,055,000 79% $ 111.0
----------- -----------
----------- -----------

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

(1) Does not count the 45,000 square foot garage as a lease or as part of the
property's rentable square feet. The garage is operated by a third party
pursuant to a management contract. If the garage were counted as leased, the
percent leased at this Pending Acquisition would have been 81%.

LEASING ACTIVITY

acquired by the Company at the IPO (50 West 23rd Street, 1140 Avenue of the
Americas and 1372 Broadway).

The following represents the change in percent leased rates at those three
Properties:

PERCENT LEASED
------------------------------
AUGUST 21, DECEMBER 31,
1997 1997
------------- ---------------

1140 Avenue of the Americas............................................................. 98% 99%
1372 Broadway........................................................................... 84% 92%(1)
50 West 23rd Street..................................................................... 91% 86%(2)
--- ---
Weighted Average.................................................................... 89% 91%

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

(1) As of March 31, 1998, this Property was 96% leased.

(2) The decrease in percent leased is due to a tenant leaving prior to the lease
expiration date. The space was leased to a new tenant in January 1998,
increasing the percent leased to 91% and increasing the weighted average
percent leased rate of these three properties to 93%.

CREDIT FACILITIES

On December 19, 1997 the Company entered into a $140 million three year
senior unsecured revolving credit facility (the "Credit Facility") due December
2000. Availability under the Credit Facility may be limited to an amount less
than $140 million. Availability is calculated by reference to several factors
including recent acquisition activity and most recent quarterly property
performance. Outstanding loans under the Credit Facility bear interest at a rate
per annum equal to the London Interbank Offered Rate ("LIBOR") applicable to
each interest period plus 130 basis points to 145 basis points per annum. The
Credit Facility requires the Company to comply with certain covenants, including
but not limited to, maintenance of certain financial ratios. At December 31,
1997 the outstanding amount of indebtedness under the Credit Facility was $76
million, and the interest rate on such indebtedness was 7.265% per annum.

On December 30, 1997 the Company entered into a $7 million additional
advance under its existing mortgage loan which is secured by 50 West 23rd
Street. The note bore interest at a rate of LIBOR plus 175 basis points (7.6875%
at December 31, 1997). On April 3, 1998, the interest rate on this note was
fixed at 7.06%, and will mature co-terminous with the underlying mortgage note.
As of April 15, 1998, the current amount of the mortgage note was $21 million.

On March 18, 1998, the Company asked the Credit Facility banking group to
temporarily relieve the Company from its obligations under the financial
covenants of the Credit Facility, in order to close an additional financing
provided by Lehman Brothers necessary to acquire the Helmsley Properties (the
"Acquisition Facility"). The Acquisition Facility, with a borrowing capacity of
up to $275 million, financed the purchase of the Helmsley Properties, paid off
the outstanding balance on the Credit Facility and provided ongoing liquidity
for future acquisition and corporate needs. The term of this facility is one
year. The interest rate is determined by a schedule of the principal balance of
the loan outstanding and the applicable quarterly period extending from March
18, 1998 through the maturity date. The outstanding principal amount of $240
million under the Acquisition Facility will be paid from the proceeds of the
Offerings. The Credit Facility will remain committed but unused until the
Acquisition Facility is repaid, at which time the Company will be in compliance
with all financial covenants under the Credit Facility and will again be able to
draw additional funds under such Credit Facility.

BUSINESS AND GROWTH STRATEGIES

The Company's primary business objective is to maximize total return to
stockholders through growth in distributable cash flow and appreciation in the
value of its assets. The Company seeks to achieve this objective by capitalizing
on the external and internal growth opportunities described below.

Unless indicated otherwise, information contained herein concerning the New
York metropolitan economy and the Manhattan office market is derived from a
report commissioned by the Company and prepared by the Rosen Consulting Group,
and is included herein (the "Rosen Market Study"), with the consent of the Rosen
Consulting Group.

THE MARKET OPPORTUNITY

- The Company believes that the continuing recovery of the New York
commercial real estate market from the downturn of the late 1980s and
early 1990s creates an attractive environment for owning, operating and
acquiring Class B office properties in Manhattan.

- Continued net private sector job growth (especially in smaller companies),
an improving business environment and "quality of life" enhancements in
New York City have led to growing demand for office space in Manhattan.

- The Midtown Markets in particular have benefited from the growth in
smaller companies that have traditionally been attracted to Class B space
in the Midtown Markets due to its prime locations and relatively less
expensive rental rates (as compared to Class A space) and from the
relocation of larger firms from Class A space to Class B space.

- The Company expects the supply of office space in the Midtown Markets to
remain relatively stable through the year 2000 because new construction
generally is not economically feasible at current market rental rates and
property values, there are relatively few sites available for construction
and the lead time required for construction typically exceeds three years.

- As a result of these positive supply and demand fundamentals, the Class B
office vacancy rate in the Midtown Markets declined to 9.8% from its 1990s
high of 17.2% in 1992 and asking rental rates for Class B office space in
the Midtown Markets increased to $27.74 per square foot as of March 31,
1998 from their 1990s low of $21.90 per square foot as of year-end 1993.
These developments coupled with projected continuing decreases in vacancy
rates and increases in rental rates create attractive opportunities for
owning and acquiring Class B office properties in Manhattan. However,
concentration of most of the Properties in these markets increases the
risk of the Company being adversely affected by any downturn in the New
York metropolitan economy. See "Risk Factors--The Company's Dependence on
the Midtown Markets Due to Limited Geographic Diversification Could
Adversely Affect the Company's Financial Performance."

GROWTH STRATEGIES

- The Company seeks to capitalize on current opportunities in the Class B
Manhattan office market through (i) property acquisitions--continuing to
acquire Class B office properties at significant discounts to replacement
costs that provide attractive initial yields and the potential for cash
flow growth, (ii) releasing expiring leases to increasing market rents,
(iii) property repositioning-- repositioning acquired properties that are
underperforming through renovations, active management and proactive
leasing and (iv) integrated leasing and property management.

- PROPERTY ACQUISITIONS. In acquiring properties, the Company believes that
it will have the following advantages over its competitors: (i) over 18
years experience as a full service, fully integrated real estate company
focused on the Class B office market in Manhattan, (ii) enhanced access to
capital as a public company, (as compared to the generally fragmented and
far less institutional ownership of competing Manhattan Class B office
properties) and (iii) the ability to offer tax-advantaged structures to
sellers.

- RE-LEASING EXPIRING LEASES TO INCREASING MARKET RENTS. Although there can
be no assurances in this regard, the Company believes that as the
commercial real estate market in Manhattan continues to improve, there
will be increasing demand for office space and declining vacancies which
are expected to continue to result in increasing market rents. The Company
believes it has significant opportunities to increase cash flow during
such periods of increasing market rents by renewing or re-leasing expiring
leases at increased market rents.

- PROPERTY REPOSITIONING. The Company believes that there are a significant
number of potential acquisitions that could greatly benefit from
management's experience in enhancing property cash flow and value by
renovating and repositioning properties to be among the best in their
submarkets.

- INTEGRATED LEASING AND PROPERTY MANAGEMENT. The Company seeks to
capitalize on management's extensive knowledge of the Class B Manhattan
marketplace and the needs of the tenants therein through its proactive
approach to leasing and management, which includes (i) the use of in-depth
market research, (ii) the utilization of an extensive network of
third-party brokers, (iii) comprehensive building management analysis and
planning and (iv) a commitment to tenant satisfaction and providing "Class
A" tenant services. The Company believes that its proactive leasing
efforts have contributed to average occupancy rates at the Properties that
are above the market average. See "Business and Growth Strategies--Growth
Strategies--Integrated Leasing and Property Management." In addition, the
Company's commitment to tenant service and satisfaction is evidenced by
the renewal of approximately 75% of the expiring rentable square footage
75% of the expiring leases determined by number of leases) at the
Properties owned and managed by the Company and its predecessors during
the period from January 1, 1994 through December 31, 1997.

THE PROPERTIES

THE PORTFOLIO

GENERAL. The Company owns or has contracted to acquire interests in 19
Class B office properties located primarily in Manhattan which contain
approximately 6.1 million rentable square feet (one property is located in
downtown Manhattan and one property is located in Brooklyn). Of these 19
properties, nine properties containing approximately 2.2 million rentable square
feet were owned or acquired by the Company at the time of the IPO (the "Initial
Properties"), six properties containing approximately 2.8 million rentable
square feet have been acquired by the Company since the IPO (the "Acquired
Properties") and three properties containing approximately 1,055,000 rentable
square feet are currently under contract by the Company (the "Pending
Acquisitions"). Certain of the Properties include at least a small amount of
retail space on the lower floors, as well as basement/storage space. One
Property (673 First Avenue) and one Pending Acquisition (711 Third Avenue)
include underground parking.

The following table sets forth certain information with respect to each of
the Properties and the Pending Acquisitions as of December 31, 1997:

PERCENTAGE
OF
APPROXIMATE PORTFOLIO
YEAR RENTABLE RENTABLE
BUILT/ SQUARE SQUARE PERCENT ANNUALIZED
PROPERTIES RENOVATED SUBMARKET FEET FEET LEASED RENT(1)
- ---------------------------- ----------- ------------------------- ------------ ------------- ----------- -----------

INITIAL PROPERTIES
673 First Avenue(4)......... 1928/1990 Grand Central South 422,000 7.0% 100% $10,912,915
470 Park Avenue South(5).... 1912/1994 Park Avenue 260,000(4) 4.3 99 5,994,254
South/Flatiron
Bar Building(4)(6).......... 1922/1985 Rockefeller Center 165,000(5) 2.7 99 4,559,339(5)
70 W. 36th Street........... 1923/1994 Garment 151,000 2.5 100 2,850,097
1414 Avenue of the
Americas.................. 1923/1990 Rockefeller Center 111,000 1.8 99 3,409,628
29 W. 35th Street........... 1911/1985 Garment 78,000 1.3 92 1,407,620
1372 Broadway............... 1914/1985 Garment 508,000 8.4 92 10,375,221
1140 Avenue of the
Americas(4)............... 1926/1951 Rockfeller Center 191,000 3.2 99 5,035,238
50 W. 23rd Street........... 1892/1992 Chelsea 333,000 5.5 86 5,647,325
ACQUIRED PROPERTIES
110 East 42nd Street........ 1921 Grand Central North 251,000 4.1 92 5,469,318
17 Battery Place(7)......... 1906/1973 World Trade/Battery 811,000 13.3 79 13,073,251
633 Third Avenue (partial
interest)(8).............. 1962/1996 Grand Central North 41,000 0.7 99 1,030,920
1466 Broadway............... 1907/1982 Times Square 289,000 4.8 87 8,155,597
420 Lexington Avenue
(the Graybar
Building)(9).............. 1927/1982 Grand Central North 1,188,000 19.6 86 27,450,607
321 West 44th Street........ 1929 Times Square 203,000 3.4 96 2,748,406
PENDING ACQUISITIONS
440 Ninth Avenue............ 1927/1989 Garment 339,000 5.6 76 4,681,118
38 East 30th Street......... 1915/1996 Park Avenue 91,000 1.5 79 1,580,201
South/Flatiron
116 Nassau Street
(Brooklyn)................ 1931/1994 Northwest Brooklyn 100,000 1.7 93 1,176,048
711 Third Avenue(10)........ 1955 Grand Central North 524,000 8.6 79(11) 10,894,291(12)
------------ ----- --- -----------
Total/Weighted Average...... 6,056,000(13) 100.0% 88% $126,451,394
------------ ----- -----------
------------ ----- -----------

ANNUAL
NET
ANNUALIZED EFFECTIVE
PERCENTAGE RENT RENT
OF PER PER
PORTFOLIO NUMBER LEASED LEASED
ANNUALIZED OF SQUARE SQUARE
PROPERTIES RENT LEASES FOOT(2) FOOT(3)
- ---------------------------- ------------- ------------- ------------- -----------

INITIAL PROPERTIES
673 First Avenue(4)......... 8.6% 15 $ 25.86 $ 21.79
470 Park Avenue South(5).... 4.7 27 23.21 19.42

Bar Building(4)(6).......... 3.6 70 27.95 24.51
70 W. 36th Street........... 2.3 37 18.88 16.03
1414 Avenue of the
Americas.................. 2.7 32 30.98 30.97
29 W. 35th Street........... 1.1 8 19.73 16.22
1372 Broadway............... 8.2 32 22.26 22.71
1140 Avenue of the
Americas(4)............... 4.0 41 26.61 26.46
50 W. 23rd Street........... 4.3 14 19.70 18.61
ACQUIRED PROPERTIES
110 East 42nd Street........ 4.5 32 23.60 24.05
17 Battery Place(7)......... 10.4 38 20.52 21.23
633 Third Avenue (partial
interest)(8).............. 0.8 3 25.38 43.98
1466 Broadway............... 6.4 157 32.41 30.68
420 Lexington Avenue
(the Graybar
Building)(9).............. 21.8 301 26.80 25.45
321 West 44th Street........ 2.2 29 14.10 14.04
PENDING ACQUISITIONS
440 Ninth Avenue............ 3.7 20 18.22 16.68
38 East 30th Street......... 1.2 5 21.86 24.50

116 Nassau Street
(Brooklyn)................ 0.9 2 12.65 12.26
711 Third Avenue(10)........ 8.6 24 28.88(12) 27.44(12)
----- --- ------ -----------
Total/Weighted Average...... 100.0% 887 $ 23.87 $ 22.86
----- ---
----- ---

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

(1) As used throughout this Prospectus, Annualized Rent represents the monthly
contractual rent under existing leases as of December 31, 1997 multiplied
by 12. This amount reflects total rent before any rent abatements and
includes expense reimbursements, which may be estimated as of such date.
Total rent abatements for leases in effect as of December 31, 1997 for the
12 months ending December 31, 1998 are approximately $888,000.

(2) Annualized Rent Per Leased Square Foot, as used throughout this Prospectus,
represents Annualized Rent, as described in footnote (1) above, presented
on a per leased square foot basis.

(3) As used throughout this Prospectus, Annual Net Effective Rent Per Leased
Square Foot represents (a) for leases in effect at the time an interest in
the relevant property was first acquired by the Company or its
predecessors, the remaining lease payments under the lease including
escalations (excluding operating expense pass-throughs, if any) divided by
the number of months remaining under the lease multiplied by 12 and (b) for
leases entered into after an interest in the relevant property was first
acquired by the Company or its predecessors and for leases at the Acquired
Properties, all lease payments under the lease including escalations
(excluding operating expense pass-throughs, if any) divided by the number
of months in the lease multiplied by 12, and, in the case of both (a) and
(b), minus tenant improvement costs and leasing commissions, if any, paid
or payable by the Company or its predecessors and presented on a per leased
square foot basis. Annual Net

Effective Rent Per Leased Square Foot includes future contractual increases
in rental payments and therefore, in certain cases, may exceed Annualized
Rent Per Leased Square Foot.

(4) The Company holds a long-term leasehold interest in the land and
improvements with respect to this Property. See "The Properties--673 First
Avenue," "--36 West 44th Street (The Bar Building)" and "--1140 Avenue of
the Americas."

(5) 470 Park Avenue South is comprised of two buildings, 468 Park Avenue South
(a 17-story office building) and 470 Park Avenue South (a 12-story office
building).

(6) The Bar Building is comprised of two buildings, 36 West 44th Street (a
14-story building) and 35 West 43rd Street (a four-story building).

(7) The Company has a co-tenancy interest in this Property. See "The
Properties--17 Battery Place."

(8) The Company holds fee interests in condominium units comprising
approximately 41,000 square feet of this one million square foot office
building. The units are currently leased to primarily retail tenants. See
"The Properties--633 Third Avenue (partial interest)."

(9) The Company holds an operating sublease interest in the land and
improvements with respect to this Property. See "The Properties--420
Lexington Avenue (The Graybar Building)."

(10) The Company will hold a leasehold mortgage interest, a net sub-leasehold
interest and a co-tenancy interest in this property. See "The
Properties--Pending Acquisitions--711 Third Avenue."

(11) Does not count the 45,000 square foot garage as a lease or as part of the
property's rentable square feet. The garage is operated by a third party
pursuant to a management contract. If the garage were counted as leased,
the percent leased at this Pending Acquisition would have been 81%.

(12) Does not include rent from the 45,000 square foot garage at this property.

(13) Includes approximately 5,602,600 square feet of rentable office space,
348,700 square feet of rentable retail space, 29,700 square feet of
mezzanine space and 75,000 square feet of garage space.

THE PIERS OFFERING

All capitalized terms used herein and not defined have the meanings provided
in "Capital Stock." For a more complete description of the terms of the PIERS
specified in the following summary, see "Capital Stock -- PIERS." In connection
with the PIERS Offering, the Company will contribute or otherwise transfer the
net proceeds of the sale of the PIERS to the Operating Partnership and the
Operating Partnership will issue to the Company Preference Units that mirror the
rights, preferences and other privileges of the PIERS.

Securities Offered.............. 4,000,000 8.0% Preferred Income Equity Redeemable Shares
("PIERS") (4,600,000 PIERS if the Underwriter's
over-allotment option is exercised in full).

Ranking......................... The PIERS will rank senior to the Common Stock with
respect to the payment of distributions and amounts upon
liquidation, dissolution or winding up. See "Capital Stock
-- PIERS -- Ranking."

Distributions................... Distributions on the PIERS are cumulative from the date of
issue and are payable quarterly on or about the fifteenth
day of January, April, July and October of each year (each
a "Distribution Payment Date"), commencing on July 15,
1998, in an amount per share equal to the greater of (i)
8.0% of the liquidation preference per annum (equivalent
to $2.00 per annum per PIERS) or (ii) the cash dividends
paid or payable (determined on each of the Distribution
Payment Dates referred to above) on a number of shares of
Common Stock equal to the number of shares of Common Stock
(or portion thereof) into which a PIERS is convertible.
See "Capital Stock -- PIERS -- Distributions."

Distributions on the PIERS will accumulate whether or not
the Company has sufficient earnings, whether or not there
are funds legally available for the payment of such
distributions and whether or not such distributions are
declared.

If the Company designates any portion of a dividend as a
"capital gain dividend," a U.S. Stockholder's share of
such capital gain dividend would be an amount which bears
the same ratio to the total amount of distributions paid
to such U.S. Stockholder for the year as the aggregate
amount designated as a capital gain dividend bears to the
aggregate amount of all distributions paid on all classes
of shares for the year. See "Capital Stock -- PIERS --
Distributions."

For a discussion of the tax treatment of distributions to
the holders of Common Stock and PIERS, see "Material
Federal Income Tax Consequences -- Taxation of
Stockholders," "--Taxation of Holders of PIERS."

Liquidation Preference.......... The PIERS will have a liquidation preference of $25.00 per
share, plus an amount equal to accumulated and unpaid
distributions. See "Capital Stock --PIERS -- Liquidation
Preference."

Conversion Rights............... The PIERS are convertible at any time, at the option of
the holder, unless previously redeemed, into Common Stock
at an initial conversion price of $24.475 per share of
Common Stock (equivalent to a conversion rate of 1.0215
shares of Common Stock for each PIERS), subject to
adjustment in certain circumstances (the "Conversion
Price"). See "Capital Stock -- PIERS -- Conversion Rights"
and "-- Conversion Price Adjustments."

Mandatory Redemption............ The PIERS are subject to mandatory redemption on April 15,
2008 at a price of $25.00 per PIERS, plus accumulated and
unpaid distributions to the redemption date. See "Capital
Stock -- PIERS -- Redemption."

Redemption at Option
of the Company................ Except in certain circumstances relating to the
preservation of the Company's status as a REIT for federal
income tax purposes, the PIERS are not redeemable prior to
July 15, 2003. On and after July 15, 2003, the PIERS will
be redeemable by the Company, in whole or in part, at the
option of the Company, for such number of shares of Common
Stock as are issuable at the Conversion Price (the "Stock
Redemption Right"). The Company may exercise its Stock
Redemption Right only if for 20 trading days within any
period of 30 consecutive trading days, including the last
day of such period, the closing price of the Common Stock
on the NYSE exceeds $28.146 per share, subject to
adjustment in certain circumstances. See "Capital Stock --
PIERS -- Redemption."

On and after July 15, 2003, the PIERS may be redeemed at
the option of the Company (the "Cash Redemption Right"),
in whole or in part, initially at $25.889 per PIERS and
thereafter at prices declining to $25.00 per PIERS on and
after July 15, 2007, plus in each case accumulated and
unpaid distributions, if any, to the redemption date. See
"Capital Stock --PIERS -- Redemption."

The Company will not exercise its Cash Redemption Right
unless the redemption price (other than the portion
thereof consisting of accumulated and unpaid
distributions) for the exercise of the Cash Redemption
Right is paid solely out of the sale proceeds of other
shares of stock of the Company, which may include other
series of preferred stock ("Preferred Stock"), and from no
other source.

Voting Rights................... If distributions on the PIERS are in arrears for six or
more quarterly periods, holders of the PIERS (voting
separately as a class with all other series of Preferred
Stock upon which like voting rights have been conferred
and are exercisable) will be entitled to vote for the
election of two additional directors to serve on the Board
of Directors of the Company until all distribution
arrearages are eliminated. See "Capital Stock -- PIERS --
Voting Rights."

Use of Proceeds................. Repayment of the Acquisition Facility to an affiliate of
Lehman Brothers, the acquisition of the Pending
Acquisitions and payment of costs associated with the
Offerings. See "Use of Proceeds."

Form............................ The PIERS will be issued and maintained in book-entry form
registered in the name of the nominee of DTC, except under
limited circumstances described herein.

Listing......................... Application has been made to list the PIERS and the Common
Stock issuable upon conversion or redemption of the PIERS
on the NYSE. The PIERS will be listed under the symbol
"SLGPrA". Trading of the PIERS is expected to commence on
the NYSE within 30 days from the closing of the Offerings.

TAX STATUS OF THE COMPANY

The Company has operated and intends to continue to operate so as to
continue to qualify, and will elect, to be taxed as a REIT under Sections 856
through 860 of the Code, commencing with its short taxable year ending December
31, 1997. The Company believes its organization and proposed method of operation
will enable it to continue to meet the requirements for qualifications as a
REIT. To maintain REIT status, an entity must meet a number of organizational
and operational requirements, including a requirement that it currently
distribute at least 95% of its REIT taxable income (computed without regard to
the Company's net capital gain and dividends paid deduction) to its
stockholders. As a REIT, the Company generally will not be subject to federal
income tax or net income it distributes currently to its stockholders. If the
Company fails to qualify as a REIT in any taxable year, it will be subject to
federal income tax at regular corporate rates. See "Material Federal Income Tax
Consequences" and "Risk Factors--Failure to Qualify as a REIT Would Cause the
Company to be Taxed as a Corporation; Other tax liabilities could adversely the
Company's cash flow." Even if the Company qualifies for taxation as a REIT, the
Company may be subject to certain federal, state and local taxes on its income
and property.

SUMMARY SELECTED FINANCIAL INFORMATION

The following table sets forth summary selected financial and operating
information on a pro forma and historical consolidated basis for the Company,
and on a historical combined basis for the SL Green Predecessor (as defined
below), and should be read in conjunction with all of the financial statements
and notes thereto included in this Prospectus. The consolidated historical
balance sheet data as of December 31, 1997 and the operating data for the period
August 21 to December 31, 1997 have been derived from the historical
consolidated financial statements audited by Ernst & Young LLP, independent
auditors. The combined historical balance sheet information as of December 31,
1996 and 1995 and operating data for the period January 1, 1997 to August 20,
1997 and years ended December 31, 1996, 1995, and 1994 of the SL Green
Predecessor have been derived from the historical combined financial statements
audited by Ernst & Young LLP, independent auditors. The operating data for the
year ended December 31, 1993 has been derived from the unaudited combined
financial statements of the SL Green Predecessor. In the opinion of management
of the SL Green Predecessor, the operating data for the year ended December 31,
1993 include all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the information set forth therein.

The "SL Green Predecessor" consists of 100% of the net assets and results of
operations of two Properties, 1414 Avenue of the Americas and 70 West 36th
Street, equity interests in four other Properties, 673 First Avenue, 470 Park
Avenue South, 29 West 35th Street and the Bar Building (which interests are
accounted for under the equity method) and 100% of the net assets and results of
operations of the Service Corporations.

The unaudited pro forma consolidated balance sheet of the Company as of
December 31, 1997 has been prepared as if the Offerings and the Company's
purchase of certain of the Acquired Properties after December 31, 1997 (1466
Broadway, 420 Lexington Avenue and 321 West 44th Street) and the Pending
Acquisitions had been consummated on December 31, 1997. The pro forma
consolidated statement of operations for the year ended December 31, 1997 is
presented as if the IPO, Formation Transactions, the Offerings, and the purchase
of the Acquired Properties and the Pending Acquisitions occurred at January 1,
1997 and the effect thereof was carried forward through the year. The pro forma
financial information is not necessarily indicative of what the actual financial
position and results of operations of the Company would have been as of and for
the year indicated, nor does it purport to represent the Company's future
financial position and results of operations.

THE COMPANY AND THE SL GREEN PREDECESSOR
(IN THOUSANDS, EXCEPT FOR PER SHARE AND PROPERTY DATA)

THE COMPANY SL GREEN PREDECESSOR
-------------------------- --------------------------------------------
AUGUST 21- JANUARY 1- YEAR ENDED DECEMBER 31,
PRO FORMA DECEMBER 31, AUGUST 20, -------------------------------
1997 1997 1997 1996 1995 1994
----------- ------------- ----------- --------- --------- ---------
(UNAUDITED)

OPERATING DATA:
Total revenues..................................... $ 143,498 $ 23,207 $ 9,724 $ 10,182 $ 6,564 $ 6,600
----------- ------------- ----------- --------- --------- ---------
Property operating expense......................... 57,784 7,077 2,722 3,197 2,505 2,009
Real estate taxes.................................. 24,349 3,498 705 703 496 543
Interest........................................... 9,421 2,135 1,062 1,357 1,212 1,555
Depreciation and amortization...................... 16,467 2,815 811 975 775 931
Marketing, general and administration.............. 2,577 948 2,189 3,250 3,052 2,351
----------- ------------- ----------- --------- --------- ---------
Total expenses..................................... 110,598 16,473 7,489 9,482 8,040 7,389
----------- ------------- ----------- --------- --------- ---------
Operating income (loss)............................ 32,900 6,734 2,235 700 (1,476) (789)
Equity in net income (loss) from Service
Corporations..................................... 2,331 (101) -- -- -- --
Equity in net income (loss) of uncombined joint
ventures......................................... -- -- (770) (1,408) (1,914) (1,423)
----------- ------------- ----------- --------- --------- ---------
Income (loss) before extraordinary item and
minority interest................................ 35,231 6,633 1,465 (708) (3,390) (2,212)
Minority interest.................................. (2,641) (1,074) -- -- -- --
----------- ------------- ----------- --------- --------- ---------
Income (loss) before extraordinary item............ 32,590 5,559 1,465 (708) (3,390) (2,212)
Extraordinary item (net of minority interest)...... -- (1,874) 22,087 8,961 -- --
------------- ----------- --------- --------- ---------
Net income (loss).................................. -- $ 3,685 $ 23,552 $ 8,253 $ (3,390) $ (2,212)
------------- ----------- --------- --------- ---------
------------- ----------- --------- --------- ---------
Mandatory preferred stock dividends and
accretion........................................ (8,350)
-----------
Income before extraordinary item available to
Common Stockholders.............................. $ 24,240
-----------
-----------
Income before extraordinary item per share of
Common Stock (1).................................
Basic............................................ $ 1.09 $ .45
Diluted.......................................... $ 1.08 $ .45
Cash dividend declared per share of Common Stock... $ .51

1993
-------------
(UNAUDITED)

OPERATING DATA:
Total revenues..................................... $ 5,926
------
Property operating expense......................... 1,741
Real estate taxes.................................. 592
Interest........................................... 1,445
Depreciation and amortization...................... 850
Marketing, general and administration.............. 1,790
------
Total expenses..................................... 6,418
------
Operating income (loss)............................ (492)
Equity in net income (loss) from Service
Corporations.....................................
Equity in net income (loss) of uncombined joint
ventures......................................... 88
------
Income (loss) before extraordinary item and
minority interest................................ (404)
Minority interest.................................. --
------
Income (loss) before extraordinary item............ (404)
Extraordinary item (net of minority interest)...... --
------
Net income (loss).................................. $ (404)
------
------
Mandatory preferred stock dividends and
accretion........................................
Income before extraordinary item available to
Common Stockholders..............................
Income before extraordinary item per share of
Common Stock (1).................................
Basic............................................
Diluted..........................................
Cash dividend declared per share of Common Stock...

THE COMPANY SL GREEN PREDECESSOR
---------------------- --------------------------------------------
AS OF DECEMBER 31,
--------------------------------------------
PRO FORMA
1997 1997 1996 1995 1994 1993
----------- --------- --------- --------- --------- -----------

(UNAUDITED) (UNAUDITED)
BALANCE SHEET DATA:
Commercial real estate, before accumulated
depreciation............................... $ 596,978 $ 338,818 $ 26,284 $ 15,559 $ 15,761 $ 15,352
Total assets................................. 660,935 382,775 30,072 16,084 15,098 16,218
Mortgages and notes payable.................. 52,820 52,820 16,610 12,700 12,699 12,698
Credit Facility.............................. 45,375 76,000
Minority interest............................ 41,303 33,906 -- -- -- --
PIERS........................................ 95,300
Stockholders' equity/Owners' (deficit)....... 379,186 176,208 (8,405) (18,848) (15,521) (13,486 )

AUGUST 21-
DECEMBER JANUARY 1- YEAR ENDED DECEMBER 31,
PRO FORMA 31, AUGUST 20, ----------------------------------------------
1997 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- --------- --------- --------- -------------
(UNAUDITED) (UNAUDITED)

OTHER DATA:
Funds from operations(2)........... $ 43,001 $ 9,355 $ -- $ -- $ -- $ -- $ --
Net cash provided by (used in)
operating activities............... -- 5,713 2,838 272 (234) 939 --
Net cash provided by financing
activities......................... -- 224,234 2,782 11,960 63 178 --
Net cash (used in) investing
activities......................... -- (217,165 ) (5,559 ) (12,375) (432) (567) --
Basic weighted average shares of
Common Stock outstanding........... 22,292 12,292 -- -- -- -- --
Diluted weighted average shares of
Common Stock and Common Stock
equivalents outstanding............ 22,404 12,404 -- -- -- -- --
Units outstanding at period end.... 2,428 2,383 -- -- -- -- --
Number of Properties owned at
period end......................... 19 12 6 6 4 4 4
Gross rentable square feet of
Properties owned at period end..... 6,056 3,300 1,200 1,200 900 900 900
Percentage leased for Properties
owned at period end................ 88 92 97 95 95 98 96

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

(1) Basic earnings per share excludes any dilutive effect of options
outstanding. Diluted earnings per share includes the dilutive effect of the
outstanding options calculated under the treasury stock method. As each Unit
is redeemable for one share of Common Stock, the calculation of earnings per
share upon redemption of the outstanding Units will be unaffected, as
Unitholders and stockholders are entitled to equal distributions on a per
Unit and per share basis in the net income of the Company. Pro forma basic
and diluted income before extraordinary item reflect the preferred stock
dividends and accretion. Pro forma diluted income per share before
extraordinary item excludes the conversion of the PIERS as the conversion of
these shares would be antidilutive.

(2) The White Paper on Funds from Operations approved by the Board of Governors
of NAREIT in March 1995 defines Funds from Operations as net income (loss)
(computed in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of properties, plus real estate related depreciation
and amortization and after adjustments for unconsolidated partnerships and
joint ventures. The Company believes that Funds from Operations is helpful
to investors as a measure of the performance of an equity REIT because,
along with cash flow from operating activities, financing activities and
investing activities, it provides investors with an indication of the
ability of the Company to incur and service debt, to make capital
expenditures and to fund other cash needs. The Company computes Funds from
Operations in accordance with standards established by NAREIT which may not
be comparable to Funds from Operations reported by other REITs that do not
define the term in accordance with the current NAREIT definition or that
interpret the current NAREIT definition differently than the Company. Funds
from Operations does not represent cash generated from operating activities
in accordance with GAAP and should not be considered as an alternative to
net income (determined in accordance with GAAP) as an indication of the
Company's financial performance or to cash flow from operating activities
(determined in accordance with GAAP) as a measure of the Company's
liquidity, nor is it indicative of funds available to fund the Company's
cash needs, including its ability to make cash distributions. For a
reconciliation of net income and Funds from Operations, see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Funds from Operations."

RISK FACTORS

An investment in the PIERS involves various risks. Prospective investors
should carefully consider the following information before making a decision to
purchase PIERS in the PIERS Offering.

THE COMPANY'S DEPENDENCE ON THE MIDTOWN MARKETS DUE TO LIMITED GEOGRAPHIC
DIVERSIFICATION COULD ADVERSELY AFFECT THE COMPANY'S FINANCIAL PERFORMANCE

The Properties are primarily located in midtown Manhattan. Like other office
markets, the Midtown Markets have experienced downturns in the past, including
most recently in the late 1980s and early 1990s, and future declines in the New
York metropolitan economy or the Midtown Markets could adversely affect the
Company's financial performance. The Company's financial performance and its
ability to make distributions to stockholders are therefore dependent on
conditions in the New York metropolitan economy and the Midtown Markets. The
Company's revenue and the value of its properties may be affected by a number of
factors, including the economic climate in metropolitan New York (which may be
adversely affected by business layoffs or downsizing, industry slowdowns,
relocations of businesses, changing demographics, increased telecommuting,
infra-structure quality, New York State and New York City budgetary constraints
and priorities and other factors) and conditions in the Midtown Markets (such as
oversupply of or reduced demand for office space). There can be no assurance as
to the continued growth of the New York metropolitan economy, the continued
strength of the Midtown Markets or the future growth rate of the Company.

RISK THAT PENDING ACQUISITIONS WILL NOT CLOSE

The Company has executed contracts with respect to the acquisition of the
four Pending Acquisitions which are expected to close within 60 days after the
closing of the Offerings. While the Company has commenced its due diligence with
respect to the Pending Acquisitions, the acquisition contracts are subject to
customary closing conditions and no assurances can be made that the Company will
complete any of the Pending Acquisitions. In the event any of the Pending
Acquisitions are not acquired, there can be no assurance that the Company will
apply any remaining net proceeds from the Offerings towards other acquisitions
that meet the Company's acquisition criteria. If the Company is unable to close
the acquisition of a significant number of the Pending Acquisitions or to locate
additional available acquisitions after the Offerings, the Company's ability to
continue to make distributions could be adversely affected.

RISKS ASSOCIATED WITH RAPID GROWTH, THE RECENT ACQUISITION OF MANY OF THE NEW
PROPERTIES AND THE LACK OF OPERATING HISTORY

The Company is currently experiencing a period of rapid growth. As the
Company acquires additional properties, the Company will be subject to risks
associated with managing new properties, including lease-up and tenant
retention. In addition, the Company's ability to manage its growth effectively
will require it to successfully integrate its new acquisitions into its existing
management structure. No assurances can be given that the Company will be able
to succeed with such integration or effectively manage additional properties or
that newly acquired properties will perform as expected.

All of the Acquired Properties have relatively short or no operating history
under management by the Company prior to their acquisition by the Company, and
none of the Pending Acquisitions are currently managed by the Company. The
Company has had limited control over the operation of the Acquired Properties
and the Pending Acquisitions, and such properties may have characteristics or
deficiencies unknown to the Company affecting their valuation or revenue
potential, and it is also possible that the operating performance of these
properties may decline under the Company's management.

The Company is currently under contract to acquire three Class B office
properties encompassing 531,000 rentable square feet. See "Recent
Developments--Pending Acquisitions." In the future, the Company expects to
acquire additional office properties, including the three under contract. As
noted

above, acquisitions entail the risk that investments will fail to perform in
accordance with expectations, including operating and leasing expectations. The
Company anticipates that certain of its acquisitions will be financed using the
proceeds of periodic equity or debt offerings, lines of credit or other forms of
secured or unsecured financing that will result in a risk that permanent
financing for newly acquired projects might not be available or would be
available only on disadvantageous terms. If permanent debt or equity financing
is not available on acceptable terms to refinance acquisitions undertaken
without permanent financing, further acquisitions may be curtailed or cash
available for distribution may be adversely affected. In addition, it is
anticipated that acquisition risks may be heightened for acquisitions of
Manhattan office properties due to the large size of many Manhattan office
properties and the complexity of acquisition transactions in the Manhattan
office market.

THE MANAGING UNDERWRITER WILL RECEIVE $240 MILLION FROM THE NET PROCEEDS OF THE
OFFERINGS

An affiliate of Lehman Brothers, the lead managing underwriter of the
Offerings, will receive $240 million from the net proceeds of the Offerings in
repayment of the Acquisition Facility in addition to underwriting discounts and
commissions. Prudential Securities Incorporated will act as a "qualified
independent underwriter" in connection with the Offerings.

THE COMPANY'S PERFORMANCE AND VALUE ARE SUBJECT TO RISKS ASSOCIATED WITH THE
REAL ESTATE INDUSTRY

THE COMPANY'S ABILITY TO MAKE DISTRIBUTIONS IS DEPENDENT UPON THE ABILITY OF
ITS OFFICE PROPERTIES TO GENERATE INCOME IN EXCESS OF OPERATING EXPENSES. Real
estate investments are subject to varying degrees of risk. The yields available
from equity investments in real estate and the Company's ability to service debt
depend in large part on the amount of income generated, expenses incurred and
capital expenditures required. The Company's distributable cash flow and ability
to continue to make distributions to its stockholders is dependent upon the
ability of its office properties to generate income in excess of its
requirements to meet operating expenses, including debt service and capital
expenditures. The Company's income from office properties and the value of its
properties may be significantly adversely affected by a number of factors,
including national, state and local economic climates and real estate conditions
(such as an oversupply of or a reduction in demand for office space in the area;
the perceptions of tenants and prospective tenants of the safety, convenience
and attractiveness of the Company's properties; the Company's ability to provide
adequate management, maintenance and insurance; the quality, philosophy and
performance of the Company's management; competition from comparable properties;
the occupancy rate of the Company's properties; the ability to collect on a
timely basis all rent from tenants; the effects of any bankruptcies or
insolvencies of major tenants; the expense of periodically renovating, repairing
and re-leasing space (including, without limitation, substantial tenant
improvement costs, capital improvement to properties and leasing costs of
re-leasing office space); and increasing operating costs (including increased
real estate taxes) which may not be passed through fully to tenants). In
addition, income from properties and real estate values also are affected by
such factors as the cost of compliance with laws, including zoning and tax laws,
the potential for liability under applicable laws, interest rate levels and the
availability of financing. Certain significant expenditures associated with
equity investments in real estate (such as mortgage payments, real estate taxes,
insurance and maintenance costs) also may not be reduced if circumstances cause
a reduction in income from a property. If any of the above occurred, the
Company's ability to continue to make distributions to its stockholders at
historical levels could be adversely affected.

TENANT DEFAULTS AND BANKRUPTCIES COULD ADVERSELY AFFECT THE COMPANY'S CASH
FLOW. Substantially all of the Company's income is derived from rental income
from its properties and, consequently, the Company's distributable cash flow and
ability to continue to make distributions to stockholders would be adversely
affected if a significant number of tenants at its properties failed to meet
their lease obligations. At any time, a tenant at a property in which the
Company has an interest may seek the protection of the bankruptcy laws, which
could result in delays in rental payments or in the rejection and termination of
such tenant's lease, thereby causing a reduction in the Company's cash flow and,
possibly, the amounts available

for distribution to stockholders. No assurance can be given that tenants will
not file for bankruptcy protection in the future or, if any tenants file, that
they will affirm their leases and continue to make rental payments in a timely
manner. In addition, a tenant from time to time may experience a downturn in its
business which may weaken its financial condition and result in the failure to
make rental payments when due. If tenant leases are not affirmed following
bankruptcy or if a tenant's financial condition weakens, the Company's cash flow
and continued ability to make distributions to its stockholders could be
adversely affected. While the Company and its predecessors have not experienced
any significant interruption of its cash flow due to tenant defaults in the past
five years, no assurance can be given that the Company will not experience
significant tenant defaults in the future.

LEASE EXPIRATIONS COULD ADVERSELY AFFECT THE COMPANY'S CASH FLOW. The
Company is subject to the risk that, upon expiration of leases for space located
in the Properties, these leases may not be renewed, the space may not be
re-leased or the terms of renewal or re-leasing (including the cost of required
renovations) may be less favorable than current lease terms. Leases on a total
of 10.2% and 7.5% of the total leased square feet at the Properties expire
during 1998 and 1999, respectively.

ILLIQUIDITY OF REAL ESTATE INVESTMENTS COULD ADVERSELY AFFECT THE COMPANY'S
FINANCIAL CONDITION. Real estate investments are relatively illiquid and,
therefore, will tend to limit the ability of the Company to sell and purchase
properties promptly in response to changes in economic or other conditions. In
addition, the Code places limits on the Company's ability to sell properties
held for fewer than four years, and the Lock-out Provisions (as defined herein)
impose certain special restrictions with respect to the sale of certain of the
Properties during the Lock-out Period (as defined herein). These considerations
could make it difficult for the Company to sell properties, even if a sale were
in the best interests of the Company's stockholders.

OPERATING COSTS COULD ADVERSELY AFFECT THE COMPANY'S CASH FLOW. The
Properties will be subject to operating risks common to commercial real estate
in general, any and all of which may adversely affect occupancy or rental rates.
The Properties are subject to increases in operating expenses such as cleaning;
electricity; heating, ventilation and air conditioning ("HVAC"); elevator repair
and maintenance; insurance and administrative costs; and other general costs
associated with security, repairs and maintenance. While the Company's tenants
generally are currently obligated to pay a portion of these escalating costs,
there can be no assurance that tenants will agree to pay such costs upon renewal
or that new tenants will agree to pay such costs. If operating expenses
increase, the local rental market may limit the extent to which rents may be
increased to meet increased expenses without decreasing occupancy rates. While
the Company implements cost saving incentive measures at each of its Properties,
if any of the above occurs, the Company's distributable cash flow and ability to
continue to make distributions to stockholders could be adversely affected.

INVESTMENTS IN MORTGAGE LOANS COULD CAUSE EXPENSES WHICH COULD ADVERSELY
AFFECT THE COMPANY'S FINANCIAL CONDITION. The Company owns a mortgage interest
in 17 Battery Place, which mortgage interest provides the Company with
substantially all control over and economic interest derived from such Property
and will hold a mortgage interest in a leasehold interest, in addition to other
interests held by the Company, in 711 Third Avenue subject to completion of that
Pending Acquisition. See "The Properties--17 Battery Place." To the extent the
Company invests in mortgage loans, such mortgage loans may or may not be
recourse obligations of the borrower and generally will not be insured or
guaranteed by governmental agencies or otherwise. In the event of a default
under such obligations, the Company may have to foreclose its mortgage or
protect its investment by acquiring title to a property and thereafter making
substantial improvements or repairs in order to maximize the property's
investment potential. Borrowers may contest enforcement of foreclosure or other
remedies, seek bankruptcy protection against such enforcement and/ or bring
claims for lender liability in response to actions to enforce mortgage
obligations. Relatively high "loan-to-value" ratios and declines in the value of
the property may prevent the Company from realizing an amount equal to its
mortgage loan upon foreclosure.

JOINT INVESTMENTS COULD BE ADVERSELY AFFECTED BY THE COMPANY'S LACK OF SOLE
DECISION-MAKING AUTHORITY AND RELIANCE UPON A CO-VENTURER'S FINANCIAL
CONDITION. The Company may co-invest with third parties through partnerships,
joint ventures, co-tenancies or other entities, acquiring non-controlling
interests in or sharing responsibility for managing the affairs of a property,
partnership, joint venture, co-tenancy or other entity and, therefore, will not
be in a position to exercise sole decision-making authority regarding the
property, partnership, joint venture or other entity. Investments in
partnerships, joint ventures, or other entities may, under certain
circumstances, involve risks not present were a third party not involved,
including the possibility that the Company's partners, co-tenants or
co-venturers might become bankrupt or otherwise fail to fund their share of
required capital contributions, that such partners or co-venturers might at any
time have economic or other business interests or goals which are inconsistent
with the business interests or goals of the Company, and that such partners,
co-tenants or co-venturers may be in a position to take action contrary to the
instructions or the requests of the Company and contrary to the Company's
policies or objectives. Such investments may also have the potential risk of
impasses on decisions, such as a sale, because neither the Company nor the
partner, co-tenant or co-venturer would have full control over the partnership
or joint venture. Consequently, actions by such partner, co-tenant or
co-venturer might result in subjecting properties owned by the partnership or
joint venture to additional risk. In addition, the Company may in certain
circumstances be liable for the actions of its third-party partners, co-tenants
or co-venturers. The Company will seek to maintain sufficient control of such
entities to permit it to achieve its business objectives.

For instance, the interest of the Company in the Property at 17 Battery is
comprised of a co-tenancy interest in the co-tenancy that owns the land and
buildings, and a note and mortgage encumbering the interest of the other
co-tenant in the co-tenancy. Upon acquisition of the Property, a co-tenancy was
created between a subsidiary of the Company and 17 Battery Upper Partners LLC
("Upper"), an arm's length third party. Pursuant to the co-tenancy agreement,
the Company acts as managing and leasing agent for the entire property. The
economic risks and benefits of the lower thirteen (13) floors (excluding certain
portions of the ground floor) of the south building and the entire north
building are vested with the Company, and these risks and benefits for the
fourteenth and higher floors (together with certain tenanted areas of the ground
floor) of the south building are vested with Upper.

The co-tenancy agreement contemplates the formation of a three unit
condominium. The co-tenancy interest of Upper will be converted to one unit and
the co-tenancy interest of the Company will be converted to the other two units.
It is the current intention of the Company to complete the condominium
organization process in the second quarter of 1998.

In addition, the Company will have a co-tenancy interest in the feehold of
711 Third Avenue, among other interests, subject to completion of this Pending
Acquisition.

THE EXPIRATION OF NET LEASES AND OPERATING SUBLEASES COULD ADVERSELY AFFECT
THE COMPANY'S FINANCIAL CONDITION. With respect to four of the Properties (35
West 43rd Street (a part of the Bar Building), 673 First Avenue, 1140 Avenue of
the Americas and the Graybar Building) and one Pending Acquisition (711 Third
Avenue), the Company holds or will hold, subject to completion of the Pending
Acquisitions, a long-term leasehold or operating sublease interest in the land
and the improvements. Accordingly, unless the Company can purchase the subject
real estate or extend the terms of these leases before their expiration, the
Company will lose its interest in the improvements and land upon expiration of
the leases, the remaining terms of which exceeds 82 years in the case of 35 West
43rd Street, 39 years in the case of 673 First Avenue, 18 years (with an option
to extend for a further 50 year term) in the case of 1140 Avenue of the
Americas, 31 years (including a 21 year option) in the case of the Graybar
Building and 25 years in the case of 711 Third Avenue. The lease for 35 West
43rd Street contains a right of first refusal (which will run for the benefit of
the Company), to purchase fee title to the land and building if the owner
desires to sell its interest. The lease for 673 First Avenue contains a right of
first offer, whereby if the current fee owner of the Property wishes to create a
new underlying lease of the land and building (the term of which would extend
beyond

the term of the existing lease), then the Company has a right of first offer to
enter into the new underlying lease. See "The Properties."

THE COMPANY'S FINANCIAL CONDITION COULD BE ADVERSELY AFFECTED DUE TO ITS
RELIANCE ON MAJOR TENANTS. On a pro forma basis (giving effect to signed leases
in effect as of December 31, 1997) during the twelve months ended December 31,
1997, five tenants (City of New York, NYANA, Greenpoint Savings Bank, MetroNorth
and Dow Jones) each accounted for more than 2.0% of the Company's pro forma
total annualized rental revenues and such tenants collectively accounted for
approximately 12.5% of the Company's total annualized rental revenues. See "The
Properties--The Portfolio--Tenant Diversification." The Company would be
adversely affected in the event of a bankruptcy or insolvency of, or a downturn
in the business of, any major tenant which resulted in a failure or delay in
such tenant's rent payments.

THE COMPANY'S USE OF DEBT FINANCING, INCREASES IN INTEREST RATES, FINANCIAL
COVENANTS AND ABSENCE OF LIMITATION ON DEBT COULD ADVERSELY AFFECT THE COMPANY

THE REQUIRED REPAYMENT OF DEBT OR INTEREST THEREON COULD ADVERSELY AFFECT
THE COMPANY'S FINANCIAL CONDITION. The Company is subject to the risks normally
associated with debt financing, including the risk that the Company's cash flow
will be insufficient to meet required payments of principal and interest, the
risk of violating loan covenants, the risk of rising interest rates on the
Company's variable rate debt and the risk that the Company will not be able to
repay or refinance existing indebtedness on its properties at maturity (which
generally will not have been fully amortized at maturity) or that the terms of
such refinancing will not be as favorable as the terms of existing indebtedness.
There can be no assurance that the Company will be able to refinance any
indebtedness it may incur or otherwise obtain funds by selling assets or raising
equity to make required payments on indebtedness. In addition, the Company's
ability to sell certain Properties or refinance indebtedness encumbering such
Properties will be restricted by the Lock-Out Provisions.

The outstanding principal amount of $240 million under the Acquisition
Facility will be paid from the proceeds of these Offerings. The Credit Facility
will remain committed but unused until the Acquisition Facility is repaid, at
which time, the Company will be in compliance with all financial covenants under
the Credit Facility and will, subject to continuing compliance with such
covenants, again be able to draw additional funds under such Credit Facility. In
addition, upon expiration of the term of the Credit Facility, it is anticipated
that the Operating Partnership will be required to obtain an extension or
renewal of the Credit Facility or refinance borrowings thereunder through the
issuance of debt or equity securities or alternative lending sources. There is
no guarantee that such extension or renewal will be obtained or obtained on
favorable terms. See "The Properties--Credit Facilities."

If one or more properties are mortgaged to secure payment of indebtedness
and the Company is unable to generate funds to cover debt service, the mortgage
securing such properties could be foreclosed upon by, or such properties could
otherwise be transferred to, the mortgagee with a consequent loss of income and
asset value to the Company. Although no Property owned or controlled by the
Company or its predecessors has been subject to bankruptcy proceedings, during
the downturn in the real estate market in the late 1980s and early 1990s,
certain real estate assets (including one office property in Manhattan and one
office property in Hempstead, New York) owned by partnerships affiliated with
the Company's predecessors did not generate sufficient cash flow to service the
debt secured by such properties. As a result, the partnerships which owned these
properties have transferred or agreed to transfer the properties to the lenders
in satisfaction of the loans.

RISING INTEREST RATES COULD ADVERSELY AFFECT THE COMPANY'S CASH
FLOW. Advances under the Credit Facility will bear interest at a variable rate.
In addition, the Company may incur indebtedness in the future that also bears
interest at a variable rate or may be required to refinance its debt at higher
rates. Accordingly, increases in interest rates could increase the Company's
interest expense, which could adversely affect the Company's ability to continue
to make distributions to stockholders.

THE COMPANY'S POLICY OF NO LIMITATION ON DEBT COULD ADVERSELY AFFECT THE
COMPANY'S CASH FLOW. Upon completion of the Offerings, the debt to market
capitalization ratio ("Debt Ratio") of the Company will be approximately 13.2%
on a fully diluted basis. The Company currently has a policy of incurring debt
only if upon such incurrence the Company's Debt Ratio would be 50% or less.
However, the organizational documents of the Company do not contain any
limitation on the amount of indebtedness the Company may incur. Accordingly, the
Board of Directors could alter or eliminate this policy and would do so, for
example, if it were necessary in order for the Company to continue to qualify as
a REIT, or to provide capital for investment, if the Board of Directors
determines that such an action is in the best interests of the Company. If this
policy were changed, the Company could become more highly leveraged, resulting
in an increase in debt service that could adversely affect the Company's cash
available for distribution to stockholders and could increase the risk of
default on the Company's indebtedness. See "Policies with Respect to Certain
Activities--Financing Policies."

The Company has established its debt policy relative to the total market
capitalization of the Company rather than relative to the book value of its
assets. The Company has used total market capitalization because it believes
that the book value of its assets (which to a large extent is the depreciated
original cost of real property, the Company's primary tangible assets) does not
accurately reflect its ability to borrow and to meet debt service requirements.
The market capitalization of the Company, however, is more variable than book
value, and does not necessarily reflect the fair market value of the underlying
assets of the Company at all times. The Company also will consider factors other
than market capitalization in making decisions regarding the incurrence of
indebtedness, such as the purchase price of properties to be acquired with debt
financing, the estimated market value of its properties upon refinancing and the
ability of particular properties and the Company as a whole to generate cash
flow to cover expected debt service.

THE ABILITY OF STOCKHOLDERS TO EFFECT A CHANGE OF CONTROL OF THE COMPANY IS
LIMITED

STOCK OWNERSHIP LIMITS IN THE CHARTER COULD INHIBIT CHANGES IN CONTROL. In
order to maintain its qualification as a REIT, not more than 50% in value of the
outstanding capital stock of the Company may be owned, directly or indirectly,
by five or fewer individuals (as defined in the Code to include certain
entities) during the last half of a taxable year (other than the first year)
(the "Five or Fewer Requirement"). In order to protect the Company against the
risk of losing REIT status due to a concentration of ownership among its
stockholders, the Company's Articles of Incorporation (the "Charter") limits
ownership of the issued and outstanding Common Stock by any single stockholder
to 9.0% of the lesser of the number or value of the outstanding shares of Common
Stock from time to time (the "Ownership Limit"). See "Capital
Stock--Restrictions on Transfer." The Board of Directors can waive these
restrictions if evidence satisfactory to the Board of Directors and the
Company's tax counsel is presented that the changes in ownership will not then
or in the future jeopardize the Company's status as a REIT and the Board of
Directors otherwise decides such action is in the best interests of the Company.
These restrictions have been waived by the Board of Directors with respect to
three current stockholders. See "Principal Stockholders." Shares acquired or
transferred in breach of the limitation will be automatically transferred to a
trust for the exclusive benefit of one or more charitable organizations and the
purchaser-transferee shall not be entitled to vote or to participate in
dividends or other distributions. In addition, shares of Common Stock acquired
or transferred in breach of the limitation may be purchased from such trust by
the Company for the lesser of the price paid and the average closing price for
the ten trading days immediately preceding redemption. A transfer of shares to a
person who, as a result of the transfer, violates the Ownership Limit will be
void. See "Capital Stock--Restrictions on Transfer" for additional information
regarding the Ownership Limit.

The Ownership Limit may have the effect of delaying, deferring or preventing
a transaction or a change in control of the Company that might involve a premium
price for the Common Stock or otherwise be in the best interests of the
stockholders. See "Capital Stock--Restrictions on Transfer."

POTENTIAL EFFECTS OF STAGGERED BOARD COULD INHIBIT CHANGES IN CONTROL. The
Company's Board of Directors is divided into three classes. The initial terms of
the first, second and third classes expire in 1998, 1999 and 2000, respectively.
Beginning in 1998, directors of each class will be chosen for three-year terms
upon the expiration of their current terms and each year one class of directors
will be elected by the stockholders. The staggered terms for directors may
reduce the possibility of a tender offer or an attempt to effect a change in
control of the Company, even if a tender offer or a change in control would be
in the best interests of the stockholders.

FUTURE ISSUANCES OF COMMON STOCK COULD DILUTE EXISTING STOCKHOLDERS'
INTERESTS. The Charter authorizes the Board of Directors to issue additional
shares of Common Stock without stockholder approval. Any such issuance could
have the effect of diluting existing stockholders' interests in the Company.

ISSUANCES OF PREFERRED STOCK COULD INHIBIT CHANGES IN CONTROL. The Charter
authorizes the Board of Directors to issue up to 25 million shares of preferred
stock, $.01 par value per share (the "Preferred Stock" and, together with the
Common Stock, the "Stock"), to reclassify unissued shares of Stock, and to
establish the preferences, conversion and other rights, voting powers,
restrictions, limitations and restrictions on ownership, limitations as to
dividends or other distributions, qualifications, and terms and conditions of
redemption for each such class or series of any Preferred Stock issued.
4,000,000 PIERS will be issued and outstanding as of the closing of the
Offerings.

CERTAIN PROVISIONS OF MARYLAND LAW COULD INHIBIT CHANGES IN CONTROL.
Certain provisions of the Maryland General Corporation Law (the "MGCL") may have
the effect of inhibiting a third party from making an acquisition proposal for
the Company or of impeding a change in control of the Company under
circumstances that otherwise could provide the holders of shares of Common Stock
with the opportunity to realize a premium over the then-prevailing market price
of such shares. The Company has opted out of these provisions of the MGCL, but
the Board of Directors may elect to adopt these provisions in the future. See
"Certain Provisions of Maryland Law and the Company's Charter and By-Laws."

DEPENDENCE ON SMALLER AND GROWTH-ORIENTED BUSINESSES TO RENT CLASS B OFFICE
SPACE COULD ADVERSELY AFFECT THE COMPANY'S CASH FLOW

Many of the tenants in the Properties are smaller and growth-oriented
businesses that may not have the financial strength of larger corporate tenants.
Smaller companies generally experience a higher rate of failure than large
businesses. Growth-oriented firms may seek other office space, including Class A
space, as they develop. Dependence on these companies could create a higher risk
of tenant defaults and bankruptcies, which could adversely affect the Company's
distributable cash flow and ability to continue to make distributions to
stockholders.

CONFLICTS OF INTEREST IN CONNECTION WITH THE FORMATION TRANSACTIONS AND THE
BUSINESS OF THE COMPANY

A SALE OF, OR REDUCTION IN MORTGAGE INDEBTEDNESS ON, ANY OF THE PROPERTIES
WILL HAVE DIFFERENT EFFECTS ON HOLDERS OF UNITS THAN ON STOCKHOLDERS. Certain
holders of Units, consisting of Stephen L. Green, members of his immediate
family and unaffiliated partners in the Property-owning entities, may experience
different and more adverse tax consequences compared to those experienced by
holders of shares of Common Stock or other holders of Units upon the sale of, or
reduction of mortgage indebtedness on, any of the Properties. Therefore, such
holders and the Company may have different objectives regarding the appropriate
pricing and timing of any sale of, or reduction of mortgage indebtedness on the
Properties, and regarding the appropriate characteristics of additional
properties to be considered for acquisition. Mr. Green and members of his
immediate family, are the holders of 2,140,784 Units, and their status as
holders of Units may influence the Company not to sell particular properties, or
not to pay down mortgage indebtedness on particular properties, even though such
sales or debt paydowns might otherwise be financially advantageous to the
Company and its stockholders. See "--Limitations on Ability to Sell or Reduce
the Mortgage Indebtedness on Certain Properties Could Adversely Affect the Value
of the Common Stock" below.

FAILURE TO ENFORCE TERMS OF CONTRIBUTION AND OTHER AGREEMENTS. As
affiliates of the Company's predecessors (which owned certain of the Properties
acquired by the Company in the Formation Transactions), and recipients of Units
in the Formation Transactions, certain members of the Company's management,
including Mr. Green, have a conflict of interest with respect to their
obligations as directors or executive officers of the Company in enforcing the
terms (including customary representations and warranties as to ownership and
operations) of the contribution agreements relating to the transfer to the
Company of their interests in the Properties' assets. The failure to enforce the
material terms of those agreements, particularly the indemnification provisions
for breaches of representations and warranties, could result in a monetary loss
to the Company, which loss could have a material adverse effect on the Company's
financial condition or results of operations. In addition, the aggregate
liability of Mr. Green and other members of management under those agreements is
limited to approximately $20 million (the initial value of the Units received by
them in the Formation Transactions based on the IPO price of the Common Stock)
with no liability being assumed until the aggregate liability exceeds $250,000.
In addition, Stephen L. Green, David J. Nettina, Nancy A. Peck, Steven H. Klein,
Benjamin P. Feldman, Gerard Nocera and Louis A. Olsen have entered into
employment and noncompetition agreements with the Company pursuant to which they
have agreed, among other things, not to engage in certain business activities in
competition with the Company. See "Management--Employment and Noncompetition
Agreements." To the extent that the Company chooses to enforce its rights under
any of these contribution, employment and noncompetition agreements, it may
determine to pursue available remedies, such as actions for damages or
injunctive relief, less vigorously than it otherwise might because of its desire
to maintain its ongoing relationship with the individual involved.

CONFLICTS OF INTEREST WITH AFFILIATES OF THE COMPANY. Two entities owned by
a son of Stephen L. Green (First Quality Maintenance, L.P. and Classic Security
LLC) currently provide cleaning and security services to office properties,
including the Company's Properties. See "Certain Relationships and
Transactions-- Cleaning Services" and "--Security Services." Although management
believes, based on its knowledge of the Class B Manhattan office market, that
the terms and conditions of the contracts pursuant to which these services are
provided are not less favorable to the Company than those which could be
obtained from a third party-providing comparable services, such contracts are
not the result of arm's length negotiations and, therefore, there can be no
assurance to this effect. The Company has adopted certain policies relating to
conflicts of interest. These policies include a resolution adopted by the
Company's Board of Directors which requires all transactions in which executive
officers or directors have a material conflicting interest to that of the
Company to be approved by a majority of the disinterested directors or by the
holders of a majority of the shares of Common Stock held by disinterested
stockholders. There can be no assurance, however, that the Company's policies
will be successful in eliminating the influence of such conflicts, and if they
are not successful, decisions could be made that might fail to reflect fully the
interests of all stockholders. See "Policies with Respect to Certain
Activities--Conflict of Interest Policies."

OUTSIDE INTERESTS OF OFFICERS AND DIRECTORS COULD CONFLICT WITH THE
COMPANY'S INTERESTS. Certain officers and directors of the Company own direct
and indirect interests in office properties and other real estate assets, which
interests may give rise to certain conflicts of interest concerning the
fulfillment of their responsibilities as officers and directors of the Company.
For a discussion of the role of the Company's disinterested directors and the
Company's policies and agreements designed to minimize any adverse effects from
these conflicts of interest, see "Policies with Respect to Certain
Activities--Conflict of Interest Policies."

LIMITATIONS ON ABILITY TO SELL OR REDUCE THE MORTGAGE INDEBTEDNESS ON CERTAIN
PROPERTIES COULD ADVERSELY AFFECT THE VALUE OF THE COMMON STOCK AND THE PIERS

In connection with the solicitation of approval of partners or members in
the various Property-owning entities to transfer their interests to the Company
at the time of the IPO, the Company agreed to certain restrictions relating to
future capital transactions involving two of the Properties. Pursuant to the
Lock-out Provisions, the Company may not sell its interest in (except in certain
events, including certain transactions

that would not result in the recognition of any gain for tax purposes) or,
earlier than one year prior to its maturity, reduce the mortgage indebtedness
(other than pursuant to scheduled amortization) on 673 First Avenue or 470 Park
Avenue South during the Lock-out Period without, in the case of each such
Property, the consent of holders of 75% of the Units originally issued to
limited partners in the Operating Partnership (including Stephen L. Green,
members of his immediate family and unaffiliated partners in the Property-owning
entities) who immediately prior to completion of the Formation Transactions
owned direct or indirect interests in such Property that remain outstanding at
the time of such vote (other than Units held by the Company and Units the
adjusted tax basis of which have been increased to reflect fair market value
through a taxable disposition or otherwise). (This vote requirement does not
apply to a sale of all or substantially all of the assets of the Operating
Partnership, but such a transaction during the Lock-out Period generally would
require the approval of the holders, as a group, of 75% of the aggregate Units
originally issued with respect to 673 First Avenue and 470 Park Avenue South
that remain outstanding (excluding Units held by the Company and Units the
adjusted tax basis of which have been increased to reflect fair market value
through a taxable disposition or otherwise) unless the transaction would not
result in the recognition of any gain for tax purposes with respect to such
Units and certain other conditions are satisfied.) In addition, during the
Lock-out Period, the Company is obligated to use commercially reasonable
efforts, commencing one year prior to the stated maturity, to refinance at
maturity (on a basis that is nonrecourse to the Operating Partnership and the
Company, with the least amount of principal amortization as is available on
commercially reasonable terms) the mortgage indebtedness secured by each of
these two Properties at not less than the principal amount outstanding on the
maturity date. Finally, during the Lock-out Period, the Company may not incur
debt secured by either of these two Properties if the amount of the new debt
would exceed the greater of 75% of the value of the Property securing the debt
or the amount of existing debt being refinanced (plus costs associated
therewith). Thus, the Lock-out Provisions materially restrict the Company from
selling or otherwise disposing of its interest in, or refinancing indebtedness
encumbering, 673 First Avenue and 470 Park Avenue South without obtaining such
consents. The Lock-out Provisions apply even if it would otherwise be in the
best interest of the stockholders for the Company to sell its interest in these
two Properties, reduce the outstanding indebtedness with respect to either of
these Properties or not refinance such indebtedness on a nonrecourse basis at
maturity, or increase the amount of indebtedness with respect to these two
Properties.

The Lock-out Provisions may impair the ability of the Company to take
actions during the Lock-out Period that would otherwise be in the best interests
of the Company's stockholders and, therefore, may have an adverse impact on the
value of the Common Stock and the PIERS (relative to the value that would result
if the Lock-out Provisions did not exist). In particular, the Lock-out
Provisions could preclude the Operating Partnership (and thus the Company) from
participating in certain major transactions that could result in a disposition
of the Operating Partnership's assets or a change in control of the Company that
would result in the recognition of gain with respect to the holders of Units
issued with respect to 673 First Avenue or 470 Park Avenue South even though
such disposition or change in control might be in the best interests of the
stockholders. See "Partnership Agreement--Operational Matters--Sales of Assets."

The Company anticipates that, in connection with future acquisitions of
interests in properties in which the Company uses Units as consideration, the
Company may agree to limitations on its ability to sell, or reduce the amount of
mortgage indebtedness on, such acquired properties, which may increase the
Company's leverage. Such limitations may impair the Company's ability to take
actions that would otherwise be in the best interests of its stockholders and,
therefore, may have an adverse impact on the value of the Common Stock and the
PIERS (relative to the value that would result if such limitations did not
exist). Such possible future limitations, together with the Lock-out Provisions,
may restrict the ability of the Company to sell substantially all of its assets,
even if such a sale would be in the best interests of its stockholders.

FAILURE TO QUALIFY AS A REIT WOULD CAUSE THE COMPANY TO BE TAXED AS A
CORPORATION

The Company has operated and intends to continue to operate so as to qualify
as a REIT under the Code, commencing with its taxable year ending December 31,
1997. Although management believes that the Company is and will continue to be
organized and has operated and will continue to operate in such a manner, no
assurance can be given that the Company is now or will continue to be organized
or operated in a manner so as to qualify or remain so qualified. Qualification
as a REIT involves the satisfaction of numerous requirements (some on an annual
and quarterly basis) established under highly technical and complex Code
provisions for which there are only limited judicial and administrative
interpretations, and involves the determination of various factual matters and
circumstances not entirely within the Company's control. For example, in order
to qualify as a REIT, at least 95% of the Company's gross income in any year
must be derived from qualifying sources and the Company must pay distributions
to stockholders aggregating annually at least 95% of its REIT taxable income
(excluding capital gains). The complexity of these provisions and of the
applicable Treasury Regulations that have been promulgated under the Code is
greater in the case of a REIT that holds its assets in partnership form. No
assurance can be given that legislation, new regulations, administrative
interpretations or court decisions will not significantly change the tax laws
with respect to qualification as a REIT or the federal income tax consequences
of such qualification. The Company, however, is not aware of any pending
legislation that would adversely affect the Company's ability to operate as a
REIT. Brown & Wood LLP, counsel to the Company, will render an opinion to the
effect that commencing with its taxable year ended December 31, 1997, the
Company has been organized and has operated in conformity with the requirements
for qualification and taxation as a REIT, and that the Company's proposed method
of operation will enable it to continue to meet the requirements for
qualifications and taxation as a REIT. See "Material Federal Income Tax
Consequences--Taxation of the Company." Such legal opinion is based on various
assumptions and factual representations by the Company regarding the Company's
ability to meet the various requirements for qualification as a REIT, and no
assurance can be given that actual operating results will meet these
requirements. The opinion of Brown & Wood LLP is not binding on the IRS or any
court. Moreover, the Company's qualification and taxation as a REIT depend on
the Company's ability to meet (through actual annual operating results,
distribution levels and diversity of stock ownership) the various qualification
tests imposed under the Code, the results of which will not be reviewed by tax
counsel to the Company.

If the Company were to fail to qualify as a REIT in any taxable year, the
Company would be subject to federal income tax (including any applicable
alternative minimum tax) on its taxable income at regular corporate rates.
Moreover, unless entitled to relief under certain statutory provisions, the
Company also would be disqualified from treatment as a REIT for the four taxable
years following the year during which qualification was lost. This treatment
would significantly reduce the net earnings of the Company available for
investment or distribution to stockholders because of the additional tax
liability to the Company for the years involved. In addition, distributions to
stockholders would no longer be required to be made. See "Material Federal
Income Tax Consequences--Taxation of the Company--Requirements for
Qualification."

COMPETITION IN ITS MARKETPLACE COULD HAVE AN ADVERSE IMPACT ON THE COMPANY'S
RESULTS OF OPERATIONS

All of the Properties are located in highly developed areas of Manhattan
that include a large number of other office properties. Manhattan is by far the
largest office market in the United States and contains more rentable square
feet than the next six largest central business district office markets in the
United States combined. Of the total inventory of 379 million rentable square
feet in Manhattan, approximately 172 million rentable square feet is comprised
of Class B office space and 207 million rentable square feet is comprised of
Class A office space. Class A office properties are generally newer than Class B
office properties, have higher finishes and command higher rental rates. Many
tenants have been attracted to Class B properties in part because of their
relatively less expensive rental rates (as compared to Class A

properties) and the tightening of the Class A office market in midtown
Manhattan. See "Market Overview." Consequently, an increase in vacancy rates
and/or a decrease in rental rates for Class A office space would likely have an
adverse effect on rental rates for Class B office space. Also, the number of
competitive Class B office properties in Manhattan (some of which are newer and
better located) could have a material adverse effect on the Company's ability to
lease office space at its properties, and on the effective rents the Company is
able to charge.

In addition, the Company competes with other property owners that have
greater resources than the Company. In particular, although currently no other
publicly traded REITs have been formed solely to own, operate and acquire
Manhattan Class B office properties, the Company may in the future compete with
such other REITs. In addition, the Company may face competition from other real
estate companies (including other REITs that currently invest in markets other
than Manhattan) that have greater financial resources than the Company or that
are willing to acquire properties in transactions which are more highly
leveraged than the Company is willing to undertake. The Company also faces
competition from other real estate companies that provide management, leasing,
construction and other services similar to those to be provided by the Service
Corporations. In addition, certain requirements for REIT qualification may in
the future limit the Company's ability to increase operations conducted by the
Service Corporations without jeopardizing the Company's qualification as a REIT.
See "Material Federal Income Tax Consequences-- Other Tax
Considerations--Service Corporations."

THE FINANCIAL CONDITION OF THIRD-PARTY PROPERTY MANAGEMENT, LEASING AND
CONSTRUCTION BUSINESSES COULD ADVERSELY AFFECT THE COMPANY'S FINANCIAL
CONDITION

The Company is subject to the risks associated with the management, leasing
and construction businesses that will be conducted by the Service Corporations
(as defined herein), in which the Operating Partnership holds a 95% economic
interest. These risks include the risk that management and leasing contracts
with third party property owners will not be renewed upon expiration (or will be
canceled pursuant to cancellation options) or will not be renewed on terms at
least as favorable to the Company as current terms, that the rental revenues
upon which management, leasing and construction fees are based will decline as a
result of general real estate market conditions or specific market factors
affecting properties serviced by the Company, and that leasing and construction
activity generally will decline. Since the IPO, 10 management and leasing
contracts with third party property owners have been cancelled, representing an
aggregate of approximately $2.0 million in annual revenue. In order to focus on
the management and leasing of its own Properties, the Company does not intend to
seek to replace the contracts or to pursue other third party management and
leasing opportunities. Each of these developments could adversely affect the
revenues of S.L. Green Managment Corp. (the "Management Corporation"), S.L.
Green Leasing, Inc. (the "Leasing Corporation") and Emerald City Construction
Corp. (the "Construction Corporation"), the Companies that conduct the
management, leasing and construction businesses, respectively, with respect to
properties in which the Company has no ownership interest, and could adversely
affect the ability of the Company to continue to make expected distributions to
its stockholders.

In order to maintain its qualification as a REIT, the Company does not have
voting control over the Management Corporation, the Leasing Corporation or the
Construction Corporation (together, the "Service Corporations"). The Service
Corporation LLC owns 100% of the voting common stock (representing 5% of the
economic interest) of each of the Service Corporations. As a result, the Company
does not have the ability to elect or remove any members of the board of
directors of the Management Corporation, the Leasing Corporation or the
Construction Corporation, and, therefore, its ability to influence the
day-to-day decisions of the Service Corporations is limited. As a result, the
boards of directors or management of the Service Corporations may implement
business policies or decisions that might not have been implemented by persons
elected by the Company and that are adverse to the interests

of the Company or that lead to adverse financial results, which could adversely
affect the ability of the Company to make expected distributions to the
Company's stockholders.

LIABILITY FOR ENVIRONMENTAL MATTERS COULD ADVERSELY AFFECT THE COMPANY'S
FINANCIAL CONDITION

Under various Federal, state and local laws, ordinances and regulations, a
current or previous owner or operator of real estate may be required to
investigate and clean up certain hazardous substances released at a property,
and may be held liable to a governmental entity or to third parties for property
damage or personal injuries and for investigation and clean-up costs incurred by
the parties in connection with any contamination. In addition, some
environmental laws create a lien on a contaminated site in favor of the
government for damages and costs it incurs in connection with the contamination.
Such laws often impose such liability without regard to whether the owner or
operator knew of, or was responsible for, the release of hazardous substances.
The cost of any required remediation and the owner's liability therefore as to
any property is generally not limited under such enactments and could exceed the
value of the property and/or the aggregate assets of the owner. The presence of
contamination or the failure to remediate contamination may adversely affect the
owner's ability to sell or lease real estate or to borrow using the real estate
as collateral. No assurances can be given that (i) a prior owner, operator or
occupant, such as a tenant, did not create a material environmental condition
not known to the Company, (ii) a material environmental condition with respect
to any Property does not exist, or (iii) future uses or conditions (including,
without limitation, changes in applicable environmental laws and regulations)
will not result in the imposition of environmental liability.

The Company engaged independent environmental consulting firms to perform
Phase I environmental site assessments on the Properties (except 633 Third
Avenue and 17 Battery Place) and on the Pending Acquisitions in order to assess
existing environmental conditions. All of the Phase I assessments have been
conducted since or after March 1997, except for the Bar Building, where a Phase
I assessment was conducted in September 1996. Additionally, a Phase I assessment
on 17 Battery Place was conducted on behalf of a prior owner in December 1995.
Such owner retained SL Green as property manager and leasing agent in January
1996 and SL Green or the Company has operated a management office on-site since
such date. All of the Phase I assessments met the requirements of the American
Society for Testing and Materials ("ASTM") Standard Practice for Phase I
Environmental Site Assessments (the "ASTM Standard"). Under the ASTM Standard, a
Phase I environmental site assessment consists of a site visit, a historical
record review, a review of regulatory agency data bases and records, interviews,
and a report, with the purpose of identifying potential environmental concerns
associated with real estate. The Phase I assessments conducted at the Properties
also addressed certain issues that are not covered by the ASTM Standard,
including asbestos, radon, lead-based paint and lead in drinking water. These
environmental site assessments did not reveal any known environmental liability
that the Company believes will have a material adverse effect on the Company's
financial condition or results of operations or would represent a material
environmental cost, nor is the Company aware of any such material environmental
liability. The Company as a matter of policy conducts Phase I environmental site
assessments on all new acquisitions prior to completing any transaction. See
"The Properties--Environmental Matters."

LACK OF PUBLIC MARKET FOR THE PIERS

The PIERS are a new issue of securities for which there is currently no
active trading market. If the PIERS are traded after their initial issuance,
they may trade at a discount from their initial offering price, depending upon
prevailing interest rates, the market for similar securities, the financial
condition and performance of the Company and other factors beyond the control of
the Company, including general economic conditions.

OTHER RISKS OF OWNERSHIP OF COMMON STOCK AND PIERS COULD ADVERSELY AFFECT THE
TRADING PRICE
OF THE COMMON STOCK AND OF THE PIERS

AVAILABILITY OF SHARES FOR FUTURE SALE COULD ADVERSELY AFFECT THE PRICE OF
THE COMMON STOCK AND THE PIERS. Sales of a substantial number of shares of
Common Stock, or the perception that such sales could occur, could adversely
affect prevailing market prices of the Common Stock and of the PIERS. Beginning
on August 20, 1999 (or sooner in certain circumstances), holders of Units may be
able to sell shares of Common Stock received upon exercise of their redemption
right in the public market pursuant to registration or available exemptions from
registration. Additionally, holders of PIERS will be able to sell shares of
Common Stock they will receive upon exercise of the conversion rights in the
public market. Furthermore, a substantial number of shares of Common Stock will,
pursuant to employee benefit plans, be issued or reserved for issuance from time
to time, including shares of Common Stock reserved for issuance pursuant to
options issued concurrently with the completion of the Offering, and these
shares of Common Stock will be available for sale in the public market from time
to time pursuant to exemptions from registration or upon registration. No
prediction can be made about the effect that future sales of shares of Common
Stock will have on the market price of the Common Stock or the PIERS.

CHANGES IN MARKET INTEREST RATES COULD ADVERSELY AFFECT THE PRICE OF COMMON
STOCK AND OF THE PIERS. One of the factors that influences the price of both
the Common Stock and the PIERS is the dividend yield on such stock (as a
percentage of the price of such stock) relative to market interest rates. Thus,
an increase in market interest rates may lead prospective purchasers of stock to
expect a higher dividend yield, which may adversely affect the market price of
the price of the Common Stock and of the PIERS.

UNRELATED EVENTS COULD ADVERSELY AFFECT THE PRICE OF COMMON STOCK AND OF THE
PIERS. As with other publicly traded equity securities, the value of the Common
Stock and of the PIERS depends upon various market conditions, including
conditions unrelated to the New York metropolitan economy, the Manhattan office
market or real estate investments generally. Thus, events which depress equity
market prices may not have any effect on real estate market values, and shares
of Common Stock may trade at prices below the Company's net asset value and the
PIERS may trade below their liquidation preference.

THE OFFICERS, DIRECTORS AND SIGNIFICANT STOCKHOLDERS OF THE COMPANY HAVE
SUBSTANTIAL INFLUENCE. Upon the completion of the Offerings, approximately 9.5%
of the equity in the Company will be beneficially owned by officers and
directors of the Company, on a fully diluted basis. See "Principal
Stockholders." In addition, Stephen L. Green and Benjamin P. Feldman serve on
the Board of Directors of the Company. Accordingly, such persons have
substantial influence on the Company, which influence may not be consistent with
the interests of other stockholders, and may in the future have a substantial
influence on the outcome of any matters submitted to the Company's stockholders
for approval if all or a significant number of their Units are exchanged for
shares of Common Stock. In addition, although there is no current agreement,
understanding or arrangement for these stockholders to act together on any
matter, these stockholders would be in a position to exercise significant
influence over the affairs of the Company if they were to act together in the
future.

THE COMPANY RELIES ON KEY PERSONNEL WHOSE CONTINUED SERVICE IS NOT GUARANTEED

The Company is dependent on the efforts of its executive officers, Stephen
L. Green, Nancy A. Peck, David J. Nettina, Steven H. Klein, Benjamin P. Feldman,
Gerard Nocera and Louis A. Olsen. The loss of their services could have a
material adverse effect on the operations of the Company. Mr. Green has
interests in various properties in Manhattan and a property located in
Pennsylvania. It is expected that Mr. Green will not devote a substantial amount
of time to the management or operation of these other properties. Prior to the
completion of the IPO, each of the executive officers, including Mr. Green,
entered into an employment and noncompetition agreement with the Company which
provide, among other items, that each such person will devote substantially all
of his or her business time to the Company but excepts the excluded assets
referred to above from the noncompetition provisions thereof. See "Management--
Employment and Noncompetition Agreements."

STOCKHOLDER APPROVAL IS NOT REQUIRED TO CHANGE POLICIES OF THE COMPANY

The investment, financing, borrowing and distribution policies of the
Company and its policies with respect to all other activities, including
qualification as a REIT, growth, debt, capitalization and operations, are
determined by the Board of Directors. Although it has no present intention to do
so, the Board of Directors may amend or revise these policies at any time and
from time to time at its discretion without a vote of the stockholders of the
Company. A change in these policies could adversely affect the Company's
financial condition, results of operations or the market price of the Common
Stock.

UNINSURED LOSSES COULD ADVERSELY AFFECT THE COMPANY'S CASH FLOW

The Company carries comprehensive liability, fire, flood, extended coverage
and rental loss (for rental losses extending up to 12 months) with respect to
the Properties with policy specifications and insured limits customarily carried
for similar properties. Certain types of losses (such as from wars,
environmental hazards and employee discrimination claims), however, may be
either uninsurable or not economically insurable. Should an uninsured loss or a
loss in excess of insured limits occur, the Company could lose both its capital
invested in, and anticipated profits from, one or more of the Properties, and
may continue to be obligated on the mortgage indebtedness or other obligations
related to the property. Any such loss may adversely affect the business of the
Company and its financial condition and results of operations.

New owner's title insurance policies were not obtained for one of the
Properties (1414 Avenue of the Americas) in connection with the Formation
Transactions. The Property is covered by existing title insurance policies
insuring the interests of the Property-owning entities. Further, the title
insurance policy covering such Property is for an amount which is less than the
current value of the Property. In the event of a loss with respect to a Property
relating to a title defect that is in excess of the amount of such title
insurance policy, the Company could lose both its capital invested in and
anticipated profits from such Property.

THE COSTS OF COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT AND SIMILAR
LAWS COULD ADVERSELY AFFECT THE COMPANY'S CASH FLOW

AMERICANS WITH DISABILITIES ACT. Under the Americans with Disabilities Act
of 1980 (the "ADA"), places of public accommodation and commercial facilities
are required to meet certain Federal requirements related to access and use by
disabled persons. These requirements became effective in 1992. Although
management of the Company believes that the Properties are substantially in
compliance with present requirements of the ADA, the Company may incur
additional costs of compliance in the future. A number of additional Federal,
state and local laws exist which impose further burdens or restrictions on
owners with respect to access by disabled persons and may require modifications
to the Properties owned by the Company, or restrict certain further renovations
thereof, with respect to access by disabled persons. Final regulations under the
ADA have not yet been promulgated and the ultimate amount of the cost

compliance with the ADA or other such laws is not currently ascertainable. While
such costs are not expected to have a material effect on the Company, they could
be substantial. If required changes involve greater expense than the Company
currently anticipates, the Company's ability to make distributions at historical
levels could be adversely affected.

OTHER LAWS. The Properties are also subject to various Federal, state and
local regulatory requirements, such as state and local fire and life safety
requirements. Failure to comply with these requirements could result in the
imposition of fines by governmental authorities or awards of damages to private
litigants. The Company believes that the Properties and the Pending Acquisitions
are currently in compliance with all such regulatory requirements. However,
there can be no assurance that these requirements will not be changed or that
new requirements will not be imposed which would require significant
unanticipated expenditures by the Company and could have an adverse effect on
the Company's Funds from Operations and expected distributions.

THE COMPANY

The Company is the first fully integrated, self-administered and
self-managed equity REIT solely engaged in owning, managing, leasing, acquiring
and repositioning Class B office properties in Manhattan. The Company continues
to be the only Class B office REIT in New York City. The Company currently owns
interests in 15 Class B office properties (the "Properties") containing
approximately 5.0 million rentable square feet located in Manhattan. As of April
24, 1998, the Company had entered into agreements to purchase four additional
office properties (the "Pending Acquisitions") containing an aggregate of
approximately 1,055,000 rentable square feet for an aggregate purchase price of
$111.0 million. As of December 31, 1997, the Properties were 90% leased. In
addition, the Company acts as leasing agent and/or manages 27 properties
(including the Properties owned by the Company) encompassing approximately 8.2
million rentable square feet.

A variety of tenants who do not require, desire or cannot afford Class A
space are attracted to Class B office properties due to their prime locations,
excellent amenities, distinguished architecture and relatively less expensive
rental rates. Class B office space has historically attracted many smaller
growth oriented firms (many of which have fueled the recent growth in the New
York metropolitan economy) and has played a critical role in satisfying the
space requirements of particular industry groups in Manhattan, such as the
advertising, apparel, business services, engineering, not-for-profit, new media
and publishing industries. In addition, several areas of Manhattan, including
many in which particular trades or industries traditionally congregate, are
dominated by Class B office space and contain no or very limited Class A office
space. Examples of such areas include the Garment District (where three of the
Properties are located), the Flatiron District (where one Property is located),
Soho, Noho, Chelsea (where one Property is located), and the area surrounding
the United Nations (where one Property is located). Businesses significantly
concentrated in certain of these areas include those in the following
industries: new media, garment, apparel, toy, jewelry, interior decoration,
antiques, giftware, contract furnishing and UN-related businesses. The
concentration of businesses creates strong demand for the available Class B
office space in those locations.

As described herein, current developments in the New York economy provide an
attractive environment for owning, operating and acquiring Class B office
properties in Manhattan. See "Business and Growth Strategies--The Market
Opportunity" and "Risk Factors--The Company's Dependence on the Midtown Markets
Due to Limited Geographic Diversification Could Adversely Affect the Company's
Financial Performance." These developments have resulted in growing demand for
midtown Manhattan office space (particularly Class B space), declining vacancy
rates (the Class B vacancy rate in the Midtown Markets declined from 17.2% at
year-end 1992 to 9.8% at March 31, 1998) and appreciation in rental rates and
property values. The Company believes there will be a continued strengthening of
the Class B office market driven by expected job growth in Manhattan,
particularly among smaller companies which are, in many instances, Class B
tenants. Additionally, the Company believes that a number of high quality
tenants will likely seek to relocate from Class A space to Class B space in the
Midtown Markets as a result of the rising cost of Class A space. The Company
seeks to capitalize on growth opportunities in its marketplace by acquiring
Class B office properties on a selective basis and, when necessary, enhancing
their value after acquisition through repositioning of the properties in their
respective submarkets. As described more fully below, the Company may have
certain competitive advantages over other potential acquirors of Class B
Manhattan office space due to its local market expertise, long-term
relationships with brokers and property owners as a result of its property
management and leasing businesses, enhanced access to capital as a public
company and ability to offer tax-advantaged acquisition structures.
Additionally, the Company will seek to optimize its properties' cash flow
through ongoing intensive management and leasing. See "Business and Growth
Strategies--Growth Strategies."

The Company has offices in midtown Manhattan and employs approximately 331
persons, including professionals with experience in all aspects of commercial
real estate. In addition to Stephen L. Green, the

Company has six senior executives that average more than seven years with SL
Green and more than 19 years in the commercial real estate business. This
management team has developed a comprehensive knowledge of the Manhattan Class B
office market, an extensive network of tenant and other business relationships
and experience in acquiring underperforming office properties and repositioning
them into profitable Class B properties through intensive full service
management and leasing efforts. Upon completion of the Offering, approximately
9.5% of the equity of the Company, on a fully diluted basis, will be
beneficially owned by officers and directors of the Company.

The Company was incorporated in the State of Maryland on June 10, 1997. Its
executive offices are located at 70 West 36th Street, New York, New York
10018-8007 and its telephone number is (212) 594-2700.

RECENT DEVELOPMENTS

ACQUIRED PROPERTIES

PERCENT
APPROXIMATE LEASED AT PURCHASE
ACQUIRED RENTABLE DECEMBER 31, PRICE MONTH
PROPERTIES SUBMARKET SQUARE FEET 1997 (MILLIONS) ACQUIRED
- ------------------------------------------- ------------------- ------------ --------------- ----------- --------------

110 East 42nd Street(1).................... Grand Central North 251,000 92% $ 30.0 September 1997
17 Battery Place(1)........................ World Trade/Battery 811,000 79 59.0 December 1997
633 Third Avenue........................... Grand Central North 41,000 100 10.5 December 1997
1466 Broadway(2)........................... Times Square 289,000 87 64.0 March 1998
420 Lexington Avenue (the Graybar
Building)(2)............................. Grand Central North 1,188,000 86 78.0 March 1998
321 West 44th Street....................... Times Square 203,000 96 17.5 March 1998
------------ ----- -----------
Total/Weighted Average................... 2,783,000 86% $ 259.0
------------ -----------
------------ -----------

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

(1) Identified as an Option Property in the IPO.

(2) Property acquired from the Helmsley organization (the "Helmsley
Properties").

PENDING ACQUISITIONS

As of April 24, 1998, the Company had executed contracts to acquire four
additional office properties containing approximately 1,055,000 rentable square
feet for an aggregate purchase price of approximately $111.0 million. The
Company intends to use a portion of the net proceeds from the Offerings to
complete the Pending Acquisitions within 60 days after the closing of the
Offerings, with the remainder of the purchase price funded through borrowings
under its Credit Facility; however, purchase of the Pending Acquisitions is
subject to the Company's completion of due diligence and the satisfaction of
other customary conditions to closing, and there can be no assurance that any of
the Pending Acquisitions will be completed. See "Risk Factors--Risk that Pending
Acquisitions Will Not Close." In addition to the Pending Acquisitions, as part
of its ongoing business, the Company continually engages in discussions with
various property owners regarding possible portfolio or single asset
acquisitions. No assurance can be made that the Company will acquire any of the
property opportunities currently under review. The following table sets forth
certain data regarding the Pending Acquisitions:

APPROXIMATE PERCENT PURCHASE
RENTABLE LEASED AT PRICE
PENDING ACQUISITIONS SUBMARKET SQUARE FEET DECEMBER 31, 1997 (MILLIONS)
- ----------------------------------- ------------------------------- ------------ --------------------- -----------

440 Ninth Avenue................... Garment 340,000 76% $ 29.0
38 East 30th Street................ Park Avenue South/Flatiron 91,000 80 10.5
116 Nassau Street (Brooklyn)....... Northwest Brooklyn 100,000 93 10.5
711 Third Avenue(1)................ Grand Central North 524,000 79 61.0
------------ --- -----------
Total/Weighted Average......... 1,055,000 79% $ 111.0
------------ -----------
------------ -----------

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

LEASING ACTIVITY

Since the IPO, 148,000 square feet of tenant space was leased (85,000 square
feet) or renewed (63,000 square feet). During this period, the Company
substantially completed the lease up of three Properties acquired by the Company
at the IPO (50 West 23rd Street, 1140 Avenue of the Americas and 1372 Broadway).

The following represents the change in percent leased rates at those three
Properties:

PERCENT LEASED
------------------------------

AUGUST 21, DECEMBER 31,
------------- ---------------

1997 1997

1140 Avenue of the Americas............................................................ 98% 99%
1372 Broadway.......................................................................... 84% 92%(1)
50 West 23rd Street.................................................................... 91% 86%(2)
--- ---
Weighted Average................................................................... 89% 91%

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

(1) As of March 31, 1998, the Property was 96% leased.

CREDIT FACILITIES

On December 19, 1997 the Company entered into the $140 million Credit
Facility due December 2000. Availability under the Credit Facility may be
limited to an amount less the $140 million. Availability is calculated by
reference to several factors including recent acquisition activity and most
recent quarterly property performance. Outstanding loans under the Credit
Facility bear interest at a rate per annum equal to LIBOR applicable to each
interest period plus 130 basis points to 145 basis points per annum. The Credit
Facility requires the Company to comply with certain covenants, including but
not limited to, maintenance of certain financial ratios. At December 31, 1997
the outstanding amount of indebtedness under the Credit Facility was $76
million, and the interest rate on such indebtedness was 7.265% per annum.

On March 18, 1998, the Company asked the Credit Facility banking group to
temporarily relieve the Company from its obligations under the financial
covenants of the Credit Facility, in order to close the Acquisition Facility.
The Acquisition Facility, with a borrowing capacity of up to $275 million
financed the purchase of the Helmsley Properties, paid off the outstanding
balance on the Credit Facility and to provide ongoing liquidity for future
acquisition and corporate needs. The term of this loan is one year. The interest
rate is determined by a schedule of the principal balance of the loan
outstanding and the applicable quarterly period extending from March 18, 1998
through the maturity date. The outstanding principal amount of $240 million
under the Acquisition Facility will be paid from the proceeds of the Offerings.
The Credit Facility will remain committed but unused until the Acquisition
Facility is repaid, at which time, the Company will be in compliance with all
financial covenants under the Credit Facility and will again be able to draw
additional funds under such Credit Facility.

BUSINESS AND GROWTH STRATEGIES

The Company's primary business objective is to maximize total return to
stockholders through growth in distributable cash flow and appreciation in the
value of its assets. The Company plans to achieve this objective by capitalizing
on the external and internal growth opportunities described below.

Unless indicated otherwise, information contained herein concerning the New
York metropolitan economy and the Manhattan office market is derived from the
Rosen Market Study.

THE MARKET OPPORTUNITY

Management believes that current developments in the New York City economy
provide an attractive environment for owning, operating and acquiring Class B
office properties in Manhattan. The New York commercial real estate market is
currently recovering from the sustained downturn of the late 1980s and early
1990s. Specifically, the New York City metropolitan economy has recently
benefited from consistent net private sector job growth, an improving business
environment and enhancements in the "quality of life" afforded to city
residents. In that regard, private sector employment gained an average of more
than 50,300 jobs per year between 1994 and 1997 for an average annual growth
rate of 1.6%; between February of 1997 and 1998, private sector employment
growth was 2.3%, which is the strongest growth rate in more than ten years. Much
of this private sector job growth has been concentrated among smaller companies
involved in growth oriented industries. Smaller companies have traditionally
been attracted to Class B office properties in the Midtown Markets due to their
prime locations and relatively less expensive rental rates (as compared to Class
A office properties). These smaller companies conduct business in industries
including: business services, software, advertising, audio recording, trade
sectors (e.g., apparel and other textile products), major media (e.g.,
television, magazines and publishing), new media (e.g., entertainment software,
online/Internet services, CD-ROM title development and web site design) and
engineering, as well as nonprofit endeavors.

The combination of a growing office space demand fueled by a strengthening
New York City economy and limited recent and projected new supply of office
space has resulted in a recovery in the Midtown Markets. The combined vacancy
rate for Class A and Class B office space in the Midtown Markets declined to
9.1% at March 31, 1998 from a 1990s high of 16.8% at year-end 1991. The Class B
segment of the market tightened to a vacancy rate of 9.8% at March 31, 1998 from
its 1990s high of 17.2% at year-end 1992, a 43.0% decline. According to Rosen
Consulting Group, a nationally recognized real estate consulting company,
between February of 1997 and 1998, private sector employment growth was 2.3%,
which is the strongest growth rate in more than ten years. The outlook in the
New York metropolitan area is for healthy private sector employment growth of
approximately 1.8% per annum in 1998, followed by approximately 1.4% growth per
annum through 2002, which is expected to generate significant demand for office
space. Specifically, Rosen Consulting Group projects vacancy rates in the Class
B Midtown Markets to further drop to 7.0% by 2002, resulting in projected
average asking market rents of $34.14 per square foot, a 23.1% increase over
average asking rents as of March 31, 1998 of $27.74 per square foot. See "Market
Overview." However, conditions in the New York City metropolitan economy and the
Midtown Markets are subject to change and there can be no assurance that any
such projections will approximate actual results. See "Risk Factors--The
Company's Dependence on the Midtown Markets Due to Limited Geographic
Diversification Could Adversely Affect the Company's Financial Performance."

The Company believes the pronounced recovery of Class B space is being
driven by the growth of smaller companies, the relocation of large firms from
Class A space to Class B as a result of the dearth of available Class A space,
particularly in large blocks, and the heightened cost consciousness of large
tenants. In that regard, as of September 1995, there were 30 blocks of 150,000
or more rentable square feet of Class A space available for lease in the Midtown
Markets. As of March 31, 1998 the number of such available blocks had declined
to 15. As the supply of Class A space continues to contract, management believes
that it is likely that more high quality tenants will locate in well-located
Class B office properties, many of which offer comparable amenities to Class A
buildings at a significant discount to Class A costs.

Improving supply and demand fundamentals in the Midtown Markets have
generated increasingly favorable rental terms from a property owner's
perspective. According to Rosen Consulting Group, asking rental rates for Class
B space in the Midtown Markets have increased to $27.74 per square foot as of

March 31, 1998 from their 1990s low of $21.90 per square foot as of year-end
1993. See "The Properties-- The Portfolio" for a discussion of Annualized Rent
associated with the Properties.

Management believes that opportunities to acquire Class B office properties
in Manhattan on economically attractive terms will be available to the Company.
The Rosen Consulting Group estimates that the replacement cost of Class A office
space in Manhattan (no Class B space is built in Manhattan) is approximately
$366 per square foot, which is substantially above the estimated current
acquisition price of Class A space of $250 to $325 per square foot and the
estimated current acquisition price for Class B space of $90 to $225 per square
foot. Furthermore, even if rental rates were to approach a level that would
justify new construction, there are few development sites available in Manhattan
and the regulatory approval process is both costly and lengthy. The Company
believes that as the Class A market continues to recover, rental rates and
corresponding property values should increase to a level that may justify new
construction. The Company also believes that property values and rental rates in
the Class B market have historically tracked those of the Class A market and,
consequently, there is potential for rental rate and property value increases in
the Class B marketplace.

Investors should note that the concentration of the Company's investments in
Class B office properties located in Manhattan entails certain risks. See "Risk
Factors--The Company's Dependence on Midtown Markets Due to Limited Geographic
Diversification Could Adversely Affect the Company's Financial Performance" and
"Risk Factors--Competition in its Marketplace Could Have an Adverse Impact on
the Company's Results of Operations."

GROWTH STRATEGIES

Management seeks to capitalize on current opportunities in the Class B
Manhattan office market through (i) property acquisitions -- continuing to
acquire Class B office properties at significant discounts to replacement costs
that provide attractive initial yields and the potential for cash flow growth,
(ii) releasing expiring leases to increasing market rates, (iii) property
repositioning -- repositioning acquired properties that are underperforming
through renovations, active management and proactive leasing and (iv) integrated
leasing and property management.

PROPERTY ACQUISITIONS

The Company seeks to continue to capitalize on favorable market conditions
for acquiring Manhattan Class B office properties and management's experience in
enhancing the value of its properties. In assessing acquisition candidates, the
Company evaluates the following factors: (i) the property's strategic location
in its marketplace and its strategic fit within the Company's portfolio, (ii)
current and projected occupancy and market rental rates and the ability to
operate the property profitably at competitive rental rates, (iii) the purchase
price as compared to the replacement cost of the property, (iv) the potential to
modify and/or upgrade and reposition the property in its market to increase
returns and (v) the quality of the construction and presence of existing and/or
potential deferred maintenance issues.

The Company believes that it has the following competitive advantages over
its competitors, primarily private companies and individuals, in acquiring Class
B properties in Manhattan:

LOCAL MARKET EXPERTISE. The Company is a full service, fully integrated
real estate company which manages approximately 10.5 million square feet of
Class B office space in Manhattan. Based upon the eighteen year operating
history of SL Green, management has an extensive working knowledge of the Class
B Manhattan office market with a substantial base of information concerning
current and prospective tenants, effective rental rates, property management and
renovation costs, the complicated regulatory processes characteristic of the
Manhattan office market, as well as other factors relevant to the sourcing and
evaluation of potential acquisition properties. The depth and expertise of the
Company's management is unusual in the Class B marketplace, which has
historically attracted far less institutional interest than the Class A property
sector.

ENHANCED ACCESS TO CAPITAL. Management believes the Company enjoys better
access to capital than is generally available to private real estate firms,
especially those that compete for Manhattan Class B properties. In that regard,
management believes that ownership of Class B office space in Manhattan is more
fragmented and far less institutional in nature than ownership of Class A
Manhattan office space. As

a public company, the Company has the potential to raise capital through
subsequent issuances of securities in the public and private marketplace. The
Company also intends to finance property acquisitions through single asset debt
financings and to obtain revolving credit facilities. However, no assurances can
be made as to the availability of any such financing sources.

UNIT ACQUISITIONS. As an "UPREIT", the Company has the ability to acquire
properties for Units and thereby provide sellers with deferral of income taxes
that would otherwise be payable upon a cash sale. In addition, Units afford
property sellers diversification and liquidity of investment as well as certain
estate planning benefits. Management believes that the Company operates in an
established and mature real estate market in which many property owners have
owned their properties for many years and therefore have a low tax basis in such
properties. Consequently, the ability to offer Units may afford the Company
certain competitive advantages over other potential acquirors who are unable to
offer tax-efficient consideration.

Investors should note that acquisitions of office properties entail certain
risks. See "Risk Factors-- The Company May Not Achieve Expected Returns on
Recently Acquired Properties and Property Acquisitions."

RE-LEASING EXPIRING LEASES TO INCREASING MARKET RENTS

Although there can be no assurances in this regard, the Company believes
that as the commercial real estate market in Manhattan continues to improve,
there will be increasing demand for office space and declining vacancies which
are expected to continue to result in increasing market rents. The Company
believes it has significant opportunities to increase cash flow during such
periods of increasing market rents by renewing or re-leasing expiring leases at
increased market rents. The potential for increasing rental rates is
demonstrated through a comparison of the Direct Weighted Average Office Rental
Rate for the Class B Midtown Markets, according to RELocate, of $27.15 as of
December 31, 1997, as adjusted by the Company to weight the representation of
the Properties in the Midtown Markets to the Annualized Rent Per Leased Square
Foot of Expiring Leases with Future Step-Ups at the Properties and the Pending
Acquisitions of $24.34 for the 502,981 square feet expiring in 1998, $27.16 for
the 368,202 square feet expiring in 1999 and $25.98 for all the Company's leases
as of December 31, 1997. Excluding rental payments attributable to retail space
at the Properties, the Weighted Average Annualized Rent Per Leased Square Foot
of Expiring Leases would be $23.14 for all of the Company's leases as of
December 31, 1997.

PROPERTY REPOSITIONING

The Company believes that, consistent with its core operating philosophy of
maximizing asset value, it can reposition future acquisition properties, where
warranted, in order to enhance property cash flow and value. To achieve these
goals, the Company works to increase occupancy and rental rates by repositioning
buildings to be among the best in their submarkets. The Company considers the
amount of capital required to be invested in a property to achieve the
repositioning. The Company then judges the benefit of a repositioning on a total
return basis, such that for the Company to undertake the project the present
value of the projected future increase in net cash flow and property value must
exceed the cost of the capital expenditure required to achieve the
repositioning.

The repositionings pursued by the Company and its predecessors in the past
have consisted of both intensive large scale renovations as well as smaller
scale repositionings. In the case of an intensive large scale renovation, either
a property's use is changed (e.g., from light industrial/warehouse to office) or
a property is completely rehabilitated. In the case of a smaller scale
repositioning, generally cosmetic renovations are made to targeted areas of a
building, deferred maintenance is corrected and an intensive leasing program is
commenced. The Company believes there are a significant number of potential
acquisitions for which this strategy can be successfully implemented due to the
large number of Manhattan office properties that have significant deferred
maintenance or have been undermanaged. The Company believes this situation has
resulted from fragmented ownership that is generally non-institutional and has
limited access to capital.

An important component of the Company's repositioning strategy is its
construction management capability. The construction management division of the
Company and its predecessors has renovated approximately 2.0 million square feet
of office space, including entire building renovations, at an aggregate

cost exceeding $100 million. In the past, the Company and its predecessors have
implemented successful repositioning programs which have involved significant
capital investments to improve the physical condition with respect to building
facade, entrance and lobby, mechanical systems (including HVAC, fire/ safety and
elevators) and tenant space layout, while maintaining cost control with respect
to these activities. Additionally, the Company benefits in its repositioning
efforts from its fully-integrated real estate operations. The Company believes
that its in-house leasing, property management and construction management
capabilities provide it with valuable information regarding the cost of
accommodating tenant preferences and the potential rental revenues achievable
from various repositioning options.

Examples of successful implementation of this strategy include the Bar
Building (which property accounted for 3.6% of the aggregate Annualized Rent at
the Properties as of December 31, 1997) and 1372 Broadway (which property
accounted for 8.2% of the aggregate annualized Rent at the Properties as of
December 31, 1997). The Company successfully implemented a repositioning
strategy at the Bar Building resulting in NOI increasing from approximately $1.3
million to $2.3 million over the 18 months ending March 31, 1998. When the
Company purchased this Property in October, 1996 it suffered from deferred
maintenance, and was under performing relative to its marketplace as a result of
only a 82% occupancy rate and inefficient building operations. West 44(th)
Street, between Fifth Avenue and Avenue of the Americas, where the Bar Building
is located, has many attractive buildings and prominent clubs which by
association, enhance the value of the Property. Therefore, in order to
capitalize on the location of the building, a modest cosmetic improvement was
implemented, including the restoration of the facade and renovation of common
corridors. As of March 31, 1998 the Property is 100% leased. 43,613 square feet
of vacant space was leased and 61,711 square feet of space was renewed over the
18 months ending March 31, 1998. A similar repositioning strategy was pursued at
1372 Broadway, just 4 blocks south of Times Square. When the Company purchased
this Property in August, 1997 it was only 84% occupied and in immediate need of
a cosmetic renovation in order to take advantage of its superb location and
large floor plates. The Company designed and implemented a $2.0 million lobby
and elevator upgrade program which lead to this Property being 96% leased as of
March 31, 1998. Most importantly, the NOI increased 18% from $4.4 million in
August, 1997 to $5.2 million in March, 1998.

INTEGRATED LEASING AND PROPERTY MANAGEMENT

The Company seeks to optimize long-term cash flow from its properties
through the implementation and integration of targeted leasing and management
programs.

PROACTIVE LEASING PROGRAM. The Company seeks to capitalize on its market
position and relationships with an extensive network of brokers and tenants to
implement a proactive leasing program. Management believes that its extensive
knowledge of the Class B Manhattan office market enhances its ability to
monitor, understand and anticipate the current and future space needs of tenants
in its submarkets. The leasing process for an acquisition property begins with
extensive market research in order to determine the strengths and weaknesses of
the property. This review includes an analysis of the building's physical
characteristics, aesthetic attributes, floor plate sizes, services, elevators
and mechanical systems, followed by an in-depth market analysis to determine the
property's competitive position in the marketplace and perception in the
brokerage community. The results of these analyses are used to develop the
appropriate marketing strategy and the appropriate program to communicate the
positive attributes and key features of the property or space to the marketplace
and the brokerage community. These strategies may include the development of
marketing tools such as brochures, listing sheets, fliers, signage and
advertising copy.

The utilization of third-party brokerage firms in implementing a successful
leasing program is an integral component of the Company's leasing strategy. By
closing transactions quickly and at market terms and paying commissions
promptly, the Company and its predecessors have created a network of
relationships with leasing professionals who regularly bring tenants to the
Company's properties.

The Company believes that these proactive leasing efforts have contributed
to average occupancy rates at the Properties that are above the market average.
During the period between 1994 and 1997, the Initial Properties averaged percent
leased rates of 97%, which exceeded the average of 88% for Class B Manhattan
office space in the Midtown Markets by over 10% during the comparable period.

Another key component of the the Company's leasing strategy is a commitment
to tenant retention. Each leasing executive regularly conducts in-person
interviews with existing tenants in order to gain insight into each tenant's
business objectives, financial position and strength and future space
requirements. This knowledge, in addition to a full understanding of each
tenant's current lease obligation, is utilized to develop a plan to retain
existing tenants in order to maximize long term cash flow. The Company's
commitment to tenant service and satisfaction is evidenced by the renewal of
approximately 75% of the expiring rentable square footage (75% of the expiring
leases determined by number of leases) at the Properties in the Core Portfolio
owned and managed by the Company and its predecessors during the period from
January 1, 1994 through December 31, 1997.

IMPLEMENTATION OF STRATEGIC MANAGEMENT SYSTEMS. The Company's proactive
management begins with a comprehensive operational and physical analysis of a
property followed by a preventive maintenance assessment. SL Green professionals
evaluate all service contracts, survey electrical capacity and costs and, after
interviewing all building personnel, appraise personnel resources and payroll
costs on an ongoing basis. Based on the results of the analysis of the
contractual lease obligations, building position in the market and the
capital/aesthetic improvements needed to bring the property to its desired level
relative to its competition, the Company develops and implements a management
program designed to provide tenants with the highest level of service while
maintaining the lowest cost to ownership.

MAXIMIZING TENANT SATISFACTION. The Company seeks to provide tenants with a
level of service more typically found in Class A properties. Characteristics of
the Company's office property redevelopments include upgraded or new entrances,
lobbies, elevator cabs/mechanicals, hallways, bathrooms, windows, telecom
systems and tenant spaces. Additionally, the Company seeks to provide certain
tenant amenities typically associated only with Class A properties. For example,
the Company maintains flowers in its buildings' lobbies and also provides
uniformed concierges focused on tenant service as opposed to the security guards
found at many Class B Manhattan office buildings. Within particular submarkets,
the Company arranges for the provision of cleaning and 24 hour, seven days per
week security services to its tenants. The Company believes that this level of
service is unusual in the Class B market, in large part due to the highly
fragmented nature of Class B ownership and management. RELocate, a real estate
market research firm, estimates that the 630 Class B buildings in the Midtown
Markets are owned by over 500 different entities, many of whom own a single
property or a few properties. The Company believes that the relatively large
size of its operations and focus on the Class B market enables it to provide a
level of service superior to that typically provided by the smaller
owner/operators that permeate the Class B Manhattan marketplace.

USE OF PROCEEDS

The net cash proceeds to the Company from the PIERS Offering, after
deducting the underwriting discounts and commissions are estimated to be
approximately $96.0 million (approximately $110.4 million if the Underwriters'
over-allotment option is exercised in full). The net cash proceeds to the
Company from the Common Offering, after deducting the underwriting discounts and
commissions are estimated to be $211.4 million (approximately $243.1 million if
the Underwriters' over-allotment option is exercised in full).

The net cash proceeds of the Offerings will be used by the Company as
follows: $240 million to repay the Acquisition Facility, (ii) $65.4 million for
the acquisition of the Pending Acquisitions including 1.5 million of transaction
costs (an additional $45.4 million in borrowings from the Credit Facility and
$0.7 million in credits against prior payments under the Acquisition Facility
will be used to acquire the Pending Acquisitions) and (iii) $2.0 million to pay
costs associated with the Offerings. The Acquisition Facility which closed in
March 1998, financed the acquisition of the Helmsley Properties, paid-off the
outstanding balance on the Company's Credit Facility and provided on-going
liquidity for future acquisition and corporate needs. The term of the
Acquisition Facility is one year. The interest rate is determined by a schedule
of the percent of loan commitment outstanding and the applicable quarterly
period extending from March 18, 1998 through the maturity date. The outstanding
principal amount of $240 million under the Acquisition Facility will be paid
from the proceeds from the Offerings. The Credit Facility will remain committed
but unused until the Acquicition Facilty is repaid, at which time the Company
will again be in compliance with all financial covenants under the Credit
Facility and will again be able to draw additional funds under such Credit
Facility.

If the Underwriters' over-allotment options are exercised in full, the
Company expects to use the additional net proceeds (which will be approximately
$14.4 million for the PIERS Offering and $31.7 million for the Common Offering)
to repay borrowings under the Credit Facility.

Pending application of the net proceeds of the Offerings, the Company will
invest such portion of the net proceeds in interest-bearing accounts and/or
short-term, interest-bearing securities which are consistent with the Company's
intention to qualify for taxation as a REIT.

RATIOS OF EARNINGS TO FIXED CHARGES

The Company's ratios of earnings to fixed charges are as follows:

SL GREEN SL GREEN PREDECESSOR
COMPANY PREDECESSOR (COMBINED)
(CONSOLIDATED) (COMBINED) YEARS ENDED DECEMBER 31,
AUGUST 21, 1997 TO JANUARY 1, 1997 TO ------------------------------------------
DECEMBER 31, 1997 AUGUST 20, 1997 1996 1995 1994 1993
----------------------- ------------------- --------- --------- --------- ---------

Ratio of Earnings to Fixed Charges(1)..... 3.96 0.98 0.61 0.22 0.45 0.86

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

(1) Prior to completion of the IPO on August 20, 1998, the Company's
predecessors operated in a manner as to minimize net taxable income to the
owners. The IPO and the related Formation Transactions permitted the Company
to deleverage its properties significantly, resulting in a significantly
improved ratio of earnings to fixed charges.

The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges, which includes 100% of majority owned non-combined entities of
the SL Green Predecessor. For this purpose, earnings consist of income (loss)
before gains from sale of property and extraordinary items plus fixed charges.
Fixed charges consist of interest expense (including interest costs
capitalized), the amortization of debt issuance costs and rental expense deemed
to represent interest expense. To date, the Company has not issued any preferred
stock; therefore, the ratios of earnings to fixed charges and preferred stock
dividends are unchanged from the ratios specified above.

PRICE RANGE OF COMMON STOCK AND DISTRIBUTION HISTORY

The Common Stock began trading on the NYSE on August 15, 1997 under the
symbol "SLG." On May 12, 1998, the last reported sales price per share of Common
Stock on the NYSE was $22.25, and there were approximately 39 holders of record
of the Common Stock. The table below sets forth the quarterly high and low
closing sales price per share of Common Stock reported on the NYSE and the
distributions paid by the Company with respect to each such period.

HIGH LOW DISTRIBUTIONS
---------- ---------- -------------------

Period August 20, 1997 (inception) to September 30,
1997.................................................. $25 7/8 $23 1/16 $ 0.16(a)
Quarter ended December 31, 1997........................ $26 15/16 $23 11/16 $ 0.35
Quarter ended March 31, 1998........................... $27 7/8 $24 $ 0.35
Quarter ended June 30, 1998 (through May 12, 1998)..... $26 1/2 $22 1/4

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

(a) On November 5, 1997, the Company's Board of Directors declared a $0.16 per
share distribution payable November 19, 1997, to stockholders of record on
November 17, 1997. The distribution was for the period August 20, 1997
(closing date of the IPO) through September 30, 1997, which is approximately
equivalent to a full quarterly distribution of $0.35 per share of Common
Stock and an annual distribution of $1.40 per common share.

Distributions by the Company to the extent of its current and accumulated
earnings and profits for federal income tax purposes, other than capital gain
dividends, will be taxable to stockholders as ordinary dividend income. Capital
gain dividends generally will be treated as long-term capital gain.
Distributions in excess of earnings and profits generally will be treated as a
non-taxable reduction of the stockholder's basis in the Common Stock to the
extent thereof, and thereafter as capital gain. Distributions treated as a non-
taxable reduction in basis will generally have the effect of deferring taxation
until the sale of a stockholder's Common Stock. The Company has determined that
for federal income tax purposes, approximately $0.16 per share (or approximately
100%) of the $0.16 per share distributions paid in 1997 represented ordinary
dividend income to stockholders. No assurances can be given regarding what
percent of future dividends will constitute return of capital for federal income
tax purposes. In order to avoid corporate income taxation of the earnings that
it distributes, the Company must make annual distributions to stockholders of at
least 95% of its REIT taxable income (determined by excluding any net capital
gain), which the Company anticipates will be less than its share of cash
available for distribution. Under certain circumstances, the Company may be
required to make distributions in excess of cash available for distribution in
order to meet such distribution requirements. In such a case, the Company may
find it necessary to arrange for short-term (or possibly long-term) borrowings
or to raise funds through the issuance of preferred shares or additional shares
of Common Stock.

The Company has set a dividend policy whereby regular dividends shall be
payable on the 15th day of the month immediately following the end of each
calendar quarter, or the first business day thereafter, to stockholders of
record on the last day of the quarter. While the Company has established a
policy of paying quarterly distributions, future distributions by the Company
remain at the discretion of the Board of Directors and will depend on the actual
Funds from Operations of the Company, its financial condition, capital
requirements, the annual distribution requirements under the REIT provisions of
the Code (see "Material Federal Income Tax Consequences--Taxation of the
Company"), economic conditions and such other factors as the Board of Directors
deems relevant. See "Risk Factors--Stockholder Approval is Not Required to
Change Policies of the Company" and "Distributions."

CAPITALIZATION

The following table sets forth the consolidated historical capitalization of
the Company as of December 31, 1997 and on a pro forma basis giving effect to
the Offerings and use of the net proceeds from the Offerings as set forth under
"Use of Proceeds," and all property acquisitions through May 12, 1998. The
information set forth in the table should be read in conjunction with the
financial statements and notes thereto, the pro forma financial information and
notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources" included elsewhere
in this Prospectus.

DECEMBER 31, 1997
------------------------
CONSOLIDATED PRO FORMA
HISTORICAL (UNAUDITED)
----------- -----------
(IN THOUSANDS)

Mortgage debt......................................................... $ 52,820 $ 52,820
Credit Facility....................................................... 76,000 45,375
Minority interests in Operating Partnership........................... 33,906 41,303
Mandatory Redeemable Preferred Stock, $.01 par value; 25,000,000
shares authorized; no shares issued and outstanding; 4,000,000 PIERS
issued and outstanding on a pro forma basis......................... 95,300
Stockholders' equity:
Common Stock, $.01 par value; 100,000,000 shares authorized;
12,292,311 issued and outstanding; 22,292,311 issued and
outstanding on a pro forma basis (1).............................. 123 223
Additional paid-in capital.......................................... 178,669 382,272
Distributions in excess of earnings................................. (2,584) (3,309)
----------- -----------
Total stockholders' equity........................................ 176,208 379,186
----------- -----------
Total capitalization............................................ $ 338,934 $ 613,984
----------- -----------
----------- -----------

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

(1) Includes shares of Common Stock to be issued in the Common Stock Offering.
Does not include (i) 2,428,228 shares of Common Stock that may be issued
upon the redemption of Units issued in connection with the Formation
Transactions beginning two years following the completion of the IPO (or
earlier in certain circumstances) or in connection with the Pending
Acquisitions, (ii) 838,000 shares of Common Stock subject to options being
granted under the Company's stock option plan, (iii) 1,500,000 shares of
Common Stock that are issuable upon exercise of the Underwriters' over-
allotment option, and (iv) up to 4,086,000 shares of Common Stock estimated
to be issuable upon conversion or redemption of the PIERS.

SELECTED FINANCIAL INFORMATION

THE COMPANY AND THE SL GREEN PREDECESSOR
(IN THOUSANDS, EXCEPT FOR PER SHARE AND PROPERTY DATA)

1993
-------------
(UNAUDITED)

SL GREEN PREDECESSOR
-------------------------------
THE COMPANY AS OF DECEMBER 31,
---------------------- -------------------------------
1997 1996 1995 1994
PRO FORMA --------- --------- --------- ---------
1997
-----------
(UNAUDITED)

BALANCE SHEET DATA:
Commercial real estate, before accumulated depreciation.......... $ 596,978 $ 338,818 $ 26,284 $ 15,559 $ 15,761
Total assets..................................................... 660,935 382,775 30,072 16,084 15,098
Mortgages and notes payable...................................... 52,820 52,820 16,610 12,700 12,699
Credit Facility.................................................. 45,375 76,000
Minority interest................................................ 41,303 33,906 -- -- --
PIERS............................................................ 95,300
Stockholders' equity/Owners' (deficit)........................... 379,186 176,208 (8,405) (18,848) (15,521)

BALANCE SHEET DATA:
Commercial real estate, before accumulated depreciation.......... $ 15,352
Total assets..................................................... 16,218
Mortgages and notes payable...................................... 12,698
Credit Facility..................................................
Minority interest................................................ --
PIERS............................................................
Stockholders' equity/Owners' (deficit)........................... (13,486)

AUGUST 21- JANUARY 1- YEAR ENDED DECEMBER 31,
DECEMBER 31, AUGUST 20, -------------------------------
1997 1997 1996 1995 1994
PRO FORMA ------------- ----------- --------- --------- ---------
1997
-----------
(UNAUDITED)

OTHER DATA:
Funds from operations(2)............................... $ 43,001 $ 9,355 $ -- $ -- $ -- $ --
Net cash provided by (used in) operating activities.... -- 5,713 2,838 272 (234) 939
Net cash provided by financing activities.............. -- 224,234 2,782 11,960 63 178
Net cash (used in) investing activities................ -- (217,165) (5,559) (12,375) (432) (567)
Basic weighted average shares of Common Stock
outstanding............................................ 22,292 12,292 -- -- -- --
Diluted weighted average shares of Common Stock and
Common Stock equivalents outstanding................... 22,404 12,404 -- -- -- --
Units outstanding at period end........................ 2,428 2,383 -- -- -- --
Number of Properties owned at period end............... 19 12 6 6 4 4
Gross rentable square feet of Properties owned at
period end............................................. 6,056 3,300 1,200 1,200 900 900
Percentage leased for Properties owned at period end... 88 92 97 95 95 98

1993
---------------
(UNAUDITED)

OTHER DATA:
Funds from operations(2)............................... $ --
Net cash provided by (used in) operating activities.... --
Net cash provided by financing activities.............. --
Net cash (used in) investing activities................ --
Basic weighted average shares of Common Stock
outstanding............................................ --
Diluted weighted average shares of Common Stock and
Common Stock equivalents outstanding................... --
Units outstanding at period end........................ --
Number of Properties owned at period end............... 4
Gross rentable square feet of Properties owned at
period end............................................. 900
Percentage leased for Properties owned at period end... 96

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

(1) Basic earnings per share excluded any dilutive effect of options
outstanding. Diluted earnings per share includes the dilutive effect of the
outstanding options calculated under the treasury stock method. As each Unit
is redeemable for one share of Common Stock, the calculation of earnings per
share upon redemption of the outstanding Units will be unaffected, as
Unitholders and stockholders are entitled to equal distributions on a per
Unit and per share basis in the net income of the Company. Pro forma basic
and diluted income before extraordinary item reflect the preferred stock
dividends and accretion. Pro forma diluted income per share before
extraordinary item excludes the conversion of the PIERS as the conversion of
these shares would be antidilutive.

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

OVERVIEW

This report includes certain statements that may be deemed to be
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. All statements, other than statements of historical facts, included
in this report that address activities, events or developments that the Company
expects, believes or anticipates will or may occur in the future, including such
matters as future capital expenditures, dividends and acquisitions (including
the amount and nature thereof), expansion and other development trends of the
real estate industry, business strategies, expansion and growth of the Company's
operations and other such matters are forward-looking statements. These
statements are based on certain assumptions and analyses made by the Company 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, general economic and business conditions, the business
opportunities that may be presented to and pursued by the Company, changes in
laws or regulations and other factors, many of which are beyond the control of
the Company. Any such statements are not guarantees of future performance and
actual results or developments may differ materially from those anticipated in
the forward-looking statements.

The following discussion related to the consolidated financial statements of
the Company and the combined financial statements of SL Green Predecessor should
be read in conjunction with the financial statements appearing in Item 8. In
connection with the Formation Transactions as described in Note 1 to the
financial statements there were significant changes in the financial condition
and results of operations of the Company which are outlined below, consequently,
the comparison of the historical periods provides only limited information
regarding the operations of the Company. Therefore, in addition to the
historical comparison, the Company has provided a comparison of the results of
operations on a pro forma basis.

RESULTS OF OPERATIONS

COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO YEAR ENDED DECEMBER 31, 1996

For discussion purposes and to provide comparable periods for analysis, the
following discussion of the results of operations for the year ended December
31, 1997, combines the operating results of SL Green Predecessor for the period
January 1, 1997 to August 20, 1997 and the operating results of the Company for
the period August 21, 1997 to December 31, 1997. Management believes that this
provides for more meaningful analysis of the financial statements to be made.
The results of operations for the year ended December 31, 1996 represent solely
the operating results of the SL Green Predecessor.

Rental revenue and escalation and reimbursement revenue for the year
December 31, 1997 were $27,137,000 representing an increase of 411% compared to
$5,250,000 for the year ended December 31, 1996. The increase is primarily
attributable to (i) the Formation Transactions in which three buildings
accounted for on the equity method are consolidated in the financial statements
of the Company for the period August 21, 1997 to December 31, 1997 and three
buildings (50 West 23rd Street, 1140 Avenue of the Americas and 1372 Broadway)
were acquired, (ii) the inclusion of revenue from 1414 Avenue of the Americas
for the full year during 1997 as compared to six months (purchased in July 1996)
during 1996, and (iii) the results of 110 East 42nd Street (acquired September
15, 1997), 17 Battery Place (acquired December 19, 1997) and 633 Third Avenue
(acquired December 30, 1997) (collectively, the "1997 Acquisitions") are
included in the consolidated financial statements for a portion of the period
August 21, 1997 to December 31, 1997 and not included during any portion of
1996.

Management fee income decreased $1,068,000 for the year ended December 31,
1997 compared to the year ended December 31, 1996 due to (i) lower management
fee revenue being earned in the aggregate $600,000 and (ii) $500,000 in
management fee income which was recorded in the Equity Income (loss) from
Service Corporations for the period August 21, 1997 to December 31, 1997. As of
the IPO date, all third party management income and related expense are incurred
on the books of the Management Corporation, a 95% owned subsidiary of the
Company. This change in the recognition of income and expense from third party
management business activity was made in order to maintain management fee
revenue in a manner which is consistent with the REIT qualifying income test, as
defined by the IRS.

During the reported periods for the Predecessor Company, management revenues
were earned from affiliated properties in which the Predecessor had an interest
and were not eliminated. The amounts related to these properties are:

1997 (Pre-IPO).......... $ 458,000
1996.................... 447,000
1995.................... 449,000

Leasing commission revenues increased $1,576,000 for year ended December 31,
1997 compared to the year ended December 31, 1996 due to strong leasing activity
in the current market.

Investment income increased $485,000 for the year ended December 31, 1997
compared to the year ended December 31, 1996 due to interest income earned on
cash on hand. The cash on hand primarily represents excess proceeds from the
IPO.

Other income decreased by $107,000 or 87% to $16,000 during the year ended
December 31, 1997 compared to $123,000 during the year ended December 31, 1996,
primarily due to a one-time consulting engagement in 1996.

Prior to the IPO, third party revenues and income were derived from various
management, leasing and construction activities. As part of the Formation
Transactions, to the extent the Company continues to pursue such business, it
will be conducted through separate subsidiaries. The equity income (loss) from
Service Corporations represents the Company's 95% interest in the net income or
loss derived from these activities. From the period August 21, 1997 to December
31, 1997 the Company recognized $101,000 as its share of the loss by these
subsidiaries.

Operating expenses, depreciation and amortization, and real estate taxes
increased $6,602,000, $2,651,000 and $3,500,000, respectively, as compared to
the year ended December 31, 1996. The increase in these expenses is primarily
attributable to (i) the Formation Transactions in which three buildings (50 West
23rd Street, 1140 Avenue of the Americas and 1372 Broadway) were acquired and
three buildings accounted for on the equity method are consolidated in the
financial statements of the Company for the period August 21, 1997 to December
31, 1997, (ii) the inclusion of expenses from 1414 Avenue of the Americas for
the full year during 1997 as compared to six months (purchased July 1996) during
1996, and (iii) the results of the 1997 Acquisitions included in a portion of
1997 and not included during any portion of 1996.

Interest expense increased $1,840,000 for the year ended December 31, 1997
as compared to the year ended December 31, 1996. The increase is primarily due
to (i) interest expense related to the capitalized lease acquired with a
building previously accounted for under the equity method, (ii) increase of
$21,000,000 in mortgage debt acquired in August 1997 ($14,000,000) and December
1997 ($7,000,000) and (iii) the borrowing of $76,000,000 on December 19, 1997
under the Credit Facility to finance the acquisition of 17 Battery Place.

COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995

Rental revenue increased $1,783,000, or 73.8%, to $4,199,000 from $2,416,000
for the year ended December 31, 1996 compared to the year ended December 31,
1995. The increase was due primarily to the acquisition of 1414 Avenue of the
Americas during July 1996 which had rental revenue of $1,612,000 and increased
occupancy.

Escalations and reimbursement revenues increased $293,000, or 38.6%, to
$1,051,000 from $758,000 for the year ended December 31, 1995. The acquisition
of 1414 Avenue of the Americas accounted for an increase of $428,000 which was
offset by a decrease of $166,000 at 70 West 36th Street due to reduced real
estate tax escalations and porter wage escalation revenue. New leases with more
current base years utilized to calculate the escalations and a reduction in real
estate tax expense accounted for the decreased escalation revenue.

Management revenues remained substantially unchanged with a slight increase
for the year ended December 31, 1996 compared to the year ended December 31,
1995.

Leasing commission revenues increased $1,475,000, or 164.4%, to $2,372,000
from $897,000 for the year ended December 31, 1996 compared to the year ended
December 31, 1995 due to the addition of several buildings under service
contracts and intensified efforts (prior to the IPO) to perform leasing services
for unaffiliated third parties.

Construction revenue decreased by $132,000, or 56.7%, to $101,000 from
$233,000 for the year ended December 31, 1996 compared to the year ended
December 31, 1995. Overall construction revenue remained constant but a larger
amount related to property-owning partnerships and was eliminated pursuant to
the equity method of accounting.

Other income for the year ended December 31, 1996 was $123,000 which
consisted of miscellaneous consulting fees and interest.

Share of net loss of uncombined joint ventures decreased $506,000 or 26.4%
to $1,408,000 from $1,914,000 for the year ended December 31, 1996 compared to
the year ended December 31, 1995 as follows:

INCREASE
PROPERTY (DECREASE)
- -------------------------------------------------------------------------------- ------------

673 First Avenue................................................................ $ (392,000)
470 Park Avenue South........................................................... (130,000)
29 West 35th Street............................................................. 22,000
Bar Building.................................................................... (6,000)
------------
$ (506,000)
------------
------------

The decrease in net loss for 673 First Avenue was due primarily to lower
interest expense as a result of mortgage loan principal amortization and lower
amortization expense as a result of deferred leasing commissions written off
during 1995 for a tenant that vacated.

The decrease in net loss for 470 Park Avenue South was due primarily to a
reduction in real estate tax expense as a result of a decrease in assessed
valuation.

The decrease in net income for 29 West 35th Street was due primarily to
reduced rental revenue as a result of a vacancy.

The increase in net income for the Bar Building was due to the acquisition
of an interest in the Property during October 1996.

Operating expenses increased $692,000, or 27.6%, to $3,197,000 from
$2,505,000 for the year ended December 31, 1996 compared to the year ended
December 31, 1995 due substantially to the inclusion of 1414 Avenue of the
Americas which was acquired during July 1996.

Interest expense increased $145,000 or 12.0%, to $1,357,000 from $1,212,000
for the year ended December 31, 1996 compared to the year ended December 31,
1995. The inclusion of 1414 Avenue of the Americas accounted for an increase of
$445,000 which was offset by a decrease of $300,000 for 70 West 36th Street due
to refinancing at a lower interest rate.

Depreciation and amortization increased $200,000, or 25.9%, to $975,000 from
$775,000 for the year ended December 31, 1996 compared to the year ended
December 31, 1995. The increase was due primarily to the inclusion of 1414
Avenue of the Americas.

Real estate taxes increased $207,000 or 41.7%, to $703,000 from $496,000 for
the year ended December 31, 1996 compared to year ended December 31, 1995. The
increase was due to the inclusion of $290,000 for 1414 Avenue of the Americas
offset by a decrease of $83,000 for 70 West 36th Street which resulted from a
reduction in property assessment.

Marketing, general and administrative expenses increased $198,000, or 6.5%,
to $3,250,000 from $3,052,000 for the year ended December 31, 1996 compared to
the year ended December 31, 1995, due primarily to staff increases for the
corporation which provided leasing services.

As a result of the foregoing, the loss before extraordinary item decreased
$2,682,000, or 79.1%, to $708,000 from $3,390,000 for the year ended December
31, 1996 compared to the year ended December 31, 1995.

PRO FORMA RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1997

On a pro forma basis after giving effect to the Offerings, the IPO, the
Formation Transactions and the purchase of the IPO Acquisition Properties, the
Acquired Properties and the Pending Acquisitions, income before minority
interest and extraordinary item would have been $35,231,000 for the year ended
December 31, 1997, representing an increase of $27,133,000 over the historical
income before minority interest for the comparable year. The historical income
before minority interest represents the consolidated historical results of the
Company for the period August 21, 1997 to December 31, 1997 and the combined
historical results of SL Green Predecessor for the period January 1, 1997 to
August 20, 1997. The increase is accounted for as follows:

Increases to Income:
Decrease in interest expense due
to mortgage loans repaid or forgiven....................... $3,008,000
Additional income due to the
acquisition of certain partners interests (A).............. 295,000
Additional income due to the
IPO Acquisition Properties (B)............................. 7,697,000
Additional income due to the 1997
Acquired Properties (C).................................... 8,710,000
Additional income due to the 1998
Acquired Properties (D).................................... 9,533,000
Additional income due to the
Pending Acquisitions (E)................................... 5,567,000
Other........................................................ 12,000

Decreases to Income:
Adjust the provision of doubtful accounts
based on 2% of the acquired pro forma rental revenue....... (2,028,000)
Additional general and administrative
expenses associated with a public company.................. (961,000)
Elimination of Service Corporations'
income under the equity method of accounting (303,000)
Decrease in interest income earned on
excess cash used to acquire 110 East 42nd Street........... (485,000)
Increase in interest expense as a result of borrowings under
the Credit Facility........................................ (3,912,000)
----------
$27,133,000
----------
----------

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

Further information regarding the effects of the Initial Properties, the
Acquired Properties and the Pending Acquisitions on the financial position and
results of operations of the Company is set forth in the historical financial
statements of the Initial Properties, the Acquired Properties and the Pending
Acquisitions and the pro forma financial statements of the Company contained in
this Prospectus.

(A) Represents the operating results of 673 First Avenue, 470 Park Avenue South,
29 West 35th Street and 36 West 44th Street for the period January 1, 1997
to August 20, 1997.

(B) Represents the operating results of 1372 Broadway, 1140 Avenue of the
Americas and 50 West 23rd Street from January 1, 1997 up to the date of
acquisition (August 20, 1997).

(C) Represents the operating results of 110 East 42nd Street from January 1,
1997 to September 14, 1997, 17 Battery Place from January 1, 1997 to
December 18, 1997 and 633 Third Avenue for the year ended December 31, 1997.

(D) Represents the operating results for the year ended December 31, 1997 for
420 Lexington Avenue, 1466 Broadway and 321 West 44th Street.

(E) Represents the operating results for the year ended December 31, 1997 for
440 Ninth Avenue, 116 Nassau Street, 38 East 30th Street and 711 Third
Avenue.

LIQUIDITY AND CAPITAL RESOURCES

The SL Green Predecessor historically relied on mortgage financing plus the
use of its capital for the acquisition, redevelopment and renovation of
properties. The proceeds from the IPO as well as a new mortgage loan in the
amount of $14 million, which is secured by 50 West 23rd Street, were utilized to
repay existing mortgage loans, acquire properties, pay IPO and Formation
Transaction expenses and provide working capital. Total mortgage loans including
the new mortgage loan amounted to $45.8 million as a result of the Formation
Transactions. All mortgage loans encumbering the Properties at the time of the
IPO closing had fixed interest rates ranging from 7.47% to 9.0%.

On December 19, 1997 the Company entered into the $140 million Credit
Facility due December 2000. Availability under the Credit Facility may be
limited to an amount less than $140 million. Availability is calculated by
reference to several factors including recent acquisition activity and most
recent quarterly property performance. Outstanding loans under the Credit
Facility bear interest at a rate per annum equal to LIBOR applicable to each
interest period plus 130 basis points to 145 basis points per annum. The Credit
Facility requires the Company to comply with certain covenants, including but
not limited to, maintenance of certain financial ratios. At December 31, 1997
the outstanding amount of indebtedness under the Credit Facility was $76
million, and the interest rate on such indebtedness was 7.265% per annum.

On December 30, 1997 the Company entered into a $7 million additional
advance under its existing mortgage loan which is secured by 50 West 23rd
Street. The note bears interest at a rate of LIBOR plus 175 basis points
(7.6875% at December 31, 1997). On April 3, 1998, this mortgage note was fixed
at 7.06%, maturing co-terminous with the underlying mortgage note. As of April
15, 1998 the current amount of the mortgage note was $21 million.

On March 18, 1998, the Company asked the Credit Facility banking group to
temporarily relieve the Company from its obligations under the financial
covenants of the Credit Facility, in order to close the Acquisition Facility.
The Acquisition Facility, which closed in March 1998, financed the purchase of
the Helmsley Properties acquisition, paid off the outstanding balance on the
Credit Facility and provided ongoing liquidity for future acquisition and
corporate needs. The term of this facility is one year. The interest rate is
determined by a schedule of the principal balance of the loan outstanding and
the applicable quarterly period extending from March 18, 1998 through the
maturity date. The outstanding principal amount of $240 million under the
Acquisition Facility will be paid from the proceeds of the Offerings. The Credit
Facility will remain committed but unused until the Acquisition Facility is
repaid at which time, the Company will be in compliance with all financial
covenants under the Credit Facility and will again be able to draw additional
funds under such Credit Facility.

The Company estimates that for the 12 months ending December 31, 1998 and
1999, it will incur approximately $6.6 million and $3.2 million, respectively,
of capital expenditures on Properties owned at December 31, 1997. In 1998, over
$5.8 million of the capital investments are dedicated to redevelopment costs
associated with properties purchased at or after the Company's IPO. The Company
expects to fund these capital expenditures with the Acquisition Facility, Credit
Facility, operating cash flow and cash on hand. Future property acquisitions may
require substantial capital investments in such properties for refurbishment and
leasing costs. The Company expects that these financing requirements will be
provided primarily from its existing Credit Facility, from additional borrowings
secured by one or more properties and from future issuances of equity and debt.
The Company believes that it will have sufficient capital resources to satisfy
its obligations during the next 12 month period. Thereafter, the Company expects
that capital needs will be met through a combination of net cash provided by
operations, borrowings and additional equity issuances.

The Company expects to continue making distributions to its stockholders
primarily based on its distributions received from the Operating Partnership or,
if necessary, from working capital or borrowings.

The Operating Partnership income will be derived primarily from lease revenue
from the Properties and, to a limited extent, from fees generated by the Service
Corporations.

CASH FLOWS

COMPARISON OF THE YEAR ENDED DECEMBER 31, 1997 TO YEAR ENDED DECEMBER 31,
1996

Net cash provided by operating activities increased $8,279,000 during the
year ended December 31, 1997 to $8,551,000 from $272,000 for the year ended
December 31, 1996. The increase was due primarily to the inclusion of properties
encompassed in the Offering and Formation Transaction (the acquisition of 50
West 23rd Street, 1140 Avenue of the Americas and 1372 Broadway) as of August
21, 1997, the acquisition of 1414 Avenue of the Americas (acquired July 1996),
110 East 42nd Street (acquired September 1997) and 17 Battery Place (acquired
December 1997) and an increase in leasing commission and investment income. Net
cash used in investing activity increased $210,349,000 during the year ended
December 31, 1997 to $222,724,000 as compared to $12,375,000 for the year ended
December 31, 1996. The increase is primarily due to the acquisition of certain
properties at the date of the IPO, the purchase of 110 East 42nd Street in
September 1997 and the purchase of an interest in 17 Battery Place and 633 Third
Avenue in December 1997. Net cash provided by financing activities increased by
$215,056,000 during the year ended December 31, 1997 to $227,016,000 as compared
to $11,960,000 during the year ended December 31, 1996. The primary reason for
the increase is (i) net proceeds from the IPO, (ii) net proceeds from mortgage
notes payable and (iii) proceeds from the Credit Facility. These proceeds were
used to purchase the properties described above.

COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995

Net cash provided by operating activities increased $506,000 to $272,000
from a deficit of $234,000 for the year ended December 31, 1996 compared to the
year ended December 31, 1995. The increase was due primarily to the acquisition
of 1414 Avenue of the Americas, an increase in leasing commission income. Net
cash used in investing activities increased $11,943,000 to $12,375,000 from
$432,000 for the year ended December 31, 1996 compared to the year ended
December 31, 1995. The increase was due primarily to the acquisition of 1414
Avenue of the Americas plus contributions to the partnerships that own 470 Park
Avenue South and the Bar Building. Net cash provided by financing activities
increased $11,897,000 to $11,960,000 from $63,000 for the year ended December
31, 1996 compared to the year ended December 31, 1995. The increase was due
primarily to the financing of the acquisition of 1414 Avenue of the Americas,
the refinancing of the mortgage on 70 West 36th Street and net cash contribution
from owners.

FUNDS FROM OPERATIONS

The White Paper on Funds from Operations approved by the Board of Governors
of NAREIT in March 1995 defines Funds from Operations as net income (loss)
(computed in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of properties, plus real estate related depreciation and
amortization and after adjustments for unconsolidated partnerships and joint
ventures. The Company believes that Funds from Operations is helpful to
investors as a measure of the performance of an equity REIT because, along with
cash flow from operating activities, financing activities and investing
activities, it provides investors with an indication of the ability of the
Company to incur and service debt, to make capital expenditures and to fund
other cash needs. The Company computes Funds from Operations in accordance with
standards established by NAREIT which may not be comparable to Funds from
Operations reported by other REITs that do not define the term in accordance
with the current NAREIT definition or that interpret the current NAREIT
definition differently than the Company. Funds from Operations does not
represent cash generated from operating activities in accordance with GAAP and
should not be considered as an alternative to net income (determined in
accordance with GAAP) as an indication of the Company's financial performance or
to cash flow from operating activities (determined in

accordance with GAAP) as a measure of the Company's liquidity, nor is it
indicative of funds available to fund the Company's cash needs, including its
ability to make cash distributions.

On a pro forma basis after giving effect to the IPO, Funds from Operations
for the year ended December 31, 1997 is as follows:

PRO FORMA
-------------
YEAR ENDED
DECEMBER 31,
1997
-------------

Income before extraordinary item less preferred stock dividend..................................... $ 24,590,000
Add:
Depreciation and amortization.................................................................... 16,467,000
Minority interest................................................................................ 2,641,000
Amortization of deferred financing costs and depreciation of non-rental real estate assets....... (697,000)
-------------
Funds From Operations.............................................................................. $ 43,001,000
-------------
-------------

INFLATION

Substantially all of the office leases provide for separate real estate tax
and operating expense escalations over a base amount. In addition, many of the
leases provide for fixed base rent increases or indexed escalations. The Company
believes that inflationary increases may be at least partially offset by the
contractual rent increases described above.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Financial Accounting Standards Board Statement No. 131 ("FAS No. 131")
"Disclosure about Segments of an Enterprise and Related Information" is
effective for financial statements issued for periods beginning after December
15, 1997. FAS No. 131 requires disclosures about segments of an enterprise and
related information regarding the different types of business activities in
which an enterprise engages and the different economic environments in which it
operates.

The Company does not believe that the implementation of or FAS No. 131 will
have a significant effect on its financial statements.

YEAR 2000 COMPLIANCE

The Company has determined that it will need to modify or replace
significant portions of its software so that its computer systems will function
properly with respect to dates in the year 2000 and beyond. The Company's
comprehensive Year 2000 initiative is being managed by a team of internal staff
and outside consultants. The team's activities are designed to ensure that there
is no adverse effect on the Company's core business operations and that
transactions with customers, suppliers, and financial institutions are fully
supported. The Company is well under way with these efforts, which are scheduled
to be completed in mid-1998. While the Company believes its planning efforts are
adequate to address its Year 2000 concerns, there can be no guarantee that the
systems of other companies on which the Company's systems and operations rely
will be converted on a timely basis and will not have a material effect on the
Company. The cost of the Year 2000 initiatives is not expected to be material to
the Company's results of operation or financial position.

MARKET OVERVIEW

UNLESS INDICATED OTHERWISE, INFORMATION CONTAINED HEREIN CONCERNING THE NEW
YORK METROPOLITAN ECONOMY AND THE MANHATTAN OFFICE MARKET IS DERIVED FROM THE
ROSEN MARKET STUDY.

The Company believes that the strength of the New York metropolitan economy
and the current supply/demand fundamentals in the Manhattan office market
provide an attractive environment for acquiring, owning and operating Class B
office properties.

NEW YORK ECONOMY

New York City is a leading international city with a large, dynamic and
diverse economy. According to the U.S. Bureau of Economic Analysis, as of July
1995, the economy of the New York consolidated metropolitan statistical area
("CMSA") was larger than the economies of the next two largest U.S. CMSAs
combined (Los Angeles and Chicago), and larger than the economy of any
individual state except California, based on aggregate personal income (which
the Company believes is a good proxy for overall economic output). Strong growth
of the national economy has benefited New York City, causing the New York
metropolitan area (including Bronx, Kings, New York, Putnam, Queens, Richmond,
Rockland and Westchester counties) economy to improve significantly in recent
years. Private sector employment gained an average of approximately 50,300 jobs
per year between 1994 and 1997 for an average annual growth rate of 1.6%;
between February of 1997 and 1998, private sector employment growth was an even
stronger 2.3%, which is the strongest growth rate in more than ten years. In
November of 1997, Fortune Magazine ranked New York as the most improved city for
business. Also in 1997, Inc. Magazine recognized New York as the city with the
largest number of growing, privately-held companies.

With its unique appeal, New York City is headquarters to many of the leading
corporations and service firms in the U.S., including:

- more Fortune 500 companies (46) than any other U.S. city;

- three of the four largest U.S. commercial banks (400 international banks
have offices in New York City--more than any other city in the world);

- 23 of the 25 largest U.S. securities firms;

- four of the 10 largest U.S. money managers;

- 27 of the 100 largest U.S. law firms (64 of the 100 largest U.S. law firms
have offices in New York City);

- four of the "Big Six" accounting firms; and

- four of the largest U.S. entertainment/media conglomerates.

New York is also a world leader in the advertising industry and contains a
large base of nonprofit organizations. It also has the largest consulate
community in the world, contributing to its position as an international center
of business and politics.

In addition to its diverse base of large businesses, Manhattan also has a
large base of small companies. The New York City Office of the Comptroller
reports that small businesses (which are defined as businesses with fewer than
500 employees) comprise approximately 99.7% of all businesses in New York City
and employ approximately 70.7% of the private-sector work force. In the four
years between 1994 and 1997, during which period some 201,200 private sector
jobs were added in the New York metropolitan area (an average of approximately
50,300 each year), the percentage of jobs added from small business has grown
increasingly more significant, especially in New York City, where small
businesses added approximately 69,000 jobs during 1994 and 1995 and
approximately 42,000 jobs between the fourth quarters of 1996 and 1997.

The single fastest-growing employment sector in the New York metropolitan
economy is the services sector, which grew at a rate of 3.5% during the year
ended in February of 1998. With almost 1.5 million jobs, the services sector
currently represents 38% of the New York metropolitan area's total employment
base and 44% of its private sector employment base. Important components of the
services sector are business services, legal services, engineering and
management services and membership organizations (including approximately 20,000
nonprofit organizations which are based in New York City). One of the largest
components of the services industry is business services, which supplied
approximately 307,000 jobs as of February 1998, representing 21% of total
services employment. Between 1992 and 1997, growth in business services
employment averaged 4.9% per year, and between February 1997 and February 1998,
business services employment grew 7.3%. Fueling the growth in the business
services sector are the advertising industry, audio recording, software
industries and agencies providing temporary workers. One very active sector of
business services is the new media industry that is centered south of 41st
Street in what is known as midtown south's "Silicon Alley." The companies that
work in this industry include entertainment software, online/Internet services,
CD-ROM title developers, and web site designers. According to the State Deputy
Comptroller for New York City, New Media employment has nearly doubled in size
to just over 30,000 jobs between 1993 and 1997.

The trade sector is the second largest and fastest growing part of the
metropolitan economy, with an employment gain of 13,800 jobs during the 12
months ended February 28, 1998, representing a 2.1% annual growth rate.
Approximately 68% of the metropolitan area's trade jobs are in the retail
sector, where growth was an even stronger 2.4% during the same period. The
retail industry has benefited from improved city services, reduced crime and an
increase in the number of visitors and their spending volume.

Part of New York City's appeal to employers is a highly educated work-force.
Over 40% of New York County's residents over the age of 25 have received a
college degree and nearly half of those residents have received a graduate or
professional degree, rates that are well above the national average. In
addition, with a population of approximately 7.4 million, including
approximately 96,300 households that have an annual effective buying/disposable
income in excess of $150,000, New York City also provides a large base of
potential consumers with significant disposable income, which is of particular
appeal to businesses providing goods and services. Increased spending by local
residents combined with a higher level of visitor spending caused retail sales
growth in New York City to average 3.2% annually during the period January 1,
1994 to December 31, 1996.

New York City is an international financial and cultural capital that, in
addition to housing the United Nations and numerous foreign missions, attracts
tourism, is a center for international investment and a favored North American
base for many multinational corporations headquartered overseas. The lower cost
of office rents when compared internationally with other major cities is a
competitive advantage in attracting such overseas companies to New York City.
Midtown Manhattan ranks 13th among major business centers around the world in
terms of office occupancy costs, after such cities as Tokyo, London, Paris, Hong
Kong and Singapore, while downtown Manhattan ranked 31st.

New York City is the consummate "24-hour city," featuring a wide variety of
restaurants, entertainment and cultural offerings, such as Broadway theater and
productions at Carnegie Hall and Lincoln Center. In addition, many of the
world's finest museums, including The Metropolitan Museum of Art, The Museum of
Modern Art, The Guggenheim Museum, The Whitney Museum and The Museum of Natural
History, are located in New York City. New York City is also home to major
educational institutions, including Columbia University, Fordham University, New
York University and Rockefeller University.

The quality of life in New York City also has improved with the
implementation of various public/ private ventures and government initiatives.
For example, Business Improvement Districts ("BIDs"), which are public/private
ventures that provide security, sanitation and other services within their
boundaries, operate in the Grand Central Station, Penn Station and Times Square
areas and in 36 additional areas within New York City. In addition, crime in New
York City has declined. The Rosen Consulting Group

estimates show that New York City ranked 151st out of the 182 largest U.S.
cities in terms of total crimes per capita for the first half of 1997, lower
than such cities as Las Vegas (1), Atlanta (3), Miami (5), Phoenix (40), and
Milwaukee (84). According to the New York City Police Department, New York
City's crime rate decreased 44% between 1993 and 1997, including a 9% drop
during 1997 (a greater decrease than any other large U.S. city during the last
four years).

The New York City government is "reinventing" itself in an effort to
streamline its operations and attract and retain businesses. For example, the
New York Economic Development Council has been actively involved in encouraging
businesses to remain in New York City. New York City also has recently reduced
or eliminated numerous taxes, including the real property transfer tax, the
unincorporated businesses tax, the commercial rent tax, the hotel occupancy tax
and the sidewalk vault tax. New York City also was influential in eliminating
the New York State real property gains tax. Even with the reduction or
elimination of numerous taxes, New York City has announced a budget surplus for
its fiscal year ended June 30, 1997 of approximately $856 million, as a result
of savings in operating expenses and improvements in the New York City economy.

With its dynamic and diverse base of businesses, New York City is poised to
continue its course of steady growth and economic improvement. Private sector
job creation in the New York metropolitan area is anticipated to continue at an
average rate of 1.8% during 1998, for the addition of approximately 60,000
private sector jobs, and continue to increase at approximately 1.4% annually
through 2002.

MANHATTAN OFFICE MARKET

OVERVIEW. The Company believes that current supply/demand fundamentals in
the Manhattan office market provide an attractive environment for acquiring,
owning and operating Class B Manhattan office properties. Specifically, the
Midtown Markets have the following favorable characteristics: (i) the Class A
and Class B sectors of the Midtown Markets, collectively, have experienced five
consecutive years of positive net absorption and declining vacancy rates; (ii)
there have been virtually no new additions to supply in the Midtown Markets
since 1993; and (iii) new office development is limited at the current time
because there are relatively few sites available for construction, the lead time
required for construction typically exceeds three years and new construction
generally is not economically feasible given current market rental rates.

The Manhattan office market consists primarily of midtown, midtown south and
downtown submarkets. According to Rosen Consulting Group, midtown extends from
the north side of 32nd Street to 62nd Street; midtown south is defined as Canal
Street to the south side of 32nd Street; and downtown is defined as Battery to
Canal Street. In each case the submarkets are defined from the East River on the
east to the Hudson River on the west. As referred to herein, the Midtown Markets
collectively consist of midtown and midtown south.

SIZE OF MARKET. The Manhattan office market, with an overall stock of
almost 380 million square feet, is the largest office market in the U.S and is
larger than the next six largest U.S. central business district office markets
combined (Chicago, Washington, D.C., Boston, San Francisco, Philadelphia and Los
Angeles). The following chart sets forth the size of the Manhattan office market
and the size of certain other U.S. office markets, as of December 31, 1997:

1997 COMPARATIVE OFFICE STOCK

STOCK
SQUARE
FEET
RANK METROPOLITAN STATISTICAL AREA (000S)
- ----------- ------------------------------------------------ ---------

1......... New York, NY (includes all of Manhattan) 379,367
2......... Chicago, IL 118,853
3......... Washington, DC 79,601
4......... Boston, MA 47,970
5......... San Francisco, CA 39,940
6......... Philadelphia, PA-NJ 38,525
7......... Los Angeles-Long Beach, CA 36,563
8......... Houston, TX 36,410
9......... Dallas, TX 30,580
10........ Pittsburgh, PA 29,390

Within Manhattan, 45% of the office space is classified as Class B space;
almost half of the Class B space is located in midtown, and approximately
one-fourth of the Class B space is located in each of midtown south and
downtown. The following table sets forth the relative sizes of the Class A and
Class B office markets and the rents and vacancy rates as of March 31, 1998
existing in such markets:

MANHATTAN OFFICE MARKET OVERVIEW

% OF CLASS A 1ST QUARTER 1998 1ST QUARTER 1998
AND CLASS B STOCK VACANCY RATE RENT/SQUARE FEET
------------------------ ------------------------ --------------------

CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
----------- ----------- ----------- ----------- --------- ---------
Midtown Markets (1)..................... 69.6% 75.4% 8.5% 9.8% $ 43.03 $ 27.74
Midtown................................. 67.2% 49.3% 8.8% 9.7% $ 43.07 $ 29.33
Midtown South........................... 2.3% 26.1% 0.7% 10.1% $ 27.05 $ 24.87
Downtown................................ 30.4% 24.6% 11.3% 18.2% $ 31.16 $ 24.12
Total................................... 54.7%(2) 45.3%(2) 9.3% 11.9% $ 38.67 $ 26.37

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

(1) Consists of midtown and midtown south submarkets.

(2) Represents proportion of total Class A stock and Class B stock in the
Manhattan office market.

HISTORICAL PERSPECTIVE. The Midtown Markets experienced rapid growth both
in demand for, and supply of, office space during the 1980s. A wave of new
construction peaked in the late 1980s and, between 1985 and 1992, 39 buildings
containing approximately 20.3 million square feet of space were built. However,
since 1992, there has been very little new construction in the Midtown Markets.

NEW CONTRUCTION OF OFFICE SPACE

MIDTOWN MARKETS

[Bar chart showing new construction from 1980
through the projection for 1998]

Source: Real Estate Board of New York (historical); Rosen Consulting Group
(projections).

In the late 1980s and early 1990s, as much of the new supply of office space
was being delivered, the demand for space in the Midtown Markets fell off
abruptly as a result of the general downturn in the economy and subsequent
corporate downsizings. As a result of the increase in inventory and the
significant decrease in employment in Manhattan, Class A vacancy rates in the
Midtown Markets increased into the double digits, reaching 17.8% in 1991 and
Class B vacancy rates in the Midtown Markets increased to 17.2% in 1992.

In the early 1990s, however, conditions began to improve in the Midtown
Markets, as a result of the following factors: new jobs were created as the
national and New York metropolitan economies recovered from their downturns;
existing midtown Manhattan businesses expanded, resulting in an increased need
for office space.

LIMITED SUPPLY OF NEW OFFICE SPACE. The Company expects the supply of
office space in the Midtown Markets to remain relatively stable through the year
2000 because there are relatively few sites available for construction, the lead
time required for construction typically exceeds three years and new
construction generally is not economically feasible at current market rental
rates. Only one major Class A development, containing approximately 1.5 million
square feet, which has substantial grandfathered tax benefits, is scheduled to
be completed in 1999. (The Company does not believe that this property will have
a material impact on the market because it represents less than 1% of the total
Class A midtown office space and is already substantially preleased to two
tenants.) Four other development sites were purchased recently which could
accommodate a total of 3.7 million square feet of office space, although
construction is not yet underway on any of these projects. In the absence of tax
incentives, the Company believes that rents generally would have to increase
significantly to justify the cost of new construction. Assuming development
costs of approximately $366 per square foot (as estimated by Rosen Consulting
Group), a market

base rent of approximately $56 per square foot would be needed to make
construction economically viable. This suggests that, in order to justify new
construction, market base rents (not taking into account any tax benefits that
may apply) generally would have to increase to at least 30% more than current
asking rents for Class A office space in midtown Manhattan (as estimated by
Rosen Consulting Group).

INCREASING DEMAND FOR OFFICE SPACE IN THE MIDTOWN MARKETS. In addition, net
absorption as calculated by Rosen Consulting Group ("Net Absorption") of Class B
office space in the Midtown Markets has been positive since 1992 and surged in
1994, 1995, 1996, and 1997 reaching 3.0 million, 1.6 million, 1.7 million and
1.8 million square feet, respectively. An average of 28,200 office
space-consuming jobs are projected to be created annually from 1998 until 2002.

NET ABSORPTION OF CLASS B OFFICE SPACE

MIDTOWN MARKETS

[Bar chart showing net absorption of Class B office space
from 1993 through 2002]

As a result of sustained positive Net Absorption coupled with virtually no
new construction since 1992, the Class A office vacancy rate in the Midtown
Markets had fallen to 8.5% as of March 31, 1998 from its 1990s high of 17.8% in
1991 and the Class B office vacancy rate in the Midtown Markets had fallen to
9.8% from its 1990s high of 17.2% in 1992. As a result of the projected economic
strength and private sector job growth, combined with limited projected new
construction through 2000, Rosen Consulting Group projects that the Class A
vacancy rate in the Midtown Markets will fall to 6.5% in 1998 and further to
5.8% in 2002; similarly, Rosen Consulting Group projects that the Class B
vacancy rate in the Midtown Markets will fall to 9.1% in 1998 and further to
7.0% in 2002. The Company believes the demand for Class B space will increase as
a result of the expectation of the following factors: (i) growth in the office
space demands of small businesses, which generally choose to locate in office
space with lower occupancy costs, (ii) the continued desire of larger
corporations to reduce office occupancy costs and (iii) growth in key office-
consuming sectors such as finance, securities, legal services and accounting
which would reduce the availability of Class A office space.

The following chart shows the history and projections of vacancy rates and
asking rents for Class B office space in the Midtown Markets. According to Rosen
Consulting Group, rent growth is inversely related to vacancy rates. When market
conditions tighten and the market vacancy rate falls below the optimal vacancy
rate, rent growth accelerates. The optimal vacancy rate is the vacancy rate at
which neither

excess supply nor excess demand exists, and it is determined by examining the
historical relationship between vacancy rates and rent growth. As shown in the
chart below, the Class B vacancy rate in the Midtown Markets rose to its highest
level in 1992, at which time average asking rents continued to decline to their
lowest levels in 1993. Since 1992, the Class B vacancy rate has decreased, and
as the actual vacancy rate has approached the optimal vacancy rate, average
asking rents stabilized and began to rise in 1995.

The chart further shows that as vacancy rates decline below the optimal rate
of 10% (as is projected to occur over the next four years), projected asking
rents begin to increase at an accelerated rate over current levels. In light of
the supply and demand fundamentals outlined above and the estimate of Class A
base rental rates required to justify new office construction (of approximately
$56 per square foot), the Company believes the estimate in the chart below of
Class B asking rents in the $30 per square foot range at a projected vacancy
level of 8% to be reasonable. However, conditions in the Midtown Markets are
subject to change and there can be no assurance that any projections will
approximate actual results. See "Risk Factors--The Company's Dependence on the
Midtown Markets Due to Limited Geographic Diversification Could Adversely Affect
the Company's Financial Performance."

OFFICE VACANCY RATES AND ASKING RENTS

MIDTOWN MARKETS CLASS B

[Bar chart showing vacancy rates and asking rents for 1992
through the projection for 2002]

POSITIVE OUTLOOK FOR EFFECTIVE RENTAL RATES. As discussed above, the
Company anticipates continued growth in the demand for Class A and Class B
office space in the Midtown Markets and relatively little new supply of such
space being delivered over the next several years. Accordingly, the Company
believes that vacancy rates among Class A and Class B properties in the Midtown
Markets should continue to

decrease, which the Company believes should result in increased rental rates and
decreased re-leasing costs in well-managed, well-located Class A and Class B
office properties. However, there can be no assurance that any of these
expectations will be met.

DOWNTOWN SUBMARKET. The downtown submarket of the Manhattan office market,
where the Option Property is located, has been the subject of significant
revitalization efforts in recent years. The Downtown Commercial Revitalization
Program offers a mix of commercial rent tax, real estate tax and energy expense
relief to tenants who sign new or renew leases in buildings constructed before
1975. These efforts appear to be yielding results, as the vacancy rate for
downtown Class B office space had declined to 18.2% as of March 31, 1998 from
its 1990s high of 21.3% at the end of 1995 (although such rate represents an
increase from the vacancy rate of 17.8% at the end of 1996). In addition,
average asking rents per square foot for Class B office space in the downtown
submarket rose to $24.12 as of March 31, 1998 from its 1990s low of $21.53 at
the end of 1995. Rosen Consulting Group projects the vacancy rate for downtown
Class B office space to decrease to 17.2% by the end of 1998 and to continue to
decline to 14% by 2002. In addition, Rosen Consulting Group estimates that
average asking rents per square foot for Class B office space in the downtown
submarket will increase to $24.17 by the end of 1998 and continue rising to
$27.47 by the end of 2002.

THE PROPERTIES

THE PORTFOLIO

As noted above under "Market Overview," the Manhattan office market is
predominantly segregated into two distinct categories: Class A and Class B. The
Class B category generally includes office properties that are more than 25
years old, in good physical condition, attract high-quality tenants and are
situated in desirable locations in Manhattan. Class B properties can be
distinguished from Class A properties in that Class A properties are generally
newer properties with higher finishes and obtain the highest rental rates in
their markets.

The following table sets forth certain information with respect to each of
the Properties and the Pending Acquisitions as of December 31, 1997:

PERCENTAGE
OF
APPROXIMATE PORTFOLIO
YEAR RENTABLE RENTABLE
BUILT/ SQUARE SQUARE
PROPERTIES RENOVATED SUBMARKET FEET FEET
- ------------------------------ --------- -------------------------- ----------- ----------

INITIAL PROPERTIES
673 First Avenue(4)........... 1928/1990 Grand Central South 422,000 7.0%
470 Park Avenue South(5)...... 1912/1994 Park Avenue South/Flatiron 260,000(4) 4.3
Bar Building(4)(6)............ 1922/1985 Rockefeller Center 165,000(5) 2.7
70 W. 36th Street............. 1923/1994 Garment 151,000 2.5
1414 Avenue of the Americas... 1923/1990 Rockefeller Center 111,000 1.8
29 W. 35th Street............. 1911/1985 Garment 78,000 1.3
1372 Broadway................. 1914/1985 Garment 508,000 8.4
1140 Avenue of the
Americas(4)................. 1926/1951 Rockfeller Center 191,000 3.2
50 W. 23rd Street............. 1892/1992 Chelsea 333,000 5.5
ACQUIRED PROPERTIES
110 East 42nd Street.......... 1921 Grand Central North 251,000 4.1
17 Battery Place(7)........... 1906/1973 World Trade/Battery 811,000 13.3
633 Third Avenue (partial
interest)(8)................ 1962/1996 Grand Central North 41,000 0.7
1466 Broadway................. 1907/1982 Times Square 289,000 4.8
420 Lexington Avenue
(the Graybar Building)(9)... 1927/1982 Grand Central North 1,188,000 19.6
321 West 44th Street.......... 1929 Times Square 203,000 3.4
PENDING ACQUISITIONS
440 Ninth Avenue.............. 1927/1989 Garment 339,000 5.6
38 East 30th Street........... 1915/1996 Park Avenue South/Flatiron 91,000 1.5
116 Nassau Street (Brooklyn).. 1931/1994 Northwest Brooklyn 100,000 1.7
711 Third Avenue(10).......... 1955 Grand Central North 524,000 8.6
----------- -----
Total/Weighted Average........ 6,056,000(13) 100.0%
----------- -----
----------- -----

ANNUAL
NET
ANNUALIZED EFFECTIVE
PERCENTAGE RENT RENT
OF PER PER
PORTFOLIO NUMBER LEASED LEASED
PERCENT ANNUALIZED ANNUALIZED OF SQUARE SQUARE
PROPERTIES LEASED RENT(1) RENT LEASES FOOT(2) FOOT(3)
- ------------------------------ ------- ------------ ---------- ------ ---------- ---------

INITIAL PROPERTIES
673 First Avenue(4)........... 100% $ 10,912,915 8.6% 15 $25.86 $21.79
470 Park Avenue South(5)...... 99 5,994,254 4.7 27 23.21 19.42
Bar Building(4)(6)............ 99 4,559,339 3.6 70 27.95 24.51
70 W. 36th Street............. 100 2,850,097 2.3 37 18.88 16.03
1414 Avenue of the Americas... 99 3,409,628 2.7 32 30.98 30.97
29 W. 35th Street............. 92 1,407,620 1.1 8 19.73 16.22
1372 Broadway................. 92 10,375,221 8.2 32 22.26 22.71
1140 Avenue of the
Americas(4)................. 99 5,035,238 4.0 41 26.61 26.46
50 W. 23rd Street............. 86 5,647,325 4.3 14 19.70 18.61
ACQUIRED PROPERTIES
110 East 42nd Street.......... 92 5,469,318 4.5 32 23.60 24.05
17 Battery Place(7)........... 79 13,073,251 10.4 38 20.52 21.23
633 Third Avenue (partial
interest)(8)................ 99 1,030,920 0.8 3 25.38 43.98
1466 Broadway................. 87 8,155,597 6.4 157 32.41 30.68
420 Lexington Avenue
(the Graybar Building)(9)... 86 27,450,607 21.8 301 26.80 25.45
321 West 44th Street.......... 96 2,748,406 2.2 29 14.10 14.04
PENDING ACQUISITIONS
440 Ninth Avenue.............. 76 4,681,118 3.7 20 18.22 16.68
38 East 30th Street........... 79 1,580,201 1.2 5 21.86 24.50
116 Nassau Street (Brooklyn).. 93 1,176,048 0.9 2 12.65 12.26
711 Third Avenue(10).......... 79(11) 10,894,291 ) 8.6 24 28.88(12) 27.44(12)
------- ------------ ----- ------ ---------- ---------
Total/Weighted Average........ 88% $126,451,394 100.0% 887 $23.87 $22.86
------------ ----- ------
------------ ----- ------

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

(1) As used throughout this Prospectus, Annualized Rent represents the monthly
contractual rent under existing leases as of December 31, 1997 multiplied by
12. This amount reflects total rent before any rent abatements and includes
expense reimbursements, which may be estimated as of such date. Total rent
abatements for leases in effect as of December 31, 1997 for the 12 months
ending December 31, 1998 are approximately $888,000.

(2) Annualized Rent Per Leased Square Foot, as used throughout this Prospectus,
represents Annualized Rent, as described in footnote (1) above, presented on
a per leased square foot basis.

(3) As used throughout this Prospectus, Annual Net Effective Rent Per Leased
Square Foot represents (a) for leases in effect at the time an interest in
the relevant property was first acquired by the Company or its predecessors,
the remaining lease payments under the lease including escalations
(excluding operating expense pass-throughs, if any) divided by the number of
months remaining under the lease multiplied by 12 and (b) for leases entered
into after an interest in the relevant property was first acquired by the
Company or its predecessors and for leases at the Acquired Properties, all
lease payments under the lease including escalations (excluding operating
expense pass-throughs, if any) divided by the number of months in the lease
multiplied by 12, and, in the case of both (a) and (b), minus tenant
improvement costs and leasing commissions, if any, paid or payable by the
Company or its predecessors and presented on a per leased square foot basis.
Annual Net Effective Rent Per Leased Square Foot includes future contractual
increases in rental payments and therefore, in certain cases, may exceed
Annualized Rent Per Leased Square Foot.

(4) The Company holds a long-term leasehold interest in the land and
improvements with respect to this Property. See "--673 First Avenue," "-- 36
West 44th Street (The Bar Building)" and "--1140 Avenue of the Americas."

(5) 470 Park Avenue South is comprised of two buildings, 468 Park Avenue South
(a 17-story office building) and 470 Park Avenue South (a 12-story office
building).

(6) The Bar Building is comprised of two buildings, 36 West 44th Street (a
14-story building) and 35 West 43rd Street (a four-story building).

(7) The Company has a co-tenancy interest in this Property. See "--17 Battery
Place."

(9) The Company holds an operating sublease interest in the land and
improvements with respect to this Property. See "--420 Lexington Avenue (The
Graybar Building)."

(10) The Company will hold a leasehold mortgage interest, a net sub-leasehold
interest and a co-tenancy interest in this property. See "The
Properties--Pending Acquisitions--711 Third Avenue."

(11) Does not count the 45,000 square foot garage as a lease or as part of the
property's rentable square feet. The garage is operated by a third party
pursuant to a management contract. If the garage were counted as leased, the
percent leased at this Pending Acquisition would have been 8.1%.

(12) Does not include rent from the 45,000 square foot garage at this property.

(13) Includes approximately 5,602,600 square feet of rentable office space,
348,700 square feet of rentable retail space 29,700 square feet of mezzanine
space and 75,000 square feet of garage space.

HISTORICAL OCCUPANCY. The Company has historically achieved consistently
higher occupancy rates in comparison to the overall Class B Midtown Markets, as
shown in the following table:

OCCUPANCY RATE OF CLASS B
PERCENT OFFICE PROPERTIES
LEASED AT THE IN THE MIDTOWN
PROPERTIES (1) MARKETS (2)
----------------- -----------------------------

December 31, 1997............................................... 94% 90%
December 31, 1996............................................... 95 89
December 31, 1995............................................... 95 87
December 31, 1994............................................... 98 86
December 31, 1993............................................... 96 84

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

(1) Includes space for leases that were executed as of the relevant date in
Properties owned by the Company or SL Green as of that date.

(2) Includes vacant space available for direct lease, but does not include
vacant space available for sublease; including vacant space available for
sublease would reduce the occupancy rate as of each date shown. Sources:
RELocate, Rosen Consulting Group.

LEASE EXPIRATIONS. Leases at the Properties, as at many other Manhattan
office properties, typically extend for a term of ten or more years, compared to
typical lease terms of 5-10 years in other large U.S. office markets. From
January 1, 1994 through December 31, 1997, the Company or its predecessor
renewed approximately 75% of the leases scheduled to expire at the Properties
owned and managed by the Company or its predecessor during such period,
constituting renewal of approximately 75% of the expiring rentable square
footage during such period. Through December 31, 2002, the average annual
rollover at the Properties and the Pending Acquisitions is approximately 503,205
square feet, representing an average annual expiration of 9.5% of the total
leased square feet at the Properties and the Pending Acquisitions per year
(assuming no tenants exercise renewal or cancellation options and no tenant
bankruptcies or other tenant defaults).

The following table sets out a schedule of the annual lease expirations at
the Properties and the Pending Acquisitions with respect to leases in place as
of December 31, 1997 for each of the next ten years and thereafter (assuming
that no tenants exercise renewal or cancellation options and that there are no
tenant bankruptcies or other tenant defaults):

ANNUALIZED
RENT
PERCENTAGE PER
SQUARE OF ANNUALIZED LEASED
NUMBER FOOTAGE TOTAL RENT SQUARE
OF OF LEASED OF FOOT OF
EXPIRING EXPIRING SQUARE EXPIRING EXPIRING
YEAR OF LEASE EXPIRATION LEASES LEASES FEET LEASES(1) LEASES (2)
- -------------------------------------------------- ----------- ---------- ----------- -------------- ---------------

1998.............................................. 198 572,933 10.8% $ 13,955,352 $ 24.36
1999.............................................. 140 368,202 7.0 9,923,624 26.95
2000.............................................. 133 459,661 8.7 12,513,246 27.22
2001.............................................. 99 470,685 8.9 11,693,474 24.84
2002.............................................. 100 644,543 12.2 14,025,288 21.76
2003.............................................. 51 345,817 6.5 9,169,117 26.51
2004.............................................. 41 460,231 8.7 10,825,965 23.52
2005.............................................. 30 440,608 8.3 10,273,002 23.32
2006.............................................. 25 302,901 5.7 7,181,423 23.71
2007.............................................. 37 508,079 9.6 11,127,939 21.90
2008 & thereafter................................. 33 723,835 13.6 15,762,962 21.78
--- ---------- ----- -------------- ------
Total/weighted average........................ 887 5,297,495 100.0% $ 126,451,392 $ 23.87
--- -----
--- -----

ANNUALIZED
RENT PER
LEASED
SQUARE FOOT
OF EXPIRING
LEASES WITH
FUTURE
YEAR OF LEASE EXPIRATION STEP-UPS(3)
- -------------------------------------------------- -----------

1998.............................................. $ 24.42
1999.............................................. 27.16
2000.............................................. 27.60
2001.............................................. 25.68
2002.............................................. 22.61
2003.............................................. 30.33
2004.............................................. 27.61
2005.............................................. 25.19
2006.............................................. 27.79
2007.............................................. 25.63
2008 & thereafter................................. 28.28
-----------
Total/weighted average........................ $ 26.34(4)

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

(1) Annualized Rent of Expiring Leases, as used throughout this Prospectus,
represents the monthly contractual rent under existing leases as of December
31, 1997 multiplied by 12. This amount reflects total rent before any rent
abatements and includes expense reimbursements, which may be estimated as of
such date. Total rent abatements for leases in effect as of December 31,
1997 for the 12 months ending December 31, 1998 are approximately $888,000.

(2) Annualized Rent Per Leased Square Foot of Expiring Leases, as used
throughout this Prospectus, represents Annualized Rent of Expiring Leases,
as described in footnote (1) above, presented on a per leased square foot
basis.

(3) Annualized Rent Per Leased Square Foot of Expiring Leases With Future
Step-Ups represents Annualized Rent Per Leased Square Foot of Expiring
Leases, as described in footnote (2) above, adjusted to reflect contractual
increases in monthly base rent that occur after December 31, 1997.

(4) For comparison purposes, the Direct Weighted Average Rental Rate for the
Class B Midtown Markets, according to RELocate (as adjusted by the Company
to weight the representation of the Properties in the Chelsea, Grand Central
North, Grand Central South, Garment, Park Avenue South/Flatiron, Rockefeller
Center and Times Square submarkets), was $27.15 per square foot as of
December 31, 1997. The Direct Weighted Average Rental Rate represents the
weighted average of asking rental rates for direct Class B office space as
it relates to the Properties, except for 17 Battery Place which is located
in the World Trade/Battery submarket of the downtown Manhattan office
market. Asking rental rates generally are higher than actual rental rates
(which generally are not publicly available). In addition, the Direct
Weighted Average Rental Rate represents a large number of Class B properties
in various locations within the Midtown Markets, and, therefore, may not be
representative of asking or actual rental rates at the Properties.
Additionally, the Annualized Rent Per Leased Square Foot of Expiring Leases
includes the effect of retail rental rates at the Properties, which are
generally higher than office rental rates. Excluding rental payments
attributable to retail space at the Properties, the Weighted Average
Annualized Rent Per Leased Square Foot of Expiring Leases would be $23.14.

TENANT DIVERSIFICATION. The Properties and the Pending Acquisitions
currently are leased to over 860 tenants which are engaged in a variety of
businesses, including publishing, health services, retailing and banking. The
following table sets forth information regarding the leases with respect to the
20 largest tenants at the Properties and the Pending Acquisitions, based on the
amount of square footage leased by such tenants as of December 31, 1997:

PERCENTAGE
OF
AGGREGATE
PORTFOLIO
REMAINING LEASED
LEASE TERM TOTAL LEASED SQUARE ANNUALIZED
TENANT(1) PROPERTIES IN MONTHS SQUARE FEET FEET RENT
- -------------------------------------------- ----------------------- ------------- ------------ ------------- ----------

City Of New York............................ 17 Battery Place 120 287,931 5.4% $5,614,655
NYANA....................................... 17 Battery Place 60 124,254 2.3 2,609,334
Greenpoint Savings Bank(2).................. 110 East 42nd Street 35 109,939 2.1 2,569,898
MetroNorth.................................. Graybar Building 205 107,208 2.0 2,466,060
Board Of Education of the City of New 50 West 23rd Street
York(3)................................... 116 Nassau Street 143 106,000 2.0 1,074,713
Dow Jones................................... Graybar Building 43 88,372 1.7 2,492,269
Parade Publications......................... 711 Third Avenue 152 82,444 1.6 1,874,200
Kallir, Philips & Ross...................... 673 First Avenue 78 80,000 1.5 1,911,453
New York Hospital........................... 673 First Avenue 104 76,000 1.4 1,906,829
Gibbs & Cox................................. 50 West 23rd Street 90 66,700 1.3 1,591,802
Capital-Mercury............................. 1372 Broadway 91 64,122 1.2 1,292,732
Ann Taylor.................................. 1372 Broadway 151 58,975 1.1 1,169,118
NationsBank................................. 1372 Broadway 27 55,238 1.0 1,364,343
Vollmer Associates.......................... 50 West 23rd Street 90 53,577 1.0 1,307,501
Dun & Bradstreet............................ 711 Third Avenue 4 53,454 1.0 1,262,321
FEGS........................................ 116 Nassau Street 54 51,000 1.0 823,810
Ross Stores................................. 1372 Broadway 110 50,599 1.0 973,760
Newbridge Communications.................... 673 First Avenue 94 49,000 0.9 1,455,930
Newport News................................ 711 Third Avenue 159 48,468 0.9 1,169,832
J. Walter Thompson.......................... Graybar Building 104 47,977 0.9 1,206,223
----- ------------ --- ----------
TOTAL/Weighted Average(4)................... 96 1,661,258 31.4% $36,136,783
----- ------------ --- ----------
----- ------------ --- ----------

PERCENTAGE
OF
AGGREGATE
PORTFOLIO
ANNUALIZED
TENANT(1) RENT
- -------------------------------------------- ---------------

City Of New York............................ 4.4%
NYANA....................................... 2.1
Greenpoint Savings Bank(2).................. 2.0
MetroNorth.................................. 2.0
Board Of Education of the City of New
York(3)................................... 0.8
Dow Jones................................... 2.0
Parade Publications......................... 1.5
Kallir, Philips & Ross...................... 1.5
New York Hospital........................... 1.5
Gibbs & Cox................................. 1.3
Capital-Mercury............................. 1.0
Ann Taylor.................................. 0.9
NationsBank................................. 1.1
Vollmer Associates.......................... 1.0
Dun & Bradstreet............................ 1.0
FEGS........................................ 0.7
Ross Stores................................. 0.8
Newbridge Communications.................... 1.1
Newport News................................ 0.9
J. Walter Thompson.......................... 1.0
---
TOTAL/Weighted Average(4)................... 28.6%
---
---

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

(1) This list is not intended to be representative of the Company's tenants as a
whole.

(2) 76,241 square feet expires September 1998, 17,842 square feet expires
December 1999, 15,856 square feet expires December 2003.

(3) 64,000 square feet at 50 West 23rd Street expires June 2010 and 42,000
square feet at 116 Nassau Street expires March 2009.

(4) Weighted average calculation based on total rentable square footage leased
by each tenant.

LEASE DISTRIBUTION. The following table sets forth information relating to
the distribution of leases at the Properties and the Pending Acquisitions, based
on rentable square feet under lease, as of December 31, 1997:

PERCENTAGE
OF AGGREGATE
PORTFOLIO
LEASED
SQUARE FEET NUMBER OF PERCENT OF TOTAL LEASED SQUARE ANNUALIZED
UNDER LEASE LEASES ALL LEASES SQUARE FEET FEET RENT
------------- ------------- ----------- ------------ ------------- --------------

2,500 or less...................................... 519 58.5% 601,155 11.4% $ 17,139,076
2,501-5,000........................................ 155 17.5 539,402 10.2 14,537,095
5,001-7,500........................................ 62 7.0 371,886 7.0 9,590,314
7,501-10,000....................................... 41 4.6 365,646 6.9 8,449,977
10,001-20,000...................................... 55 6.2 820,882 15.5 21,216,988
20,001-39,999...................................... 24 2.7 601,088 11.3 11,649,207
40,000 + .......................................... 31 3.5 1,997,436 37.7 43,868,732
--- ----- ------------ ----- --------------
TOTAL.............................................. 887 100.0% 5,297,495 100.0% $ 126,451,389
--- ----- ------------ ----- --------------
--- ----- ------------ ----- --------------

PERCENTAGE
OF
AGGREGATE
PORTFOLIO
SQUARE FEET ANNUALIZED
UNDER LEASE RENT
------------- ---------------

2,500 or less...................................... 13.6%
2,501-5,000........................................ 11.5%
5,001-7,500........................................ 7.6%
7,501-10,000....................................... 6.7%
10,001-20,000...................................... 16.8%
20,001-39,999...................................... 9.2%
40,000 + .......................................... 34.6%
-----
TOTAL.............................................. 100.0%
-----
-----

TENANT RETENTION AND HISTORICAL LEASE RENEWALS. The Company works closely
with its tenants to provide a high level of tenant services. The Company
continually seeks to improve its tenant roster by attracting high-quality
tenants to the Properties and seeks to stabilize its rent roll through the early
extension of near-term expiring leases. From January 1, 1994 through December
31, 1997, the Company or its predecessor renewed approximately 75% of the leases
scheduled to expire at the Properties owned and managed by the Company or its
predecessor during such period, constituting renewal of approximately 75% of the
expiring rentable square footage during such period. The following table sets
forth certain historical information regarding tenants at such Properties who
renewed an existing lease at or prior to the expiration of such lease:

TOTAL/
WEIGHTED
AVERAGE
JANUARY 1,
1994-
DECEMBER 31,
1994 1995 1996 1997 1997
--------- --------- --------- --------- ------------

Number of leases expired during calendar year or period..... 5 12 31 32 80
Number of leases renewed.................................... 5 7 26 22 60
Percentage of leases renewed................................ 100.0% 58.3% 83.9% 68.8% 75.0%
Aggregate rentable square footage of expiring leases........ 14,223 38,008 137,932 104,941 295,104
Aggregate rentable square footage of lease renewals......... 14,223 28,055 108,758 70,313 221,349
Percentage of expiring rentable square foot renewed......... 100.0% 73.8% 78.9% 67.0% 75.0%

HISTORICAL TENANT IMPROVEMENTS AND LEASING COMMISSIONS. The following table
sets forth certain historical information regarding tenant improvement and
leasing commission costs for tenants at the Properties then owned by the Company
or its predecessors for the years 1994 through 1997:

1994 1995 1996 1997
--------- --------- ---------- ----------

RENEWALS
Number of leases.................................................. 5 7 26 22
Square feet....................................................... 14,223 28,055 108,758 70,313
Tenant improvement costs per square foot.......................... $ 1.96 $ 0.00 $ 2.39 $ 1.34
Leasing commission costs per square foot.......................... $ 1.77 $ 1.99 $ 3.36 $ 2.27
--------- --------- ---------- ----------
Total tenant improvement and leasing commission costs per square
foot.......................................................... $ 3.73 $ 1.99 $ 5.75 $ 3.61
--------- --------- ---------- ----------
--------- --------- ---------- ----------
RE-TENANTED OR NEWLY TENANTED SPACE
Number of leases.................................................. 8 7 11 45
Square feet....................................................... 42,632 25,787 36,911 156,777
Tenant improvement costs per square foot.......................... $ 16.41 $ 22.73 $ 13.76 $ 16.93
Leasing commission costs per square foot.......................... $ 7.27 $ 4.55 $ 9.41 $ 8.15
--------- --------- ---------- ----------
Total tenant improvement and leasing commission costs per square
foot.......................................................... $ 23.68 $ 27.28 $ 23.17 $ 25.08
--------- --------- ---------- ----------
--------- --------- ---------- ----------
TOTAL
Number of leases.................................................. 13 14 37 67
Square feet....................................................... 56,855 53,842 145,669 227,090
Tenant improvement costs per square foot.......................... $ 12.80 $ 10.88 $ 5.27 $ 12.10
Leasing commission costs per square foot.......................... $ 5.90 $ 3.21 $ 4.90 $ 6.33
--------- --------- ---------- ----------
Total tenant improvement and leasing commission costs per square
foot.......................................................... $ 18.70 $ 14.09 $ 10.17 $ 18.43
--------- --------- ---------- ----------
--------- --------- ---------- ----------

TOTAL/WEIGHTED
AVERAGE
JANUARY 1,
1994-DECEMBER 31,
1997
-----------------

RENEWALS
Number of leases.................................................. 60
Square feet....................................................... 221,349
Tenant improvement costs per square foot.......................... $ 1.73
Leasing commission costs per square foot.......................... $ 2.74
--------
Total tenant improvement and leasing commission costs per square
foot.......................................................... $ 4.47
--------
--------
RE-TENANTED OR NEWLY TENANTED SPACE
Number of leases.................................................. 71
Square feet....................................................... 262,107
Tenant improvement costs per square foot.......................... $ 16.97
Leasing commission costs per square foot.......................... $ 7.83
--------
Total tenant improvement and leasing commission costs per square
foot.......................................................... $ 24.80
--------
--------
TOTAL
Number of leases.................................................. 131
Square feet....................................................... 483,456
Tenant improvement costs per square foot.......................... $ 9.99
Leasing commission costs per square foot.......................... $ 5.50
--------
Total tenant improvement and leasing commission costs per square
foot.......................................................... $ 15.49(1)
--------
--------

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

(1) The cost of leasing vacant space (i.e., newly-tenating) generally exceeds
the cost of renewing or retenating occupied space. During the period January
1, 1994 through December 31, 1997, certain of the Properties were in a
lease-up phase. In the event the weighted average of total tenant
improvement costs and leasing commission per square foot were calculated
assuming a 75% renewal rate on expiring square footage and percentage leased
rate throughout such period equal to 90% (the percentage leased rate at the
Properties as of December 31, 1997), such weighted average per square foot
amount would be $9.55.

HISTORICAL CAPITAL EXPENDITURES. The Company often acquires underperforming
properties and enhances their value through renovation or repositioning programs
followed by regular capital expenditure programs. Within the next 18 months, the
Company anticipates spending $25 million in redevelopment costs and capital
improvements at the Properties and the Pending Acquisitions, of which
approximately $21 million is designated for the Acquired Properties and the
Pending Acquisitions. These costs are expected to be paid from operating cash
flows, proceeds from debt and equity financings and borrowings under the Credit
Facility.

Prior to acquisition each property under consideration is evaluated to
determine an initial capital budget. The extent of these improvements is
predicated on the physical condition and vacancy at the property, and the
anticipated target market rent. Ongoing capital budgets are determined annually
and are geared toward addressing tenant rollover and changing target market
rent.

The following table sets forth information regarding historical capital
expenditures at the six properties owned by SL Green immediately prior to the
IPO (except for the Bar Building, an interest in which was first acquired in
October 1996) for the years 1995 through 1997:

1995 1996 1997 TOTAL
---------- ---------- ---------- ------------

673 First Ave................................................... $ 52,369 $ 15,636 $ 82,050 $ 150,055
470 Park Ave. So. .............................................. $ -- $ 130,700(2) $ 81,493 $ 212,193
70 W. 36th St. ................................................. $ 24,717 $ 178,521(4) $ 17,101 $ 220,339
1414 Ave. of Americas (5)....................................... $ -- $ 132,459(6) $ 93,250 $ 225,709
29 W. 35th St. ................................................. $ 176,123(7) $ 98,786(8) $ 13,023 $ 287,932
---------- ---------- ---------- ------------
Total......................................................... $ 253,209 $ 556,102 $ 286,917 $ 1,096,228
---------- ---------- ---------- ------------
---------- ---------- ---------- ------------
Total Square Feet............................................... 1,021,000 1,021,000 1,021,000 1,021,000
Capital Expenditures Per Square Foot............................ $0.25 $0.54 $0.28 $0.36(9)

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

(1) Expenditures included asbestos abatement, new boiler and new roof-top
structures.

(2) Expenditures included partial elevator modernization.

(3) Expenditures included elevator modernization.

(4) Expenditures included new boiler, exit signs and fire doors.

(5) SL Green's interest in 1414 Avenue of the Americas was acquired in May,
1996; however, SL Green managed the Property for prior ownership since
December 1989.

(6) Expenditures included floor renovations, ADA bathrooms, new windows and
parapet.

(7) Expenditures included elevator modernization.

(8) Expenditures included new roof.

(9) Weighted average.

673 FIRST AVENUE

673 First Avenue is a 12-story office building that occupies the entire
block front on the west side of First Avenue between East 38th Street and East
39th Street in the Grand Central South submarket of the Manhattan office market.
673 First Avenue contains approximately 422,000 rentable square feet (including
approximately 366,000 square feet of office space, 26,000 square feet of retail
space and a 30,000 square foot garage), with floor plates of approximately
40,000 square feet on all but the top two floors. The building, located three
blocks from the United Nations, was completed in 1928 and converted from a
warehouse/distribution facility to an office building by the Company's
Predecessor in 1989 and 1990. The Company holds a net leasehold interest (which
expires in 2037) in the Property and a ground leasehold interest (which expires
in 2037) in the land underlying the Property. See "Risk Factors--The Company's
Performance and Value are Subject to Risks Associated with the Real Estate
Industry--The expiration of net leases and operating subleases could adversely
affect the Company's financial condition."

At 673 First Avenue, the Company's Predecessor converted a distribution and
warehouse facility into an office property to take advantage of desirable 40,000
square foot floor plates and a strategic location near the United Nations
complex. To accomplish the repositioning, the Company's Predecessor invested
approximately $25 million in the Property for (i) new building entrance, lobby
and storefronts, (ii) complete replacement of the elevator systems, (iii) the
creation of common areas, (iv) entirely reconfigured HVAC and electrical systems
and (v) the build-out of tenant spaces. The repositioning resulted in the
conversion of a 43% occupied warehouse/distribution facility into a 100%
occupied Class B office building within 24 months. The Property's net operating
income (NOI) increased dramatically from approximately $466,000 per annum upon
acquisition to approximately $7.6 million per annum following repositioning and
lease-up (exclusive of net lease payments and debt service payments).

As of December 31, 1997, 100% of the rentable office and retail square
footage in 673 First Avenue was leased. The following table sets forth certain
information with respect to the Property:

ANNUAL NET
EFFECTIVE
ANNUALIZED RENT
RENT PER LEASED PER LEASED
YEAR-END PERCENT LEASED SQUARE FOOT SQUARE FOOT
- ----------------------------------------------------------------- ----------------- ----------------- -------------

1997............................................................. 100% $ 25.86 $ 21.79

1996............................................................. 100 25.12 21.79

1995............................................................. 97 24.83 21.66

1994............................................................. 100 23.83 21.47

1993............................................................. 100 23.48 21.50

As of December 31, 1997, 673 First Avenue was leased to 15 tenants operating
in various industries, including healthcare, advertising and publishing, three
of whom occupied 10% or more of the rentable square footage at the Property. A
major New York City hospital occupied approximately 76,000 square feet
(approximately 18% of the Property) under two leases expiring on August 31,
2006, that provide for an aggregate annualized base rent as of December 31, 1997
of approximately $1.9 million (approximately $25.00 per square foot) and renewal
options for five years on the two direct leases. In addition, such tenant
occupies an additional 65,000 square feet under two subleases, one expiring on
December 31, 2003 and the other expiring on December 31, 2004. In addition to
annualized base rent, this tenant pays real estate tax escalations and operating
escalations in excess of a base year amount.

In addition, an advertising firm occupied approximately 80,000 square feet
(approximately 19% of the Property) under a lease expiring on June 30, 2004 that
provides for annualized base rent as of December 31, 1997 of approximately $1.76
million (approximately $22.00 per square foot). In addition to annualized base
rent, this tenant pays real estate tax escalations and operating escalations in
excess of a base year amount.

Also, a publishing company occupied approximately 49,000 square feet
(approximately 11.6% of the Property) under two leases expiring on October 31,
2005 that provide for an aggregate annualized base rent as of December 31, 1997
of approximately $1.37 million (approximately $28.00 per square foot). In
addition, such tenant occupies an additional 13,000 square feet under a sublease
expiring on April 30, 2004. In addition to annualized base rent, this tenant
pays real estate tax escalations and operating escalations in excess of a base
year payment.

The following table sets out a schedule of the annual lease expirations at
673 First Avenue for leases executed as of December 31, 1997 with respect to
each of the next ten years and thereafter (assuming that no tenants exercise
renewal or cancellation options and that there are no tenant bankruptcies or
other tenant defaults):

ANNUALIZED
RENT PER
PERCENTAGE ANNUALIZED LEASED
SQUARE OF ANNUALIZED RENT PER SQUARE FOOT
NUMBER FOOTAGE TOTAL RENT LEASED OF EXPIRING
OF OF LEASED OF SQUARE FOOT LEASES WITH
EXPIRING EXPIRING SQUARE EXPIRING OF EXPIRING FUTURE
YEAR OF LEASE EXPIRATION LEASES LEASES FEET LEASES LEASES (1) STEP-UPS
- ---------------------------------------------- ----------- --------- ----------- ------------- ----------- -----------

1998.......................................... -- -- -- -- -- --
1999.......................................... 1 1,018 0.2% $ 10,180 $ 10.00 $ 10.00
2000.......................................... 1 100 -- 46,434 464.34(2) 511.94(2)
2001.......................................... -- -- -- -- -- --
2002.......................................... 1 1,046 0.2 22,835 21.83 24.57
2003.......................................... 2 80,300 19.1 2,309,628 28.76 36.16
2004.......................................... 6 203,944 48.3 4,895,944 24.01 28.62
2005.......................................... 1 49,000 11.7 1,455,931 29.71 32.46
2006.......................................... 1 76,000 18.0 1,906,829 25.09 27.35
2007.......................................... -- -- -- -- -- --
2008 and thereafter........................... 2 10,659 2.5 265,134 24.87 35.55
--- --------- ----- ------------- ----------- -----------
SUBTOTAL/WEIGHTED AVERAGE..................... 15 422,067 100.0% $ 10,912,915 $ 25.86 $ 30.51(3)
Unleased at 12/31/97.......................... -- --
--------- -----
TOTAL..................................... 422,067 100.0%
--------- -----
--------- -----

- ------------------------
(1) For comparison purposes, according to RELocate, the Direct Weighted Average
Rental Rate for the direct Class B Grand Central South submarket (which,
according to RELocate is the area bounded by 32nd Street to 40th Street,
Fifth Avenue east to the East River) was $28.44 per square foot as of
December 31, 1997. Direct Weighted Average Rental Rate represents the
weighted average of asking rental rates for direct Class B space. Asking
rental rates generally are higher than actual rental rates (which generally
are not publicly available). Therefore, the Direct Weighted Average Rental
Rate may not be representative of asking or actual rental rates at 673 First
Avenue.

(2) These rental rates reflect the lease of approximately 100 square feet of
roof and office space at the Property for the placement of cellular
telephone antennas and equipment.

(3) The differential between Annualized Rent Per Leased Square Foot of Expiring
Leases and Annualized Rent Per Leased Square Foot of Expiring Leases with
Future Step-Ups is attributable to significant contractual step-ups in base
rental rates that exist in certain leases at this Property.

The aggregate undepreciated tax basis of depreciable real property at 673
First Avenue for Federal income tax purposes was $19,193,732 as of December 31,
1997. Depreciation and amortization are computed for Federal income tax purposes
on the straight-line method over lives which range up to 39 years.

The current real estate tax rate for all Manhattan office properties is
$10.164 per $100 of assessed value. The total annual tax for 673 First Avenue at
this rate for the 1997-98 tax year is $1,236,756 (at a taxable assessed value of
$12,168,000).

470 PARK AVENUE SOUTH

470 Park Avenue South is comprised of two buildings, 468 Park Avenue South
(a 17-story building) and 470 Park Avenue South (a 12-story building), that
occupy the entire blockfront on the west side of Park Avenue South between East
31st and East 32nd Streets in the Park Avenue South/Flatiron submarket of the
Manhattan office market. The buildings are joined together by a single lobby and
common base building systems. 468 Park Avenue South was completed in 1912 and
470 Park Avenue South was completed in 1917. Various portions of the common
areas of both buildings were substantially renovated in 1987, 1990 and 1994. The
Company owns a 100% fee simple interest in this Property. The Property contains
an aggregate of approximately 260,000 rentable square feet (including
approximately 232,000 square feet of office space and approximately 28,000
square feet of retail space), with floor plates of approximately 8,400 square
feet in the 468 building and floor plates of approximately 9,735 square feet in
the 470 building.

As of December 31, 1997, 99% of the rentable square footage in 470 Park
Avenue South was leased (including space for leases that were executed as of
December 31, 1997). The office space was 99% leased and the retail space was
100% leased. The following table sets forth certain information with respect to
the Property:

ANNUAL NET
EFFECTIVE
ANNUALIZED RENT RENT
PER LEASED PER LEASED
YEAR-END PERCENT LEASED SQUARE FOOT SQUARE FEET
- ------------------------------------------------------------------ ------------------- --------------- -------------

1997.............................................................. 99% $ 23.21 $ 19.42
1996.............................................................. 95 21.93 19.57
1995.............................................................. 93 21.79 18.50
1994.............................................................. 99 21.23 17.82
1993.............................................................. 98 21.15 17.62

As of December 31, 1997, 470 Park Avenue South was leased to 27 tenants
operating in various industries, including financial services, publishing and
general contracting, one of whom leased 10% or more of the Property's rentable
square feet. A general contractor occupied approximately 27,870 square feet
(approximately 11% of the Property) under a lease expiring on December 31, 2009
that provides for annualized base rent as of December 31, 1997 of approximately
$621,000 (approximately $22.28 per square foot). In addition to annualized base
rent, this tenant pays real estate tax escalations and operating escalations in
excess of a base year amount.

The following table sets out a schedule of the annual lease expirations at
470 Park Avenue South with respect to leases executed as of December 31, 1997
for each of the next ten years and thereafter (assuming that no tenants exercise
renewal or cancellation options and that there are no tenant bankruptcies or
other tenant defaults):

ANNUALIZED
RENT PER
ANNUALIZED LEASED
PERCENTAGE RENT PER SQUARE FOOT
SQUARE OF ANNUALIZED LEASED OF EXPIRING
NUMBER FOOTAGE TOTAL RENT SQUARE LEASES
OF OF LEASED OF FOOT OF WITH
EXPIRING EXPIRING SQUARE EXPIRING EXPIRING FUTURE
YEAR OF LEASE EXPIRATION LEASES LEASES FOOT LEASES LEASES(1) STEP-UPS
- --------------------------------------------- ----------- ----------- ---------- ---------- --------- -----------

1998......................................... 1 2,400 0.9% $ 54,000 $22.50 $23.23
1999......................................... 3 18,800 7.2 447,793 23.82 24.44
2000......................................... 2 18,135 7.0 455,438 25.11 27.43
2001......................................... 3 19,271 7.4 483,753 25.10 28.53
2002......................................... 6 53,520 20.6 1,219,558 22.79 23.98
2003......................................... 5 61,062 23.5 1,345,941 22.04 26.58
2004......................................... 2 18,364 7.1 330,707 18.01 21.56
2005......................................... 1 9,735 3.7 198,096 20.35 22.40
2006......................................... 2 26,135 10.1 667,166 25.53 31.82
2007......................................... 1 3,000 1.2 156,000 52.00 83.75
2008 and thereafter.......................... 1 27,870 10.7 635,803 22.81 28.53
----------- ----- ---------- --------- -----------
SUBTOTAL/WEIGHTED AVERAGE.................... 27 258,292 99.4% $5,994,255 $23.21 $26.95(2)
Unleased at 12/31/97......................... 1,637 0.6%
----------- -----
TOTAL.................................... 259,929 100.0%
----------- -----
----------- -----

- ------------------------
(1) For comparison purposes, according to RELocate, the Direct Weighted Average
Rental Rate for the direct Class B Park Avenue South/Flatiron submarket
(which, according to RELocate, is the area bounded by the northside of 32nd
Street, the southside of 20th Street, First Avenue and east to Fifth Avenue
from 20th Street to 23rd Street and Broadway from 24th Street to 32nd
Street) was $23.64 per square foot as of December 31, 1997. Direct Weighted
Average Rental Rate represents the weighted average of asking rental rates
for direct Class B space. Asking rental rates generally are higher than
actual rental rates (which generally are not publicly available). Therefore,
the Direct Weighted Average Rental Rate may not be representative of asking
or actual rental rates at 470 Park Avenue South.

(2) The differential between Annualized Rent Per Leased Square Foot of Expiring
Leases and Annualized Rent Per Leased Square Foot of Expiring Leases with
Future Step-Ups is attributable to significant contractual step-ups in base
rental rates that exist in certain leases at this Property.

In 1987, 1990 and 1994, 470 Park Avenue South was substantially renovated by
the Company's predecessor to upgrade the building's amenities and services to
accommodate first class office use. The renovations were completed at a total
cost of approximately $2.6 million and included a significant restoration of the
exterior of the building, a new lobby, a cosmetic upgrade of the elevator cabs,
modernization of the elevator machinery, new plumbing risers, electrical service
upgrades, heating plant replacement, asbestos abatement, installation of a new
roofing system and new windows and replacement of the bathrooms and HVAC systems
on a floor by floor basis.

The aggregate undepreciated tax basis of depreciable real property at 470
Park Avenue South for Federal income tax purposes was $15,283,589 as of December
31, 1997. Depreciation and amortization are computed on the straight-line method
over 39 years.

The current real estate tax rate for all Manhattan office properties is
$10.164 per $100 of assessed value. The total annual tax for 470 Park Avenue
South at this rate for the 1997-98 tax year is $654,053 (at an assessed value of
$6,435,000).

36 WEST 44TH STREET (THE BAR BUILDING)

36 West 44th Street (the Bar Building) is comprised of two buildings, 36
West 44th Street (a 14-story building) and 35 West 43rd Street (a four-story
building), located on the south side of West 44th Street through to the north
side of West 43rd Street between Fifth and Avenue of the Americas in the
Rockefeller Center submarket of the Manhattan office market. The buildings were
completed in 1922 and, as discussed below, a renovation program is underway. The
Property contains approximately 165,000 rentable square feet (including
approximately 148,500 square feet of office space and approximately 16,500
square feet of retail space), with floor plates of approximately 12,000 square
feet at the 44th Street building and floor plates of approximately 2,200 square
feet at the 43rd Street building. The Company owns a leasehold interest (which
expires in 2080) in the land and building at 35 West 43rd Street and fee simple
title to the building at 36 West 44th Street. See "Risk Factors--The Company's
Performance and Value are Subject to Risks Associated with the Real Estate
Industry--The expiration of net leases and operating subleases could adversely
affect the Company's financial condition."

The Bar Building is centrally located on 44th Street between Fifth Avenue
and Avenue of the Americas, in the heart of midtown Manhattan, a block that
includes the headquarters of the Association of the Bar of the City of New York,
the University of Pennsylvania Alumni Club, the Harvard Club, the Algonquin
Hotel, the Royalton Hotel and the Mansfield Hotel. A new Sofitel hotel is
planned for the vacant parcel of land located across the street from the Bar
Building. This location is within two and one half blocks of Grand Central
Terminal, four blocks of Rockefeller Center and five blocks of the Port
Authority Bus Terminal, a major transportation hub for commuters from New
Jersey.

When the Company's Predecessor first purchased its interest in the Bar
Building in October 1996, approximately 35,000 square feet of space was vacant
and approximately 70,000 square feet of space was subject to leases expiring
within 18 months. The Property was nearing the end of a consensual foreclosure
process during which little capital was spent on preventive maintenance or
leasing incentives. Since the purchase of its interest, the Company has
implemented an aggressive leasing and marketing campaign in conjunction with a
strategic property-wide renovation program. The renovation work, which will be
completed at an aggregate cost of approximately $1.1 million, includes roof
repair, facade restoration and steam cleaning, window upgrade, entrance and
lobby upgrade, sidewalk replacement and public corridor renovations. As of
December 31, 1997, approximately 1,600 square feet of space at the Property was
vacant and approximately 99% of the expiring leases were renewed.

As of December 31, 1997, approximately 99% of the rentable square footage in
the Bar Building was leased. The office space was 99% leased and the retail
space was 100% leased. The following table sets forth certain information with
respect to the Property:

1997.............................................................. 99% $ 27.95 $ 24.51
1996.............................................................. 78 29.28 25.98

As of December 31, 1997, the Bar Building was leased to 70 tenants operating
in various businesses, including legal, not-for-profit and the theater, one of
whom occupied 10% or more of the rentable square footage at the Property. A
professional organization for lawyers occupied approximately 16,777 square feet
(approximately 10.2% of the Property) under two leases expiring on September 30,
1999 that provide for an aggregate annualized base rent as of December 31, 1997
of approximately $403,000 (approximately

$24.00 per square foot). In addition to annualized base rent, this tenant pays
real estate tax escalations and operating escalations in excess of a base year
amount.

The following table sets out a schedule of the annual lease expirations at
The Bar Building with respect to leases executed as of December 31, 1997 for
each of the next ten years and thereafter (assuming that no tenants exercise
renewal or cancellation options and that there are no tenant bankruptcies or
other tenant defaults):

ANNUALIZED
ANNUALIZED RENT PER
RENT LEASED
PERCENTAGE PER SQUARE FOOT
SQUARE OF ANNUALIZED LEASED OF EXPIRING
NUMBER FOOTAGE TOTAL RENT SQUARE LEASES
OF OF LEASED OF FOOT OF WITH
EXPIRING EXPIRING SQUARE EXPIRING EXPIRING FUTURE
YEAR OF LEASE EXPIRATION LEASES LEASES FEET LEASES LEASES(1) STEP-UPS
- --------------------------------------------- --------------- --------- --------------- ------------ ----------- -----------

1998......................................... 12 15,274 9.3% $ 420,350 $ 27.52 $ 27.59
1999......................................... 4 20,726 12.5 837,094 40.39 40.68
2000......................................... 17 32,892 20.0 941,378 28.62 29.23
2001......................................... 10 18,356 11.1 521,468 28.41 30.43
2002......................................... 16 40,517 24.6 953,034 23.52 24.35
2003......................................... 3 8,069 4.9 157,210 19.48 21.55
2004......................................... 2 9,982 6.1 254,195 25.47 32.63
2005......................................... -- -- -- -- -- --
2006......................................... 2 8,095 4.9 209,407 25.87 28.74
2007......................................... 3 6,710 4.1 181,648 27.07 32.45
2008 and thereafter.......................... 1 2,532 1.5 83,556 33.00 53.75
--
--------- ----- ------------ ----------- -----------
SUBTOTAL/WEIGHTED AVERAGE.................... 70 163,153 99.0% $ 4,559,340 $ 27.95 $ 29.77
--
------------ ----------- -----------
Unleased at 12/31/97......................... 1,631 1.0%
--------- -----
TOTAL.................................... 164,784 100.0%
--------- -----
--------- -----

- ------------------------
(1) For comparison purposes, according to RELocate, the Direct Weighted Average
Rental Rate for the direct Class B Rockefeller Center submarket (which,
according to RELocate, is the area between 40th Street to 59th Street along
Avenue of the Americas and 40th Street to 52nd Street between 5th Avenue and
Avenue of the Americas) was $28.38 per square foot as of December 31, 1997.
Direct Weighted Average Rental Rate represents the weighted average of
asking rental rates for direct Class B space. Asking rental rates generally
are higher than actual rental rates (which generally are not publicly
available). Therefore, the Direct Weighted Average Rental Rate may not be
representative of asking or actual rental rates at the Bar Building.
Additionally, the Annualized Rent Per Leased Square Foot of Expiring Leases
includes the effect of retail rental rates at this Property, which are
generally higher than office rental rates. Excluding rental payments
attributable to retail space at this Property, the weighted average
Annualized Rent Per Leased Square Foot of Expiring Leases would be $27.04.

The aggregate tax basis of the mortgage indebtedness encumbering The Bar
Building (which was converted to a fee and leasehold interest on April 15, 1998)
for Federal income tax purposes was $17,181,021 as of December 31, 1997.

The current real estate tax rate for all Manhattan office properties is
$10.164 per $100 of assessed value. The total annual tax for The Bar Building at
this rate for the 1997-98 tax year is $736,382 (at an assessed value of
$7,245,000).

70 WEST 36TH STREET

70 West 36th Street is a 16-story office building located on the south side
of West 36th Street between Fifth Avenue and Sixth Avenue in the Garment
submarket of the Manhattan office market. The building, situated between Grand
Central Terminal and Penn Station, was completed in 1923 and various portions of

the common areas were renovated in 1985, 1993 and 1994. The Company owns a 100%
fee simple interest in this Property. The Property contains approximately
151,000 rentable square feet (including approximately 130,000 square feet of
office space and approximately 21,000 square feet of retail space including the
basement), with floor plates ranging from 6,500 square feet to 10,000 square
feet. The Company's headquarters is located at 70 West 36th Street.

As of December 31, 1997, approximately 100% of the rentable square footage
in 70 West 36th Street was leased (including space for leases that were executed
as of December 31, 1997). The office space was 100% leased and the retail space
was 100% leased. The following table sets forth certain information with respect
to the Property:

ANNUAL NET
EFFECTIVE
ANNUALIZED RENT RENT
PER LEASED PER LEASED
YEAR-END PERCENT LEASED SQUARE FOOT SQUARE FOOT
- ---------------------------------------------- ----------------- --------------- -------------

1997.......................................... 100% $ 18.88 $ 16.03
1996.......................................... 95 19.50 15.92
1995.......................................... 94 21.13 16.08
1994.......................................... 92 21.31 16.09
1993.......................................... 89 21.99 16.59

As of December 30, 1997, 70 West 36th Street was leased to 37 tenants
operating in various industries, including textiles, not-for-profit and
advertising, one of whom occupied 10% or more of the rentable square footage at
the Property. A textile company occupied approximately 16,222 square feet
(approximately 10.8% of the Property) under one lease expiring on December 31,
2003 that provides for an aggregate annualized base rent as of December 31, 1997
of approximately $266,000 (approximately $16.40 per square foot). In addition to
annualized base rent, this tenant pays real estate tax escalations and operating
escalations in excess of a base year amount.

The following table sets out a schedule of the annual lease expirations at
70 West 36th Street with respect to leases executed as of December 31, 1997 for
each of the next ten years and thereafter (assuming that no tenants exercise
renewal or cancellation options and that there are no tenant bankruptcies or
other tenant defaults):

ANNUALIZED
ANNUALIZED RENT PER
RENT LEASED
PERCENTAGE PER SQUARE FOOT
SQUARE OF ANNUALIZED LEASED OF EXPIRING
NUMBER FOOTAGE TOTAL RENT SQUARE LEASES
OF OF LEASED OF FOOT OF WITH
EXPIRING EXPIRING SQUARE EXPIRING EXPIRING FUTURE
YEAR OF LEASE EXPIRATION LEASES LEASES FEET LEASES LEASES(1) STEP-UPS
- ------------------------------------------------- ------------- --------- ----------- ------------ ----------- -----------

1998............................................. 7 24,165 16.0% $ 487,019 $ 20.15 $ 20.51
1999............................................. 2 3,600 2.4 78,818 21.89 22.05
2000............................................. 4 11,264 7.5 221,315 19.65 20.56
2001............................................. 8 14,193 9.3 273,932 19.30 20.28
2002............................................. 5 16,011 10.6 297,927 18.61 19.48
2003............................................. 3 33,192 22.0 579,272 17.45 19.25
2004............................................. 1 2,589 1.7 57,585 22.24 22.24
2005............................................. 2 9,047 6.0 178,310 19.71 20.47
2006............................................. 3 18,356 12.2 328,461 17.89 23.42
2007............................................. 2 18,559 12.3 347,458 18.72 19.00
2008 and thereafter.............................. -- -- -- -- -- --
--
--------- ----- ------------ ----------- -----------
SUBTOTAL/WEIGHTED AVERAGE........................ 37 150,976 100.0% $ 2,850,097 $ 18.88 $ 20.34
--
------------ ----------- -----------
Unleased at 12/31/97 -- --
--------- -----
TOTAL........................................ 150,976 100.0%
--------- -----
--------- -----

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

(1) For comparison purposes, according to RELocate the Direct Weighted Average
Rental Rate for the direct Class B Garment submarket (which, according to
RELocate is the area from 32nd Street to 40th Street, west of Avenue of the
Americas to the Hudson River) was $22.71 per square foot as of December 31,
1997. Direct Weighted Average Rental Rate represents the weighted average of
asking rental rates for direct Class B space. Asking rental rates generally
are higher than actual rental rates (which generally are not publicly
available). Therefore, the Direct Weighted Average Rental Rate may not be
representative of asking or actual rental rates at 70 West 36th Street.

In 1984, a complete renovation of 70 West 36th Street was commenced to
convert the Property from a manufacturing loft building into an office building.
The conversion included the creation of a new lobby and building entrance,
installation of office quality public corridors and lavatories, steam cleaning
and repainting of the Property's facade and upgrading and reconfiguration of the
building's plumbing system and electric service. In addition, a monitored,
state-of-the-art security system was installed for the building's entrance and
all tenant spaces. In 1994, further renovations included a new heating plant,
asbestos abatement and elevator modernization, including new cabs. The aggregate
cost of these renovations was approximately $3 million.

70 West 36th Street is located in the Fashion Center Business Improvement
District (BID). The Fashion Center BID encompasses the area bordered to the
north and south by 41st Street and 35th Street, respectively, and to the east
and west by Avenue of the Americas and Ninth Avenue, respectively. The BID
includes approximately 450 buildings with over 5,000 fashion-related tenants
occupying more than 34 million square feet of office space. The Fashion Center
BID provides a private, uniformed security force for on-street, five-day-per
week surveillance and response and a private, uniformed sanitation force. In
addition, the BID has been responsible for the implementation of various special
projects in the area, including the construction of handicapped access curbs and
the installation of enhanced street lighting.

The aggregate undepreciated tax basis of depreciable real property at 70
West 36th Street for Federal income tax purposes was $6,512,826 as of December
31, 1997. Depreciation and amortization are computed on the straight-line method
over 39 years.

The current real estate tax rate for all Manhattan office properties is
$10.164 per $100 of assessed value. The total annual tax for 70 West 36th Street
at this rate for the 1997-98 tax year, including the applicable BID tax, is
$380,973 (at an assessed value of $3,645,000).

1414 AVENUE OF THE AMERICAS

1414 Avenue of the Americas is a 19-story office building located on the
southeast corner of Avenue of the Americas (Sixth Avenue) and West 58th Street
in the Rockefeller Center submarket of the Manhattan office market. The
building, situated one block from Central Park, was completed in 1923. A
renovation program has commenced at this Property, which includes new windows,
lobby and entrance as well as steam cleaning of the facade, at an estimated
aggregate cost of $660,000. The Company owns a 100% fee simple interest in this
Property. The Property contains approximately 111,000 rentable square feet
(including approximately 103,000 square feet of office space and approximately
8,000 square feet of retail space), with floor plates of approximately 6,400
square feet on all but the top floor.

Located on the easterly blockfront of Sixth Avenue between 57th and 58th
Streets, the Property is at the heart of the Avenue of the Americas corridor
which is host to many of world's most recognizable corporate names in domestic
and international banking, legal services, manufacturing, securities, printing,
publishing, advertising and communications. The Property also benefits from
being strategically located one block north of 57th Street. 57th Street has
become the focal point of the resurgence of high end and specialty retail
development in New York in recent years. Warner Brothers recently expanded their
successful company store on 57th Street and Fifth Avenue. In addition, the Nike
Town Store recently opened on 57th Street between Fifth and Madison Avenues.
High-profile theme retail restaurants such as the Harley Davidson Cafe, the Hard
Rock Cafe, the Motown Cafe, Planet Hollywood and the Jekyll and Hyde Cafe have
all also opened restaurant/theme stores on 57th Street and Avenue of the
Americas. These developments have made the 57th Street corridor a major shopping
and tourist destination which accommodates clientele generated by the area's
concentration of businesses and tourist attractions.

As of December 31, 1997, approximately 99% of the rentable square footage in
1414 Avenue of the Americas was leased (including space for leases that were
executed as of December 31, 1997). The office space was 99% leased and the
retail space was 100% leased. The following table sets forth certain information
with respect to the Property:

ANNUAL NET
EFFECTIVE
ANNUALIZED RENT RENT
PER LEASED PER LEASED
YEAR-END PERCENT LEASED SQUARE FOOT SQUARE FOOT
- ---------------------------------------------- ------------------- --------------- -------------

1997.......................................... 99% $ 30.98 $ 30.97
1996.......................................... 97 30.40 31.14

As of December 31, 1997, 1414 Avenue of the Americas was leased to 32
tenants operating in various industries including financial services, shoe
manufacturing and travel, two of whom occupied 10% or more of the rentable
square footage at the Property. A shoe manufacturer and retailer occupied
approximately 12,200 square feet (approximately 11% of the Property) under a
lease expiring on September 30, 1998 that provides for annualized base rent as
of December 31, 1997 of approximately $420,268 (approximately $34.45 per square
foot) and a cancellation option that has been exercised and takes effect as of
September 30, 1998. All of the space subject to the expiration has been released
to two tenants. In addition to annualized base rent, this tenant pays real
estate tax escalations and operating escalations in excess of a base year
amount.

In addition, an entertainment product developer occupied approximately
13,975 square feet (approximately 12.6% of the Property) under a lease expiring
on May 31, 2004 that provides for annualized base rent as of December 31, 1997
of approximately $305,725 (approximately $21.88 per square foot). In addition to
annualized base rent, this tenant pays real estate tax escalations and operating
escalations in excess of a base year amount.

The following table sets out a schedule of the annual lease expirations at
1414 Avenue of the Americas with respect to leases executed as of December 31,
1997 for each of the next ten years and thereafter (assuming that no tenants
exercise renewal or cancellation options and that there are no tenant
bankruptcies or other tenant defaults:

ANNUALIZED
ANNUALIZED RENT PER
RENT LEASED
PERCENTAGE PER SQUARE FOOT
SQUARE OF ANNUALIZED LEASED OF EXPIRING
NUMBER FOOTAGE TOTAL RENT SQUARE LEASES
OF OF LEASED OF FOOT OF WITH
EXPIRING EXPIRING SQUARE EXPIRING EXPIRING FUTURE
YEAR OF LEASE EXPIRATION LEASES LEASES FEET LEASES LEASES(1) STEP-UPS
- ------------------------------------------------- ------------- --------- ----------- ------------ ----------- -----------

1998............................................. 6 21,533(2) 19.3% $ 854,107 $ 39.67 $ 40.45
1999............................................. 3 13,700 12.3 458,180 33.44 34.21
2000............................................. 4 6,280 5.6 164,981 26.27 29.02
2001............................................. 5 14,265 12.7 381,614 26.75 28.63
2002............................................. 3 5,200 4.7 124,800 24.00 26.38
2003............................................. 5 21,465 19.3 584,694 27.24 32.88
2004............................................. 1 13,975 12.6 355,950 25.47 30.35
2005............................................. 1 2,187 2.0 60,327 27.58 31.69
2006............................................. 2 3,100 2.8 82,600 26.65 38.73
2007............................................. -- -- -- -- -- --
2008 and thereafter.............................. 2 8,346 7.5 342,375 41.02 58.09
--
--------- ----- ------------ ----------- -----------
SUBTOTAL/WEIGHTED AVERAGE........................ 32 110,051 98.8% $ 3,409,628 $ 30.98 $ 35.18(3)
--
------------ ----------- -----------
Unleased at 12/31/97 1,300 1.2%
--------- -----
TOTAL........................................ 111,351 100.0%
--------- -----
--------- -----

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

(1) For comparison purposes, according to RELocate the Direct Weighted Average
Rental Rate for the direct Class B Rockefeller Center submarket (which,
according to RELocate, is the area between 40th Street to 59th Street along
Avenue of the Americas and 40th Street to 52nd Street between Fifth Avenue
and Avenue of the Americas) was $28.38 per square foot as of December 31,
1997. Direct Weighted Average Rental Rate represents the weighted average of
asking rental rates for direct Class B space. Asking rental rates generally
are higher than actual rental rates (which generally are not publicly
available). Therefore, the Direct Weighted Average Rental Rate may not be
representative of asking or actual rental rates at 1414 Avenue of the
Americas. Additionally, the Annualized Rent Per Leased Square Foot of
Expiring Leases includes the effect of retail rental rates at this Property,
which are generally higher than office rental rates. Excluding rental
payments attributable to retail space at this Property, the weighted average
Annualized Rent Per Leased Square Foot of Expiring Leases would be $28.09.

(2) As noted above, 12,200 square feet of the space expiring during 1998 has
been released to two tenants.

The aggregate undepreciated tax basis of depreciable real property at 1414
Avenue of the Americas for Federal income tax purposes was $11,753,975 as of
December 31, 1997. Depreciation and amortization are computed on the
straight-line method over 39 years.

The current real estate tax rate for all Manhattan office properties is
$10.164 per $100 of assessed value. The total annual tax for 1414 Avenue of the
Americas at this rate for the 1997-98 tax year is $489,396 (at an assessed value
of $4,815,000).

29 WEST 35TH STREET

29 West 35th Street is a 12-story building located on the north side of West
35th Street between Fifth Avenue and Sixth Avenue in the Garment submarket of
the Manhattan office market. The building, situated between Grand Central
Terminal and Penn Station, was completed in 1911 and substantially renovated in
1985. The Company owns a 100% fee simple interest in this Property. The Property
contains approximately 78,000 rentable square feet (including approximately
72,000 square feet of office space and approximately 6,000 square feet of retail
space), with floor plates of approximately 6,500 square feet.

As of December 31, 1997, approximately 92% of the rentable square footage in
29 West 35th Street was leased (including space for leases executed as of
December 31, 1997). The office space was 90% leased and the retail space was
100% leased. The following table sets forth certain information with respect to
the Property:

1997.......................................... 92% $ 19.73 $ 16.22
1996.......................................... 92 21.06 15.60
1995.......................................... 92 21.26 15.77
1994.......................................... 100 19.90 15.77
1993.......................................... 88 19.53 15.94

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

As of December 31, 1997, 29 West 35th Street was leased to eight tenants
operating in the publishing, executive recruiting and specialty apparel
industries, three of whom occupied 10% or more of the rentable square footage at
the Property. A publishing company occupied approximately 19,500 square feet
(approximately 25% of the Property) under three leases expiring on April 8, 2004
that provide for an aggregate annualized base rent as of December 31, 1997 of
approximately $522,000 (approximately $26.77 per square foot). In addition to
annualized base rent, this tenant pays real estate tax escalations and operating
escalation in excess of a base year amount.

Also, a second publishing company occupied approximately 16,250 square feet
(approximately 20.9% of the Property) under a lease expiring on December 31,
1999 that provides for annualized base rent as of December 31, 1997 of
approximately $260,000 (approximately $16.00 per square foot). In addition to
annualized base rent, this tenant pays real estate tax escalations and operating
escalation in excess of a base year amount.

In addition, an executive recruiting firm occupied approximately 9,750
square feet (approximately 12.5% of the Property) under a lease expiring on
August 14, 1998 that provides for annualized base rent as of December 31, 1997
of approximately $191,000 (approximately $19.59 per square foot). In addition to
annualized base rent, this tenant pays real estate tax escalations and operating
escalations in excess of a base year amount.

The following table sets out a schedule of the annual lease expirations at
29 West 35th Street with respect to leases executed as of December 31, 1997 for
each of the next ten years and thereafter (assuming

that no tenants exercise renewal or cancellation options and that there are no
tenant bankruptcies or other tenant defaults):

ANNUALIZED
ANNUALIZED RENT PER
RENT LEASED
PERCENTAGE PER SQUARE FOOT
SQUARE OF ANNUALIZED LEASED OF EXPIRING
NUMBER FOOTAGE TOTAL RENT SQUARE LEASES
OF OF LEASED OF FOOT OF WITH
EXPIRING EXPIRING SQUARE EXPIRING EXPIRING FUTURE
YEAR OF LEASE EXPIRATION LEASES LEASES FEET LEASES LEASES(1) STEP-UPS
- ------------------------------------------------- ------------- ----------- ----------- ------------ ----------- -----------

1998............................................. 1 9,750 12.5% $ 191,475 $ 19.64 $ 20.42
1999............................................. 1 16,250 20.9 260,585 16.04 16.04
2000............................................. -- -- -- -- -- --
2001............................................. -- -- -- -- -- --
2002............................................. 1 3,835 4.9 80,485 20.99 23.34
2003............................................. -- -- -- -- -- --
2004............................................. 3 28,500 36.6 699,575 24.55 33.75
2005............................................. -- -- -- -- -- --
2006............................................. -- -- -- -- -- --
2007............................................. 2 13,000 16.7 175,500 13.50 17.56
2008 and thereafter.............................. -- -- -- -- -- --
--
----------- ----- ------------ ----------- -----------
SUBTOTAL/WEIGHTED AVERAGE........................ 8 71,335 91.6% $ 1,407,620 $ 19.73 $ 24.38(2)
--
--
------------ ----------- -----------
------------ ----------- -----------
Unleased at 12/30/97............................. 6,500 8.4%
----------- -----
TOTAL........................................ 77,835 100.0%
----------- -----
----------- -----

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

(1) For comparison purposes, according to RELocate, the Direct Weighted Average
Rental Rate for the direct Class B Garment submarket (which, according to
RELocate, is the area from 32nd Street to 40th Street west of Avenue of the
Americas to the Hudson River) was $22.71 per square foot as of December 31,
1997. Direct Weighted Average Rental Rate represents the weighted average of
asking rental rates for direct Class B space. Asking rental rates generally
are higher than actual rental rates (which generally are not publicly
available). Therefore, the Direct Weighted Average Rental Rate may not be
representative of asking or actual rental rates at 29 West 35th Street.

In 1985, 29 West 35th Street was substantially renovated by SL Green at a
total cost of approximately $1 million. The program included the renovation of
the building's lobby, entrance and storefronts, modernization of the elevator
equipment, including new cabs, new electric service and distribution, code
compliant lavatories and fire protection system and a new roof and sidewalk.

29 West 35th Street is located in the Fashion Center BID, which encompasses
the area bordered to the north and south by 41st Street and 35th Street and to
the east and west by Avenue of the Americas and Ninth Avenue, respectively. The
BID includes approximately 450 buildings with over 5,000 fashion-related tenants
occupying more than 34 million square feet of office space. The Fashion Center
BID provides a private, uniformed security force for on-street, five-day-per
week surveillance and response and a private, uniformed sanitation force. In
addition, the BID has been responsible for the implementation of various special
projects in the area, including the construction of handicapped access curbs and
the installation of enhanced street lighting.

The aggregate undepreciated tax basis of depreciable real property at 29
West 35th Street for Federal income tax purposes was $4,801,880 as of December
31, 1997. Depreciation and amortization are computed on the straight-line method
over 39 years.

The current real estate tax rate for all Manhattan office properties is
$10.164 per $100 of assessed value. The total annual tax for 29 West 35th Street
at this rate for the 1997-98 tax year, including the applicable BID tax, is
$178,258 (at an assessed value of $1,705,500).

1372 BROADWAY

1372 Broadway is a 21-story office building located on the northeast corner
of West 37th Street in the Garment submarket of the Manhattan office market. The
building, situated within four blocks of the Port Authority Bus Terminal and
Penn Station, was completed in 1914 and a renovation commenced in the fall of
1997. The Property contains approximately 508,000 rentable square feet
(including approximately 475,000 square feet of office space, approximately
24,000 square feet of retail space and 9,000 square feet of mezzanine space),
with floor plates ranging from 34,000 square feet to 11,000 square feet.

The Property is located within five blocks of Times Square, arguably the
most vibrant development area in New York City. Times Square has undergone
large-scale redevelopment in recent years that has transformed the area into a
popular family entertainment destination. See "--1466 Broadway" below.

The Company has commenced a $2.0 million capital improvement program geared
toward enhancing the infrastructure and marketability of the Property. Included
in this renovation is a new lobby, elevator cab modernization, freight elevator
upgrade, facade restoration and cleaning, sidewalk replacement and asbestos
abatement. Through the repositioning efforts of the Company, the Property was
96% leased as of March 31, 1998.

As of December 31, 1997, approximately 92% of the rentable square footage in
1372 Broadway was leased. The office space was 86% leased and the retail and
mezzanine space were 100% leased. The following table sets forth certain
information with respect to the Property:

ANNUAL NET
ANNUALIZED EFFECTIVE
RENT RENT
PER LEASED PER LEASED
YEAR-END PERCENT LEASED SQUARE FOOT SQUARE FOOT
- --------------------------------------------------------------------- ------------------- ----------- -------------

1997................................................................. 92% $ 22.26 $ 22.71
1996................................................................. 89 22.05 21.20

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

As of December 31, 1997, 1372 Broadway was leased to 32 tenants operating in
various industries including financial services, textiles and retailing, three
of whom occupied 10% or more of the rentable square footage at the Property. A
shirt manufacturer occupied approximately 64,000 square feet (approximately
12.6% of the Property) under a lease expiring on July 31, 2005 that provides for
annualized base rent as of December 31, 1997 of approximately $1.28 million
(approximately $20.00 per square foot). In addition to annualized base rent,
this tenant pays real estate tax escalations and operating escalations in excess
of a base year amount.

Also, a women's fashion retailer occupied approximately 58,975 square feet
(approximately 11.6% of the Property) under a lease expiring on July 31, 2010
that provides for annualized base rent as of December 31, 1997 of approximately
$1.17 million (approximately $19.84 per square foot). In addition to annualized
base rent, this tenant pays real estate tax escalations and operating
escalations in excess of a base year amount.

In addition, a commercial bank occupied approximately 55,238 square feet
(approximately 10.9% of the Property) under a lease expiring on March 31, 2000
that provides for annualized base rent as of December 31, 1997 of approximately
$1.24 million (approximately $22.45 per square foot). In addition to annualized
base rent, this tenant pays real estate tax escalations and operating
escalations in excess of a base year amount.

In addition, a department store buying office occupied approximately 50,599
square feet (approximately 10.0% of the Property) under a lease expiring on May
31, 2007 that provides for annualized base rent as of December 31, 1997 of
approximately $954,000 (approximately $18.86 per square foot). In addition to
annualized base rent, this tenant pays real estate tax escalations and operating
escalations in excess of a base year amount.

The following table sets out a schedule of the annual lease expirations at
1372 Broadway with respect to leases executed as of December 31, 1997 for each
of the next ten years and thereafter (assuming that no tenants exercise renewal
or cancellation options and that there are no tenant bankruptcies or other
tenant defaults):

ANNUALIZED
RENT PER
PERCENTAGE ANNUALIZED LEASED
SQUARE OF ANNUALIZED RENT PER SQUARE FOOT
NUMBER FOOTAGE TOTAL RENT LEASED OF EXPIRING
OF OF LEASED OF SQUARE FOOT LEASES WITH
EXPIRING EXPIRING SQUARE EXPIRING OF EXPIRING FUTURE
YEAR OF LEASE EXPIRATION LEASES LEASES FEET LEASES LEASES (1) STEP-UPS
- ----------------------------------------------- ----------- --------- ----------- ------------- ----------- -----------

1998........................................... 2 2,847 0.6% $ 138,555 $ 48.67 $ 48.67
1999........................................... 5 5,276 1.0 129,686 24.58 25.23
2000........................................... 4 76,133 15.0 1,955,175 25.68 26.29
2001........................................... -- -- -- -- -- --
2002........................................... 5 33,867 6.7 697,033 20.58 21.47
2003........................................... 1 20,500 4.0 429,987 20.97 21.97
2004........................................... -- -- -- -- -- --
2005........................................... 2 98,167 19.2 1,871,498 19.06 21.41
2006........................................... 3 6,577 1.3 464,415 70.61 82.03
2007........................................... 3 68,897 13.6 1,483,964 21.54 23.65
2008 and thereafter............................ 7 153,812 30.3 3,204,908 20.84 25.68
----------- --------- ----- ------------- ----------- -----------
SUBTOTAL/WEIGHTED AVERAGE...................... 32 466,076 91.7% $ 10,375,221 $ 22.26 $ 25.04(2)
----------- ------------- ----------- -----------
Unleased at 12/31/97........................... 41,924 8.3%
--------- -----
TOTAL...................................... 508,000 100.0%
--------- -----
--------- -----

- ------------------------
(1) For comparison purposes, according to RELocate, the Direct Weighted Average
Rental Rate for the direct Class B Garment submarket (which, according to
RELocate is the area from 32nd Street to 40th Street, west of Avenue of the
Americas to the Hudson River) was $22.71 per square foot as of December 31,
1997. Direct Weighted Average Rental Rate represents the weighted average of
asking rental rates for direct Class B space. Asking rental rates generally
are higher than actual rental rates (which generally are not publicly
available). Therefore, the Direct Weighted Average Rental Rate may not be
representative of asking or actual rental rates at 1372 Broadway.
Additionally, the Annualized Rent Per Leased Square Foot of Expiring Leases
includes the effect of retail rental rates at this Property, which are
generally higher than office rental rates. Excluding rental payments
attributable to retail space at this Property, the weighted average
Annualized Rent Per Leased Square Foot of Expiring Leases would be $20.34.

1372 Broadway is located in the Fashion Center BID, which encompasses the
area bordered to the north and south by 41st Street and 35th Street,
respectively, and to the east and west by Avenue of the Americas and Ninth
Avenue, respectively. The BID includes approximately 450 buildings with over
5,000 fashion-related tenants occupying more than 34 million square feet of
office space. The Fashion Center BID provides a private, uniformed security
force for on-street, five-day-per-week surveillance and response

and a private, uniformed sanitation force. In addition, the BID has been
responsible for the implementation of various special projects in the area,
including the construction of handicapped access curbs and the installation of
enhanced street lighting.

The aggregate undepreciated tax basis of depreciable real property at 1372
Broadway for Federal income tax purposes was $52.9 million as of December 31,
1997. Depreciation and amortization are computed on the straight-line method
over 39 years.

The current real estate tax rate for all Manhattan office properties is
$10.164 per $100 of assessed value. The total annual tax for 1372 Broadway at
this rate for the 1997-98 tax year, including the applicable BID tax, is
$2,277,788 (at an assessed value of $21,793,000).

1140 AVENUE OF THE AMERICAS

1140 Avenue of the Americas is a 22-story office building completed in 1926
and renovated in 1951 and located in the Rockefeller Center submarket of the
Manhattan office market. The Property contains approximately 191,000 rentable
square feet (including approximately 175,000 square feet of office space,
approximately 7,600 square feet of retail space and 8,400 square feet of
mezzanine space), with floor plates ranging from 3,500 square feet to 9,400
square feet. The Company anticipates spending $1.675 million over the next 18
months in renovations including lobby renovation, elevator cab upgrades and
elevator modernization.

1140 Avenue of the Americas is centrally located at the northeast corner of
West 44th Street and Avenue of the Americas, in the heart of midtown Manhattan,
at the end of a block that includes the headquarters of the Association of the
Bar of the City of New York, the University of Pennsylvania Alumni Club, the
Harvard Club, the Algonquin Hotel, the Royalton Hotel and the Mansfield Hotel. A
new Sofitel hotel is planned for a vacant parcel of land located on the block.
The location is within three blocks of Grand Central Terminal, four blocks of
Rockefeller Center and five blocks of the Port Authority Bus Terminal, a major
transportation hub for commuters from New Jersey.

As of December 31, 1997, approximately 99% of the rentable square footage in
1140 Avenue of the Americas was leased (including space for leases that were
executed as of December 31, 1997). The office space was 99% leased and the
retail space was 100% leased. The following table sets forth certain information
with respect to the Property:

1997................................................................. 99% $ 26.61 $ 26.46
1996................................................................. 99 26.57 24.78

As of December 31, 1997, 1140 Avenue of the Americas was leased to 41
tenants operating in various industries including executive placement, financial
services and precious stones, one of whom occupied 10% or more of the rentable
square footage at the Property. An executive placement firm occupied
approximately 28,200 square feet (approximately 14.8% of the Property) under two
leases expiring on September 30, 2005 and September 30, 2006, respectively, that
provide for aggregate annualized base rent as of December 31, 1997 of
approximately $714,000 (approximately $25.32 per square foot). In addition to
annualized base rent, this tenant pays real estate tax escalations and operating
escalations in excess of a base year amount.

The following table sets out a schedule of the annual lease expirations at
1140 Avenue of the Americas with respect to leases executed as of December 31,
1997 for each of the next ten years and thereafter (assuming that no tenants
exercise renewal or cancellation options and that there are no tenant
bankruptcies or other tenant defaults):

ANNUALIZED
RENT PER
PERCENTAGE ANNUALIZED LEASED
SQUARE OF ANNUALIZED RENT PER SQUARE FOOT
NUMBER FOOTAGE TOTAL RENT LEASED OF EXPIRING
OF OF LEASED OF SQUARE FOOT LEASES WITH
EXPIRING EXPIRING SQUARE EXPIRING OF EXPIRING FUTURE
YEAR OF LEASE EXPIRATION LEASES LEASES FEET LEASES LEASES (1) STEP-UPS
- ------------------------------------------------ ----------- --------- ----------- ------------ ----------- -----------

1998............................................ 7 12,286 6.4% $ 320,895 $ 26.12 $ 25.52
1999............................................ 9 22,119 11.6 557,785 25.22 24.49
2000............................................ 2 13,400 7.0 378,992 28.28 29.73
2001............................................ 5 22,198 11.6 723,008 32.57 31.50
2002............................................ 1 3,500 1.8 101,412 28.97 28.97
2003............................................ 6 22,243 11.7 564,276 25.37 28.65
2004............................................ 5 40,370 21.1 1,000,725 24.79 27.39
2005............................................ 3 17,498 9.2 425,385 24.31 29.08
2006............................................ 1 18,800 9.9 486,638 25.89 32.39
2007............................................ 2 16,575 8.7 476,122 28.73 34.16
2008 and thereafter............................. -- -- -- -- -- --
--- --------- ----- ------------ ----------- -----------
SUBTOTAL/WEIGHTED AVERAGE....................... 41 188,989 99.0% $ 5,035,238 $ 26.64 $ 29.00
--- ------------ ----------- -----------
Unleased at 12/31/97............................ 1,982 1.0%
--------- -----
TOTAL....................................... 190,971 100.0%
--------- -----
--------- -----

- ------------------------
(1) For comparison purposes, according to RELocate the Direct Weighted Average
Rental Rate for the direct Class B Rockefeller Center submarket (which,
according to RELocate, is the area between 40th Street to 59th Street along
Avenue of the Americas and 40th Street to 52nd Street between Fifth Avenue
and Avenue of the Americas) was $28.38 per square foot as of December 31,
1997. Direct Weighted Average Rental Rate represents the weighted average of
asking rental rates for direct Class B space. Asking rental rates generally
are higher than actual rental rates (which generally are not publicly
available). Therefore, the Direct Weighted Average Rental Rate may not be
representative of asking or actual rental rates at 1140 Avenue of the
Americas. Additionally, the Annualized Rent Per Leased Square Foot of
Expiring Leases includes the effect of retail rental rates at this Property,
which are generally higher than office rental rates. Excluding rental
payments attributable to retail space at this Property, the weighted average
Annualized Rent Per Leased Square Foot of Expiring Leases would be $25.05.

The aggregate undepreciated tax basis of depreciable real property at 1140
Avenue of the Americas for Federal income tax purposes was $21.2 million as of
December 31, 1997. Depreciation and amortization are computed on the
straight-line method over 39 years.

The current real estate tax rate for all Manhattan office properties is
$10.164 per $100 of assessed value. The total annual tax for 1140 Avenue of the
Americas at this rate for the 1997-98 tax year is $983,367 (at an assessed value
of $9,675,000).

50 WEST 23RD STREET

50 West 23rd Street was completed in 1892 and substantially renovated in
1992. The property contains approximately 333,000 rentable square feet
(including approximately 324,000 square feet of office space and approximately
9,000 square feet of retail space), with floor plates ranging from 32,000 square
feet to 6,500 square feet. The substantial renovation of 50 West 23rd Street in
1992, completed by the prior owner of the building at a cost of approximately
$15.4 million, included (i) construction of a new lobby, (ii) overhaul of
elevator mechanical systems, (iii) enhancement of electrical capacity, (iv)
replacement of HVAC and plumbing systems, (v) installation of new windows, (vi)
facade restoration and (vii) asbestos abatement.

As of December 31, 1997, approximately 86% of the rentable square footage in
50 West 23rd Street was leased (including space for leases that were executed as
of December 31, 1997). The office space was 86% leased and the retail space was
100% leased. The following table sets forth certain information with respect to
the Property:

1997................................................................. 86% $ 19.70 $ 18.61
1996................................................................. 91 19.68 17.09

As of December 31, 1997, 50 West 23rd Street was leased to 14 tenants
operating in various industries including engineering, architecture and
aerospace, three of whom occupied 10% or more of the rentable square footage at
the Property. A naval architecture firm occupied approximately 64,700 square
feet (approximately 19.3% of the Property) under a lease expiring on August 31,
2005, that provides for annualized base rent as of December 31, 1997 of
approximately $1.3 million (approximately $20.09 per square foot). In addition
to annualized base rent, this tenant pays real estate tax escalations and
operating escalations in excess of a base year amount.

In addition, a New York City agency occupied approximately 64,000 square
feet (approximately 19.2% of the Property) under a lease expiring on December
31, 2010, that provides for annualized base rent as of December 31, 1997 of
approximately $700,000 (approximately $10.94 per square foot). In addition to
annualized base rent, this tenant pays real estate tax escalations and operating
escalations in excess of a base year amount.

Also, an engineering firm occupied approximately 53,600 square feet
(approximately 16.1% of the Property) under a lease expiring on June 30, 2005,
that provides for annualized base rent as of December 31, 1997 of approximately
$1.1 million (approximately $20.52 per square foot). In addition to annualized
base rent, this tenant pays real estate tax escalations and operating
escalations in excess of a base year amount.

The following table sets out a schedule of the annual lease expirations at
50 West 23rd Street with respect to leases executed as of December 31, 1997 for
each of the next ten years and thereafter (assuming that no tenants exercise
renewal or cancellation options and that there are no tenant bankruptcies or
other tenant defaults):

ANNUALIZED
RENT PER
ANNUALIZED LEASED
PERCENTAGE RENT PER SQUARE FOOT
SQUARE OF ANNUALIZED LEASED OF EXPIRING
NUMBER FOOTAGE TOTAL RENT SQUARE LEASES
OF OF LEASED OF FOOT OF WITH
EXPIRING EXPIRING SQUARE EXPIRING EXPIRING FUTURE
YEAR OF LEASE EXPIRATION LEASES LEASES FEET LEASES LEASES(1) STEP-UPS
- ---------------------------------------- ------------- --------- ----------- ------------ ----------- -----------

1998.................................... 3 7,109 2.1% $ 277,901 $ 39.09 $ 39.10
1999.................................... -- -- -- -- -- --
2000.................................... -- -- -- -- -- --
2001.................................... -- -- -- -- -- --
2002.................................... 1 3,008 0.9 97,080 32.27 39.05
2003.................................... -- -- -- -- -- --
2004.................................... 2 28,700 8.6 518,545 18.07 18.33
2005.................................... 3 141,477 42.4 3,377,824 23.88 25.26
2006.................................... 1 21,230 6.4 297,220 14.00 16.00
2007.................................... 2 13,617 4.1 243,801 17.90 27.87
2008 and thereafter..................... 2 71,500 21.4 834,952 11.68 15.21
--
--------- ----- ------------ ----------- -----------
Subtotal/Weighted Average............... 14 286,641 85.9% $ 5,647,323 $ 19.70 $ 21.99
--
------------ ----------- -----------
Unleased at 12/31/97.................... 46,889 14.1%
--------- -----
TOTAL................................... 333,530 100.0%
--------- -----
--------- -----

- ------------------------
(1) For comparison purposes, according to RELocate the Direct Weighted Average
Rental Rate for the direct Class B Chelsea submarket (which, according to
RELocate, is the area from 14th Street to 33rd Street between 5th Avenue,
from 14th Street to 23rd Street, and Broadway from 23rd Street to 33rd
Street and the Hudson River), was $23.34 per square foot as of December 31,
1997. Direct Weighted Average Rental Rate represents the weighted average of
asking rental rates for direct Class B space. Asking rental rates generally
are higher than actual rental rates (which generally are not publicly
available). Therefore, the Direct Weighted Average Rental Rate may not be
representative of asking or actual rental rates at 50 West 23rd Street.

The aggregate undepreciated tax basis of depreciable real property at 50
West 23rd Street for Federal income tax purposes was $36.0 million as of
December 31, 1997. Depreciation and amortization are computed on the
straight-line method over 39 years.

The current real estate tax rate for all Manhattan office properties is
$10.164 per $100 of assessed value. The total annual tax for 50 West 23rd Street
at this rate for the 1997-98 tax year is $977,878 (at an assessed value of
$9,621,000).

17 BATTERY PLACE

Formerly an option property, the Company purchased a co-tenancy interest in
17 Battery Place in December 1997. 17 Battery Place is comprised of a 423,000
square foot glass and steel high-rise office

structure (the "North Building") built in approximately 1972 and an 799,000
square foot Beaux Art office building (the "South Building") constructed in
two-phases during the 1910's.

The co-tenancy agreement contemplates the formation of a three unit
condominium. The co-tenancy interest of the Company will be converted to two
units comprising 389,000 square feet in the South Building and 422,000 square
feet in the North Building. It is the current intention of the Company to
complete the condominium organization process in the second quarter of 1998. The
Company anticipates spending approximately $6.0 million on a redevelopment
program which will include a new entrance and modernized lobby, facade repair
and restoration, upgraded air conditioning, fire protection and electrical
systems, and redecorated elevator lobby and corridors.

The interest of the Company in 17 Battery is comprised of a co-tenancy
interest in the co-tenancy that owns the land and building, and a note and
mortgage encumbering the interest of the other co-tenant in the co-tenancy. The
note and mortgage held by the Company are in the principal amount of
$15,500,000. The obligation is due and payable on September 30, 1998. The note
bears interest at 12% per annum. The entire interest obligation through maturity
is cash-collateralized, with the cash collateral held by the Company. At the
acquisition of the Property, a co-tenancy was created between a subsidiary of
the Company and Upper, an arm's length third party. Pursuant to the co-tenancy
agreement, the Company acts as managing and leasing agent for the entire
property. The economic risks and benefits of the lower thirteen (13) floors
(excluding certain portions of the ground floor) of the South Building and the
entire North Building are vested with the Company, and these risks and benefits
for the fourteenth and higher floors (together with certain tenanted areas of
the ground floor) of the south building are vested with Upper.

Pursuant to the co-tenancy agreement, the Company is restricted from renting
153,000 rentable square feet of currently vacant space in the portion of the
Property which forms the Company's co-tenancy interest until December 31, 1998,
other than to current tenants of the portion of the Property which forms Upper's
co-tenancy interest.

17 Battery Place is located in the re-emerging World Trade/Battery submarket
of downtown Manhattan. The Property contains 811,000 rentable square feet
(including approximately 802,421 square feet of office space and approximately
8,579 square feet of retail space), with floor plates ranging from 13,325 square
feet to 30,740 square feet. Immediately adjacent to the Property is the Downtown
Athletic Club ("DAC"), home of the Heisman Trophy award. Adjacent to the DAC is
a 300,000 square foot rental apartment building conversion. In addition, the
Property offers unobstructed views of New York Harbor, the Statue of Liberty and
Ellis Island.

As of December 31, 1997, approximately 78.6% of the rentable square footage
in 17 Battery Place was leased (including space for leases that were executed as
of December 31, 1997). The office space was 78.4% leased and the retail space
was 100% leased. The following table sets forth certain information with respect
to the Property:

1997............................................................. 78.6% $ 20.52 $ 21.23

1996............................................................. 79.9 18.27 17.95

As of December 31, 1997, 17 Battery Place was leased to 38 tenants operating
in various industries, including security, not-for-profit and sales training,
two of whom occupied 10% or more of the rentable square footage at the Property.
New York City agencies occupied approximately 288,000 square feet (approximately
35.5% of the Property) under leases expiring on December 31, 2007, that provide
for an

aggregate annualized base rent as of December 31, 1997 of approximately $5.6
million (approximately $19.50 per square foot). The tenant has the right
pursuant to these leases to cancel the term upon 270 days prior notice and
payment of a cancellation penalty in the amount of the unamortized initial
leasing costs. In addition to annualized base rent, this tenant pays real estate
tax escalations and operating escalations in excess of a base year amount.

In addition, a not-for-profit organization occupied approximately 124,000
square feet (approximately 15.3% of the Property) under a lease expiring on
December 31, 2002 that provides for annualized base rent as of December 31, 1997
of approximately $2.6 million (approximately $21.00 per square foot). The tenant
has the right pursuant to the lease to cancel up 99,755 rentable square feet of
the tenancy on six months' prior notice, upon payment of a cancellation penalty
in the amount of the unamortized initial leasing costs for the cancelled space.
In addition to annualized base rent, this tenant pays real estate tax
escalations and operating escalations in excess of a base year amount.

The following table sets out a schedule of the annual lease expirations at
17 Battery Place with respect to leases executed as of December 31, 1997 for
each of the next ten years and thereafter (assuming that no tenants exercise
renewal or cancellation options and that there are no tenant bankruptcies or
other tenant defaults):

ANNUALIZED
RENT PER
ANNUALIZED LEASED
SQUARE RENT PER SQUARE FOOT
FOOTAGE PERCENTAGE ANNUALIZED LEASED OF EXPIRING
NUMBER OF OF OF TOTAL RENT OF SQUARE FOOT LEASES WITH
EXPIRING EXPIRING LEASED EXPIRING OF EXPIRING FUTURE
YEAR OF LEASE EXPIRATION LEASES LEASES SQUARE FEET LEASES LEASES(1) STEP-UPS
- --------------------------------------- ------------- --------- ----------- ------------- ----------- -----------

1998................................... 7 17,140 2.1% $ 321,324 $ 18.75 $ 18.75
1999................................... 8 56,793 7.0 1,161,576 20.45 20.45
2000................................... 6 9,629 1.2 389,171 40.42 40.42
2001................................... 6 53,761 6.6 1,004,785 18.69 18.71
2002................................... 3 134,654 16.7 2,843,176 21.11 21.11
2003................................... 2 9,493 1.2 295,488 31.13 31.83
2004................................... 1 25,161 3.1 528,381 21.00 24.00
2005................................... 3 39,807 4.9 830,695 20.87 21.38
2006................................... -- -- -- -- -- --
2007................................... 1 287,931 35.5 5,614,655 19.50 23.00
2008 & thereafter...................... 1 2,700 0.3 84,000 31.11 41.11
--
--------- ----- ------------- ----------- -----------
Subtotal/Weighted Average.............. 38 637,069 78.6% $ 13,073,251 $ 20.52 $ 22.31
Unleased at 12/31/97................... 173,747 21.4%
--------- -----
Total.................................. 810,816 100.0%

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

(1) For comparison purposes, according to RELocate the Direct Weighted Average
Rental Rate for the direct Class B World Trade/ Battery submarket (which,
according to RELocate, is the area bounded by New York Harbor to the south,
Barclay Street to the north, Broadway to the east and the Hudson River to
the west), was $22.82 per square foot as of December 31, 1997. Direct
Weighted Average Rental Rate represents the weighted average of asking
rental rates for direct Class B space. Asking rental rates generally are
higher than actual rental rates (which generally are not publicly
available). Therefore, the Direct Weighted Average Rental Rate may not be
representative of asking or actual rental rates at 50 West 23rd Street.

The aggregate undepreciated tax basis of depreciable real property at 17
Battery Place for Federal income tax purposes was $58.4 million as of December
31, 1997. Depreciation and amortization are computed on the straight-line method
over 39 years.

The current real estate tax rate for all Manhattan office properties is
$10.164 per $100 of assessed value. The total annual tax for 17 Battery Place at
this rate for the 1997-98 tax year is $2,469,852 (at an assessed value of
$24,300,000), of which the Company is responsible for approximately $2.0 million
pursuant to its co-tenancy interest in the Property.

110 EAST 42ND STREET

Directly across from the Grand Hyatt Hotel and Grand Central Station is 110
East 42nd Street, a 250,000 square foot 18-story office building located in the
Grand Central North sub-market of the midtown Manhattan office market.
Distinguished by its landmark lobby and banking hall, this Property was the
Company's first entry into the Grand Central North sub-market. The Property is
occupied by, among others, a major savings bank, law firm and soccer
headquarters. The savings bank intends to leave upon expiration of its lease at
the end of the third quarter of 1998. The rent at this space is significantly
below market and the Company believes that it will appeal to corporate users
that require a unique identity. At December 31, 1997 this Property was 92.5%
leased at an annualized rent per leased square foot of $23.60. The Company
anticipates spending approximately $785,000 on building renovations over the
next 18 months, including lobby renovation, elevator cab upgrades, steam
cleaning and exterior lighting.

633 THIRD AVENUE (PARTIAL INTEREST)

The Company's interest in 633 Third Avenue consists of fee title to
condominium units comprising approximately 41,000 square feet of this one
million square foot office building located on the southeast corner of 41st
Street and Third Avenue, in the Grand Central North sub-market of the midtown
Manhattan office market. Located within 3 blocks of Grand Central Terminal, this
Property is 99% leased primarily to a major commercial bank and a sports/health
club and has an annualized rent per leased square foot of $25.38, at December
31, 1997.

1466 BROADWAY

Located in the heart of Times Square and the Times Square sub-market of the
midtown Manhattan office market is 1466 Broadway, a 17-story office property.
Built by John Jacob Astor as the Knickerbocker Hotel, the Property was
completely renovated in 1982, converting it to its current use. Today, the
Property is the home to textile and related companies that specialize in men's
and women's fashion. The Property contains approximately 289,000 rentable square
feet (including approximatey 266,244 square feet of office space and
approximately 22,756 square feet of retail space), with floor plates ranging
from 5,500 square feet to 18,000 square feet. The Company anticipates spending
approximately $1 million on building renovations over the next 18 months,
including roof and exterior restoration and asbestos abatement.

The development fervor that surrounds the Property is significant. Within
one block of the Property is the development of Sony and AMC movie theaters,
live theaters including the Selwyn, New Victory and Disney's New Amsterdam,
Madame Tussaud's Wax Museum, the Warner Brothers Store, hotels and the new
office headquarters of Conde Nast and a major law firm.

In addition, this Property enjoys great access to public transportation. It
is directly adjacent to the Times Square Subway Station where a confluence of
subway trains converge. It is one block from the Port Authority Bus Terminal,
which provides transportation to Central and Northern New Jersey and is
equidistant to Grand Central Station and Pennsylvania Station.

As of December 31, 1997, approximately 87% of the rentable square footage in
1466 Broadway was leased (including space for leases that were executed as of
December 31, 1997). The office space was

86.1% leased and the retail space was 100% leased. The following table sets
forth certain information with respect to the Property:

1997............................................................. 87% $ 32.41 $ 30.68

1996............................................................. 97 33.10 31.78

1995............................................................. 94 34.48 33.40

As of December 31, 1997, 1466 Broadway was leased to 157 tenants operating
in various industries, including textiles and retail, none of whom occupied 10%
or more of the rentable square footage at the Property.

The following table sets out a schedule of the annual lease expirations at
1466 Broadway for leases executed as of December 31, 1997 with respect to each
of the next ten years and thereafter (assuming that no tenants exercise renewal
or cancellation options and that there are no tenant bankruptcies or other
tenant defaults):

ANNUALIZED
RENT PER
PERCENTAGE ANNUALIZED LEASED
SQUARE OF ANNUALIZED RENT PER SQUARE FOOT
NUMBER FOOTAGE TOTAL RENT LEASED OF EXPIRING
OF OF LEASED OF SQUARE FOOT LEASES WITH
EXPIRING EXPIRING SQUARE EXPIRING OF EXPIRING FUTURE
YEAR OF LEASE EXPIRATION LEASES LEASES FEET LEASES LEASES (1) STEP-UPS
- ----------------------------------------------- ----------- --------- ----------- ------------ ----------- -----------

1998........................................... 48 52,705 18.2% $ 1,455,129 $ 27.61 $ 27.71
1999........................................... 51 73,927 25.6 2,221,977 30.06 30.29
2000........................................... 28 36,947 12.8 1,014,155 27.45 27.53
2001........................................... 13 29,695 10.4 803,812 27.07 29.73
2002........................................... 7 11,121 3.8 391,499 35.20 39.71
2003........................................... 2 2,939 1.0 206,160 70.15 84.91
2004........................................... 1 1,524 0.5 84,000 55.12 55.12
2005........................................... -- -- -- -- -- --
2006........................................... 1 888 0.3 27,028 30.44 30.44
2007........................................... 4 20,420 7.1 558,905 27.37 27.75
2008 and thereafter............................ 2 21,470 7.4 1,392,932 64.88 85.65
--- --------- ----- ------------ ----------- -----------
SUBTOTAL/WEIGHTED AVERAGE...................... 157 251,636 87.1% $ 8,155,597 $ 32.41 $ 35.00
Unleased at 12/31/97........................... 37,364 12.9%
--------- -----
TOTAL...................................... 289,000 100.0%
--------- -----
--------- -----

- ------------------------
(1) For comparison purposes, according to RELocate, the Direct Weighted Average
Rental Rate for the direct Class B Times Square submarket (which, according
to RELocate is the area bounded by 40th Street to the south, 51st Street to
the north, Sixth Avenue to the east and the Hudson River to the west) was
$24.26 per square foot as of December 31, 1997. Direct Weighted Average
Rental Rate represents the weighted average of asking rental rates for
direct Class B space. Asking rental rates generally are higher than actual
rental rates (which generally are not publicly available). Therefore, the
Direct Weighted Average Rental Rate may not be representative of asking or
actual rental rates at 1466 Broadway. Additionally, the Annualized Rent Per
Leased Square Foot of Expiring Leases includes the effect of retail rental
rates at this Property, which are generally higher than office rental rates.
Excluding rental payments attributable to retail space at this Property, the
weighted average Annualized Rent Per Leased Square Foot of Expiring Leases
would be $29.57.

The aggregate undepreciated tax basis of depreciable real property at 1466
Broadway for Federal income tax purposes was $51,200,000 as of December 31,
1997. Depreciation and amortization are computed for Federal income tax purposes
on the straight-line method over lives which range up to 39 years.

The current real estate tax rate for all Manhattan office properties is
$10.164 per $100 of assessed value. The total annual tax for 1466 Broadway at
this rate including the applicable BIO tax for the 1997-98 tax year is
$1,902,380 (at a taxable assessed value of $18,095,670).

420 LEXINGTON AVENUE (THE GRAYBAR BUILDING)

The Company purchased the operating sublease at the Graybar Building, a.k.a.
420 Lexington Avenue in March 1998. This 31-story office property sits at the
foot of Grand Central Terminal in the Grand Central North sub-market of the
midtown Manhattan office market. The Property was designed by Sloan and
Robertson and completed in 1927. The building takes its name from its original
owner, the Graybar Electric Company. The Property contains approximately 1.2
million rentable square feet (including approximately 1,150,000 square feet of
office space, 12,260 square feet of mezzanine space and 27,463 square feet of
retail space), with floor plates ranging from 17,000 square feet to 50,000
square feet. The Company anticipates restoring the grandeur of this building
through the implementation of an $8 million capital improvement program geared
toward certain cosmetic upgrades including steam cleaning the facade, new
entrance and storefronts, new lobby, elevator cabs, and elevator lobbies and
corridors.

The Graybar Building offers unsurpassed convenience to transportation. This
Property enjoys excellent accessibility to a wide variety of transportation
options with a direct passageway to Grand Central Station. Grand Central Station
is the major transportation destination for commutation from southern
Connecticut and Westchester County. Major bus and subway lines serve this
Property, as well. The Property is ideally located to take advantage of the
renaissance of Grand Central Terminal, which is being redeveloped into a major
retail/transportation hub containing restaurants such as Michael Jordan's
Steakhouse and retailers such as Banana Republic and Kenneth Cole.

The Graybar Building consists of the building at 420 Lexington Avenue and
fee title to a portion of the land above the railroad tracks and associated
structures which form a portion of the Grand Central Terminal complex in midtown
Manhattan. The Company interest consists of a tenant's interest in a controlling
sublease, as described below. The ownership structure of the Graybar Building is
as follows.

Fee title to the building and the land parcel is owned by an unaffiliated
third party, who also owns landlord's interest under a lease (the "Ground
Lease") the term of which expires December 31, 2008 subject to renewal by the
tenant through December 31, 2029. The Company controls the exercise of this
renewal option through the terms of the subordinate leases described below.

The tenant under the Ground Lease is the holder of the landlord's interest
under a lease (the "Ground Sublease") which is coterminous (except that it ends
on December 30, 2029) and has a complementary renewal option term structure and
control to the Ground Lease. The tenant's interest under the Ground Sublease is
held by an unaffiliated third party. The tenant under the Ground Sublease is the
holder of the landlord's interest under a lease (the "Operating Lease") which is
coterminous (except that it ends on December 28, 2029) and has a complementary
renewal option term structure and control to the Ground Lease. The tenant's
interest under the Operating Lease is held by an unaffiliated third party. The
tenant under the Operating Lease is the holder of the landlord's interest under
a lease (the "Operating Sublease") which is coterminous and has a complementary
renewal option term structure and control to the Ground Lease. The tenant's
interest under the Operating Sublease is held by the Company.

As of December 31, 1997, approximately 86% of the rentable square footage in
the Graybar Building was leased. The office space was 86% leased, the mezzanine
space was 32% leased and the retail space was 100% leased. The following table
sets forth certain information with respect to the Property:

1997............................................................. 86% $ 26.80 $ 25.45

1996............................................................. 88 27.26 25.62

1995............................................................. 91 28.97 29.04

As of December 31, 1997, the Graybar Building was leased to 301 tenants
operating in various industries, including legal services, financial services
and advertising, none of whom occupied 10% or more of the rentable square
footage at the Property.

The following table sets out a schedule of the annual lease expirations at
the Graybar Building for leases executed as of December 31, 1997 with respect to
each of the next ten years and thereafter (assuming that no tenants exercise
renewal or cancellation options and that there are no tenant bankruptcies or
other tenant defaults):

ANNUALIZED
RENT PER
PERCENTAGE ANNUALIZED LEASED
SQUARE OF ANNUALIZED RENT PER SQUARE FOOT
NUMBER FOOTAGE TOTAL RENT LEASED OF EXPIRING
OF OF LEASED OF SQUARE FOOT LEASES WITH
EXPIRING EXPIRING SQUARE EXPIRING OF EXPIRING FUTURE
YEAR OF LEASE EXPIRATION LEASES LEASES FEET LEASES LEASES (1) STEP-UPS
- -------------------------------------------- ----------- ---------- ----------- ------------- ----------- -----------

1998........................................ 86 182,331 15.4% $ 4,807,977 $ 26.36 $ 26.36
1999........................................ 44 85,475 7.2 2,582,664 30.22 30.49
2000........................................ 46 96,615 8.1 2,702,506 28.00 28.20
2001........................................ 34 148,897 12.5 4,119,609 27.67 28.75
2002........................................ 33 132,367 11.1 3,343,840 25.26 26.14
2003........................................ 15 42,222 3.6 1,260,388 29.85 30.49
2004........................................ 11 55,071 4.6 1,438,095 26.11 27.65
2005........................................ 11 58,494 4.9 1,521,324 26.01 26.70
2006........................................ 4 57,997 4.9 1,453,704 25.07 28.54
2007........................................ 11 31,258 2.6 1,104,197 35.33 42.25
2008 and thereafter......................... 6 133,731 11.3 3,116,303 23.30 30.63
--- ---------- ----- ------------- ----------- -----------
Subtotal/Weighted average................... 301 1,024,458 86.2% $ 27,450,607 $ 26.80 $ 28.62
Unleased at 12/31/97........................ 163,542 13.8%
---------- -----
TOTAL................................... 1,188,000 100.0%

- ------------------------
(1) For comparison purposes, according to RELocate, the Direct Weighted Average
Rental Rate for the direct Class B Grand Central North submarket (which,
according to RELocate is the area bounded by 40th Street to the south, 51st
Street to the north, 5th Avenue to the west and the East River to the east)
was $31.12 per square foot as of December 31, 1997. Direct Weighted Average
Rental Rate represents the weighted average of asking rental rates for
direct Class B space. Asking rental rates generally are higher than actual
rental rates (which generally are not publicly available). Therefore, the
Direct Weighted Average Rental Rate may not be representative of asking or
actual rental rates at the Graybar Building.

The aggregate undepreciated tax basis of depreciable real property at the
Graybar Building for Federal income tax purposes was $78,000,000 as of December
31, 1997. Depreciation and amortization are computed for Federal income tax
purposes on the straight-line method over lives which range up to 39 years.

The current real estate tax rate for all Manhattan office properties is
$10.164 per $100 of assessed value. The total annual tax for the Graybar
Building at this rate including the applicable BIO tax for the 1997-98 tax year
is $5,745,000 (at a taxable assessed value of $54,647,000).

321 WEST 44TH STREET

Located just west of Eighth Avenue in Manhattan's burgeoning Times Square
sub-market of the midtown Manhattan office market is 321 West 44th Street, a
203,000 square foot office building. This Property is two blocks north of the
Times Square Redevelopment area, which is being buttressed by new hotel,
entertainment and office development. See "--1466 Broadway" above. The major
tenants at this Property include a sound studio and medical facility. At
December 31, 1997 321 West 44th Street was 96% leased at an annualized rent per
leased square foot of $14.10. The Company anticipates spending approximately
$2.0 million on building renovations over the next 18 months, including facade
restoration and roof replacement.

PENDING ACQUISITIONS:

440 NINTH AVENUE

The 339,000 square foot office building known as 440 Ninth Avenue is located
one block west of Pennsylvania Station, in the Garment sub-market of the midtown
Manhattan office market. Penn Station is the major transportation hub for
commutation from Northern and Central New Jersey and New York's Long Island. At
December 31, 1997 this property was 76% leased at an annualized rent per leased
square foot of $18.22. However, the Company believes that its 22,000 square foot
floor plates are significantly attractive to major office space users. This
property is occupied by, among others, a not-for-profit organization, a law firm
and a security company. The purchase price for this property is approximately
$29 million, plus additional expenses of approximately $1.5 million. The Company
intends to complete the closing of this acquisition within 60 days after the
closing of the Offerings. The Company anticipates spending approximately $1.6
million on building renovations over the next 18 months, including a new lobby
and elevator cabs, roof replacement and parapet restoration.

38 EAST 30TH STREET

38 East 30th Street, located between Madison and Fifth Avenues, is a 91,000
square foot office building located in the Park Avenue South/Flatiron sub-market
of the midtown Manhattan office market. This 12-story office property is
primarily occupied by a color imaging company and a medical facility. This 93%
occupied property has a retail store that is currently vacant. This property
provides great access to Penn Station, Grand Central Station and the subway and
bus lines. As of December 31, 1997, this property had an annualized rent per
leased square foot of $21.86 and was 79% leased. The purchase price for this
property is approximately $10.5 million. The Company intends to complete the
closing of this acquisition within 60 days after the closing of the Offerings.
The Company anticipates spending approximately $550,000 on building renovations
over the next 18 months, including elevator upgrades and exterior restoration.

116 NASSAU STREET (BROOKLYN)

Located in Downtown Brooklyn is 116 Nassau Street, a 100,000 square foot
7-story office building occupied by a New York City government agency and a
not-for-profit corporation. Located in the

Northwest sub-market of Brooklyn, this property was 93% leased at December 31,
1997 at an annualized rent per leased square foot of $12.65. The purchase price
for this property is approximately $10.5 million. The Company intends to
complete the closing of this acquisition within 60 days after the closing of the
Offerings. The Company anticipates spending approximately $275,000 on building
renovations over the next 18 months, including roof replacement and exterior
restoration.

711 THIRD AVENUE

The Company has executed a purchase contract to acquire various operating
and ownership positions at 711 Third Avenue in an aggregate amount of $61.0
million, including transaction costs. This 20-story Class B office building is
located in the Grand Central North sub-market of the midtown Manhattan office
market. The property was designed by William Lescaze and constructed in 1955 by
Swig, Weiler & Arnow, a nationally known real estate developer and the owner of
the property. The property contains approximately 524,000 rentable square feet
(including 453,000 square feet of office space, 26,000 square feet of retail
space and a 45,000 square foot garage), with floor plates ranging from 17,000
square feet to 45,000 square feet.

The property is strategically located on the east side of Third Avenue
between 44th and 45th Streets, one block from the Graybar Building. Located next
to the Graybar Building is Grand Central Station, which is the major
transportation destination for commutation from southern Connecticut and
Westchester County. Major bus and subway lines serve this property as well.

The Company is acquiring the leasehold mortgage (currently in foreclosure)
related to this Pending Acquisition for a net purchase price of $41 million. The
mortgage will be assigned to the Operating Partnership. A subsidiary of the
Company will net sublease the property from the leasehold partnership for a term
expiring in 2023 at a rent substantially equal to the debt service on the
leasehold mortgage plus two pass-throughs of the net rent obligations of the
leasehold described below. The Company will have the option to collapse the
lease/sublease positions and take control of the entire leasehold asset after 12
years in exchange for the distribution to the current leasehold partnership of
Units in the amount of $1 million.

The Company will also acquire a 50% interest in the fee title to the
property for a purchase price of $19 million plus Units having a value of $1
million. The existing fee partnership will be converted to a co-tenancy. This
co-tenancy will hold the landlord's interest under the existing leasehold. The
initial term of the leasehold expires in 2033. There are five renewal options of
ten years each beyond 2033.

The Company will also hold a net leasehold interest (which expires in 2031)
in the land underlying the property. See "Risk Factors--The Company's
Performance and Value are Subject to Risks Associated with the Real Estate
Industry--The expiration of net leases and operating subleases could adversely
affect the Company's financial condition."

As of December 31, 1997 approximately 79% of the rentable square footage in
711 Third Avenue were leased. The office was 73% leased, the retail was 100%
leased and the garage was 100% leased. The following table sets forth-certain
information with respect to the property, but does not count the 45,000 square
foot garage as a lease or as part of the property's rentable square feet:

1997.......................................... 79% $ 28.88 $ 27.44
1996.......................................... 79 29.11 27.42
1995.......................................... 84 29.32 23.92
1994.......................................... 83 30.72 25.07
1993.......................................... 77 29.50 24.47

As of December 31, 1997, 711 Third Avenue was leased to 24 tenants operating
in various industries, including publishing, legal services and commercial
shipbuilding, two of whom occupied more than 10% of the rentable square footage
at the property. A magazine publisher occupied approximately 82,444 square feet
(approximately 15.7% of the property) under a lease expiring August, 2010 that
provides for an aggregate annualized base rent as of December 31, 1997 of
approximately $1,813,768 (approximately $22.00 per square foot). In addition,
another publisher occupied approximately 53,454 square feet (approximately 10.2%
of the property) under a lease expiring April, 1998 (which lease was renewed
subsequent to December 31, 1997 and currently expires in April 2000) that
provides for an aggregate annualized base rent as of December 31, 1997 of
approximately $1,250,105 (approximately $23.39 per square foot).

The following table sets out a schedule of the annual lease expirations at
711 Third Avenue with respect to leases executed as of December 31, 1997 for
each of the next ten years and thereafter (assuming that no tenants exercise
renewal or cancellation options that there are no tenant bankruptcies or other
tenant defaults). The table does not include the 45,000 square foot garage at
711 Third Avenue that is operated by a third party pursuant to a management
contract.

ANNUALIZED
RENT PER
PERCENTAGE ANNUALIZED LEASED
SQUARE OF ANNUALIZED RENT PER SQUARE FOOT
NUMBER FOOTAGE TOTAL RENT LEASED OF EXPIRING
OF OF LEASED OF SQUARE FOOT LEASES WITH
EXPIRING EXPIRING SQUARE EXPIRING OF EXPIRING FUTURE
YEAR OF LEASE EXPIRATION LEASES LEASES FOOT LEASES LEASES (1) STEP-UPS
- ---------------------------------- ----------- ---------- ----------- ------------- ----------- -----------

1998.............................. 4 69,952 14.6% $ 1,748,748 $ 25.00 $ 25.00
1999.............................. -- -- -- -- -- --
2000.............................. 3 41,976 8.8 1,670,078 39.79 40.26
2001.............................. 5 46,297 9.7 1,408,856 30.43 30.43
2002.............................. 2 11,214 2.3 653,939 58.31 59.24
2003.............................. 3 21,090 4.4 873,901 41.44 41.87
2004.............................. 2 10,718 2.2 283,200 26.42 28.42
2005.............................. -- -- -- -- -- --
2006.............................. -- -- -- -- -- --
2007.............................. 2 15,159 3.2 487,139 32.14 35.22
2008 and thereafter............... 3 160,879 33.5 3,768,430 23.42 28.03
--- ---------- ----- ------------- ----------- -----------
SUBTOTAL/WEIGHTED AVERAGE......... 24 377,285 78.8% $ 10,894,291 $ 28.88 $ 31.12
Unleased at 12/31/97.............. 101,816 21.3%
---------- -----
TOTAL......................... 479,101 100.0%

(1) For comparison purposes, according to RELocate, the Direct Weighted Average
Rental Rate for the direct Class B Grand Central North submarket (which,
according to RELocate, is the area bounded 40th Street to the south, 51st
Street to the north, 5th Avenue to the west and the East River to the east)
was $31.12 per square foot as of December 31, 1997. Direct Weighted Average
Rental Rate represents the weighted average of asking rental rates for
direct Class B space. Asking rental rates generally are higher than actual
rental rates (which generally are not publicly available). Therefore, the
Direct Weighted Average Rental Rate may not be representative of asking or
actual rental rates at 711 Third Avenue. Additionally, the Annualized Rent
Per Leased Square Foot of Expiring Leases includes the effect of retail
rental rates at this Property, which are generally higher than office rental
rates. Excluding rental payments attributable to retail space at this
Property, the weighted average Annualized Rent Per Leased Square Foot of
Expiring Leases would be $27.09.

The aggregate undepreciated tax basis of depreciable real property at 711
Third Avenue for Federal income tax purposes was $41 million as of December 31,
1997. Depreciation and amortization are computed on the straight-line method
over 39 years.

The current real estate tax rate for all Manhattan office properties is
$10.164 per $100 of assessed value. The total annual tax for 711 Third Avenue at
this rate for the 1997-98 tax year is $2,593,956 (at an assessed value of
$25,520,000).

GENERAL TERMS OF LEASES IN THE MIDTOWN MARKETS

Leases entered into for space in the Midtown Markets typically contain terms
which may not be contained in leases in other U.S. office markets. The initial
term of leases entered into for space in excess of 10,000 square feet in the
Midtown Markets generally is ten to 15 years. The tenant often will negotiate an
option to extend the term of the lease for one or two renewal periods of five
years each. The base rent during the initial term often will provide for agreed
upon increases periodically over the term of the lease. Base rent for renewal
terms, and base rent for the final years of a long-term year lease (in those
leases which do not provide an agreed upon rent during such final years), often
is based upon a percentage of the fair market rental value of the premises
(determined by binding arbitration in the event the landlord and the tenant are
unable to mutually agree upon the fair market value) but not less than the base
rent payable at the end of the prior period. Leases typically do not provide for
increases in rent based upon increases in the consumer price index.

In addition to base rent, the tenant also generally will pay the tenant's
pro rata share of increases in real estate taxes and operating expenses for the
building over a base year. In some leases, in lieu of paying additional rent
based upon increases in building operating expenses, the tenant will pay
additional rent based upon increases in the wage rate paid to porters over the
porters' wage rate in effect during a base year.

Electricity is most often supplied by the landlord either on a submetered
basis or rent inclusion basis (i.e., a fixed fee is included in the rent for
electricity, which amount may increase based upon increases in electricity rates
or increases in electrical usage by the tenant). Base building services other
than electricity (such as heat, air-conditioning and freight elevator service
during business hours, and base building cleaning) typically are provided at no
additional cost, with the tenant paying additional rent only for services which
exceed base building services or for services which are provided other than
during normal business hours.

In a typical lease for a new tenant, the landlord, at its expense, will
deliver the premises with all existing improvements demolished and any asbestos
abated. The landlord also typically will provide a tenant improvement allowance,
which is a fixed sum which the landlord will make available to the tenant to
reimburse the tenant for all or a portion of the tenant's initial construction
of its premises. Such sum typically is payable as work progresses, upon
submission of invoices for the cost of construction. However, in certain leases
(most often for relatively small amounts of space), the landlord will construct
the premises for the tenant.

MORTGAGE INDEBTEDNESS

Upon completion of the Offerings, the Company expects to have outstanding
approximately $52.8 million of indebtedness secured by four of the Properties.

The mortgage notes payable collateralized by the respective Properties and
assignment of leases at December 31, 1997 are as follows:

Property Mortgage Notes Balance
- ---------------------------------- ------------------------------------------------------------------- ---------

50 West 23rd Street Notes payable to an affiliate of Lehman Brothers with interest at a $ 21,000
blended rate of 7.33% as of December 31, 1997 due December 2007 and
August 2007.
29 West 35th Street First mortgage note with interest payable at 8.464%, due February $ 2,974
1, 2001
673 First Avenue First mortgage note with interest payable at 9.0%, due December 13, $ 18,013
2003
470 Park Avenue South First mortgage note with interest payable at 8.25%, due April 1, $ 10,833
2004
---------
Total Mortgage Notes Payable $ 52,820
---------
---------

CREDIT FACILITIES

On December 19, 1997 the Company entered into the $140 million Credit
Facility due December 2000. Availability under the Credit Facility may be
limited to an amount less the $140 million which is calculated by several
factors including recent acquisition activity and most recent quarterly property
performance. Outstanding loans under the Credit Facility bear interest at a rate
per annum equal to LIBOR applicable to each interest period plus 130 basis
points to 145 basis points per annum. The Credit Facility requires the Company
to comply with certain covenants, including but not limited to, maintenance of
certain financial ratios. At December 31, 1997 the outstanding amount of
indebtedness under the Credit Facility was $76 million, and the interest rate on
such indebtedness was 7.265% per annum.

On March 18, 1998, the Company asked the Credit Facility banking group to
temporarily relieve the Company from its obligations under the financial
covenants of the Credit Facility, in order to close the Acquisition Facility.
The Acquisition Facility, with a borrowing capacity of up to $275 million,
financed the purchase of the Helmsley Properties, paid off the outstanding
balance on the Credit Facility and provided ongoing liquidity for future
acquisition and corporate needs. The term of the this facility is one year. The
interest rate is determined by a schedule of the principal balance of the loan
outstanding and the applicable quarterly period extending from March 18, 1998
through the maturity date. The outstanding principal amount of $240 million
under the Acquisition Facility will be paid from the proceeds of the Offerings.
The Credit Facility will remain committed but unused until the Acquisition
Facility is repaid, at which time the Company will be in compliance with all
financial covenants under the Credit Facility and will again be able to draw
additional funds under the Credit Facility.

ENVIRONMENTAL MATTERS

Under various federal, state and local laws, ordinances and regulations, a
current or previous owner or operator of real estate may be required to
investigate and clean up certain hazardous substances released at a property,
and may be held liable to a governmental entity or to third parties for property
damage or personal injuries and for investigation and clean-up costs incurred by
the parties in connection with any contamination. In addition, some
environmental laws create a lien on a contaminated site in favor of the
government for damages and costs it incurs in connection with the contamination.
Such laws often impose such liability without regard to whether the owner or
operator knew of, or was responsible for, the release

of hazardous substances. The cost of any required remediation and the owner's
liability therefore as to any property is generally not limited under such
enactments and could exceed the value of the property and/or the aggregate
assets of the owner. The presence of contamination or the failure to remediate
contamination may adversely affect the owner's ability to sell or lease real
estate or to borrow using the real estate as collateral. No assurances can be
given that (i) a prior owner, operator or occupant, such as a tenant, did not
create a material environmental condition not known to the Company, (ii) a
material environmental condition with respect to any Property does not exist, or
(iii) future uses or conditions (including, without limitation, changes in
applicable environmental laws and regulations) will not result in the imposition
of environmental liability.

The Company engaged independent environmental consulting firms to perform
Phase I environmental site assessments on the Properties (except 633 Third
Avenue and 17 Battery Place) and on the Pending Acquisitions in order to assess
existing environmental conditions. All of the Phase I assessments were conducted
since or after March 1997, except for the Bar Building, where a Phase I
assessment was conducted in September 1996. All of the Phase I assessments met
the requirements of the ASTM Standard. Under the ASTM Standard, a Phase I
environmental site assessment consists of a site visit, a historical record
review, a review of regulatory agency data bases and records, interviews, and a
report, with the purpose of indemnifying potential environmental concerns
associated with real estate. The Phase I assessments conducted at the Properties
and Pending Acquisitions also addressed certain issues that were not covered by
the ASTM Standard, including asbestos, radon, lead-based paint and lead in
drinking water. These environmental site assessments did not reveal any known
environmental liability that the Company believes will have a material adverse
effect on the Company's financial condition or results of operations or would
represent a material environmental cost, nor is the Company aware of any such
material environmental liability. See "--Environmental Matters."

The Company maintains a policy of conducting Phase I site inspections for
all acquisitions. Such reports have been completed at or prior to the
acquisitions of all properties acquired since the IPO (except 633 Third Avenue).
These environmental reports did not reveal any environmental liability that
would have a material adverse effect on the Company or its business, nor is the
Company aware of any such material environmental liability.

PROPERTY MANAGEMENT AND LEASING SERVICES

The Company (through the Management Entities (as defined in the Glossary)
and the Leasing Corporation) provides management and leasing services for 27
properties (including the Properties owned by the Company) in the New York
metropolitan area. The Company is deemphasizing this business activity because
of the generally short term nature of these assignments and the dilution of
management attention such assignments bring relative to the Company's growth
through acquisitions. The Company plans to complete current assignments, for
which it has been engaged, and may selectively undertake assignments in the
future, where acquisition opportunities are likely.

The Company believes that its fully integrated management structure enhances
its ability to respond to tenant needs and acquisition opportunities while
permitting the Company to maintain control over certain costs associated with
the management and renovation of its properties. The Company maintains a staff
of 47 professionals experienced in the management of Manhattan Class B office
properties. This management team has developed a comprehensive knowledge of the
Class B Manhattan office market, an extensive network of local tenant and other
business relationships and is experienced in acquiring office properties and
repositioning them into profitable Class B properties through intensive full
service management and leasing efforts.

In addition, the Company seeks to capitalize on its market position and
relationships with an extensive network of brokers and tenants to implement a
proactive leasing program. Management believes that its extensive knowledge of
the Class B Manhattan office market enhances its ability to monitor, understand

and anticipate the current and future space needs of tenants in its submarkets.
See "Business and Growth Strategies" above.

The Company (through the Management LLC (as defined in the Glossary))
provides management and leasing services for the Properties owned by the Company
as well as leasing services for a portion of the properties in which the Company
owns no interest. In addition, the Company (through the Management Corporation
and the Leasing Corporation) provides management and tenant representation
services for properties in which the Company owns no interest and leasing
services for a portion of such properties.

CONSTRUCTION SERVICES

The Company (through the Construction Corporation and the Management
Entities) provides construction services as a part of the Company's management
business and through the Construction Corporation as a general contractor.

CONSTRUCTION MANAGEMENT AS PART OF MANAGEMENT SERVICE AGREEMENTS. A fee
from 2.5% to 5% of costs provided for or on behalf of third parties incurred for
capital improvements or tenant installations is paid to the Management Entities
for construction management services. These services are comprised of (i)
preconstruction scope of work development and preliminary cost estimating for
the leasing department in connection with potential leasing transactions, plan
review and approval of proposed tenant installation plans; coordination with
property management with respect to tenant installation construction as it
relates to building systems; and, coordination and supervision of tenant's
architects, engineers and contractors in managed properties from the beginning
of lease workletter negotiations through construction of the tenant's build-out
to move-in and (ii) capital improvement programs, including major building
renovations, system upgrades, local law compliance requirements, and completion
of deferred maintenance items requiring replacement (rather than repair).

GENERAL CONTRACTOR SERVICES PROVIDED THROUGH THE CONSTRUCTION
CORPORATION. The Construction Corporation charges from 5% to 10% provided for
or on behalf of third parties over the costs of construction for the building of
tenant installations in properties managed and leased by the Management Entities
and the Leasing Corporation. This service enables the leasing agent to offer
"turn-key" and "prebuilt" spaces to prospective tenants who want to have space
prepared for them to move into without having to go through the
designing/building process, while holding down the costs of tenant improvements.

EMPLOYEES

The Company employs approximately 331 persons. Of such 331 employees,
approximately 65 are "home office" executive and administrative personnel and
approximately 266 are on-site management, operating and administrative
personnel. 251 of these employees are represented by a labor union.

COMPETITION

All of the Properties are located in highly developed areas of midtown
Manhattan that include a large number of other office properties. Manhattan is
by far the largest office market in the United States and contains more rentable
square feet than the next six largest central business district office markets
in the United States combined. Of the total inventory of 379 million rentable
square feet in Manhattan approximately 207 million rentable square feet is
comprised of Class A office space and 172 million of Class B office space. Class
A office properties are generally newer than Class B office properties, have
higher finishes and command higher rental rates. Many tenants have been
attracted to Class B properties in part because of their relatively less
expensive rental rates and the tightening of the Class A office market in
midtown Manhattan. See "Market Overview." Consequently, an increase in vacancy
rates and/or a decrease in rental rates for Class A office space would likely
have an adverse effect on rental rates for Class B office space. Also, the
number of competitive Class B office properties in Manhattan (some of which are
newer and better located) could have a material adverse effect on the Company's
ability to lease

office space at its properties, and on the effective rents the Company is able
to charge. In addition, the Company may compete with other property owners that
have greater resources than the Company. See "Risk Factors--Competition in its
Marketplace Could Have an Adverse Impact on the Company's Results of
Operations."

REGULATION

GENERAL. Office properties in Manhattan are subject to various laws,
ordinances and regulations, including regulations relating to common areas. The
Company believes that each Property has the necessary permits and approvals to
operate its business.

AMERICANS WITH DISABILITIES ACT. The Company's properties must comply with
Title III of the ADA to the extent that such properties are "public
accommodations" as defined by the ADA. The ADA may require removal of structural
barriers to access by persons with disabilities in certain public areas of the
Company's properties where such removal is readily achievable. The Company
believes that the Properties are in substantial compliance with the ADA and that
it will not be required to make substantial capital expenditures with respect to
the Properties to address the requirements of the ADA. However, noncompliance
with the ADA could result in imposition of fines or an award of damages to
private litigants. The obligation to make readily achievable accommodations is
an ongoing one, and the Company will continue to assess its properties and to
make alterations as appropriate in this respect.

ENVIRONMENTAL MATTERS. Under various Federal, state and local laws,
ordinances and regulations, a current or previous owner or operator of real
estate may be required to investigate and clean up certain hazardous substances
released at a property, and may be held liable to a governmental entity or to
third parties for property damage or personal injuries and for investigation and
clean-up costs incurred by the parties in connection with the contamination.
Such laws often impose liability without regard to whether the owner or operator
knew of, or was responsible for, the release of such hazardous substances. The
presence of contamination or the failure to remediate contamination may
adversely affect the owner's ability to sell or lease real estate or to borrow
using the real estate as collateral. Though not a guarantee, the Company as a
matter of policy undertakes Phase I site assessments to identify these risks
before completing any of its acquisitions. See "Risk Factors--Liability for
Environmental Matters Could Adversely Affect the Company's Financial Condition."

INSURANCE

The Operating Partnership carries comprehensive liability, fire, extended
coverage and rental loss insurance covering all of the Properties, with policy
specifications and insured limits which the Company believes are adequate and
appropriate under the circumstances. There are, however, certain types of losses
that are not generally insured because they are either uninsurable or not
economically feasible to insure. Should an uninsured loss or a loss in excess of
insured limits occur, the Operating Partnership could lose its capital invested
in the property, as well as the anticipated future revenues from the property
and, in the case of debt which is with recourse to the Operating Partnership,
would remain obligated for any mortgage debt or other financial obligations
related to the property. Any such loss would adversely affect the Company.
Moreover, as a general partner of the Operating Partnership, the Company will
generally be liable for any unsatisfied obligations other than non-recourse
obligations. The Company believes that the Properties will be adequately
insured; however no assurance can be given that material losses in excess of
insurance proceeds will not occur in the future.

LEGAL PROCEEDINGS

The Company currently is not a party to any material legal proceedings.
Certain affiliates of the Company are parties to a variety of legal proceedings
relating to their ownership of the Properties and activities with regard to its
construction, management and leasing businesses, respectively, arising in the
ordinary course of business. Because the Company acquired certain of the
Properties subject to associated liabilities, it could become a successor
party-in-interest to certain of these proceedings. The Company believes that
substantially all of this liability is covered by insurance. All of these
matters, taken together, are not expected to have a material adverse impact on
the Company.

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The Board of Directors of the Company consists of five members, three of
whom are not employees or affiliates of the Company. Pursuant to the Company's
Charter, the Board of Directors is divided into three classes of directors. The
initial terms of the first, second and third classes will expire in 1998, 1999
and 2000, respectively. Beginning in 1998, directors of each class will be
chosen for three-year terms upon the expiration of their current terms and each
year one class of directors will be elected by the stockholders. The Company
believes that classification of the Board of Directors will help to assure the
continuity and stability of the Company's business strategies and policies as
determined by the Board of Directors. Holders of shares of Common Stock will
have no right to cumulative voting in the election of directors. Consequently,
at each annual meeting of stockholders, the holders of a majority of the shares
of Common Stock will be able to elect all of the successors of the class of
directors whose terms expire at that meeting.

The following table sets forth certain information with respect to the
directors and executive officers of the Company:

NAME AGE POSITION
- --------------------------------------------- --- ------------------------------------------------------------

Stephen L. Green............................. 60 Chairman of the Board, Chief Executive Officer and President
(term expires in 2000)
David J. Nettina............................. 45 Executive Vice President, Chief Operating Officer and Chief
Financial Officer
Nancy Ann Peck............................... 53 Executive Vice President--Development and Operations
Steven H. Klein.............................. 37 Executive Vice President--Acquisitions
Benjamin P. Feldman.......................... 45 Executive Vice President, General Counsel, Secretary and
Director (term will expire in 1999)
Gerard Nocera................................ 41 Executive Vice President--Leasing
Louis A. Olsen............................... 53 Senior Vice President--Finance
John H. Alschuler, Jr. ...................... 50 Director (term expires in 2000), member of Audit Committee
and member of the Executive Committee
Edwin Thomas Burton, III..................... 55 Director (term expires in 1998), Chairman of the Audit
Committee
John S. Levy................................. 61 Director (term expires in 1999) and member of Audit
Committee

STEPHEN L. GREEN has served as the Chairman of the Board of Directors, Chief
Executive Officer and President of the Company since 1997. Mr. Green founded
S.L. Green Real Estate in 1980. Since then he has been involved in the
acquisition of over 30 Manhattan office buildings containing in excess of four
million square feet and the management of 50 Manhattan office buildings
containing in excess of 10 million square feet. His clients have included
Aldrich Eastman & Waltch, Bank of New York, CalPERS, Dai-lchi Kangyo Bank, and
CS First Boston. Mr. Green is a Governor of the Real Estate Board of New York
and an at-large member of the Executive Committee of the Board of Governors of
the Real Estate Board of New York. Additionally, Mr. Green is a Co-Chairman of
the Real Estate Tax Fairness Coalition. Mr. Green received a B.A. degree from
Hartwick College and a J.D. degree from Boston College Law School. Mr. Green is
the husband of Nancy A. Peck.

DAVID J. NETTINA has served as Executive Vice President, Chief Operating
Officer and Chief Financial Officer of the Company since 1997. Prior to joining
the Company, Mr. Nettina worked for The Pyramid Companies ("Pyramid"), based in
Syracuse, NY, in various positions from March 1986 to July, 1997. From 1990 to
1997, Mr. Nettina was a partner and Chief Financial Officer of Pyramid. From
1989 to 1990, Mr. Nettina was a development partner at the Boston, MA office of
Pyramid. Mr. Nettina was the Director of Corporate Finance of the Pyramid
Development Group from 1987 to 1989. From 1986 to 1987, Mr. Nettina was Chief
Operating Officer of the Pyramid Management Group. Mr. Nettina served as
President

100

of Citibank (Maine), N.A. from 1983 to 1986. From 1980 to 1983, Mr. Nettina was
Assistant Vice President of Citibank (NYS), N.A. in Rochester, NY. Mr. Nettina
was in the U.S. Army from 1976 until he completed service as a Captain in 1980.
Mr. Nettina received a B.S. degree in 1974 and a MBA in 1976 from Canisius
College.

NANCY ANN PECK has served as Executive Vice President-Development and
Operations of the Company since 1997. From 1983 until August, 1997, Ms. Peck has
supervised redevelopment of the SL Green projects and has overseen the
management and construction of all properties owned and managed by SL Green.
Prior to joining SL Green, Ms. Peck served as project coordinator for projects
valued in excess of $500 million, one of which was the renovation and conversion
of the two million square foot American Furniture Mart in Chicago into a
multi-use complex. Ms. Peck worked for McKeon Construction Corp., Paul
Properties and Shelter Rock Holdings Corp. She recently was appointed to the
Board of Directors of the Real Estate Board of New York, Management Division.
Ms. Peck received a B.A. degree from the University of California at Berkeley
and an MBA in finance from New York University Business School. She is the wife
of Stephen L. Green.

STEVEN H. KLEIN has served as Executive Vice President-Acquisitions of the
Company since 1997. From 1991 to August of 1997 Mr. Klein oversaw the Asset
Management division of SL Green and lead acquisition, sale and investment
analysis decisions. Mr. Klein played a major role in the redevelopment of SL
Green's managed portfolio. Prior to joining SL Green, Mr. Klein worked at Gallin
Realty Company in marketing and leasing. Mr. Klein received a B.A. degree from
the University of Michigan.

BENJAMIN P. FELDMAN has served as Executive Vice President and General
Counsel of the Company and as a Director and member of the Executive Committee
of the Company since 1997. He was General Counsel of SL Green from 1987 until
August, 1997. Mr. Feldman handles the legal aspects of all leasing, financing
and acquisition decisions. Prior to joining the Company, Mr. Feldman was
vice-president and general counsel for Bruce Berger Realty. Mr. Feldman received
a B.A. degree from Columbia University and a J.D. degree from Columbia
University School of Law.

GERARD NOCERA has served as Executive Vice President-Leasing of the Company
since 1997. From 1991 until August, 1997, Mr. Nocera was responsible for the
development and implementation of marketing and leasing programs at SL Green
owned and managed properties. Prior to joining SL Green, Mr. Nocera worked for
The Cohen Brothers as a landlord representative. Mr. Nocera is a member of the
Real Estate Board of New York. Mr. Nocera received a B.A. degree from Duquesne
University.

LOUIS A. OLSEN has served as Senior Vice President--Finance of the Company
since 1997. From 1988 until August, 1997, Mr. Olsen oversaw all financial and
accounting functions at SL Green. Before joining SL Green, Mr. Olsen was vice
president and comptroller of the management division of Edward S. Gordon Company
where he was responsible for the financial accounting of an 8 million square
foot commercial office portfolio managed by Edward S. Gordon. Mr. Olsen also
served for four years as vice president of Chase Manhattan Bank where he was
responsible for financial reporting for the $200 million Real Estate Owned
Portfolio. Mr. Olsen also worked as a manager in the real estate department at
Peat, Marwick & Mitchell. Mr. Olsen received a B.S. degree in accounting from
Bloomfield College and an M.B.A. degree in accounting and taxation from
Fairleigh Dickenson University. Mr. Olsen is a licensed New York State Certified
Public Accountant.

JOHN H. ALSCHULER, JR. has served as President and Partner-in-Charge of the
New York office of Hamilton, Rabinowitz & Alschuler, Inc., ("HRA") a nationally
recognized real estate and management consulting firm since 1996 and 1983,
respectively. Mr. Alschuler has also been an Adjunct Assistant Professor in the
Graduate Program in Real Estate at Columbia University since 1987. As President
of HRA, Mr. Alschuler is currently advising the Government of Kuwait on the
redevelopment of the main commercial district of Kuwait City. Mr. Alschuler is
also advising the Governor of Massachusetts and the Board of the MBTA on the
restructuring and privatization of the nation's second largest mass transit
system. Mr. Alschuler also serves as the real estate advisor to the Guggenheim
family and their foundation. Mr. Alschuler has advised a wide range of
development clients, including Olympia & York, Maguire

101

Thomas Partners, Queens West Development Corporation and the Empire State
Development Corpora-
tion. Mr. Alschuler has also advised many public organizations and elected
officials, including the Mayor of New York City and the Governor of New York.
Mr. Alschuler received a B.A. degree from Wesleyan University and Ed.D. degree
from the University of Massachusetts at Amherst.

EDWIN THOMAS BURTON, III has served as a director of the Company since 1997
and serves as Chairman of the Audit Committee, and is a member of the
Compensation Committee. He has been Chairman of the Board of Trustees and a
member of the Investment Advisory Committee of the Virginia Retirement System
("VRS") for state and local employees of the Commonwealth of Virginia ($30
billion in assets). Mr. Burton also served as the Chairman of the VRS Special
Committee on the sale of RF&P Corporation, a $570 million real estate company.
He is also currently a visiting professor of commerce and economics at the
University of Virginia. From 1994 until 1995, Mr. Burton served as Senior Vice
President, Managing Director and member of the Board of Directors of Interstate
Johnson Lane, Incorporated, an investment banking firm where he was responsible
for the Corporate Finance and Public Finance Divisions. From 1987 to 1994, Mr.
Burton served as President of Rothschild Financial Services, Incorporated (a
subsidiary of Rothschild, Inc. of North America), an investment banking company
headquartered in New York City that is involved in proprietary trading,
securities lending and other investment activities. From 1985 until 1987, Mr.
Burton was a partner of First Capital Strategists, a partnership that managed
security lending and investment activities for large endowment portfolios. Mr.
Burton also served as a consultant to the American Stock Exchange from 1985
until 1986 and a senior vice president with Smith Barney (or its corporate
predecessor) from 1976 until 1984. Mr. Burton currently serves on the Board of
Directors of Capstar, a publicly traded hotel company and SNL Securities, a
private securities data company. He has held various teaching positions at York
College, Rice University and Cornell University and has written and lectured
extensively in the field of economics. Mr. Burton also serves as a member of the
Children's Medical Center Committee of the University of Virginia Hospital
Advisory Board. Mr. Burton received a B.A. and an M.A. in economics from Rice
University and a Ph.D in economics from Northwestern University.

JOHN S. LEVY is a private investor. Mr. Levy was associated with Lehman
Brothers Inc. (or its corporate predecessors) from 1983 until 1995. During this
period, Mr. Levy served as Managing Director and Chief Administrative Officer of
the Financial Services Division, Senior Executive Vice President and Co-Director
of the International Division overseeing the International Branch System and
Managing Partner of the Equity Securities Division, where he managed the
International, Institutional, Retail and Research Departments. Prior to that
period, Mr. Levy was associated with A.G. Becker Incorporated (or its corporate
predecessors) from 1960 until 1983. During this period, Mr. Levy served as
Managing Director of the Execution Services Division, Vice President-Manager of
Institutional and Retail Sales, Manager of the Institutional Sales Division,
Manager of the New York Retail Office and a Registered Representative. Mr. Levy
received a B.A. degree from Dartmouth College.

COMMITTEES OF THE BOARD OF DIRECTORS

EXECUTIVE COMMITTEE. Subject to the Company's conflict of interest
policies, the Executive Committee has the authority to acquire and dispose of
real estate and the power to authorize, on behalf of the full Board of
Directors, the execution of certain contracts and agreements, including those
related to the borrowing of money by the Company (and, consistent with the
Partnership Agreement of the Operating Partnership, to cause the Operating
Partnership to take such actions). The Executive Committee consists of Stephen
L. Green, Benjamin P. Feldman and John H. Alschuler, Jr.

AUDIT COMMITTEE. The Audit Committee makes recommendations concerning the
engagement of independent public accountants, reviews with the independent
public accountants the scope and results of the audit engagement, approves
professional services provided by the independent public accountants, reviews
the independence of the independent public accountants, considers the range of
audit and non-audit fees and reviews the adequacy of the Company's internal
accounting controls. The Audit Committee consists of John H. Alschuler, Jr.,
Edwin Thomas Burton, III and John S. Levy.

102

COMPENSATION COMMITTEE. The Compensation Committee, which consists of John
H. Alschuler, Jr., Edwin Thomas Burton, III and John S. Levy, makes
recommendations and exercises all powers of the Board of Directors in connection
with compensation matters, including incentive compensation and benefit plans.
The Compensation Committee also has authority to grant awards under the
Company's 1997 Stock Option and Incentive Plan, as amended by the Board of
Directors (the "Amended 1997 Stock Option and Incentive Plan").

The Board of Directors does not have a standing nominating committee. The
full Board of Directors performs the function of such a committee.

COMPENSATION OF DIRECTORS

The Company pays its non-employee directors annual compensation of $12,000
for their services. In addition, non-employee directors will receive a fee of
$1,000 for each Board of Directors meeting attended (in person or by telephone).
Non-employee directors receive an additional fee of $500 for each committee
meeting attended (in person or by telephone), unless the committee meeting is
held on the day of a meeting of the Board of Directors. Non-employee directors
also are reimbursed for reasonable expenses incurred to attend director and
committee meetings. Compensation and fees may be paid to non-employee directors
in the form of cash or Common Stock, at the election of each such director.
Officers of the Company who are directors are not paid any director's
compensation or fees. Pursuant to the Company's Amended 1997 Stock Option and
Incentive Plan (the "Stock Option Plan"), each non-employee director received
options to purchase 6,000 shares of Common Stock (at market price on the date of
grant) which will vest after one year.

EXECUTIVE COMPENSATION

The following table sets forth the annual base salary rates and other
compensation paid in 1997 to the Company's Chief Executive Officer and each of
the Company's other five most highly compensated executive officers.

1997 BASE
SALARY RATE OPTIONS
NAME TITLE (1) ALLOCATED (2)
- --------------------------------------- --------------------------------------- -------------- -------------

Stephen L. Green....................... Chairman of the Board, President and $ 250,000 --
Chief Executive Officer
David J. Nettina....................... Executive Vice President, Chief $ 200,000 75,000(3)
Operating Officer and Chief Financial
Officer
Nancy A. Peck.......................... Executive Vice President-- Development $ 150,000 50,000
and Operations
Steven H. Klein........................ Executive Vice President-- Acquisitions $ 175,000 50,000
Benjamin P. Feldman.................... Executive Vice President and General $ 150,000 50,000
Counsel
Gerard Nocera.......................... Executive Vice President--Leasing $ 175,000 50,000

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

(1) Does not include bonuses that may be paid to the above individuals. See
"--Incentive Compensation Plan" below.

(2) On August 14, 1997, options to purchase a total of 660,000 shares of Common
Stock were granted to officers and other employees of the Company under the
Stock Option Plan at a price equal to the initial public offering price. See
"--Stock Option and Incentive Plan" below.

(3) In February 1998, options to purchase an additional 100,000 shares of Common
Stock were granted to Mr. Nettina, under the Stock Option Plan at a price of
$26.50, the closing market price on February 11, 1998.

103

OPTION GRANTS IN FISCAL YEAR 1997

POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
TOTAL ANNUAL RATES OF SHARE
OPTIONS TO PRICE APPRECIATION FOR
OPTIONS BE GRANTED EXERCISE OPTION TERM(3)
TO BE TO EMPLOYEES PRICE EXPIRATION --------------------------
NAME GRANTED(1) IN FISCAL YEAR PER SHARE(2) DATE 5%(4) 10%(5)
- -------------------------------------- ----------- --------------- ------------- ----------- ------------ ------------

Stephen L. Green...................... -- -- -- -- -- --
David J. Nettina...................... 75,000(6) 11.4% $ 21.00 8/14/07 $ 990,509 $ 2,510,144
Nancy A. Peck......................... 50,000 7.6% $ 21.00 8/14/07 $ 660,339 $ 1,673,430
Benjamin P. Feldman................... 50,000 7.6% $ 21.00 8/14/07 $ 660,339 $ 1,673,430
Steven H. Klein....................... 50,000 7.6% $ 21.00 8/14/07 $ 660,339 $ 1,673,430
Gerard Nocera......................... 50,000 7.6% $ 21.00 8/14/07 $ 660,339 $ 1,673,430

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

(1) These options will vest in three equal annual installments (rounded to the
nearest whole share) over three years.

(2) All options are granted at the fair market value of the Common Stock on the
date of grant. The exercise price per share was based on the IPO price.

(3) In accordance with the rules of the Commission, these amounts are the
hypothetical gains or "options spreads" that would exist for the respective
options based on assumed rates of annual compound share appreciation of 5%
and 10% from the date the options were granted over the full option term. No
gain to the option is possible without an increase in the price of the
common shares which would benefit all shareholders.

(4) An annual compound share price appreciation of 5% from the IPO price of
$21.00 per share of Common Stock yields a price of $34.21 per share of
Common Stock.

(5) An annual compound share price appreciation of 10% from the IPO price of
$21.00 per share of Common Stock yields a price of $54.47 per share of
Common Stock.

(6) In February 1998, options to purchase an additional 100,000 shares of Common
Stock were granted to Mr. Nettina, under the Stock Option Plan at a price of
$26.50, the closing market price on February 11, 1998.

EMPLOYMENT AND NONCOMPETITION AGREEMENTS

Each of Stephen L. Green, Nancy A. Peck, Steven H. Klein, Benjamin P.
Feldman, Gerard Nocera and Louis A. Olsen have entered into employment and
noncompetition agreements. Each agreement will expire on the third anniversary
of the closing of the IPO (i.e. August 20, 2000), unless otherwise extended,
except that Mr. Olsen's agreement will expire on the first anniversary of the
closing of the IPO (i.e. August 20, 1998), unless extended. Employment under the
agreements may be terminated for "cause" by the Company for: (i) engagement in
conduct that constitutes a felony, (ii) breach of fiduciary duty, gross
negligence or willful misconduct or other conduct against the best interests of
the Company, (iii) a breach of material obligations or covenants under the
agreement, or (iv) an uncured failure to substantially perform the duties
provided for in such agreement. The employee may terminate his or her employment
for "good reason," which includes (i) failure to be elected to offices with the
same or substantially the same duties as provided for in the agreement, (ii) an
uncured breach by the Company of its material obligations under the agreement,
or (iii) a substantial adverse change in the nature or scope of the
responsibility and authority provided in the agreement following a
change-in-control of the Company. If employment is terminated by the Company
"without cause" or by the employee "with good reason," then the employee is
entitled to severance benefits for the remaining period of the agreement
including (i) base salary paid on the same periodic payment dates provided for
in the agreement, (ii) continuation of benefits provided for

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in the agreement and (iii) continuation of any rights of the employee under the
Company's Stock Option Plan.

The employment and noncompetition agreements, subject to certain exceptions,
prohibit each of such persons from engaging, directly or indirectly, during the
term of his or her employment, in any business which engages or attempts to
engage in, directly or indirectly, the acquisition, development, construction,
operation, management or leasing of any office real estate property within the
New York City metropolitan area (the "Competitive Activities"). The exceptions
include investments listed under "The Properties-- Assets Not Being Transferred
to the Company" and any investments in publicly traded real-estate entities
representing less than 1% of the equity ownership of such entity. Pursuant to
the agreements, each of such persons devotes substantially all of his or her
business time to the Company. The employment and noncompetition agreement of
Stephen L. Green also, subject to certain exceptions, prohibits Mr. Green from
engaging, directly or indirectly, during the Noncompetition Period in any
Competitive Activities. The Noncompetition Period is the period beginning on the
date of the termination of employment and ending on the later of (i) three years
from the closing of the Offering and (ii) one year from the termination of his
employment with the Company.

David J. Nettina has entered into a similar employment and noncompetition
agreement with the Company. Mr. Nettina's agreement also provides for a minimum
yearly bonus of $100,000, the award of options to purchase at least 50,000
shares of Common Stock (exercisable at the IPO price of $21.00 per Common
Share), the award of $200,000 worth of shares of Common Stock on each of the
first, second and third anniversaries of his employment and customary relocation
expenses. The definition of "good reason" in Mr. Nettina's agreement includes a
change-in-control of the Company.

In addition, pursuant to the terms of Mr. Nettina's employment agreement,
Mr. Nettina received a loan from the Company to purchase shares of Common Stock
to be issued under the Stock Option Plan ("Stock Loan"). The principal amount of
the Stock Loan is $300,000. The Stock Loan has a term of three years, accrues
interest at the Federal mid-term "Applicable Federal Rate" ("AFR") as in effect
from time to time, and is secured by the Common Stock purchased and is otherwise
non-recourse. One-third of the Stock Loan (together with accrued interest on the
Stock Loan) will be forgiven each year during the term of the Stock Loan
provided that Mr. Nettina is then employed by the Company. In the event of a
change-in-control of the Company, Mr. Nettina's death or permanent disability or
termination of his employment by the Company without cause, the outstanding
principal amounts of the Stock Loan will be forgiven in full. In the event Mr.
Nettina leaves the employ of the Company or is terminated with cause, the
outstanding amount of the Stock Loan will be immediately due and payable. The
outstanding amount shall be equal to the amount then due and owing, pro rated
for the number of months elapsed for the year in which termination occurs. Mr.
Klein received a similar Stock Loan from the Company in the principal amount of
$500,000, with a term of five years.

STOCK OPTION AND INCENTIVE PLAN

In August 1997, the Company adopted the Stock Option Plan. The Stock Option
Plan is administered by the Compensation Committee of the Board of Directors.
Officers and certain other employees of the Company and its subsidiaries
generally are eligible to participate in the Stock Option Plan. Non-employee
Directors of the Company are eligible to receive stock options under the Stock
Option Plan on a limited basis. See "--Compensation of Directors."

The following summary of the Stock Option Plan is qualified in its entirety
by reference to the full text of the Stock Option Plan, a copy of which has been
filed as an exhibit to the Registration Statement of which this Prospectus is a
part.

The Stock Option Plan authorizes (i) the grant of stock options that qualify
as incentive stock options under Section 422 of the Code ("ISOs"), (ii) the
grant of stock options that do not so qualify ("NQSOs"), (iii) the grant of
stock options in lieu of cash Directors' fees and employee bonuses, (iv) grants
of shares of

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Common Stock, in lieu of cash compensation and (v) the making of loans to
acquire shares of Common Stock, in lieu of compensation. The exercise price of
stock options will be determined by the Compensation Committee, but may not be
less than 100% of the fair market value of the shares of Common Stock on the
date of grant in the case of ISOs; provided that, in the case of grants of NQSOs
granted in lieu of cash Directors' fees and employee bonuses, the exercise price
may not be less than 50% of the fair market value of the shares of Common Stock
on the date of grant. The Company has reserved 1,100,000 shares of Common Stock
for issuance under the Stock Option Plan.

INCENTIVE COMPENSATION PLAN

The Company has an incentive compensation plan for key officers of the
Company and the Company's subsidiaries and affiliates. This plan provides for
payment of cash bonuses to participating officers after an evaluation of the
officer's performance and the overall performance of the Company has been
completed. The Chief Executive Officer makes recommendations to the Compensation
Committee of the Board of Directors, which makes the final determination for the
award of bonuses in its sole discretion. The Compensation Committee will
determine the amount of such bonuses, if any, for the Chief Executive Officer in
its sole discretion.

401(k) PLAN

The Company maintains a 401(k) Savings/Retirement Plan (the "401(k) Plan")
to cover eligible employees of the Company and any designated affiliate.

The 401(k) Plan permits eligible employees of the Company to defer up to 15%
of their annual compensation, subject to certain limitations imposed by the
Code. The employees' elective deferrals are immediately vested and
non-forfeitable upon contribution to the 401(k) Plan.

LIMITATION OF LIABILITY AND INDEMNIFICATION

The MGCL permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (i) actual receipt of an improper benefit or profit in money,
property or services, or (ii) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The Charter contains
such a provision which eliminates such liability to the maximum extent permitted
by the MGCL.

The Charter authorizes the Company, to the maximum extent permitted by
Maryland law, to obligate itself to indemnify and to pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to (i) any present or
former director or officer, or (ii) any individual who, while a director of the
Company and at the request of the Company serves or has served another
corporation, limited liability company, partnership, joint venture, trust,
employee benefit plan or any other enterprise as a director, officer, member,
partner or trustee of such corporation, limited liability company, partnership,
joint venture, trust, employee benefit plan or other enterprise from and against
any claim or liability which such persons may incur by reason of his status as a
present or former stockholder, director or officer of the Company. The Bylaws
obligate the Company, to the maximum extent permitted by Maryland law, to
indemnify and to pay or reimburse reasonable expenses in advance of final
disposition of a proceeding to (i) any present or former director or officer who
is made a party to the proceeding by reason of his service in that capacity, or
(ii) any individual who while a director of the Company and at the request of
the Company serves or has served another corporation, limited liability company,
partnership, joint venture, trust, employee benefit plan or any other enterprise
as a director, officer, member, partner or trustee of such corporation, limited
liability company, partnership, joint venture, trust, employee benefit plan or
other enterprise and who is made a party to the proceeding by reason of his
service in that capacity against any claim or liability to which he may become
subject by reason of such service. The Charter and the

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Bylaws also permit the Company to indemnify and advance expenses to any person
who served a predecessor of the Company in any of the capacities described above
and to any employee or agent of the Company or a predecessor of the Company.

The MGCL requires a corporation (unless its charter provides otherwise,
which the Company's Charter does not) to indemnify a director or officer who has
been successful, on the merits or otherwise, in the defense of any proceeding to
which he is made a party by reason of his service in that capacity. The MGCL
permits a corporation to indemnify its present and former directors and
officers, among others, against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason of their service in those or other
capacities unless it is established that (i) the act or omission of the director
or officer was material to the matter giving rise to the proceeding and (A) was
committed in bad faith, or (B) was the result of active and deliberate
dishonesty, (ii) the director or officer actually received an improper personal
benefit in money, property or services, or (iii) in the case of any criminal
proceeding, the director or officer had reasonable cause to believe that the act
or omission was unlawful. However, a Maryland corporation may not indemnify for
an adverse judgment in a suit by or in the right of the corporation. In
addition, the MGCL requires the Company, as a condition to advancing expenses,
to obtain (i) a written affirmation by the director or officer of his good faith
belief that he has met the standard of conduct necessary for indemnification by
the Company as authorized by the Bylaws, and (ii) a written statement by or on
his behalf to repay the amount paid or reimbursed by the Company if it shall
ultimately be determined that the standard of conduct was not met.

The Partnership Agreement also provides for indemnification and advance of
expenses of the Company and its officers and directors to the same extent
indemnification and advance of expenses is provided to officers and directors of
the Company in the Charter and Bylaws, and limits the liability of the Company
and its officers and directors to the Operating Partnership and its partners to
the same extent liability of officers and directors of the Company to the
Company and its stockholders is limited under the Charter. See "Partnership
Agreement--Liability and Indemnification."

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STRUCTURE AND FORMATION OF THE COMPANY

THE OPERATING ENTITIES OF THE COMPANY

THE OPERATING PARTNERSHIP. Substantially all of the Company's assets are
held by, and its operations are through, the Operating Partnership and its
subsidiaries and affiliates. The Company is the sole general partner of the
Operating Partnership and has the exclusive power under the Partnership
Agreement to manage and conduct the business of the Operating Partnership.
Except with respect to the Lock-out Provisions, limited partners generally will
have only limited consent rights. See "Partnership Agreement." The Board of
Directors of the Company manages the affairs of the Company by directing the
affairs of the Operating Partnership. The Operating Partnership cannot be
dissolved for a period of 50 years without the consent of the limited partners,
except in connection with a sale of all or substantially all of its assets,
which also requires the consent of the limited partners. See "Partnership
Agreement." The Company's limited and general partner interests in the Operating
Partnership entitle it to share in cash distributions from, and in the profits
and losses of, the Operating Partnership in proportion to the Company's
percentage interest which currently is approximately 83.8% and will be 90.2%
upon completion of the Offerings.

After a holding period of up to two years following the completion of the
IPO, and at any time thereafter (for as long as the Operating Partnership is in
existence and subject to compliance with the securities laws and the ownership
limits of the Company's organizational documents), limited partners in the
Operating Partnership will be able to have their Units redeemed by the Operating
Partnership for cash or, at the option of the Company, shares of Common Stock on
a one-for-one basis. With each redemption or exchange of Units, the Company's
percentage interest in the operating partnership will increase.

THE MANAGEMENT CORPORATION. In order to maintain the Company's
qualification as a REIT while realizing income from management contracts with
third parties, all of the management operations with respect to properties in
which the Company will not own 100% of the interest are conducted through the
Management Corporation. The Company, through the Operating Partnership, owns
100% of the non-voting common stock (representing 95% of the total equity) of
the Management Corporation. Through dividends on its equity interest, the
Operating Partnership expects to receive substantially all of the cash flow from
the Management Corporation's operations. All of the voting common stock of the
Management Corporation (representing 5% of the total equity) is held by the
Service Corporation LLC. This controlling interest gives The Service Corporation
LLC the power to elect all directors of the Management Corporation.

THE MANAGEMENT LLC. All of the management and leasing operations with
respect to the Properties and properties to be acquired by the Company, as well
as leasing operations with respect to a portion of the properties not owned by
the Company, is conducted through the Management LLC. The Operating Partnership
owns a 100% interest in the Management LLC.

THE LEASING CORPORATION. In order to maintain the Company's qualification
as a REIT while realizing income from leasing and tenant representation services
performed for third parties, leasing operations with respect to a portion of the
properties in which the Company will not own 100% of the interest, as well as
tenant representation services for all of such properties, is conducted through
the Leasing Corporation. The Company, through the Operating Partnership, will
owns 100% of the non-voting common stock (representing 95% of the total equity)
of the Leasing Corporation. Through dividends on its equity interest, the
Operating Partnership expects to receive substantially all of the cash flow from
the Leasing Corporation's operations. All of the voting common stock of the
Leasing Corporation (representing 5% of the total equity) is held by the Service
Corporation LLC. This controlling interest gives the Service Corporation LLC the
power to elect all directors of the Leasing Corporation.

THE CONSTRUCTION CORPORATION. In order to maintain the Company's
qualification as a REIT while realizing income from construction services all of
the Company's construction operations is conducted through the Construction
Corporation. The Company, through the Operating Partnership, owns 100% of

108

the non-voting common stock (representing 95% of the total equity) of the
Construction Corporation. Through dividends on its equity interest, the
Operating Partnership expects to receive substantially all of the cash flow from
the Construction Corporation's operations. All of the voting common stock of the
Construction Corporation (representing 5% of the total equity) is held by the
Service Corporation LLC. This controlling interest gives the Service Corporation
LLC the power to elect all directors of the Construction Corporation.

FORMATION TRANSACTIONS

The Formation Transactions described below (the "Formation Transactions")
were designed to (i) enable the Company to raise the necessary capital to
acquire the Properties, repay certain mortgage indebtedness secured by certain
of the Properties and establish a working capital reserve, (ii) provide a
vehicle for future acquisitions, (iii) enable the Company to comply with certain
requirements under the Code (and the regulations promulgated by the IRS
thereunder (the "Treasury Regulations")) relating to REITs, and (iv) preserve
certain tax advantages for certain participants in the Formation Transactions.
The following Formation Transactions included the following, which were
consummated in connection with the completion of the Offering.

- The Company was organized as a Maryland corporation and the Operating
Partnership was organized as a Delaware limited partnership in June 1997.
In connection with the formation of the Company, certain members of SL
Green management (Nancy A. Peck, Steven H. Klein, Benjamin P. Feldman,
Gerard Nocera and Louis A. Olsen) were issued an aggregate of 553,616
shares of Common Stock for total consideration of $3,831 in cash (the
aggregate par value amount of such stock at the time of issuance).

- Lehman Brothers Holdings Inc. ("LBHI") entered into a loan with Green
Realty LLC (the "LBHI Loan") pursuant to which LBHI agreed to loan up to
$46 million to acquire interests in the Initial Properties, to fund
property related operating expenses, to fund organizational expenses of
the Company and to purchase Treasury Securities.

- The Company sold 11,615,000 shares of Common Stock in the IPO and
contributed the net proceeds therefrom to the Operating Partnership in
exchange for 11,615,000 Units (which, including the issuance of Common
Stock to Victor Capital, a financial advisor to the Company, and to the
members of SL Green management referred to herein, represent approximately
an 81.9% economic interest in the Operating Partnership).

- The Operating Partnership received a contribution of its interests in the
Properties owned by SL Green immediately prior to the IPO as well as 100%
of the non-voting common stock of (representing 95% of the economic
interest in) the Service Corporations from the Property-owning entities,
the partners or members of such entities and the holders of interests in
the Service Corporations. As consideration therefor, the Operating
Partnership issued to such entities, partners or members and holders
2,383,284 Units (having an aggregate value of approximately $50 million
based on the IPO price) and approximately $6.4 million.

- The management and leasing business of SL Green with respect to the
Properties in which the Company will have a 100% ownership interest and
the tenant representation business with respect to certain properties not
owned by the Company was transferred to the Management LLC.

- The Operating Partnership was granted (i) an option from 17 Battery LLC to
acquire its interest in 17 Battery Place from an unaffiliated seller for a
purchase price of approximately $59 million in cash and (ii) an option
from 110 Realty LLC to acquire its interest in 110 East 42nd Street from
an unaffiliated seller for a purchase price of approximately $30 million
in cash.

- The Operating Partnership acquired interests in 1372 Broadway, 1140 Avenue
of the Americas and 50 West 23rd Street (together, the "IPO Acquisitions")
for an aggregate purchase price of

109

approximately $113.0 million (including a $1.6 million escrow account
established in connection with the acquisition of 50 West 23rd Street), to
be funded with net proceeds from the Offering and mortgage financing.

- The Operating Partnership used approximately $82.3 million of net proceeds
from the IPO to repay mortgage debt encumbering the Properties owned by SL
Green prior to the IPO and the LBHI Loan (including approximately $9.4
million in proceeds drawn under the LBHI Loan to fund purchase of the IPO
Acquisitions).

- The Company issued to Victor Capital 85,600 shares of restricted Common
Stock and the Operating Partnership will pay $900,000 (funded with
borrowings under the LBHI Loan and proceeds from the Offering) to Victor
Capital as consideration for financial advisory services rendered to the
Company in connection with the Formation Transactions.

BENEFITS TO RELATED PARTIES

Certain affiliates of the Company realized certain material benefits in
connection with the Formation Transactions and the IPO, including the following:

- Certain continuing investors (including Stephen L. Green, members of his
immediate family and unaffiliated partners in the Property-owning
entities) received 2,383,284 Units in consideration for their interests in
the Properties, Property-owning entities and the management, leasing and
construction businesses of SL Green with a total value of approximately
$50 million (representing approximately 18.1% of the equity of the Company
on a fully-diluted basis).

- The Operating Partnership used $20 million to repay a portion of the LBHI
Loan that was made to Green Realty LLC and invested in Treasury Securities
pledged as collateral therefor (which, upon repayment of the LBHI Loan,
was released for the benefit of Stephen L. Green).

- Certain members of SL Green management (Nancy A. Peck, Steven H. Klein,
Benjamin P. Feldman, Gerard Nocera and Louis A. Olsen) own an aggregate of
553,616 shares of restricted Common Stock (purchased for an aggregate of
$3,831) with a value of $11.6 million based on the IPO price of $21.00 per
Common Share.

- Certain members of SL Green management (Stephen L. Green, David J.
Nettina, Nancy A. Peck, Steven H. Klein, Benjamin P. Feldman, Gerard
Nocera and Louis A. Olsen) became officers and/or directors of the Company
and entered into employment and noncompetition agreements with the
Company. See "Management--Employment and Noncompetition Agreements." Also,
the Company granted to directors, officers and employees of the Company
options to purchase an aggregate of 660,000 shares of Common Stock at the
IPO price of $21.00 per Common Share under the Company's stock option and
incentive plan, subject to certain vesting requirements (50,000 of such
options were granted to each of Ms. Peck and Messrs. Klein, Feldman,
Nocera and Olsen; 75,000 of such options were granted to Mr. Nettina). In
addition, pursuant to the terms of their employment agreements, Messrs.
Nettina and Klein received forgivable loans to purchase Common Stock
issued under such plan in the principal amount of $300,000 and $500,000,
respectively. See "Management."

- The interests in the Properties, Property-owning entities and Service
Corporations contributed to the Operating Partnership had a negative book
value of approximately $7.2 million. As a result of the foregoing
transactions, continuing investors, members of management and affiliates
of the Company received benefits with an aggregate value of $82.4 million,
consisting of (i) Units with an aggregate value of $50 million based on
the IPO price of $21.00 per Common Share, (ii) $20 million in Treasury
Securities, (iii) shares of restricted Common Stock of the Company valued
at $11.6 million based on the IPO price of $21.00 per Common Share and
(iv) forgivable loans to purchase Common Stock in the aggregate principal
amount of $800,000.

- The structure of the Formation Transactions provided the Unit recipients
(including Stephen L. Green, members of his immediate family and
unaffiliated partners in the Property-owning entities)

110

the opportunity for deferral of the tax consequences of their contribution
to the Operating Partnership of their interest in the Properties,
Property-owning entities and Service Corporations.

- The Service Corporation LLC own all of the voting stock of each of the
Service Corporations (representing a 5% equity interest therein).

- Pursuant to the Lock-out Provisions, the Company is restricted in its
ability to sell, or reduce the amount of mortgage indebtedness on, two of
the Properties (673 First Avenue and 470 Park Avenue South) for up to 12
years following the completion of the Offering, which could enable certain
participants in the Formation Transactions (including Stephen L. Green,
members of his immediate family and unaffiliated partners in the
Property-owning entities) to defer certain tax consequences associated
with the Formation Transactions.

- Persons or entities who received Units in the Formation Transactions
(including entities owned by Stephen L. Green) have registration rights
with respect to shares of Common Stock issued in exchange for Units.

POLICIES WITH RESPECT TO CERTAIN ACTIVITIES

The following is a discussion of certain investment, financing and other
policies of the Company. These policies have been determined by the Company's
Board of Directors and may be amended or revised from time to time by the Board
of Directors without a vote of the stockholders, except that (i) the Company
cannot change its policy of holding its assets and conducting its business only
through the Operating Partnership and its affiliates without the consent of the
holders of Units as provided in the Partnership Agreement, (ii) changes in
certain policies with respect to conflicts of interest must be consistent with
legal requirements, and (iii) the Company cannot take any action intended to
terminate its qualification as a REIT without the approval of the holders of a
majority of the outstanding shares of Common Stock.

INVESTMENT POLICIES

INVESTMENT IN REAL ESTATE OR INTERESTS IN REAL ESTATE. The Company will
conduct all of its investment activities through the Operating Partnership and
its affiliates. The Company's primary business objective is to maximize total
return to stockholders through growth in distributable cash flow and
appreciation in the value of its assets. For a discussion of the Properties and
the Company's corporate and growth strategies, see "The Properties" and
"Business and Growth Strategies." In general, it is the Company's policy to
acquire assets primarily for income.

The Company expects to pursue its investment objectives primarily through
the direct or indirect ownership by the Operating Partnership of the Properties
and other acquired office properties. The Company currently intends to invest
primarily in existing improved properties but may, if market conditions warrant,
invest in development projects as well. Furthermore, the Company currently
intends to invest in or develop commercial office properties, primarily in
midtown Manhattan. However, future investment or development activities will not
be limited to any geographic area or product type or to a specified percentage
of the Company's assets. The Company does not have any limit on the amount or
percentage of its assets that may be invested in any one property or any one
geographic area. The Company intends to engage in such future investment or
development activities in a manner which is consistent with the maintenance of
its status as a REIT for Federal income tax purposes. In addition, the Company
may purchase or lease income-producing commercial properties and other types of
properties for long-term investment, expand and improve the real estate
presently owned or other properties purchased, or sell such real estate or other
properties, in whole or in part, if and when circumstances warrant.

The Company also may participate with third parties in property ownership,
through joint ventures or other types of co-ownership. Such investments may
permit the Company to own interests in larger assets without unduly restricting
diversification and, therefore, may add flexibility in structuring its
portfolio. The Company will not, however, enter into a joint venture or
partnership to make an investment that would not otherwise meet its investment
policies.

111

Equity investments may be subject to existing mortgage financing and other
indebtedness or such financing or indebtedness as may be incurred in connection
with acquiring or refinancing these investments. Debt service on such financing
or indebtedness will have a priority over any distributions with respect to the
Common Stock. Investments also are subject to the Company's policy not to be
treated as an investment company under the Investment Company Act of 1940, as
amended (the "1940 Act").

INVESTMENTS IN REAL ESTATE MORTGAGES. While the Company's business
objectives emphasize equity investments in commercial real estate, the Company
may, in the discretion of the Board of Directors, invest in mortgages and other
types of equity real estate interests consistent with the Company's
qualification as a REIT. In that regard, the Company has acquired mortgage
interests in the Bar Building and 1372 Broadway which will provide the Company
with substantially all control over, and economic interest derived from, such
Properties. Although the Company does not presently intend to emphasize
investments in mortgages or deeds of trust, it may invest in non-performing
mortgages on an opportunistic basis in order to acquire an equity interest in
the underlying property or in participating or convertible mortgages if the
Company concludes that it would be in the Company's interest to do so.
Investments in real estate mortgages are subject to the risk that one or more
borrowers may default under such mortgages and that the collateral securing such
mortgages may not be sufficient to enable an investor to recoup its full
investment.

SECURITIES OR INTERESTS IN PERSONS PRIMARILY ENGAGED IN REAL ESTATE
ACTIVITIES AND OTHER ISSUERS. Subject to the percentage of ownership limitations
and gross income tests necessary for REIT qualification, the Company also may
invest in securities of other REITs, securities of other entities engaged in
real estate activities or securities of other issuers, including for the purpose
of exercising control over such entities. See "Material Federal Income Tax
Consequences--Taxation of the Company." No such investment will be made,
however, unless the Board of Directors determines that the proposed investment
would not cause the Company or the Operating Partnership to be an "investment
company" within the meaning of the 1940 Act. The Company may acquire all or
substantially all of the securities or assets of other REITs or similar entities
if such investments would be consistent with the Company's investment policies.

DISPOSITION POLICIES

The Company does not currently intend to dispose of any of the Properties,
although it reserves the right to do so, subject to the Lock-out Provisions, if,
based upon management's periodic review of the Company's portfolio, the Board of
Directors determines that such action would be in the best interests of the
Company. The tax consequences of the disposition of the Properties may, however,
influence the decision of certain directors and executive officers of the
Company who hold Units as to the desirability of a proposed disposition. See
"Risk Factors--Conflicts of Interests in Connection with the Formation
Transactions and the Business of the Company" and "--Limitations on Ability to
Sell or Reduce the Mortgage Indebtedness on Certain Properties Could Adversely
Affect the Value of the Common Stock."

Any decision to dispose of a Property must be approved by a majority of the
Board of Directors (and in accordance with the applicable partnership
agreement). In addition, under the Lock-out Provisions contained in the
Partnership Agreement, the Company may not sell (except in certain events,
including certain transactions that would not result in the recognition of any
gain for tax purposes) 673 First Avenue and 470 Park Avenue South during the
Lock-out Period without, in the case of either Property, the consent of holders
of 75% of the Units originally issued to limited partners in the Operating
Partnership who immediately prior to completion of the Formation Transactions
owned direct or indirect interests in such Property that remain outstanding at
the time of such vote (other than Units held by the Company and excluding any
such Units the adjusted tax basis of which has been increased, in the hands of
the holder or any predecessor holder thereof, to reflect fair market value
through a taxable disposition or otherwise). The Lock-out Provisions apply even
if it would otherwise be in the best interest of the stockholders for the
Company to sell one or more of these three Properties.

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FINANCING POLICIES

As a general policy, the Company intends to limit its total consolidated
indebtedness, and its pro rata share of unconsolidated indebtedness, so that at
the time any debt is incurred, the Company's Debt Ratio does not exceed 50%.
Upon the completion of the Offerings, the Debt Ratio of the Company will be
approximately 13.2%. The Charter and Bylaws do not, however, limit the amount or
percentage of indebtedness that the Company may incur. In addition, the Company
may from time to time modify its debt policy in light of current economic
conditions, relative costs of debt and equity capital, market values of its
Properties, general conditions in the market for debt and equity securities,
fluctuations in the market price of its Common Stock, growth and acquisition
opportunities and other factors. Accordingly, the Company may increase its Debt
Ratio beyond the limits described above. If this policy were changed, the
Company could become more highly leveraged, resulting in an increased risk of
default on its obligations and a related increase in debt service requirements
that could adversely affect the financial condition and results of operations of
the Company and the Company's ability to make distributions to stockholders.

The Company has established its debt policy relative to the total market
capitalization of the Company computed at the time the debt is incurred, rather
than relative to the book value of its assets, a ratio that is frequently
employed, because it believes the book value of its assets (which to a large
extent is the depreciated value of real property, the Company's primary tangible
asset) does not accurately reflect its ability to borrow and to meet debt
service requirements. Total market capitalization, however, is subject to
greater fluctuation than book value, and does not necessarily reflect the fair
market value of the underlying assets of the Company at all times. Moreover, due
to fluctuations in the value of the Company's portfolio of properties over time,
and since any measurement of the Company's total consolidated indebtedness, and
its pro rata share of unconsolidated indebtedness incurred, to total market
capitalization is made only at the time debt is incurred, the Debt Ratio could
exceed the 50% level.

The Company has not established any limit on the number or amount of
mortgages that may be placed on any single property or on its portfolio as a
whole.

Although the Company will consider factors other than total market
capitalization in making decisions regarding the incurrence of debt (such as the
purchase price of properties to be acquired with debt financing, the estimated
market value of properties upon refinancing, and the ability of particular
properties and the Company as a whole to generate sufficient cash flow to cover
expected debt service), there can be no assurance that the Debt Ratio, or any
other measure of asset value, at the time the debt is incurred or at any other
time will be consistent with any particular level of distributions to
stockholders.

CONFLICT OF INTEREST POLICIES

Certain holders of Units, including Stephen L. Green, will incur adverse tax
consequences upon the sale of certain of the Properties to be owned by the
Company at the completion of the Formation Transactions and on the repayment of
indebtedness which are different from the tax consequences to the Company and
persons who purchase shares of Common Stock in the Offering. Consequently, such
holders may have different objectives regarding the appropriate pricing and
timing of any such sale or repayment of indebtedness. In addition, pursuant to
the Lock-out Provisions, the Operating Partnership may not sell or reduce the
mortgage indebtedness on 673 First Avenue and 470 Park Avenue South for up to 12
years following completion of the IPO, even if such sale or reduction in
mortgage indebtedness would be in the best interests of the Company's
stockholders. Subject to the Lock-out Provisions, the limited partners of the
Operating Partnership have agreed that in the event of a conflict in the
fiduciary duties owed by the Company to its stockholders and by the General
Partner to such limited partners, the General Partner will fulfill its fiduciary
duties to such limited partnership by acting in the best interest of the
Company's stockholders. See "Partnership Agreement."

The Company has adopted certain policies and entered into agreements with
its executive officers designed to eliminate or minimize certain potential
conflicts of interest. See "Management--Employment and Noncompetition
Agreements." In that regard, the Company has adopted a policy that, without the
approval of a majority of the disinterested Directors, it will not (i) acquire
from or sell to any director, officer or employee of the Company, or any entity
in which a director, officer or employee of the Company beneficially owns more
than a 1% interest, or acquire from or sell to any affiliate of any of the
foregoing,

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any of the assets or other property of the Company, (ii) make any loan to or
borrow from any of the foregoing persons or (iii) engage in any other
transaction with any of the foregoing persons.

In addition, the Company's Board of Directors is subject to certain
provisions of Maryland law, which are designed to eliminate or minimize certain
potential conflicts of interest. There can be no assurance, however, that these
policies and provisions or these agreements always will be successful in
eliminating the influence of such conflicts, and if they are not successful,
decisions could be made that may fail to reflect fully the interests of all
stockholders.

See "Risk Factors--Conflicts of Interest in Connection with the Formation
Transactions and the Business of the Company."

INTERESTED DIRECTOR AND OFFICER TRANSACTIONS

Under Maryland law, a contract or other transaction between the Company and
a director or between the Company and any other corporation or other entity in
which a director is a director or has a material financial interest is not void
or voidable solely on the grounds of such common directorship or interest, the
presence of the director at the meeting at which the contract or transaction is
authorized, approved or ratified or the counting of the director's vote in favor
thereof if (i) the transaction or contract is authorized, approved or ratified
by the board of directors or a committee of the board, after disclosure of the
common directorship or interest, by the affirmative vote of a majority of
disinterested directors, even if the disinterested directors constitute less
than a quorum, or by a majority of the votes cast by disinterested stockholders,
or (ii) the transaction or contract is fair and reasonable to the Company.

Under Delaware law (where the Operating Partnership is formed), the Company,
as general partner, has a fiduciary duty to the Operating Partnership and,
consequently, such transactions also are subject to the duties of care and
loyalty that the Company, as general partner, owes to limited partners in the
Operating Partnership (to the extent such duties have not been eliminated
pursuant to the terms of the Partnership Agreement). The Company will adopt a
policy which requires that all contracts and transactions between the Company,
the Operating Partnership or any of its subsidiaries, on the one hand, and a
director or executive officer of the Company or any entity in which such
director or executive officer is a director or has a material financial
interest, on the other hand, must be approved by the affirmative vote of a
majority of the disinterested directors. Where appropriate in the judgment of
the disinterested directors, the Board of Directors may obtain a fairness
opinion or engage independent counsel to represent the interests of
non-affiliated security holders, although the Board of Directors will have no
obligation to do so.

BUSINESS OPPORTUNITIES

Pursuant to Maryland law, each director is obligated to offer to the Company
any business opportunity (with certain limited exceptions) that comes to him and
that the Company reasonably could be expected to have an interest in pursuing.
SL Green continues to own interests in certain other properties as well as
entities that will provide cleaning (and related) services to office properties
and security services to office properties, including the Properties. The
Company does not have any interest in these properties or businesses.

POLICIES WITH RESPECT TO OTHER ACTIVITIES

The Company and the Operating Partnership have authority to offer Common
Stock, Preferred Stock, Units, preferred Units or options to purchase capital
stock or Units in exchange for property and to repurchase or otherwise acquire
its Common Stock or Units or other securities in the open market or otherwise
and may engage in such activities in the future. Except in connection with the
Formation Transactions, the Company has not issued Common Stock, Units or any
other securities in exchange for property or any other purpose, and the Board of
Directors has no present intention of causing the Company to repurchase any
Common Stock. The Company may issue Preferred Stock from time to time, in one or
more series, as authorized by the Board of Directors without the need for
stockholder approval. See "Capital Stock--Preferred Stock." The Company has not
engaged in trading, underwriter or agency distribution or sale of securities of
other issuers other than the Operating Partnership, nor has the Company invested
in the securities of other issuers other than the Operating Partnership for the
purposes of exercising control, and does not intend to do so. At all times, the
Company intends to make investments in such a manner as to qualify as a REIT,
unless because of circumstances or changes in the Code (or the

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Treasury Regulations), the Board of Directors determines that it is no longer in
the best interest of the Company to qualify as a REIT and such determination is
approved by a majority vote of the Company's stockholders, as required by the
Charter. The Company has not made any loans to third parties, although it may in
the future make loans to third parties, including, without limitation, to joint
ventures in which it participates. The Company intends to make investments in
such a way that it will not be treated as an investment company under the 1940
Act. The Company's policies with respect to such activities may be reviewed and
modified or amended from time to time by the Company's Board of Directors
without a vote of the stockholders.

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CERTAIN RELATIONSHIPS AND TRANSACTIONS

FORMATION TRANSACTIONS

The terms of the acquisitions of interests in the Initial Properties and the
Service Corporations by the Operating Partnership are described in "Structure
and Formation of the Company--Formation Transactions."

CLEANING SERVICES

First Quality Maintenance, L.P. ("First Quality") provides cleaning and
related services with respect to the Properties. First Quality is owned by Gary
Green, a son of Stephen L. Green. First Quality also provides additional
services directly to tenants on a separately negotiated basis. The aggregate
amount of fees to First Quality for services provided (excluding services
provided directly to tenants) was approximately $188,000 in 1994, $164,000 in
1995 and $296,000 in 1996. After the completion of the IPO, the Company retained
First Quality to provide cleaning and related services for the Company's
properties at market rates. In addition, the cleaning entity will continue to
have the non-exclusive opportunity to provide cleaning and related services to
individual tenants at the Company's properties on a basis separately negotiated
with any tenant seeking such additional services. The cleaning entity will
provides such services to individual tenants pursuant to agreements on customary
terms (including at market rates). First Quality leases 3,740 square feet of
space at 70 West 36th Street pursuant to a lease that expires on December 31,
2005 and provides for annual rental payments of approximately $68,660.

SECURITY SERVICES

Classic Security LLC ("Classic Security") provides security services with
respect to the Properties. Classic Security is owned by Gary Green, a son of
Stephen L. Green. The aggregate amount of fees for such services was
approximately $24,000 in 1996 (no fees were paid to such entity in 1994 or
1995). Classic Security continues to provide security services for the Company's
properties at market rates.

RELATED PARTY TRANSACTIONS

During 1996, HRA, a real estate and management consulting firm of which John
H. Alschuler, Jr., a director nominee of the Company, is the President provided
consulting services for the Leasing Corporation. HRA negotiated certain New York
City benefit programs for Information Builders, Inc., a tenant that was
represented by the Leasing Corporation in connection with its relocation from
1250 Broadway to 2 Penn Plaza. For such services, HRA was paid a total of
$128,962.99 by the Leasing Corporation.

PARTNERSHIP AGREEMENT

THE FOLLOWING SUMMARY OF THE AGREEMENT OF LIMITED PARTNERSHIP OF THE
OPERATING PARTNERSHIP (THE "PARTNERSHIP AGREEMENT"), INCLUDING THE DESCRIPTIONS
OF CERTAIN PROVISIONS SET FORTH ELSEWHERE IN THIS PROSPECTUS, IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE PARTNERSHIP AGREEMENT, WHICH IS FILED AS AN
EXHIBIT TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART.

OPERATIONAL MATTERS

GENERAL. Holders of Units (other than the Company in its capacity as
general partner) will hold a limited partnership interest in the Operating
Partnership, and all holders of Units (including the Company in its capacity as
general partner) will be entitled to share in cash distributions from, and in
the profits and losses of, the Operating Partnership. Each Unit generally will
receive distributions in the same amount paid on each share of Common Stock. See
"Distributions."

Holders of Units will have the rights to which limited partners are entitled
under the Partnership Agreement and, to the extent not limited by the
Partnership Agreement, the Delaware Revised Uniform Limited Partnership Act (the
"Act"). The Units have not been and are not expected to be registered

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pursuant to any Federal or state securities laws or listed on any exchange or
quoted on any national market system. The Partnership Agreement imposes certain
restrictions on the transfer of Units, as described below.

PURPOSES, BUSINESS AND MANAGEMENT. The purpose of the Operating Partnership
includes the conduct of any business that may be lawfully conducted by a limited
partnership formed under the Act, except that the Partnership Agreement requires
the business of the Operating Partnership to be conducted in such a manner that
will permit the Company to be classified as a REIT under Section 856 of the
Code, unless the Company ceases to qualify as a REIT for reasons other than the
conduct of the business of the Operating Partnership. Subject to the foregoing
limitation, the Operating Partnership may enter into partnerships, joint
ventures or similar arrangements and may own interests directly or indirectly in
any other entity.

The Company, as the general partner of the Operating Partnership, has the
exclusive power and authority to conduct the business of the Operating
Partnership, subject to the consent of the limited partners in certain limited
circumstances discussed below. No limited partner may take part in the
operation, management or control of the business of the Operating Partnership by
virtue of being a holder of Units.

The Company may not conduct any business other than the business of the
Operating Partnership without the consent of the holders of a majority of the
limited partnership interests (not including the limited partnership interests
held by the Company in its capacity as a limited partner in the Operating
Partnership).

DISTRIBUTIONS. The Partnership Agreement provides for the quarterly
distribution of Available Cash (as defined below), as determined in the manner
provided in the Partnership Agreement, to the Company and the limited partners
in proportion to their percentage interests in the Operating Partnership.
"Available Cash" is generally defined as net income plus any reduction in
reserves and minus interest and principal payments on debt, capital
expenditures, any additions to reserves and other adjustments. Neither the
Company nor the limited partners are entitled to any preferential or
disproportionate distributions of Available Cash.

BORROWING BY THE OPERATING PARTNERSHIP. The Company is authorized to cause
the Operating Partnership to borrow money and to issue and guarantee debt as it
deems necessary for the conduct of the activities of the Operating Partnership.
Such debt may be secured by mortgages, deeds of trust, liens or encumbrances on
properties of the Operating Partnership. The Company also may cause the
Operating Partnership to borrow money to enable the Operating Partnership to
make distributions, including distributions in an amount sufficient to permit
the Company, as long as it qualifies as a REIT, to avoid the payment of any
Federal income tax. See "Policies with Respect to Certain Activities--Financing
Policies." Pursuant to the Lock-out Provisions, the Operating Partnership may
not, earlier than one year prior to its maturity, repay the mortgage
indebtedness on 673 First Avenue or 470 Park Avenue South and may not consent to
any such prepayment of mortgage indebtedness on 673 First Avenue or 470 Park
Avenue South (other than pursuant to scheduled amortization) during the Lock-out
Period without, in the case of each such Property, the consent of holders of 75%
of the Units originally issued to limited partners in the Operating Partnership
who immediately prior to completion of the Formation Transactions owned direct
or indirect interests in such Property that remain outstanding at the time of
such vote (whether held by the original recipient of such Units or by a
successor or transferee of the original recipient, but excluding Units held by
the Company and excluding any such Units the adjusted tax basis of which has
been increased, in the hands of the holder or any predecessor holder thereof, to
reflect fair market value through a taxable disposition or otherwise) unless the
repayment is in connection with either a refinancing of the outstanding debt (on
a basis that is nonrecourse to the Operating Partnership and providing for the
least amount of principal amortization that is available on commercially
reasonable terms and permitting certain guarantees by the holders of the Units
originally issued with respect to the affected Property) or an involuntary sale
pursuant to foreclosure of a mortgage securing the debt (or other similar
event). In addition, during

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the Lock-out Period, the Company is obligated to use commercially reasonable
efforts, commencing one year prior to the stated maturity, to refinance at
maturity (on a basis that is nonrecourse to the Operating Partnership and
providing for the least amount of principal amortization that is available on
commercially reasonable terms and permitting certain guarantees by the holders
of the Units originally issued with respect to the affected Property) the
mortgage indebtedness secured by each of these two Properties at not less than
the principal amount outstanding on the maturity date. Finally, during the
Lock-out Period, the Company may not incur debt secured by either of these two
Properties if the amount of the new debt would exceed the greater of 75% of the
value of the Property securing the debt or the amount of existing debt being
refinanced (plus the costs associated therewith).

REIMBURSEMENT OF THE COMPANY; TRANSACTIONS WITH THE COMPANY AND ITS
AFFILIATES. The Company will not receive any compensation for its services as
general partner of the Operating Partnership. The Company, however, as a partner
in the Operating Partnership, has the same right to allocations and
distributions as other partners in the Operating Partnership. In addition, the
Operating Partnership will reimburse the Company for substantially all expenses
it incurs relating to the ongoing operation of the Company and offerings of
Units or shares of Common Stock (or rights, options, warrants or convertible or
exchangeable securities).

Except as expressly permitted by the Partnership Agreement, affiliates of
the Company will not engage in any transactions with the Operating Partnership
except on terms that are fair and reasonable and no less favorable to the
Operating Partnership than would be obtained from an unaffiliated third party.

SALES OF ASSETS. Under the Partnership Agreement, the Company generally has
the exclusive authority to determine whether, when and on what terms the assets
of the Operating Partnership (including the Properties) will be sold, subject to
the Lock-out Provisions. A sale of all or substantially all of the assets of the
Operating Partnership (or a merger of the Operating Partnership with another
entity) generally requires an affirmative vote of the holders of a majority of
the outstanding Units (including Units held by the Company), but also is subject
to the Lock-out Provisions.

Under the Lock-out Provisions, the Operating Partnership may not sell or
otherwise dispose of 673 First Avenue or 470 Park Avenue South (or any direct or
indirect interest therein) during the Lock-out Period (except pursuant to a sale
or other disposition of all or substantially all of the Operating Partnership's
assets approved as described below, an involuntary sale pursuant to foreclosure
of a mortgage secured by one of these Properties or a bankruptcy proceeding, and
certain transactions, including a "Section 1031 like-kind exchange," that would
not result in the recognition of any gain for tax purposes by the holders of
Units issued in the Formation Transactions with respect to these Properties)
without, in the case of each such Property, the consent of holders of 75% of the
Units originally issued to limited partners in the Operating Partnership who
immediately prior to the completion of the Formation Transactions owned direct
or indirect interests in such Property that remain outstanding at the time of
such vote (whether held by the original recipient of such Units or by a
successor or transferee of the original recipient, but excluding Units held by
the Company and excluding any such Units the adjusted tax basis of which has
been increased, in the hands of the holder or any predecessor holder thereof, to
reflect fair market value through a taxable disposition or otherwise). Under the
Lock-out Provisions, a sale or other disposition of all or substantially all of
the assets of the Operating Partnership during the Lock-out Period generally
would require the approval of the holders, as a group, of 75% of the aggregate
Units originally issued with respect to 673 First Avenue and 470 Park Avenue
South that remain outstanding (whether held by the original recipient of such
Units or by a successor or transferee of the original recipient, but excluding
Units held by the Company and excluding any such Units the adjusted tax basis of
which has been increased, in the hands of the holder or any predecessor holder
thereof, to reflect fair market value through a taxable disposition or
otherwise). The consent requirement under the Lockout Provisions, however, would
not apply in the event of a merger or consolidation involving the Operating
Partnership and substantially all of its assets if (i) the transaction would not
result in the recognition of any gain with respect to the Units originally
issued with respect to 673 First Avenue and 470 Park Avenue South, (ii) the

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Lock-out Provisions would continue to apply with respect to each of these two
Properties, and (iii) the surviving entity agrees to a number of restrictions
and conditions for the benefit of the holders of such Units designed to preserve
the benefit of certain provisions and restrictions in the Partnership Agreement
for the holders of such Units.

NO REMOVAL OF THE GENERAL PARTNER. The Partnership Agreement provides that
the limited partners may not remove the Company as general partner of the
Operating Partnership with or without cause (unless neither the General Partner
nor its parent entity is a "public company," in which case the General Partner
may be removed for cause).

ISSUANCE OF LIMITED PARTNERSHIP INTERESTS. The Company is authorized,
without the consent of the limited partners, to cause the Operating Partnership
to issue Units to the Company, to the limited partners or to other persons for
such consideration and upon such terms and conditions as the Company deems
appropriate. The Operating Partnership also may issue partnership interests in
different series or classes, which may be senior to the Units. If Units are
issued to the Company, then the Company must issue shares of Common Stock and
must contribute to the Operating Partnership the proceeds received by the
Company from such issuance. In addition, the Company may cause the Operating
Partnership to issue to the Company partnership interests in different series or
classes of equity securities, which may be senior to the Units, in connection
with an offering of securities of the Company having substantially similar
rights upon the contribution of the proceeds therefrom to the Operating
Partnership. Consideration for partnership interests may be cash or any property
or other assets permitted by the Act. No limited partner has preemptive,
preferential or similar rights with respect to capital contributions to the
Operating Partnership or the issuance or sale of any partnership interests
therein.

AMENDMENT OF THE PARTNERSHIP AGREEMENT. Generally, the Partnership
Agreement may be amended with the approval of the Company, as general partner,
and limited partners (including the Company) holding a majority of the Units.
Certain provisions regarding, among other things, the rights and duties of the
Company as general partner or the dissolution of the Operating Partnership, may
not be amended without the approval of a majority of the Units not held by the
Company. Notwithstanding the foregoing, the Company, as general partner, has the
power, without the consent of the limited partners, to amend the Partnership
Agreement in certain circumstances. Certain amendments that would affect the
fundamental rights of a limited partner must be approved by the Company and each
limited partner that would be adversely affected by such amendment. In addition,
any amendment that would affect the Lock-out Provisions with respect to 673
First Avenue or 470 Park Avenue South during the Lock-out Period would require,
in the case of each such Property affected by the Amendment, the consent of
holders of 75% of the Units originally issued with respect to such Property that
remain outstanding at the time of such vote (whether held by the original
recipient of such Units or by a successor or transferee of the original
recipient, but excluding Units held by the Company and excluding any such Units
the adjusted tax basis of which has been increased, in the hands of the holder
or any predecessor holder thereof, to reflect fair market value through a
taxable disposition or otherwise).

DISSOLUTION, WINDING UP AND TERMINATION. The Operating Partnership will
continue until December 31, 2095, unless sooner dissolved and terminated. The
Operating Partnership will be dissolved prior to the expiration of its term, and
its affairs wound up upon the occurrence of the earliest of: (i) the withdrawal
of the Company as general partner without the permitted transfer of the
Company's interest to a successor general partner (except in certain limited
circumstances); (ii) the sale of all or substantially all of the Operating
Partnership's assets and properties (subject to the Lock-out Provisions during
the Lockout Period); (iii) the entry of a decree of judicial dissolution of the
Operating Partnership pursuant to the provisions of the Act; (iv) the entry of a
final non-appealable order for relief in a bankruptcy proceeding of the general
partner, or the entry of a final non-appealable judgment ruling that the general
partner is bankrupt or insolvent (except that, in either such case, in certain
circumstances the limited partners (other than the Company) may vote to continue
the Operating Partnership and substitute a new general partner in place of the
Company); and (v) on or after January 1, 2046, at the option of the

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Company, in its sole and absolute discretion. Upon dissolution, the Company, as
general partner, or any liquidator will proceed to liquidate the assets of the
Operating Partnership and apply the proceeds therefrom in the order of priority
set forth in the Partnership Agreement.

LIABILITY AND INDEMNIFICATION

LIABILITY OF THE COMPANY AND LIMITED PARTNERS. The Company, as general
partner of the Operating Partnership, is liable for all general recourse
obligations of the Operating Partnership to the extent not paid by the Operating
Partnership. The Company is not liable for the nonrecourse obligations of the
Operating Partnership. Assuming that a limited partner does not take part in the
control of the business of the Operating Partnership and otherwise acts in
conformity with the provisions of the Partnership Agreement and the Act, the
liability of a limited partner for obligations of the Operating Partnership
under the Partnership Agreement and the Act will be limited, subject to certain
exceptions, generally to the loss of such limited partner's investment in the
Operating Partnership represented by his Units. The Operating Partnership will
operate in a manner that the Company deems reasonable, necessary or appropriate
to preserve the limited liability of the limited partners.

EXCULPATION AND INDEMNIFICATION OF THE COMPANY. The Partnership Agreement
generally provides that the Company, as general partner of the Operating
Partnership, will incur no liability to the Operating Partnership or any limited
partner for losses sustained, liabilities incurred or benefits not derived as a
result of errors in judgment or mistakes of fact or law or of any act or
omission, if the Company carried out its duties in good faith. In addition, the
Company is not responsible for any misconduct or negligence on the part of its
agents, provided the Company appointed such agents in good faith.

The Partnership Agreement also provides for indemnification (including, in
certain circumstances, the advancement of expenses) of the Company, the
directors and officers of the Company and such other persons as the Company may
from time to time designate against any judgments, penalties, fines, settlements
and reasonable expenses that are actually (or will be) incurred by such person
in connection with a proceeding in which any such person is involved, or is
threatened to be involved, as a party or otherwise, unless it is established
that: (i) the act or omission of the indemnified person was material to the
matter giving rise to the proceeding and either was committed in bad faith or
was the result of active and deliberate dishonesty; (ii) the indemnified person
actually received an improper personal benefit in money, property or services;
or (iii) in the case of any criminal proceeding, the indemnified person had
reasonable cause to believe that the act or omission was unlawful.

TRANSFERS OF INTERESTS

RESTRICTIONS ON TRANSFER OF THE COMPANY'S INTEREST. The Company may not
transfer any of its interests as general or limited partner in the Operating
Partnership, except in connection with a merger or sale of all or substantially
all of its assets, in which (i) the limited partners in the Operating
Partnership either will receive, or will have the right to receive,
substantially the same consideration as holders of shares of Common Stock, and
(ii) such transaction has been approved by the holders of a majority of the
interests in the Operating Partnership (including interests held by the
Company). The Lock-out Provisions do not apply to a sale or other transfer by
the Company of its interests as a partner in the Operating Partnership, but they
would apply to transfers of assets of the Operating Partnership undertaken
during the Lock-out Period in connection with or as part of any such transaction
by the Company. See "--Operational Matters--Sales of Assets" above.

RESTRICTIONS ON TRANSFERS OF UNITS BY LIMITED PARTNERS. For up to two years
after the completion of the Offering, a limited partner may not transfer any of
his rights as a limited partner without the consent of the Company, which
consent the Company may withhold in its sole discretion. Any attempted transfer
in violation of this restriction will be void ab initio and without any force or
effect. Beginning two years after the completion of the IPO, limited partners
(other than the Company) will be permitted to transfer all or any portion of
their Units without restriction as long as they satisfy certain requirements set
forth in the

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Partnership Agreement. In addition, limited partners will be permitted to
dispose of their Units following the expiration of up to a two-year period
following the completion of the IPO by exercising the redemption right described
below. See "--Redemption of Units" below.

The right of any permitted transferee of Units to become a substituted
limited partner is subject to the consent of the Company, which consent the
Company may withhold in its sole and absolute discretion. If the Company does
not consent to the admission of a transferee of Units as a substituted limited
partner, then the transferee will succeed to all economic rights and benefits
attributable to such Units (including the redemption right described below), but
will not become a limited partner or possess any other rights of limited
partners (including the right to vote).

REDEMPTION OF UNITS. Subject to certain limitations and exceptions, holders
of Units (other than the Company) have the right to have each of their Units
redeemed by the Operating Partnership at any time beginning two years after the
completion of the Formation Transactions. Unless the Company elects to assume
and perform the Operating Partnership's obligation with respect to the
redemption right, as described below, the limited partner will receive cash from
the Operating Partnership in an amount equal to the market value of the Units to
be redeemed. The market value of a Unit for this purpose will be equal to the
average of the closing trading price of a share of Common Stock on the NYSE for
the ten trading days before the day on which the redemption notice was given to
the Operating Partnership of exercise of the redemption right. In lieu of the
Operating Partnership's acquiring the Units for cash, the Company will have the
right (except as described below, if the Common Stock is not publicly traded) to
elect to acquire the Units directly from a limited partner exercising the
redemption right, in exchange for either cash or shares of Common Stock, and,
upon such acquisition, the Company will become the owner of such Units. The
redemption generally will occur on the tenth business day after the notice to
the Operating Partnership, except that no redemption or exchange can occur if
delivery of shares of Common Stock would be prohibited either under the
provisions of the Company's Charter designed primarily to protect the Company's
qualification as a REIT or under applicable Federal or state securities laws as
long as the shares of Common Stock are publicly traded. See "Capital
Stock--Restrictions on Transfer--Ownership Limits."

In the event that the Common Stock is not publicly traded but another entity
whose stock is publicly traded owns more than 50% of the capital stock of the
Company (referred to as the "Parent Entity"), the redemption right will be
determined by reference to the publicly traded stock of the Parent Entity and
the Company will have the right to elect to acquire the Units to be redeemed for
publicly traded stock of the Parent Entity. In the event that the Common Stock
is not publicly traded and there is no Parent Entity with publicly traded stock,
the redemption right will be based upon the fair market value of the Operating
Partnership's assets at the time the redemption right is exercised (as
determined in good faith by the Company based upon a commercially reasonable
estimate of the amount that would be realized by the Operating Partnership if
each asset of the Operating Partnership were sold to an unaffiliated purchaser
in an arm's length transaction where neither the purchaser nor the seller were
under economic compulsion to enter into the transaction), and the Company and
the Operating Partnership will be obligated to satisfy the redemption right in
cash (unless the redeeming partner, in such partner's sole and absolute
discretion, consents to the receipt of Common Stock), payable on the thirtieth
business day after notice was given to the Operating Partnership of exercise of
the redemption right.

ISSUANCE OF ADDITIONAL UNITS AND/OR PREFERENCE UNITS

The Company is authorized at any time, without the consent of the limited
partners, to cause the Operating Partnership to issue additional Units to the
Company, to the limited partners or to other persons for such consideration and
on such terms and conditions as the Company deems appropriate. If Units are
issued to the Company, then the Company must issue a corresponding number of
shares of Common Stock and must contribute to the Operating Partnership the
proceeds, if any, received by the Company from such issuance. In addition, the
Partnership Agreement provides that the Operating

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Partnership may also issue preferred units and other partnership interests of
different classes and series (collectively, "Preference Units") having such
rights, preferences and other privileges, variations and designations as may be
determined by the Company. Any such Preference Units may have terms, provisions
and rights which are preferential to the terms, provisions and rights of the
Units. Preference Units, however, may be issued to the Company only in
connection with an offering of securities of the Company having substantially
similar rights and the contribution of the proceeds therefrom to the Operating
Partnership. Accordingly, in connection with the PIERS Offering, the Operating
Partnership will issue to the Company 8.0% Series A Convertible, Cumulative
Preference Units that mirror the rights, preferences and other privileges of the
PIERS. No limited partner has preemptive, preferential or similar rights with
respect to capital contributions to the Operating Partnership or the issuance or
sale of any partnership interests therein.

FIDUCIARY DUTY

The limited partners have agreed, subject to the Lock-out Provisions, that
in the event of a conflict in the fiduciary duties owed by the Company to its
stockholders and by the General Partner to such limited partners, the General
Partner will fulfill its fiduciary duties to such limited partnership by acting
in the best interests of the Company's stockholders.

122

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of Common Stock (or Common Stock for which Units are exchangeable) by
(i) each director (and director nominee) of the Company, (ii) each executive
officer of the Company, (iii) all directors (including director nominees) and
executive officers of the Company as a group, and (iv) each person or entity
which is expected to be the beneficial owner of 5% or more of the outstanding
shares of Common Stock immediately following the completion of the Offerings.
Except as indicated below, all of such Common Stock is owned directly, and the
indicated person or entity has sole voting and investment power. The extent to
which a person will hold shares of Common Stock as opposed to Units is set forth
in the footnotes below.

NUMBER OF
SHARES AND UNITS PERCENT OF
BENEFICIALLY PERCENT OF ALL SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) ALL SHARES(2) AND UNITS(3)
- ---------------------------------------------------------------- -------------------- --------------- ---------------

Stephen L. Green (4)(5)......................................... 2,140,784 8.8% 7.4%
David J. Nettina (6)(7)......................................... 14,285 0.1 0.1
Nancy A. Peck (6)............................................... 197,720 0.9 0.7
Steven H. Klein (6)(8).......................................... 102,897 0.5 0.4
Benjamin P. Feldman (6)(9)...................................... 117,832 0.5 0.4
Gerard Nocera (6)............................................... 79,088 0.4 0.3
Louis A. Olsen (6).............................................. 79,088 0.4 0.3
Edwin Thomas Burton, III........................................ 0 0 0
John S. Levy.................................................... 0 0 0
John H. Alschuler, Jr........................................... 0 0 0
Cohen & Steers Capital Management, Inc. (10).................... 1,702,000 7.6 5.9
Capital Growth Management Limited Partnership (11).............. 1,320,000 5.9 4.5
The Equitable Companies Incorporated (12)....................... 1,302,900 5.8 4.5
Neuberger & Berman LLC (13)..................................... 681,100 3.1 2.4
EII Realty Securities Inc. (14)................................. 638,300 2.9 2.2
FMR Corp. (15).................................................. 622,400 2.8 2.2

All directors and executive officers as a group (10 persons).... 2,731,694 11.2% 9.5%

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

(1) The number of Common Shares beneficially owned is reported on the basis of
regulations of the Commission governing the determination of beneficial
ownership of securities.

(2) Assumes 28,803,480 shares of Common Stock outstanding immediately following
the Offerings. Assumes that all Units held by the person (and no other
person) are redeemed for shares of Common Stock. The total number of shares
of Common Stock outstanding used in calculating this percentage assumes that
none of the Units held by any persons are redeemed for shares of Common
Stock and that none of the PIERS are converted to Common Stock.

(3) Assumes a total of 28,525,191 shares of Common Stock and Units outstanding
immediately following the Offerings (22,292,311 shares of Common Stock,
4,086,000 shares of Common Stock issuable upon conversion or redemption of
the PIERS and 2,425,169 Units, which may be redeemed for cash or shares of
Common Stock under certain circumstances). Assumes that all Units held by
the person are redeemed for shares of Common Stock. The total number of
shares of Common Stock outstanding used in calculating this percentage
assumes that all of the Units held by other persons are redeemed for shares
of Common Stock and that all the PIERS are converted into Common Stock.

(4) Represents Units issued in the Formation Transactions.

(5) The business address for this stockholder is 70 West 36th Street, New York,
New York 10018.

(6) Represents shares of restricted Common Stock.

(7) Represents the number of shares of restricted Common Stock to be purchased
by Mr. Nettina pursuant to his Stock Loan. See "Management."

(8) Certain of such shares are held by Mr. Klein through family trusts of which
he is the managing member. Includes the number of shares of restricted
Common Stock to be purchased by Mr. Klein pursuant to his Stock Loan. See
"Management."

(9) All of such shares are held by Mr. Feldman through a limited liability
company of which he is the managing member.

123

(10) The business address for this stockholder is 757 Third Avenue, New York,
New York 10017. Pursuant to a Schedule 13G filed with the Commission, as of
December 31, 1997, this stockholder may have direct or indirect voting
and/or investment discretion over these shares of Common Stock which are
held for the benefit of its clients by its separate accounts, externally
managed accounts, registered investment companies, subsidiaries and/or other
affiliates. This stockholder is reporting the combined holdings of the
entities for the purpose of administrative convenience. The Board of
Directors of the Company has granted a waiver of the Common Stock ownership
restrictions with respect to this stockholder.

(11) The business address for this stockholder is One International Plaza,
Boston, MA 02110. Pursuant to a Schedule 13G filed with the Commission, as
of December 31, 1997, this stockholder may have direct or indirect voting
and/or investment discretion over these shares of Common Stock which are
held for the benefit of its clients by its separate accounts, externally
managed accounts, registered investment companies, subsidiaries and/or other
affiliates. This stockholder is reporting the combined holdings of the
entities for the purpose of administrative convenience. The Board of
Directors of the Company has granted a waiver of the Common Stock ownership
restrictions with respect to this stockholder.

(12) The business address for this stockholder is 1290 Avenue of the Americas,
New York, NY 10104. Pursuant to a Schedule 13G filed with the Commission, as
of December 31, 1997, this stockholder may have direct or indirect voting
and/or investment discretion over these shares of Common Stock which are
held for the benefit of its clients by its separate accounts, externally
managed accounts, registered investment companies, subsidiaries and/or other
affiliates. This stockholder is reporting the combined holdings of the
entities for the purpose of administrative convenience. The Board of
Directors of the Company has granted a waiver of the Common Stock ownership
restrictions with respect to this stockholder.

(13) The business address for this stockholder is 605 Third Avenue, New York, NY
10158. Pursuant to a Schedule 13G filed with the Commission, as of December
31, 1997, this stockholder may have direct or indirect voting and/or
investment discretion over these shares of Common Stock which are held for
the benefit of its clients by its separate accounts, externally managed
accounts, registered investment companies, subsidiaries and/or other
affiliates. This stockholder is reporting the combined holdings of the
entities for the purpose of administrative convenience.

(14) The business address for this stockholder is 667 Madison Avenue, New York,
NY 10021. Pursuant to a Schedule 13G filed with the Commission, as of
December 31, 1997, this stockholder may have direct or indirect voting
and/or investment discretion over these shares of Common Stock which are
held for the benefit of its clients by its separate accounts, externally
managed accounts, registered investment companies, subsidiaries and/or other
affiliates. This stockholder is reporting the combined holdings of the
entities for the purpose of administrative convenience.

(15) The business address for this stockholder is 82 Devonshire Street, Boston,
MA 02109. Pursuant to a Schedule 13G filed with the Commission, as of
December 31, 1997, this stockholder may have direct or indirect voting
and/or investment discretion over these shares of Common Stock which are
held for the benefit of its clients by its separate accounts, externally
managed accounts, registered investment companies, subsidiaries and/or other
affiliates. This stockholder is reporting the combined holdings of the
entities for the purpose of administrative convenience.

124

CAPITAL STOCK

GENERAL

The Company's Charter provides that the Company may issue up to 100 million
shares of common stock, $.01 par value per share ("Common Stock"), 25 million
shares of preferred stock, $.01 par value per share ("Preferred Stock"), and 75
million shares of excess stock, $.01 par value per share ("Excess Stock"). As of
May 12, 1998, 12,292,311 shares of Common Stock were issued and outstanding and
no shares of Preferred Stock were issued and outstanding. Under Maryland law,
stockholders generally are not liable for the corporation's debts or
obligations.

COMMON STOCK

All shares of Common Stock outstanding are, and all shares of Common Stock
issuable upon completion of the Common Offering and upon conversion or
redemption of the PIERS offered hereby will be, duly authorized, fully paid and
nonassessable. Subject to the preferential rights of any other shares or series
of stock and to the provisions of the Charter regarding Excess Stock, holders of
shares of Common Stock are entitled to receive dividends on such stock if, as
and when authorized and declared by the Board of Directors of the Company out of
assets legally available therefor and to share ratably in the assets of the
Company legally available for distribution to its stockholders in the event of
its liquidation, dissolution or winding up after payment of or adequate
provision for all known debts and liabilities of the Company.

Subject to the provisions of the Charter regarding Excess Stock, each
outstanding share of Common Stock entitles the holder to one vote on all matters
submitted to a vote of stockholders, including the election of directors, and,
except as provided with respect to any other class or series of stock, the
holders of such shares will possess the exclusive voting power. There is no
cumulative voting in the election of directors, which means that the holders of
a majority of the outstanding shares of Common Stock can elect all of the
directors then standing for election and the holders of the remaining shares
will not be able to elect any directors.

Holders of shares of Common Stock have no preference, conversion, exchange,
sinking fund, redemption or appraisal rights and have no preemptive rights to
subscribe for any securities of the Company. Subject to the provisions of the
Charter regarding Excess Stock, shares of Common Stock will have equal dividend,
liquidation and other rights.

The Charter authorizes the Board of Directors to reclassify any unissued
shares of Common Stock into other classes or series of classes of stock and to
establish the number of shares in each class or series and to set the
preferences, conversion and other rights, voting powers, restrictions,
limitations and restrictions on ownership, limitations as to dividends or other
distributions, qualifications and terms or conditions of redemption for each
such class or series.

PREFERRED STOCK

The Charter authorizes the Board of Directors to classify any unissued
shares of Preferred Stock and to reclassify any previously classified but
unissued shares of Preferred Stock of any series. Prior to issuance of shares of
each series the Board is required by the MGCL and the Charter to set, subject to
the provisions of the Charter regarding Excess Stock, the terms, preferences,
conversion or other rights, voting powers, restrictions, limitations and
restrictions on ownership, limitations as to dividends or other distributions,
qualifications and terms or conditions of redemption for each such series. Thus,
the Board could authorize the issuance of shares of Preferred Stock with terms
and conditions which could have the effect of delaying, deferring or preventing
a transaction or a change in control of the Company that might involve a premium
price for holders of Common Stock or otherwise be in their best interest. As of
the date hereof, no shares of Preferred Stock are outstanding.

125

PIERS

The Board of Directors of the Company has adopted Articles Supplementary
determining the terms of the PIERS as a series of Preferred Stock consisting of
up to 4,600,000 shares, designated as the 8.0% Series A Convertible, Cumulative
Preferred Stock (referred to herein as the PIERS). When issued, the PIERS will
be validly issued, fully paid and nonassessable. Unless converted or redeemed by
the Company, PIERS are subject to mandatory redemption on April 15, 2008.

In connection with the PIERS Offering, the Company will contribute or
otherwise transfer the net proceeds of the sale of the PIERS to the Operating
Partnership and the Operating Partnership will issue to the Company 8.0% Series
A Convertible, Cumulative Preference Units that mirror the rights, preferences
and other privileges of the PIERS. The Operating Partnership will be required to
make all required distributions on such Preference Units prior to any
distribution of cash or assets to the holder of Units or to the holders of any
other equity interest of the Operating Partnership, except for any other series
of Preference Units ranking on a parity with such Preference Units as to
distributions and liquidation, except for distributions required to enable the
Company to maintain its qualification as a REIT.

LISTING. Application will be made to list the PIERS and the Common Stock
issuable upon conversion or redemption of the PIERS on the NYSE. The PIERS will
be listed under the symbol "SLGPrA". Trading of the PIERS is expected to
commence on the NYSE within 30 days of the closing of the PIERS Offering.

RANKING. The PIERS will rank senior to the Common Stock as to priority for
receiving distributions and amounts upon liquidation, dissolution or winding up
of the Company.

DISTRIBUTIONS. Holders of the PIERS will be entitled to receive, when and
as authorized by the Board of Directors, out of funds legally available for the
payment of quarterly cumulative cash distributions payable in an amount per
share equal to the greater of (i) 8.0% of the $25.00 liquidation preference per
annum (equivalent to $2.00 per share per annum), payable in equal amounts of
$0.50 per share quarterly or (ii) the cash dividends paid or payable (determined
on each of the Distribution Payment Dates referred to below) on a number of
shares of Common Stock equal to the number of shares of Common Stock (or portion
thereof) into which a PIERS is convertible. Distributions on the PIERS shall
accumulate and be cumulative from the fifteenth day of each January, April, July
and October or, if not a business day, the next succeeding business day (each, a
"Distribution Payment Date"). The first distribution on the PIERS, which will be
paid on July 15, 1998, will be for less than a full quarter. Such distributions
and any distribution payable on the PIERS for any other partial distribution
period will be computed on the basis of a 360-day year consisting of twelve
30-day months. Distributions will be payable to holders of record as they appear
in the stock records of the Company at the close of business on the applicable
record date, which will be the first day of the calendar month in which the
applicable Distribution Payment Date falls or such other date designated by the
Board of Directors of the Company for the payment of distributions that is not
more than 30 nor less than 10 days prior to such Distribution Payment Date
(each, a "Distribution Record Date").

No distribution on the PIERS will be authorized by the Board of Directors if
such authorization, payment or setting apart for payment would violate any
agreement of the Company or is restricted or prohibited by law.

If any PIERS are outstanding, no distributions will be declared or paid or
set apart for payment on any shares of the capital stock of the Company of any
other series ranking, as to distributions or upon liquidation, on a parity with
or junior to the PIERS for any period unless full cumulative distributions have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for such payment on the PIERS for all past
distribution periods and the then current distribution period. When
distributions are not paid in full (or a sum sufficient for such full payment is
not so set apart) upon the PIERS and the shares of any other series of Preferred
Stock ranking on a parity as to distributions with the PIERS, all distributions
declared upon the PIERS and any other series of

126

Preferred Stock ranking on a parity as to distributions with the PIERS will be
declared pro rata so that the amount of distributions declared per share of
PIERS and such other series of Preferred Stock shall in all cases bear to each
other the same ratio that accumulated distributions per share on the PIERS and
such other series of Preferred Stock (which shall not include any accumulation
in respect of unpaid distributions for prior distribution periods if such
Preferred Stock does not have a cumulative distribution) bear to each other. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any distribution payment or payments on the PIERS which may be in arrears.

Except as provided in the immediately preceding paragraph, unless full
cumulative distributions on the PIERS have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for payment for all past distribution periods and the then current
distribution period, no distributions (other than in Common Stock or Preferred
Stock ranking junior to the PIERS as to distributions and upon liquidation,
dissolution or winding up of the Company) shall be declared or paid or set aside
for payment or other distribution upon the Common Stock or any Preferred Stock
ranking junior to or on a parity with the PIERS as to distributions or upon
liquidation, dissolution or winding up of the Company, nor shall any Common
Stock or any other series of Preferred Stock ranking junior to or on a parity
with the PIERS as to distributions or upon liquidation, dissolution or winding
up of the Company be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking fund for
the redemption of any such Stock) by the Company (except by conversion into or
exchange for other stock of the Company ranking junior to the PIERS as to
distributions and upon liquidation, dissolution or winding up of the Company or
by redemptions for the purpose of maintaining the Company's qualification as a
REIT).

Notwithstanding the foregoing, distributions on the PIERS will accumulate
whether or not any of the foregoing restrictions exist, whether or not there are
funds legally available for the payment thereof and whether or not such
distributions are authorized. Accumulated but unpaid distributions on the PIERS
will not bear interest and holders of the PIERS will not be entitled to any
distributions in excess of full cumulative distributions as described above.

Any distribution payment made on the PIERS shall first be credited against
the earliest accumulated but unpaid distribution due with respect to such shares
which remains payable.

If the Company designates any portion of a dividend as a "capital gain
dividend," a U.S. Stockholder's share of such capital gain dividend would be an
amount which bears the same ratio to the total amount of dividends paid to such
U.S. Stockholder for the year as the aggregate amount designated as a capital
gain dividend bears to the aggregate amount of all dividends paid on all classes
of capital stock for the year.

LIQUIDATION PREFERENCE. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the holders of the PIERS
will be entitled to receive out of the assets of the Company available for
distribution to stockholders remaining after payment or provisions for payment
of all debts and other liabilities of the Company a liquidation preference of
$25.00 per share, plus an amount equal to any accumulated and unpaid
distributions to the date of payment, before any distribution of assets is made
to holders of Common Stock or any other Preferred Stock ranking junior to the
PIERS as to the distribution of assets upon the liquidation, dissolution or
winding up of the Company. After payment of the full amount of the liquidating
distributions to which they are entitled, the holders of PIERS will have no
right or claim to any of the remaining assets of the Company. None of (i) a
consolidation or merger of the Company with or into another entity, (ii) a
merger of another entity with or into the Company, (iii) a statutory share
exchange by the Company or (iv) a sale, lease or conveyance of all or
substantially all of the Company's property or business shall be considered a
liquidation, dissolution or winding up of the Company. If, upon any voluntary or
involuntary liquidation, dissolution or winding up of the Company, the assets of
the Company are insufficient to make the full payment due to holders of the
PIERS and the corresponding amounts payable on all other Preferred Stock of the
Company ranking on a parity with the PIERS as to the distribution of assets upon
the liquidation, dissolution or winding up of the Company,

127

then the holders of the PIERS and all other such Preferred Stock shall share
ratably in any such distribution of assets in proportion to the full liquidating
distributions to which they would otherwise be respectively entitled.

REDEMPTION. Except in certain circumstances relating to the preservation of
the Company's status as a REIT for federal income tax purposes, the PIERS will
not be redeemable prior to July 15, 2003. On and after July 15, 2003, the PIERS
will be redeemable by the Company, in whole or in part, at the option of the
Company, for such number of shares of Common Stock as equals the liquidation
preference of the PIERS to be redeemed divided by the Conversion Price as of the
opening of business on the date set for such redemption (equivalent to a
conversion rate of 1.0215 shares of Common Stock per each PIERS) (the "Stock
Redemption Right"). The Company may exercise the Stock Redemption Right only if
for 20 trading days within any period of 30 consecutive trading days, including
the last day of such period, the closing price of the Common Stock on the NYSE
exceeds $28.146 per share, subject to adjustment under the circumstances
described below under "--Conversion Price Adjustments." To exercise the Stock
Redemption Right, the Company must issue a press release announcing the
redemption prior to the opening of business on the second trading day after the
conditions described in the preceding sentence have, from time to time, been
met, but may not issue a press release prior to May 15, 2002.

Notice of redemption pursuant to the Stock Redemption Right will be given by
mail or by publication (with subsequent prompt notice by mail) to the holders of
the PIERS not more than four business days after the Company issues the press
release announcing its intention to redeem the PIERS. The redemption date will
be a date selected by the Company not less than 30 nor more than 60 days after
the date on which the Company issues such press release.

On and after July 15, 2003, the PIERS may be redeemed at the option of the
Company, in whole or from time to time in part, at the following redemption
prices per PIERS if redeemed during the twelve-- month period beginning July 15
of the year indicated below, plus, in each case, all distributions accumulated
and unpaid on the PIERS to the date of such redemption (the "Cash Redemption
Right"), upon giving notice as provided below:

REDEMPTION PRICE
YEAR PER PIERS
- ------------------------------------------------------------------------------------------------ ----------------

2003............................................................................................ $ 25.889
2004............................................................................................ 25.667
2005............................................................................................ 25.444
2006............................................................................................ 25.222
2007 and thereafter............................................................................. $ 25.000

The Company will not exercise its option to redeem the PIERS pursuant to the
Cash Redemption Right unless the redemption price (other than the portion
thereof consisting of accumulated and unpaid distributions) for the exercise of
the Cash Redemption Right is paid solely out of the sale proceeds of other stock
of the Company, which may include other series of Preferred Stock, and from no
other source.

Notice of redemption pursuant to the Cash Redemption Right will be mailed,
not less than 30 nor more than 60 days prior to the PIERS Redemption Date, to
each holder of record of PIERS to be redeemed, notifying such holder of the
Company's election to redeem such shares, stating (i) the date fixed for
redemption thereof, (ii) the redemption price, (iii) the number of shares to be
redeemed (and, if fewer than all the PIERS are to be redeemed, the number of
shares to be redeemed from such holder), (iv) the place(s) where the PIERS are
to be surrendered for payment, (v) that distributions on the shares to be
redeemed will cease to accumulate on such redemption date and (vi) the date upon
which the holder's conversion rights, if any, as to such shares shall terminate.

The PIERS will be subject to mandatory redemption on April 15, 2008 at a
price of $25.00 per PIERS, plus accumulated and unpaid distributions to the
redemption date.

128

Any date fixed for redemption pursuant to the foregoing provisions is
referred to as a "PIERS Redemption Date."

If fewer than all of the outstanding PIERS are to be redeemed pursuant to
the Stock Redemption Right or the Cash Redemption Right, the PIERS to be
redeemed will be determined pro rata or by lot or in such other manner as
prescribed by the Company's Board of Directors. If such redemption is to be by
lot and as a result of such redemption any holder of PIERS would become a holder
of a number of PIERS in excess of the Ownership Limit because such holder's
PIERS were not redeemed, or were only redeemed in part, then, except in certain
instances, the Company will redeem the requisite number of PIERS of such holder
such that he will not hold in excess of the Ownership Limit subsequent to such
redemption. In addition, the Company may redeem PIERS in certain circumstances
relating to the maintenance of its ability to qualify as a REIT for federal
income tax purposes.

On or after the PIERS Redemption Date, each holder of PIERS to be redeemed
must present and surrender the certificates representing his PIERS to the
Company at the place designated in the applicable notice and thereupon the
redemption price of such shares will be paid to or on the order of the person
whose name appears on such certificate representing PIERS as the owner thereof
and each surrendered certificate will be canceled. If fewer than all the shares
represented by any such certificate representing PIERS are to be redeemed, a new
certificate will be issued representing the unredeemed shares. From and after
the PIERS Redemption Date (unless the Company defaults in payment of the
redemption price), all distributions on the PIERS called for redemption will
cease to accumulate and all rights of the holders thereof, except the right to
receive the redemption price thereof (including all accumulated and unpaid
distributions to the PIERS Redemption Date), will cease and terminate and such
shares will not thereafter be transferred (except with the consent of the
Company) on the Company's books, and such shares shall not be deemed to be
outstanding for any purpose whatsoever. At its election, the Company, prior to a
PIERS Redemption Date relating to its Cash Redemption Right, may irrevocably
deposit the redemption price (including accumulated and unpaid distributions) of
the PIERS so called for redemption in trust for the holders thereof with a bank
or trust company, in which case the notice to holders of the PIERS to be
redeemed will (i) state the date of such deposit, (ii) specify the office of
such bank or trust company as the place of payment of the redemption price and
(iii) require such holders to surrender the certificates representing such
shares at such place on or about the date fixed in such redemption notice (which
may not be later than such PIERS Redemption Date) against payment of the
redemption price (including all accumulated and unpaid distributions to such
PIERS Redemption Date). Any moneys so deposited which remain unclaimed by the
holders of the PIERS at the end of two years after the PIERS Redemption Date
will be returned by such bank or trust company to the Company.

Notwithstanding the foregoing, unless full cumulative distributions on all
PIERS have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for all past
distribution periods and the current distribution period, no PIERS will be
redeemed unless all outstanding PIERS are simultaneously redeemed; provided,
however, that the foregoing will not prevent the purchase or acquisition of
PIERS pursuant to a purchase or exchange offer made on the same terms to holders
of all outstanding PIERS. In addition, unless full cumulative distributions on
all outstanding PIERS have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment for
all past distributions periods and the then current distribution period, the
Company will not purchase or otherwise acquire directly or indirectly any PIERS
or any Preferred Stock ranking junior to or on a parity with the PIERS as to
distributions or upon liquidation, dissolution or winding up of the Company
(except by conversion into or exchange for stock of the Company ranking junior
to the PIERS as to distributions and upon liquidation, dissolution or winding up
of the Company or by redemptions for the purposes of maintaining the Company's
qualification as a REIT).

129

Fractional shares of Common Stock are not to be issued upon redemption of
the PIERS pursuant to the Share Redemption Right, but, in lieu thereof, the
Company will pay a cash adjustment based on the current market price of the
Common Stock on the trading day prior to the PIERS Redemption Date.

VOTING RIGHTS. Holders of PIERS will not have any voting rights, except as
provided by law and as described below. Whenever distributions on any PIERS are
in arrears for six or more quarterly periods, the holders of PIERS (voting
separately as a class with all other series of Preferred Stock upon which like
voting rights have been conferred and are exercisable) will be entitled to vote
for the election of two additional directors of the Company who will be elected
for a one year term. Such election shall be held at a special meeting of the
stockholders and at each subsequent annual meeting until all arrearages and the
distributions on the PIERS and such other series of Preferred Stock upon which
like voting rights have been conferred and are exercisable for the then current
distribution period have been fully paid or a sum sufficient for the full
payment thereof has been set aside. Vacancies for directors elected by holders
of PIERS and any other such series of Preferred Stock shall be filled by the
remaining director so elected then in office or, if there is no such remaining
director, by vote of holders of a majority of the outstanding PIERS and any
other such series of Preferred Stock voting as a single class. A director
elected by the holders of PIERS and any other such series of Preferred Stock may
be removed with or without cause and only by vote of holders of a majority of
the outstanding PIERS and any other such series of Preferred Stock voting as a
single class.

So long as any PIERS remain outstanding, the Company will not, without the
affirmative vote or consent of the holders of at least two-thirds of PIERS
outstanding at the time, given in person or by proxy, either in writing or at a
meeting (voting separately as a class), (i) authorize or create, or increase the
authorized or issued amount of, any class or series of capital stock of the
Company ranking prior to PIERS with respect to the payment of distributions or
the distribution of assets upon liquidation, dissolution or winding up of the
Company, or reclassify any authorized shares of capital stock of the Company
into such shares, or create, authorize or issue any obligation or security
convertible or exchangeable into or evidencing the right to purchase any such
shares; or (ii) amend, alter or repeal the provisions of the Charter or the
Articles Supplementary for the PIERS, whether by merger or consolidation (an
"Event") or otherwise, so as to materially and adversely affect any right,
preference, privilege or voting power of such PIERS or the holders thereof;
provided, however, with respect to the occurrence of any of the Events set forth
in (ii) above, so long as PIERS remain outstanding with the terms thereof
materially unchanged, taking into account that upon the occurrence of an Event,
the Company may not be the surviving entity, the occurrence of any such Event
will not be deemed to materially adversely affect such rights, preferences,
privileges or voting powers of holders of PIERS; and provided further that (x)
any increase in the amount of the authorized Preferred Stock or the creation or
issuance of any other series of Preferred Stock, or (y) any increase in the
amount of authorized PIERS or any other series of Preferred Stock, in each case
ranking on a parity with or junior to the PIERS with respect to payment of
distributions and the distribution of assets upon liquidation, dissolution or
winding up of the Company, will not be deemed to materially and adversely affect
such rights, preferences, privileges or voting powers.

The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required will be
effected, all outstanding PIERS have been converted, redeemed or called for
redemption and sufficient funds shall have been deposited in trust to effect
such redemption.

CONVERSION RIGHTS. Subject to the restrictions on transfer and ownership
described below in "-- Restrictions on Ownership and Transfer," the PIERS will
be convertible in whole or in part at any time, at the option of the holders
thereof, into Common Stock at a conversion price of $24.475 per share of Common
Stock (equivalent to a conversion rate of 1.0215 shares of Common Stock for each
PIERS), subject to adjustment as described below (the "Conversion Price"). The
right to convert PIERS called for redemption will terminate at the close of
business on a PIERS Redemption Date. For information as to notices of
redemption, see "-- Redemption" above.

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Conversion of PIERS, or a specified portion thereof, may be effected by
delivering certificates representing PIERS together with written notice of
conversion and a proper assignment of such certificates to the office of
American Stock Transfer & Trust Co., the conversion agent for the PIERS.

Each conversion will be deemed to have been effected immediately prior to
the close of business on the date on which the certificates representing PIERS
shall have been surrendered and notice shall have been received by the Company
as aforesaid (and if applicable, payment of any amount equal to the distribution
payable on such shares shall have been received by the Company as described
below) and the conversion shall be at the Conversion Price in effect at such
time and on such date.

Holders of PIERS at the close of business on a Distribution Record Date will
be entitled to receive the distribution payable on such shares on the
corresponding Distribution Payment Date notwithstanding the conversion of such
shares following such Distribution Record Date and prior to such Distribution
Payment Date. However, certificates representing PIERS surrendered for
conversion during the period between the close of business on any Distribution
Record Date and ending with the opening of business on the corresponding
Distribution Payment Date (except shares converted after the issuance of a
notice of redemption with respect to a PIERS Redemption Date during such period
or coinciding with such Distribution Payment Date) must be accompanied by
payment of an amount equal to the distribution payable on such shares on such
Distribution Payment Date. A holder of PIERS on a Distribution Record Date who
(or whose transferee) tenders any such shares for conversion into Common Stock
on such Distribution Payment Date will receive the distribution payable by the
Company on such PIERS on such date, and the converting holder need not include
payment of the amount of such distribution upon surrender of certificates
representing such PIERS for conversion. Except as provided above, the Company
will make no payment or allowance for unpaid distributions, whether or not in
arrears, on converted shares or for distribution on the Common Stock that is
issued upon such conversion.

Fractional shares of Common Stock will not be issued upon conversion but, in
lieu thereof, the Company will pay a cash adjustment based on the current market
price of the Common Stock at the close of business on the trading day prior to
the conversion date.

CONVERSION PRICE ADJUSTMENTS. The Conversion Price is subject to adjustment
upon certain events, including (i) the payment of distributions payable in
Common Stock on any class or series of shares of Capital Stock of the Company,
(ii) the issuance to all holders of Common Stock of certain rights or warrants
entitling them to subscribe for or purchase Common Stock (or securities
convertible into or exchangeable for Common Stock) at a price per share less
than the fair market value per share of Common Stock, (iii) subdivisions,
combinations and reclassifications of Common Stock, (iv) distributions to all
holders of Common Stock of evidences of indebtedness of the Company or assets
(including securities, but excluding those rights, warrants and distributions
referred to above and distributions paid in cash out of equity, including
revaluation equity, applicable to Common Stock), (v) distributions consisting
exclusively of cash (excluding any cash portion of distributions referred to in
clause (iv) to all holders of Common Shares to the extent such distributions,
combined with (A) all such cash distributions made within the preceding 12
months in respect of which no adjustment has been made plus (B) any cash and the
fair market value of other consideration payable in respect of any tender offers
by the Company for Common Stock concluded within the preceding 12 months in
respect of which no adjustment has been made, but only to the extent that the
consideration payable in respect of such tender offers exceeds the current
market price of the Common Shares acquired in such tender offers, exceeds 15% of
the Company's market capitalization (being the product of the then current
market price of the Common Stock times the number of shares of Common Stock then
outstanding) on the record date for such distribution and (vi) a tender offer
made by the Company or any Subsidiary for all or any portion of the Common Stock
shall expire and such tender offer shall require payment to stockholders of
aggregate consideration having a fair market value that combined with (Y) the
aggregate of the cash plus the fair market value, as of the expiration of such
tender offer, of consideration payable in respect of any other tender offer by
the Company or any subsidiary for all or any portion of the Common Stock
expiring within 12 months preceding the expiration

131

of such tender offer and in respect of which no adjustment to this section (vi)
has been made, but only to the extent that the consideration payable in respect
of such expired tender offer exceeds the current market price of the Common
Stock acquired in such tender offer, and (Z) the aggregate amount of any
distributions to all holders of Common Stock made exclusively in cash within the
12 months preceding the expiration of such tender offer and in respect of which
no adjustment pursuant to section (v) has been made, exceeds 15% of the product
of the current market price per share of the Common Stock as of the last time
tenders could have been made pursuant to such tender offer times the number of
Common Stock outstanding (including tendered shares). In addition to the
foregoing adjustments, the Company will be permitted to make such reductions in
the Conversion Price as it considers to be advisable in order that any event
treated for federal income tax purposes as a dividend of stock or stock rights
will not be taxable to the holders of Common Stock.

In case the Company shall be a party to any transactions (including, without
limitation, a merger, consolidation, statutory share exchange, tender offer for
all or substantially all of the Common Stock or sale of all or substantially all
of the Company's assets), in each case as a result of which Common Stock will be
converted into the right to receive shares of common stock or beneficial
interest, securities or other property (including cash or any combination
thereof), each PIERS will thereafter be convertible into the kind and amount of
shares of stock or beneficial interest, securities and other property receivable
(including cash or any combination thereof) upon the consummation of such
transaction by a holder of that number of shares of Common Stock or fraction
thereof into which one PIERS was convertible immediately prior to such
transaction, assuming such holder of Common Stock failed to exercise any rights
of election (provided that if the kind and amount of stock or beneficial
interest, securities and other property so receivable is not the same for each
non-electing share, the kind and amount so receivable by each non-electing share
shall be deemed to be the kind and amount received per share by a plurality of
non-electing shares). The Company may not become a party to any such transaction
unless the terms thereof are consistent with the foregoing. No adjustment of the
Conversion Price is required to be made in any case until cumulative adjustments
amount to 1% or more of the Conversion Price. Any adjustments not so required to
be made will be carried forward and taken into account in subsequent
adjustments.

OWNERSHIP LIMIT. The restrictions on transferability and ownership
described in "-- Restrictions on Transfer" below apply to the PIERS.

EXCESS STOCK

For a description of Excess Stock, see "--Restrictions on Transfer."

POWER TO ISSUE ADDITIONAL SHARES OF COMMON STOCK AND PREFERRED STOCK

The Company believes that the power of the Board of Directors to issue
additional authorized but unissued shares of Common Stock or Preferred Stock and
to classify or reclassify unissued shares of Common Stock or Preferred Stock and
thereafter to cause the Company to issue such classified or reclassified shares
of stock will provide the Company with increased flexibility in structuring
possible future financings and acquisitions and in meeting other needs which
might arise. The additional classes or series, as well as the Common Stock, will
be available for issuance without further action by the Company's stockholders,
unless such action is required by applicable law or the rules of any stock
exchange or automated quotation system on which the Company's securities may be
listed or traded. Although the Board of Directors has no intention at the
present time of doing so, it could authorize the Company to issue a class or
series that could, depending upon the terms of such class or series, delay,
defer or prevent a transaction or a change of control of the Company that might
involve a premium price for holders of Common Stock or otherwise be in their
best interest.

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The Company intends to furnish its stockholders with annual reports
containing audited consolidated financial statements and an opinion thereon
expressed by an independent public accounting firm and quarterly reports for the
first three quarters of each fiscal year containing unaudited financial
information.

RESTRICTIONS ON TRANSFER

For the Company to qualify as a REIT under the Code, among other things, not
more than 50% in value of its outstanding capital stock may be owned, directly
or indirectly, by five or fewer individuals (defined in the Code to include
certain entities) during the last half of a taxable year (other than the first
taxable year) (the "Five or Fewer Requirement"), and such shares of capital
stock must be beneficially owned by 100 or more persons during at least 335 days
of a taxable year of 12 months (other than the first taxable year) or during a
proportionate part of a shorter taxable year. Pursuant to the Code, Common Stock
held by certain types of entities, such as pension trusts qualifying under
Section 401(a) of the Code, United States investment companies registered under
the Investment Company Act of 1940, partnerships, trusts and corporations, will
be attributed to the beneficial owners of such entities for purposes of the Five
or Fewer Requirement (I.E., the beneficial owners of such entities will be
counted as persons). See "Material Federal Income Tax Consequences." In order to
protect the Company against the risk of losing it status as a REIT due to a
concentration of ownership among its stockholders, the Charter, 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 9.0% (the "Ownership
Limit") of the aggregate number or value of the Company's outstanding shares of
Common Stock. The Articles Supplementary creating the Preferred Stock designated
as the PIERS will provide that no stockholder may own, or be deemed to own by
virtue of the attribution provisions of the Code, more than 9.0% in value of the
Company's outstanding capital stock or more than 20.0% of the aggregate number
or value of the Company's outstanding PIERS. Any direct or indirect ownership of
shares of stock in excess of the Ownership Limit or that would result in the
disqualification of the Company as a REIT, including any transfer that results
in shares of capital stock being owned by fewer than 100 persons or results in
the Company being "closely held" within the meaning of Section 856(h) of the
Code, 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 the Board of Directors determines that it is no
longer in the best interests of the Company to attempt to qualify, or to
continue to qualify, as a REIT. The Board of Directors may, in its sole
discretion, waive the Ownership Limit if evidence satisfactory to the Board of
Directors and the Company's tax counsel is presented that the changes in
ownership will not then or in the future jeopardize the Company's REIT status
and the 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 Charter 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 provisions of the Company's Charter 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

133

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 owned 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, statue, rule or regulation, 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 owed 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 Board of
Directors determines that a violative transfer has been made.

These restrictions will not preclude settlement of transactions through the
New York Stock Exchange.

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

Each stockholder shall upon demand 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 the Board of Directors deems
necessary to comply with the provisions of the Code applicable to REITs, to
comply with the requirements of any taxing authority or governmental agency or
to determine any such compliance.

The Ownership Limit may have the effect of delaying, deferring or preventing
a change in control of the Company unless the Board of Directors determines that
maintenance of REIT status is no longer in the best interest of the Company.

134

TRANSFER AGENT, REGISTRAR, CONVERSION AGENT AND DISTRIBUTION DISBURSING AGENT

The transfer agent, registrar and distribution disbursing agent for the
Common Stock is, and the transfer agent, registrar, conversion agent and
distribution disbursing agent for the PIERS will be, American Stock Transfer &
Trust Company.

GLOBAL SECURITIES

The PIERS will be evidenced by one or more global certificates (the "Global
Securities"), which will be deposited with, or on behalf of, The Depository
Trust Company, New York, New York ("DTC"), and registered in the name of Cede &
Co. ("Cede"), as DTC's nominee.

Holders may hold their interests in any of the Global Securities directly
through DTC, or indirectly through organizations which are participants in DTC
("Participants"). Transfers between Participants will be effected in the
ordinary way in accordance with DTC rules and will be settled in immediately
available funds.

Holders who are not Participants may beneficially own interests in a Global
Security held by DTC only through Participants, including certain banks,
brokers, dealers, trust companies and other parties that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly, and have indirect access to the DTC system ("Indirect
Participants"). So long as Cede, as the nominee of DTC, is the registered owner
of any Global Security, Cede for all purposes will be considered the sole holder
of such Global Security. Except as provided below, owners of beneficial
interests in a Global Security will not be entitled to have certificates
registered in their names, will not receive or be entitled to receive physical
delivery of certificates in definitive form, and will not be considered the
holder thereof.

The Company will not have any responsibility for the performance by DTC or
their Participants or Indirect Participants of their respective obligations
under the rules and procedures governing their operations. DTC has advised the
Company that it will take any action permitted to be taken by a holder of PIERS
only at the direction of one or more Participants whose accounts are credited
with DTC interests in a Global Security.

DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions, such as transfers and pledges, among Participants in
deposited securities through electronic book--entry changes to accounts of its
Participants, thereby eliminating the need for physical movement of securities
certificates. Participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. Certain of
such Participants (or their representatives), together with other entities, own
DTC. The rules applicable to DTC and its Participants are on file with the
Commission.

Purchases of PIERS under the DTC system must be made by or through
Participants, which will receive a credit for the PIERS on DTC's records. The
ownership interest of each actual purchaser of each PIERS (a "Beneficial Owner")
is in turn to be recorded on the Participant's and Indirect Participants'
records. Beneficial Owners will not receive written confirmation from DTC of
their purchase, but Beneficial Owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Participant or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the PIERS are to be accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial Owners
will not receive certificates representing their ownership interests in PIERS,
except in the event that use of the book-entry system for the PIERS is
discontinued.

135

The deposit of PIERS with DTC and their registration in the name of Cede
effect no change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the PIERS; DTC's records reflect only the identity of the
Participants whose accounts such PIERS are credited, which may or may not be the
Beneficial Owners. The Participants will remain responsible for keeping account
of their holdings on behalf of their customers.

The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may, and the
restrictions described under "Notice to Investors" shall, impair the ability to
transfer beneficial interests in the Global Security.

Redemption notices shall be sent to Cede. If less than all of the PIERS
represented by the Global Securities are being redeemed, DTC's practice is to
determine by lot the amount of the interest of each Participant therein to be
redeemed.

Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements that may be in effect from
time to time.

Distributions and other payments in respect of the PIERS will be made to DTC
by wire transfer of immediately available funds. DTC's practice is to credit
Participants' accounts on the payable date in accordance with their respective
holdings shown on DTC's records unless DTC has reason to believe that it will
not receive payment on the payable date. Payments by Participants to Beneficial
Owners will be governed by standing instructions and customary practices, as is
the case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such Participant
and not of DTC or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Distributions and other
payments in respect of the PIERS to DTC is the responsibility of the Company;
disbursement of such payments to Participants shall be the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners shall be the
responsibility of Participants and Indirect Participants. The Company will not
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests in the Global
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.

136

CERTAIN PROVISIONS OF MARYLAND LAW AND THE COMPANY'S CHARTER AND BYLAWS

THE FOLLOWING SUMMARY OF CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE
CHARTER AND BYLAWS OF THE COMPANY DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT
TO AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO MARYLAND LAW AND THE CHARTER
AND BYLAWS OF THE COMPANY, COPIES OF WHICH ARE EXHIBITS TO THE REGISTRATION
STATEMENT OF WHICH THIS PROSPECTUS IS A PART.

The Charter and the bylaws of the Company (the "Bylaws") contain certain
provisions that could make more difficult an acquisition or change in control of
the Company by means of a tender offer, a proxy contest or otherwise. These
provisions are expected to discourage certain types of coercive takeover
practices and inadequate takeover bids and to encourage persons seeking to
acquire control of the Company to negotiate first with the Board of Directors.
The Company believes that the benefits of these provisions outweigh the
potential disadvantages of discouraging such proposals because, among other
things, negotiation of such proposals might result in an improvement of their
terms. The description set forth below is intended as a summary only and is
qualified in its entirety by reference to the Charter and the Bylaws, which have
been filed as exhibits to the Registration Statement of which this Prospectus is
a part. See also "Capital Stock--Restrictions on Transfer."

CLASSIFICATION AND REMOVAL OF BOARD OF DIRECTORS; OTHER PROVISIONS

The Company's Charter provides for the Board of Directors to be divided into
three classes of directors, with each class to consist as nearly as possible of
an equal number of directors. The term of office of the first class of directors
expires at the 1998 annual meeting of stockholders; the term of the second class
of directors will expire at the 1999 annual meeting of stockholders; and the
term of the third class will expire at the 2000 annual meeting of stockholders.
At each annual meeting of stockholders, the class of directors to be elected at
such meeting will be elected for a three-year term, and the directors in the
other two classes will continue in office. Because stockholders will have no
right to cumulative voting for the election of directors, at each annual meeting
of stockholders the holders of a majority of the shares of Common Stock will be
able to elect all of the successors to the class of directors whose term expires
at that meeting.

The Company's Charter also provides that, except for any directors who may
be elected by holders of a class or series of capital stock other than the
Common Stock, directors may be removed only for cause and only by the
affirmative vote of stockholders holding at least two-thirds of all the votes
entitled to be cast for the election of directors. Vacancies on the Board of
Directors may be filled by the affirmative vote of the remaining directors and,
in the case of a vacancy resulting from the removal of a director, by the
stockholders by a majority of the votes entitled to be cast for the election of
directors. A vote of stockholders holding at least two-thirds of all the votes
entitled to be cast thereon is required to amend, alter, change, repeal or adopt
any provisions inconsistent with the foregoing classified board and director
removal provisions. Under the Charter, the power to amend the Bylaws of the
Company is vested exclusively in the Board of Directors, and the stockholders do
not have any power to adopt, alter or repeal the Bylaws absent amendment to the
Charter to confer such power. These provisions may make it more difficult and
time-consuming to change majority control of the Board of Directors of the
Company and, thus, may reduce the vulnerability of the Company to an unsolicited
proposal for the takeover of the Company or the removal of incumbent management.

Because the Board of Directors will have the power to establish the
preferences and rights of additional series of capital stock without stockholder
vote, the Board of Directors may afford the holders of any series of senior
capital stock preferences, powers and rights, voting or otherwise, senior to the
rights of holders of shares of Common Stock. The issuance of any such senior
capital stock could have the effect of delaying or preventing a change in
control of the Company. The Board of Directors, however, currently does not
contemplate the issuance of any series of capital stock other than shares of
Common Stock.

137

See "Management--Directors and Executive Officers" for a description of the
limitations on liability of directors of the Company and the provisions for
indemnification of directors and officers provided for under applicable Maryland
law and the Charter.

BUSINESS COMBINATION STATUTE

The MGCL establishes special requirements with respect to "business
combinations" between Maryland corporations and "interested stockholders" unless
exemptions are applicable. Among other things, the law prohibits for a period of
five years a merger and other specified or similar transactions between a
company and an interested stockholder and requires a super majority vote for
such transactions after the end of the five-year period.

For this purpose, "interested stockholders" are all persons owning
beneficially, directly or indirectly, 10% or more of the outstanding voting
stock of a Maryland corporation, and affiliates and associates of the Maryland
corporation (which are, generally, any entities controlling, controlled by, or
under common control with, the Maryland corporation) which owned beneficially,
directly or indirectly, 10% or more of the outstanding voting stock of such
Maryland corporation. "Business combinations" include any merger or similar
transaction subject to a statutory vote and additional transactions involving
transfers of assets or securities in specified amounts to interested
stockholders or their affiliates. Unless an exemption is available, transactions
of these types may not be consummated between a Maryland corporation and an
interested stockholder or its affiliates for a period of five years after the
date on which the stockholder first became an interested stockholder.
Thereafter, the transaction may not be consummated unless recommended by the
board of directors and approved by the affirmative vote of at least 80% of the
votes entitled to be cast by all holders of outstanding shares of voting stock
and two-thirds of the votes entitled to be cast by all holders of outstanding
shares of voting stock other than the interested stockholder. A business
combination with an interested stockholder that is approved by the board of
directors of a Maryland corporation at any time before an interested stockholder
first becomes an interested stockholder is not subject to the special voting
requirements. An amendment to a Maryland corporation's charter electing not to
be subject to the foregoing requirements must be approved by the affirmative
vote of at least 80% of the votes entitled to be cast by all holders of
outstanding shares of voting stock and two-thirds of the votes entitled to be
cast by holders of outstanding shares of voting stock who are not interested
stockholders. Any such amendment is not effective until 18 months after the vote
of stockholders and does not apply to any business combination of a corporation
with a stockholder who was an interested stockholder on the date of the
stockholder vote. The Company has opted out of the business combination
provisions of the MGCL, but the Board of Directors may elect to adopt these
provisions of the MGCL in the future.

CONTROL SHARE ACQUISITION STATUTE

Maryland law imposes certain limitations on the voting rights in a "control
share acquisition." The MGCL considers a "control share acquisition" to occur at
each of the 20%, 33 1/3% and 50% acquisition levels, and requires the
affirmative vote of at least two-thirds of the votes entitled to be cast by
holders of outstanding shares of voting stock (excluding shares owned by the
acquiring person and certain members of management) to accord voting rights to
capital stock acquired in a control share acquisition. The statute also requires
Maryland corporations to hold a special meeting at the request of an actual or
proposed control share acquirer generally within 50 days after a request is made
by means of the submission of an "acquiring person statement," but only if the
acquiring person (i) posts a bond for the cost of a meeting (not including the
expenses of opposing approval of the voting rights) and (ii) submits a
definitive financing agreement with respect to the proposed control share
acquisition to the extent that financing is not provided by the acquiring
person. In addition, unless its charter or bylaws provide otherwise, the statute
gives a Maryland corporation, within certain time limitations, various
redemption rights if there is a stockholder vote on the issue and the grant of
voting rights is not approved, or if an acquiring person statement is not
delivered to the corporation within 10 days following an actual control share
acquisition.

138

Moreover, unless the charter or bylaws provide otherwise, the statute provides
that if, before a control share acquisition occurs, voting rights are accorded
to control shares that result in the acquiring persons having majority voting
power, then minority stockholders have certain appraisal rights. An acquisition
of shares may be exempted from the control share statute, provided that a
charter or bylaw provision is adopted for such purpose prior to the control
share acquisition. The Company has opted out of the control share provisions of
the MGCL, but the Board of Directors may elect to adopt these provisions of the
MGCL in the future.

AMENDMENTS TO THE CHARTER

The Charter, including its provisions on classification of the Board of
Directors, restrictions on transferability of shares of Common Stock and removal
of directors, may be amended only by the affirmative vote of the holders of not
less than two-thirds of all of the votes entitled to be cast on the matter.
However, the provisions of the Charter relating to authorized shares of stock
and the classification and reclassification of shares of Common Stock and
Preferred Stock may be amended by the affirmative vote of the holders of not
less than a majority of the votes entitled to be cast on the matter.

ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS

The Bylaws of the Company provide that (i) with respect to an annual meeting
of stockholders, nominations of persons for election to the Board of Directors
and the proposal of business to be considered by stockholders may be made only
(A) pursuant to the Company's notice of the meeting, (B) by the Board of
Directors or (C) by a stockholder who is entitled to vote at the meeting and has
complied with the advance notice procedures set forth in the Bylaws and (ii)
with respect to special meetings of the stockholders, only the business
specified in the Company's notice of meeting may be brought before the meeting
of stockholders and nominations of persons for election to the Board of
Directors may be made only (A) pursuant to the Company's notice of the meeting,
(B) by the Board of Directors or (C) provided that the Board of Directors has
determined that directors shall be elected at such meeting, by a stockholder who
is entitled to vote at the meeting and has complied with the advance notice
provisions set forth in the Bylaws.

ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE CHARTER
AND BYLAWS

The business combination provisions and the control share acquisition
provisions of the MGCL, the provisions of the Charter on classification of the
Board of Directors and removal of directors and the advance notice provisions of
the Bylaws could delay, defer or prevent a transaction or a change in control of
the Company that might involve a premium price for holders of Common Stock or
otherwise be in their best interests.

RIGHTS TO PURCHASE SECURITIES AND OTHER PROPERTY

The Charter authorizes the Board of Directors to create and issue rights
entitling the holders thereof to purchase from the Company shares of capital
stock or other securities or property. The times at which and terms upon which
such rights are to be issued would be determined by the Board of Directors and
set forth in the contracts or instruments that evidence such rights. This
provision is intended to confirm the Board of Directors' authority to issue
share purchase rights, which might have terms that could impede a merger, tender
offer or other takeover attempt, or other rights to purchase shares or
securities of the Company or any other corporation.

SHARES AVAILABLE FOR FUTURE SALE

GENERAL

Upon the completion of the Offerings, the Company will have outstanding
22,292,311 shares of Common Stock (23,792,311 shares if the Underwriters'
overallotment option is exercised in full). In

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addition, 2,425,169 shares of Common Stock are reserved for issuance upon
exchange of Units and 4,086,000 shares of Common Stock are reserved for issuance
via conversion of the PIERS. The shares of Common Stock issued in the Common
Offering will be freely tradeable by persons other than "affiliates" of the
Company without restriction under the Securities Act, subject to the limitations
on ownership set forth in the Charter. See "Capital Stock--Restrictions on
Transfer." The shares of Common Stock received by the participants in the
Formation Transactions or acquired by any participant in redemption of Units
(the "Restricted Shares") will be "restricted" securities under the meaning of
Rule 144 promulgated under the Securities Act ("Rule 144") and may not be sold
in the absence of registration under the Securities Act unless an exemption from
registration is available, including exemptions contained in Rule 144. As
described below under "--Registration Rights," the Company has granted certain
holders registration rights with respect to their shares of Common Stock.

In general, under Rule 144, if one year has elapsed since the later of the
date of acquisition of Restricted Shares from the Company or any "affiliate" of
the Company, as that term is defined under the Securities Act, the acquiror or
subsequent holder thereof is entitled to sell within any three-month period a
number of shares that does not exceed the greater of 1% of the then outstanding
shares of Common Stock or the average weekly trading volume of the Common Stock
during the four calendar weeks immediately preceding the date on which notice of
the sale is filed with the Securities and Exchange Commission (the
"Commission"). Sales under Rule 144 also are subject to certain manner of sales
provisions, notice requirements and the availability of current public
information about the Company. If two years have elapsed since the date of
acquisition of Restricted Shares from the Company or from any "affiliate" of the
Company, and the acquiror or subsequent holder thereof is deemed not to have
been an affiliate of the Company at any time during the 90 days immediately
preceding a sale, such person is entitled to sell such shares in the public
market under Rule 144(k) without regard to the volume limitations, manner of
sale provisions, public information requirements or notice requirements.

The Company has established a stock option plan for the purpose of
attracting and retaining highly qualified directors, executive officers and
other key employees. See "Management--Stock Option and Incentive Plan" and
"--Compensation of Directors." Since the IPO, the Company has issued options to
purchase approximately 838,000 shares of Common Stock to directors, officers and
employees and has reserved 862,000 additional shares for future issuance under
the plan. On or prior to the expiration of the initial 12-month period following
the completion of the Offering, the Company expects to file a registration
statement with the Commission with respect to the shares of Common Stock
issuable under these plans, which shares may be resold without restriction,
unless held by affiliates.

No prediction can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the market
price prevailing from time to time. Sales of substantial amounts of Common Stock
(including shares issued upon the exercise of options), or the perception that
such sales could occur, could adversely affect prevailing market prices of the
Common Stock. See "Risk Factors--Other Risks of Ownership of Common Stock Could
Adversely Affect the Trading Price of the Common Stock" and "Partnership
Agreement--Transfers of Interests."

REGISTRATION RIGHTS

The Company has granted the participants in the Formation Transactions who
received Units in the Formation Transactions certain registration rights with
respect to the shares of Common Stock owned by them or acquired by them in
connection with the exercise of the redemption right under the Partnership
Agreement. These registration rights require the Company to register all such
shares of Common Stock upon request. The Company will bear expenses incident to
its registration requirements under the registration rights, except that such
expenses shall not include any underwriting discounts or commissions or transfer
taxes, if any, relating to such shares.

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MATERIAL FEDERAL INCOME TAX CONSEQUENCES

GENERAL

The following discussion summarizes the material Federal income tax
consequences that are generally applicable to all prospective holders of PIERS.
The specific tax consequences of owning PIERS will vary for stockholders because
of the different circumstances of stockholders and the discussion contained
herein does not purport to address all aspects of Federal income taxation that
may be relevant to particular holders in light of their personal investment or
tax circumstances. Therefore, it is imperative that a stockholder review the
following discussion and consult with such stockholders tax advisors to
determine the interaction of such stockholders tax situation with the
anticipated tax consequences of owning PIERS.

The information in this section and the opinions of Brown & Wood LLP are
based on the Code, existing and proposed Treasury Regulations thereunder,
current administrative interpretations and court decisions. No assurance can be
given that future legislation, Treasury Regulations, administrative
interpretations and court decisions will not significantly change current law or
affect existing interpretations of current law in a manner which is adverse to
stockholders. Any such change could apply retroactively to transactions
preceding the date of change. The Company and the Operating Partnership do not
plan to obtain any rulings from the IRS concerning any tax issue with respect to
the Company. Thus, no assurance can be provided that the opinions and statements
set forth herein (which do not bind the IRS or the courts) will not be
challenged by the IRS or will be sustained by a court if so challenged. The
following description does not constitute tax advice.

This summary does not discuss state, local or foreign tax considerations.
Except where indicated, the discussion below describes general Federal income
tax considerations applicable to individuals who are citizens or residents of
the United States. Accordingly, the following discussion has limited application
to domestic corporations and persons subject to specialized Federal income tax
treatment, such as foreign persons, trusts, estates, tax-exempt entities,
regulated investment companies and insurance companies.

As used in this section, the term "Company" refers solely to SL Green Realty
Corp. and the term "Operating Partnership" refers solely to SL Green Operating
Partnership, L.P.

PROSPECTIVE STOCKHOLDERS ARE STRONGLY URGED TO CONSULT WITH THEIR OWN TAX
ADVISORS WITH REGARD TO THE APPLICATION OF THE FEDERAL INCOME TAX LAWS TO SUCH
STOCKHOLDERS' RESPECTIVE PERSONAL TAX SITUATIONS, AS WELL AS ANY TAX
CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING
JURISDICTION.

TAXATION OF THE COMPANY

GENERAL. The Company will make an election to be taxed as a REIT under
Sections 856 through 860 of the Code effective for its taxable year ending
December 31, 1997. The Company believes that, commencing with such taxable year,
it will be organized and will operate in such a manner as to qualify for
taxation as a REIT under the Code and the Company intends to continue to operate
in such a manner. Although the Company has been structured so as to qualify to
be treated as a REIT, no assurance can be given that the Company will operate in
a manner so as to qualify or remain qualified as a REIT.

In the opinion of Brown & Wood LLP, commencing with the Company's taxable
year ended December 31, 1997, the Company will be organized in conformity with
the requirements for qualification and taxation as a REIT under the Code and the
proposed method of operation of the Company will enable the Company to meet the
requirements for qualification and taxation as a REIT. This opinion is based on
various assumptions relating to the organization and operation of the Company,
the Operating Partnership, the Management LLC, the Management Corporation
(together with the Management LLC, the

141

"Management Entities"), the Leasing Corporation and the Construction Corporation
and upon certain representations made by the Company, the Operating Partnership,
the Management Entities, the Leasing Corporation and the Construction
Corporation as to certain relevant factual matters, including matters related to
the organization and expected manner of operation of the Company, the Operating
Partnership, the Property-owning entities, the Management Entities, the Leasing
Corporation and the Construction Corporation. Moreover, such qualification and
taxation as a REIT will depend upon the Company's ability to meet on a
continuing basis, through actual annual operating results, distribution levels,
and diversity of stock ownership, the various qualification tests imposed under
the Code (discussed below). Brown & Wood LLP will not review compliance with
these tests on a continuing basis. Accordingly, no assurance can be given that
the Company will satisfy such tests on a continuing basis. See "--Failure to
Qualify" below.

The following is a general summary of the material Code provisions that
govern the Federal income tax treatment of a REIT and its stockholders. These
provisions of the Code are highly technical and complex.

If the Company qualifies for taxation as a REIT, it generally will not be
subject to Federal corporate income taxes on net income that it distributes
currently to stockholders. This treatment substantially eliminates the "double
taxation" (taxation at both the corporate and stockholder levels) that generally
results from investment in a corporation. However, the Company will be subject
to Federal income and excise tax in certain circumstances, including the
following. First, the Company will be taxed at regular corporate rates on any
undistributed REIT taxable income, including undistributed net capital gains
(other than certain retained capital gains as discussed below). Second, under
certain circumstances, the Company may be subject to the "alternative minimum
tax" on its items of tax preference. Third, if the Company has (i) net income
from the sale or other disposition of "foreclosure property" (which is, in
general, property acquired by foreclosure or otherwise on default of a loan
secured by the property) held primarily for sale to customers in the ordinary
course of business or (ii) other non-qualifying income from foreclosure
property, the Company will be subject to tax at the highest corporate rate on
such income. Fourth, if the Company has net income from prohibited transactions
(which are, in general, certain sales or other dispositions of property (other
than dispositions of foreclosure property and, as a result of the Taxpayer
Relief Act of 1997, enacted on August 5, 1997 (the "Taxpayer Relief Act"),
effective for the Company's taxable year ending December 31, 1998, dispositions
of property that occur due to an involuntary conversion) held primarily for sale
to customers in the ordinary course of business), such income will be subject to
a 100% tax. Fifth, if the Company fails to satisfy either the 75% gross income
test or the 95% gross income test (both of which are discussed below), but
nonetheless maintains its qualification as a REIT because certain other
requirements have been met, it will be subject to a 100% tax on the greater of
the amount by which the Company fails the 75% or 95% test, multiplied by a
fraction intended to reflect the Company's profitability. Sixth, if the Company
fails to distribute during each calendar year at least the sum of (i) 85% of its
REIT ordinary income for such year, (ii) 95% of its REIT capital gain net income
for such year and (iii) any undistributed taxable income from prior years, the
Company will be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed. Seventh, if the Company
acquires any asset from a C corporation (i.e., a corporation generally subject
to full corporate level tax) in a transaction in which the basis of the asset in
the Company's hands is determined by reference to the basis of the asset (or any
other property) in the hands of the C corporation and the Company recognizes
gain on the disposition of such asset during the ten-year period (the
"Recognition Period") beginning on the date on which such asset was acquired by
the Company, then, to the extent of such property's "built-in" gain (the excess
of the fair market value of such property at the time of acquisition by the
Company over the adjusted basis in such property at such time), such gain will,
under Treasury Regulations to be issued in the future, be subject to tax at the
highest regular corporate rate applicable (the "Built-In Gain Rule").

REQUIREMENTS FOR QUALIFICATION. The Code defines a REIT as a corporation,
trust, or association (i) that is managed by one or more trustees or directors;
(ii) the beneficial ownership of which is evidenced by transferable shares or by
transferable certificates of beneficial interest; (iii) that would be taxable as
a

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domestic corporation, but for Section 856 through 859 of the Code; (iv) that is
neither a financial institution nor an insurance company subject to certain
provisions of the Code; (v) the beneficial ownership of which is held by 100 or
more persons; (vi) during the last half of each taxable year not more than 50%
in value of the outstanding stock of which is owned, directly or indirectly, by
five or fewer individuals (as defined in the Code to include certain entities);
and (vii) that meets certain other tests, described below, regarding the nature
of its income and assets. The Code provides that conditions (i) through (iv),
inclusive, must be met during the entire taxable year and that condition (v)
must be met during at least 335 days of a taxable year of 12 months, or during a
proportionate part of a taxable year of less than 12 months. Conditions (v) and
(vi), however, will not apply until after the first taxable year for which an
election is made to be taxed as a REIT. The Company anticipates that it will
have issued and outstanding sufficient shares of Common Stock and PIERS with
sufficient diversity of ownership to allow the Company to satisfy conditions (v)
and (vi). In addition, the Company intends to comply with Treasury Regulations
requiring it to ascertain the actual ownership of its outstanding shares. The
Taxpayer Relief Act eliminates the rule that a failure to comply with these
regulations will result in a loss of REIT status. Instead, a failure to comply
with the regulations will result in a fine. This provision will be effective for
the Company's taxable year ending December 31, 1998. In addition, the Company's
Charter will include restrictions regarding the transfer of its shares of
capital stock that are intended to assist the Company in continuing to satisfy
the share ownership requirements described in (v) and (vi) above. See "Capital
Stock--Restrictions on Transfer."

In addition, a corporation may not elect to become a REIT unless its taxable
year is the calendar year. The Company's taxable year will be the calendar year.

If a REIT owns a corporate subsidiary that is a "qualified REIT subsidiary,"
that subsidiary is disregarded for Federal income tax purposes and all assets,
liabilities and items of income, deduction and credit of the subsidiary are
treated as assets, liabilities and items of the REIT itself. (A qualified REIT
subsidiary is a corporation all of the capital stock of which has been owned by
the REIT from the commencement of such corporate existence. The Taxpayer Relief
Act eliminates the requirement that a REIT own a qualified REIT subsidiary from
the commencement of its corporate existence. This change will be effective for
the Company's taxable year ending December 31, 1998.) Similarly, a single member
limited liability company owned by the REIT or by the Operating Partnership is
disregarded as a separate entity for Federal income tax purposes.

In the case of a REIT that is a partner in a partnership, Treasury
Regulations provide that for purposes of the gross income tests and asset tests
the REIT will be deemed to own its proportionate share (based on its interest in
partnership capital) of the assets of the partnership and will be deemed to be
entitled to the income of the partnership attributable to such share. In
addition, the assets and gross income of the partnership will retain the same
character in the hands of the REIT for purposes of Section 856 of the Code,
including satisfying the gross income tests and asset tests, that they have in
the hands of the Partnership. Thus, the Company's proportionate share of the
assets, liabilities and items of gross income of the Operating Partnership will
be treated as assets, liabilities and items of gross income of the Company for
purposes of applying the requirements described herein.

INCOME TESTS. In order to maintain qualification as a REIT, three gross
income tests must be satisfied annually. First, at least 75% of the REIT's gross
income (excluding gross income from "prohibited transactions") for each taxable
year must be derived directly or indirectly from investments relating to real
property or mortgages on real property (including "rents from real property"
and, in certain circumstances, interest) or from certain types of temporary
investments. Second, at least 95% of the REIT's gross income (excluding gross
income from prohibited transactions) for each taxable year must be derived from
such real property investments described above and from dividends, interest and
gain from the sale or disposition of stock or securities, or from any
combination of the foregoing. Third, gain from the sale or other disposition of
stock or securities held for less than one year, gain from prohibited
transactions and gain on the sale or other disposition of real property held for
less than four years (apart from involuntary

143

conversions and sales of foreclosure property) must represent less than 30% of
the REIT's gross income (including gross income from prohibited transactions)
for each taxable year. For purposes of applying the 30% gross income test, the
holding period of Properties and other assets acquired in the Formation
Transactions will be deemed to have commenced on the date of the Formation
Transactions. The Taxpayer Relief Act repeals the 30% gross income test for
taxable years beginning after its enactment on August 5, 1997. Thus, the 30%
gross income test will apply only to the Company's taxable year ended December
31, 1997.

Rents received by a REIT will qualify as "rents from real property" in
satisfying the gross income requirements for a REIT described above only if
several conditions are met. First, the amount of rent must not be based in whole
or in part on the income or profits of any person. However, an amount received
or accrued generally will not be excluded from the term "rents from real
property" solely by reason of being based on a fixed percentage or percentages
of receipts or sales. Second, rents received from a tenant will not qualify as
"rents from real property" in satisfying the gross income tests if the REIT, or
a direct or indirect owner of 10% or more of the REIT, directly or
constructively, owns 10% or more of such tenant (a "Related Party Tenant").
Third, if rent attributable to personal property, leased in connection with a
lease of real property, is greater than 15% of the total rent received under the
lease, then the portion of rent attributable to such personal property will not
qualify as "rents from real property." Finally, in order for rents received with
respect to a property to qualify as "rents from real property," the REIT
generally must not operate or manage the property or furnish or render services
to tenants, except through an "independent contractor" who is adequately
compensated and from whom the Company derives no income. The "independent
contractor" requirement, however, does not apply to the extent the services
provided by the REIT are "usually or customarily rendered" in connection with
the rental of space for occupancy only and are not otherwise considered
"rendered to the occupant." The Taxpayer Relief Act provides a DE MINIMIS rule
for non-customary services which is effective for taxable years beginning after
August 5, 1997. If the value of the non-customary service income with respect to
a property (valued at no less than 150% of the Company's direct costs of
performing such services) is 1% or less of the total income derived from the
property, then all rental income except the non-customary service income will
qualify as "rents from real property." This provision will be effective for the
Company's taxable year ending December 31, 1998.

The Company does not anticipate charging rent that is based in whole or in
part on the income or profits of any person (except by reason of being based on
a fixed percentage or percentages of receipts of sales consistent with the rule
described above). The Company does not anticipate deriving rent attributable to
personal property leased in connection with real property that exceeds 15% of
the total rents.

The Company will provide certain services with respect to the Properties,
but the Company believes (and has represented to Brown & Wood LLP) that all such
services will be considered "usually or customarily rendered" in connection with
the rental of space for occupancy only, so that the provision of such services
will not jeopardize the qualification of rent from the Properties as "rents from
real property." In rendering its opinion on the Company's ability to qualify as
a REIT, Brown & Wood LLP is relying on such representations. In the case of any
services that are not "usual and customary" under the foregoing rules, the
Company intends to employ "independent contractors" to provide such services.

The Operating Partnership may receive certain types of income, including
rent from Related Party Tenants, with respect to the properties it owns that
will not qualify under the 75% or 95% gross income test. In particular,
dividends on the Operating Partnership's stock in the Service Corporations will
not qualify under the 75% gross income test. The Company believes, however, that
the aggregate amount of such items and other non-qualifying income in any
taxable year will not cause the Company to exceed the limits on non-qualifying
income under the 75% and 95% gross income tests.

The Management LLC will receive managements fees from the Operating
Partnership with respect to properties that are wholly-owned by the Operating
Partnership. In the opinion of Brown & Wood LLP, such fees will not constitute
gross income of the Operating Partnership.

144

If the Company fails to satisfy one or both of the 75% or the 95% gross
income tests for any taxable year, it nevertheless may qualify as a REIT for
such year if it is entitled to relief under certain provisions of the Code.
These relief provisions generally will be available if the Company's failure to
meet any such tests was due to reasonable cause and not due to willful neglect,
the Company attaches a schedule of the sources of its income to its Federal
corporate income tax return and any incorrect information on the schedule was
not due to fraud with intent to evade tax. It is not possible, however, to state
whether in all circumstances the Company would be entitled to the benefit of
these relief provisions. As discussed in "--General" above, even if these relief
provisions were to apply, a tax would be imposed with respect to the excess net
income. Moreover, these relief provisions would be unavailable if the Company
failed the 30% gross income test.

ASSET TESTS. The Company must also satisfy three tests relating to the
nature of its assets at the close of each quarter of its taxable year. First, at
least 75% of the value of the Company's total assets must be represented by real
estate assets (including (i) its allocable share of real estate assets held by
the Operating Partnership or any partnerships in which the Operating Partnership
owns an interest and (ii) stock or debt instruments held for not more than one
year purchased with the proceeds of a stock offering or long-term (i.e., at
least five-year) public debt offering of the Company), cash, cash items and
government securities. Second, of the investments not included in the 75% asset
class, the value of any one issuer's securities owned by the Company may not
exceed 5% of the value of the Company's total assets. Third, of the investments
not included in the 75% asset class, the Company may not own more than 10% of
any one issuer's outstanding voting securities.

After initially meeting the asset tests at the close of any quarter, the
Company will not lose its status as a REIT for failure to satisfy the asset
tests at the end of a later quarter solely by reason of changes in asset values.
If the failure to satisfy the asset tests results from an acquisition of
securities or other property during a quarter, the failure can be cured by
disposition of sufficient non-qualifying assets within 30 days after the close
of that quarter. The Company intends to maintain adequate records of the value
of its assets to ensure compliance with the asset tests and to take such other
action within 30 days after the close of any quarter as may be required to cure
any noncompliance.

Based on the foregoing, the 5% test must generally be met for any quarter in
which the Company acquires securities of an issuer. Thus, this requirement must
be satisfied not only on the date the Company acquires securities of the Service
Corporations, but also each time the Company increases its ownership of
securities of a Service Corporation (including as a result of increasing its
interest in the Operating Partnership as limited partners exercise their
redemption rights).

The Operating Partnership will own all of the non-voting stock of each of
the Service Corporations, which stock represents 95% of the equity of the
Service Corporations. See "Structure and Formation of the Company--The Operating
Entities of the Company--The Service Corporations." By virtue of its ownership
of Units, the Company will be considered to own its pro rata share of the assets
of the Operating Partnership, including the securities of the Service
Corporations described above. The Operating Partnership will not own more than
10% of the voting securities of the Service Corporations and, therefore, the
Company will not own more than 10% of the voting securities of the Service
Corporations. In addition, the Company and senior management believe that the
Company's pro rata share of the value of the securities of the Service
Corporations will not exceed, for each Service Corporation, as of the completion
of the Offering, 5% of the total value of the Company's assets. The Company's
belief is based in part upon its analysis of the anticipated operating cash
flows of the Service Corporations. There can be no assurance, however, that the
IRS will not contend that the value of the securities of a Service Corporation
exceeds the 5% value limitation. Brown & Wood LLP, in rendering its opinion
regarding the qualification of the Company as a REIT, will rely on the
conclusions of the Company and its senior management as to the value of the
securities of the Service Corporations.

145

As noted above, the 5% value requirement must be satisfied at or within 30
days after the end of each quarter during which the Company increases its
(direct or indirect) ownership of securities of the Service Corporations
(including as a result of increasing its interest in the Operating Partnership).
Although the Company plans to take steps to ensure that it satisfies the 5%
value test for any quarter with respect to which retesting is to occur, there
can be no assurance that such steps always will be successful or will not
require a reduction in the Operating Partnership's overall interest in a Service
Corporation.

Although currently the IRS will not rule regarding compliance with the 10%
voting securities test, in the opinion of Brown & Wood LLP the Company's
proposed structure will meet the current statutory requirements with respect to
the 10% voting securities test.

ANNUAL DISTRIBUTION REQUIREMENTS. The Company, in order to qualify as a
REIT, is required to distribute dividends (other than capital gain dividends) to
its stockholders in an amount at least equal to (i) the sum of (A) 95% of the
Company's "REIT taxable income" (computed without regard to the dividends paid
deduction and the REIT's net capital gain) and (B) 95% of the net income (after
tax), if any, from foreclosure property, minus (ii) the sum of certain items of
noncash income (including, as a result of the Taxpayer Relief Act of 1997, INTER
ALIA cancellation of indebtedness and original issue discount income). Such
distributions must be paid during the taxable year to which they relate (or
during the following taxable year, if declared before the Company timely files
its tax return for the preceding year and paid on or before the first regular
dividend payment after such declaration). To the extent that the Company does
not distribute all of its net capital gain or distributes at least 95%, but less
than 100%, of its "REIT taxable income," as adjusted, it will be subject to tax
on the undistributed amount at regular corporate capital gains rates and
ordinary income tax rates. Furthermore, if the Company fails to distribute
during each calendar year at least the sum of (i) 85% of its REIT ordinary
income of such year, (ii) 95% of its REIT capital gain income for such year and
(iii) any undistributed taxable income from prior periods, the Company will be
subject to a 4% excise tax on the excess of such amounts over the amounts
actually distributed. In addition, if the Company disposes of any asset subject
to the Built-In Gain Rule during its Recognition Period, the Company will, under
Treasury Regulations to be issued in the future, be required to distribute at
least 95% of the built-in gain (after tax), if any, recognized on the
disposition.

The Company intends to make timely distributions sufficient to satisfy the
annual distribution requirements. In this regard, it is expected that the
Company's REIT taxable income will be less than its cash flow due to the
allowance of depreciation and other noncash charges in the computing of REIT
taxable income. Moreover, the Partnership Agreement of the Operating Partnership
authorizes the Company, as general partner, to take such steps as may be
necessary to cause the Operating Partnership to make distributions to its
partners of amounts sufficient to permit the Company to meet these distribution
requirements. It is possible, however, that the Company, from time to time, may
not have sufficient cash or other liquid assets to meet the 95% distribution
requirement due to timing differences between the actual receipt of income and
actual payment of deductible expenses and the inclusion of such income and
deduction of such expenses in arriving at REIT taxable income of the Company, or
due to an excess of nondeductible expenses such as principal amortization or
capital expenditures over noncash deductions such as depreciation. In the event
that such circumstances do occur, then in order to meet the 95% distribution
requirement, the Company may cause the Operating Partnership to arrange for
short-term, or possibly long-term, borrowings to permit the payment of required
dividends.

Under certain circumstances, the Company may be able to rectify a failure to
meet the distribution requirement for a year by paying "deficiency dividends" to
stockholders in a later year that may be included in the Company's deduction for
dividends paid for the earlier year. Thus, the Company may be able to avoid
being taxed on amounts distributed as deficiency dividends. However, the Company
would be required to pay to the IRS interest based upon the amount of any
deduction taken for deficiency dividends.

FAILURE TO QUALIFY. If the Company fails to qualify for taxation as a REIT
in any taxable year and certain relief provisions do not apply, the Company will
be subject to tax (including any applicable alternative

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minimum tax) on its taxable income at regular corporate rates. Unless entitled
to relief under specific statutory provisions, the Company also will be
disqualified from taxation as a REIT for the four taxable years following the
year during which qualification was lost. It is not possible to state whether in
all circumstances the Company would be entitled to such statutory relief.

Distributions to stockholders in any year in which the Company fails to
qualify as a REIT will not be deductible by the Company, nor will the Company be
required to make distributions. If the Company makes distributions, such
distributions will be taxable as ordinary income to the extent of the Company's
current and accumulated earnings and profits. Subject to certain limitations in
the Code, corporate distributees may be eligible for the dividends received
deduction.

RECENT DEVELOPMENTS. On February 2, 1998, the Clinton Administration
released a summary of its proposed budget plan which contained several proposals
affecting REITs. One such proposal, if enacted in its present form, would
prohibit a REIT from holding securities representing more than 10% of the value
of all classes of stock of a corporation, other than a qualified REIT subsidiary
or another REIT. Although current stock interests in existing subsidiaries, such
as the Management Corporation, the Management LLC, the Leasing Corporation and
the Construction Corporation (together, the "Subsidiary Corporations"), would be
grandfathered under such proposal, the Subsidiary Corporations would be
prohibited from acquiring substantial new assets or engaging in a new trade or
business. If enacted in its present form, the proposal may limit the future
activities and growth of the Subsidiary Corporations. No prediction can be made
as to whether such proposal or any other proposal affecting REITs will be
enacted into legislation and the impact of any such legislation on the Company.

TAXATION OF STOCKHOLDERS GENERALLY

Taxation of Domestic Stockholders. As long as the Company qualifies as a
REIT, distributions made to the Company's taxable domestic stockholders out of
current or accumulated earnings and profits (and not designated as capital gain
dividends) will be taken into account by them as ordinary income and corporate
stockholders will not be eligible for the dividends received deduction as to
such amounts. Distributions that are designated as capital gain dividends will
be taxed as long-term capital gains (to the extent they do not exceed the
Company's actual net capital gain for the taxable year) without regard to the
period for which the stockholder has held its stock. However, corporate
stockholders may be required to treat up to 20% of certain capital gain
dividends as ordinary income. The Taxpayer Relief Act provides that, beginning
with the Company's taxable year ending December 31, 1998, if the Company elects
to retain and pay income tax on any net long term capital gain, domestic
stockholders of the Company would include in their income as long term capital
gain their proportionate share of such net long term capital gain. A domestic
stockholder would also receive a refundable tax credit for such stockholder's
proportionate share of the tax paid by the REIT on such retained capital gains
and an increase in its basis in the stock of the REIT in an amount equal to the
difference between the undistributed long term capital gains and the amount of
tax paid by the REIT. In addition, Notice 97-64 provides temporary guidance with
respect to the taxation of distributions by the Company designated as capital
gain dividends. Pursuant to Notice 97-64, forthcoming Temporary Regulations will
provide that capital gains allocated to a stockholder by the Company may be
designated as a 20% rate gain distribution, an unrecaptured Section 1250 gain
distribution (subject to a 25% rate), or a 28% rate gain distribution. In
determining the amounts which may be designated as each class of capital gains
dividends, a REIT must calculate its net capital gains as if it were an
individual subject to a marginal tax rate of 28%. Unless specifically designated
otherwise by the Company, a distribution designated as a capital gain
distribution is presumed to be a 28% rate gain distribution. If the Company
elects to retain any net long-term capital gain, as discussed above, the
undistributed long-term capital gains are considered to be designated as capital
gain dividends for purposes of Notice 97-64. Distributions in excess of current
and accumulated earnings and profits will not be taxable to a stockholder to the
extent that they do not exceed the adjusted basis of the stockholder's shares of
Common Stock, but rather will reduce the adjusted basis of a stockholder's
shares of Common

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Stock. To the extent that such distributions exceed the stockholder's adjusted
basis in his shares of Common Stock, they will be included in income as
long-term capital gain (or short-term capital gain if the shares have been held
for one year or less), assuming the shares of Common Stock are a capital asset
in the hands of the stockholder.

Any dividend declared by the Company in October, November or December of any
year payable to a stockholder of record on a specific date in any such month
shall be treated as both paid by the Company and received by the stockholder on
December 31 of such year, if the dividend is actually paid by the Company during
January of the following calendar year.

Stockholders may not include in their individual income tax returns net
operating losses or capital losses of the Company. In addition, distributions
from the Company and gain from the disposition of PIERS will not be treated as
"passive activity" income and, therefore, stockholders will not be able to use
passive losses to offset such income.

In general, a domestic stockholder will realize capital gain or loss on the
disposition of PIERS equal to the difference between (i) the amount of cash and
the fair market value of any property received on such disposition, and (ii) the
stockholder's adjusted basis of such PIERS. Such gain or loss generally will
constitute short-term capital gain or loss if the stockholder has not held such
shares for more than one year, and long-term capital gain or loss if the
stockholder has held such shares for more than one year. The maximum rate of tax
on net capital gains of individuals, trusts and estates from the sale or
exchange of PIERS held for more than 18 months is 20%, and the maximum rate is
reduced to 18% for assets acquired after December 31, 2000 and held for more
than five years. For individuals, trusts and estates who would be subject to a
maximum tax rate of 15%, the rate on net capital gains is reduced to 10%, and
effective for taxable years commencing after December 31, 2000, the rate is
reduced to 8% for assets held for more than five years. The maximum rate for net
capital gains attributable to the sale of depreciable real property held for
more than 18 months is 25% to the extent of the deductions for depreciation
(other than certain depreciation recapture taxable as ordinary income) with
respect to such property. The maximum rate of capital gains tax for capital
assets held more than one year but not more than 18 months remains at 28%. In
general, any loss upon a sale or exchange of PIERS by a stockholder which has
held such PIERS for six months or less (after applying certain holding period
rules) will be treated as a long-term capital loss to the extent of
distributions from the Company required to be treated by such stockholder as
long-term capital gains.

BACKUP WITHHOLDING. The Company will report to its domestic stockholders and
the IRS the amount of dividends paid during each calendar year and the amount of
tax withheld, if any, with respect thereto. Under the backup withholding rules,
a stockholder may be subject to backup withholding at the rate of 31% with
respect to dividends paid unless such holder (i) is a corporation or comes
within certain other exempt categories and, when required, demonstrates this
fact, or (ii) provides a taxpayer identification number and certifies as to no
loss of exemption, and otherwise complies with the applicable requirements of
the backup withholdings rules. Any amount paid as backup withholding will be
creditable against the stockholder's income tax liability. The United States
Treasury has recently issued final regulations (the "Final Regulations")
regarding the withholding and information reporting rules discussed above. In
general, the Final Regulations do not alter the substantive withholding and
information reporting requirements but unify current certification procedures
and forms and clarify and modify reliance standards. The Final Regulations
generally are effective for payments made on or after January, 2000, subject to
certain transition rules.

In addition, the Company may be required to withhold a portion of capital
gain distributions made to any stockholders which fail to certify their non
foreign status to the Company. See "--Taxation of Foreign Stockholders" below.

TAXATION OF TAX-EXEMPT STOCKHOLDERS. The IRS has ruled that amounts
distributed as dividends by a qualified REIT generally do not constitute
unrelated business taxable income ("UBTI") when received by

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a tax-exempt entity. Based on that ruling, the dividend income from the PIERS
will not be UBTI to a tax-exempt stockholder, provided that the tax-exempt
stockholder has not held its PIERS as "debt financed property" within the
meaning of the Code and such shares are not otherwise used in a trade or
business. Similarly, income from the sale of PIERS will not constitute UBTI
unless such tax-exempt stockholder has held such shares as "debt financed
property" within the meaning of the Code or has used the shares in a trade or
business.

Notwithstanding the above, however, a portion of the dividends paid by a
"pension held REIT" will be treated as UBTI as to any trust which is described
in Section 401(a) of the Code and is tax-exempt under Section 501(a) of the Code
(a "qualified trust") and which holds more than 10% (by value) of the interests
in the REIT. A REIT is a "pension held REIT" if (i) it would not have qualified
as a REIT but for the application of a "look-through" exception to the "not
closely held" requirement applicable to qualified trusts, and (ii) either (A) at
least one such qualified trust holds more than 25% (by value) of the interests
in the REIT, or (B) one or more such qualified trusts, each of which owns more
than 10% (by value) of the interests in the REIT, hold in the aggregate more
than 50% (by value) of the interests in the REIT. The percentage of any REIT
dividend treated as UBTI is equal to the ratio of (i) the gross income (less
direct expenses related thereto) of the REIT from unrelated trades or businesses
(determined as if the REIT were a qualified trust) to (ii) the total gross
income (less direct expenses related thereto) of the REIT. A DE MINIMIS
exception applies where this percentage is less than 5% for any year. The
provisions requiring qualified trusts to treat a portion of REIT distributions
as UBTI will not apply if the REIT is able to satisfy the "not closely held"
requirement without relying upon the "look-through" exception with respect to
qualified trusts. As a result of certain limitations on transfer and ownership
of Common Stock contained in the Charter, the Company does not expect to be
classified as a "pension held REIT."

TAXATION OF NON-U.S. STOCKHOLDERS. The rules governing U.S. 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 herein to provide more
than a limited summary of such rules. Prospective Non-U.S. Stockholders should
consult with their own tax advisors to determine the impact of U.S. Federal,
state and local income tax laws with regard to an investment in shares of Common
Stock, including any reporting requirements.

ORDINARY DIVIDENDS. Distributions, other than distributions that are treated
as attributable to gain from sales or exchanges by the Company of U.S. real
property interests (discussed below) and other than distributions designated by
the Company as capital gain dividends, will be treated as ordinary income to the
extent that they are made out of current or accumulated earnings and profits of
the Company. Such distributions to foreign stockholders will ordinarily be
subject to a withholding tax equal to 30% of the gross amount of the
distribution, unless an applicable tax treaty reduces that tax rate. However, if
income from the investment in the shares of Common Stock is treated as
effectively connected with the Non-U.S. Stockholder's conduct of a U.S. trade or
business, the Non-U.S. Stockholder generally will be subject to a tax at
graduated rates in the same manner as U.S. stockholders are taxed with respect
to such dividends (and may also be subject to the 30% branch profits tax if the
stockholder is a foreign corporation). The Company expects to withhold U.S.
income tax at the rate of 30% on the gross amount of any dividends, other than
dividends treated as attributable to gain from sales or exchanges of U.S. real
property interests and capital gain dividends, paid to a Non-U.S. Stockholder,
unless (i) a lower treaty rate applies and the required form evidencing
eligibility for that reduced rate is filed with the Company or (ii) the Non-U.S.
Stockholder files an IRS Form 4224 (or its future equivalent) with the Company
claiming that the distributions are "effectively connected" income.

Pursuant to the Final Regulations generally effective for payments made on
or after January 1, 2000, dividends paid to an address in a country outside the
United States will no longer be presumed to be paid to a resident of such
country for purposes of determining the applicability of withholding discussed
above and the applicability of a tax treaty rate. A Non-U.S. Stockholder who
wishes to claim the benefit of an applicable treaty rate will now required to
satisfy certain certification and other requirements.

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RETURN OF CAPITAL. Distributions in excess of current and accumulated
earnings and profits of the Company, which are not treated as attributable to
the gain from disposition by the Company of a U.S. real property interest, will
not be taxable to a Non-U.S. Stockholder to the extent that they do not exceed
the adjusted basis of the Non-U.S. Stockholder's shares of Common Stock, but
rather will reduce the adjusted basis of such shares of Common Stock. To the
extent that such distributions exceed the adjusted basis of a Non-U.S.
Stockholder's shares of Common Stock, they will give rise to tax liability if
the Non-U.S. Stockholder otherwise would be subject to tax on any gain from the
sale or disposition of its shares of Common Stock, as described below. If it
cannot be determined at the time a distribution is made whether such
distribution will be in excess of current and accumulated earnings and profits,
the distribution will be subject to withholding at the rate applicable to
dividends. However, the Non-U.S. Stockholder may seek a refund of such amounts
from the IRS if it is subsequently determined that such distribution was, in
fact, in excess of current and accumulated earnings and profits of the Company.

CAPITAL GAIN DIVIDENDS. For any year in which the Company qualifies as a
REIT, distributions that are attributable to gain from sales or exchanges by the
Company of U.S. real property interests will be taxed to a Non-U.S. Stockholder
under the provisions of the Foreign Investment in Real Property Tax Act of 1980,
as amended ("FIRPTA"). Under FIRPTA, these distributions are taxed to a Non-U.S.
Stockholder as if such gain were effectively connected with a U.S. business.
Thus, Non-U.S. Stockholders will be taxed on such distributions at the same
capital gain rates applicable to U.S. stockholders (subject to any applicable
alternative minimum tax and special alternative minimum tax in the case of
nonresident alien individuals), without regard to whether such distributions are
designated by the Company as capital gain dividends. Also, distributions subject
to FIRPTA may be subject to a 30% branch profits tax in the hands of a corporate
Non-U.S. Stockholder not entitled to treaty relief or exemption. The Company is
required by applicable Treasury Regulations under FIRPTA to withhold 35% of any
distribution that could be designated by the Company as a capital gain dividend.

PIERS SALES. Gain recognized by a Non-U.S. Stockholder upon a sale or
exchange of PIERS, including a redemption that is treated as a sale, generally
will not be taxed under FIRPTA if the Company is a "domestically controlled
REIT," defined generally as a REIT in respect of which at all times during a
specified testing period less than 50% in value of the stock was held directly
or indirectly by foreign persons. It is currently anticipated that the Company
will be a "domestically controlled REIT" and that therefore the sale of shares
of Common Stock will not be subject to taxation under FIRPTA. However, gain not
subject to FIRPTA will be taxable to a Non-U.S. Stockholder if (i) investment in
the shares of Common Stock is treated as "effectively connected" with the
Non-U.S. Stockholder's U.S. trade or business, in which case the Non-U.S.
Stockholder will be subject to the same treatment as U.S. stockholders with
respect to such gain, or (ii) the Non U.S. Stockholder is a nonresident alien
individual who was present in the United States for 183 days or more during the
taxable year and has a "tax home" in the United States, or maintains an office
or a fixed place of business in the United States to which the gain is
attributable, in which case the nonresident alien individual will be subject to
a 30% tax on the individual's capital gains. A similar rule will apply to
capital gain dividends not subject to FIRPTA.

Although the Company anticipates that it will qualify as a domestically
controlled REIT, because the PIERS will be publicly traded, no assurance can be
given that the Company will continue to so qualify. If the Company were not a
domestically controlled REIT, whether or not a Non-U.S. Stockholder's sale of
PIERS would be subject to tax under FIRPTA would depend on whether or not the
PIERS were regularly traded on an established securities market and on the size
of the selling Non-U.S. Stockholder's interest in the Company. If the gain on
the sale of PIERS were to be subject to tax under FIRPTA, the Non-U.S.
Stockholder would be subject to the same treatment as U.S. stockholders with
respect to such gain (subject to any applicable alternative minimum tax and a
special alternative minimum tax in the case of nonresident alien individuals)
and the purchaser of such PIERS may be required to withhold 10% of the gross
purchase price.

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The Final Regulations, issued by the United States Treasury on October 6,
1997, affect the rules applicable to payments to foreign persons. In general,
the Final Regulations do not alter the substantive withholding and information
reporting requirements but unify current certification procedures and modify
reliance standards. In addition, the Final Regulations also address certain
issues relating to intermediary certification procedures designed to simplify
compliance by withholding agents. The Final Regulations are generally effective
for payments made on or after January 1, 2000, subject to certain transition
rules. Prospective investors should consult their own tax advisors concerning
the adoption of the Final Regulations and the potential effect on their
ownership of PIERS.

TAXATION OF HOLDERS OF PIERS

DIVIDENDS AND OTHER DISTRIBUTIONS; BACKUP WITHHOLDING. For a discussion of
the taxation of the Company, the treatment of dividends and other distributions
with respect to shares of the Company, and the backup withholding rules, see the
discussions under the captions "Material Federal Income Tax Considerations --
Taxation of the Company -- General" and "Taxation of Stockholders Generally." In
determining the extent to which a distribution on the PIERS constitutes a
dividend for tax purposes, the earnings and profits of the Company will be
allocated first to distributions with respect to the PIERS, and second to
distributions with respect to the Company's Common Stock.

TAX CONSEQUENCES UPON CONVERSION OF PIERS INTO COMMON STOCK AT THE PREFERRED
HOLDER'S OPTION AND REDEMPTION OF PIERS FOR COMMON STOCK AT THE OPTION OF THE
COMPANY. Generally, except with respect to cash received in lieu of fractional
shares, and except in the case of foreign holders of the PIERS under the
circumstances described above (see "-- Taxation of Non-U.S. Stockholders"), no
gain or loss will be recognized upon the conversion of PIERS into Common Stock
or upon the redemption of PIERS for Common Stock at the option of the Company.
The tax basis of a holder of PIERS (a "Preferred Holder") in the Common Stock
received will equal such Preferred Holder's tax basis in the PIERS surrendered
in the conversion, reduced by any cash received in lieu of fractional shares,
and the holding period for the Common Stock received will include the Preferred
Holder's holding period for the PIERS exchanged therefor. Based on the IRS's
present advance ruling policy, cash received in lieu of a fractional share of
Common Stock upon conversion of PIERS should be treated as a payment in
redemption of the fractional interest in such share of Common Stock. See "--
Redemption of PIERS for Cash" below.

DEEMED DIVIDENDS ON PIERS. The Conversion Price of the PIERS may be
adjusted if the Company makes certain distributions of stock, cash or other
property with respect to its Common Stock. While the Company does not presently
contemplate making such a distribution, if the Company does make a distribution
of cash or other property that results in an adjustment to the Conversion Price,
a Preferred Holder may be viewed as having received a "deemed distribution" that
is taxable as a dividend under Sections 301 and 305 of the Code. See "--Taxation
of Stockholders Generally."

REDEMPTION OF PIERS FOR CASH. The treatment accorded to any redemption by
the Company for cash (as distinguished from a sale, exchange or other
disposition) of PIERS can only be determined on the basis of particular facts
applicable to each Preferred Holder at the time of redemption. (For a discussion
of the treatment of a redemption of PIERS for Common Stock, see "-- Tax
Consequences Upon Conversion of PIERS into Common Stock at the Preferred
Holder's Option and Redemption of PIERS for Common Stock at the Option of the
Company" above.) In general, a Preferred Holder will recognize ordinary income
to the extent of accrued but unpaid dividends and will recognize capital gain or
loss measured by the difference between the amount received (less the amount
attributable to accrued but unpaid dividends) by the Preferred Holder upon the
redemption and such holder's adjusted tax basis in the PIERS redeemed (provided
the PIERS are held as a capital asset) if such redemption (i) results in a
"complete termination" of the Preferred Holder's interest in all classes of
stock of the Company under Section 302(b) (3) of the Code or (ii) is "not
essentially equivalent to a dividend" with respect to the Preferred Holder
within the meaning of Section 302(b) (1) of the Code. In applying these tests,
there must be taken into account not

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only any PIERS owned by the Preferred Holder, but also such Preferred Holder's
ownership of Common Stock, and any options (including stock purchase rights) to
acquire any of the foregoing. The Preferred Holder also must take into account
any such securities (including options) which are considered to be owned by such
Preferred Holder by reason of the constructive ownership rules set forth in
Sections 318 and 302(c) of the Code.

If a Preferred Holder owns (actually or constructively) no Common Stock or
an insubstantial percentage of the outstanding Common Stock, based upon current
law, it is probable that a redemption of PIERS from a Preferred Holder would be
considered "not essentially equivalent to a dividend." However, whether a
distribution is "not essentially equivalent to a dividend" depends on all of the
facts and circumstances and a Preferred Holder intending to rely on any of these
tests at the time of redemption should consult its own tax adviser to determine
their application to its particular situation.

If the redemption does not meet any of the tests under Section 302 of the
Code, then the redemption proceeds received from the PIERS will be treated as a
distribution on the PIERS as described under "Material Federal Income Tax
Considerations -- Taxation of Shareholders Generally." If the redemption is
taxed as a dividend, the Preferred Holder's adjusted tax basis in the PIERS
redeemed will be transferred to any other stockholdings of the Preferred Holder
in the Company. If the Preferred Holder owns no other stock of the Company,
under certain circumstances, such basis may be transferred to a related person,
or it may be lost entirely.

REDEMPTION PREMIUM. The PIERS are redeemable at the Company's option on or
after July 15, 2003 at an amount greater than the issue price of the PIERS. The
difference between the issue price and the optional redemption amount is the
"redemption premium." (For a detailed description of the Company's option to
redeem the PIERS, see "Capital Stock--PIERS--Redemption.") Under Section 305 of
the Code and the applicable Treasury Regulations, if the redemption price of the
PIERS exceeds its issue price by more than a DE MINIMIS amount or is not solely
in the nature of a penalty for a premature redemption, the amount of such excess
may be deemed to be a constructive distribution (treated as a dividend to the
extent of the Company's current and accumulated earnings and profits) taxable to
the Preferred Holder over the period during which the PIERS cannot be redeemed
(as if it were original issue discount on a debt instrument) (the "Economic
Accrual Rule").

A redemption premium is considered DE MINIMIS if it is less than the product
of 0.25% multiplied by the number of years until redemption, multiplied by the
issue price of the PIERS. A redemption premium is considered to be a penalty for
premature redemption only if it is paid as a result of changes in economic or
market conditions over which the Company or the Preferred Holder does not have
legal or practical control. Even if the redemption premium is greater than a DE
MINIMIS amount, a Preferred Holder will not have to take the redemption premium
into income pursuant to the Economic Accrual Rule unless the PIERS are (i)
mandatorily redeemable, (ii) redeemable at the Preferred Holder's option, or
(iii) redeemable at the Company's option and, at the time of issue, based on all
of the facts and circumstances, it is more likely than not that the Company will
exercise such option.

The Company believes that a Preferred Holder will not have to take the
redemption premium on the PIERS into income pursuant to the Economic Accrual
Rule because (i) based on all of the facts and circumstances, at the time of
issue, the Company believes that it is not more likely than not that the Company
will redeem the PIERS at the time when the redemption premium is greater than a
DE MINIMIS amount and (ii) at the time that the PIERS are mandatorily
redeemable, the Company believes that the redemption premium will be zero.
Moreover, the Treasury Regulations provide a "safe harbor" under which a
redemption pursuant to an issuer's right to redeem is not treated as more likely
than not to occur if (i) the issuer and the holder are not related, (ii) there
are no plans, arrangements, or agreements that effectively require or are
intended to compel the issuer to redeem the stock, and (iii) exercise of the
right to redeem would not reduce the yield of the stock. The Company believes
that the PIERS will qualify for this safe harbor.

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OTHER TAX CONSIDERATIONS

EFFECT OF TAX STATUS OF OPERATING PARTNERSHIP AND OTHER ENTITIES ON REIT
QUALIFICATION. All of the Company's significant investments are held through the
Operating Partnership. The Operating Partnership may hold interests in certain
Properties through Property-owning entities. The Operating Partnership and the
Property-owning entities, as well as the Management LLC, involve special tax
considerations. These tax considerations include: (i) allocations of income and
expense items of the Operating Partnership and the Property-owning entities,
which could affect the computation of taxable income of the Company, (ii) the
status of the Operating Partnership, the Property-owning entities and the
Management LLC as partnerships or entities that are disregarded as entities
separate from their owners (as opposed to associations taxable as corporations)
for income tax purposes and (iii) the taking of actions by the Operating
Partnership or any of the Property-owning entities that could adversely affect
the Company's qualification as a REIT.

In the opinion of Brown & Wood LLP, based on certain representations of the
Company and the Operating Partnership, for Federal income tax purposes, the
Operating Partnership will be treated as a partnership and neither the
Management LLC nor any of the Property-owning entities will be treated as an
association taxable as a corporation. If, however, the Operating Partnership or
any of such other entities were treated as an association taxable as a
corporation, the Company would fail to qualify as a REIT for a number of
reasons.

The Partnership Agreement requires that the Operating Partnership be
operated in a manner that will enable the Company to satisfy the requirements
for classification as a REIT. In this regard, the Company will control the
operation of the Operating Partnership through its rights as the sole general
partner of the Operating Partnership.

TAX ALLOCATIONS WITH RESPECT TO THE PROPERTIES. When property is contributed
to a partnership in exchange for an interest in the partnership, the partnership
generally takes a carryover basis in that property for tax purposes (i.e., the
partnership's basis is equal to the adjusted basis of the contributing partner
in the property), rather than a basis equal to the fair market value of the
property at the time of contribution. Pursuant to Section 704(c) of the Code,
income, gain, loss and deductions attributable to such contributed property must
be allocated in a manner such that the contributing partner is charged with, or
benefits from, respectively, the unrealized gain or unrealized loss associated
with the property at the time of the contribution. The amount of such unrealized
gain or unrealized loss is generally equal to the difference between the fair
market value of the contributed property at the time of contribution and the
adjusted tax basis of such property at the time of contribution (a "Book-Tax
Difference"). Such allocations are solely for Federal income tax purposes and do
not affect the book capital accounts or other economic or legal arrangements
among the partners. The Operating Partnership was funded by way of contributions
of appreciated property to the Operating Partnership in the Formation
Transactions. Consequently, the Operating Partnership Agreement will require
such allocations to be made in a manner consistent with Section 704(c) of the
Code and the regulations thereunder (the "Section 704(c) Regulations").

The Section 704(c) Regulations require partnerships to use a "reasonable
method" for allocation of items affected by Section 704(c) of the Code and
outline three methods which may be considered reasonable for these purposes. The
Operating Partnership intends to use the "traditional method" of Section 704(c)
allocations, which is the least favorable method from the Company's perspective
because of certain technical limitations. Under the traditional method,
depreciation with respect to a contributed Property for which there is a
Book-Tax Difference first will be allocated to the Company and other partners
who did not have an interest in such Property until they have been allocated an
amount of depreciation equal to what they would have been allocated if the
Operating Partnership had purchased such property for its fair market value at
the time of contribution. In addition, if such a Property is sold, gain equal to
the Book-Tax Difference at the time of sale will be specially allocated to the
contributor of the Property. These

153

allocations will tend to eliminate the Book-Tax Differences with respect to the
contributed Properties over the life of the Operating Partnership. However, they
may not always entirely eliminate the Book-Tax Difference on an annual basis or
with respect to a specific taxable transaction such as a sale. This could cause
the Company (i) to be allocated lower amounts of depreciation deduction for tax
purposes than would be allocated to the Company if all Properties were to have a
tax basis equal to their fair market value at the time of contribution and (ii)
to be allocated lower amounts of taxable loss in the event of a sale of such
contributed interests in the Properties at a book loss, than the economic or
book loss allocated to the Company as a result of such sale, with a
corresponding benefit to the other partners in the Operating Partnership. These
allocations possibly might adversely affect the Company's ability to comply with
REIT distribution requirements, although the Company does not anticipate that
this will occur. These allocations may also affect the earnings and profits of
the Company for purposes of determining the portion of distributions taxable as
a dividend income. See "--Taxation of U.S. Stockholders." The application of
these rules over time may result in a higher portion of distributions being
taxed as dividends than would have occurred had the Company purchased its
interests in the Properties at their agreed values.

Interests in the Properties purchased by the Operating Partnership for cash
simultaneously with or subsequent to the admission of the Company to the
Operating Partnership initially will have a tax basis equal to their fair market
value. Thus, Section 704(c) of the Code will not apply to such interests.

SERVICE CORPORATIONS. A portion of the amounts to be used by the Operating
Partnership to fund distributions to stockholders is expected to come from the
Service Corporations, through dividends on non-voting stock of the Service
Corporations to be held by the Operating Partnership. The Service Corporations
will not qualify as REITs and thus will pay Federal, state and local income
taxes on their net income at normal corporate rates. To the extent that the
Service Corporations are required to pay Federal, state and local income taxes,
the cash available for distribution to the Company's stockholders will be
reduced accordingly.

As described above, the value of the securities of any Service Corporation
held by the Operating Partnership cannot exceed 5% of the value of the Operating
Partnership's assets at a time when the Company is considered to acquire
additional securities of the Service Corporation. See "--Taxation of the
Company--Asset Tests." This limitation may restrict the ability of the Service
Corporations to increase the sizes of their businesses unless the value of the
assets of the Operating Partnership is increasing at a commensurate rate.

STATE AND LOCAL TAX

The Company and its stockholders may be subject to state and local tax in
states and localities in which it does business or owns property. The tax
treatment of the Company and the stockholders in such jurisdictions may differ
from the Federal income tax treatment described above.

154

UNDERWRITING

Lehman Brothers and Prudential Securities Incorporated (the "Underwriters")
have severally agreed, subject to the terms and conditions contained in the
Underwriting Agreement (the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part) to purchase from
the Company and the Company has agreed to sell to each Underwriter, the
aggregate number of PIERS set forth below opposite the name of each such
Underwriter.

NUMBER OF
UNDERWRITERS SHARES
- -------------------------------------------------------------------------------- ------------

Lehman Brothers Inc............................................................. 3,000,000
Prudential Securities Incorporated.............................................. 1,000,000
------------
Total....................................................................... 4,000,000
------------
------------

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase PIERS are subject to certain conditions, and that if
any of the PIERS are purchased by the Underwriters pursuant to the Underwriting
Agreement, all of the PIERS agreed to be purchased by the Underwriters under the
Underwriting Agreement must be so purchased.

The Company has been advised that the Underwriters propose to offer the
PIERS directly to the public at the initial public offering price set forth on
the cover page of this Prospectus, and to certain selected dealers who may
include the Underwriters at such public offering price less a selling concession
not in excess of $0.60 per PIERS. The selected dealers may reallow a concession
not in excess of $0.10 per PIERS to certain brokers or dealers. After the PIERS
Offering, the public offering price, the concession to selected dealers and the
reallowance may be changed by the Representatives.

The Company has granted to the Underwriters an option to purchase up to an
additional 600,000 PIERS at the public offering price less the aggregate
underwriting discounts and commissions shown on the cover page of this
Prospectus, solely to cover overallotments, if any. Such option may be exercised
at any time within 30 days after the date of the Underwriting Agreement. To the
extent that such option is exercised, each Underwriter will be committed,
subject to certain conditions, to purchase a number of additional PIERS
proportionate to such Underwriter's initial commitment as indicated in the
preceding table.

The Company has agreed that it will not, without the prior written consent
of Lehman Brothers, on behalf of the Underwriters, offer for sale, contract to
sell, sell or otherwise dispose of (or enter into any transaction or device
which is designed to, or could be expected to, result in the disposition by any
person at any time in the future of), directly or indirectly, any shares of
Common Stock or securities convertible into or exercisable or exchangeable for
Common Stock (other than shares offered hereby, shares issued pursuant to the
Stock Option Plan and any Units or shares of Common Stock that may be issued in
connection with any acquisition of a property), or sell or grant options, rights
or warrants with respect to any shares of Common Stock (other than the grant of
options pursuant to the Stock Option Plan), for a period of 180 days after the
date of this Prospectus.

In connection with the IPO, certain SL Green entities and certain officers
of the Company agreed that they would not, without the prior written consent of
the Company and Lehman Brothers, subject to certain exceptions, offer for sale,
contract to sell, sell or otherwise dispose of (or enter into any transaction or
device which is designed to, or could be expected to, result in the disposition
by any person at any time in the future of), directly or indirectly, any shares
of Common Stock or Units received by them in connection with the Formation
Transactions or the IPO, for an initial period of one year after the date of the
IPO prospectus, after which time one-third of such Common Stock or Units held by
each such entity or person shall no longer be subject to such restrictions and
an additional one-third thereof shall be released from such restrictions on each
of the second and third anniversaries of the date of the IPO prospectus.

155

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribute to the payments they may be required to make in respect
thereto.

Application will be made to list the PIERS and the Common Stock issuable
upon conversion or redemption of the PIERS on the NYSE. The PIERS will be listed
under the symbol "SLGPrA" and the Common Stock will be listed under the symbol
"SLG." Trading of the PIERS is expected to commence on the NYSE within 30 days
from the closing of the PIERS Offering.

Until the distribution of the PIERS is completed, rules of the Commission
may limit the ability of the Underwriters to bid for and purchase the PIERS. As
an exception to these rules, the Underwriters are permitted to engage in certain
transactions that stabilize the price of the PIERS. Such transactions consist of
bids or purchases for the purpose of pegging, fixing or maintaining the price of
the PIERS.

If the Underwriters create a short position in the PIERS in connection with
the offering, I.E., if they sell more shares of PIERS than are set forth on the
cover page of this Prospectus, the Underwriters may reduce that short position
by purchasing PIERS in the open market. The Underwriters may also elect to
reduce any short position by exercising all or part of the over-allotment option
described herein.

The Underwriters may also impose a penalty bid on certain Underwriters. This
means that if the Underwriters purchase PIERS in the open market to reduce the
Underwriters' short position or to stabilize the price of the PIERS, they may
reclaim the amount of the selling concession from the Underwriters who sold
those shares as part of the PIERS Offering.

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security by purchasers in an offering.

Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the PIERS. In addition, neither the
Company nor any of the Underwriters makes any representation that the
Representatives will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.

Concurrent with the PIERS Offering, the Company is offering 10,000,000
shares of Common Stock by a separate prospectus. The consummation of the PIERS
Offering is not contingent upon the consummation of the Common Offering or vice
versa. Certain of the Underwriters and their affiliates have from time to time
performed, and may continue to perform in the future, various investment banking
and other services for the Company, for which customary compensation has been,
and will be, received. In connection with the Offerings, an affiliate of Lehman
Brothers Inc. will receive $240 million of the net proceeds in repayment of
amounts outstanding under the Acquisition Facility. See "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resource," and "The Properties--Credit
Facilities."

Although the Conduct Rules of the National Association of Securities Dealers
Inc., exempt REITs from the conflict of the interest provisions thereof, because
Lehman Brothers and certain of its affiliates will receive more than 10% of the
net proceeds of the Offerings in payment of the Acquisition Facility, the
Underwriters have determined to conduct the Offering in accordance with the
applicable provisions of Rule 2720 of the Conduct Rules. In accordance with
these requirements, Prudential Securities Incorporated (the "Qualified
Independent Underwriter") is assuming the responsibilities of acting as
"qualified independent underwriter," and will recommend the maximum price to the
public for the Common Stock and the pricing terms contained herein for the PIERS
in compliance with the requirements of the Conduct Rules. In connection with the
Offerings, the Qualified Independent Underwriter is performing due diligence
investigations and is reviewing and participating in the preparation of these
Prospectuses and the

156

Registration Statements of which these Prospectuses form a part. The public
offering price of the Common Stock and the pricing terms for the PIERS will be
no higher than the price recommended by the Qualified Independent Underwriter.

EXPERTS

The consolidated financial statements of SL Green Realty Corp. as of
December 31, 1997 and for the period August 21, 1997 (date of commencement of
operations) to December 31, 1997; the combined financial statements of the SL
Green Predecessor as of December 31, 1996 and for the period January 1, 1997 to
August 20, 1997 and each of the two years in the period ended December 31, 1996;
the combined financial statements of the uncombined joint ventures of the SL
Green Predecessor as of December 31, 1996 and for the period January 1, 1997 to
August 20, 1997 and for each of the two years in the period ended December 31,
1996; the statements of revenues and certain expenses for each of the Properties
at (i) 36 West 44th Street, (ii) 1372 Broadway, (iii) 1140 Avenue of the
Americas, (iv) 50 West 23rd Street, (v) 110 East 42nd Street, (vi) 17 Battery
Place located in the Borough of Manhattan for the year ended December 31, 1996,
the statement of revenues and certain expenses for the Properties at (i) 440
Ninth Avenue, (ii) 1466 Broadway, (iii) 38 East 30th Street located in the
Borough of Manhattan for the year ended December 31, 1997; the statements of
revenues and certain expenses for the Property at 116 Nassau Street in the
Borough of Brooklyn for the year ended December 31, 1997, the statement of
revenues and certain expenses for the Property at 321 West 44th Street in the
Borough of Manhattan for the year ended June 30, 1997; and, the statements of
revenues and certain expenses for the leasehold interests in the Properties at
420 Lexington Avenue and 711 Third Avenue located in the Borough of Manhattan
for the year ended December 31, 1997, all appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein, and
are included in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.

The Rosen Market Study was prepared for the Company by Rosen Consulting
Group, which is a real estate consulting firm with significant expertise
relating to the New York metropolitan area economy and the Manhattan office
market and the various submarkets therein. Information relating to the New York
economy and the Manhattan office market set forth on "Market Overview" is
derived from the Rosen Market Study and is included in reliance on the Rosen
Consulting Group's authority as experts on such matters.

LEGAL MATTERS

The validity of the PIERS and certain tax matters will be passed upon for
the Company by Brown & Wood LLP. In addition, the description of Federal income
tax consequences under the heading "Material Federal Income Tax Consequences" is
based upon the opinion of Brown & Wood LLP. Certain legal matters will be passed
upon for the Underwriters by Rogers & Wells LLP, New York, New York. Rogers &
Wells LLP may rely on the opinion of Brown & Wood LLP as to certain matters of
Maryland law.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-11 (of which this Prospectus is a part) under the Securities Act with respect
to the securities offered hereby. This Prospectus does not contain all
information set forth in the Registration Statement, certain portions of which
have been omitted as permitted by the rules and regulations of the Commission.
Statements contained in this Prospectus as to the content of any contract or
other document are not necessarily complete, and in each instance reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement is qualified in all respects by such
reference and the exhibits and schedules hereto. For further information
regarding the Company and the Common Stock offered hereby, reference is hereby
made to the Registration Statement and such exhibits and schedules, which

157

may be obtained from the Commission as its principal office at 450 Fifth Street,
N.W., Washington, D.C. 20549, upon payment of the fees prescribed by the
Commission. The Commission maintains a website at http:/www.sec.gov containing
reports, proxy and information statements and other information regarding
registrants, including the Company, that file electronically with the
Commission. In addition, the Company intends to file an application to list the
Common Stock on the New York Stock Exchange and, if the Common Stock is listed
on the New York Stock Exchange, similar information concerning the Company can
be inspected and copied at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.

The Company intends to furnish its stockholders with annual reports
containing audited combined financial statements and a report thereon by
independent certified public accountants.

158

GLOSSARY OF SELECTED TERMS

Unless the context otherwise requires, the following capitalized terms shall
have the meanings set forth below for the purposes of this Prospectus:

"ACMS" means asbestos containing materials.

"ACQUISITION FACILITY" means the $275 million financing facility used to
acquire the Helmsley Properties and for other purposes.

"ADA" means the Americans with Disabilities Act, as amended.

"BENEFICIAL OWNER" means an actual purchaser of PIERS.

"BIDS" means Business Improvement Districts (public/private ventures that
provide security, sanitation and other services within their boundaries).

"BOOK-TAX DIFFERENCE" means the difference between the fair market value of
a contributed property at the time of contribution and the adjusted tax basis of
such property at the time of contribution.

"BYLAWS" means the Company's bylaws, as supplemented or amended.

"CASH REDEMPTION RIGHT" means the right of the Company to redeem PIERS on
and after July 15, 2003, in whole or from time to time in part, at the cash
redemption prices per PIERS set forth in this Prospectus.

"CHARTER" means the Company's articles of incorporation, as supplemented or
amended.

"CODE" means the Internal Revenue Code of 1986, as amended.

"COMMISSION" means the Securities and Exchange Commission.

"COMMON OFFERING" means the concurrent offering of shares of Common Stock.

"COMMON STOCK" means shares of the Company's Common Stock, $.01 par value
per share.

"COMPANY" means SL Green Realty Corp., a Maryland corporation, and one or
more of its subsidiaries (including the Operating Partnership), and the
predecessors thereof or, as the context may require, SL Green Realty Corp. only
or the Operating Partnership only.

"CONSTRUCTION CORPORATION" means Emerald City Construction Corp., the
corporation which conducts the construction business with respect to properties
in which the Company has no ownership interest.

"CONVERSION PRICE" means the initial conversion price of $24.475 per share
of Common Stock (equivalent to a conversion rate of 1.0215 shares of Common
Stock for each PIERS), as may be adjusted under certain circumstances described
under "Capital Stock--PIERS--Conversion Price Adjustments."

"CREDIT FACILITY" means the Company's $140 million three year senior
unsecured revolving credit facility due December 2000.

"DISTRIBUTION PAYMENT DATE" means the fifteenth day of January, April, July
and October or, if not a business day, the next succeeding business day, on
which distributions on the PIERS are payable.

"DISTRIBUTION RECORD DATE" means the first day of the calendar month in
which the applicable Distribution Payment Date falls or such other date
designated by the Board of Directors of the Company for the payment of
distributions that is not more than 30 nor less than ten days prior to such
Distribution Payment Date.

"DTC" means the Depository Trust Company, New York, New York.

159

"EXCESS STOCK" means the separate class of stock of the Company into which
shares of stock of the Company owned, or deemed to be owned, or transferred to a
stockholder in excess of the Ownership Limit will automatically be converted.

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

"FIRPTA" means the Foreign Investment in Real Property Tax Act of 1980, as
amended.

"FORMATION TRANSACTIONS" means the transactions described in "Structure and
Formation of the Company--Formation Transactions."

"401(K) PLAN" means the Company's Section 401(k) Savings/Retirement Plan.

"FUNDS FROM OPERATIONS" means net income (computed in accordance with GAAP)
excluding gains (or losses) from debt restructuring and sales of property, plus
depreciation and amortization on real estate assets, and after adjustments for
unconsolidated partnerships and joint ventures.

"GAAP" means generally accepted accounting principles.

"GLOBAL SECURITIES" means one or more global securities evidencing PIERS in
book entry form.

"INTERESTED STOCKHOLDER" means, with respect to the business combination
provisions of the MGCL, any person who beneficially owns 10% or more of the
voting power of a corporation's shares.

"IPO" means the Company's August 20, 1997 initial public offering of
11,615,000 shares of Common Stock.

"IRA" means an individual retirement account or annuity.

"IRS" means the United States Internal Revenue Service.

"LEASING CORPORATION" means S.L. Green Leasing, Inc. (formerly S.L. Green
Realty, Inc.), the corporation which conducts the leasing business with respect
to properties in which the Company has no interest.

"LEHMAN BROTHERS" means Lehman Brothers Inc.

"LOCK-OUT PERIOD" means the period, up to 12 years following the completion
of the IPO, during which the Lock-out Provisions will be in effect.

"LOCK-OUT PROVISIONS" means the limitations on the ability of the Company to
sell, or reduce the amount of mortgage indebtedness on, two of the Properties
(673 First Avenue and 470 Park Avenue South) for up to 12 years following the
completion of the IPO, except in certain circumstances.

"MANAGEMENT CORPORATION" means S.L. Green Management Corp., the corporation
which conducts the management business with respect to properties in which the
Company has no ownership interest.

"MANAGEMENT ENTITIES" means the Management Corporation and the Management
LLC.

"MANAGEMENT LLC" means the limited liability company which conducts the
management and leasing business with respect to the Properties owned by the
Company as well as the tenant representation business with respect to certain
properties not owned by the Company.

"MGCL" means the Maryland General Corporation Law.

"NAREIT" means the National Association of Real Estate Investment Trusts.

"1940 ACT" means the Investment Company Act of 1940, as amended.

"NON-U.S. STOCKHOLDERS" means nonresident alien individuals, foreign
corporations, foreign partnerships and other foreign stockholders.

160

"OFFERINGS" means, together, the Common Offering and the PIERS Offering.

"OPERATING PARTNERSHIP" means SL Green Operating Partnership, L.P., a
Delaware limited partnership.

"OWNERSHIP LIMIT" means the restriction contained in the Company's Charter
providing that, subject to certain exceptions, no holder may own, or be deemed
to own by virtue of the attribution provision of the Code, more than 9.0% of the
aggregate number or value of shares of Common Stock of the Company.

"PARENT ENTITY" means an entity whose stock is publicly traded and which
owns more than 50% of the capital stock of the Company.

"PARTNERSHIP AGREEMENT" means the Agreement of Limited Partnership of the
Operating Partnership, as amended from time to time.

"PCB'S" means polychlorinated biphenyls.

"PIERS" means the Company's 8.0% Preferred Income Equity Redeemable Shares,
liquidation preference $25.00 per, share which have been designated as a series
of preferred stock, par value $0.01, of the Company.

"PIERS OFFERING" means this offering of PIERS of the Company pursuant to and
described in this Prospectus.

"PREFERRED STOCK" means one or more classes of Preferred Stock of the
Company as designated and issued by the Board of Directors from time to time.

"PROPERTIES" means the 15 Class B properties owned by the Company and
located in Manhattan.

"QUALIFIED INDEPENDENT UNDERWRITER" means Prudential Securities
Incorporated.

"REIT" means a real estate investment trust as defined by Sections 856
through 860 of the Code and applicable Treasury Regulations.

"RELATED PARTY TENANT" means, for purposes of determining whether rents
received by the Company will qualify as "rents from real property" for
satisfying the gross income requirements for a REIT, a tenant in which the
Company, or an owner of 10% or more of the Company, directly or constructively
has at least a 10% ownership interest.

"RESTRICTED SHARES" means the shares of Common Stock received by the
participants in the Formation Transactions or acquired by any participant in the
Formation Transactions as a result of the redemption of Units.

"SECTION 704(c) REGULATIONS" means the regulations promulgated by the IRS
under Section 704(c) of the Code.

"SECURITIES ACT" means the Securities Act of 1933, as amended.

"SERVICE CORPORATIONS" means the Management Corporation, the Leasing
Corporation and the Construction Corporation.

"SERVICE CORPORATION LLC" means a limited liability company unaffiliated
with the Company which owns 100% of the voting common stock of each of the
Service Corporations.

"STOCK OPTION PLAN" means the Amended 1997 Stock Option and Incentive Plan.

"STOCK REDEMPTION RIGHT" means the right of the Company to redeem the PIERS
on and after July 15, 2003, in whole or in part, for such number shares of
Common Stock as are issuable at the Conversion Price.

"SUBSIDIARY CORPORATIONS" means the Management Corporation, the Management
LLC, the Leasing Corporation and the Construction Corporation.

161

"TREASURY REGULATIONS" means the regulations promulgated by the IRS under
the Code.

"TRUSTEE" means the trustee appointed by the Company, but not affiliated
with the Company, who will name a charitable trust for the benefit of a
charitable organization to receive any shares of Common Stock purportedly
transferred to a stockholder in violation of the applicable Ownership Limit or
Existing Holder Limit.

"UBTI" means unrelated business taxable income.

"UNDERWRITERS" means Lehman Brothers and Prudential Securities Incorporated.

"UNITS" means units of limited partnership interest in the Operating
Partnership.

"UPPER" means 17 Battery Upper Partners LLC.

"UPREIT" means a REIT conducting business through a partnership.

162

INDEX TO FINANCIAL STATEMENTS

SL GREEN REALTY CORP.

Pro Forma Consolidated Financial Statements (unaudited).............................. F-4
Pro Forma Consolidated Balance Sheet as of December 31, 1997..................... F-5
Pro Forma Consolidated Statement of Operations for the year ended
December 31, 1997.............................................................. F-6
Notes to Pro Forma Consolidated Financial Statements............................. F-7
Historical
Report of Independent Auditors................................................... F-16
Consolidated Balance Sheet as of December 31, 1997............................... F-18
Consolidated Statement of Operations for the period August 21, 1997 (Inception)
to December 31, 1997............................................................. F-20
Consolidated Statement of Stockholders' Equity for the period August 21, 1997
(Inception) to December 31, 1997................................................. F-21
Consolidated Statement of Cash Flows for the period August 21, 1997 (Inception)
to December 31, 1997............................................................. F-23
Notes to Consolidated Financial Statements....................................... F-24

Schedule III
Real Estate and Accumulated Depreciation as of December 31, 1997................. F-42

THE SL GREEN PREDECESSOR

Combined Financial Statements
Report of Independent Auditors................................................... F-17
Combined Balance Sheet as of December 31, 1996................................... F-18
Combined Statements of Operations for the period January 1, 1997 to August 20,
1997 and the Years Ended December 31, 1996 and 1995............................. F-20
Combined Statements of Owners' Equity (Deficit) for the period January 1, 1997 to
August 20, 1997 and the Years Ended December 31, 1996 and 1995.................. F-22
Combined Statements of Cash Flows for the period January 1, 1997 to August 20,
1997 and the Years Ended December 31, 1996 and 1995............................. F-23
Notes to the Combined Financial Statements....................................... F-24

Uncombined Joint Ventures--Combined Financial Statements
Report of Independent Auditors................................................... F-44
Combined Balance Sheet as of December 31, 1996................................... F-45
Combined Statements of Operations for the period January 1, 1997 to August 20,
1997 and the Years Ended December 31, 1996 and 1995............................. F-46
Combined Statements of Owners' Deficit for the period January 1, 1997 to August
20, 1997 and Years Ended December 31, 1996 and 1995............................. F-47
Combined Statements of Cash Flows for the period January 1, 1997 to August 20,
1997 and the Years Ended December 31, 1996 and 1995............................. F-48
Notes to the Combined Financial Statements....................................... F-50

F-1

INDEX TO FINANCIAL STATEMENTS (CONTINUED)

36 WEST 44TH STREET

Report of Independent Auditors................................................ F-59
Statements of Revenues and Certain Expenses for the Six Months Ended
June 30, 1997 (unaudited) and the Year Ended December 31, 1996.............. F-60
Notes to Statements of Revenues and Certain Expenses.......................... F-61

1372 BROADWAY

Report of Independent Auditors................................................ F-63
Statements of Revenues and Certain Expenses for the Six Months Ended
June 30, 1997 (unaudited) and the Year Ended December 31, 1996.............. F-64
Notes to Statements of Revenues and Certain Expenses.......................... F-65

1140 AVENUE OF THE AMERICAS

Report of Independent Auditors................................................ F-67
Statements of Revenues and Certain Expenses for the Six Months Ended
June 30, 1997 (unaudited) and the Year Ended December 31, 1996.............. F-68
Notes to Statements of Revenues and Certain Expenses.......................... F-69

50 WEST 23RD STREET

Report of Independent Auditors................................................ F-71
Statements of Revenues and Certain Expenses for the Six Months Ended
June 30, 1997 (unaudited) and the Year Ended December 31, 1996.............. F-72
Notes to Statements of Revenues and Certain Expenses.......................... F-73

110 EAST 42ND STREET
Report of Independent Auditors................................................ F-75
Statements of Revenues and Certain Expenses for the Six Months Ended June 30,
1997 (unaudited) and the Year Ended December 31, 1996........................ F-76
Notes to Statements of Revenues and Certain Expenses.......................... F-77

17 BATTERY PLACE
PROPERTY
Report of Independent Auditors................................................ F-79
Statements of Revenues and Certain Expenses for the Nine Months Ended
September 30, 1997 (unaudited) and the Year Ended December 31, 1996.......... F-80
Notes to Statements of Revenues and Certain Expenses.......................... F-81

MORTGAGE
Report of Independent Auditors................................................ F-83
Statements of Revenues and Certain Expenses for the Nine Months Ended
September 30, 1997 (unaudited) and the Year Ended December 31, 1996
(Mortgagor).................................................................. F-84
Notes to Statements of Revenues and Certain Expenses (Mortgagor).............. F-85

F-2

1466 BROADWAY
Report of Independent Auditors................................................ F-87
Statement of Revenues and Certain Expenses for the Year Ended December 31,
1997 F-88
Notes to Statement of Revenues and Certain Expenses........................... F-89

420 LEXINGTON AVENUE
Report of Independent Auditors................................................ F-91
Statement of Revenues and Certain Expenses for the Year Ended December 31,
1997......................................................................... F-92
Notes to Statement of Revenues and Certain Expenses........................... F-93

321 WEST 44TH STREET
Report of Independent Auditors................................................ F-95
Statements of Revenues and Certain Expenses for the Six Months Ended December
31, 1997 (unaudited) and the Year Ended June 30, 1997........................ F-96
Notes to Statements of Revenues and Certain Expenses.......................... F-97

440 NINTH AVENUE
Report of Independent Auditors................................................ F-99
Statement of Revenues and Certain Expenses for the Year Ended December 31,
1997......................................................................... F-100
Notes to Statement of Revenues and Certain Expenses........................... F-101

38 EAST 30TH STREET
Report of Independent Auditors................................................ F-103
Statement of Revenues and Certain Expenses for the Year Ended December 31,
1997......................................................................... F-104
Notes to Statement of Revenues and Certain Expenses........................... F-105

116 NASSAU STREET
Report of Independent Auditors................................................ F-107
Statement of Revenues and Certain Expenses for the Year Ended December 31,
1997......................................................................... F-108
Notes to Statement of Revenues and Certain Expenses........................... F-109

711 THIRD AVENUE
Report of Independent Auditors................................................ F-111
Statement of Revenues and Certain Expenses for the Year Ended December 31,
1997......................................................................... F-112
Notes to Statement of Revenues and Certain Expenses........................... F-113

F-3

SL GREEN REALTY CORP.

PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The unaudited pro forma consolidated balance sheet of the Company as of
December 31, 1997 has been prepared as if the Offerings and the Company's
purchase of the Acquired Properties purchased after December 31, 1997 (1466
Broadway, 420 Lexington Avenue and 321 West 44th Street) and the Pending
Acquisitions had been consummated on December 31, 1997. The pro forma
consolidated statement of operations for the year ended December 31, 1997 is
presented as if the IPO, the Formation Transactions, the Offerings, and the
purchase of the Acquired Properties and Pending Acquisitions occurred at January
1, 1997 and the effect thereof was carried forward through the year.

The pro forma consolidated financial statements do not purport to represent
what the Company's financial position or results of operations would have been
assuming the completion of the IPO, Formation Transactions, the Offerings and
the purchase of the Acquired Properties and Pending Acquisitions had occurred at
the beginning of the period indicated, nor do they purport to project the
Company's financial position or results of operations at any future date or for
any future period. The pro forma consolidated financial statements should be
read in conjunction with the Company's consolidated financial statements for the
period August 21, 1997 to December 31, 1997 and the SL Green Predecessor
combined financial statements for the period January 1, 1997 to August 20, 1997
included elsewhere herein.

F-4

SL GREEN REALTY CORP.

PRO FORMA CONSOLIDATED BALANCE SHEET

AS OF DECEMBER 31, 1997

(UNAUDITED)

(DOLLARS IN THOUSANDS)

SL GREEN MINORITY
REALTY CORP. THE ACQUIRED PENDING FINANCING INTEREST COMPANY
HISTORICAL OFFERINGS PROPERTIES ACQUISITIONS ADJUSTMENTS ADJUSTMENT PRO FORMA
(A) (B) (C) (D) (E) (F) AS ADJUSTED
------------ ------------ ----------- ------------ ----------- ----------- -----------

ASSETS
Commercial real estate property
at cost:
Land........................... $ 53,834 $ 16,574 $ 10,300 $ 80,708
Buildings and improvements..... 272,776 66,298 41,200 380,274
Building leasehold............. 82,788 41,000 123,788
Property under capital lease... 12,208 12,208
------------ ------------ ----------- ------------ ----------- ----------- -----------
338,818 165,660 92,500 596,978
Less accumulated
depreciation............... (23,800) -- (23,800)
------------ ------------ ----------- ------------ ----------- ----------- -----------
315,018 165,660 92,500 573,178
Cash and cash equivalents...... 12,782 $ 306,125 (111,500) $(194,625) 12,782
Restricted cash................ 10,310 10,310
Receivables.................... 738 738
Related party receivables...... 1,971 1,971
Deferred rents receivable, net
of provision for doubtful
accounts of $399............. 11,563 11,563
Investment in Service
Corporations................. 1,480 1,480
Mortgage loan receivable....... 15,500 15,500
Investment in real estate
partnership.................. 20,000 20,000
Deferred costs, net............ 6,099 (725) 1,450 (725) 6,099
Other assets................... 7,314 7,314
------------ ------------ ----------- ------------ ----------- ----------- -----------
Total assets................. $ 382,775 $ 305,400 $ 167,110 $ 1,000 $(195,350) $ 660,935
------------ ------------ ----------- ------------ ----------- ----------- -----------
------------ ------------ ----------- ------------ ----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS'
EQUITY
Mortgage notes payable......... $ 52,820 $ 52,820
Credit Facility................ 76,000 $ (76,000) $ 45,375 45,375
Acquisition Facility........... 240,000 (240,000)
Accrued interest payable....... 552 552
Accounts payable and accrued
expenses..................... 3,340 3,340
Accounts payable to related
parties...................... 367 367
Capitalized lease
obligations.................. 14,490 14,490
Dividend and distributions
payable...................... 5,136 5,136
Overage rent payable........... 3,110 3,110
Deferred land lease payable.... 8,481 8,481
Security deposits.............. 11,475 11,475
------------ ------------ ----------- ------------ ----------- ----------- -----------
Total liabilities............ 172,661 167,110 (194,625) 145,146
------------ ------------ ----------- ------------ ----------- ----------- -----------
Minority interest in Operating
Partnership.................. 33,906 $ 1,000 $ 6,397 41,303
8% Preferred Income Equity
Mandatory Redeemable Shares
(Redemption amount $100,000) $ 95,300 95,300
STOCKHOLDERS' EQUITY
Common stock................... 123 100 223
Additional paid-in capital..... 178,669 210,000 (6,397) 382,272
Distributions in excess of
earnings..................... (2,584) (725) (3,309)
------------ ------------ ----------- ------------ ----------- ----------- -----------
Total stockholders' equity... 176,208 210,100 (725) (6,397) 379,186
------------ ------------ ----------- ------------ ----------- ----------- -----------
Total liabilities and
stockholders' equity....... $ 382,775 $ 305,400 $ 167,110 $ 1,000 $(195,350) $ 0 $ 660,935
------------ ------------ ----------- ------------ ----------- ----------- -----------
------------ ------------ ----------- ------------ ----------- ----------- -----------

F-5

SL GREEN REALTY CORP.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)

IPO/FORMATION TRANSACTIONS
--------------------------------------------------------
SL GREEN ACQUISITION EQUITY
REALTY SL GREEN OF CONVERSION IPO IPO
CORP. PREDECESSOR PARTNERSHIPS' SERVICE ACQUISITION FINANCING
HISTORICAL HISTORICAL INTERESTS CORPORATIONS PROPERTIES ADJUSTMENTS
(A) (B) (C) (D) (E) (F)
----------- ------------- ------------- ------------- ----------- -------------

Revenues
Rental revenue.............................. $ 20,033 $ 4,107 $ 13,079 $ 12,254
Escalations and reimbursement revenues...... 2,205 792 859 1,644
Management revenues......................... 1,268 $ (1,268)
Leasing commissions......................... 484 3,464 (3,464)
Construction revenues....................... 77 (77)
Investment income........................... 485
Other income................................ 16 89 (11) 1,582
----------- ------ ------------- ------------- ----------- -------------
Total revenues.......................... 23,207 9,724 14,027 (4,820) 15,480
----------- ------ ------------- ------------- ----------- -------------
Equity in net income (loss) in Service
Corporations.............................. (101) 1,948
Equity in net (loss) from uncombined joint
ventures.................................. (770) 770
----------- ------ ------------- ------------- ----------- -------------
Expenses
Operating expenses.......................... 7,077 2,722 4,985 (1,000) 3,679
Interest.................................... 2,135 1,062 5,320 $ (3,008)
Depreciation and amortization............... 2,815 811 2,456 (48) 1,390 (16)
Real estate taxes........................... 3,498 705 1,741 2,714
Marketing, general and administrative....... 948 2,189 (1,521)
----------- ------ ------------- ------------- ----------- -------------
Total expenses.......................... 16,473 7,489 14,502 (2,569) 7,783 (3,024)
----------- ------ ------------- ------------- ----------- -------------
Income (loss) before minority interest and
extraordinary item........................ 6,633 1,465 295 (303) 7,697 3,024
Minority interest in operating partnership.. (1,074)
----------- ------ ------------- ------------- ----------- -------------
Income (loss) before extraordinary item... $ 5,559 $ 1,465 $ 295 $ (303) $ 7,697 $ 3,024
----------- ------ ------------- ------------- ----------- -------------
----------- ------ ------------- ------------- ----------- -------------
Mandatory preferred stock dividends and
accretion (Q)...............................
Pro forma income before extraordinary item
available to common shareholders............
Pro forma income before extraordinary item
available per common share - basic (R)......
Pro forma income before extraordinary item
available per common share - diluted (R)....

1997 1998 1998
ACQUIRED ACQUIRED PENDING FINANCING PRO COMPANY

PROPERTIES PROPERTIES ACQUISITIONS ADJUSTMENTS FORMA PRO

(G) (H) (I) (J) ADJUSTMENTS FORMA

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

Revenues
Rental revenue.............................. $ 17,725 $ 36,993 $ 17,226 $ 121,417

Escalations and reimbursement revenues...... 1,390 7,628 2,056 16,574

Management revenues.........................
Leasing commissions......................... $ (484)(M)
Construction revenues.......................
Investment income........................... 1,782 (485)(N) 1,782

Other income................................ 96 1,006 947 3,725

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

Total revenues.......................... 20,993 45,627 20,229 (969) 143,498

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

Equity in net income (loss) in Service
Corporations.............................. 484(M) 2,331

Equity in net (loss) from uncombined joint
ventures..................................
----------- ----------- ------------- ------------- ------------ -----------

Expenses
Operating expenses.......................... 6,747 23,731 7,815 2,028(P) 57,784

Interest.................................... $ 3,912 9,421

Depreciation and amortization............... 2,269 4,146 2,640 4(K) 16,467

Real estate taxes........................... 3,267 8,217 4,207 24,349

Marketing, general and administrative....... 961(L) 2,577

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

Total expenses.......................... 12,283 36,094 14,662 3,912 2,993 110,598

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

Income (loss) before minority interest and
extraordinary item........................ 8,710 9,533 5,567 (3,912) (3,478) 35,231

Minority interest in operating partnership.. (1,567) (O) (2,641)

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

Income (loss) before extraordinary item... $ 8,710 $ 9,533 $ 5,567 $ (3,912) $ (5,045) 32,590

----------- ----------- ------------- ------------- ------------
----------- ----------- ------------- ------------- ------------
Mandatory preferred stock dividends and
accretion (Q)............................... 8,350

-----------

Pro forma income before extraordinary item
available to common shareholders............ $ 24,240

-----------

Pro forma income before extraordinary item
available per common share - basic (R)...... $ 1.09

-----------

Pro forma income before extraordinary item
available per common share - diluted (R).... $ 1.08

-----------

F-6

SL GREEN REALTY CORP.

NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

ADJUSTMENTS TO THE PRO FORMA CONSOLIDATED BALANCE SHEET

(A) To reflect the consolidated balance sheet of SL Green Realty Corp. as of
December 31, 1997.

(B) To reflect the issuance of 10,000,000 shares of common stock at an
assumed price of $22.25 per share which is reduced by the underwriting discount
of $11,100, including $725 previously paid and is deferred on the pro-forma
balance sheet and estimated other costs of the Common Offering of $1,300.

Also, to reflect the issuance of 4,000,000 shares of 8% Preferred Income
Equity Mandatory Redeemable Shares at a liquidation value of $25 per share which
is reduced by the underwriting discount of $4,000 and estimated other costs of
the PIERS Offering of $700.

(C) To reflect the acquisition of the three respective Acquired Properties
at cost which represents the purchase price, including certain closing costs, of
420 Lexington Avenue, 1466 Broadway and 321 West 44th Street as follows:

420 321
LEXINGTON 1466 WEST 44TH
AVENUE BROADWAY STREET TOTAL
----------- ----------- ----------- ----------

Assets acquired:
Land.................................................................... $ 13,074 $ 3,500 $ 16,574
Building................................................................ 52,298 14,000 66,298
Building leasehold...................................................... $ 82,788 82,788
----------- ----------- ----------- ----------
82,788 65,372 17,500 165,660
Liabilities assumed:
Overage rent payable (3,110) (3,110)
----------- ----------- ----------- ----------
Acquisition costs....................................................... $ 79,678 $ 65,372 $ 17,500 $ 162,550
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------

The purchase of 420 Lexington, 1466 Broadway and 321 West 44th Street were
funded primarily by proceeds from the Company's Acquisition Facility totalling
approximately $162,550. In addition, the Company utilized the Acquisition
Facility to repay the Credit Facility in the amount of $76,000 and paid $1,450
in financing costs related to the Acquisition Facility, including $725 which is
to be applied toward the underwriting fees (see (B) above).

(D) To reflect the acquisition of the Pending Acquisitions at cost which
represents the purchase price, including certain closing costs, of 711 Third
Avenue, 440 Ninth Avenue, 116 Nassau Street and 38 East 30th Street as follows:

711 440 116
THIRD NINTH NASSAU 38 EAST
AVENUE AVENUE STREET 30TH STREET TOTAL
--------- --------- --------- ----------- ----------

Assets acquired:
Land.......................................................... $ 5,974 $ 2,163 $ 2,163 $ 10,300
Building...................................................... 23,896 8,652 8,652 41,200
Building leasehold............................................ $ 41,000 41,000
Investment in real estate partnership......................... 20,000 20,000
--------- --------- --------- ----------- ----------
Acquisition costs............................................. $ 61,000 $ 29,870 $ 10,815 $ 10,815 $ 112,500
--------- --------- --------- ----------- ----------
--------- --------- --------- ----------- ----------

F-7

SL GREEN REALTY CORP.

NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The purchase of the Pending Acquisitions will be funded from net proceeds
from the Offerings, issuance of Units, and additional borrowings under the
Company's Credit Facility (see (E) below).

(E) To reflect the partial repayment of the Company's Credit Facility and
full repayment of the Acquisition Facility with net proceeds from the Offerings.
Financing fees related to the Acquisition Facility totalling $725 have been
charged to distributions in excess of earnings as a result of the early
retirement of the Acquisition Facility. The Credit Facility remained committed
until the Acquisition Facility is repaid, at which time, the Company will be in
compliance under the Credit Facility and is able to draw additional funds under
such Credit Facility.

(F) To adjust minority interest in the Company to reflect the Pending
Acquisition and Common Offering as follows:

Total stockholders' equity and minority interest.................. $ 420,489
Percentage of Units which are not owned by the Company............ 9.82%
---------
Minority interest in the equity of the Company.................... $ 41,303
---------
---------

ADJUSTMENTS TO THE PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997

(A) To reflect the historical consolidated statement of operations of SL
Green Realty Corp. for the period August 21, 1997 to December 31, 1997.

(B) To reflect the historical combined statement of operations of SL Green
Predecessor for the period January 1, 1997 to August 20, 1997.

F-8

SL GREEN REALTY CORP.

NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

(C) To reflect the period January 1, 1997 to August 20, 1997 operations of
673 First Avenue, 470 Park Avenue South, 29 West 35th Street and 36 West 44th
Street (the "Equity Properties") as consolidated entities rather than equity
method investees due to the acquistion of 100% of the partnership interests.

ACQUISITION OF PARTNERSHIPS' INTERESTS AND
FAIR MARKET VALUE ADJUSTMENTS
------------------------------------------------------

ELIMINATE
HISTORICAL UNCOMBINED 673 470 29 36
AMOUNTS TOTAL FIRST AVE PARK AVE WEST 35TH WEST 44TH
----------- ------------- ----------- ----------- ------------- -------------
REVENUES:
Rental revenue(a)........................ $ 12,604 $ 247 $ 152 $ 64 $ 12
Escalations and reimbursement revenues... 859
Other income............................. 89
--
----- ------------- ----- ----- -----
Total revenues..................... 13,552 247 152 64 12
--
----- ------------- ----- ----- -----
Equity in net income/(loss) of
investees.............................. $ 770
--
----- ------------- ----- ----- -----

EXPENSES:
Operating expenses(b).................... 2,976 (221) (128) (37) (62)
Real estate taxes........................ 1,741
Ground rent(c)........................... 2,425 31
Interest................................. 5,320
Depreciation and amortization(c)......... 2,510 24 (64) (11) (2)
--
----- ------------- ----- ----- -----
Total expenses..................... 14,972 (166) (192) (48) (64)
--
----- ------------- ----- ----- -----
Income (loss) before minority interest... $ 770 $ (1,420) $ 413 $ 344 $ 112 $ 76
--
--
----- ------------- ----- ----- -----
----- ------------- ----- ----- -----

TOTAL
ADJUSTMENTS
-------------
REVENUES:
Rental revenue(a)........................ $ 13,079
Escalations and reimbursement revenues... 859
Other income............................. 89

-------------
Total revenues..................... 14,027

-------------
Equity in net income/(loss) of
investees.............................. 770

-------------
EXPENSES:
Operating expenses(b).................... 2,528
Real estate taxes........................ 1,741
Ground rent(c)........................... 2,456
Interest................................. 5,320
Depreciation and amortization(c)......... 2,457

-------------
Total expenses..................... 14,502

-------------
Income (loss) before minority interest... $ 295

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

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

(a) Rental income is adjusted to reflect straight line amounts as of the
acquisition date.

(b) Operating expenses are adjusted to eliminate management fees paid to the
Service Corporations (Management fee income received by the Service
Corporations was also eliminated.)

F-9

SL GREEN REALTY CORP.

NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

(D) To reflect the operations of the Service Corporations pursuant to the
equity method of accounting for the period January 1, 1997 to August 20, 1997.

EXPENSES
HISTORICAL ATTRIBUTABLE EQUITY
SERVICE TO REIT CONVERSION TOTAL
CORPORATIONS (A) (B) ADJUSTMENT
------------- ------------- ----------- -----------

STATEMENT OF OPERATIONS:
Management revenues.......................... $ 1,268 $ (1,268)
Leasing commissions.......................... 3,464 (3,464)
Construction revenues........................ 77 (77)
Equity in net income of Service
Corporations............................... $ (1,948) 1,948
Other income................................. 11 (11)
------ ----- ----------- -----------
Total revenues........................... 4,820 (1,948) (2,872)
------ ----- ----------- -----------

EXPENSES
Operating expenses........................... 1,000 (1,000)
Depreciation and amortization................ 48 (48)
Marketing, general and administrative........ 2,189 $ (668) (1,521)
------ ----- ----------- -----------
Total expenses........................... 3,237 (668) (2,569)
------ ----- ----------- -----------
Income (loss)............................ $ 1,583 $ 668 $ (1,948) $ (303)
------ ----- ----------- -----------
------ ----- ----------- -----------

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

(a) Expenses are allocated to the Service Corporations and the Management LLC
based upon the job functions of the employees.

(b) The equity in net income of the Service Corporations is computed as follows:

Historical Service Corporations income............................................. $ 1,583
Adjustment for management fees eliminated in the combined
historical financial statements due to acquisition of
partnerships interests........................................................... (201)
Expenses attributable to REIT...................................................... 668
---------
Income............................................................................. $ 2,050
---------
---------
Equity in net income of Service Corporations' at 95 percent........................ $ 1,948
---------
---------

F-10

SL GREEN REALTY CORP.

NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

(E) To reflect the operations of 1372 Broadway, 1140 Avenue of the Americas
and 50 West 23rd Street for the period January 1, 1997 to August 20, 1997.
Historical rental revenue was adjusted for straight line rents as of the
acquisition date, historical operating expenses were reduced for management
fees, the land lease on 1140 Avenue of the Americas was recorded, and
depreciation and amortization based on cost was recorded.

1372 BROADWAY 1140 AVENUE OF THE AMERICAS
----------------------------------------- ---------------------------------------
HISTORICAL ADJUSTMENT PRO FORMA HISTORICAL ADJUSTMENT PRO FORMA
----------- --------------- ----------- ----------- ------------- -----------

REVENUES:
Rental revenue....................... $ 5,154 $ 578 $ 5,732 $ 2,768 $ 230 $ 2,998
Escalations & reimbursement
revenues........................... 713 713 440 440
Other income......................... 1,520 1,520 61 61
----------- ----- ----------- ----------- ----- -----------
Total revenues................... 7,387 578 7,965 3,269 230 3,499
----------- ----- ----------- ----------- ----- -----------

EXPENSES:
Operating expenses................... 1,701 (181) 1,520 1,261 (130) 1,131
Ground rent.......................... 268 268
Depreciation & amortization.......... 658 658 271 271
Real estate taxes.................... 1,396 1,396 660 660
----------- ----- ----------- ----------- ----- -----------
Total expenses................... 3,097 477 3,574 1,921 409 2,330
----------- ----- ----------- ----------- ----- -----------
Income before minority interest...... $ 4,290 $ 101 $ 4,391 $ 1,348 $ (179) $ 1,169
----------- ----- ----------- ----------- ----- -----------
----------- ----- ----------- ----------- ----- -----------

50 WEST 23RD STREET
--------------------------------------- TOTAL
HISTORICAL ADJUSTMENT PRO FORMA PRO FORMA
----------- ------------- ----------- ---------

REVENUES:
Rental revenue....................... $ 3,303 $ 221 $ 3,524 $ 12,254
Escalations & reimbursement
revenues........................... 491 491 1,644
Other income......................... 1 1 1,582
----------- ----- ----------- ---------
Total revenues................... 3,795 221 4,016 15,480
----------- ----- ----------- ---------
EXPENSES:
Operating expenses................... 876 (116) 760 3,411
Ground rent.......................... 268
Depreciation & amortization.......... 461 461 1,390
Real estate taxes.................... 658 658 2,714
----------- ----- ----------- ---------
Total expenses................... 1,534 345 1,879 7,783
----------- ----- ----------- ---------
Income before minority interest...... $ 2,261 $ (124) $ 2,137 $ 7,697
----------- ----- ----------- ---------
----------- ----- ----------- ---------

(F) To reflect the changes in interest expense as the result of the IPO
financing transactions and the related adjustments to deferred financing
expense.

470 29 36 70
673 1ST AVE PAS W 35TH W 44TH W 36TH
----------- --------- ----------- ----------- -----------

Interest................................................ $ (1,123) $ (1,025) $ (593) $ (339)
Depreciation and amortization........................... 30 9 $ 3 (47)
--
----------- --------- ----- -----
Total expenses.................................... (1,093) (1,016) 3 (593) (386)
--
----------- --------- ----- -----
Income before minority interest................... $ 1,093 $ 1,016 $ (3) $ 593 $ 386
--
--
----------- --------- ----- -----
----------- --------- ----- -----

NEW
1414 MORTGAGE
AVE. AMERICAS LOAN TOTAL
--------------- ----------- ---------

Interest................................................ $ (591) $ 663 $ (3,008)
Depreciation and amortization........................... (29) 18 (16)

----- ----- ---------
Total expenses.................................... (620) 681 (3,024)

----- ----- ---------
Income before minority interest................... $ 620 $ (681) $ 3,024

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

F-11

SL GREEN REALTY CORP.

NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

(G) To reflect the operations of 110 East 42nd Street for the period January
1, 1997 to September 15, 1997, 17 Battery Place including the mortgage loan
receivable for the period January 1, 1997 to December 18, 1997, and 633 Third
Avenue for the period January 1, 1997 to December 31, 1997. Historical rental
revenue was adjusted for straight line rents as of the acquisition date,
historical operating expenses were reduced for management fees, and depreciation
based on recorded cost. These acquisitions were funded by proceeds from the IPO
and Revolving Credit Facility.

633 THIRD
110 EAST 42ND STREET 17 BATTERY PLACE AVENUE
------------------------------------- ------------------------------------- -------------
HISTORICAL ADJUSTMENT PRO FORMA HISTORICAL ADJUSTMENT PRO FORMA HISTORICAL
----------- ----------- ----------- ----------- ----------- ----------- -------------

REVENUES:
Rental revenue.......... $ 3,499 $ (166) $ 3,333 $ 12,458 $ 742 $ 13,200 $ 809
Escalation &
reimbursement
revenues.............. 501 501 889 889
Investment income....... 1,782 1,782
Other income............ 14 14 82 82
----------- ----------- ----------- ----------- ----------- ----------- -----
Total revenues...... 4,014 (166) 3,848 13,429 2,524 15,953 809
----------- ----------- ----------- ----------- ----------- ----------- -----

EXPENSES:

Operating expenses...... 1,839 (147) 1,692 5,264 (410) 4,854 201
Interest expense........
Depreciation &
amortization.......... 426 426 1,627 1,627
Real estate taxes....... 1,000 1,000 2,075 2,075 192
----------- ----------- ----------- ----------- ----------- ----------- -----
Total expenses...... 2,839 279 3,118 7,339 1,217 8,556 393
----------- ----------- ----------- ----------- ----------- ----------- -----
Income before minority
interest................ $ 1,175 $ (445) $ 730 $ 6,090 $ 1,307 $ 7,397 $ 416
----------- ----------- ----------- ----------- ----------- ----------- -----
----------- ----------- ----------- ----------- ----------- ----------- -----

TOTAL
PRO
ADJUSTMENT PRO FORMA FORMA
------------- ----------- ---------

REVENUES:
Rental revenue.......... $ 383 $ 1,192 $ 17,725
Escalation &
reimbursement
revenues.............. 1,390
Investment income....... 1,782
Other income............ 96
----- ----------- ---------
Total revenues...... 383 1,192 20,993
----- ----------- ---------
EXPENSES:
Operating expenses...... 201 6,747
Interest expense........
Depreciation &
amortization.......... 216 216 2,269
Real estate taxes....... 192 3,267
----- ----------- ---------
Total expenses...... 216 609 12,283
----- ----------- ---------
Income before minority
interest................ $ 167 $ 583 $ 8,710
----- ----------- ---------
----- ----------- ---------

F-12

SL GREEN REALTY CORP.

NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

(H) To reflect three of the Acquired Properties operations purchased after
December 31, 1997 of 420 Lexington Avenue, 1466 Broadway and 321 West 44th
Street for the year ended December 31, 1997. Historical rental revenue was
adjusted for straight line rents and historical operating expenses were reduced
for management fees and depreciation based on the recorded cost.

420 LEXINGTON AVE 1466 BROADWAY 321 WEST 44TH STREET
------------------------------------- ------------------------------------- ------------------------
HISTORICAL ADJUSTMENT PRO FORMA HISTORICAL ADJUSTMENT PRO FORMA HISTORICAL ADJUSTMENT
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------

Revenue:
Rental revenue......... $ 25,278 $ 876 $ 26,154 $ 7,749 $ 380 $ 8,129 $ 2,511 $ 199
Escalation &
reimbursement
revenues............. 5,708 5,708 760 760 1,160
Other income........... 763 763 225 225 18
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total revenues..... 31,749 876 32,625 8,734 380 9,114 3,689 199
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Expenses:
Operating expenses..... $ 20,431 (442) 19,989 2,554 (151) 2,403 1,450 (111)
Depreciation &
amortization......... 2,516 2,516 1,280 1,280 350
Real estate taxes...... 5,823 5,823 1,931 1,931 463
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total expenses..... 26,254 2,074 28,328 4,485 1,129 5,614 1,913 239
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before minority
interest............. $ 5,495 $ (1,198) $ 4,297 $ 4,249 $ (749) $ 3,500 $ 1,776 $ (40)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------

TOTAL
PRO FORMA PRO FORMA
----------- -----------

Revenue:
Rental revenue......... $ 2,710 $ 36,993
Escalation &
reimbursement
revenues............. 1,160 7,628
Other income........... 18 1,006
----------- -----------
Total revenues..... 3,888 45,627
----------- -----------
Expenses:
Operating expenses..... 1,339 23,731
Depreciation &
amortization......... 350 4,146
Real estate taxes...... 463 8,217
----------- -----------
Total expenses..... 2,152 36,094
----------- -----------
Income before minority
interest............. $ 1,736 $ 9,533
----------- -----------
----------- -----------

F-13

SL GREEN REALTY CORP.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 31, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

(I) To reflect the Pending Acquisitions of 711 Third Avenue, 440 Ninth
Avenue, 116 Nassau Street and 38 East 30th Street for the year ended December
31, 1997. Historical rental revenue was adjusted for straight line rents and
historical operating expenses were reduced for management fees, ground lease
adjustment and depreciation was calculated based on the estimated purchase
prices.

711 THIRD AVENUE 440 NINTH AVENUE 116 NASSAU STREET
------------------------------------- --------------------------------------- --------------------------
HISTORICAL ADJUSTMENT PRO FORMA HISTORICAL ADJUSTMENT PRO FORMA HISTORICAL ADJUSTMENT
----------- ----------- ----------- ----------- ------------- ----------- ----------- -------------

Revenue:
Rental
revenue...... $ 10,097 $ 541 $ 10,638 $ 3,923 $ 205 $ 4,128 $ 1,183 $ 11
Escalation &
reimbursement
revenues..... 353 353 1,145 1,145 36
Other income... 847 847 68 68 1
----------- ----------- ----------- ----------- ----- ----------- ----------- -----
Total
revenues.. 11,297 541 11,838 5,136 205 5,341 1,220 11
----------- ----------- ----------- ----------- ----- ----------- ----------- -----
Expenses:
Operating
expenses..... 5,434 (172) 5,262 1,948 (256) 1,692 264 $ (59)
Depreciation &
amortization... -- 1,640 1,640 580 580 210
Real estate
taxes........ 2,674 2,674 1,123 1,123 121
----------- ----------- ----------- ----------- ----- ----------- ----------- -----
Total
expenses.. 8,108 1,468 9,576 3,071 324 3,395 385 151
----------- ----------- ----------- ----------- ----- ----------- ----------- -----
Income before
minority
interest..... $ 3,189 $ (927) $ 2,262 $ 2,065 $ (119) $ 1,946 $ 835 $ (140)
----------- ----------- ----------- ----------- ----- ----------- ----------- -----
----------- ----------- ----------- ----------- ----- ----------- ----------- -----

38 EAST 30TH STREET
------------------------------------- TOTAL
PRO FORMA HISTORICAL ADJUSTMENT PRO FORMA PRO FORMA
----------- ----------- ----------- ----------- -----------

Revenue:
Rental
revenue...... $ 1,194 $ 1,240 $ 26 $ 1,266 $ 17,226
Escalation &
reimbursement
revenues..... 36 522 522 2,056
Other income... 1 31 31 947
----------- ----------- ----------- ----------- -----------
Total
revenues.. 1,231 1,793 26 1,819 20,229
----------- ----------- ----------- ----------- -----------
Expenses:
Operating
expenses..... 205 757 (101) 656 7,815
Depreciation &
amortization... 210 210 210 2,640
Real estate
taxes........ 121 289 289 4,207
----------- ----------- ----------- ----------- -----------
Total
expenses.. 536 1,046 109 1,155 14,662
----------- ----------- ----------- ----------- -----------
Income before
minority
interest..... $ 695 $ 747 $ (83) $ 664 $ 5,567
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------

F-14

SL GREEN REALTY CORP.

NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

(J) To reflect the additional borrowings required under the Credit Facility
to fund the Pending Acquisitions (7.265% interest rate).

(K) To reflect for 70 West 36th Street and 1414 Avenue of the Americas,
depreciation expense adjustments for real property transfer taxes capitalized in
connection with the Formation Transactions which are amortized over the
remaining life of the commercial property.

(L) To reflect the increase in marketing, general and administrative
expenses related to operations of a public company for the period January 1,
1997 to August 20, 1997 which includes the following:

Officers' compensation and related costs............................. $ 446
Professional fees.................................................... 203
Directors' fees and insurance........................................ 174
Printing and distribution costs...................................... 87
Other................................................................ 51
---------
$ 961
---------
---------

The additional officers' compensation and related costs are attributable
primarily to Employment Agreements with the officers as further described under
the caption "Employment and Non Competition Agreement."

(M) Represents the reclassifications of leasing commissions attributable to
the Service Corporations since all leasing commissions is presently being
recorded in the Service Corporations.

(N) Represents the reduction of interest income from the excess cash that
was used to fund Pending Acquisitions.

(O) Represents the 9.8% interest of the minority shareholders in the
Operating Partnership less Unit Holders 9.8% share of the preferred dividends
and accretion totalling $820.

(P) To adjust the provision for doubtful accounts based upon 2% of Pro Forma
rental revenue.

(Q) Represents the 8% dividends and accretion on the Preferred Income Equity
Mandatory Redeemable Shares. The difference between the carrying value and the
redemption amount is being accreted using the interest method over ten years.

(R) Pro Forma income before extraordinary item per common share--basic is
based upon 22,292,311 shares of common stock outstanding as of December 31,
1997. Pro Forma income before extraordinary item per common share--diluted is
based upon 22,404,412 weighted average shares of common stock outstanding as of
December 31, 1997, which gives effect to stock options (the preferred shares are
anti-dilutive). As each Unit is redeemable for cash, or at the Company's
election, for one share of common stock, the calculation of earnings per share
upon redemption will be unaffected as unitholders and stockholders share equally
on a per unit and per share basis in the net income of the Company. Pursuant to
the terms of the Partnership Agreement, the Unit holders that received Units at
the IPO may not, for up to two years from the IPO date, transfer any of their
rights or redeem their Units as a limited partner without the consent of the
Company.

F-15

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors of
SL Green Realty Corp.

We have audited the accompanying consolidated balance sheet of SL Green
Realty Corp. as of December 31, 1997 and the related consolidated statements of
operations, stockholders' equity and cash flows for the period August 21, 1997
(date of commencement of operations) to December 31, 1997. We have also audited
the financial statement schedule listed in the Index to Financial Statements
included in the Prospectus. These financial statements and financial statement
schedule are the responsibility of SL Green Realty Corp.'s management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule 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 consolidated financial position of SL Green Realty
Corp. at December 31, 1997 and the consolidated results of its operations and
its cash flows for the period August 21, 1997 (date of commencement of
operations) to December 31, 1997 in conformity with generally accepted
accounting principles. Also, in our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial statements
taken as a whole, presents fairly, in all material respects, the information set
forth therein.

/s/ Ernst & Young LLP

New York, New York
February 10, 1998 except for the
last two paragraphs in Note 15,
as to which the date is March 18, 1998

F-16

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors of
SL Green Realty Corp.

We have audited the accompanying balance sheet of SL Green Predecessor as of
December 31, 1996 and the related combined statements of operations, owners'
deficit and cash flows for the period from January 1, 1997 to August 20, 1997
and for each of the two years in the period ended December 31, 1996. We have
also audited the financial statement schedule listed in the Index to Financial
Statements included in the Prospectus. These financial statements and financial
statement schedule are the responsibility of SL Green Predecessor's management.
Our responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.

We conducted our audits in accordance with 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 combined financial statements referred to above present
fairly in all material respects, the combined financial position of SL Green
Predecessor at December 31, 1996 and the combined results of its operations and
its cash flows for the period from January 1, 1997 to August 20, 1997 and for
each of the two years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles. Also, in our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.

/s/ Ernst & Young LLP

New York, New York
February 10, 1998

F-17

SL GREEN REALTY CORP.

BALANCE SHEETS

(DOLLARS IN THOUSANDS)

SL GREEN SL GREEN
REALTY CORP. PREDECESSOR
DECEMBER 31, DECEMBER 31,
1997 1996
------------- ------------

(CONSOLIDATED) (COMBINED)
Assets
Commercial real estate properties, at cost:
Land................................................................................ $ 53,834 $ 4,465
Buildings and improvements.......................................................... 272,776 21,819
Property under capital lease........................................................ 12,208 --
------------- ------------
338,818 26,284
Less accumulated depreciation....................................................... (23,800) (5,721)
------------- ------------
315,018 20,563
Cash and cash equivalents........................................................... 12,782 476
Restricted cash..................................................................... 10,310 1,227
Receivables......................................................................... 738 914
Related party receivables........................................................... 1,971 1,186
Deferred rents receivable net of provision for doubtful accounts of $399 in 1997.... 11,563 1,265
Investment in Service Corporations.................................................. 1,480 --
Mortgage loan receivable............................................................ 15,500 --
Investment in uncombined joint venture.............................................. -- 1,730
Deferred costs, net................................................................. 6,099 1,371
Other assets........................................................................ 7,314 1,340
------------- ------------
Total assets........................................................................ $ 382,775 $ 30,072
------------- ------------
------------- ------------

See accompanying notes.

F-18

SL GREEN REALTY CORP.

BALANCE SHEETS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

SL GREEN SL GREEN
REALTY CORP. PREDECESSOR
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------

(CONSOLIDATED) (COMBINED)
Liabilities and Stockholders' Equity/ Owners' Deficit
Mortgage notes payable............................................................... $ 52,820 $ 16,610
Revolving credit facility............................................................ 76,000 --
Accrued interest payable............................................................. 552 90
Accounts payable and accrued expenses................................................ 3,340 1,037
Accounts payable to related parties.................................................. 367 2,213
Excess of distributions and share of losses over investments in uncombined joint
ventures........................................................................... -- 17,300
Capitalized lease obligations........................................................ 14,490 --
Deferred land lease payable.......................................................... 8,481 --
Dividend and distributions payable................................................... 5,136 --
Security deposits.................................................................... 11,475 1,227
------------ ------------
Total liabilities.................................................................... 172,661 38,477
Minority interest.................................................................... 33,906 --

Commitments, contingencies and other matters

Stockholders' Equity/ Owners' Deficit
Preferred stock, $.01 par value 25,000 shares authorized, none outstanding
Common stock, $.01 par value 100,000 shares authorized, 12,292 issued and
outstanding.................................................................... 123 --
Additional paid-in capital....................................................... 178,669 --
Distributions in excess of earnings.............................................. (2,584) --
------------ ------------
Total stockholders' equity........................................................... 176,208 --
------------ ------------
Owners' deficit...................................................................... -- (8,405)
------------ ------------
Total liabilities and stockholders' equity/owners' deficit........................... $ 382,775 $ 30,072
------------ ------------
------------ ------------

See accompanying notes.

F-19

SL GREEN REALTY CORP.

STATEMENTS OF OPERATIONS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

SL GREEN
REALTY CORP SL GREEN PREDECESSOR
------------ ----------------------------------
AUGUST 21 TO JANUARY 1 TO YEAR ENDED DECEMBER
DECEMBER 31, AUGUST 20, 31,
1997 1997 1996 1995
------------ ------------ --------- ---------

(CONSOLIDATED) (COMBINED)
Revenues
Rental revenue................................................. $ 20,033 $ 4,107 $ 4,199 $ 2,416
Escalation and reimbursement revenues.......................... 2,205 792 1,051 758
Management revenues, including $458 (1997), $447 (1996), and
$449 (1995) from affiliates.................................. -- 1,268 2,336 2,260
Leasing commissions............................................ 484 3,464 2,372 897
Construction revenues, net, including $6 (1997), $35 (1996),
and $82 (1995), from affiliates.............................. -- 77 101 233
Investment income.............................................. 485 -- -- --

Other income................................................... -- 16 123 --
------------ ------------ --------- ---------
Total revenues................................................... 23,207 9,724 10,182 6,564
------------ ------------ --------- ---------

Equity in net (loss) from Service Corporations................... (101) -- -- --
Equity in net (loss) of uncombined joint ventures................ -- (770) (1,408) (1,914)
------------ ------------ --------- ---------

Expenses
Operating expenses............................................. 7,077 2,722 3,197 2,505
Interest....................................................... 2,135 1,062 1,357 1,212
Depreciation and amortization.................................. 2,815 811 975 775
Real estate taxes.............................................. 3,498 705 703 496
Marketing, general and administrative.......................... 948 2,189 3,250 3,052
------------ ------------ --------- ---------
Total expenses................................................... 16,473 7,489 9,482 8,040
------------ ------------ --------- ---------

Income (loss) before minority interest and extraordinary item.... 6,633 1,465 (708) (3,390)
Minority interest in operating partnership....................... (1,074) -- -- --
Extraordinary item, net of minority interest of $362 in 1997..... (1,874) 22,087 8,961 --
------------ ------------ --------- ---------
Net income (loss)................................................ $ 3,685 $ 23,552 $ 8,253 $ (3,390)
------------ ------------ --------- ---------
------------ ------------ --------- ---------
Per share data:
Income per share before extraordinary item....................... $ 0.45
Extraordinary item............................................... (0.15)
------------
Net income per share--basic and diluted.......................... $ 0.30
------------
------------
Basic weighted average common share outstanding.................. 12,292
------------
------------
Diluted weighted average common share and common share
equivalents outstanding........................................ 12,404
------------
------------

See accompanying notes.

F-20

SL GREEN REALTY CORP.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(DOLLARS IN THOUSANDS)

DISTRIBUTIONS
ADDITIONAL IN
PAID- EXCESS OF
COMMON STOCK IN CAPITAL EARNINGS TOTAL
----------------- ---------- --------------- ----------

Balance at August 20, 1997 (Inception)
Net proceeds from Initial Public Offering of Common
stock.................................................. $ 123 $ 223,366 -- $ 223,489
Net income............................................... -- -- $ 3,685 3,685
Cash distributions declared ($0.51 per common share of
which none represented a return of capital for Federal
Income Tax purposes)................................... -- -- (6,269) (6,269)
Contribution of the net assets of SL Green Predecessor in
exchange for Units of the Operating Partnership and
other Formation Transactions........................... -- (44,697) -- (44,697)
----- ---------- ------- ----------
Balance at December 31, 1997............................. $ 123 $ 178,669 $ (2,584) $ 176,208
----- ---------- ------- ----------
----- ---------- ------- ----------

See accompanying notes.

F-21

SL GREEN REALTY CORP.

COMBINED STATEMENTS OF OWNERS' EQUITY (DEFICIT)

(DOLLARS IN THOUSANDS)

SL GREEN
PREDECESSOR
-----------

Balance at December 31, 1994......................................................................... $ (15,521)
Distributions...................................................................................... --
Contributions...................................................................................... 63
Net loss for the year ended December 31, 1995...................................................... (3,390)
-----------
Balance at December 31, 1995......................................................................... (18,848)
Distributions...................................................................................... (552)
Contributions...................................................................................... 2,742
Net income for the year ended December 31, 1996.................................................... 8,253
-----------
Balance at December 31, 1996......................................................................... (8,405)
Distributions...................................................................................... (4,024)
Contributions...................................................................................... 25
Net income for the period ended August 20, 1997.................................................... 23,552
-----------
Balance at August 20, 1997........................................................................... $ 11,148
-----------
-----------

See accompanying notes.

F-22

SL GREEN REALTY CORP.

STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)

SL GREEN SL GREEN PREDECESSOR
REALTY CORP. -----------------------------------
------------- YEAR ENDED DECEMBER
AUGUST 21, TO JANUARY 1, TO 31,
DECEMBER 31, AUGUST 20, --------------------
1997 1997 1996 1995
------------- ------------- --------- ---------

(CONSOLIDATED) (COMBINED)
Operating activities
Net income (loss).............................................. $ 3,685 $ 23,552 $ 8,253 $ (3,390)
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities
Depreciation and amortization................................ 2,815 811 975 775
Equity in net loss (income) from Service Corporations........ 101 -- -- --
Minority interest............................................ 712 -- -- --
Share of net (income) loss from uncombined joint ventures.... -- (21,072) 1,763 2,249
Deferred rents receivable.................................... (946) (102) (362) 87
Extraordinary -non cash portion, net of minority interest in
1997....................................................... 803 -- (8,961) --
Changes in operating assets and liabilities:
Restricted cash.............................................. (223) -- (563) (38)
Receivables.................................................. (614) (190) (531) 47
Related party receivables.................................... (1,633) (365) (170) (299)
Deferred costs............................................... (707) (279) (1,108) (465)
Other assets................................................. (3,101) 579 (287) (858)
Accounts payable and accrued expenses........................ 3,142 118 280 (180)
Accounts payable to related parties.......................... 830 (201) 121 948
Deferred land lease payable.................................. 297 -- -- --
Security deposits............................................ -- 77 -- --
Security deposits payable.................................... -- (67) 564 29
Accrued interest payable..................................... 552 (23) 298 861
------------- ------------- --------- ---------
Net cash provided by (used in) operating activities............ 5,713 2,838 272 (234)
------------- ------------- --------- ---------

Investing activities
Additions to land, buildings and improvements.................. (217,165) (7,411) (10,725) (369)
Contributions to partnership investments....................... -- (25) (1,650) (63)
Distributions from partnership investments..................... -- 1,877 -- --
------------- ------------- --------- ---------
Net cash used in investing activities.......................... (217,165) (5,559) (12,375) (432)
------------- ------------- --------- ---------

Financing Activities
Proceeds from mortgage notes payable........................... 21,000 7,000 16,680 --
Payments of mortgage notes payable............................. (76,822) (219) (6,910) --
Proceeds form senior revolving credit facility................. 76,000 -- -- --
Capitalized lease obligation................................... 58 -- -- --
Mortgage loan receivable....................................... (15,500) -- -- --
Cash distributions to owners................................... -- (4,024) (552) --
Cash contributions from owners................................. -- 25 2,742 63
Dividends and distributions paid............................... (2,348) -- -- --
Deferred loan costs............................................ (1,643) -- -- --
Net proceeds from sale of common stock......................... 228,704 -- -- --
Formation expenses............................................. (5,215) -- -- --
------------- ------------- --------- ---------
Net cash provided by financing activities...................... 224,234 2,782 11,960 63
Net increase (decrease) in cash and cash equivalents........... 12,782 61 (143) (603)
Cash and cash equivalents at beginning of period............... -- 476 619 1,222
------------- ------------- --------- ---------
Cash and cash equivalents at end of period..................... $ 12,782 $ 537 $ 476 $ 619
------------- ------------- --------- ---------
------------- ------------- --------- ---------

Supplemental cash flow disclosures
Interest paid.................................................. $ 1,583 $ 1,085 $ 1,059 $ 351
------------- ------------- --------- ---------
------------- ------------- --------- ---------
Income taxes paid.............................................. $ -- $ -- $ -- $ 35
------------- ------------- --------- ---------
------------- ------------- --------- ---------
Supplemental disclosure of non-cash investing and financing
activities
Formation transaction activity:
Assets acquired
Commercial real estate, net.................................. $ 91,123
Other assets................................................. $ 16,751

Liabilities Assumed
Mortgage notes payable....................................... $ 73,073
Capitalized lease obligation................................. $ 14,431
Deferred land lease.......................................... $ 8,184
Security deposits payable.................................... $ 4,262

In December 1997 the Company declared distributions per unit of $0.35. The
distributions were paid in 1998.

See accompanying notes.

F-23

SL GREEN REALTY CORP.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

1. ORGANIZATION AND BASIS OF PRESENTATION

INITIAL PUBLIC OFFERING AND FORMATION TRANSACTIONS

SL Green Realty Corp. (the "Company"), a Maryland corporation, and SL Green
Operating Partnership, L.P., (the "Operating Partnership"), were formed in June
1997 for the purpose of combining the commercial real estate business of S.L.
Green Properties, Inc. and its affiliated partnerships and entities ("SL
Green"). The Operating Partnership received a contribution of interest in the
real estate properties as well as 95% of the economic interest in the
management, leasing and construction companies (the "Service Corporations"). The
Company qualifies as a real estate investment trust ("REIT") under the Internal
Revenue Code of 1986, as amended; and operates as a fully integrated,
self-administered, self-managed REIT. A REIT is a legal entity that holds real
estate interests and, through payments of dividends to shareholders, is
permitted to reduce or avoid the payment of federal income taxes at the
corporate level.

The authorized capital stock of the Company consists of 200 million shares
of capital stock, $.01 par value, of which the Company has authorized the
issuance of up to 100 million shares of Common Stock, $.01 par value per share,
75 million shares of Excess Stock, at $.01 par value per share, and 25 million
shares of Preferred Stock, par value $.01 per share. On August 20, 1997, the
Company issued 11.615 million shares of its Common Stock (including the
underwriters' over-allotment option of 1.52 million shares) to the public
through a public offering (the "Offering"). Concurrently with the consummation
of the Offering, the Company issued 38,095 shares of restricted common stock
pursuant to stock loans and 85,600 shares of restricted common stock to a
financial advisor. In addition, the Company previously issued to its executive
officers approximately 553,616 shares, as founders' shares. As of December 31,
1997, no shares of Excess Stock or Preferred Stock are issued and outstanding.

Concurrent with the consummation of the Offering, the Company and the
Operating Partnership, together with the partners and members of the affiliated
partnerships of the SL Green Predecessor and other parties which held ownership
interests in the properties contributed to the Operating Partnership
(collectively, the "Participants"), engaged in certain Formation Transactions
(the "Formation Transactions").

The net cash proceeds received by the Company from the Offering (after
deducting underwriting discounts) was $228.7 million. The Company utilized
approximately $42.6 million of the Offering proceeds to repay mortgage
indebtedness encumbering the properties, including $1.5 million for prepayment
penalties and other financing fees and expenses, approximately $6.6 million to
purchase the direct or indirect interests of certain participants in the
properties, approximately $95.5 million to acquire properties (50 West 23rd
Street, 1140 Avenue of the Americas, and 1372 Broadway) approximately $3.4
million to pay certain expenses incurred in the Formation Transactions, $35.6
million to repay a loan from Lehman Brothers Holdings, Inc. ("LBHI") (which
included $20 million to repay a loan that was made to a company indirectly owned
by Stephen L. Green), $1.8 million to fund the advisory fee payment to Lehman
Brothers, Inc. and $41.7 million to fund capital expenditures, general working
capital needs and future acquisitions (See note 2).

Substantially all of the Company's assets are held by, and it conducts its
operations through, the Operating Partnership, a Delaware limited partnership.
The Company is the sole managing general partner of the Operating Partnership.
Continuing investors hold, in the aggregate, a 16.2% limited partnership
interest in the Operating Partnership.

F-24

SL GREEN REALTY CORP.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

1. ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
PRINCIPLES OF COMBINATION--SL GREEN PREDECESSOR

The SL Green Predecessor is not a legal entity but rather a combination of
real estate properties and affiliated real estate management, construction and
leasing entities under common control and management of Stephen L. Green; and
interests owned and managed by Stephen L. Green in entities accounted for on the
equity method (see note 2) that are organized as partnerships and a limited
liability company. The entities included in this financial statement have been
combined for only the periods that they were under common control and
management. All significant intercompany transactions and balances have been
eliminated in combination. Capital contributions, distributions and profits and
losses are allocated in accordance with the terms of the applicable agreements.

The accompanying combined financial statements include partnerships and
corporations which are under common control as follows:

STEPHEN L. GREEN
PERCENTAGE
ENTITY PROPERTY/SERVICE OWNERSHIP OWNERSHIP TYPE
- --------------------------------------- --------------------------------- ------------------- -------------------

Office Property Entities

64-36 Realty Associates................ 70 West 36th Street 95% General partner
1414 Management Associates, LP 1414 Avenue of the Americas 100% General partner

Service Corporations

SL Green Management, Corp.............. Management 100% Sole shareholder
SL Green Leasing, Inc.................. Management and leasing 100% Sole shareholder
Emerald City Construction Corp......... Construction 100% Sole shareholder

On June 30, 1997, the majority owner of SL Green Predecessor purchased the
remaining 90% interest in Praedium Bar Associates LLC, which was funded by a
loan from Lehman Brothers Holdings Inc., which as of that date is included in
the combined financial statements (see note 2).

For the entities accounted for on the equity method, SL Green Predecessor
records its investments in partnerships and limited liability company at cost
and adjusts the investment accounts for its share of the entities' income or
loss and for cash distributions and contributions.

MANAGEMENT

In order to maintain the Company's qualification as a REIT while realizing
income from management leasing and construction contracts from third parties,
all of the management operations with respect to properties in which the Company
will not own 100% of the interest are conducted through the Service
Corporations. In so doing, the Company should not incur a risk of this revenue
exceeding the 5% REIT Qualifying Income Test. The Company, through the Operating
Partnership, owns 100% of the non-voting common stock (representing 95% of the
total equity) of the Service Corporations. Through dividends on its equity
interest, the Operating Partnership will receive substantially all of the cash
flow (if any) from the Service Corporations' operations. All of the voting
common stock of the Service Corporations (representing 5% of the total equity)
is held by an SL Green affiliate. This controlling interest gives the SL Green

F-25

SL GREEN REALTY CORP.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

1. ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
affiliate the power to elect all directors of the Service Corporations. The
Company accounts for its investment in the Service Corporations on the equity
basis of accounting on the basis that it has significant influence with respect
to management and operations.

All of the management and leasing with respect to the properties contributed
and acquired by the Company are conducted through the Management LLC. The
Operating Partnership owns 100% interest in the Management LLC.

PARTNERSHIP AGREEMENT

In accordance with the partnership agreement of the Operating Partnership
(the "Operating Partnership Agreement"), all allocations of distributions and
profits and losses are to be made in proportion to the percentage ownership
interests of their respective partners. As the managing general partner of the
Operating Partnership, the Company will be required to take such reasonable
efforts, as determined by it in its sole discretion, to cause the Operating
Partnership to distribute sufficient amounts to enable the payment of sufficient
distributions by the Company to avoid any federal income or excise tax at the
Company level as a consequence of a sale of a SL Green property. Under the
Operating Partnership agreement each limited partner will have the right to
redeem limited partnership interest for cash, or if the Company so elects shares
of common stock. In accordance with the Operating Partnership Agreement, the
Company is prohibited from selling 673 First Avenue and 470 Park Avenue South
through August 2009. Pursuant to the terms of the Operating Partnership's
partnership agreement, the Units issued to the Company's management and
continuing investors at the IPO may not, for up to two years from the IPO date,
transfer any of their rights or redeem their Units as a limited partner without
the consent of the Company.

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.

DEPRECIATION OF REAL ESTATE PROPERTIES

Depreciation and amortization is computed on the straight-line method as
follows.

CATEGORY TERM
- -------------------------------------------------------- --------------------------------------------------------

Building (fee ownership)................................ 40 years
Building improvements................................... remaining life of the building
Building (leasehold interest)........................... lesser of 40 years or remaining life of the lease
Property under capital lease............................ 49 years
Furniture and fixtures.................................. four to seven years
Tenant improvements..................................... remaining life of the lease

F-26

SL GREEN REALTY CORP.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

1. ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)

DEPRECIATION OF REAL ESTATE PROPERTIES (CONTINUED)
Depreciation expense included amortization of the capital lease asset
amounted to $2,526 for the period August 21, 1997 to December 31, 1997 and $591
for the period January 1, 1997 to August 20, 1997, $788 and $579 in 1996 and
1995 respectively.

CASH AND CASH EQUIVALENTS

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

RESTRICTED CASH

Restricted cash primarily consists of security deposits held on behalf of
tenants.

REVENUE RECOGNITION

Rental revenue is recognized on a straight-line basis over the term of the
lease. The excess of rents recognized over amounts contractually due pursuant to
the underlying leases are included in deferred rents receivable on the
accompanying balance sheets. The Company establishes an allowance on a current
basis a reserve for future potential tenant credit losses, which may occur
against this account. The balance reflected on the balance sheet is net of such
allowance.

RENT EXPENSE

Rent expense is recognized on a straight-line basis over the initial term of
the lease. The excess of the rent expense recognized over the amounts
contractually due pursuant to the underlining lease is included in the deferred
lease payable in the accompanying combined balance sheet.

DEFERRED LEASE COSTS

Deferred lease costs consist of fees and direct costs incurred to initiate
and renew operating leases and are amortized on a straight-line basis over the
initial lease term or renewal period as appropriate.

DEFERRED FINANCING COSTS

Deferred financing costs represent commitment fees, legal and other third
party costs associated with obtaining commitments for financing which result in
a closing of such financing. These costs are amortized over the terms of the
respective agreements. Unamortized deferred financing costs are expensed when
the associated debt is refinanced before maturity. Costs incurred in seeking
financial transactions which do not close are expensed in the period incurred.

EARNINGS PER SHARE

In 1997, Statement of Financial Accounting Standards (SFAS) No. 128,
Earnings Per Share ("SFAS No. 128"), replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive

F-27

SL GREEN REALTY CORP.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

1. ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)

EARNINGS PER SHARE (CONTINUED)
effects of options, warrants and convertible securities. Diluted earnings per
share is very similar to the previously reported fully diluted earnings per
share. All earnings per share amounts for the quarter ended September 30, 1997
have been restated to conform to SFAS No. 128 requirements.

CONCENTRATIONS OF CREDIT RISK

Financial instruments that potentially subject the Company to concentrations
of credit risk consist primarily of cash investments and accounts receivable.
The Company places its cash investments with high quality institutions.
Management of the Company performs ongoing credit evaluation of its tenants and
requires certain tenants to provide security deposits. Though these security
deposits are insufficient to meet the terminal value of a tenant's lease
obligation, they are a measure of good faith and a source of funds to offset the
economic costs associated with lost rent and the costs associated with
retenanting the space. Although the SL Green Predecessors' buildings and new
acquisitions are all located in Manhattan, the tenants located in these
buildings operate in various industries and no single tenant represents a
dominant share of the Company's revenue and no tenant represents 10% of the
Company's revenue. Approximately 19% of the Company's revenue for the period
August 21, 1997 to December 31, 1997 was derived from 673 First Avenue.

STOCK-BASED COMPENSATION

The Company accounts for its stock compensation arrangements under the
provisions of APB opinion No. 25, "Accounting for Stock Issued to Employees".
Since the stock options are granted by the Company at the fair value of the
shares at the date of grant, no compensation expense is recognized in the
financial statements. Awards of stock, restricted stock or employee loans to
purchase stock which may be forgiven over a period of time are expensed as
compensation expense on a current basis over the benefit period.

INCOME TAXES

The Company is taxed as a REIT under Section 856(c) of the Internal Revenue
Code of 1986, as amended, commencing with the period August 21, 1997 to December
31, 1997. As a REIT, the Company generally is not subject to federal income tax.
To maintain qualification as a REIT, the Company must distribute at least 95% of
its REIT taxable income to its stockholders and meet certain other requirements.
If the Company fails to qualify as a REIT in any taxable year, the Company will
be subject to federal income tax on its taxable income at regular corporate
rates. The Company may also be subject to certain state and local taxes on its
income and property. Under certain circumstances, federal income and excise
taxes may be due on its undistributed taxable income. At December 31, 1997, the
Company believes it is in compliance with all REIT requirements and was not
subject to federal income taxes.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

SFAS 131, Disclosure about Segments of an Enterprise and Related Information
("SFAS No. 131") is effective for financial statements issued for periods
beginning after December 15, 1997. SFAS No. 131 requires disclosures about
segments of an enterprise and related information regarding the different types

F-28

SL GREEN REALTY CORP.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

1. ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)
of business activities in which an enterprise engages and the different economic
environments in which it operates.

The Company does not believe that the implementation of SFAS No. 131 will
have a material impact on its financial statements.

2. INVESTMENT IN UNCOMBINED JOINT VENTURES

The SL Green Predecessor's investments in three partnerships and a limited
liability company had been accounted for under the equity method since control
was shared with other parties. The investment in partnerships and limited
liability company were as follows:

PARTNERSHIPS/LIMITED GREEN GROUP
LIABILITY COMPANY PROPERTY OWNERSHIP OWNERSHIP TYPE
- ------------------------------- -------------------------- --------------- ----------------------------------

673 First Realty Company....... 673 First Avenue 67% Co-general partner
470 Park South Associates, LP.. 470 Park Avenue South 65% Co-general partner
29/35 Realty Associates, LP.... 29 West 35th Street 21.5% Co-general partner
Praedium Bar Associates, LLC
("Praedium Bar").............. 36 West 44th Street 10%(A) Has veto rights relating to sale
and financing

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

(A) Praedium Bar acquired the first mortgage related to the property in October,
1996 which provides for substantially all the economic interest in the
property and has the sole right to purchase the fee interest, (the property
deed is in escrow), for a nominal cost; accordingly SL Green Predecessor has
accounted for Praedium Bar investment as a ownership interest in the
property. On June 30, 1997, the majority owner of SL Green Predecessor
purchased the remaining 90% interest in Praedium Bar Associates, LLC for
$6.3 million. The current owners of the fee interest in 36 West 44th Street
and the leasehold interest in 35 West 43rd Street are obligated to transfer
their interests, in this property to the Company not later than October 1,
1998.

F-29

SL GREEN REALTY CORP.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

2. INVESTMENT IN UNCOMBINED JOINT VENTURE (CONTINUED)

Condensed combined financial statements of the partnerships and the limited
liability company, are as follows:

DECEMBER 31,
1996
------------

CONDENSED BALANCE SHEETS
ASSETS:
Commercial real estate property, net................................................................ $ 72,958
Deferred rent receivable............................................................................ 14,860
Cash and cash equivalents, including restricted cash of $1,588...................................... 3,811
Deferred costs and other assets..................................................................... 7,271
------------
Total assets........................................................................................ $ 98,900
------------
------------
LIABILITIES:
Mortgages and accrued interest payable.............................................................. $ 90,245
Obligations under capital lease..................................................................... 14,265
Deferred rent payable............................................................................... 11,459
Accounts payable and other liabilities.............................................................. 4,560
Owners' deficit
SL Green Predecessor.............................................................................. (15,570)
Other partners.................................................................................... (6,059)
------------
Total owners' deficit............................................................................... (21,629)
------------
Total liabilities and owner's deficit............................................................... $ 98,900
------------
------------

JANUARY 1, YEAR ENDED DECEMBER
TO 31,
AUGUST 20, --------------------
1997 1996 1995
------------ --------- ---------

CONDENSED STATEMENTS OF OPERATIONS
Rental revenue and escalations......................................... $ 13,552 $ 18,874 $ 17,934
Other revenue.......................................................... -- 28 18
------------ --------- ---------
Total revenues......................................................... 13,552 18,902 17,952
------------ --------- ---------
Interest............................................................... 5,320 7,743 7,785
Depreciation and amortization.......................................... 2,510 3,580 3,768
Operating and other expenses........................................... 7,142 10,036 9,552
------------ --------- ---------
Total expenses......................................................... 14,972 21,359 21,105
------------ --------- ---------
Operating loss before outside partner's interest....................... (1,420) (2,457) (3,153)
Elimination of inter-company management fees........................... 240 355 335
Extraordinary gain on forgiveness of debt.............................. 33,419 -- --
Other partner share of the (income) loss............................... (10,922) 694 904
------------ --------- ---------
Income (loss) allocated to the SL Green Predecessor.................... $ 21,317 $ (1,408) $ (1,914)
------------ --------- ---------
------------ --------- ---------

F-30

SL GREEN REALTY CORP.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

2. INVESTMENT IN UNCOMBINED JOINT VENTURE (CONTINUED)
There are several business relationships with related parties which involve
management, leasing and construction fee revenues and maintenance expense.
Transactions relative to the aforementioned combined statements of operations
and balance sheet for the equity investees include the following before
elimination of intercompany transactions:

JANUARY 1, TO YEAR ENDED DECEMBER 31,
AUGUST 20, --------------------------------
1997 1996 1995
------------- --------------- ---------------

Management fee expenses................................................. $ 448 $ 622 $ 563
Leasing commission expenses............................................. 295 218 48
Construction fees....................................................... 1,796 185 376
Maintenance expenses.................................................... 186 227 132

3. PROPERTY ACQUISITIONS

In connection with the Formation Transaction (see note 1), the Company
acquired the first mortgage related to 1372 Broadway on August 21, 1997 which
provides for substantially all of the economic interest in the property and has
the sole right to purchase the fee interest; accordingly, the Company has
accounted for the 1372 Broadway investment as ownership interest in the
property. The Company purchased the fee interest in January 1998 for
approximately $1 million.

On September 15, 1997, the Operating Partnership acquired the land and
building at 110 East 42nd Street for $30 million. The acquisition was funded by
proceeds of an LBHI loan and the Offering.

On December 19, 1997, the Operating Partnership exercised the Company's
option to acquire an interest in 17 Battery Place for approximately $59 million.
In connection with this acquisition, the Company also loaned $15.5 million to
the co-tenant at 17 Battery Place. The mortgage receivable bears interest at 12%
and is due September 30, 1998 and is secured by a first mortgage on the
co-tenant's interest in the property. The cash required to purchase the
investment and make the loan were funded through borrowings under the Company's
senior unsecured revolving credit facility.

In connection with the acquisition of 17 Battery Place, prior to January 1,
1999, the Company is required to make available up to 153,000 rentable square
feet of vacant office space to tenants of 17 Battery Place, who currently occupy
portions of the co-tenants space. In order to convert the upper floors of the
South Building into hotel/ residential space, the co-tenant plans to exercise
relocation options to relocate tenants from its hotel/ residential space to the
Company's office space.

On December 30, 1997 the Operating Partnership acquired a condominium
ownership interest at 633 Third Avenue for $10.5 million and a capital reserve
of $1 million. The acquisition was funded by proceeds from a mortgage loan on 50
West 23rd Street and cash on hand.

The following table summarizes, on an unaudited pro forma basis, the
combined results of operations of the Company for the years ended December 31,
1997 and 1996 as though each acquisition described above and each acquisition
included in the Offering and Formation Transactions was made on January 1, 1996.

F-31

SL GREEN REALTY CORP.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

3. PROPERTY ACQUISITIONS (CONTINUED)

1997 1996
--------- ---------

Revenues.................................................................................... $ 80,675 $ 78,648
Pro forma net income........................................................................ 18,147 14,348
Pro forma basic earnings per share.......................................................... 1.47 1.18
Pro forma diluted earnings per share........................................................ 1.46 1.17
Common and common equivalent share--basic................................................... 12,293 12,293
Common and common equivalent share--diluted................................................. 12,404 12,404

4. DEFERRED COSTS

Deferred costs consist of the following:

1997 1996
---------- ---------

Deferred financing.......................................................................... $ 3,147 $ 982
Deferred lease.............................................................................. 7,201 1,613
Deferred offering........................................................................... -- 87
---------- ---------
10,348 2,682
Less accumulated amortization............................................................... (4,249) (1,311)
---------- ---------
$ 6,099 $ 1,371
---------- ---------
---------- ---------

5. MORTGAGE NOTES PAYABLE AND REVOLVING CREDIT FACILITY

The mortgage notes payable collateralized by the respective properties and
assignment of leases at December 31, 1997 and 1996 are as follows:

PROPERTY MORTGAGE NOTES 1997 1996
- -------------------------- --------------------------------------------------------------- --------- ---------

1414 Avenue of the First mortgage note with interest payable at 7.875%, due June
Americas 1, 2006(A) $ -- $ 9,946
70 West 36th Street First mortgage note with interest payable at LIBOR plus 2%, due
January 29, 2001 (A) (B) -- 6,664
50 West 23rd Street Note payable to Lehman Brothers Holdings, Inc. with interest
based on LIBOR plus 1.75% (7.6875% at December 31, 1997) due
December, 2007 (C) 7,000 --
50 West 23rd Street Note payable to Lehman Brothers Holdings Inc., with interest at
7.47% due August, 2007 (C) 14,000 --
29 West 35th Street First mortgage note with interest payable at 8.464%, due
February 1, 2001 2,974
673 First Avenue First mortgage note with interest payable at 9.0%, due December
13, 2003 18,013
470 Park Avenue South First mortgage note with interest payable at 8.25%, due April
1, 2004 10,833
--------- ---------
Total mortgage notes payable $ 52,820 $ 16,610
--------- ---------
--------- ---------

F-32

SL GREEN REALTY CORP.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

5. MORTGAGE NOTES PAYABLE AND REVOLVING CREDIT FACILITY (CONTINUED)
- ------------------------

(A) These loans were repaid in connection with proceeds from the Offering.

(B) In January, 1996, the first mortgage was bifurcated into a first and second
mortgage; the second mortgage was acquired by an unrelated entity for no
consideration. In December 1996 the holder of the second mortgage on 70 West
36th Street forgave the indebtedness for no consideration; as a result SL
Green Predecessor recognized extraordinary income of $8,961. The remaining
unpaid portion of the first mortgage was paid during August 1997.

(C) The Lehman Brothers Holdings Inc. loan is collateralized by partnership
interests in certain property-owning entities.

On December 19, 1997 the Company entered into a $140 million three year
senior unsecured revolving credit facility (the "Credit Facility") due December
2000. Availability under the Credit Facility may be limited to an amount less
than $140 million which is calculated by several factors including recent
acquisition activity and most recent quarterly property performance. Outstanding
loans under the Credit Facility bear interest at a rate per annum equal to the
London Interbank Offered Rate ("LIBOR") applicable to each interest period plus
130 basis points to 145 basis points per annum. The Credit Facility requires the
Company to comply with certain covenants, including but not limited to,
maintenance of certain financial ratios. At December 31, 1997 the outstanding
amount of indebtedness under the Credit Facility was $76 million, and the
interest rate on such indebtedness was 7.265% per annum. At December 31, 1997
the Company's borrowing availability was $40 million.

The interest rate of the existing mortgage loan which is collateralized by
50 West 23rd Street can be fixed in the future at 150 basis points plus the ten
year US Treasury Note rate and maturing co-terminously with the underlying
mortgage note when certain income targets are met.

PRINCIPAL MATURITIES

Combined aggregate principal maturities of mortgages and notes payable as of
December 31, 1997 are as follows:

1998.............................................................. $ 1,973
1999.............................................................. 2,228
2000.............................................................. 79,241
2001.............................................................. 3,473
2002.............................................................. 3,782
Thereafter........................................................ 38,123
---------
$ 128,820
---------
---------

F-33

SL GREEN REALTY CORP.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

5. MORTGAGE NOTES PAYABLE AND REVOLVING CREDIT FACILITY (CONTINUED)

MORTGAGE RECORDING TAX--HYPOTHECATED LOAN

The Operating Partnership received loans totaling approximately $69.5
million from LBHI. These loans are collateralized by the mortgages encumbering
the Operating Partnership's interests in 1140 Avenue of the Americas and 110
East 42nd Street. The loans are also collateralized by an equivalent amount of
the Company's cash which is held by LBHI and invested in US Treasury securities.
Interest earned on the cash collateral is applied by Lehman to service the loans
which interest rate is commensurate with that of the portfolio of US Treasury
securities, which mature on May 15, 1998. The Operating Partnership and LBHI
each have the right of offset and therefore the loans and the cash collateral
have been presented on a net basis in the consolidated balance sheet at December
31, 1997. The purpose of these loans is to temporarily preserve mortgage
recording tax credits for future potential acquisitions of real property which
the Company may make, the financing of which may include property based debt,
for which these credits would be applicable and provide a financial savings.

6. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosures of estimated fair value were determined by
management, using available market information and appropriate valuation
methodologies. Considerable judgment is necessary to interpret market data and
develop estimated fair value. Accordingly, the estimates presented herein are
not necessarily indicative of the amounts the SL Green Predecessor could realize
on disposition of the financial instruments. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.

Cash equivalents, variable rate mortgages and fixed rate debt are carried at
amounts which reasonably approximate their fair values.

Disclosure about fair value of financial instruments is based on pertinent
information available to management as of December 31, 1997. Although management
is not aware of any factors that would significantly affect the reasonable fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these financial statements since that date and current estimates of fair
value may differ significantly from the amounts presented herein.

7. RENTAL INCOME

The Operating Partnership is the lessor and the sublessor to tenants under
operating leases with expiration dates ranging from 1998 to 2011. The minimum
rental amounts due under the leases are generally either subject to scheduled
fixed increases or adjustments. The leases generally also require that the
tenants reimburse the Company for increases in certain operating costs and real
estate taxes above their base year costs. Approximate future minimum rents to be
received over the next five years and thereafter for leases in effect at
December 31, 1997 are as follows:

F-34

SL GREEN REALTY CORP.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

7. RENTAL INCOME (CONTINUED)

1998.............................................. $ 61,039
1999.............................................. 59,423
2000.............................................. 56,234
2001.............................................. 53,146
2002.............................................. 50,683
Thereafter........................................ 212,478
---------
$ 493,003
---------
---------

8. RELATED PARTY TRANSACTIONS

There are several business relationships with related parties, entities
owned by Stephen L. Green or relatives of Stephen L. Green exclusive of the
uncombined joint ventures (see note 2) which involve management, leasing, and
construction fee revenues, rental income and maintenance expenses in the
ordinary course of business. These transactions for the years ended December 31,
include the following:

AUGUST 21, JANUARY 1,
TO TO
DECEMBER 31, AUGUST 20,
1997 1997 1996 1995
--------------- --------------- --------- ---------

Management revenues.................................................. $ 78 $ 172 $ 180 $ 221
Leasing commission revenues.......................................... 8 29 37 36
Construction fees.................................................... 14 37 25 69
Rental income........................................................ -- 43 33 25
Maintenance expense.................................................. 119 163 93 32

Amounts due from related parties at December 31, consist of:

1997 1996
--------- ---------

SL Green Properties Inc........................................................................ $ -- $ 507
First Quality Maintenance...................................................................... -- 160
250 PAS, Associates, LP........................................................................ -- 363
SL Green Management............................................................................ 582 --
SL Green Leasing............................................................................... 498 --
Emerald City Corporation....................................................................... 166 --
Officers....................................................................................... 725 156
--------- ---------
$ 1,971 $ 1,186
--------- ---------
--------- ---------

F-35

SL GREEN REALTY CORP.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

8. RELATED PARTY TRANSACTIONS (CONTINUED)
Amounts due to related parties at December 31, consist of:

1997 1996
--------- ---------

29 West 35th Street Predecessor Partnership...................................................... $ 45 $ --
36 West 44th Street Predecessor Partnership...................................................... 56 --
70 West 36th Street Predecessor Partnership...................................................... 67 --
1414 Avenue of the Americas Predecessor Partnership.............................................. 88 --
470 Park Avenue South Predecessor Partnership.................................................... 72 --
673 First Avenue Predecessor Partnership......................................................... 39 --
SL Green Properties, Inc......................................................................... -- 2,213
--------- ---------
$ 367 $ 2,213
--------- ---------
--------- ---------

9. STOCKHOLDERS' EQUITY

The authorized capital stock of the Company consists of $200 million shares
of capital stock, $.01 par value, of which the Company has authorized the
issuance of up to 100 million shares of Common Stock $0.01 par value per share,
75 million shares of excess stock, at $0.01 par value per share and 25 million
shares of preferred stock, par value $0.01 per share. Under the Company's
Charter, the Board of Directors will have authority to issue, without any
further action by the stockholders, shares of capital stock in one or more
series having such preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption as the Board of Directors may determine.

During August 1997, the Company instituted the 1997 Stock Option and
Incentive Plan (The "Stock Option Plan"). The Stock Option Plan authorizes (i)
the grant of stock options that qualify as incentive stock options under Section
422 of the Code ("ISOs"), (ii) the grant of stock options that do not so qualify
("NQSOs"), (iii) the grant of stock options in lieu of cash Directors' fees and
employee bonuses, (iv) grants of shares of Common Stock, in lieu of compensation
and (v) the making of loans to acquire shares of Common Stock, in lieu of
compensation. The exercise price of stock options will be determined by the
Compensation Committee, but may not be less than 100% of the fair market value
of the shares of Common Stock on the date of grant in the case of ISOs; provided
that, in the case of grants of NQSOs granted in lieu of cash Director's fees and
employee bonuses, the exercise price may not be less than 50% of the fair market
value of the shares of Common Stock on the date of grant. At December 31, 1997,
1.1 million shares of Common Stock are reserved for exercise of warrants and
stock options.

Options granted under the 1997 qualified stock option plan are exercisable
at the fair market value on the date of grant and, subject to termination of
employment, expire ten years form the date of grant, are not transferable other
than on death, and are exercisable in three equal annual installments commencing
one year from the date of grant (with the exception of 10,000 options which have
a vesting period of one year).

F-36

SL GREEN REALTY CORP.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

9. STOCKHOLDERS' EQUITY (CONTINUED)
Information on stock options is shown in the following table:

SHARES OUTSTANDING EXERCISABLE PRICE RANGE
------------------ --------------- ------------------

Balances at August 21, 1997.................................. -- -- --
Granted...................................................... 626,000 -- $ 21.00
Granted...................................................... 34,000 -- $ 24.69
Granted...................................................... 10,000 -- $ 26.19
Became Exercisable........................................... -- -- --
Canceled..................................................... (10,000) -- $ 21.00
-------- ---
Balances at December 31, 1997................................ 660,000 -- $ 21.00-$26.19
-------- ---
-------- ---

The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" in accounting for stock-based employee
compensation arrangements whereby no compensation cost related to stock options
is deducted in determining net income. Had compensation cost for the Company's
stock option plans been determined pursuant to Financial Accounting Standards
Board Statement No. 123 ("SFAS No. 123"), "Accounting for Stock-Based
Compensation," the Company's pro forma net income and earnings per share would
have differed. The Black-Scholes option pricing model estimates fair value of
options using subjective assumptions which can materially effect fair value
estimates and, therefore, do not necessarily provide a single measure of fair
value of options. Using the Black-Scholes option pricing model for all options
granted on or after August 20, 1997 and a risk-free interest rate of 5.00%,
dividend yield on common stock of 5%, a volatility factor for the market price
of the Company's Common Stock of .259 and a weighted-average expected life of
options of approximately four years, the Company's pro forma net income, basic
pro forma earnings per share and diluted pro forma earnings per share would have
been $3,439, $0.28 and $0.28, respectively, for the period August 20, 1997 to
December 31, 1997. For purposes of these pro forma disclosures, the estimated
fair value of options is amortized over the options' vesting period. Since the
number of options granted and their fair value may vary significantly from year
to year, the pro forma compensation expense in future years may be materially
different.

EARNINGS PER SHARE

Basic and diluted earnings per common share for the period ended December
31, 1997 have been computed based upon weighted average equivalent shares
outstanding of 12,292 and 12,404 respectively. The difference in the weighted
average shares outstanding represents the inclusion of common share equivalents
from options issued and outstanding at December 31, 1997 in the calculation of
diluted earnings per share which is not included in basic earnings per share.

10. BENEFIT PLANS

The building employees of the individual partnerships are covered by
multi-employer defined benefit pension plans and post-retirement health and
welfare plans. Contributions to these plans amounted to $35, $44, $30 and $7
during the periods August 21, 1997 to December 31, 1997, January 1, 1997 to
August 20, 1997 and the years ended December 31, 1996 and 1995, respectively.
Separate actuarial information

F-37

SL GREEN REALTY CORP.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

10. BENEFIT PLANS (CONTINUED)
regarding such plans is not made available to the contributing employers by the
union administrators or trustees, since the plans do not maintain separate
records for each reporting unit.

401(K) PLAN

During August 1997, the Company implemented a 401(k) Savings/ Retirement
Plan (the "401(k) Plan") to cover eligible employees of the Company and any
designated affiliate. The 401(k) Plan permits eligible employees of the Company
to defer up to 15% of their annual compensation, subject to certain limitations
imposed by the Code. The employees' elective deferrals are immediately vested
and non-forfeitable upon contribution to the 401(k) Plan. The Company did not
make any contributions to the 401(k) Plan during 1997.

11. COMMITMENTS AND CONTINGENCIES

The Company and the Operating Partnership are not presently involved in any
material litigation nor, to their knowledge, is any material litigation
threatened against them or their properties, other than routine litigation
arising in the ordinary course of business. Management believes the costs, if
any, incurred by the Company and the Operating Partnership related to this
litigation will not materially affect the financial position, operating results
or liquidity of the Company and the Operating Partnership.

The Company has entered into employment agreements with certain executive
officers. Six executive officers have three year employment agreements which
expire in August 2000. The base compensation associated with these employment
agreements total $1,100 annually.

The SL Green Predecessor is the lessor and sub-lessor of commercial
buildings under operating leases with expiration dates ranging from 1998 to
2031. The minimum rental amounts due under the leases are generally either
subject to scheduled fixed increases or adjustments. The leases generally also
require that the tenants reimburse the SL Green Predecessor for increases in
certain operating costs and real estate taxes above their base year costs.

In April 1988, the SL Green Predecessor entered into a lease agreement for
property at 673 First Avenue in New York City, which has been capitalized for
financial statement purposes. Land was estimated to be approximately 70% of the
fair market value of the property. The portion of the lease attributed to land
is classified as an operating lease and the remainder as a capital lease. The
initial lease term is 49 years with an option for an additional 26 years.
Beginning in lease year 11 and 25, the lessor is entitled to additional rent as
defined by the lease agreement.

The Company leases 673 First Avenue with a cost basis of $12,208 and
cumulative amortization of $2,284 under a capital lease at December 31, 1997.
The following is a schedule of future minimum lease payments under capital
leases and noncancellable operating leases with initial terms in excess of one
year as of December 31, 1997:

F-38

SL GREEN REALTY CORP.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

11. COMMITMENTS AND CONTINGENCIES (CONTINUED)

NONCANCELLABLE
CAPITAL OPERATING
DECEMBER 31 LEASES LEASES
- ---------------------------------------------------------------------------------- ------------- --------------

1998.............................................................................. $ 1,140 $ 3,101
1999.............................................................................. 1,140 3,101
2000.............................................................................. 1,177 3,218
2001.............................................................................. 1,290 3,451
2002.............................................................................. 1,290 4,741
Thereafter........................................................................ 62,886 158,015
------------- --------------
Total minimum lease payments...................................................... 68,923 $ 175,627
--------------
--------------
Less amount representing interest................................................. (54,433)
-------------
Present value of net minimum lease payments....................................... $ 14,490
-------------
-------------

Rent expense under noncancellable operating leases for the year ended
December 31, 1997 was $1,560.

12. ENVIRONMENTAL MATTERS

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

13. EXTRAORDINARY ITEMS

Forgiveness of mortgage debt totaling $22,087 (net of other partners' share
of $11,332 for the period January 1, 1997 to August 20, 1997) is reflected in
the accompanying SL Green Predecessor financial statements as an extraordinary
gain.

Prepayment penalties of $1,071 (net of minority interest of $207) and
unamortized deferred charges of $803 (net of minority interest of $155) related
to mortgages paid in connection with the Formation Transactions were expensed
and are reflected in the Company's financial statements as an extraordinary
loss.

F-39

SL GREEN REALTY CORP.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

14. QUARTERLY FINANCIAL DATA (UNAUDITED)

The following summary represents the Company's results of operations for the
quarters ended September 30, 1997 (August 21, 1997 to September 30, 1997)
December 31, 1997 (in thousands, except share amounts)

QUARTER ENDED QUARTER ENDED
DECEMBER 31, 1997 SEPTEMBER 30, 1997
----------------- -------------------

Total revenues............................................................. $ 16,058 $ 7,149
------- ------
------- ------
Income net of minority interest and before extraordinary item.............. $ 3,033 $ 2,056
------- ------
------- ------
Net income................................................................. $ 3,503 $ 182
------- ------
------- ------
Income per share before extraordinary item................................. $ 0.29 $ 0.17
------- ------
------- ------
Net income per share--basic................................................ $ 0.29 $ 0.01
------- ------
------- ------
Net income per share--diluted.............................................. $ 0.28 $ 0.01
------- ------
------- ------

The 1997 quarters' earnings per share amounts have been restated to comply
with SFAS No. 128.

15. SUBSEQUENT EVENTS

ACQUISITION OF 321 AND HELMSLEY PROPERTIES

The Company announced in February 1998 three (3) additional properties
placed under contract for purchase at a cost of approximately $176 million. The
properties aggregate rentable area is approximately 1.7 million square feet. The
Company closed two of these acquisitions in March 1998 and the third is expected
to close during the second quarter of 1998. Acquisition financing for these
properties was obtained through a commitment from Lehman Brothers Holdings, Inc.
for a short term acquisition facility for up to $275 million. The Company used
these loan proceeds to (i) re-pay the current balance on its line of credit ($93
million at March 1, 1998), (ii) fund the closing of the announced acquisitions
and (iii) provide for general corporate purposes. The three acquisition
properties are as follows:

321 WEST 44TH STREET

On January 26, 1998 SL Green announced it had placed under contract a
200,000 square foot office building at 321 West 44th Street. The property was
contracted to be acquired for $17 million in cash and was approximately 96%
leased at the time of acquisition. Closing is anticipated to occur during the
second quarter of 1998.

F-40

SL GREEN REALTY CORP.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

15. SUBSEQUENT EVENTS (CONTINUED)
ACQUISITION OF HELMSLEY PROPERTIES (CONTINUED)

On February 20, 1998 the Company announced it had placed under contract for
purchase of the fee interest in one property (1466 Broadway) and the operating
interest of another property (420 Lexington Avenue, the Graybar Building) from
the Helmsley organization. The Graybar building is located adjacent to Grand
Central Station and encompasses approximately 1.2 million square feet. 1466
Broadway is located in the heart of Times Square at 42nd Street and Broadway
encompassing approximately 290,000 square feet. The aggregate base purchase
price for the two properties is $142 million. At the time the acquisition was
announced, the Graybar building was 83% leased and 1466 Broadway was
approximately 87% leased. The Company closed on these acquisitions on March 18,
1998.

ACQUISITION FINANCING

Subsequent to December 31, 1997, the Company asked the Credit Facility
banking group to temporarily relieve the Company from its obligations under the
financial covenants of the Credit Facility, in order to close an additional
financing necessary to acquire the Helmsley properties (the "Acquisition
Facility"). This Acquisition Facility which closed in March financed the
Helmsley properties, paid-off the outstanding balance on the Company's Credit
Facility and provide on going liquidity for future acquisition and corporate
needs. The term of the Acquisition Facility is one year. The interest rate is
determined by a schedule of the percent of loan commitment outstanding and the
duration of the outstanding commitments, ranging from 170 basis points over
LIBOR to 300 basis points over LIBOR (7.3875% at date of borrowing). The
original Credit Facility will remain committed but unused until the Acquisition
Facility is paid off through either permanent debt or an equity financing and
the Company's financial covenant obligations are restored.

F-41

SL GREEN REALTY CORP.
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)

COLUMN D COLUMN E
---------------------------- ------------------------
COLUMN C GROSS AMOUNT AT WHICH
------------------------ COST CAPITALIZED
SUBSEQUENT TO ACQUISITION CARRIED
INITIAL COST AT CLOSE OF PERIOD
COLUMN A COLUMN B ------------------------ ---------------------------- ------------------------
- -------------------------- ------------ BUILDING AND BUILDING AND BUILDING AND
DESCRIPTION(2) ENCUMBRANCE LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS
- -------------------------- ------------ --------- ------------- ----- --------------- --------- -------------

70 West 36th Street -- $ 1,517 $ 7,700 $ 13 $ 7,342 $ 1,530 $ 15,042
1414 Avenue of the
Americas -- 2,948 6,790 60 716 3,008 7,506
673 First Avenue $ 18,013 -- 43,618 -- 82 -- 43,700
(1 mortgage)
29 West 35th Street 2,974 339 5,682 -- 89 339 5,771
(1 mortgage)
470 Park Avenue South 10,833 3,750 30,718 -- 212 3,750 30,930
(1 mortgage)
36 West 44th Street -- 3,259 13,330 -- 592 3,259 13,922
1372 Broadway -- 10,478 41,912 66 485 10,544 42,397
1140 Avenue of the
Americas -- 4,207 16,828 54 231 4,261 17,059
50 West 23rd Street 21,000 7,217 28,866 43 180 7,260 29,046
(1 mortgage)
17 Battery Place -- 11,686 46,744 -- -- 11,686 46,744
110 East 42nd Street -- 6,000 24,070 26 115 6,026 24,185
633 Third Avenue -- 2,171 8,682 -- -- 2,171 8,682
------------ --------- ------------- ----- ------- --------- -------------
$ 52,820 $ 53,572 $ 274,940 $ 262 $ 10,044 $ 53,834 $ 284,984
------------ --------- ------------- ----- ------- --------- -------------
------------ --------- ------------- ----- ------- --------- -------------

COLUMN I
COLUMN F COLUMN G COLUMN H ---------------
COLUMN A ------------- ------------- ----------- LIFE ON WHICH
- -------------------------- ACCUMULATED DATE OF DATE DEPRECIATION IS
DESCRIPTION(2) TOTAL DEPRECIATION CONSTRUCTION ACQUIRED COMPUTED
- -------------------------- --------- ------------- ------------- ----------- ---------------

70 West 36th Street $ 16,572 $ 6,183 12/19/84 Various
1414 Avenue of the
Americas 10,514 378 6/18/96 Various
673 First Avenue 43,700 8,432 8/20/97 Various

29 West 35th Street 6,110 474 8/20/97 Various

470 Park Avenue South 34,680 7,044 8/20/97 Various

36 West 44th Street 17,181 307 8/20/97 Various
1372 Broadway 52,941 385 8/20/97 Various
1140 Avenue of the
Americas 21,320 154 8/20/97 Various
50 West 23rd Street 36,306 265 8/20/97 Various

17 Battery Place 58,430 -- 12/19/97 Various
110 East 42nd Street 30,211 178 9/15/97 Various
633 Third Avenue 10,853 -- 12/30/97 Various
--------- -------------
$ 338,818 $ 23,800
--------- -------------
--------- -------------

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

(1) Encumbrance includes accrued interest of $235 December 31, 1996

(2) All properties located in New York, New York

F-42

SL GREEN REALTY CORP.
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)

The changes in real estate for the three years ended December 31, 1997 are as
follows:

1997 1996 1995
---------- --------- ---------

Balance at beginning of year.................................................... $ 26,284 $ 15,559 $ 15,190
Property Acquisitions and Formation Transactions................................ 306,752 -- --
Improvements.................................................................... 5,782 10,725 369
---------- --------- ---------
Balance at end of year.......................................................... $ 338,818 $ 26,284 $ 15,559
---------- --------- ---------
---------- --------- ---------

The aggregate cost of land, buildings and improvements for Federal income
tax purposes at December 31, 1997 was approximately $338,818.

The changes in accumulated depreciation, exclusive of amounts relating to
equipment, autos, and furniture and fixtures, for the three years ended December
31, 1997 are as follows:

1997 1996 1995
--------- --------- ---------

Balance at beginning of year........................................................ $ 5,721 $ 5,025 $ 4,508
Formation Transactions.............................................................. 14,073 -- --
Depreciation for year............................................................... 4,006 696 517
--------- --------- ---------
Balance at end of year.............................................................. $ 23,800 $ 5,721 $ 5,025
--------- --------- ---------
--------- --------- ---------

F-43

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors of
SL Green Realty Corp.

We have audited the accompanying combined balance sheet of the uncombined
joint ventures of SL Green Predecessor as of December 31, 1996 and the related
combined statements of operations, owners' deficit and cash flows for the period
from January 1, 1997 to August 20, 1997 and for each of the two years in the
period ended December 31, 1996. These financial statements are the
responsibility of SL Green Predecessor's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

In our opinion, the combined financial statements referred to above present
fairly in all material respects, the combined financial position of the
uncombined joint ventures of SL Green Predecessor at December 31, 1996 and the
combined results of its operations and its cash flows for the period from
January 1, 1997 to August 20, 1997 and for each of the two years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles.

/S/ Ernst & Young LLP

New York, New York
February 10, 1998

F-44

UNCOMBINED JOINT VENTURES OF

SL GREEN PREDECESSOR

COMBINED BALANCE SHEET

(DOLLARS IN THOUSANDS)

DECEMBER 31, 1996

ASSETS
Commercial real estate properties, at cost:
Land............................................................................. $ 6,366
Buildings and improvements....................................................... 75,307
Property under capital lease..................................................... 12,208
---------
93,881
Less accumulated depreciation.................................................... (20,923)
---------
72,958
Cash and cash equivalents.......................................................... 2,223
Restricted cash.................................................................... 1,588
Deferred rents receivable.......................................................... 14,860
Deferred costs, net................................................................ 4,812
Other assets....................................................................... 2,459
---------
Total assets....................................................................... $ 98,900
---------
---------
LIABILITIES AND OWNERS' DEFICIT
Mortgages and note payable......................................................... $ 74,827
Accrued interest payable........................................................... 15,418
Obligations under capital lease.................................................... 14,265
Deferred rent payable.............................................................. 11,459
Accounts payable and accrued expenses.............................................. 1,200
Accounts payable to related parties................................................ 688
Security deposits.................................................................. 2,672
---------
Total liabilities.................................................................. 120,529
Commitments, contingencies and other comments
Owners' deficit:
SL Green Predecessor............................................................. (15,570)
Other partners................................................................... (6,059)
---------
Total owners' deficit.............................................................. (21,629)
---------
Total liabilities and owners' deficit.............................................. $ 98,900
---------
---------

See accompanying notes.

F-45

UNCOMBINED JOINT VENTURES OF
SL GREEN PREDECESSOR

COMBINED STATEMENTS OF OPERATIONS

(DOLLARS IN THOUSANDS)

JANUARY 1, YEAR ENDED DECEMBER
TO 31,
AUGUST 20 --------------------
1997 1996 1995
------------ --------- ---------

Revenues:
Rental revenue.............................................................. $ 12,604 $ 17,386 $ 16,519
Escalation and reimbursement revenues....................................... 859 1,488 1,415
Other income................................................................ 89 28 18
------------ --------- ---------
Total revenues................................................................ 13,552 18,902 17,952
------------ --------- ---------
Expenses:
Operating expenses:
Other..................................................................... 2,342 3,115 2,931
Related parties........................................................... 634 849 695
Real estate taxes........................................................... 1,741 2,316 2,183
Rent expense................................................................ 2,425 3,756 3,743
Interest.................................................................... 5,320 7,743 7,785
Depreciation and amortization............................................... 2,510 3,580 3,768
------------ --------- ---------
Total expenses................................................................ 14,972 21,359 21,105
------------ --------- ---------
Loss before extraordinary gain................................................ (1,420) (2,457) (3,153)
------------ --------- ---------
Extraordinary gain............................................................ 33,419 -- --
------------ --------- ---------
Net income (loss)............................................................. $ 31,999 $ (2,457) $ (3,153)
------------ --------- ---------
------------ --------- ---------

See accompanying notes.

F-46

UNCOMBINED JOINT VENTURES OF

SL GREEN PREDECESSOR

COMBINED STATEMENTS OF OWNERS' DEFICIT

(DOLLARS IN THOUSANDS)

SL GREEN &
RELATED ALL OTHER
ENTITIES PARTNERS TOTAL
-------------- --------- ----------

Balance at December 31, 1994............................................... $ (13,271) $ (7,473) $ (20,744)
Distributions............................................................ -- -- --
Contributions............................................................ 63 62 125
Net loss for the year ended December 31, 1995............................ (2,249) (904) (3,153)
-------------- --------- ----------
Balance at December 31, 1995............................................... (15,457) (8,315) (23,772)
Distributions............................................................ -- (1,150) (1,150)
Contributions............................................................ 1,650 4,100 5,750
Net loss for the year ended December 31, 1996............................ (1,763) (694) (2,457)
-------------- --------- ----------
Balance at December 31, 1996............................................... (15,570) (6,059) (21,629)
Distributions............................................................ (1,702) (1,345) (3,047)
Other-reclassification of joint venture to combined property............. (880) (4,463) (5,343)
Contributions............................................................ 450 385 835
Net income for the period ending August 20, 1997......................... 21,102 10,897 31,999
-------------- --------- ----------
Balance at August 20, 1997................................................. $ 3,400 $ (585) $ 2,815
-------------- --------- ----------
-------------- --------- ----------

See accompanying notes.

F-47

UNCOMBINED JOINT VENTURES OF

SL GREEN PREDECESSOR

COMBINED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)

JANUARY 1, YEAR ENDED DECEMBER
TO 31,
AUGUST 20 --------------------
1997 1996 1995
------------ --------- ---------

OPERATING ACTIVITIES
Net Income (loss)............................................................. $ 31,999 $ (2,457) $ (3,153)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities
Extraordinary item.......................................................... (33,419) -- --
Depreciation and amortization............................................... 2,510 3,580 3,768
Deferred rents receivable................................................... (293) (524) (370)
Other....................................................................... 93 -- --
Changes in operating assets and liabilities
Restricted cash............................................................. (135) (383) 70
Deferred costs.............................................................. (639) (705) (54)
Other assets................................................................ 1,552 (1,033) (75)
Accounts payable and accrued expenses....................................... (616) 768 (192)
Accounts payable to related parties......................................... (85) (91) (124)
Security deposits........................................................... 133 409 (102)
Accrued interest on mortgage notes payable.................................. 1,144 969 1,781
------------ --------- ---------
Net cash provided by operating activities..................................... 2,244 533 1,549
------------ --------- ---------
INVESTING ACTIVITIES
Additions to land, buildings and improvements................................. (1,232) (4,583) (690)
------------ --------- ---------
Net cash used in investing activities......................................... (1,232) (4,583) (690)
------------ --------- ---------
FINANCING ACTIVITIES
Payments of mortgage notes payable............................................ (1,211) (1,674) (1,531)
Cash distributions to owners.................................................. (3,047) (1,150) --
Cash contributions from owners................................................ 835 5,750 125
Capitalized lease obligations................................................. 824 1,277 1,532
------------ --------- ---------
Net cash provided by (used in) financing activities........................... (2,599) 4,203 126
------------ --------- ---------
Net increase (decrease) in cash and cash equivalents.......................... (1,587) 153 985
Cash transfer related to Praedium Bar Associates, LLC presented as a combined
entity...................................................................... (185) -- --
Cash and cash equivalents at beginning of period.............................. 2,223 2,070 1,085
------------ --------- ---------
Cash and cash equivalents at end of period.................................... $ 451 $ 2,223 $ 2,070
------------ --------- ---------
------------ --------- ---------
Supplemental cash flow disclosures interest paid.............................. $ 4,176 $ 6,774 $ 6,004
------------ --------- ---------
------------ --------- ---------
Supplemental schedule of non cash investing and financing activities:
Assumption of mortgage in connection with property acquisition.............. -- $ 10,200 --

F-48

UNCOMBINED JOINT VENTURES OF

SL GREEN PREDECESSOR

COMBINED STATEMENTS OF CASH FLOWS (CONTINUED)

(DOLLARS IN THOUSANDS)

On June 30, 1997 the remaining interest of Praedium Bar Associates, LLC
("Praedium Bar") was purchased by an affiliate of Stephen L. Green. In
connection with the purchase as of June 30, 1997, the assets and liabilities of
Praedium Bar have been excluded from the financial statements of the uncombined
joint ventures of SL Green Predecessor and have been presented in the combined
financial statements of SL Green Predecessor. The assets, liabilities and
owners' equity of Praedium Bar as of June 30, 1997 were as follows:

Commercial real estate property, net............................................... $ 14,383
Total assets....................................................................... 16,174
Mortgage notes payable............................................................. 10,200
Total liabilities.................................................................. 10,831
Owners' equity..................................................................... 5,343

See accompanying notes.

F-49

UNCOMBINED JOINT VENTURES OF
SL GREEN PREDECESSOR

DECEMBER 31, 1996

NOTES TO COMBINED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS)

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

The uncombined joint ventures of SL Green Predecessor are engaged in the
business of owning, managing and leasing, and repositioning Class B office
properties in Manhattan, New York.

FORMATION TRANSACTIONS

Concurrently with the consummation of the initial public offering of SL
Green Realty Corp. (the "REIT") Common Stock (the "Offering"), which was
completed on August 20, 1997 the REIT and a newly formed limited partnership, SL
Green Operating Partnership, L.P. (the "Operating Partnership"), together with
the partners and members of the affiliated partnerships of the SL Green
Predecessor and other parties which hold ownership interests in the properties
(collectively, the "Participants"), engaged in certain formation transactions
(the "Formation Transactions"). The Formation Transactions were designed to (i)
enable the REIT to raise the necessary capital to acquire the remaining
interests in the uncombined joint ventures of the SL Green Predecessor and repay
certain mortgage debt relating thereto and pay other indebtedness, (ii) enable
the REIT to acquire properties, (iii) fund costs, capital expenditures, and
working capital, (iv) provide a vehicle for future acquisitions, (v) enable the
REIT to comply with certain requirements under the Federal income tax laws and
regulations relating to real estate investment trusts, and (vi) preserve certain
tax advantages for certain Participants.

The REIT is the sole general partner in the Operating Partnership. The
Operating Partnership received a contribution of interests in the real estate
properties in exchange for units of limited partnership interests in the
Operating Partnership and/or cash. The REIT is a fully integrated
self-administered and self-managed.

PRINCIPLES OF COMBINATION

The uncombined joint ventures of the SL Green Predecessor is not a legal
entity but rather a combination of real estate properties (collectively, the
"Properties") and interests in entities that are organized as partnerships and a
limited liability company. The operations of the properties are included in the
financial statements of the SL Green Predecessor from the date of acquisition
and management. All significant intercompany transactions and balances have been
eliminated in combination.

Capital contributions, distributions and profits and losses are allocated to
the owners in accordance with the terms of the applicable agreements.

F-50

UNCOMBINED JOINT VENTURES OF
SL GREEN PREDECESSOR

DECEMBER 31, 1996

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The joint ventures, included in the accompanying combined financial
statements include partnerships and a limited liability company which are
managed but not controlled by the SL Green Predecessor, are as follows:

PARTNERSHIPS/LIMITED SL GREEN PREDECESSOR
LIABILITY COMPANY PROPERTY PERCENTAGE OWNERSHIP OWNERSHIP TYPE
- -------------------------------------------- -------------------------- -------------------- ---------------------

673 First Realty Company.................... 673 First Avenue 67.0% Co-general partner
29/35 Realty Associates, LP................. 29 West 35th Street 21.5% Co-general partner
470 Park South Associates, LP............... 470 Park Avenue South 65.0% Co-general partner
Praedium Bar Associates, LLC................ 36 West 44th Street 10.0%(A) Has veto rights
("Praedium Bar") relating to sale
and financing

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

USE OF ESTIMATES

DEPRECIATION OF REAL ESTATE PROPERTIES

Depreciation and amortization is computed on the straight-line method as
follows:

CATEGORY TERM
- ----------------------------------------------------------- ---------------------------------

Building................................................... 40 years
Property under capital lease............................... 49 years
Building improvements...................................... remaining life of the building
Tenant improvements........................................ remaining life of the lease

Depreciation expense including the amortization of the capital lease asset
amounted to $2,917, and $2,999 in 1996 and 1995 respectively. For the period
ended August 20, 1997 depreciation expense amounted to $1,859.

CASH AND CASH EQUIVALENTS

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

F-51

UNCOMBINED JOINT VENTURES OF
SL GREEN PREDECESSOR

DECEMBER 31, 1996

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RESTRICTED CASH

Restricted cash consists of security deposits.

REVENUE RECOGNITION

Rental revenue is recognized on a straight-line basis over the term of the
lease. The excess of rents recognized over amounts contractually due pursuant to
the underlying leases are included in deferred rents receivable on the
accompanying combined balance sheet. Contractually due but unpaid rents are
included in other assets on the accompanying combined balance sheet. Certain
lease agreements provide for reimbursement of real estate taxes, insurance and
certain common area maintenance costs and rental increases tied to increases in
certain economic indexes.

DEFERRED LEASE COSTS

Deferred lease costs consist of fees and direct costs incurred to initiate
and renew operating leases, and are amortized on a straight-line basis over the
initial lease term or renewal period as appropriate.

DEFERRED FINANCING COSTS

Deferred financing costs are amortized over the terms of the respective
agreements. Unamortized deferred financing costs are expensed when the
associated debt is retired before maturity.

CAPITALIZED INTEREST

Interest for borrowings used to fund development and construction is
capitalized to individual property costs.

RENT EXPENSE

INCOME TAXES

The properties are not taxpaying entities for Federal income tax purposes,
and, accordingly, no provision or credit has been made in the accompanying
financial statements for Federal income taxes. Owners' allocable shares of
taxable income or loss are reportable on their income tax returns.

CONCENTRATION OF REVENUE AND CREDIT RISK

Approximately 60% of the properties revenue for the two years ended December
31, 1996 were derived from 673 First Avenue. Approximately 50% of the properties
revenue for the period January 1, 1997 to August 20, 1997 were derived from 673
First Avenue. The loss or a material decrease in revenues from this building for
any reason may have a material adverse effect on the properties. In addition

F-52

UNCOMBINED JOINT VENTURES OF
SL GREEN PREDECESSOR

DECEMBER 31, 1996

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

CONCENTRATION OF REVENUE AND CREDIT RISK (CONTINUED)
approximately 30% of the properties revenue for the two years ended December 31,
1996 and the period January 1, 1997 to August 20, 1997 were derived from three
tenants, (Society of NY Hospital, Kallir, Phillips, Ross, Inc. and UNICEF),
which lease space in the 673 First Avenue building.

Management of the SL Green Predecessor performs on going credit evaluations
of its tenants and requires certain tenants to provide security deposits.

F-53

UNCOMBINED JOINT VENTURES OF
SL GREEN PREDECESSOR

DECEMBER 31, 1996

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

2. MORTGAGE NOTES PAYABLE

The mortgage notes payable collateralized by the respective properties and
assignment of leases at December 31, 1996 are as follows:

MORTGAGE ACCRUED
PAYABLE INTEREST
PROPERTY MORTGAGE NOTES WITH FIXED INTEREST 1996 1996
- --------------------------------- -------------------------------------------------------- ----------- ---------

29 West 35th Street First mortgage note with interest payable at 8.464%, due
February 1, 2001 $ 3,040 $ 21
673 First Avenue First mortgage note with interest payable at 9.0%, due
December 13, 2003 19,439 --
470 Park Avenue South First mortgage note with interest payable at 8.25%, due
April 1, 2004 11,132 77
470 Park Avenue South Second mortgage note with interest payable at 10.0%, due
October 31, 1999 1,067 9
(A) 470 Park Avenue South Third mortgage note with interest payable at 10.98%, due
September 30, 2001 13,000 10,204
----------- ---------
Total Fixed Rate Notes 47,678 10,311
----------- ---------

MORTGAGE NOTES WITH VARIABLE INTEREST
--------------------------------------------------------

36 W 44th Street First mortgage note with interest based on LIBOR + 3.4%,
due September 30, 1998 10,200 --
673 First Avenue Second mortgage note with interest based on adjusted
LIBOR rate, as defined by the mortgage agreement, or
Prime + 1.0%, due January 1, 2014 15,180 4,574
----------- ---------
Total Variable Rate Notes 25,380 4,574
----------- ---------

UNSECURED NOTE
--------------------------------------------------------

673 First Avenue Unsecured note with interest based on Prime plus 1.0%,
due January 1, 2014 1,769 533
----------- ---------
Total Unsecured Note 1,769 533
----------- ---------
Total Mortgages and Note Payable $ 74,827 $ 15,418
----------- ---------
----------- ---------

F-54

UNCOMBINED JOINT VENTURES OF
SL GREEN PREDECESSOR

DECEMBER 31, 1996

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

2. MORTGAGE NOTES PAYABLE (CONTINUED)
An analysis of the mortgages and accrued interest are as follows:

MORTGAGE ACCRUED
PAYABLE INTEREST
MORTGAGE TYPE 1996 1996
- ------------------------------------------------------------------------ ----------- ---------

First mortgages......................................................... $ 43,811 $ 98
Second mortgages........................................................ 16,247 4,583
Third mortgage.......................................................... 13,000 10,204
Unsecured note.......................................................... 1,769 533
----------- ---------
$ 74,827 $ 15,418
----------- ---------
----------- ---------

(A) 470 Park Avenue South

The third mortgage requires the monthly payment of minimum interest at 6%.
The difference between the minimum interest and the base interest of 10.98%
may be deferred until the maturity of the mortgage. The mortgage requires
additional interest of 50% of adjusted gross revenue, as defined in the
mortgage agreement, of the property for the applicable loan year. If the
total loan balance exceeds 90% of the appraised value in lieu of payments of
additional interest all of the adjusted gross revenue shall be paid and
applied as a reduction of the principal indebtedness until such time as the
loan balance is reduced to 90% of the appraised value. Upon payment of the
outstanding principal balance at maturity or on another date shared
appreciation interest, as defined in the mortgage agreement will be due. The
holder of the mortgage is entitled to an annual rate of return on the
mortgage of 13%. If the annual rate of return is less than 13%, the share
appreciation interest will be increased to the percentage necessary to
provide the mortgage holder with such return. Additional interest of $19 was
due in 1996 and was unpaid as of December 31, 1996.

3. EXTRAORDINARY ITEM

Forgiveness of mortgage debt totaling $33,419 is reflected in the 1997
combined statement of operation as in extraordinary gain.

4. DEFERRED COSTS

Deferred costs consist of the following:

1996
---------

Deferred financing................................................................... $ 3,372
Deferred lease....................................................................... 7,415
---------
10,787
Less accumulated amortization........................................................ (5,975)
---------
$ 4,812
---------
---------

F-55

UNCOMBINED JOINT VENTURES OF
SL GREEN PREDECESSOR

DECEMBER 31, 1996

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

5. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosures of estimated fair value were determined by
management, using available market information and appropriate valuation
methodologies. Considerable judgment is necessary to interpret market data and
develop estimated fair value. Accordingly, the estimates presented herein are
not necessarily indicative of the amounts the properties could realize on
disposition of financial instruments. The use of different market assumptions
and/or estimation methodologies may have a material effect on the estimated fair
value amounts.

Cash equivalents and variable rate mortgages are carried at amounts which
reasonably approximate their fair values. Estimated fair value is based on
anticipated settlement in connection with the REIT formation, interest rates and
other related factors currently available to the properties for issuance of debt
with similar terms and remaining maturities. The fair value by mortgage type as
of December 31, 1996 is as follows:

CARRYING
MORTGAGE TYPE AMOUNT FAIR VALUE
- ----------------------------------------------------------------------- --------- -----------

First Mortgages........................................................ $ 43,811 $ 44,369
Second Mortgages....................................................... 16,247 6,067
Third Mortgages........................................................ 13,000 12,000
Unsecured Note......................................................... 1,769 0

Disclosure about fair value of financial instruments is based on pertinent
information available to management as of December 31, 1996. Although management
is not aware of any factors that would significantly affect the reasonable fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these financial statements since that date and current estimates of fair
value may differ significantly from the amounts presented herein.

6. LEASE AGREEMENTS

CAPITAL LEASE

Rent expense amounted to approximately $3,756 for each year ended December
31, 1996 and 1995 respectively. For the period January 1, 1997 to August 20,
1997 rent expense amounted to approximately $2,425.

F-56

UNCOMBINED JOINT VENTURES OF
SL GREEN PREDECESSOR

DECEMBER 31, 1996

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

6. LEASE AGREEMENTS (CONTINUED)
CAPITAL LEASE BUILDING

Leased property consists of the following:

1996
---------

Building........................................................................... $ 12,208
Less accumulation amortization..................................................... 2,035
---------
Leased property, net............................................................... $ 10,173
---------
---------

7. RELATED PARTY TRANSACTIONS

There are several business relationships with related parties which involve
management, leasing, and construction fee revenues and maintenance expenses in
the ordinary course of business. Transactions include the following:

YEAR ENDED DECEMBER
JANUARY 1 TO 31,
AUGUST 20, --------------------
1997 1996 1995
------------- --------- ---------

Management expenses............................................. $ 448 $ 622 $ 563
Leasing commission expenses..................................... 295 218 48
Construction fees............................................... 1,796 185 376
Maintenance expenses............................................ 186 227 132

Amounts due to related parties consist of:

DECEMBER 31,
1996
---------------

SL Green Management Corp........................................................ $ 512
Other partners.................................................................. 176
-----
$ 688
-----
-----

8. BENEFIT PLAN

The building employees of the individual partnerships are covered by
multi-employer defined benefit pension plans and post-retirement health and
welfare plans. Contributions to these plans amounted to $42 and $30 in 1996 and
1995 respectively; and $38 for the period January 1 to August 20, 1997. Separate
actuarial information regarding such plans is not made available to the
contributing employers by the union administrators or trustees, since the plans
do not maintain separate records for each reporting unit.

F-57

UNCOMBINED JOINT VENTURES OF
SL GREEN PREDECESSOR

DECEMBER 31, 1996

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

9. CONTINGENCIES

SL Green Predecessor is party to a variety of legal proceedings relating to
the ownership of the Properties arising in the ordinary course of business. SL
Green Predecessor management believes that substantially all of these
liabilities are covered by insurance. All of these matters, taken together, are
not expected to have a material adverse impact on the uncombined joint venture
of SL Green Predecessor's, financial position, results of operations or cash
flows.

10. ENVIRONMENTAL MATTERS

The management of SL Green Predecessor believes that the properties are in
compliance in all material respects with applicable federal, state and local
ordinances and regulations regarding environmental issues. Management is not
aware of any environmental liability that management believes would have a
material adverse impact on the uncombined joint venture of SL Green
Predecessor's financial position, results of operations or cash flows.
Management is unaware of any instances in which it would incur significant
environmental cost if any of the properties were sold.

F-58

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors of
SL Green Realty Corp.

We have audited the statement of revenues and certain expenses of the
property at 36 West 44th Street ("Bar Building") as described in Note 1, for the
year ended December 31, 1996. The financial statement is the responsibility of
management of the Bar Building. Our responsibility is to express an opinion on
this financial statement 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and the 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.

The accompanying statement of revenues and certain expenses was prepared for
the purposes of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in Form S-11 of SL Green Realty Corp. and is
not intended to be a complete presentation of the Bar Building's revenues and
expenses.

In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of the Bar Building,
as described in Note 1 for the year ended December 31, 1996 in conformity with
generally accepted accounting principles.

/S/ Ernst & Young LLP

New York, New York
May 7, 1997

F-59

36 WEST 44TH STREET

STATEMENTS OF REVENUES AND CERTAIN EXPENSES

(DOLLARS IN THOUSANDS)

NOTE 1

YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1996 JUNE 30, 1997
----------------- -----------------

(UNAUDITED)
Revenues
Rental revenue............................................................ $ 3,599 $ 1,547
Escalation and reimbursement revenue...................................... 980 471
Other income.............................................................. 53 30
------ ------
Total revenues.............................................................. 4,632 2,048
------ ------
Certain Expenses
Property taxes............................................................ 872 413
Cleaning and security..................................................... 838 250
Utilities................................................................. 358 165
Professional fees......................................................... 133 42
Payroll and expenses...................................................... 74 131
Management fees........................................................... 61 61
Repairs and maintenance................................................... 40 46
Ground rent............................................................... 93 46
Other operating expenses.................................................. 100 69
------ ------
Total certain expenses...................................................... 2,569 1,223
------ ------
Revenues in excess of certain expenses...................................... $ 2,063 $ 825
------ ------
------ ------

See accompanying notes.

F-60

36 WEST 44TH STREET

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

(DOLLARS IN THOUSANDS)

DECEMBER 31, 1996

1. BASIS OF PRESENTATION

Presented herein are the statements of revenues and certain expenses related
to the operations of the Bar Building, (the "Property"), located in the borough
of Manhattan in New York City.

The accompanying financial statements have been prepared in accordance with
the applicable rules and regulations of the Securities and Exchange Commission
for the acquisition of real estate properties. Accordingly, the financial
statements exclude certain expenses that may not be comparable to those expected
to be incurred by the SL Green Realty Corp. in the proposed future operations of
the Property. Items excluded consist of interest, amortization and depreciation.

On September 30, 1996 Praedium Bar Associates, LLC ("Praedium") acquired the
mortgage secured by the property and SL Green Predecessor acquired its interest
in Praedium.

2. USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

3. REVENUE RECOGNITION

The Property is leased to tenants under operating leases. Minimum rental
income is generally recognized on a straight-line basis over the term of the
lease. The excess of amounts due over amounts so recognized pursuant to the
underlying leases amounted to approximately $60 and $29 (unaudited) for the year
ended December 31, 1996 and the six months ended June 30, 1997, respectively.

4. CONCENTRATION OF REVENUE

Approximately 11% and 13% of the Bar Building's revenue for the year ended
December 31, 1996 and the six months ended June 30, 1997, respectively, was
derived from one tenant.

5. MANAGEMENT AGREEMENTS

There was no management fee incurred for the period January 1, through June
28, 1996. The compensation for management services incurred from June 28,
through September 30, 1996 included an initial one time start-up fee of $7,500
and thereafter, a monthly fixed fee of $7,500. For the period of October 1,
through December 31, 1996 the management fee was based on three percent (3%) of
gross receipts from the Property.

6. LEASE AGREEMENTS

The Property is being leased to tenants under operating leases with term
expiration dates ranging from 1997 to 2006. The minimum rental amounts due under
the leases are generally subject to scheduled fixed increases. The leases
generally also require that the tenants reimburse the Property for increases in
certain operating costs and real estate taxes above their base year costs.
Approximate future minimum

F-61

36 WEST 44TH STREET

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES (CONTINUED)

(DOLLARS IN THOUSANDS)

DECEMBER 31, 1996

6. LEASE AGREEMENTS (CONTINUED)
rents to be received over the next five years and thereafter for non-cancelable
operating leases as of December 31, 1996 (exclusive of renewal option periods)
are as follows:

1997............................................................... $ 2,886
1998............................................................... 2,335
1999............................................................... 2,110
2000............................................................... 1,434
2001............................................................... 859
Thereafter......................................................... 1,163
---------
$ 10,787
---------
---------

The Property is the lessee of a triple net ground lease with term expiration
date of 2080. The minimum rental amounts due under the ground lease is subject
to scheduled increases, based on 33% of the percentage increase in the Consumer
Price Index. The ground lease requires that the tenant is responsible for the
payment for all expenses. Approximate future minimum rents to be paid over the
next five years and thereafter for the ground lease as of December 31, 1996 are
as follows:

1997................................................................ $ 93
1998................................................................ 93
1999................................................................ 93
2000................................................................ 93
2001................................................................ 93
Thereafter.......................................................... 7,347
---------
$ 7,812
---------
---------

7. RELATED PARTY TRANSACTIONS

There are several business relationships with related parties which involve
management, leasing and maintenance expenses. Transactions include the
following:

YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1996 JUNE 30, 1997
--------------------- ---------------------

(UNAUDITED)
Leasing commission's................................... $ 40 $ 98
Management fees........................................ 31 61
Cleaning and security.................................. 6 42

8. INTERIM UNAUDITED FINANCIAL INFORMATION

The financial statement for the six months ended June 30, 1997 is unaudited,
however, in the opinion of management all adjustments, (consisting solely of
normal recurring adjustments), necessary for a fair presentation of the
financial statement for the interim period have been included. The results of
the interim period is not necessarily indicative of the results to be obtained
for a full fiscal year.

F-62

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors of
SL Green Realty Corp.

We have audited the statement of revenues and certain expenses of the
property at 1372 Broadway, as described in Note 1, for the year ended December
31, 1996. The financial statement is the responsibility of management of 1372
Broadway. Our responsibility is to express an opinion on this financial
statement 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and the 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 statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of 1372 Broadway, as
described in Note 1 for the year ended December 31, 1996 in conformity with
generally accepted accounting principles.

/S/ Ernst & Young LLP

New York, New York
May 2, 1997

F-63

1372 BROADWAY

STATEMENTS OF REVENUES AND CERTAIN EXPENSES

(DOLLARS IN THOUSANDS)

NOTE 1

SIX MONTHS ENDED
JUNE 30, 1997
YEAR ENDED -----------------
DECEMBER 31, 1996
----------------- (UNAUDITED)

Revenues
Rental revenue............................................................ $ 8,580 $ 4,054
Escalations and reimbursement revenue..................................... 1,842 562
Other income.............................................................. 690 1,483
------ ------
Total revenues.............................................................. 11,112 6,099
------ ------
Certain Expenses
Property taxes............................................................ 2,343 1,098
Utilities................................................................. 1,287 491
Management fees........................................................... 459 142
Marketing, general, and administrative.................................... 335 144
Repairs and maintenance................................................... 950 462
Insurance................................................................. 77 32
Security.................................................................. 149 66
------ ------
Total certain expenses...................................................... 5,600 2,435
------ ------
Revenues in excess of certain expenses...................................... $ 5,512 $ 3,664
------ ------
------ ------

See accompanying notes.

F-64

1372 BROADWAY

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

(DOLLARS IN THOUSANDS)

DECEMBER 31, 1996

1. BASIS OF PRESENTATION

Presented herein are the statements of revenues and certain expenses related
to the operations of 1372 Broadway (the "Property"), located in the New York
City garment district, which is principally leased by garment, banking, and
retail tenants.

2. USE OF ESTIMATES

3. REVENUE RECOGNITION

The Property is being leased to tenants under operating leases. Minimum
rental income is generally recognized on a straight-line basis over the term of
the lease. The excess of amounts so recognized over amounts due pursuant to the
underlying leases amounted to approximately $22 and $(117) (unaudited) for the
year ended December 31, 1996 and the six months ended June 30, 1997
respectively.

4. MANAGEMENT AGREEMENTS

The Property, as of July 1, 1997, is managed by Axiom Real Estate Management
("Axiom"), Inc. for a fixed annual amount of $37 plus an allocation of overhead
costs which were approximately $354 in 1996. Prior to May 1, 1997, the Property
was managed by Winthrop Management for a fee of 5% of gross rental receipts.

5. INSURANCE COSTS

Insurance costs represent 1372 Broadway's portion of an umbrella policy held
by Winthrop Management.

F-65

1372 BROADWAY

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES (CONTINUED)

(DOLLARS IN THOUSANDS)

DECEMBER 31, 1996

6. LEASE AGREEMENTS

The Property is being leased to tenants under operating leases with
expiration dates ranging from 1997 to 2010. Most leases contain renewal options
at the election of the lessee. The lease agreements generally contain provisions
for reimbursements of real estate taxes and operating expenses over base year
amounts. Future minimum lease receipts under non-cancelable operating leases as
of December 31, 1996 (exclusive of renewal option periods) were as follows:

1997............................................... $ 8,253
1998............................................... 8,389
1999............................................... 8,421
2000............................................... 7,505
2001............................................... 7,084
Thereafter......................................... 36,787
---------
$ 76,439
---------
---------

7. CONCENTRATION OF REVENUE

Approximately 42% and 40% of 1372 Broadway's revenue for the year ended
December 31, 1996 and for the six months ended June 30, 1997 were derived from
three tenants.

8. CONTINGENCY

As of March 12, 1996, 1372 Broadway has been in legal proceedings related to
grievances filed by the Service Employees International Union for allegedly
violating the terms of their agreement for cleaning services. At this time
management can not estimate the loss, if any, associated with this litigation.

9. INTERIM UNAUDITED FINANCIAL INFORMATION

10. SUBSEQUENT EVENT

On January 31, 1997, a tenant entered into an agreement whereby certain
space leased by the tenant was terminated for a fee of $1,350.

F-66

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors of
SL Green Realty Corp.

We have audited the statement of revenues and certain expenses of the
property at 1140 Avenue of the Americas, as described in Note 1, for the year
ended December 31, 1996. The financial statement is the responsibility of
management of 1140 Avenue of the Americas. Our responsibility is to express an
opinion on this financial statement 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and the 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.

The accompanying statement of revenues and certain expenses was prepared for
the purposes of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in Form S-11 of S.L. Green Realty Corp. and is
not intended to be a complete presentation of 1140 Avenue of the Americas'
revenues and expenses.

In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of 1140 Avenue of
the Americas, as described in Note 1 for the year ended December 31, 1996 in
conformity with generally accepted accounting principles.

/S/ Ernst & Young LLP

New York, New York

May 23, 1997

F-67

1140 AVENUE OF THE AMERICAS

STATEMENTS OF REVENUES AND CERTAIN EXPENSES

(DOLLARS IN THOUSANDS)

NOTE 1

YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1996 JUNE 30, 1997
----------------- -----------------

(UNAUDITED)
Revenues
Rental revenue............................................................ $ 4,265 $ 2,178
Escalations and reimbursement revenue..................................... 716 346
Other income.............................................................. 204 48
------- -------
Total revenues.............................................................. 5,185 2,572
------- -------
Certain Expenses
Property taxes............................................................ 1,007 519
Utilities................................................................. 720 259
Cleaning and security..................................................... 551 281
Payroll and expenses...................................................... 241 137
Management fees........................................................... 205 102
Repairs and maintenance................................................... 180 69
Professional fees......................................................... 107 61
Interest--capital lease................................................... 56 28
Lease expense............................................................. 14 7
Insurance................................................................. 53 21
Other operating expenses.................................................. 50 27
------- -------
Total certain expenses...................................................... 3,184 1,511
------- -------

Revenues in excess of certain expenses...................................... $ 2,001 $ 1,061
------- -------
------- -------

See accompanying notes.

F-68

1140 AVENUE OF THE AMERICAS

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

(DOLLARS IN THOUSANDS)

DECEMBER 31, 1996

1. BASIS OF PRESENTATION

Presented herein are the statements of revenues and certain expenses related
to the operations of 1140 Avenue of the Americas, (the "Property"), located in
the borough of Manhattan in New York City.

2. USE OF ESTIMATES

3. REVENUE RECOGNITION

The Property is leased to tenants under operating leases. Minimum rental
income is generally recognized on a straight-line basis over the term of the
lease. The excess of amounts due pursuant to the underlying leases over amounts
so recognized amounted to approximately $59 and $54 (unaudited) for the year
ended December 31, 1996 and the six months ended June 30, 1997, respectively.

4. CONCENTRATION OF REVENUE

Approximately 10% of 1140 Avenue of the Americas' revenue for the year ended
December 31, 1996 and the six months ended June 30, 1997, respectively was
derived from one tenant.

5. MANAGEMENT AGREEMENTS

During 1996 and the period ended June 30, 1997 the Property was managed by
Murray Hill Property Management, Inc. During the period from January 1, 1996 to
June 30, 1997 the management and asset management fees were based on three
percent (3%) and one percent (1%) of gross collections from the Property,
respectively.

6. LEASE AGREEMENTS

The Property is being leased to tenants under operating leases with term
expiration dates ranging from 1997 to 2007. The minimum rental amounts due under
the leases are generally subject to scheduled fixed increases. The leases
generally also require that the tenants reimburse the Property for increases in
certain operating costs and real estate taxes above their base year costs.
Approximate future minimum

F-69

1140 AVENUE OF THE AMERICAS

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES (CONTINUED)

(DOLLARS IN THOUSANDS)

DECEMBER 31, 1996

1997............................................................... $ 4,439
1998............................................................... 4,210
1999............................................................... 3,813
2000............................................................... 3,327
2001............................................................... 2,826
Thereafter......................................................... 7,638
---------
$ 26,253
---------
---------

The Property operates under a net ground lease with a term expiration date
of 2016, with an option to renew for an additional 50 years. The minimum rental
amounts due under the ground lease is subject to increases every 21 years based
on four and a half percent (4 1/2%) of the fair and reasonable market value of
the unencumbered land. The ground lease requires that the tenant is responsible
for the payment for all expenses. The current annual rent for the period
commencing January 1, 1997 through December 31, 2016 was in arbitration due to a
disagreement relating to the market value of the land and has been recently
resolved in the amount of approximately $380 (unaudited).

7. INTERIM UNAUDITED FINANCIAL INFORMATION

F-70

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors of
SL Green Realty Corp.

We have audited the statement of revenues and certain expenses of the
property at 50 West 23rd Street, as described in Note 1, for the year ended
December 31, 1996. The financial statement is the responsibility of management
of 50 West 23rd Street. Our responsibility is to express an opinion on this
financial statement 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and the 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 statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of 50 West 23rd
Street, as described in Note 1 for the year ended December 31, 1996 in
conformity with generally accepted accounting principles.

/S/ ERNST & YOUNG LLP

New York, New York
May 29, 1997

F-71

50 WEST 23RD STREET

STATEMENTS OF REVENUES AND CERTAIN EXPENSES

(DOLLARS IN THOUSANDS)

(NOTE 1)

SIX MONTHS
YEAR ENDED ENDED JUNE 30,
DECEMBER 31, 1996 1997
----------------- ---------------

(UNAUDITED)
Revenues
Rental revenue............................................................. $ 5,357 $ 2,597
Escalations and reimbursement revenue...................................... 716 386
Other income............................................................... 12 1
------ ------
Total revenues............................................................... 6,085 2,984
------ ------
Certain Expenses
Property taxes............................................................. 1,006 518
Utilities.................................................................. 241 115
Management fees............................................................ 195 91
Marketing, general, and administrative..................................... 129 53
Repairs and maintenance.................................................... 808 362
Insurance.................................................................. 37 19
Security................................................................... 101 49
------ ------
Total certain expenses....................................................... 2,517 1,207
------ ------
Revenues in excess of certain expenses....................................... $ 3,568 $ 1,777
------ ------
------ ------

See accompanying notes.

F-72

50 WEST 23RD STREET

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

(DOLLARS IN THOUSANDS)

DECEMBER 31, 1996

1. BASIS OF PRESENTATION

Presented herein are the statements of revenues and certain expenses related
to the operations of 50 West 23rd Street (the "Property"), located in the
borough of Manhattan in New York City, which is principally leased by
government, professional, and retail tenants.

2. USE OF ESTIMATES

3. REVENUE RECOGNITION

The Property is being leased to tenants under operating leases. Minimum
rental income is recognized on a straight-line basis over the term of the lease.
The excess of amounts so recognized over amounts due pursuant to the underlying
leases amounted to approximately $50 and $127 (unaudited) for the year ended
December 31, 1996 and the six months ended June 30, 1997 respectively.

4. MANAGEMENT AGREEMENTS

The Property has been managed by Montrose Realty Corp., a related party to
the seller, since May 1, 1989 for a fee of 3% of all rent, escalation rent and
additional rent, and any other proceeds received from the Property.

5. LEASE AGREEMENTS

The Property is being leased to tenants under operating leases with term
expiration dates ranging from 1997 to 2010. Most leases contain renewal options
at the election of the lessee. The lease agreements generally contain provisions
for reimbursements of real estate taxes and operating expenses over base year
amounts. Future minimum lease receipts under non-cancelable operating leases as
of December 31, 1996 (exclusive of renewal option periods) were as follows:

1997............................................... $ 5,097
1998............................................... 5,387
1999............................................... 4,735
2000............................................... 4,719
2001............................................... 3,986
Thereafter......................................... 13,845
---------
$ 37,769
---------
---------

F-73

50 WEST 23RD STREET

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES (CONTINUED)

(DOLLARS IN THOUSANDS)

DECEMBER 31, 1996

6. CONCENTRATION OF REVENUE

Approximately 53% and 55% of 50 West 23rd Street's revenue for the year
ended December 31, 1996 and the six months ended June 30, 1997 was derived from
three tenants.

7. RELATED PARTY TRANSACTIONS

Legal fees of $120 were paid to a firm, certain partners of which are
affiliated with the general partner of the seller. Of such amount, $76 was
included in professional fees for the year ended December 31, 1996.

8. INTERIM UNAUDITED FINANCIAL INFORMATION

The statement of revenues and certain expenses for the six months ended June
30, 1997 is unaudited, however, in the opinion of management all adjustments,
(consisting solely of normal recurring adjustments), necessary for a fair
presentation of this financial statement for the interim period have been
included. The results of interim periods are not necessarily indicative of the
results to be obtained for a full fiscal year.

F-74

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors of
SL Green Realty Corp.

We have audited the statement of revenues and certain expenses of the
property at 110 East 42nd Street, as described in Note 1, for the year ended
December 31, 1996. The financial statement is the responsibility of management
of the Property. Our responsibility is to express an opinion on this financial
statement 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and the 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.

The accompanying statement of revenues and certain expenses was prepared for
the purposes of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in Form S-11 of SL Green Realty Corp., and is
not intended to be a complete presentation of the Property's revenues and
expenses.

In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of the Property, as
described in Note 1 for the year ended December 31, 1996 in conformity with
generally accepted accounting principles.

/s/ Ernst & Young LLP

New York, New York
November 3, 1997

F-75

110 EAST 42ND STREET

STATEMENTS OF REVENUES AND CERTAIN EXPENSES

(DOLLARS IN THOUSANDS)

NOTE 1

YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
1996 1997
------------- ---------------

(UNAUDITED)
Revenues
Rental revenue................................................................... $ 4,306 $ 2,470
Escalations and reimbursement revenue............................................ 520 354
Other income..................................................................... 16 10
------ ------
Total revenues..................................................................... 4,842 2,834
------ ------
Certain Expenses
Property taxes................................................................... 1,422 706
Utilities........................................................................ 708 329
Cleaning and service contracts................................................... 811 411
Payroll and expenses............................................................. 413 245
Management fees.................................................................. 172 104
Repairs and maintenance.......................................................... 150 60
Professional fees................................................................ 42 29
Insurance........................................................................ 60 30
Other operating expenses......................................................... 166 90
------ ------
Total certain expenses............................................................. 3,944 2,004
------ ------
Revenues in excess of certain expenses............................................. $ 898 $ 830
------ ------
------ ------

See accompanying notes.

F-76

110 EAST 42ND STREET

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

(DOLLARS IN THOUSANDS)

DECEMBER 31, 1996

1. BASIS OF PRESENTATION

Presented herein are the statements of revenues and certain expenses related
to the operations of the property, located at 110 East 42nd Street, in the Grand
Central District sub-market, in the borough of Manhattan in New York City, (the
"Property"). The Property is comprised of a building containing 250,548 square
feet.

The accompanying financial statements have been prepared in accordance with
the applicable rules and regulations of the Securities and Exchange Commission
for the acquisition of real estate properties. Accordingly, the financial
statements exclude certain expenses that may not be comparable to those expected
to be incurred by SL Green Realty Corp., in the proposed future operations of
the Property. The Property was acquired by SL Green on September 15, 1997. Items
excluded consist of interest, amortization and depreciation.

2. USE OF ESTIMATES

3. REVENUE RECOGNITION

The Property is leased to tenants under operating leases. Minimum rental
income is generally recognized on a straight-line basis over the term of the
lease. The excess of amounts due pursuant to the underlying leases over amounts
so recognized amounted to approximately $280 for the year ended December 31,
1996. For the six months ended June 30, 1997 amounts so recognized exceeded
amounts due pursuant to the underlying leases by $82 (unaudited).

4. CONCENTRATION OF REVENUE

Approximately 60% and 18% of the Property's revenue for the year ended
December 31, 1996 and the six months ended June 30, 1997 (unaudited),
respectively was derived from one tenant.

5. MANAGEMENT AGREEMENTS

During 1996 and the period ended June 30, 1997 the Property was managed by
Metromedia, Inc. During the year ended December 31, 1996 the management fees
were based on quarterly fixed payments of $13 and administrative salaries.
During the six months ended June 30, 1997 (unaudited) the management fees were
based on quarterly fixed payments of $25 and administrative salaries.

6. RELATED PARTY TRANSACTIONS

Office space is leased to companies that have shareholders who are also
partners in the partnership which owned the Property. Total rents from these
affiliated companies totaled $82 and $50 at December 31, 1996 and June 30, 1997
(unaudited), respectively.

A company controlled by partners of the partnership which owned the Property
provided management and administrative services to the Property. The management
fee for these services were $172 and

F-77

110 EAST 42ND STREET

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES (CONTINUED)

(DOLLARS IN THOUSANDS)

DECEMBER 31, 1996

6. RELATED PARTY TRANSACTIONS (CONTINUED)
$104 for the year ended December 31, 1996 and for the six months ended June 30,
1997 (unaudited), respectively.

7. LEASE AGREEMENTS

1997............................................... $ 4,654
1998............................................... 4,619
1999............................................... 4,564
2000............................................... 4,128
2001............................................... 3,533
Thereafter......................................... 9,204
---------
$ 30,702
---------
---------

8. INTERIM UNAUDITED FINANCIAL INFORMATION

F-78

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors of
SL Green Realty Corp.

We have audited the statement of revenues and certain expenses of the
property at 17 Battery Place as described in Note 1, for the year ended December
31, 1996. This financial statement is the responsibility of management of the
property. Our responsibility is to express an opinion on this financial
statement 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and the 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.

The accompanying statement of revenues and certain expenses was prepared for
the purposes of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in Form S-11 of SL Green Realty Corp., and is
not intended to be a complete presentation of 17 Battery Place as described in
Note 1, revenues and expenses.

In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of 17 Battery Place
as described in Note 1, for the year ended December 31, 1996 in conformity with
generally accepted accounting principles.

/s/ Ernst & Young LLP

New York, New York
December 16, 1997

F-79

17 BATTERY PLACE

STATEMENTS OF REVENUES AND CERTAIN EXPENSES

(DOLLARS IN THOUSANDS)
NOTE 1

NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------

(UNAUDITED)
Revenues
Rental revenue.................................................................... $ 13,231 $ 9,750
Escalations and reimbursement revenue............................................. 1,097 696
Other income...................................................................... 62 64
------------ -------------
Total revenues...................................................................... 14,390 10,510
------------ -------------
Certain Expenses
Property taxes.................................................................... 2,519 1,624
Utilities......................................................................... 1,487 1,189
Cleaning and service contracts.................................................... 2,175 1,569
Payroll and expenses.............................................................. 959 716
Management fees................................................................... 375 321
Repairs and maintenance........................................................... 192 168
Professional fees................................................................. 261 59
Insurance......................................................................... 86 67
Other operating expenses.......................................................... 124 31
------------ -------------
Total certain expenses.............................................................. 8,178 5,744
------------ -------------
Revenues in excess of certain expenses.............................................. $ 6,212 $ 4,766
------------ -------------
------------ -------------

See accompanying notes.

F-80

17 BATTERY PLACE

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

(DOLLARS IN THOUSANDS)

DECEMBER 31, 1996

1. BASIS OF PRESENTATION

Presented herein are the statements of revenues and certain expenses related
to the operations of 17 Battery Place, located in the World Trade Center
sub-market, in the borough of Manhattan in New York City. The property is
comprised of interconnected office buildings (North and South) containing a
total of approximately 1,221,481 square feet (which space is currently rented or
available for use on a commercial basis). Through its interest in a cotenancy,
SLG 17 Battery LLC, ("Green LLC") a New York limited liability company
wholly-owned by SL Green Realty Corp. ("SL Green"), purchased the entire North
Building and portions of the ground floor and floors one through thirteen of the
South Building, encompassing approximately 806,927 square feet (the "Office
Space"). An unrelated third party ("Third Party") has through its interest in
the cotenancy purchased portions of the ground floor and floors fourteen through
thirty-one of the South Building which represents the remaining 414,554 square
feet of the property. The Third Party plans to convert its space into a hotel
and residential units, (the "Hotel/ Residential Space"). Green LLC has entered
into a cotenancy agreement with the Third Party and SL Green has financed the
Third Party's purchase through the issuance of a mortgage. The cotenancy
agreement provides for the allocation of revenue and expenses substantially
consistent with the Third Party's and Green LLC's ownership interest. It is the
intention of the parties to convert the property to condominium ownership. The
statements of revenues and certain expenses present the activity of the Office
Space purchased by SL Green.

All revenues and expenses have been allocated between the Office and
Hotel/Residential Space. The allocation method used for base rent and
escalations were based on specific identification of the tenants located in the
specific floors being purchased. Expenses were allocated based on an agreed upon
allocation between Green LLC and the Third Party.

The accompanying financial statements have been prepared in accordance with
the applicable rules and regulations of the Securities and Exchange Commission
for the acquisition of real estate properties. Accordingly, the financial
statements exclude certain expenses that may not be comparable to those expected
to be incurred by SL Green in its proposed future operations. Items excluded
consist of interest, amortization and depreciation.

2. USE OF ESTIMATES

3. REVENUE RECOGNITION

The Office Space is leased to tenants under operating leases. Minimum rental
income is generally recognized on a straight-line basis over the term of the
lease. The excess of amounts recognized over amounts due pursuant to the
underlying leases amounted to approximately $507 and $270 (unaudited) for the
year ended December 31, 1996 and the nine months ended September 30, 1997,
respectively.

F-81

17 BATTERY PLACE

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES (CONTINUED)

(DOLLARS IN THOUSANDS)

DECEMBER 31, 1996

4. CONCENTRATION OF REVENUE

Approximately 62% of the Office Space's revenue for the year ended December
31, 1996 and the nine months ended September 30, 1997, respectively was derived
from two tenants.

5. MANAGEMENT AGREEMENTS

During 1996 and the period ended September 30, 1997 the property manager was
SL Green Management, Inc. During the period from January 1, 1996 to September
30, 1997 the management fees were based on two percent (2%) of gross
collections. In addition, a $15,000 monthly asset management fee was paid to
Victor Capital Group.

6. LEASE AGREEMENTS

The Office Space is being leased to tenants under operating leases with term
expiration dates ranging from 1997 to 2009. The minimum rental amounts due under
the leases are generally subject to scheduled fixed increases. The leases
generally also require that the tenants reimburse for increases in certain
operating costs and real estate taxes above their base year costs. Approximate
future minimum rents to be received over the next five years and thereafter for
non-cancelable operating leases as of December 31, 1996 (exclusive of renewal
option periods) are as follows:

1997.............................................................. $ 12,638
1998.............................................................. 12,688
1999.............................................................. 12,371
2000.............................................................. 11,847
2001.............................................................. 11,531
Thereafter........................................................ 47,464
---------
$ 108,539
---------
---------

7. LEASE RESTRICTIONS

In connection with the cotenancy agreement (Note 1), prior to January 1,
1999, Green LLC is required to make available up to 153,000 rentable square feet
of vacant Office Space to tenants of 17 Battery Place, who currently occupy
portions of the Hotel/Residential Space. In order to convert the upper floors of
the South Building, the Third Party will exercise relocation options to relocate
tenants from the Hotel/Residential Space to Office Space.

8. INTERIM UNAUDITED FINANCIAL INFORMATION

The financial statement for the nine months ended September 30, 1997 is
unaudited, however, in the opinion of management all adjustments, (consisting
solely of normal recurring adjustments), necessary for a fair presentation of
the financial statement for the interim period have been included. The results
of the interim period is not necessarily indicative of the results to be
obtained for a full fiscal year.

F-82

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors of
SL Green Realty Corp.

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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and the 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.

The accompanying statement of revenues and certain expenses was prepared for
the purposes of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in Form S-11 of SL Green Realty Corp., and is
not intended to be a complete presentation of 17 Battery Place as described in
Note 1, revenues and expenses.

/s/ Ernst & Young LLP

New York, New York
December 16, 1997

F-83

17 BATTERY PLACE (MORTGAGOR)
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
(DOLLARS IN THOUSANDS)
NOTE 1

NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------- -------------

(UNAUDITED)
Revenues
Rental revenue.................................................................... $ 2,967 $ 2,717
Escalations and reimbursement revenue............................................. 857 654
Other income...................................................................... 21 19
------ ------
Total revenues...................................................................... 3,845 3,390
------ ------
Certain Expenses
Property taxes.................................................................... 781 504
Utilities......................................................................... 714 570
Cleaning and service contracts.................................................... 1,044 752
Payroll and expenses.............................................................. 460 343
Management fees................................................................... 134 115
Repairs and maintenance........................................................... 92 81
Professional fees................................................................. 125 28
Insurance......................................................................... 41 32
Other operating expenses.......................................................... 60 15
------ ------
Total certain expenses.............................................................. 3,451 2,440
------ ------
Revenues in excess of certain expenses.............................................. $ 394 $ 950
------ ------
------ ------

See accompanying notes.

F-84

17 BATTERY PLACE (MORTGAGOR)
NOTES TO STATMENTS OF REVENUES AND CERTAIN EXPENSES
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1996

1. BASIS OF PRESENTATION

Presented herein are the statements of revenues and certain expenses related
to the operations of 17 Battery Place, located in the World Trade Center
sub-market, in the borough of Manhattan in New York City. The property is
comprised of interconnected office buildings (North and South) containing a
total of approximately 1,221,481 square feet (which space is currently rented or
available for use on a commercial basis). Through its interest in a cotenancy,
SLG 17 Battery LLC, ("Green LLC") a New York limited liability company
wholly-owned by SL Green Realty Corp. ("SL Green"), purchased the entire North
Building and portions of the ground floor and floors one through thirteen of the
South Building, encompassing approximately 806,927 square feet (the "Office
Space"). An unrelated third party ("Third Party") has through its interest in
the cotenancy purchased a portion of the ground floor and floors fourteen
through thirty-one of the South Building which represents the remaining 414,554
square feet of the property. The Third Party plans to convert its space into a
hotel and residential units, (the "Hotel/ Residential Space"). Green LLC has
entered into a cotenancy agreement with the Third Party and has financed the
Third Party's purchase of its property through the issuance of a mortgage. The
cotenancy agreement provides for the allocation of revenue and expenses
substantially consistent with the Third Party's and Green LLC's ownership
interest. The statement of revenues and certain expenses presents the activity
of the Hotel/Residential Space which is the collateral for the mortgage issued
by SL Green.

All revenues and expenses have been allocated between the Office and
Hotel/Residential Space. The allocation method used for base rent and
escalations were based on specific identification of the tenants located in the
specific floors purchased. Expenses were allocated based on an agreed upon
allocation between Green LLC and the Third Party.

The accompanying financial statements have been prepared in accordance with
the applicable rules and regulations of the Securities and Exchange Commission
for a mortgage collateralized by real estate properties. Since it is intended
that the Hotel/Residential Space is to be converted to a hotel/ residential
units, future operations will be substantially different from those presented in
these statements of revenues and certain expenses. The financial statements
exclude certain expenses that may not be comparable to those expected to be
incurred by the Third Party in its proposed future operations. Items excluded
consist of interest, amortization and depreciation.

2. USE OF ESTIMATES

3. REVENUE RECOGNITION

The Third Party's interest currently is leased to tenants under operating
leases. Minimum rental income is generally recognized on a straight-line basis
over the term of the lease. The excess of amounts recognized over amounts due
pursuant to the underlying leases amounted to approximately $114 and $154
(unaudited) for the year ended December 31, 1996 and the nine months ended
September 30, 1997, respectively.

F-85

17 BATTERY PLACE (MORTGAGOR)
NOTES TO STATMENTS OF REVENUES AND CERTAIN EXPENSES (CONTINUED)
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1996

4. CONCENTRATION OF REVENUE

Approximately 40% and 25% of the revenue for the year ended December 31,
1996 and the nine months ended September 30, 1997, were derived from three and
two tenants, respectively.

5. MANAGEMENT AGREEMENTS

6. LEASE AGREEMENTS

The Third Party's interest is being leased to tenants under operating leases
with term expiration dates ranging from 1997 to 2005. The minimum rental amounts
due under the leases are generally subject to scheduled fixed increases. The
leases generally also require that the tenants reimburse increases in certain
operating costs and real estate taxes above their base year costs. Approximate
future minimum rents to be received over the next five years and thereafter for
non-cancelable operating leases as of December 31, 1996 (exclusive of renewal
option periods) are as follows:

1997............................................... $ 3,619
1998............................................... 2,534
1999............................................... 1,755
2000............................................... 1,575
2001............................................... 1,357
Thereafter......................................... 1,943
---------
$ 12,783
---------
---------

7. INTERIM UNAUDITED FINANCIAL INFORMATION

The financial statement for the nine months ended September 30, 1997 is
unaudited, however, in the opinion of management all adjustments, (consisting
solely of normal recurring adjustments), necessary for a fair presentation of
the interim period have been included. The results of the interim period is not
necessarily indicative of the results to be obtained for a full fiscal year.

F-86

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors of
SL Green Realty Corp.

We have audited the statement of revenues and certain expenses of the
property at 1466 Broadway, as described in Note 1, for the year ended December
31, 1997. The financial statement is the responsibility of management of the
Property. Our responsibility is to express an opinion on this financial
statement 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and the 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.

The accompanying statement of revenues and certain expenses was prepared for
the purposes of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in Form S-11 of SL Green Realty Corp., and is
not intended to be a complete presentation of the Property's revenues and
expenses.

In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of the Property, as
described in Note 1 for the year ended December 31, 1997 in conformity with
generally accepted accounting principles.

/s/ Ernst & Young LLP

New York, New York
March 13, 1998

F-87

1466 BROADWAY

STATEMENT OF REVENUES AND CERTAIN EXPENSES

(DOLLARS IN THOUSANDS)

NOTE 1

YEAR ENDED
DECEMBER 31,
1997
-------------

Revenues
Rental revenue.................................................................................... $ 7,749
Escalations and reimbursement revenue............................................................. 760
Other income...................................................................................... 225
------
Total revenues...................................................................................... 8,734
------

Certain Expenses
Property taxes.................................................................................... 1,931
Utilities......................................................................................... 559
Cleaning and service contracts.................................................................... 542
Payroll and expenses.............................................................................. 463
Management fees................................................................................... 151
Repairs and maintenance........................................................................... 453
Professional fees................................................................................. 87
Insurance......................................................................................... 87
Other operating expenses.......................................................................... 212
------
Total certain expenses.............................................................................. 4,485
------
Revenues in excess of certain expenses.............................................................. $ 4,249
------
------

See accompanying notes.

F-88

1466 BROADWAY

NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES

(DOLLARS IN THOUSANDS)

DECEMBER 31, 1997

1. BASIS OF PRESENTATION

Presented herein is the statement of revenues and certain expenses related
to the operations of the property, located at 1466 Broadway, in the Times Square
sub-market, in the borough of Manhattan in New York City, (the "Property").

The accompanying financial statement has been prepared in accordance with
the applicable rules and regulations of the Securities and Exchange Commission
for the acquisition of real estate properties. Accordingly, the financial
statement excludes certain expenses that may not be comparable to those expected
to be incurred by SL Green Realty Corp., in the proposed future operations of
the Property. Items excluded consist of interest, amortization and depreciation.

2. USE OF ESTIMATES

3. REVENUE RECOGNITION

4. CONCENTRATION OF REVENUE

Approximately 15% of the Property's revenue for the year ended December 31,
1997 was derived from one tenant.

5. MANAGEMENT AGREEMENTS

During 1997 the Property was managed by Helmsley Noyes Co., Inc., an
affiliate of Helmsley Enterprises Inc., the owner of the Property. During the
year ended December 31, 1997 the management fees were based on gross
collections, as follows: 5.0% for the first $200, 3.0% for the next $300 and
1.5%
for the excess above $500.

The fees incurred for managing the Property by the affiliated company for
the year ended December 31, 1997 was $151.

6. LEASE AGREEMENTS

The Property is being leased to tenants under operating leases with term
expiration dates ranging from 1998 to 2009. The minimum rental amounts due under
the leases are generally subject to scheduled fixed increases. The leases
generally also require that the tenants reimburse the Property for increases in
certain operating costs and real estate taxes above their base year costs.
Approximate future minimum

F-89

1466 BROADWAY

NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES (CONTINUED)

(DOLLARS IN THOUSANDS)

DECEMBER 31, 1997

6. LEASE AGREEMENTS (CONTINUED)
rents to be received over the next five years and thereafter for non-cancelable
operating leases as of December 31, 1997 (exclusive of renewal option periods)
are as follows:

1998............................................................... $ 6,600
1999............................................................... 5,600
2000............................................................... 4,100
2001............................................................... 3,200
2002............................................................... 2,600
Thereafter......................................................... 13,900
---------
$ 36,000
---------
---------

F-90

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors of
SL Green Realty Corp.

We have audited the statement of revenues and certain expenses of the
property at 420 Lexington Avenue, as described in Note 1, for the year ended
December 31, 1997. The financial statement is the responsibility of management
of the Property. Our responsibility is to express an opinion on this financial
statement 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and the 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.

The accompanying statement of revenues and certain expenses was prepared for
the purposes of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in Form S-11 of SL Green Realty Corp., and is
not intended to be a complete presentation of the Property's revenues and
expenses.

In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of the Property, as
described in Note 1 for the year ended December 31, 1997 in conformity with
generally accepted accounting principles.

/s/ Ernst & Young LLP

New York, New York
March 13, 1998

F-91

420 LEXINGTON AVENUE

STATEMENT OF REVENUES AND CERTAIN EXPENSES

(DOLLARS IN THOUSANDS)

NOTE 1

YEAR ENDED
DECEMBER 31,
1997
------------

Revenues
Rental revenue.................................................................................... $ 25,278
Escalations and reimbursement revenue............................................................. 5,708
Other income...................................................................................... 763
------------
Total revenues...................................................................................... 31,749
------------

Certain Expenses
Ground rent....................................................................................... 7,946
Property taxes.................................................................................... 5,823
Utilities......................................................................................... 3,452
Cleaning and service contracts.................................................................... 946
Payroll and expenses.............................................................................. 4,537
Management fees................................................................................... 442
Repairs and maintenance........................................................................... 1,499
Professional fees................................................................................. 622
Insurance......................................................................................... 358
Other operating expenses.......................................................................... 629
------------
Total certain expenses.............................................................................. 26,254
------------
Revenues in excess of certain expenses.............................................................. $ 5,495
------------
------------

See accompanying notes.

F-92

420 LEXINGTON AVENUE

NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES

(DOLLARS IN THOUSANDS)

DECEMBER 31, 1997

1. BASIS OF PRESENTATION

Presented herein is the statement of revenues and certain expenses related
to the operations of the property, located at 420 Lexington Avenue, in the Grand
Central District sub-market, in the borough of Manhattan in New York City, (the
"Property").

2. USE OF ESTIMATES

3. REVENUE RECOGNITION

4. CONCENTRATION OF REVENUE

Approximately 20% of the Property's revenue for the year ended December 31,
1997 was derived from two tenants.

5. MANAGEMENT AGREEMENTS

The fees incurred for managing the Property by the affiliated company for
the year ended December 31, 1997 was $442.

6. RELATED PARTY TRANSACTIONS

The Property recognized approximately $116 in rental income from companies
affiliated with the seller for the year ended December 31, 1997.

7. GROUND RENT

The Property is subject to an operating sublease agreement (the "Ground
Lease"), which is subject to the terms and conditions of three other subleases.
The Ground Lease, expiring on December 31, 2008,

F-93

420 LEXINGTON AVENUE

NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES (CONTINUED)

(DOLLARS IN THOUSANDS)

DECEMBER 31, 1997

7. GROUND RENT (CONTINUED)
requires fixed annual rent of approximately $7,918, (which includes $6,000 of
ground rent) plus an additional annual rent (overage rent) equal to 33.3% of net
earnings in excess of $2,740, a portion of which is deferred and paid over five
years. The Ground Lease contains an option to renew for an additional term of 21
years to the year 2029.

8. LEASE AGREEMENTS

The Property is being leased to tenants under operating leases with term
expiration dates ranging from 1998 to 2016. The minimum rental amounts due under
the leases are generally subject to scheduled fixed increases. The leases
generally also require that the tenants reimburse the Property for increases in
certain operating costs and real estate taxes above their base year costs.

Approximate future minimum rents to be received over the next five years and
thereafter for non-cancelable operating leases as of December 31, 1997
(exclusive of renewal option periods) are as follows:

1998.............................................................. $ 23,900
1999.............................................................. 21,300
2000.............................................................. 19,400
2001.............................................................. 16,200
2002.............................................................. 12,500
Thereafter........................................................ 66,100
---------
$ 159,400
---------
---------

F-94

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors of
SL Green Realty Corp.

We have audited the statement of revenues and certain expenses of the
property at 321 West 44th Street, as described in Note 1, for the year ended
June 30, 1997. The financial statement is the responsibility of management of
the Property. Our responsibility is to express an opinion on this financial
statement 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and the 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.

The accompanying statement of revenues and certain expenses was prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in Form S-11 of SL Green Realty Corp. and is
not intended to be a complete presentation of the Property's revenues and
expenses.

In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of the Property, as
described in Note 1 for the year ended June 30, 1997 in conformity with
generally accepted accounting principles.

/s/ Ernst & Young LLP

New York, New York
March 11, 1998

F-95

321 WEST 44TH STREET

STATEMENTS OF REVENUES AND CERTAIN EXPENSES

(DOLLARS IN THOUSANDS)

NOTE 1

SIX MONTHS
YEAR ENDED ENDED
JUNE 30, DECEMBER 31,
1997 1997
----------- -------------

(UNAUDITED)
Revenues
Rental revenue....................................................................... $ 2,457 $ 1,278
Escalations and reimbursement revenue................................................ 948 560
Other income......................................................................... 25 2
----------- ------
Total revenues......................................................................... 3,430 1,840
----------- ------
Certain Expenses
Property taxes....................................................................... 462 232
Utilities............................................................................ 792 464
Cleaning and service contracts....................................................... 108 34
Payroll and expenses................................................................. 300 150
Management fees...................................................................... 104 58
Repairs and maintenance.............................................................. 151 51
Professional fees.................................................................... 17 4
Insurance............................................................................ 27 12
Other operating expenses............................................................. 23 9
----------- ------
Total certain expenses................................................................. 1,984 1,014
----------- ------
Revenues in excess of certain expenses................................................. $ 1,446 $ 826
----------- ------
----------- ------

See accompanying notes.

F-96

321 WEST 44TH STREET

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES

(DOLLARS IN THOUSANDS)

JUNE 30, 1997

1. BASIS OF PRESENTATION

Presented herein are the statements of revenues and certain expenses related
to the operations of the property, located at 321 West 44th Street, in the
Clinton sub-market, in the borough of Manhattan in New York City, (the
"Property").

The accompanying financial statements have been prepared in accordance with
the applicable rules and regulations of the Securities and Exchange Commission
for the acquisition of real estate properties. Accordingly, the financial
statements exclude certain expenses that may not be comparable to those expected
to be incurred by SL Green Realty Corp., in the proposed future operations of
the Property. Items excluded consist of interest, amortization and depreciation
expense.

2. USE OF ESTIMATES

3. REVENUE RECOGNITION

The Property is leased to tenants under operating leases. Minimum rental
income is generally recognized on a straight-line basis over the term of the
lease. The excess of amounts due pursuant to the underlying leases over amounts
so recognized amounted to approximately $15 for the year ended June 30, 1997.
For the six months ended December 31, 1997 amounts so recognized exceeded
amounts due pursuant to the underlying leases by $15 (unaudited).

4. CONCENTRATION OF REVENUE

Approximately 54% and 52% of the Property's revenue for the year ended June
30, 1997 and the six months ended December 31, 1997 (unaudited), respectively
were derived from three tenants.

5. MANAGEMENT AGREEMENTS

During 1997 the Property was managed by Williams Real Estate Co., Inc.
During the year ended June 30, 1997 and the period July 1, 1997 to December 31,
1997 (unaudited) the management fees were based on 3% of rental receipts
including escalations and reimbursement revenues.

6. RELATED PARTY TRANSACTIONS

Insurance coverage is provided by Rosen Group Properties, an affiliate of
the seller. Total premiums paid to this affiliate totaled $14 and $7 for the
year ended June 30, 1997 and for the six months ended December 31, 1997
(unaudited), respectively.

7. LEASE AGREEMENTS

The Property is being leased to tenants under operating leases with term
expiration dates ranging from July 1, 1997 to 2006. The minimum rental amounts
due under the leases are generally subject to scheduled fixed increases. The
leases generally also require that the tenants reimburse the Property for

F-97

321 WEST 44TH STREET

NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES (CONTINUED)

(DOLLARS IN THOUSANDS)

JUNE 30, 1997

7. LEASE AGREEMENTS (CONTINUED)
increases in certain operating costs and real estate taxes above their base year
costs. Approximate future minimum rents to be received over the next five years
and thereafter for non-cancelable operating leases as of June 30, 1997
(exclusive of renewal option periods) are as follows:

1998............................................................... $ 2,600
1999............................................................... 2,200
2000............................................................... 1,800
2001............................................................... 1,500
2002............................................................... 1,500
Thereafter......................................................... 3,000
---------
$ 12,600
---------
---------

8. INTERIM UNAUDITED FINANCIAL INFORMATION

The statement of revenues and certain expenses for the six months ended
December 31, 1997 is unaudited, however, in the opinion of management all
adjustments, (consisting solely of normal recurring adjustments), necessary for
a fair presentation of the statement of revenues and certain expenses for the
interim period have been included. The results of the interim period are not
necessarily indicative of the results to be obtained for a full fiscal year.

F-98

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors of
SL Green Realty Corp.

We have audited the statement of revenues and certain expenses of the
property at 440 Ninth Avenue, as described in Note 1, for the year ended
December 31, 1997. The financial statement is the responsibility of management
of the Property. Our responsibility is to express an opinion on this financial
statement 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and the 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.

The accompanying statement of revenues and certain expenses was prepared for
the purposes of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in Form S-11 of SL Green Realty Corp., and is
not intended to be a complete presentation of the Property's revenues and
expenses.

In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of the Property, as
described in Note 1 for the year ended December 31, 1997 in conformity with
generally accepted accounting principles.

/s/ Ernst & Young LLP

New York, New York
March 31, 1998

F-99

440 NINTH AVENUE

STATEMENT OF REVENUES AND CERTAIN EXPENSES

(DOLLARS IN THOUSANDS)

NOTE 1

YEAR ENDED
DECEMBER 31,
1997
-------------

Revenues
Rental revenue.................................................................................... $ 3,923
Escalations and reimbursement revenue............................................................. 1,145
Other income...................................................................................... 68
------
Total revenues...................................................................................... 5,136
------
Certain Expenses
Property taxes.................................................................................... 1,123
Utilities......................................................................................... 774
Cleaning and service contracts.................................................................... 374
Payroll and expenses.............................................................................. 276
Management fees................................................................................... 256
Repairs and maintenance........................................................................... 115
Professional fees................................................................................. 37
Insurance......................................................................................... 74
Other operating expenses.......................................................................... 42
------
Total certain expenses.............................................................................. 3,071
------
Revenues in excess of certain expenses.............................................................. $ 2,065
------
------

See accompanying notes.

F-100

440 NINTH AVENUE

NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES

(DOLLARS IN THOUSANDS)

DECEMBER 31, 1997

1. BASIS OF PRESENTATION

Presented herein is the statement of revenues and certain expenses related
to the operations of the property located at 440 Ninth Avenue in New York City,
(the "Property").

2. USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the amounts reported in the financial statement and
accompanying notes. Actual results could differ from those estimates.

3. REVENUE RECOGNITION

4. CONCENTRATION OF REVENUE

Approximately 39% of the Property's revenue for the year ended December 31,
1997 was derived from three tenants.

5. MANAGEMENT AGREEMENTS

During 1997 the Property was managed by Murray Hill Property Management,
Inc., (the "Management Company"), a related party. During the year ended
December 31, 1997 the management fees were based on 5% of gross cash receipts.
The management fee was $256 for the year ended December 31, 1997. In addition,
the Property paid to the Management Company fees of $8 for accounting services
provided by the Management Company.

6. RELATED PARTY TRANSACTIONS

The Management Company leased office space at the Property for the year
ended December 31, 1997. The rental income of $95 was not billed to the
Management Company; however, it was partially offset by payments of $28 made by
the Management Company on behalf of the Property. The financial statement
reflects both the rental income and the expenses.

F-101

440 NINTH AVENUE

NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES (CONTINUED)

(DOLLARS IN THOUSANDS)

DECEMBER 31, 1997

7. INSURANCE COSTS

The Property is included in an umbrella insurance policy that covers several
properties managed by the Management Company. The Management Company allocates
the costs of the policy on a per square foot basis.

8. LEASE AGREEMENTS

1998............................................................... $ 4,000
1999............................................................... 4,100
2000............................................................... 3,500
2001............................................................... 2,800
2002............................................................... 1,300
Thereafter......................................................... 5,700
---------
$ 21,400
---------
---------

F-102

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors of
SL Green Realty Corp.

We have audited the statement of revenues and certain expenses of the
property at 38 East 30th Street, as described in Note 1, for the year ended
December 31, 1997. The financial statement is the responsibility of management
of the Property. Our responsibility is to express an opinion on this financial
statement 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and the 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.

The accompanying statement of revenues and certain expenses was prepared for
the purposes of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in Form S-11 of SL Green Realty Corp., and is
not intended to be a complete presentation of the Property's revenues and
expenses.

In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of the Property, as
described in Note 1 for the year ended December 31, 1997 in conformity with
generally accepted accounting principles.

/s/ Ernst & Young LLP

New York, New York
March 31, 1998

F-103

38 EAST 30TH STREET

STATEMENT OF REVENUES AND CERTAIN EXPENSES

(DOLLARS IN THOUSANDS)

NOTE 1

YEAR ENDED
DECEMBER 31,
1997
-------------

Revenues
Rental revenue.................................................................................... $ 1,240
Escalations and reimbursement revenue............................................................. 522
Other income...................................................................................... 31
------
Total revenues...................................................................................... 1,793
------
Certain Expenses
Property taxes.................................................................................... 289
Utilities......................................................................................... 303
Cleaning and service contracts.................................................................... 119
Payroll and expenses.............................................................................. 129
Management fees................................................................................... 101
Repairs and maintenance........................................................................... 52
Professional fees................................................................................. 19
Insurance......................................................................................... 24
Other operating expenses.......................................................................... 10
------
Total certain expenses.............................................................................. 1,046
------
Revenues in excess of certain expenses.............................................................. $ 747
------
------

See accompanying notes.

F-104

38 EAST 30(TH) STREET

NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES

(DOLLARS IN THOUSANDS)

DECEMBER 31, 1997

1. BASIS OF PRESENTATION

Presented herein is the statement of revenues and certain expenses related
to the operations of the property located at 38 East 30th Street in New York
City, (the "Property").

2. USE OF ESTIMATES

3. REVENUE RECOGNITION

4. CONCENTRATION OF REVENUE

Approximately 73% of the Property's revenue for the year ended December 31,
1997 was derived from two tenants.

5. MANAGEMENT AGREEMENTS

During 1997 the Property was managed by Murray Hill Property Management,
Inc., (the "Management Company"), a related party. During the year ended
December 31, 1997 the management fees were based on 5% of gross cash receipts.
The management fee was $101 for the year ended December 31, 1997. In addition,
the Property paid to the Management Company fees of $9 for accounting services
provided by the Management Company.

6. INSURANCE COSTS

7. LEASE AGREEMENTS

The Property is being leased to tenants under operating leases with term
expiration dates ranging from 1998 to 2007. The minimum rental amounts due under
the leases are generally subject to scheduled fixed increases. The leases
generally also require that the tenants reimburse the Property for increases in

F-105

38 EAST 30(TH) STREET

NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES (CONTINUED)

(DOLLARS IN THOUSANDS)

DECEMBER 31, 1997

7. LEASE AGREEMENTS (CONTINUED)
certain operating costs and real estate taxes above their base year costs.
Approximate future minimum rents to be received over the next five years and
thereafter for non-cancelable operating leases as of December 31, 1997
(exclusive of renewal option periods) are as follows:

1998................................................................ $ 1,300
1999................................................................ 1,200
2000................................................................ 1,300
2001................................................................ 700
2002................................................................ 700
Thereafter.......................................................... 2,800
---------
$ 8,000
---------
---------

F-106

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors of
SL Green Realty Corp.

We have audited the statement of revenues and certain expenses of the
property at 116 Nassau Street, as described in Note 1, for the year ended
December 31, 1997. The financial statement is the responsibility of management
of the Property. Our responsibility is to express an opinion on this financial
statement 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and the 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.

The accompanying statement of revenues and certain expenses was prepared for
the purposes of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in Form S-11 of SL Green Realty Corp., and is
not intended to be a complete presentation of the Property's revenues and
expenses.

In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of the Property, as
described in Note 1 for the year ended December 31, 1997 in conformity with
generally accepted accounting principles.

/s/ Ernst & Young LLP

New York, New York
March 31, 1998

F-107

116 NASSAU STREET

STATEMENT OF REVENUES AND CERTAIN EXPENSES

(DOLLARS IN THOUSANDS)

NOTE 1

YEAR ENDED
DECEMBER 31,
1997
-------------

Revenues
Rental revenue.................................................................................... $ 1,183
Escalations and reimbursement revenue............................................................. 36
Other income...................................................................................... 1
------
Total revenues...................................................................................... 1,220
------

Certain Expenses
Property taxes.................................................................................... 121
Utilities......................................................................................... 38
Cleaning and service contracts.................................................................... 6
Payroll and expenses.............................................................................. 61
Management fees................................................................................... 59
Repairs and maintenance........................................................................... 46
Professional fees................................................................................. 28
Insurance......................................................................................... 20
Other operating expenses.......................................................................... 6
------
Total certain expenses.............................................................................. 385
------
Revenues in excess of certain expenses.............................................................. $ 835
------
------

See accompanying notes.

F-108

116 NASSAU STREET

NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES

(DOLLARS IN THOUSANDS)

DECEMBER 31, 1997

1. BASIS OF PRESENTATION

Presented herein is the statement of revenues and certain expenses related
to the operations of the property located at 116 Nassau Street in Brooklyn, New
York, (the "Property").

2. USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the amounts reported in the financial statement and
accompanying notes. Actual results could differ from those estimates.

3. REVENUE RECOGNITION

4. CONCENTRATION OF REVENUE

The Property's revenue for the year ended December 31, 1997 was derived from
two tenants.

5. MANAGEMENT AGREEMENTS

6. INSURANCE COSTS

7. LEASE AGREEMENTS

F-109

116 NASSAU STREET

NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES (CONTINUED)

(DOLLARS IN THOUSANDS)

DECEMBER 31, 1997

7. LEASE AGREEMENTS (CONTINUED)
rents to be received over the next five years and thereafter for non-cancelable
operating leases as of December 31, 1997 (exclusive of renewal option periods)
are as follows:

1998................................................................ $ 1,100
1999................................................................ 1,200
2000................................................................ 1,200
2001................................................................ 1,000
2002................................................................ 400
Thereafter.......................................................... 2,800
---------
$ 7,700
---------
---------

F-110

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors of
SL Green Realty Corp.

We have audited the statement of revenues and certain expenses of the
property at 711 Third Avenue, as described in Note 1, for the year ended
December 31, 1997. The financial statement is the responsibility of management
of the Property. Our responsibility is to express an opinion on this financial
statement 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and the 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.

The accompanying statement of revenues and certain expenses was prepared for
the purposes of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in Form S-11 of SL Green Realty Corp., and is
not intended to be a complete presentation of the Property's revenues and
expenses.

In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of the Property, as
described in Note 1 for the year ended December 31, 1997 in conformity with
generally accepted accounting principles.

/s/ Ernst & Young LLP

New York, New York
March 24, 1998

F-111

711 THIRD AVENUE
STATEMENT OF REVENUES AND CERTAIN EXPENSES
(DOLLARS IN THOUSANDS)
NOTE 1

YEAR ENDED
DECEMBER 31,
1997
------------

Revenues
Rental revenue.................................................................................... $ 10,097
Escalations and reimbursement revenue............................................................. 353
Other income...................................................................................... 847
------------
Total revenues...................................................................................... 11,297
------------
Certain Expenses
Ground rent....................................................................................... 1,550
Property taxes.................................................................................... 2,674
Utilities......................................................................................... 638
Cleaning and service contracts:
Related party................................................................................... 893
Other........................................................................................... 272
Payroll and expenses.............................................................................. 1,159
Management fees................................................................................... 172
Repairs and maintenance........................................................................... 396
Professional fees................................................................................. 89
Insurance......................................................................................... 37
Other operating expenses.......................................................................... 228
------------
Total certain expenses.............................................................................. 8,108
------------
Revenues in excess of certain expenses.............................................................. $ 3,189
------------
------------

See accompanying notes.

F-112

711 THIRD AVENUE

NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES

(DOLLARS IN THOUSANDS)
DECEMBER 31, 1997

1. BASIS OF PRESENTATION

Presented herein is the statement of revenues and certain expenses related
to the operations of the property, located at 711 Third Avenue, in the borough
of Manhattan in New York City, (the "Property").

The accompanying financial statement has been prepared in accordance with
the applicable rules and regulations of the Securities and Exchange Commission
for the acquisition of real estate properties. Accordingly, the financial
statement excludes certain expenses that may not be comparable to those expected
to be incurred by SL Green Realty Corp., ("SL Green"), in the proposed future
operations of the Property. Items excluded consist of interest, amortization and
depreciation.

SL Green has entered into an agreement to purchase 50% of the fee interest
in the Property and upon completion of this transaction will enter a co-tenancy
agreement with the other 50% fee owner. Additionally, SL Green has made an offer
to purchase the existing mortgage loan which is collateralized by the leasehold
interest in the Property and will enter into a sublease agreement for the
leasehold interest. Upon the completion of the proposed transactions the ground
rent will be adjusted in accordance with the purchase agreements.

2. USE OF ESTIMATES

The preparation of financial statement in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
effect the amounts reported in the financial statement and accompanying notes.
Actual results could differ from those estimates.

3. REVENUE RECOGNITION

4. CONCENTRATION OF REVENUE

Approximately 29% of the Property's revenue for the year ended December 31,
1997 was derived from two tenants.

5. MANAGEMENT AGREEMENTS

For the period January 1, 1997 through August 31, 1997 the Property was
managed by Weiler Arnow Management Co., Inc., (the "Management Company"), an
affiliate of the owner of the Property. The management fees were based on
monthly fixed payments of $16 plus administrative salaries. For the period
September 1, 1997 through December 31, 1997 the Property was managed by Cushman
& Wakefield Inc. and the management fees were based on monthly fixed payments of
$11 plus administrative salaries.

6. RELATED PARTY TRANSACTIONS

The Property was provided cleaning services for the eight months ended
August 31, 1997 by the Wieler Arnow Cleaning Company, which is wholly owned by
the Management Company.

F-113

711 THIRD AVENUE

NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES (CONTINUED)

(DOLLARS IN THOUSANDS)
DECEMBER 31, 1997

6. RELATED PARTY TRANSACTIONS (CONTINUED)
The Property paid approximately $893 in contract cleaning and $122 of
management, general and administrative costs to affiliated companies of the
Property owner for the year ended December 31, 1997. In addition, the Property
paid approximately $1,550 of ground rent expense to an affiliated company of the
Property owner for the year ended December 31, 1997.

7. GROUND RENT

The Property is comprised of a triple net ground lease with a term expiring
in July 2033, (the "Ground Lease"). In addition, the Ground Lease contains five
ten year renewal options and requires fixed annual rent of approximately $1,550.
The rent is re-set at July 2001, July 2011 and July 2021 (and at the
commencement of each of the five ten year renewal option periods), at the
greater of (a) the net annual rental payable for the immediately preceding lease
year, or (b) 7.75% of the fair market value of the land.

The ground rent may be adjusted for future periods due to the anticipated
acquisition of the Property (as described in Note 1) by SL Green.

8. BENEFIT PLANS

The Property employees are covered by multi-employer defined benefit pension
plans and post-retirement health and welfare plans. Contributions to these plans
amounted to $101 for the year ended December 31, 1997.

9. LEASE AGREEMENTS

The Property is being subleased to tenants under operating leases with term
expiration dates ranging from 1998 to 2011. The minimum rental amounts due under
the leases are generally subject to scheduled fixed increases. The leases
generally also require that the tenants reimburse the Property for increases in
certain operating costs and real estate taxes above their base year costs.
Approximate future minimum rents to be received over the next five years and
thereafter for non-cancelable operating leases as of December 31, 1997
(exclusive of renewal option periods) are as follows:

1998............................................................... $ 9,000
1999............................................................... 8,800
2000............................................................... 8,200
2001............................................................... 7,100
2002............................................................... 5,800
Thereafter......................................................... 36,900
---------
$ 75,800
---------
---------

F-114

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No dealer, salesperson or other individual has been authorized to give any
information or to make any representations not contained in this Prospectus and,
if given or made, such information or representations must not be relied upon as
having been authorized by the Company or any of the Underwriters. This
Prospectus does not constitute an offer of any securities other than those to
which it relates or an offer to sell, or a solicitation of an offer to buy, to
any person in any jurisdiction where such an offer or solicitation would be
unlawful. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create an implication that the information
contained herein is correct as of any time subsequent to the date hereof.

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

SUMMARY TABLE OF CONTENTS

PAGE
-----

Prospectus Summary............................. 1
Risk Factors................................... 16
The Company.................................... 31
Recent Developments............................ 32
Business and Growth Strategies................. 34
Use of Proceeds................................ 39
Ratios of Earnings to Fixed Charges............ 39
Price Range of Common Stock and Distribution
History...................................... 40
Capitalization................................. 41
Selected Financial Information................. 42
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 45
Market Overview................................ 53
The Properties................................. 61
Management..................................... 100
Structure and Formation of the Company......... 108
Policies with Respect to Certain Activities.... 111
Certain Relationships and Transactions......... 116
Partnership Agreement.......................... 116
Principal Stockholders......................... 123
Capital Stock.................................. 125
Certain Provisions of Maryland Law and the
Company's Charter and Bylaws................. 137
Shares Available for Future Sale............... 139
Material Federal Income Tax Consequences....... 141
Underwriting................................... 155
Experts........................................ 157
Legal Matters.................................. 157
Additional Information......................... 157
Glossary of Selected Terms..................... 159
Index to Financial Statements.................. F-1

4,000,000 SHARES

[LOGO]

SL GREEN REALTY CORP.
8.0% PREFERRED INCOME EQUITY
REDEEMABLE SHARES-SM-

("PIERS-SM-")

(LIQUIDATION PREFERENCE
$25.00 PER SHARE)

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

PROSPECTUS

MAY 12, 1998

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

PREFERRED INCOME EQUITY
REDEEMABLE SHARES-SM- AND
"PIERS-SM-" ARE
SERVICE MARKS OWNED BY
LEHMAN BROTHERS INC.

LEHMAN BROTHERS

PRUDENTIAL SECURITIES INCORPORATED

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