Moody's may downgrade Reckson

Moody's Investors Service said it placed on review for possible downgrade Reckson Associate Realty Corp.'s prospective Ba1 preferred stock shelf rating and Reckson Operating Partnership, LP's Baa3 senior unsecured debt rating and prospective Baa3 senior debt shelf rating following the announcement that Reckson Associates Realty will be acquired by SL Green Realty Corp. for a total transaction value of $6 billion.

Concurrent with the acquisition of Reckson, SL Green will sell assets consisting primarily of Reckson's Long Island, New Jersey and some of Reckson's Westchester properties, as well as interest in the Australian LPT, to an investment group led by Reckson's senior management and Marathon Asset Management for $2.1 billion, the proceeds of which will partly finance the Reckson acquisition. The transactions are expected to close in January 2007.

Moody's said the proposed deal could put Reckson's bondholders in a weaker position because the transaction results in greater leverage and asset concentration.

In addition to the strategic profile and management structure, Moody's stated Reckson's ratings are challenged by the geographic, asset and potential tenant concentrations within SL Green's existing portfolio and the resulting portfolio. The agency's review will focus on the quality of the unencumbered assets and cash flow left supporting the bonds.

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