<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                                  FORM 10-K/A
                                AMENDMENT NO. 2
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
    of 1934 For the fiscal year ended December 31, 1997

                                      OR

[_] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934 For the transition period from __________ to _____________

                       COMMISSION FILE NUMBER: 1-13829
                                               -------

                             CABOT INDUSTRIAL TRUST
             (Exact name of registrant as specified in its charter)

        MARYLAND                                              04-3397866
--------------------------------                         ----------------------
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                             Identification No.)


           TWO CENTER PLAZA, SUITE 200, BOSTON, MASSACHUSETTS  02108
              (Address of principal executive offices)  (Zip code)

     REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:  (617) 723-0900

     Securities registered pursuant to Section 12(b) of the Act:

     TITLE OF EACH CLASS                       NAME OF EACH EXCHANGE ON WHICH
     -------------------                       ------------------------------
                                               REGISTERED
                                               ----------

     Common Shares of Beneficial               New York Stock Exchange
     Interest, $.01 par value

     SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:  None

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.   Yes  X    No   
                                                ---      ---

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
<PAGE>
 
     The aggregate market value of the common shares of beneficial interest held
by non-affiliates of the registrant was approximately $407,948,500 based on the
closing price ($22.00) for such shares on the New York Stock Exchange on March
24, 1998.

As of March 24, 1998, there were 18,586,764 shares of the registrant's common
shares of beneficial interest outstanding.

<PAGE>
 
                               TABLE OF CONTENTS
                               -----------------
<TABLE>
<CAPTION>
 
               Description                                                                        Page
               ------------                                                                       ---- 
<S>                                                                                            <C>
PART I
               
Item 1.        Business.......................................................................     1 
Item 2.        Properties.....................................................................    10
Item 3.        Legal Proceedings..............................................................    15 
Item 4.        Submission of Matters to a Vote of Security Holders............................    15
Item 4A.       Executive Officers of the Registrant...........................................    15
 
PART II
 
Item 5.        Market for Registrant's Common Equity and Related Stockholder Matters..........    16
Item 6.        Selected Financial Data........................................................    18
Item 7.        Management's Discussion and Analysis of Financial Condition
               and Results of Operations......................................................    19
Item 7A.       Quantitative and Qualitative Disclosures About Market Risk.....................    22
Item 8.        Financial Statements and Supplementary Data ...................................    23
Item 9.        Changes in and Disagreements with Accountants on Accounting 
               and Financial Disclosure.......................................................    39

PART III
 
Item 10.        Directors and Executive Officers of the Registrant............................    40
Item 11.        Executive Compensation........................................................    41
Item 12.        Security Ownership of Certain Beneficial Owners and
                Management....................................................................    46
Item 13.        Certain Relationships and Related Transactions................................    49
 
PART IV
 
Item 14.        Exhibits, Financial Statement Schedules, and Reports on Form 8-K..............    52

EXHIBIT INDEX.................................................................................    52

SIGNATURES....................................................................................    53
 
</TABLE>
<PAGE>
 
                                    PART I


Item 1.   BUSINESS
          --------


THE COMPANY

Cabot Industrial Trust (the "Company") was organized on October 10, 1997 as a
Maryland real estate investment trust to continue and expand the national
industrial real estate business of Cabot Partners Limited Partnership ("Cabot
Partners"). The Company is the sole general partner of Cabot Industrial
Properties, L.P. (the "Operating Partnership") in which it holds a 42.8%
interest. The Company's properties and property interests are generally owned
and operated through the Operating Partnership. The Company is an internally
managed, fully integrated real estate company which, through the Operating
Partnership, acquires or develops, leases, manages, and holds for investment
industrial real estate properties in the West, Midwest, Northeast, Southeast and
Southwest areas of the United States.

In February 1998, the Company completed an initial public offering of 8,625,000
common shares of beneficial interest ("Common Shares") of the Company and a
private placement of 1,000,000 common shares of beneficial interest to a group
of investors, in each case, at an offering price of $20.00 per common share (the
"Offering Price") (collectively the "Offerings"). The Offerings resulted in net
proceeds to the Company of approximately $173.9 million. Concurrently with the
completion of the Offerings, the Company completed business combinations (the
"Formation Transactions") involving Cabot Partners and certain property-owning
entities, each of which was organized by Cabot Partners and one or more
institutional investors or by institutional investors with no prior relationship
with Cabot Partners (collectively the "Contributing Investors"). The Formation
Transactions resulted, among other things, in the transfer of ownership to the
Operating Partnership of 122 properties. As described under "Recent
Developments," subsequent to the completion of the Offerings, the Operating 
Partnership executed a credit facility agreement with a syndicate of banks with
Morgan Guaranty Trust Company of New York as its lead agent in the amount of
$325 million and has acquired 23 additional properties with a total approximate
cost of $154.9 million.

As of March 24, 1998, the Company wholly owns 145 industrial properties located
in 21 states throughout the United States (the "Properties") containing
approximately 22 million rentable square feet. As of March 24, 1998, the Company
has contracted to purchase four additional industrial properties containing
approximately 704,000 square feet.

The Company's goal is to be the preeminent national real estate company focused
on serving a variety of industrial space users. As of March 24, 1998, the
Company owns and operates a diversified portfolio of properties and has a
significant market presence across the United States, with properties in a
total of 21 markets (17 of which the Company has identified as principal
targeted markets) and including Properties with more than one million rentable
square feet in eight of such markets. Its tenant base ranges from large

                                       1
<PAGE>
 
national distributors using bulk warehouse and other types of industrial space
in multiple locations to small companies located in single flexible workspace
properties. The Properties are within overnight trucking access (a 500-mile
radius) to 90% of the country's population. The Company believes that its
geographic diversification and substantial presence in multiple markets is a
strategic advantage that allows it (i) to serve industrial space users with
multiple site and industrial property type requirements, (ii) compete more
effectively in its individual markets and (iii) respond quickly to acquisition
opportunities in markets across the country.

The Company's 17 principal targeted markets are identified below under the
heading "Properties". The Company offers a broad spectrum of industrial property
types to meet the diverse needs of its tenants. The Company classifies its
properties into three general categories: bulk distribution properties,
multitenant distribution properties and workspace properties (light assembly and
flex/R&D). The following table provides information concerning the general
characteristics and the Company's holdings of each of these property types as of
March 24, 1998.

 
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
                                           RENTABLE SQUARE FEET                ANNUALIZED NET RENT
                                           -----------------------------------------------------------------               
                                    
PROPERTY          PROPERTY                 NUMBER               % OF    AMOUNT        % OF     PER LEASED
TYPE              CHARACTERISTICS                               TOTAL                 TOTAL    SQUARE FOOT
------------------------------------------------------------------------------------------------------------
<S>              <C>                    <C>            <C>           <C>             <C>       <C>
Bulk             Buildings configured      12,067,686           54%     $37,685,190    47%           $3.24
Distribution     for large tenants
                 (generally at least
                 100,000 square feet;
                 building depths of
                 240 feet or more)
------------------------------------------------------------------------------------------------------------
Multitenant      Buildings configured       6,861,171           31       24,444,578        31         3.73
Distribution     for multitenant use
                 (generally tenant
                 sizes of
                 10,000-100,000
                 square feet;
                 building depths of
                 less than 240 feet)
------------------------------------------------------------------------------------------------------------
Workspace        Light assembly and         3,486,592           15       17,841,950        22         5.29
                 flex/R&D (generally
                 tenant sizes of
                 3,000-70,000 square
                 feet)
------------------------------------------------------------------------------------------------------------
Total/                                     22,415,449          100%     $79,971,718       100%       $3.71
weighted
 average
------------------------------------------------------------------------------------------------------------
</TABLE>

The Company intends to be taxed as a real estate investment trust ("REIT") under
the Internal Revenue Code of 1986, as amended (the "Code") beginning with its
fiscal year ended December 31, 1998. As a REIT, the Company generally will not
be subject to Federal income tax to the extent it distributes its taxable income
to its shareholders.

                                       2
<PAGE>
 
The Company's principal executive offices are located at Two Center Plaza, Suite
200, Boston, Massachusetts 02108, and its telephone number is (617) 723-0900.
The Company has regional offices in Los Angeles, Dallas and Orlando.

RECENT DEVELOPMENTS

Subsequent to the completion of the Offerings, the Company has acquired 23
properties in Atlanta, Dallas, Harrisburg, Los Angeles, Orlando, Phoenix and San
Diego for $154.9 million in 11 separate transactions. The 23 properties, 13 of
which are distribution properties and 10 of which are workspace properties,
consist of 3.9 million rentable square feet. As of March 24 1998, the Company
has contracted to acquire four additional distribution and workspace properties
in the Atlanta, Minneapolis, Chicago and Los Angeles markets, consisting of
704,019 rentable square feet. The Company expects to complete these acquisitions
in April 1998.

On March 16, 1998  the Operating Partnership entered into a $325 million
unsecured revolving line of credit (the "Acquisition Facility") with Morgan 
Guaranty Trust Company of New York. The line of credit matures on March 16,
2001. The applicable interest rate ranges from LIBOR plus 75 basis points to
LIBOR plus 125 basis points depending on the Operating Partnership's loan-to-
value ratio. The line of credit is intended to be used to acquire and develop
properties and for working capital needs. The syndication of the Acquisition
Facility to nine other banks was completed on March 27, 1998.

BUSINESS STRATEGIES

The Company's fundamental business objectives are to maximize the total return
to its shareholders through growth in its cash available for distribution per
Common Share and in the value of its portfolio of industrial properties and
operations.  The Company believes that it is well positioned to take advantage
of the opportunities presented by today's changing industrial real estate
markets through the business strategies and operations described below.

Leveraging Substantial National Market Presence

The Company believes that maintaining and expanding its market presence in its
17 principal targeted markets across the country will be an important factor in
achieving future growth and its targeted returns on investment.

The Company's substantial market presence in its principal markets will provide
significant strategic advantages.  Foremost among these advantages is that the
Company is well positioned to market its industrial space to national companies
and third-party logistics companies who have space requirements in multiple
markets.  Approximately 36% of the Company's rentable space is leased by Fortune
1,000 companies, subsidiaries thereof, and major third-party logistics companies
serving such companies.  The Company is pursuing a national tenant marketing
program that, in addition to the quality

                                       3
<PAGE>
 
and attractive locations of the Properties, will emphasize the advantages of
dealing with a single source for a company's industrial space needs. These
advantages include greater efficiency of lease negotiations and day-to-day
property management, as well as better understanding of the tenants' current
needs and prospective space requirements. The Company serves 13 tenants in
multiple Properties (four of which tenants use Properties in multiple markets)
accounting for approximately 18% of the Company's Annualized Net Rents as of
March 24, 1998.

Having a substantial inventory of properties and significant leasing activities
within each local market increases the Company's visibility to prospective
tenants and enables the Company to establish strong relationships with leasing
brokers and other local market participants.  These brokers and other local
market participants serve as sources of information and potential tenant
referrals.  In addition, larger inventories increase the Company's opportunities
to relocate tenants to one or more of its other properties as their needs
change.  Critical mass also permits the Company to achieve the economies of
scale necessary to support the management personnel and infrastructure needed to
build long-term tenant relationships.

Serving a Variety of Tenants By Offering a Broad Spectrum of Industrial Property
Types.

The Company believes that its broad offering strategy provides
complementary benefits in meeting the company's growth objectives. Offering a
broad spectrum of industrial property types and the Company's size enable it to
provide better service, on a more cost-efficient basis, to national customers
who often need various types of workspace properties, in addition to
distribution space, for their local operations. At the same time, offering a
variety of property types to smaller companies enables the Company to capture a
larger share of the growth in its chosen industrial property markets. The
Company's strategy of offering diverse property types also enables the Company
to pursue opportunities as they arise across industry segments by responding to
shifts in demand at different stages of the economic cycle.

GROWTH STRATEGIES

The Company intends to achieve its growth objectives through a combination of
property acquisitions, development and internal growth.

Acquisitions

The Company will seek to capitalize on its competitive advantages primarily by
acquiring additional modern, high-quality properties in attractive submarkets
within the industrial markets that it currently serves.

Investment Criteria.  The Company follows a disciplined, value-oriented strategy
in its property acquisitions.  The Company seeks to acquire modern, cost-
efficient buildings located in key national and regional distribution centers.
The Company's investment considerations include (i) capitalization rates, (ii)
economic fundamentals in the market, (iii) replacement costs, (iv) rent levels
and trends, (v) construction quality and property

                                       4
<PAGE>
 
condition, (vi) historical occupancy rates, (vii) access to transportation,
(viii) proximity to housing, (ix) operating costs, (x) location in modern
industrial parks and (xi) local crime rates.

Emphasis on Market Research.  The company's property acquisitions are based on
extensive research in each targeted market regarding (i) economic and
demographic trends; (ii) the supply of and demand for industrial space in
targeted submarkets; (iii) existing and potential tenant space requirements;
(iv) rental levels and trends; and (v) the physical characteristics of buildings
within the market.  The Company's research includes extensive in-market activity
by Company employees, including physical site inspections and continuing
contacts with leasing brokers and other active participants in the local
markets.  The Company has compiled the results of its extensive research over
the years into a proprietary database which is updated periodically, covering
each market and submarket in which it has invested or that it has targeted.  The
database contains computerized profiles, keyed to Company-prepared aerial maps,
of the Company's properties and each of the buildings deemed most competitive to
the Company's properties or attractive for acquisition.  Such profiles include
information regarding the building's age, physical characteristics (including
overall dimensions, clear heights and truck court dimensions) and current tenant
and lease information.

Diversification of Industrial Property Types.  To date, the majority of the
Company's properties (78% of the Properties based on Annualized Net Rents at
March 24, 1998) have been bulk distribution and multitenant distribution
facilities because of the opportunities for superior returns such properties
have provided.  While the Company expects that both types of properties will
continue to be an important focus of its future acquisition program, the Company
believes that workspace properties (light assembly and flex/R&D facilities) are
also attractive in selected markets where they are in limited supply and strong
demand exists.  The Company has begun to increase its acquisitions of workspace
properties, which represented approximately 22% of its Properties at March 24,
1998 (based on Annualized Net Rents).

Relationships with Institutional Real Estate Investors.  Cabot Partners'
operations were focused on serving public and private pension funds and other
institutional real estate investors in connection with investments in and
management of industrial real estate.  This has provided the Company's
management with an extensive knowledge of and, the Company believes, a favorable
reputation with such investors.  The Company believes that it will benefit from
its relationships with these investors through further acquisitions as they
increasingly seek to securitize their direct real estate investments.

Capital and UPREIT Structure.  The Company intends to exploit its relatively
unleveraged capital structure and substantial equity base in its acquisition and
future development activities.  The Company believes that its ability to borrow
using its $325 million credit facility will enhance its credibility with
potential property sellers.  The Company's UPREIT structure, which will enable
it to acquire industrial properties on a non-cash basis by exchanging Units in
the Operating Partnership for properties in a tax-

                                       5
<PAGE>
 
deferred manner, provides an attractive alternative to a taxable cash sale for
tax paying property owners.

Development

The Company's senior management has extensive real estate development
experience, including experience derived from the industrial park development
activities of Cabot, Cabot and Forbes, a nationwide real estate development,
investment, construction and management firm that pioneered the development of
large scale, planned industrial parks. The Company is engaging its existing
tenants in discussions about future space needs and, based on such discussions,
believes that financially attractive build-to-suit opportunities from its tenant
base may be available over time. The Company also believes that in select target
markets there are attractive opportunities for new development with potentially
greater returns than those available from the purchase of existing stabilized
properties, and it intends to pursue a development program where such
opportunities exist. In order to limit initial overhead expenses, the Company
intends to begin its development activities by engaging local or regional
builders with whom it has established strong relationships. Thereafter, the
Company intends to expand its in-house development staff as the Company's
development activities increase.

Internal Growth

The Company's primary internal growth strategy is to increase the cash flow
generated by the Properties, and from properties that it acquires in the future,
by renewing or replacing expiring leases with new leases at higher rents and
through rent increase provisions in its leases. In addition, the Company intends
to work actively to (i) maintain its historically high occupancy levels by
retaining existing tenants, thereby minimizing "down time" and releasing costs,
(ii) improve the occupancy levels of any newly acquired properties that have low
occupancy levels, (iii) realize economies of scale from the size of its
portfolio of Properties and (iv) control costs. During the period from January
1, 1995 to September 30, 1997, the lease renewal rates for the Properties
acquired prior to September 30, 1997 was 84.0%.

LEASES

The Properties typically are leased on a triple net basis, with tenants paying
their proportionate share of real estate taxes, operating costs and utilities
costs.  However, some of the Properties are leased at higher gross rents with
the landlord being responsible for paying a stated amount of real estate taxes,
operating costs and utilities costs and tenants being responsible for any and
all increases in such taxes and costs above that stated amount.  Excluding lease
renewal options, lease terms typically range from three to five years or, for
leases that are renewed, a shorter period of generally two to three years.
Approximately half (based on leased square footage) of the leases contain a
provision providing for an automatic "stepped rent" increase of a specified
amount or percentage at a certain point or points during the term of the lease.
Substantially all of the leases of the

                                       6
<PAGE>
 
Properties require the tenant to pay, as additional rent, either all real estate
taxes and operating expenses or all increases in real estate taxes and operating
expenses over a base amount.

In addition, many of such leases provide for fixed increases in base rent or
indexed escalations (based on the consumer price index or other measures).
Management believes that inflationary increases in operating expenses will be
offset, in part, by the expense reimbursements and contractual rent increases
described above.

Leases with respect to two of the Properties having a total of approximately
393,386 leasable square feet contain provisions granting the related tenants (or
in one case a third party) an option to purchase the related Property at a fixed
or formula based price for a specified period. Leases with respect to seven of
the Properties having a total of approximately 877,484 leasable square feet
(including approximately 204,369 leasable square feet relating to one of the two
Properties described above that has both associated option and right of first
refusal rights) contain provisions granting to the related tenant (or in one
case a third party) a right of first refusal to purchase the related Property at
the price offered by a prospective purchaser if such right is exercised within a
limited period after notice of the offer. The Company has not to date received
indications of intended exercise of any of such rights, other than with respect
to one building containing approximately 40,000 rentable square feet. The
Company believes the exercise of all or part of such rights would not have a
material adverse effect on its operations.

COMPETITION

Numerous industrial properties compete with the Properties in attracting tenants
to lease space and additional properties can be expected to be built in the
markets in which the Properties are located. The number and quality of
competitive industrial properties in a particular area will have a material
effect on the Company's ability to lease space at the Properties or at newly
acquired properties and on the rents charged. Some of these competing properties
may be newer or better located than the Company's Properties.

In addition, the industrial real estate market has become highly competitive.
There are a significant number of buyers of industrial property, including other
publicly traded industrial REITs, many of which have significant financial
resources. This has resulted in increased competition in acquiring attractive
industrial properties. Accordingly, it is possible that the Company may not be
able to meet its targeted level of property acquisitions and developments due to
such competition or other factors which may have an adverse effect on the
Company's expected growth in Funds from Operations ("FFO").  The Company may be
competing with others that have greater resources than the Company and whose
officers and directors have more experience than the Company's officers and
Trustees.

                                       7
<PAGE>
 
INSURANCE

The Company generally carries commercial general liability insurance, standard
"all-risk" property insurance, and flood and earthquake (where appropriate) and
rental loss insurance with respect to its Properties with policy terms and
conditions customarily carried for similar properties. No assurance can be
given, however, that material losses in excess of insurance proceeds will not
occur in the future which would adversely affect the business of the Company and
its financial condition and results of operations. In addition, certain types of
losses (such as from civil disturbances or from earthquakes for Properties
located in California) 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 its capital invested in a property, as well as the
anticipated future revenue from such property, and would continue to be
obligated on any mortgage indebtedness or other obligations related to the
property.

With certain exceptions, the Company does not carry earthquake insurance on the
Properties located in California. In light of the California earthquake risk,
California building codes have since the early 1970's established construction
standards for all new buildings and also contain guidelines for seismic
upgrading of buildings intended to reduce the possibility and severity of loss
from earthquakes. It is the Company's policy to obtain assessments from
qualified third-party professionals of the seismic standards of its Properties
located in California and to conduct such seismic upgrading thereof as it
determines, on the basis of such third-party assessments, to be appropriate.
Such upgrading, however, does not eliminate the possibility of earthquake loss.
In addition, such upgrading with respect to a number of such Properties is at
various stages of completion as of the date hereof, ranging from initial plan
review to partial completion of construction. Of the Company's 36 Properties
located in California, 15 are covered by earthquake insurance. Seismic upgrading
has been completed on four of the Properties located in California and is
expected to be completed with respect to its remaining Properties located in
California within 12 months from the date hereof. The Company currently
maintains blanket earthquake insurance coverage for all Properties located
outside California in amounts it deems reasonable.

ENVIRONMENTAL MATTERS

In connection with the ownership and operation of the Properties, the Company
may be potentially liable for costs associated with the removal or remediation
of certain hazardous or toxic substances or the release into the air of or
exposure to hazardous substances, including asbestos containing materials.

Phase I ESAs have been obtained in connection with the Properties contributed to
the Company in the Formation Transactions and for each Property acquired since
that time.  The purpose of Phase I ESAs is to identify potential sources of
contamination for which the Company may be responsible and to assess the status
of environmental regulatory compliance.  The earliest of such Phase I ESAs were
obtained in 1988 and Phase I ESAs on approximately 40% of the Properties were
obtained prior to 1995.  Commonly accepted standards and procedures for such
Phase I ESAs have evolved to encompass higher standards and more extensive
procedures over the period of 1988 to the present.  

                                       8
<PAGE>
 
Where recommended in the Phase I ESA, invasive procedures, such as soil sampling
and testing or the installation and monitoring of groundwater wells, were
subsequently performed.

The Phase I ESAs, including subsequent procedures where applicable, have not
revealed any environmental liability that the Company believes would have a
material adverse affect on the Company's business, assets or results of
operations, nor is the Company aware of any material environmental liability.
Nevertheless, it is possible that the Phase I ESAs relating to any one of the
Properties do not reveal all environmental liabilities or that there are
material environmental liabilities of which the Company is unaware.  Neither the
Company nor, to the knowledge of the Company, any of the previous owners of the
Properties has been notified by any governmental authority of any material
noncompliance, liability or claim relating to hazardous or toxic substances or
other environmental substances in connection with any of its present or former
properties.

THE OPERATING PARTNERSHIP

The business of the Company is operated through the Operating Partnership and
Cabot Advisors, Inc., a Delaware corporation (the "Management Company").  The
Company is the sole general partner of the Operating Partnership, a Delaware
limited partnership, through which it owns the Properties. At March 24, 1998,
the partnership interests in the Operating Partnership were as follows: the
Company owns a 42.8% general partnership interest, certain institutional
investors and others who participated in the Formation Transactions own in the
aggregate 53.3% in limited partnership interests and executive officers of the
Company own in the aggregate 3.9% in limited partnership interests. The
Company's interest in the Operating Partnership entitles it to share in cash
distributions from, and in the profits and losses of, the Operating Partnership
in proportion to the Company's percentage ownership (apart from tax allocations
of profits and losses to take into account pre-contribution property
appreciation). Limited partnership interests in the Operating Partnership are 
convertible into shares of the Company on a one-for-one basis subject to certain
limitations.

The Company holds one unit in the Operating Partnership for each common share
that it has issued.  The net proceeds of the issuance of common shares of the
Company were contributed to the Operating Partnership in exchange for a
corresponding number of units of partnership interest.

As the general partner of the Operating Partnership, the Company has the
exclusive power under the agreement of limited partnership of the Operating
Partnership to manage and conduct the business of the Operating Partnership.
The Board of Trustees of the Company manages the affairs of the Company by
directing the affairs of the Operating Partnership.  The Operating Partnership
will terminate on December 31, 2097 unless terminated earlier in connection
with, among other things, a merger or a sale of all or substantially all of the
assets of the Operating Partnership or upon a vote of the partners.  The
Operating Partnership is responsible for, and is required to pay when due, all
administrative and operating expenses of the Properties.

                                       9
<PAGE>
 
THE MANAGEMENT COMPANY

The Management Company will provide investment advisory and asset management
services to the clients of Cabot Partners which elected not to contribute some
or all of their industrial properties to the Company. In addition, the
Management Company will provide property management services to the Operating
Partnership and to properties of some of its own clients. The Management Company
will not provide services relating to any industrial real estate acquisition or
development activities that would conflict with the Company's own acquisition
and development activities. The Company believes that its investment in the
Management Company will help it achieve economies of scale with its property
management systems, increase market penetration and provide access to further
acquisition opportunities.

In order to permit the Company to share in the income of the Management Company
while maintaining its status as a REIT, the Operating Partnership will own all
of the Management Company's non-voting preferred stock (representing
approximately 95% of its economic interest) and Ferdinand Colloredo-Mansfeld,
the Company's Chief Executive Officer, will own all of the Management Company's
voting common stock (representing approximately 5% of its economic interest).
Although the Company will receive substantially all of the economic benefit of
the Management Company's business through dividends from the Operating
Partnership, the Company will not be able to vote on the election of the
Management Company's directors or officers and, as a result, will not have the
ability to control the Management Company's operations or require its board of
directors to declare and pay cash dividends.

EMPLOYEES

As of March 24, 1998, the Operating Partnership and the Management Company
employ a total of approximately 40 persons, none of which are represented by
any collective bargaining organization. The Company believes its employee 
relations are good.

ITEM 2. PROPERTIES
        ----------

As of March 24,1998, the Company owns a geographically diversified portfolio of
145 Properties having an aggregate of approximately 22 million rentable square
feet, approximately 96% of which space was leased to 270 tenants.  The
Properties are located in 21 states in each of the five principal regions of the
United States and are within overnight trucking access (a 500-mile radius) to
90% of the population of the United States.  As of  March 24, 1998, no single
tenant accounted for more than 5.1% of the Company's annualized base rent.

The Company categorizes its Properties into three types:  bulk distribution
properties, multi-tenant distribution properties, and workspace properties.
Bulk distribution properties are oriented primarily to large national and
regional distribution tenants.  These properties generally have at least 100,000
square feet of rentable space, building depths of at least 240 feet, clear
heights of 24 feet or more, truck courts in excess of 100 feet in 

                                       10
<PAGE>
 
depth to accommodate larger modern trucks, a ratio of loading docks to rentable
space of one or more per 10,000 square feet, and a location with good access to
interstate highways. Multi-tenant distribution properties are oriented primarily
to smaller regional and local distribution tenants, and are generally designed
to be subdivided to suit tenants whose space requirements generally range from
10,000 square feet to 100,000 square feet. These properties generally have clear
heights of 20 feet or more, building depths of less than 240 feet (unless
configured with loading docks on two sides), and a location with good access to
regional and interstate highways. Both types of distribution property are used
predominately for the storage and distribution of goods. Workspace properties
are designed to serve a variety of industrial tenants with workspace related
requirements, including light manufacturing and assembly, research, testing, re-
packaging and sorting, back office and sales office functions. Workspace tenants
include smaller companies whose space requirements generally range from 3,000
square feet to 70,000 square feet. Workspace properties generally have clear
heights of 14 to 24 feet, attractive building exteriors, office finish of up to
30% or more, parking ratios of one to four spaces per 1,000 rentable square
feet, and locations with good access to executive residential areas and local
highways, labor supply, and dining and shopping amenities.

The table set forth below summarizes the following information related to the
Properties as of March 24, 1998: (i) the name and location of the Properties,
identified by each of the Company's 17 principal targeted markets; (ii) the year
each property was completed; (iii) the number of properties at each location;
(iv) the rentable square feet at each location; (v) the percent of the rentable
square feet of each property that is currently leased; (vi) the annualized net
rent for the tenants leasing each property and (vii) the annualized net rent per
leased square foot.

                                      11
<PAGE>
 
                        PROPERTIES BY REGION AND MARKET
                        -------------------------------
                              AS OF MARCH 24, 1998
                              --------------------
                                        
<TABLE>
<CAPTION>
                                                        Rentable Square Feet           Annualized Net Rent(1)         
                                                        ---------------------  -------------------------------------- 

                                Year Built/  Number of                                                     Per Leased
Property Type and Location      Renovated   Properties    Number    % Leased      Amount     % of Total   Square Foot
-----------------------------  -----------  ----------  ----------  ---------  ------------  -----------  -----------
                                                                                            
<S>                                <C>      <C>         <C>         <C>        <C>           <C>          <C>
Bulk Distribution Properties:
West Region
Los Angeles Market
 South Vintage Avenue,                                                                                                
  Ontario, CA                         1986           2     520,512       100%   $ 1,512,233         1.9%        $2.91 
 South Rockefeller Avenue,                                                                                            
  Ontario, CA                         1986           1     164,140       100%       551,510         0.7%         3.36 
 East Jurupa Street,                                                                                                  
  Ontario, CA                         1986           1     141,132       100%       341,769         0.4%         2.42 
 DeForest Circle, 
  Mira Loma, CA                       1992           1     250,584       100%       857,943         1.1%         3.42 
 Vintage Avenue, Ontario, CA                                                                                          
 Santa Anita Avenue,                  1988           1     284,559       100%       973,200         1.2%         3.42 
   Rancho Cucamonga, CA               1988           1     212,300       100%       764,280         1.0%         3.60 
                                                    --   ---------       ---    -----------        ----         -----  

              Market Subtotal                        7   1,573,227       100%   $ 5,000,935         6.3%        $3.18

 
San Diego Market
 Dornoch Court, San Diego, CA         1988           1     220,000       100%   $   957,709         1.2%        $4.35
                                                    --   ---------       ---    -----------        ----         -----
 
Phoenix Market
 North 47th Avenue, Phoenix, AZ       1986           1     163,200       100%       434,283         0.5%        $2.66
 South 63rd Avenue, Phoenix, AZ       1990           1     168,165       100%       450,494         0.6%         2.68
 South 55th Avenue, Phoenix, AZ       1986           1     100,000       100%       300,000         0.4%         3.00
 North 104th Avenue,                                                                                                  
  Tolleson, AZ                        1995           1     279,131        56%       457,315         0.6%         2.90 
 Van Buren Avenue, Tolleson, AZ       1997           1     278,142       100%       834,426         1.0%         3.00
 South 84th Avenue, Tolleson, AZ      1989           1     236,007       100%       762,468         1.0%         3.23
                                                    --   ---------       ---    -----------        ----         -----
 
              Market Subtotal                        6   1,224,645        90%     3,238,986         4.1%         2.94
                                                    --   ---------       ---    -----------        ----         -----
 
West Region Subtotal                                14   3,017,872        96%   $ 9,197,630        11.6%        $3.18


Southwest Region 
Dallas Market
 Luna Road, Carrollton, TX            1997           1     205,400       100%       679,992         0.9%        $3.31
 DFW Trade Center, Building 1,                                                                                    
  Grapevine,TX                        1996           1     540,000        70%     1,129,000         1.4%         2.97 
 DFW Trade Center, Building                                                                                          
  2, Grapevine, TX                    1997           1     440,000        82%       993,000         1.2%         2.76 
 Airline Drive, Building 2,                                                                                           
  Coppell, TX                         1990           1     140,800       100%       492,804         0.6%         3.50 
                                                    --   ---------       ---    -----------        ----         ----- 

Southwest Region/Market Subtotal                     4   1,326,200        82%   $ 3,294,796         4.1%        $3.03
                                                                                                               
Midwest Region                                                                                                 
Chicago Market                                                                                                 
 West 73rd Street, Building                                                                                           
  1, Bedford Park, IL                 1982           1     233,282       100%       671,482         0.8%        $2.88 
 West 73rd Street, Building                                                                                           
  2, Bedford Park, IL                 1986           1     380,269       100%     1,034,331         1.3%         2.72 
 West 73rd Street, Building                                                                                           
  3, Bedford Park, IL                 1979           1     232,000       100%       720,953         0.9%         3.11 
 Remington Street,                                                                                                    
  Bolingbrook, IL                     1996           1     212,333       100%       796,925         1.0%         3.75 
 Harvester Drive, Chicago, IL         1974           1     212,922       100%       798,458         1.0%         3.75
 Arthur Avenue, Elk Grove, IL         1978           1     230,768       100%       653,076         0.8%         2.83
 Ambassador Road,                                                                                                     
  Naperville, IL                      1997           1     203,500        65%       503,366         0.6%         3.80 
 Mark Street, Wood Dale, IL           1985           1     234,000       100%       809,992         1.0%         3.46
                                                    --   ---------       ---    -----------        ----         -----
                                                                                                               
              Market Subtotal                        8   1,939,074        96%     5,988,583         7.4%        $3.21
                                                                                                               
 Cincinnati/Northern                                                                                           
  Kentucky Market                                                                                              
 Holton Drive, Independence, KY       1996           1     352,000       100%       991,952         1.2%        $2.82
 International Way, Hebron,  KY       1990           1     192,000       100%       556,800         0.7%         2.90
 International Road,                                                                                                  
  Building 1, Cincinnati, OH          1990           1     192,000       100%       528,000         0.7%         2.75 
 International Road,                                                                                                  
  Building 2, Cincinnati, OH          1990           1     204,800       100%       721,520         0.9%         3.52 
                                                    --   ---------       ---    -----------        ----         ----- 
              Market Subtotal                        4     940,800       100%     2,798,272         3.5%        $2.97
                                                                                                               
Columbus Market                                                                                                
 Westbelt Drive, Building 2,                                                                                          
  Columbus OH                         1980           1     229,200       100%       616,343         0.8%        $2.69 
 Equity Drive, Building 1,                                                                                            
  Columbus, OH                        1980           1     227,480       100%       648,318         0.8%         2.85 
                                                    --   ---------       ---    -----------        ----         ----- 
              Market Subtotal                        2     456,680       100%    1,264,661          1.6%        $2.77
                                                                                
Other Market                                                                    
 North State Rd. #9, Howe, IN         1988           1     346,515       100%      762,333          1.0%         2.20
 Lakefront Drive, Earth               
  City, MO                            1995           1     189,017       100%      656,400          0.8%         3.47
                                                    --   ---------       ---   -----------         ----         -----  

              Market Subtotal                        2     535,532       100%  $ 1,418,733          1.8%         2.65
                                                    --   ---------       ---   -----------         ----         -----
                                                                                                         
Midwest Region Subtotal                             16   3,872,086        98%  $11,470,249         14.3%         3.02
                                                                                                         
Southeast Region                                                                                         
Memphis Market                                                                                        
 Pilot Drive, Memphis, TN             1987           1     336,080       100%      795,326          1.0%         2.37
Orlando Market                                                                                           
 Landstreet Road, Building            
 1, Orlando FL                        1997           1     355,732       100%    1,639,782          2.0%         4.61  
Charlotte Market                                                                                         
 Reames Road, Charlotte, NC           1994           1     105,600       100%      318,227          0.4%         3.01
Atlanta Market                                                                                           
 Highway 316, Dacula, GA              1989           1     326,019       100%    1,041,889          1.3%         3.20
 Westgate Parkway, Atlanta,           
  GA                                  1988           1     231,835       100%      556,404          0.7%         2.40 
                                                    --   ---------       ---   -----------         ----         ----- 

              Market Subtotal                        2     557,854       100%  $ 1,598,293          2.0%         2.87
                                                    --   ---------       ---   -----------         ----         -----
Southeast Region Subtotal                            5   1,355,266       100%    4,351,628          5.4%         3.21
</TABLE> 

                                       12
<PAGE>
 
<TABLE>
<CAPTION>
                                                        Rentable Square Feet           Annualized Net Rent(1)         
                                                        ---------------------  -------------------------------------- 

                                Year Built/  Number of                                                     Per Leased
Property Type and Location      Renovated   Properties    Number    % Leased      Amount     % of Total   Square Foot
-----------------------------  -----------  ----------  ----------  ---------  ------------  -----------  -----------
                                                                                            
<S>                                <C>      <C>         <C>         <C>        <C>           <C>          <C>

Northeast Region
Baltimore/Washington Market
 Tar Bay Drive, Jessup, MD          1990        1          210,000       100%        800,527     1.0%          $3.81
 Oceano Avenue, Jessup, MD          1987        1          243,500       100%        998,350     1.2%           4.10
                                               --        ---------       ---     -----------    ----           -----
                                                                                                          
              Market Subtotal                   2          453,500       100%      1,798,877     2.2%          $3.97
                                                                                                          
New York/New Jersey Market                                                                                
 Pepes Farm Road, Milford, CT       1980        1          200,000       100%        829,998     1.0%           4.15
 South Middlesex Avenue,                                                                                  
  Building 1, Cranbury, NJ          1989        1          204,369       100%        735,728     0.9%           3.60
 Birch Creek Road,                  1991/                                                                 
  Bridgeport, NJ                    1997        1          203,229       100%        792,463     1.0%           3.90
                                                                                                          
 Pierce Street, Franklin                                                                                               
  Township, NJ                      1984        1          182,764       100%        776,748     1.0%           4.25   
 Herrod Boulevard, South                                                                                               
  Brunswick, NJ                     1989        1          418,000       100%      1,698,384     2.2%           4.06   
                                               --        ---------       ---     -----------    ----           -----   

              Market Subtotal                   5        1,208,362       100%      4,833,321     6.1%           4.00   
                                               --        ---------       ---     -----------    ----           -----  
                                                                                                          
Harrisburg Market                                                                                         
 Brackbill Boulevard,                                                                                     
  Building 1,                                                                                                        
 Mechanicsburg,  PA                 1984        1          259,200       100%    $   835,588     1.0%           3.22 
 Brackbill Boulevard,                                                                                     
  Building 2,                                                                                                        
 Mechanicsburg, PA                  1985        1          235,200       100%    $   758,133     0.9%           3.22 
 Cumberland Parkway,                                                                                                  
  Mechanicsburg, PA                 1992        1          340,000       100%      1,144,968     1.4%           3.37  
                                               --        ---------       ---     -----------    ----           -----  

              Market Subtotal                   3          834,400       100%    $ 2,738,689     3.4%           3.28
                                               --        ---------       ---     -----------    ----           -----
                                                                                                          
Northeast Region Subtotal                      10         2,496,262       100%    $ 9,370,887    11.7%           3.75
                                               --        ----------       ---     -----------    ----           -----
 Bulk Distribution Properties Total            49        12,067,686        96%    $37,685,190    47.1%          $3.24
                                                                                                          
Multi-tenant Distribution 
 Properties:                                                                                              
West Region                                                                                               
Los Angeles Market                  1954/                                                                 
 East Dyer Road, Santa Ana, CA      1965        1           372,096       100%    $ 1,319,594     1.7%          $3.55
                                               --        ----------       ---     -----------    ----           -----
                                                                                                          
San Francisco Market                                                                                      
 Reed Avenue, Building 1, West                                                                            
 Sacramento, CA                     1988        1           103,110       100%    $   378,813     0.5%           3.67
 Reed Avenue, Building 2, West                                                                            
 Sacramento, CA                     1988        1           105,600       100%        423,336     0.5%           4.01
                                               --        ----------       ---     -----------    ----           -----             
                                                                                                          
              Market Subtotal                   2           208,710       100%    $   802,149     1.0%           3.84
                                                                                                          
Phoenix Market                                                                                            
 44th Avenue, Phoenix, AZ           1997        1           144,602         0%    $         0     0.0%              0
                                               
Seattle Market                                                                                            
 Kent West Corporate Park,                                                                                            
  II, Kent, WA                      1989        1           250,820       100%    $   899,100     1.1%           3.58 
                                               --        ----------       ---     -----------    ----           ----- 

West Region Subtotal                            5           976,228        85%    $ 3,020,843     3.8%           3.63
Southwest Region                                                                                          
Dallas Market                                                                                             
 113th Street, Arlington, TX        1979        1            79,735       100%    $   291,032     0.4%          $3.65
 Airline Drive, Building 1,                                                                                           
  Coppell, TX                       1991        1            75,000       100%        262,500     0.3%           3.50 
 North Lake Drive,                                                                                                    
  Coppell, TX                       1982        1           230,400       100%        632,581     0.8%           2.75 
                                               --        ----------       ---     -----------    ----           ----- 
Southwest Region/Market Subtotal                3           385,135       100%    $ 1,186,113     1.5%           3.08 
                                                                                                          
Midwest Region                                                                                            
Chicago Market                                                                                            
 Medinah Road, Roselle, IL          1986        2           480,258       100%    $ 2,618,591     3.2%          $5.45
 High Grove Lane,                                                                                                     
  Naperville, IL                    1994        1            95,000       100%        392,549     0.5%           4.13 
                                    1970/                                                                             
 Western Avenue, Lisle, IL          1985        1            67,996       100%        383,143     0.5%           5.63 
                                               --        ----------       ---     -----------    ----           -----

              Market Subtotal                   4           643,254       100%    $ 3,394,283     4.2%          $5.28
                                                                                                          
Cincinnati/Northern Kentucky                                                                              
 Market                                                                                                   
 Lake Forest Drive, Building                                                                                          
  1, Blue Ash, OH                   1978        1           239,891        98%    $   633,837     0.8%          $2.69 
 Lake Forest Drive, Building                                                                                          
  2, Blue Ash, OH                   1979        1           176,956       100%        459,775     0.6%           2.60 
                                               --        ----------       ---     -----------    ----           ----- 

              Market Subtotal                   2           416,847        99%    $ 1,093,612     1.4%          $2.65
                                                                                                          
Columbus Market                                                                                           
 International Street,                                                                                                
  Columbus, OH                      1988        1           152,800       100%    $   420,200     0.5%          $2.75 
 Port Road, Building 1,                                                                                               
  Columbus, OH                      1995        1           205,109       100%        672,903     0.8%           3.28 
 Port Road, Building 2,                                                                                               
  Columbus, OH                      1995        1           156,000       100%        425,899     0.5%           2.73 
 Westbelt Drive, Building 1,                                                                                          
  Columbus, OH                      1979        1           202,000       100%      1,010,000     1.3%           5.00 
 Dividend Drive, Columbus, OH       1980        1           144,850       100%        434,550     0.5%           3.00
 Twin Creek Drive, Columbus,                                                                                          
  OH                                1989        1           176,000        53%        260,208     0.4%           2.78 
                                               --        ----------       ---     -----------    ----           ----- 

              Market Subtotal                   6         1,036,759        92%    $ 3,223,760     4.0%          $3.38
                                                                                                          
Other Market                                                                                              
 Sysco Court, Grand Rapids, MI      1985        1            62,700       100%    $   366,689     0.5%          $5.85
                                               --        ----------       ---     -----------    ----           -----
                                                                                                          
Midwest Region Subtotal                        13         2,159,560        96%    $ 8,078,344    10.1%          $3.90

</TABLE> 

                                      13
<PAGE>
 
<TABLE>
<CAPTION>
                                                        Rentable Square Feet           Annualized Net Rent(1)         
                                                        ---------------------  -------------------------------------- 

                                Year Built/  Number of                                                     Per Leased
Property Type and Location      Renovated   Properties    Number    % Leased      Amount     % of Total   Square Foot
-----------------------------  -----------  ----------  ----------  ---------  ------------  -----------  -----------
                                                                                            
<S>                                <C>      <C>         <C>         <C>        <C>           <C>          <C>

 
Southeast Region
Orlando Market
 Orlando Central Park,                                                                                            
  Orlando, FL                       1983          6        1,172,875      94%     $ 3,784,002      4.7%     $3.44 
 Kingspointe Parkway,                                                                                             
  Orlando, FL                       1991          1          101,870     100%         404,979      0.5%      3.98 
                                                 --       ----------     ---      -----------     ----      ----- 
Southeast Region/Market Subtotal                  7        1,274,745      94%     $ 4,188,981      5.2%     $3.49
                                                                                                         
Northeast Region                                                                                         
Boston Market                       1961/                                                                
 First Avenue, Needham, MA          1992          1          119,573     100%     $   686,246      0.9%     $5.74
                                                                                                         
New York/New Jersey Market                                                                               
 South Middlesex Avenue,                                                                                          
  Building 2, Cranbury, NJ          1982          1          203,404     100%     $   661,062      0.8%     $3.25 
 Colony Road, Building 1,                                                                                         
  Jersey City, NJ                   1976          1          262,453     100%         918,438      1.2%      3.50 
 Colony Road, Building 2,                                                                                         
  Jersey City, NJ                   1974          1          124,933     100%         499,732      0.6%      4.00 
 Pulaski Boulevard,                 1974/                                                                         
  Bayonne, NJ                       1982          1          224,664     100%         703,139      0.9%      3.13 
 Port Jersey Boulevard,                                                                                           
  Building 1, Jersey City, NJ       1974          1          425,121     100%       1,711,838      2.2%      4.03 
 Port Jersey Boulevard,                                                                                           
  Building 2, Jersey City, NJ       1974          1          204,564     100%         754,841      0.9%      3.69 
 Industrial Drive, Building                                                                                       
  1, Jersey City, NJ                1976          1          263,717     100%         988,939      1.2%      3.75 
 Industrial Drive, Building                                                                                       
  2, Jersey City, NJ                1976          1          154,000     100%         615,996      0.8%      4.00 
 Industrial Drive, Building                                                                                       
  3, Jersey City, NJ                1972          1           45,274     100%         181,096      0.2%      4.00 
                                                 --       ----------     ---      -----------     ----      ----- 

              Market Subtotal                     9        1,908,130     100%     $ 7,035,081      8.8%     $3.69
                                                                                                         
Harrisburg Market                                                                                        
 Ritter Road, Mechanicsburg,                                                                                      
  PA                                1986          1           37,800     100%     $   248,970      0.3%     $6.59 
                                                 --       ----------     ---      -----------     ----      ----- 
                                                                                                         
Northeast Region Subtotal                        11        2,065,503     100%     $ 7,970,297     10.0%     $3.86
                                                 --       ----------     ---      -----------     ----      ----- 
 Multi-tenant Distribution                                                                                       
  Properties Total                               39       6,861,171      96%     $24,444,578     30.6%     $3.73 
                                                                                                         
                                                                                                         
Workspace Properties:                                                                                    
West Region                                                                                              
Los Angeles Market                                                                                       
 East Howell Avenue,                                                                                             
  Building 1, Anaheim, CA           1968          1          81,475     100%         327,882      0.4%     $4.02 
 East Howell Avenue,                                                                                             
  Building 2, Anaheim, CA           1991          1          25,962     100%         109,040      0.1%      4.20 
 Artesia Avenue, Building 1,                                                                                     
  Fullerton, CA                     1991          1          55,498     100%         211,749      0.3%      3.82 
 Artesia Avenue, Building 2,                                                                                     
  Fullerton, CA                     1991          1          60,502     100%         232,164      0.3%      3.84 
 Commonwealth Avenue,                                                                                            
  Fullerton, CA                     1965          1          62,762      99%         222,270      0.3%      3.59 
                                                 --       ----------     ---      -----------     ----      ----- 

              Market Subtotal                     5         286,199     100%     $ 1,103,105      1.4%     $3.87
                                                                                                         
San Diego Market                                                                                         
 Avenida Encinas, Building                                                                                       
  1, Carlsbad, CA                   1972          1          80,000     100%         637,720      0.8%     $7.97 
 Avenida Encinas, Building                                                                                       
  2, Carlsbad, CA                   1993          1         126,008     100%         716,846      0.9%      5.69 
                                                 --       ----------     ---      -----------     ----      ----- 
                                                                                                         
             Market Subtotal                      2         206,008     100%     $ 1,354,566      1.7%     $6.58
                                                                                                         
San Francisco Market                                                                                     
 Brisbane Industrial Park,                                                                                       
  Brisbane, CA                      1965         14         542,378      98%     $ 2,507,549      3.1%     $4.70 
 Huntwood Avenue, Hayward, CA       1982          1          62,031     100%         446,628      0.6%      7.20
                                                 --       ----------     ---      -----------     ----      ----- 
                                                                                                         
             Market Subtotal                     15         604,409      99%     $ 2,954,177      3.7%     $4.96
                                                                                                         
Phoenix Market                                                                                           
 East Encanto Drive, Tempe, AZ      1990          1          81,817     100%     $   306,637      0.4%     $3.75
Seattle Market                                                                                           
 Kent West Corporate Park I,                                                                                     
  Kent, WA                          1989          4         151,940     100%     $   966,456      1.2%     $6.36 
                                                 --       ----------     ---      -----------     ----      ----- 
                                                                                                         
West Region Subtotal                             27       1,330,373      99%     $ 6,684,941      8.4%     $5.06
                                                                                                         
Southwest Region                                                                                         
Dallas Market                                                                                            
 DFW Trade Center, Building                                                                              
  3, Grapevine, TX                  1997          1         202,361     100%     $ 1,723,671      2.2%     $8.52
 Diplomat Drive, Carrollton, TX     1997          1          53,375     100%     $   325,044      0.4%     $6.09
                                                 --       ----------     ---      -----------     ----      ----- 
                                                                                                         
Southwest Region/Market Subtotal                  2         255,736     100%     $ 2,048,715      2.6%     $8.01
                                                                                                         
Midwest Region                                                                                           
Cincinnati/Northern Kentucky                                                                             
 Market                                                                                                  
 Empire Drive, Florence, KY         1991          1         101,250     100%     $   318,999      0.4%     $3.15
 Spiral Drive, Building 1,                                                                                       
  Florence, KY                      1988          1          26,556     100%         245,846      0.3%      9.26 
 Spiral Drive, Building 2,                                                                                       
  Florence, KY                      1989          1          34,999      93%         257,442      0.3%      7.93 
 Creek Road, Blue Ash, OH           1983          1          66,095      88%         410,096      0.5%      7.04
                                                 --       ----------     ---      -----------     ----      ----- 
                                                                                                         
              Market Subtotal                     4         228,900      95%     $ 1,232,383      1.5%     $5.64
                                                                                                         
Columbus Market                                                                                          
 Equity Drive, Building 2,                                                                                       
  Columbus, OH                      1980          1         116,160      61%     $   415,371      0.5%     $5.83 
                                                 --       ----------     ---      -----------     ----      ----- 
                                                                                                         
                                                                                                         
Midwest Region Subtotal                           5         345,060      84%     $ 1,647,754      2.0%     $5.69

</TABLE> 

                                      14
<PAGE>
 
<TABLE>
<CAPTION>
                                                        Rentable Square Feet           Annualized Net Rent(1)         
                                                        ---------------------  -------------------------------------- 

                                Year Built/  Number of                                                     Per Leased
Property Type and Location      Renovated   Properties    Number    % Leased      Amount     % of Total   Square Foot
-----------------------------  -----------  ----------  ----------  ---------  ------------  -----------  -----------
                                                                                            
<S>                                <C>      <C>         <C>         <C>        <C>           <C>          <C>

 
Southeast Region
Charlotte Market                     1957/
 Old Charlotte Highway,              1972        2        253,930       100%     $   986,000      1.2%        $3.88
  Monroe, NC                                                                                                
                                               ---     ----------       ---      -----------    -----         -----
                                                                                                            
Atlanta Market                                                                                              
 Cobb International Place,                       
  Building 1, Atlanta, GA            1996        1         60,000       100%     $   256,500      0.3%        $4.28   
 Cobb International Place,                                                                                  
  Building 2, Atlanta, GA            1996        1         68,000        80%         207,659      0.3%         3.82
 South Royal Drive, Building         
  1, Tucker, GA                      1987        1         53,402        91%         226,177      0.3%         4.65 
 South Royal Drive, Building                                                                                        
  2, Tucker, GA                      1987        1         43,720       100%         176,300      0.2%         4.03 
 South Royal Drive, Building                                                                                        
  3, Tucker, GA                      1989        1         37,041       100%         148,588      0.2%         4.01 
                                               ---     ----------       ---      -----------    -----         -----
                                     
              Market Subtotal                    5        262,163        93%     $ 1,015,224      1.3%        $4.16
                                                                                                            
Orlando Market                                                                                              
 Boggy Creek Road, Building                                                                                         
  1, Orlando, FL                     1992        1         52,508        99%     $   245,336      0.3%        $4.71 
 Boggy Creek Road, Building                                                                                         
  2, Orlando, FL                     1996        1         55,456       100%         297,949      0.4%         5.37 
 Landstreet Road, Building                                                                                          
  2, Orlando, FL                     1997        1         55,456        79%         238,052      0.3%         5.42 
 Landstreet Road, Building                                                                                          
  3, Orlando, FL                     1996        1         50,018       100%         247,587      0.3%         4.95 
                                               ---     ----------       ---      -----------    -----         -----
                                                                                                            
              Market Subtotal                    4        213,438        94%     $ 1,028,924      1.3%        $5.11
                                                                                                            
Other Market                                                                                                
 Industrial Drive South,                                                                                            
  Gluckstadt, MS                     1988        1        160,000       100%     $   671,386      0.8%        $4.20 
                                               ---     ----------       ---      -----------    -----         -----
                                                                                                            
Southeast Region Subtotal                       12        889,531        97%     $ 3,701,534      4.6%        $4.31
                                                                                                            
Northeast Region                                                                                            
Baltimore/Washington Market                                                                                 
 The Crysen Center, Jessup, MD       1985        2        151,863       100%     $   698,610      0.9%        $4.60
 Oakville Industrial Park,           
  Alexandria, VA                     1948        6        276,807        93%       1,627,761      2.0%         6.34   
                                               ---     ----------       ---      -----------    -----         -----
                                                                                                            
              Market Subtotal                    8        428,670        95%     $ 2,326,371      2.9%        $5.69
                                            

Boston Market
 Technology Drive, Auburn, MA        1973        1         54,400       100%     $   190,368      0.2%        $3.50
 John Hancock Road, Taunton, MA      1986        1         34,224       100%         206,147      0.3%         6.02
                                               ---     ----------       ---      -----------    -----         -----
                                                                                                            
              Market Subtotal                    2         88,624       100%     $   396,515      0.5%        $4.47
                                                                                                            
New York/New Jersey Market                                                                                  
 Memorial Drive, Franklin                                                                                           
  Township, NJ                       1988        1        148,598       100%     $ 1,036,120      1.3%        $6.97 
                                               ---     ----------       ---      -----------    -----         ----- 

Northeast Region Subtotal                       11        665,892        97%     $ 3,759,006      4.7%        $5.82
                                               ---     ----------       ---      -----------    -----         -----
                                                                                                            
  Workspace Properties Total                    57      3,486,592        97%     $17,841,950     22.3%        $5.29
                                               ---     ----------       ---      -----------    -----         -----
                                         
Grand Total                                    145     22,415,449        96%     $79,971,718    100.0%        $3.71
                                               ===     ==========       ===      ===========    =====         =====
</TABLE>
                                                                                

-------------------------------------------------
(1) "Annualized Net Rent" means annualized monthly Net Rent from leases in
effect as of March 24, 1998. "Net Rent" means contractual rent, excluding any
reimbursements for real estate taxes or operation expenses.

ITEM 3.   LEGAL PROCEEDINGS
          -----------------

The Company is not a party to any material litigation nor, to the Company's
knowledge, is any litigation threatened against the Company other than routine
actions arising in the ordinary course of business, substantially all of which
are expected to be covered by liability insurance and which in the aggregate are
not expected to have a material adverse effect on the business, results of
operations or financial condition of the Company.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
          ---------------------------------------------------

Not applicable.


ITEM 4A.  EXECUTIVE OFFICERS OF THE REGISTRANT
          ------------------------------------

The executive officers of the Registrant and their respective positions,
business experience and ages as of April 29, 1998 are shown in the table below.


Name
                                        Age  Position
--------------------------------------------------------------------------------
Ferdinand Colloredo-Mansfeld(1)         58   Chairman of the Board and Chief
                                             Executive Officer, Trustee
Robert E. Patterson                     53   President, Trustee
Franz Colloredo-Mansfeld(1)             35   Chief Financial Officer
Andrew D. Ebbott                        41   Senior Vice President - Director of
                                             Acquisitions
Howard B. Hodgson, Jr.                  41   Senior Vice President - Director of
                                             Real Estate Operations
Neil E. Waisnor                         43   Senior Vice President - Finance,
                                             Treasurer and Secretary
Eugene F. Reilly                        36   Senior Vice President - Director of
                                             Leasing, Marketing and Development


(1)  Messrs. Ferdinand and Franz Colloredo-Mansfeld are father and son.

The following paragraphs summarize the business experience of the officers of
the Company.

FERDINAND COLLOREDO-MANSFELD has served as Chairman of the Board of Trustees and
Chief Executive Officer of the Company since its formation in October 1997. Mr.
Colloredo-Mansfeld also serves as the Chairman and Chief Executive Officer of
the Management Company. Mr. Colloredo-Mansfeld served as Chairman, Chief
Executive Officer and Chief Investment Officer of Cabot Partners from 1990 to
1997, having previously served in the same positions with Cabot Cabot & Forbes
Realty Advisors since its formation in 1986. Mr. Colloredo-Mansfeld began his
real estate career in 1970 when he joined Cabot, Cabot & Forbes, a national real
estate development, management and construction firm, becoming its Chief
Financial Officer in 1973, Chief Operating Officer in 1974 and Chief Executive
Officer in 1976, a position he held until his retirement from Cabot, Cabot &
Forbes in 1989. As Chief Executive Officer, Mr. Colloredo-Mansfeld oversaw the
development and management of approximately $4 billion of commercial properties
in twenty states including 35 master planned suburban business and industrial
parks. Mr. Colloredo-Mansfeld is a graduate of Harvard College and Harvard
Business School. He is a limited partner in Brown Brothers Harriman & Co. and is
a Director of Data General Corporation and Raytheon Company. He is Chairman of
the Board of Trustees of Massachusetts General Hospital and a Trustee of
Partners HealthCare System, Inc.

ROBERT E. PATTERSON has served as President and a Trustee of the Company since
its formation in October 1997. Mr. Patterson served as Executive Vice President,
Director of Acquisitions and a member of the Investment Committee of Cabot Cabot
& Forbes Realty Advisors and Cabot Partners from 1987 to 1997. Mr. Patterson
began his real estate career in 1972 as a lawyer with the firm of Gaston Snow &
Ely Bartlett. In 1978, he became the first Executive Director of the
Massachusetts Industrial Finance Agency and remained in that position until 1983
when he joined the Beal Companies, a Boston-based real estate development,
management and investment firm as Senior Vice President. He joined Cabot Cabot &
Forbes Realty Advisors in 1987 to head its acquisitions group and was a founding
partner of Cabot Partners upon its formation as an independent entity in 1990.
R. Patterson is a graduate of Harvard College and Harvard Law School. He is a
Trustee of the Putnam Group of Mutual Funds and is Chairman of the Board of
Trustees of the Joslin Diabetes Center. He is a member of numerous industry
associations including the National Association of Real Estate Investment
Trusts, the Society of Industrial and Office Realtors, the Urban Land Institute
and the National Association of Real Estate Investment Managers.

FRANZ COLLOREDO-MANSFELD has been Chief Financial Officer of the Company since
October 1997 and served as a Senior Vice President of Cabot Partners from 1996
to October 1997. He was a Senior Engagement Manager of McKinsey & Company, Inc.
from 1992 through 1996. He previously worked for the Deutsche Bank real estate
investment group in 1992 and was a Robert Bosch Fellow at the German Central
Bank (Bundesbank) in Frankfurt, Germany in 1991. He was also an investment
banker with Merrill Lynch & Co. from 1986 through 1989 where he worked in
Mergers and Acquisitions. Mr. Colloredo-Mansfeld is a graduate of Harvard
College and Harvard Business School. He is a director or trustee of numerous
charitable organizations.

ANDREW D. EBBOTT has served as Senior Vice President - Director of Acquisitions
of the Company since October 1997. Mr. Ebbott joined Cabot Cabot & Forbes
Realty Advisors in 1988 as Director of Research and a member of its acquisition
department, becoming a Vice President in 1991 and a Senior Vice President in
1995 of Cabot Partners. Mr. Ebbott is a graduate of Dartmouth College and the
University of Chicago Business School. He has over 11 years experience in real
estate finance, investment and research and is a member of the American
Institute of Certified Public Accountants, the National Association of Real
Estate Investment Managers and the National Council of Real Estate Investment
Fiduciaries.

HOWARD B. HODGSON, JR. has been Senior Vice President - Director of Real Estate 
Operations of the Company since October 1997, and served as a Senior Vice
President - Director of Asset Management and Member of the Investment Committee
of Cabot Partners from 1992 to October 1997. Mr. Hodgson began his real estate
career in 1979 with the Boston-based real estate firm R.M. Bradley & Co., Inc.,
becoming the head of its institutional property management group prior to
joining CC&F Asset Management Company, an affiliate of Cabot, Cabot & Forbes, in
1991 as a Senior Vice President and head of its property management group. Mr.
Hodgson is a graduate of Northeastern University. He is a Trustee and a member
of the Board of Investment of the Cambridge Savings Bank. He is a member of the
Building Owners and Managers Association, the National Association of Industrial
and Office Parks and the National Council of Real Estate Investment Fiduciaries.

NEIL E. WAISNOR has served as Senior Vice President - Finance, Treasurer and
Secretary of the Company since October 1997. Mr. Waisnor was a founding partner
of Cabot Partners, joining as a Vice President and Treasurer in 1990 and
becoming a Senior Vice President and Chief Financial Officer in 1995. Prior to
joining Cabot Partners, he was Vice President and Controller of Cabot, Cabot &
Forbes, where he served in a variety of financial capacities since 1985. He
worked for Arthur Andersen & Co. from 1977 until 1985 where he was a senior
audit manager serving real estate and high technology companies. Mr. Waisnor is
a graduate of the University of Massachusetts at Amherst and is a member of the
American Institute of Certified Public Accountants, the Massachusetts Society of
Certified Public Accountants, the National Association of Real Estate Investment
Managers and has served on the Accounting Committee of the National Council of
Real Estate Investment Fiduciaries.

EUGENE F. REILLY has been Senior Vice President - Director of Leasing, Marketing
and Development of the Company since October 1997. Mr. Reilly served as
Director of Leasing and Marketing of Cabot Partners from 1992 to October 1997,
becoming Senior Vice President in 1996. Mr. Reilly began his real estate career
with the Boston commercial real estate brokerage firm of Leggat McCall and
Werner in 1983 and subsequently became a leasing broker with Julien J. Studley,
Inc. In 1985, he joined National Development Corporation where he became a
Senior Vice President prior to joining Cabot Partners as a Vice President in
1992. Mr. Reilly is a graduate of Harvard College. He is a member of the
National Association of Industrial and Office Parks, the Industrial Development
Research Council and The Council of Logistics Managers.




                                       15
<PAGE>
 
                                    PART II
                                        
ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
          --------------------------------------------------------------
          MATTERS
          -------
 
The Company's common shares began trading on the New York Stock Exchange
("NYSE") on January 30, 1998, under the symbol "CTR." The following table sets
forth the high and low sales prices per share as reported on the New York Stock
Exchange Composite Tape.

<TABLE> 
<CAPTION> 

PERIOD                                              HIGH    LOW
                                         
<S>                                                <C>     <C> 
January 30, 1998 through March 24, 1998.......      $23.50  $20.875

</TABLE> 


On March 24, 1998, the Company had 18,586,764 common shares outstanding held of 
record by 22 shareholders and beneficially by more than 2,000 shareholders.

No dividends have yet been declared or paid by the Company as of March 24, 1998.
The Company intends to make regular quarterly cash distributions to its
shareholders based upon an initial quarterly distribution rate of $.325 per
Common Share. On an annualized basis, this would be $1.30 per common share (or
an annual distribution rate of 6.5% based on the Offering Price). The actual
operating cash flow that the Company will realize and the amount available for
distributions to shareholders will be affected by a number of factors, including
the revenues received from the Properties, the distributions received from the
Operating Partnership, the operating expenses of the Operating Partnership and
Company, the interest expense incurred on borrowings and unanticipated capital
expenditures. No assurance can be given that the Company's estimates, on which
its initial intended distribution policy is based, will prove accurate. Future
distributions by the Company will be at the discretion of the Board of Trustees
and will depend on the actual FFO of the Company, its financial condition,
capital requirements, the annual distribution requirements under the REIT
provisions of the Code and such other factors as the Board of Trustees deems
relevant.

     The Company's transfer agent and registrar is Boston EquiServe, P.O. Box
644, Boston, Massachusetts 02102-0644.

PRIVATE PLACEMENT OF 1,000,000 COMMON SHARES OF BENEFICIAL INTEREST OF THE
COMPANY

On February 4, 1998, the Company completed a private placement of 1,000,000
Common Shares to a group of investors represented by Morgan Stanley Asset
Management, Inc. ("Morgan Stanley"). Morgan Stanley acted as advisor to the
following investors in connection with the private placement: Stichting
Bedrijspensioenfonds Voor De Metaalnijhverheid, Stichting Pensioenfonds ABP, MS
Real Estate Special Situations Inc., The Morgan Stanley Real Estate Special
Situations Funds I, L.P., The Morgan Stanley Real Estate Special Situations Fund
II, L.P. and Morgan Stanley Real Estate Special Situations Real Estate
Investors, L.P.

                                      16
<PAGE>
 
The aggregate and sales offering price of such shares was $20,000,000.

The Company relied on Regulation D to effectuate the private placement. All of
the investors who purchased common stock in the private placement were qualified
institutional buyers within the meaning of Rule 144A, except for one
institutional "accredited investor" within the meaning of Rule 501 of Regulation
D.

None of the common shares sold by the private placement are subject to
conversion.

USE OF PROCEEDS FROM SALES OF COMMON SHARES 

On January 29, 1998, the Company's registration statement on Form S-11 (File
Number 333-38383) with regard to the public offering of 8,625,000 Common Shares
in the Company for an aggregate price of $172,500,000 was declared effective by
the Securities and Exchange Commission. The offering commenced on the effective 
date and terminated on February 4, 1998 with a sale of all the registered shares
for an aggregate offering price of $172,500,000. The managing underwriter for 
the public offering was J.P. Morgan Securities, Inc.

The following table indicates the expenses incurred in connection with the
issuance and distribution of Common Shares in the Offerings:

<TABLE>
<CAPTION>
 
-----------------------------------------------------------------
Description of  Fees and Expenses                   Amount of Fee 
---------------------------------                   -------------
<S>                                             <C>
Underwriting Discounts and Commissions                $11,212,500
Finders' Fees                                                   0
Underwriters Expenses                                     170,000
Other Expenses                                          7,192,500
                                                      -----------
TOTAL FEES AND EXPENSES                               $18,575,000
                                                      ===========
-----------------------------------------------------------------
</TABLE>
                                                                                
     None of such expenses represented direct or indirect payments to
(i)Trustees or officers of the Company or their associates, (ii) persons owning
10 percent or more of any class of the Company's equity securities or (iii)
affiliates of the Company.  The net proceeds to the Company from the Offerings
after deducting the expenses described above were approximately $173.9 million.
The net proceeds of the offering were applied as follows through March 24, 1998:
approximately $146.5 million for the acquisition of other properties;
approximately $13.1 million for the repayment of indebtedness; and approximately
$14.3 million for working capital.  None of such uses of net proceeds
represented direct or indirect payments to (i)Trustees or officers of the
Company or their associates, (ii) persons owning 10 percent or more of any class
of the Company's equity securities or (iii) affiliates of the Company.

                                       17
<PAGE>
 
ITEM 6.   SELECTED FINANCIAL DATA
          -----------------------

     The Company was organized on October 10, 1997, but did not commence 
operations in its current form until February 4, 1998, the completion date of
the Formation Transactions and the Offerings described elsewhere herein. Set
forth below are selected historical financial and other data for the real estate
advisory business of Cabot Partners. The selected financial data presented below
as of December 31, 1997 and 1996 and for the three years ended December 31, 1997
have been derived from the Cabot Partners financial statements that have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports thereon. This information should be read in conjunction with such
financial statements and the notes thereto included elsewhere in this report on
Form 10-K. The selected financial data presented below as of December 31, 1995
and as of and for the years ended December 31, 1994 and 1993 for Cabot Partners
are derived from Cabot Partners Financial Statements and the notes thereto not
included in this report on Form 10-K which have been audited by Arthur Andersen
LLP.

<TABLE>
<CAPTION>
                                                                        YEARS ENDED DECEMBER 31,
 
In thousands                                    1997             1996             1995             1994             1993
                                                ----             ----             ----             ----             ----       
<S>                                        <C>              <C>              <C>              <C>              <C>
OPERATING DATA
Revenues                                         $  9,080         $  7,908         $  6,516         $  4,159         $  4,088
General and administrative expenses                 7,045            5,888            5,069            4,267            4,074
Depreciation and amortization expense                 977              419              453              474              480
Net income (loss)                                   1,058            1,594            1,057             (536)            (428)
 
In thousands                                    1997             1996             1995             1994             1993
                                                ----             ----             ----             ----             ----       

BALANCE SHEET DATA
Total assets                                     $  5,339         $  6,075         $  5,628         $  4,300         $  4,923
Total liabilities                                     760              485              563              292              379
Total partners' capital                             4,579            5,590            5,065            4,008            4,544
 
In thousands                                    1997             1996             1995             1994             1993
                                                ----             ----             ----             ----             ----       
OTHER DATA
Cash flows provided by (used in):
   Operating activities                          $  1,062         $  1,283         $  1,351         $    (12)        $   (173)
   Investing activities                              (193)             113               (6)              40               25
   Financing activities                            (2,069)          (1,069)              --               --               --
Assets under management (unaudited)(1)            861,000          979,000          778,000          515,000          472,000
</TABLE>

(1)  Based on the estimated fair market value of such assets as of the dates
     indicated.
                                      18
<PAGE>
 
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         -----------------------------------------------------------------------
         OF OPERATIONS
         -------------

The statements contained in this discussion and elsewhere in this report that
are not historical facts are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934.  These forward-looking statements are based on current
expectations, estimates and projections about the industry and markets in which
the Company operates, management's beliefs and assumptions made by management.
Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates" and variations of such words and similar expressions are intended to
identify such forward-looking statements. Such forward-looking statements are
not guarantees of future performance and involve risks and uncertainties.
Therefore, actual outcomes and results may differ materially from what is
expressed or suggested by such forward-looking statements. The Company
undertakes no obligation to update publicly any forward-looking statements,
whether as a result of new information, future events or otherwise. The
Company's operating results depend primarily on income from industrial
properties, which may be affected by various factors, including changes in
national and local economic conditions, competitive market conditions, receipt
of governmental approvals and costs of material and labor, all of which may
cause actual results to differ materially from what is expressed herein. Capital
and credit market conditions which affect the Company's cost of capital also
influence operating results.


CABOT PARTNERS

Cabot Partners is the real estate advisory and management entity that was the
sponsor and organizer of the Company.  Its revenues primarily consisted of
asset management and acquisition fees earned under Advisory Contracts with large
institutional investors.


THE COMPANY

The Company is the result of combining the properties of the Contributing
Investors and the advisory business of Cabot Partners contributed in the
Formation Transactions, the Offerings and the use of the net proceeds therefrom
to fund the Company Acquisitions and to repay indebtedness.

As a result of the successful completion of the Offerings in February 1998, the
Company issued 8,625,000 Common Shares to the public and 1,000,000 additional
Common Shares to a group of investors in a private placement of shares. All of
the Common Shares were sold at a price of $20.00 per share. The proceeds from
the Offerings, net of offering costs

                                      19
<PAGE>
 
and expenses,  totaled $173.9 million.  The net proceeds were used as follows:
<TABLE>
 
<S>                         <C>
Repayment of debt.........  $ 13,100,000
Acquisitions..............   146,500,000
Working capital reserves..    14,300,000
                            ------------
TOTAL.....................  $173,900,000
                            ============
</TABLE>

As of  March 24, 1998, the Company owns a 42.8% general partnership interest in
the Operating Partnership, which holds the operating assets of the Company.  The
limited partners hold Operating Partnership units which are convertible into
shares of the Company on a one-for-one basis, subject to certain limitations.
The Company intends to qualify as a REIT for Federal income tax purposes.

CABOT PARTNERS

YEARS ENDED DECEMBER 31, 1997 AND 1996

Revenues.  Revenues, primarily consisting of asset management fees and
--------                                                              
acquisition fees, increased by $1.2 million for the year ended December 31,
1997, or 14.8%, to $9.1 million as compared to $7.9 million for the year ended
December 31, 1996. The increase was due to a $191 million increase in average
assets under management for the year ended December 31, 1997 as compared to the
year ended December 31, 1996, which resulted in an $850,000 increase in asset
management fees. In addition, acquisition fees increased by $262,000 in 1997 as
compared to 1996 due to an increase in fee earning acquisitions of $37 million.

General and administrative expenses. General and administrative expenses
-----------------------------------                                     
increased by $1.2 million for the year ended December 31, 1997, or 19.7%, to
$7.0 million as compared to $5.9 million for the year ended December 31, 1996.
Compensation expense increases accounted for $798,000, or 69.0%, of the
increase. The remainder of the increase was primarily due to higher professional
services fees.

Depreciation and amortization expense.  Depreciation and amortization expense
-------------------------------------                                        
increased by $558,000 for the year ended December 31, 1997 to $977,000 due to
increased amortization of two advisory contracts terminated during 1997.

YEARS ENDED DECEMBER 31, 1996 AND 1995 

Revenues.  Revenues, primarily consisting of asset management fees and
--------                                                              
acquisition fees, increased by $1.4 million for the year ended December 31,
1996, or 21.4%, to $7.9 million as compared to $6.5 million for the year ended
December 31, 1995 due to a $201 million, or 25.8%, increase in assets under
management.  

                                      20
<PAGE>
 
General and administrative expense. General and administrative expenses for the
----------------------------------                                             
years ended December 31, 1996 and 1995 increased by approximately 16.2% and
18.8%, respectively, over the prior year due primarily to compensation expense
increases. General and administrative expense as a percent of revenues for 1996
and 1995 was 74.5% and 77.8%, respectively.

CAPITAL RESOURCES AND LIQUIDITY

THE COMPANY

The Company intends to rely on cash provided by operations, bank borrowings and
public debt and equity financings as its primary sources of funding for
acquisition, development, expansion or renovation of properties. The Company
recently executed a $325 million Acquisition Facility with Morgan Guaranty 
Trust Company of New York as lead agent to the syndicate of banks. The
Acquisition Facility will be used to fund property acquisitions, development
activities, building expansions and tenant leasing costs and for other general
corporate purposes. The Acquisition Facility contains certain restrictions and
requirements such as ratio limitations relating to total debt-to-assets, debt
service coverage, minimum unencumbered assets to unsecured debt ratios, and
other limitations. The Company believes cash flow from operations not
distributed to shareholders will be sufficient to cover tenant allowances and
costs associated with renewal or replacement of current tenants as their leases
expire and recurring non-incremental revenue generating capital expenditures.

The Company's initial low Debt-to-Total Market Capitalization Ratio reduces
exposure to fixed charges and increases its ability to access large amounts of
debt capital. As of March 24, 1998, after giving effect to the Formation
Transactions, the Offerings, and the post-Offering acquisitions, the Operating
Partnership had fixed rate debt secured by properties with an outstanding
principal amount of approximately $13.4 million and a Debt-to-Total Market
Capitalization Ratio of less than 2%.

As of December 31, 1997, the Company has incurred costs related to the 
Formation Transactions and the Offerings totalling $3.5 million. Approximately 
$1.2 million of these costs are payable to Cabot Partners, L.P. as direct 
reimbursement for costs paid to third parties relating to the transactions.

CABOT PARTNERS

Cabot Partners relied primarily on cash payments of asset management fees and
acquisition fees from its advisory clients to fund its operating expenses and
distributions to its partners. The receivables related to these fees 
increased significantly over the last three years due to the increase in
acquisition activity and assets under management discussed above. In addition,
several advisory contracts provided for quarterly, rather than monthly, fee
payments in arrears, further increasing amounts receivable. Finally,
approximately $1.2 million of the increase results from amounts due from the
Company as reimbursement of costs incurred in connection with the Formation
Transactions and the Offering. The increase in accounts receivable was not an
indication of a collectibility problem.

                                      21
<PAGE>
 
INFLATION

THE COMPANY

Substantially all of the leases of the Properties require the tenant to pay, as
additional rent, either all real estate taxes and operating expenses or all
increases in real estate taxes and operating expenses over a base amount. In
addition, many of such leases provide for fixed increases in base rent or
indexed escalations (based on the consumer price index or other measures).
Management believes that inflationary increases in operating expenses will be
off-set, in part, by these expense reimbursements and contractual rent 
increases.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
          ----------------------------------------------------------

Not applicable.

                                       22
<PAGE>
 
ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
           -------------------------------------------


                         INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
 
CABOT INDUSTRIAL TRUST                                                                              Page
                                                                                                    ----   
<S>                                                                                              <C> 
Report of Independent Public Accountants....................................................          24
Balance Sheet as of December 31, 1997.......................................................          25
Notes to Balance Sheet......................................................................          26
                                                                                            
CABOT PARTNERS LIMITED PARTNERSHIP                                                          
Report of Independent Public Accountants.....................................................         29
Balance Sheets as of December 31, 1997 and 1996..............................................         30
Statements of Operations for the years ended December 31, 1997, 1996 and 1995................         31
Statements of Partners' Capital for the years ended December 31, 1997, 1996 and 1995 ........         32
Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995................         33
Notes to Financial Statements................................................................         34

</TABLE>


                                      23
<PAGE>
 
                    Report of Independent Public Accountants



To the Board of Trustees
  of Cabot Industrial Trust:

We have audited the accompanying balance sheet of Cabot Industrial Trust (the
Company), a Maryland real estate investment trust, as of December 31, 1997. This
balance sheet is the responsibility of the Company's management. Our
responsibility is to express an opinion on this balance sheet 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 balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
of the balance sheet provides a reasonable basis for our opinion.

In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Cabot Industrial Trust as of
December 31, 1997, in conformity with generally accepted accounting principles.


                                  Arthur Andersen LLP

Boston, Massachusetts
March 27, 1998

                                       24
<PAGE>
 
                             Cabot Industrial Trust

                                 Balance Sheet

                               December 31, 1997



<TABLE>
<CAPTION>
 
ASSETS
<S>                                                                    <C>
  Cash                                                                                $    1,000
  Deferred offering and acquisition costs                                              3,480,000  
                                                                                      ----------
     Total assets                                                                     $3,481,000
                                                                                      ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
  Accounts payable                                                                    $2,255,000
  Due to related party                                                                 1,225,000 
                                                                                      ----------
     Total liabilities                                                                 3,480,000
                                                                                      ----------

Commitments (Note 4)
 
SHAREHOLDERS' EQUITY
  Common Shares, $0.01 par value; 150,000,000 shares authorized, 50                            1
   shares issued and outstanding
  Additional Paid in Capital                                                                 999
                                                                                      ----------
                                                                                           1,000
                                                                                      ----------
     Total liabilities and shareholders' equity                                       $3,481,000
                                                                                      ==========
</TABLE>
                                                                                


    The accompanying notes are an integral part of this financial statement.

                                      25
<PAGE>
 
                             Cabot Industrial Trust

                             Notes to Balance Sheet


1.   Organization

Cabot Industrial Trust (the Company), a Maryland real estate investment trust,
was formed on October 10, 1997. The Company is the managing general partner of a
newly formed limited partnership, Cabot Industrial Properties, L. P. (the
Operating Partnership), and will conduct substantially all of its business
through the Operating Partnership. The Company will be a fully integrated,
internally managed real estate company formed to continue and expand the
national real estate business of Cabot Partners Limited Partnership. The Company
expects to qualify as a real estate investment trust (a REIT) for federal income
tax purposes.

The Company and the Operating Partnership have had no operations from inception
through December 31, 1997.


2.   The Formation Transactions, The Offerings and the Acquisition Facility

The Formation Transactions
On February 4, 1998, under a Contribution Agreement executed by the Company, the
Operating Partnership, Cabot Partners, L.P. and various other contributors, 122
real estate properties, real estate advisory contracts and other assets were i)
contributed to the Operating Partnership in exchange for Units in the Operating
Partnership that may, subject to certain restrictions, be exchanged for common
shares of the Company or ii) contributed to the Company in exchange for common
shares. The properties contributed to the Company were contributed to the
Operating Partnership in exchange for the number of general partnership Units in
the Operating Partnership equal to the number of common shares exchanged for the
property.

The Operating Partership contributed the real estate investment advisory
contracts to Cabot Advisors, Inc. (the Management Company) and received 100% of
the non-voting preferred stock of the Management Company, which entitles it to
95% of the Management Company's net operating cash flow.  All of the common
stock of the Management Company is owned by an officer of the Company.

The Offerings
On February 4, 1998, the Company completed the offering of 8,625,000 common
shares of beneficial interest (Common Shares) at an offering price of $20.00 per
share. In addition, the Company issued 1,000,000 Common Shares to a single
investor in a private offering at $20.00 per share (collectively, the
Offerings). The Company contributed the net proceeds of the Offerings to the
Operating Partnership in exchange for the number of general partnership
interests in the Operating Partnership equal to the number of Common Shares sold
in the Offerings.

As of December 31, 1997, the Company has incurred costs related to the Formation
Transactions and the Offerings totalling $3.5 millions. Approximately $1.2
million of these costs are payable to Cabot Partners, L.P. as direct
reimbursement for costs paid to third parties relating to the transactions.

The Acquisition Facility
On March 16, 1998, the Operating Partnership entered into a $325 million 
unsecured revolving line of credit (the Acquisition Facility). The Acquisition 
Facility matures on March 16, 2001. The interest rate ranges from LIBOR plus 75 
basis points to LIBOR plus 125 basis points depending on the Operating 
Partnership's loan-to-value ratio. The Acquisition Facility is intended to be 
used to acquire and develop properties and for working capital purposes.
                                      26
<PAGE>
 
                             Cabot Industrial Trust

                             Notes to Balance Sheet

3.   Income Taxes

The Company intends to make an election to be taxed as a REIT under Sections 856
through 860 of the Internal Revenue Code of 1986, as amended (the "Code"). As
a REIT, the Company generally will not be subject to federal income tax if it
distributes at least 95% of its taxable income for each tax year to its
shareholders. REITs are subject to a number of organizational and operational
requirements. If the Company fails to qualify as a REIT in any taxable year, the
Company will be subject to federal income tax (including any applicable
alternative minimum tax) on its taxable income at regular corporate tax rates.
Even if the Company qualifies for taxation as a REIT, the Company may be subject
to state and local income taxes and to federal income tax and excise tax on its
undistributed income.


4.   Commitments

Subsequent to December 31, 1997, the Operating Partnership acquired the
following industrial properties with proceeds from the Offerings:

<TABLE>
<CAPTION>
                                                                                               
                                                                                     ACQUISITION    
                                                                        SQUARE              COST
PROPERTY LOCATION                  BUILDING TYPE                          FEET           (000's)     
-----------------                  -------------                          ----              ----
<S>                                <C>                            <C>            <C>
 
 Grapevine, TX                     Bulk Distribution/Workspace        1,182,361         $ 52,207
 Mira Loma, CA, Dacula, GA,
 Mechanicsburg, PA                 Bulk Distribution                    916,603           34,621
 Mechanicsburg, PA                 Bulk Distribution                    494,400           17,102
 San Diego, CA                     Bulk Distribution                    220,000           10,905
 Orlando, FL                       Workspace Properties                 213,430           11,027
 Tucker, GA                        Workspace Properties                 134,163            5,560
 Atlanta, GA                       Workspace Properties                 128,000            5,370
 Florence, KY                      Workspace Properties                  61,555            4,050
 Tempe, AZ                         Workspace Properties                  81,817            3,295
 Phoenix, AZ                       Multi-tenant Distribution            144,602            4,035
 Tolleson, AZ                      Bulk Distribution                    278,142            6,730
                                                                      ---------         --------
        Total square feet/acquisition cost                            3,855,073          154,902
                                                                      =========
                                                             Less: Debt assumed            8,392
                                                                                        --------
                                             Proceeds used to fund acquisitions         $146,510
                                                                                        ========
</TABLE>
                                                                                
As of March 24, 1998, the Company has entered into separate agreements to
acquire four additional properties with an estimated total acquisition cost of
$39.8 million.  The acquisitions are expected to close within 30 days.


                                      27
<PAGE>
 
                             Cabot Industrial Trust

                             Notes to Balance Sheet


5.   Long Term Incentive Plan

The Company has adopted the Cabot Industrial Trust Long Term Incentive Plan (the
Plan) for the purpose of attracting and retaining highly qualified executive
officers, Trustees and employees. The Plan will be administered by the
Compensation Committee of the Board of Trustees, except that the Board of
Directors of the Management Company or a committee thereof will select those
employees of the Management Company who are eligible for awards under the Plan
(in either case, the Administrator). Officers and other employees of the
Company, the Operating Partnership and designated subsidiaries and members of
the Board of Trustees who are not employees of the Company will also be eligible
to participate.

Options will be awarded to Trustees or employees of the Company in the form of
Common Shares and to employees of the Operating Partnership or the Management
Company in the form of Units.  The Plan currently authorizes the issuance of up
to 4,347,500 Common Shares and Units. The number of Common Shares and Units
available may increase each January 1 to an amount equal to 10% of the aggregate
number of outstanding Common Shares and Units on such date.  The Plan provides
for the grant of (i) Common Share options intended to qualify as incentive
options under Section 422 of the Code, (ii) Common Share options and Unit
options not intended to qualify as incentive options under Section 422 of the
Code and (iii) dividend equivalent rights and distribution equivalent rights
which entitle a Participant to be credited with additional Common Share or Unit
Rights.

In connection with the grant of options under the Plan, other than options to
Non-employee Trustees, the Administrator will determine the terms of the option,
including the option exercise price, any vesting requirements and whether a
dividend equivalent right or a distribution equivalent right shall be awarded.
The Administrator has authority to award options at less than fair market value
(as defined in the Plan) but at this time has no intention of doing so.

Effective as of the closing of the Offering, options for a total of 2,188,500
Common Shares and Units have been granted to employees, officers and Non-
employee Trustees with an exercise price of $20 per share. The initial options
granted under the Plan have ten-year terms and become exercisable in four equal
annual installments commencing on the first anniversary of the date of grant,
subject to acceleration of vesting upon a change in control of the Company (as
defined in the Plan).

To the extent an option has not become exercisable at the time of the holder's
termination of employment, it will be forfeited unless the Administrator has
previously exercised its reasonable discretion to make such option exercisable,
and all vested options which are not exercised by the expiration date described
in the Plan will be forfeited. Any Common Shares or Units subject to an option
which is forfeited (or which expires without exercise) will again be available
for grant under the  Plan.

                                      28
<PAGE>
 
                    Report of Independent Public Accountants


To the Partners of
 Cabot Partners Limited Partnership:

We have audited the accompanying balance sheets of Cabot Partners Limited
Partnership as of December 31, 1997 and 1996, and the related statements of
operations, partners' capital, and cash flows for each of the three years in the
period ended December 31, 1997. These financial statements are the
responsibility of the management of the Partnership. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cabot Partners Limited
Partnership as of December 31, 1997 and 1996, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.



                                  ARTHUR ANDERSEN LLP

Boston, Massachusetts
March 27, 1998

                                      29
<PAGE>
 
                       Cabot Partners Limited Partnership

                                 Balance Sheets

                             (Dollars in thousands)


<TABLE>
<CAPTION>
 
                                                                          DECEMBER 31,
                                                                      --------------------
                                                                         1997       1996
                                                                      ----------  --------
 
ASSETS
<S>                                                                   <C>         <C>
Cash and cash equivalents                                                 $  509    $1,709
Accounts receivable                                                        2,689     1,637
Accounts receivable from related party                                     1,225         -        
Investments                                                                   39       836
Cost of investment advisory contracts acquired, net of accumulated
 amortization of $824 and $2,425, respectively                               780     1,729
 
Other assets                                                                  97       164
                                                                          ------    ------
 Total Assets                                                             $5,339    $6,075
                                                                          ======    ======
 
LIABILITIES AND PARTNERS' CAPITAL
Accrued compensation                                                      $  373    $  385
Accounts payable and accrued liabilities                                     387       100
                                                                          ------    ------
 Total Liabilities                                                           760       485
                                                                          ------    ------
 
Commitments (Note 4)
Partners' capital                                                          4,579     5,590
                                                                          ------    ------
 Total Liabilities and Partners' Capital                                  $5,339    $6,075
                                                                          ======    ======
</TABLE>




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

                                      30
<PAGE>
 
                       Cabot Partners Limited Partnership

                            Statements of Operations

                             (Dollars in thousands)



<TABLE>
<CAPTION>
                                                            FOR THE YEAR ENDED
                                                               DECEMBER  31,
                                                      -------------------------------
                                                        1997        1996       1995
                                                      ---------  ----------  --------
<S>                                                   <C>        <C>         <C>
REVENUES
  Advisory fees                                          $9,010     $7,871     $6,482
  Other income                                               70         37         34
                                                         ------     ------     ------
     Total Revenues                                       9,080      7,908      6,516
                                                         ------     ------     ------
EXPENSES
  Compensation                                            4,685      3,887      3,416
  Other general and administrative                        2,360      2,001      1,653
  Depreciation and amortization                             977        419        453
                                                         ------     ------     ------
     Total Expenses                                       8,022      6,307      5,522
                                                         ------     ------     ------
Income before income (loss) from
 unconsolidated subsidiary                                1,058      1,601        994
Equity in income (loss) from unconsolidated
 subsidiary                                                   0         (7)        63
                                                         ------     ------     ------
Net income                                               $1,058     $1,594     $1,057
                                                         ======     ======     ======
</TABLE>
                                                                                



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

                                      31
<PAGE>
 
                       Cabot Partners Limited Partnership

                        Statements of Partners' Capital

              For the Years Ended December 31, 1997, 1996 and 1995

                             (Dollars in thousands)


<TABLE>
<CAPTION>
 
                                                                                                        
                                                                       Limited Partners          Total
                                                        General    ------------------------    Partners' 
                                                        Partner      Class A      Class B       Capital
                                                       ----------  -----------  -----------  -----------
<S>                                                    <C>         <C>          <C>          <C>
Partners' Capital, December 31, 1994                        $ --      $ 4,008        $  --      $ 4,008
  Net income for the year ended December 31, 1995             --        1,057           --        1,057
                                                            ----      -------        -----      -------
Partners' Capital, December 31, 1995                          --        5,065           --        5,065
  Net income for the year ended December 31, 1996             10        1,194          390        1,594
  Distributions                                               --       (1,069)          --       (1,069)
                                                            ----      -------        -----      -------
Partners' Capital, December 31, 1996                          10        5,190          390        5,590
  Net income for the year ended December 31, 1997             --        1,058           --        1,058
  Distributions                                              (10)      (1,669)        (390)      (2,069)
                                                            ----      -------        -----      -------
Partners' Capital, December 31, 1997                        $ --      $ 4,579        $  --      $ 4,579
                                                            ====      =======        =====      =======
</TABLE>
                                                                                



                                                                                



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

                                      32
<PAGE>
 
                       Cabot Partners Limited Partnership

                            Statements of Cash Flows

                             (Dollars in thousands)


<TABLE>
<CAPTION>
 
 
                                                                          For the Year Ended
                                                                             December  31,
                                                                  ---------------------------------
                                                                    1997        1996         1995
                                                                 ----------  -----------  ----------
<S>                                                              <C>         <C>          <C>
OPERATING ACTIVITIES
Net income                                                         $ 1,058      $ 1,594      $1,057
Adjustments to reconcile net income to net cash
 provided by operating activities:
 Depreciation and amortization                                         977          419         453
 Unrealized equity in (income) loss of investment                        0            7         (63)
 (Increase) in accounts receivable                                  (1,052)        (695)       (315)
 Increase (Decrease) in accrued liabilities                             37          (70)        265
 (Decrease) Increase in accounts payable                                (5)          (9)          6
 Decrease (Increase) in other assets                                    47           37         (52)
                                                                   -------      -------      ------
 Net cash provided by operating activities                           1,062        1,283       1,351
                                                                   -------      -------      ------
 
INVESTING ACTIVITIES
 Increase in accounts receivable from related parties                 (984)          --          --
 Dividends received                                                    797          183          77
 Purchase of furniture, fixtures and equipment                          (6)         (50)        (63)
 Additional cost-basis investments                                      --          (20)        (20)
                                                                   -------      -------      ------
 Net cash provided by (used in) investing activities                  (193)         113          (6)
                                                                   -------      -------      ------
 
FINANCING ACTIVITIES
 Distributions to partners                                          (2,069)      (1,069)         --
                                                                   -------      -------      ------
 
 Net (decrease) increase in cash and cash equivalents               (1,200)         327       1,345
 Cash and cash equivalents, beginning of period                      1,709        1,382          37
                                                                   -------      -------      ------
 Cash and cash equivalents, end of period                          $   509      $ 1,709      $1,382
                                                                   =======      =======      ======
</TABLE>
                                                                                


                                                                                



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

                                      33
<PAGE>
 
                       Cabot Partners Limited Partnership

                         Notes to Financial Statements

                             (Dollars in thousands)


1.   Organization

Cabot Partners Limited Partnership (the Partnership), a Massachusetts limited
partnership, was formed as of July 11, 1990 to provide a variety of real estate
investment advisory and management services, primarily to a small number of
pension and profit-sharing plans and other institutional investors.  Eight
investors represented 70% of fee revenues for 1997, nine investors represented
77% of fee revenues for 1996 and eleven investors represented 81% of fee
revenues for 1995.

The Partnership has two classes of limited partners. The Class A limited
partners contributed cash on a disproportionate basis to their ownership
interest and are entitled to a cumulative guaranteed return on their Adjusted
Capital Contributions, as defined, of 10% through December 31, 1995 and 5%
thereafter, payable only out of available cash. In addition, the Class A limited
partners are entitled to a 5% return of their Adjusted Capital Contributions
prior to distributions of available cash to all the partners in accordance with
their ownership interest. As of December 31, 1997, the cumulative unpaid and
unrecognized return was $2,795.


2.   Summary of Significant Accounting Policies

Income Taxes
No provision for federal and state income taxes has been recorded relating to
the Partnership, as the partners report their respective shares of the net
taxable income on their individual tax returns. The tax basis of assets and
liabilities does not significantly differ from their historical cost basis.

Furniture, Fixtures and Equipment
Furniture and equipment additions are recorded at cost and are depreciated over
an estimated useful life of five years. Fixtures include leasehold improvements
that are recorded at cost and amortized over the shorter of their useful life or
the remaining lease term.

Cost of Investment Advisory Contracts Acquired
The investment advisory contracts acquired are recorded at their fair market
value at the date of acquisition, based on independent appraisals, and are being
amortized over their estimated lives, which range from eight to sixteen years.

Allocation of Profits and Losses
Income and losses have been allocated to the partners in accordance with the
provisions of the partnership agreement.

                                      34
<PAGE>
 
                       Cabot Partners Limited Partnership

                         Notes to Financial Statements

                             (Dollars in thousands)


2.   Summary of Significant Accounting Policies (Continued)

Cash Equivalents
At December 31, 1997, the Partnership had invested excess funds in money market
mutual funds, which have an original maturity of less than three months. For
purposes of the statement of cash flows, this investment has been considered a
cash equivalent.

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

Fair Value of Financial Instruments
The carrying amounts reported on the accompanying balance sheets for cash and
cash equivalents, receivables, accounts payable and accrued expenses approximate
fair value, due to the short-term nature of these investments.


3.   Investments

The Partnership owns a 1% managing general partnership interest in a real estate
operating company, CP Private Partners, L.P.-I (Private Partners), and accounts
for this investment under the equity method. Under this method of accounting,
the Partnership's pro rata share of Private Partners' income (loss) is recorded
each year as an increase (decrease) in the carrying value of its investment, and
any distributions received are recorded as decreases in the carrying value.

                                      35
<PAGE>
 
                       Cabot Partners Limited Partnership

                         Notes to Financial Statements

                             (Dollars in thousands)

3.   Investments (continued)

The condensed unaudited historical cost balance sheets of Private Partners at
December 31, 1997 and December 31, 1996 are as follows:
<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                            ------------------------
                                                               1997         1996
                                                            -----------  -----------
<S>                                                         <C>          <C>
        ASSETS
        Cash and cash equivalents                                $  576      $   186
        Real estate assets, net                                   3,140       58,776
        Other assets                                                179       18,203
                                                                 ------      -------
          Total Assets                                           $3,895      $77,165
                                                                 ======      =======
 
        LIABILITIES AND PARTNERS' CAPITAL
        Accounts payable and accrued liabilities                 $   29      $   453
 
        PARTNERS' CAPITAL
        The Partnership                                              39          767
        Other Partners                                            3,827       75,945
                                                                 ------      -------
          Total Partners' Capital                                 3,866       76,712
                                                                 ------      -------
          Total Liabilities and Partners' Capital                $3,895      $77,165
                                                                 ======      =======
</TABLE>
                                                                                
The difference between the Partnership's share of the 1996 historical partners'
capital and the investment on the balance sheets is due to stating the
investment at fair market value at the time of purchase.

The condensed unaudited historical cost income statements of Private Partners
for the years ended December 31, 1997, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
                                                   Years ended December 31,
                                         --------------------------------------------
                                             1997            1996           1995
                                         -------------  --------------  -------------
<S>                                      <C>            <C>             <C>
     Sale of real estate assets              $ 60,268        $ 20,817        $    --
     Rental revenues                            6,448          11,726         12,778
     Cost of real estate sold                 (51,728)        (20,411)            --
     Note receivable reduction                 (2,078)         (7,688)            --
     Operating expenses                        (1,213)         (5,163)        (6,483)
     Write down of real estate to net
      realizable value                         (4,860)             --             --
                                             --------        --------        -------
     Net income (loss)                       $  6,837        $   (719)       $ 6,295
                                             ========        ========        =======
     Dividends paid                          $ 79,683        $ 18,292        $ 7,700
                                             ========        ========        =======
     The Partnership's share of:
     Net income (loss)                       $     68        $     (7)       $    63
                                             ========        ========        =======
     Dividends paid                          $    797        $    183        $    77
                                             ========        ========        =======
</TABLE>

Private Partners' remaining real estate is vacant land which is held for sale.
As of December 31, 1997, its carrying cost has been reduced to its estimated net
realizable value.

                                      36
<PAGE>
 
                       Cabot Partners Limited Partnership

                         Notes to Financial Statements

                             (Dollars in thousands)


4.   Minimum Future Lease Obligations

Minimum future lease obligations under noncancelable operating leases for each
of the next five years ending December 31 and thereafter are as follows:

<TABLE>
<S>                                          <C>
                         1998                 $298
                         1999                  313
                         2000                  325
                         2001                  310
</TABLE>

The Partnership incurred rental expense of $332, $304 and $242 for the years
ended December 31, 1997, 1996 and 1995, respectively. The Partnership's only
significant lease is for its office space. The lease provides for the payment of
base rent and operating expenses and real estate taxes over stated base amounts.


5.   Related Party Transactions

Under two separate agreements, the Partnership provides acquisition, asset
management and property management services to a partnership and a company
separately controlled by two Class A limited partners. The agreements are
cancelable by either party with 30 days notice. After a recent amendment, one
agreement provides for annual fixed fees of $158. The other agreement provides
for an acquisition fee of .25% of acquisition cost and an asset management fee
of 5% of net operating income. The Partnership received acquisition fees from
related parties of $345 for the year ended December 31, 1997, and other related
party fees of $287, $164 and $153 for the years ended December 31, 1997, 1996
and 1995, respectively.

As of December 31, 1997, the Partnership had incurred costs related to the
Formation Transactions decribed below of $1,225, of which $241 is unpaid and
included in accounts payable and accrued expenses. These costs are to be
reimbursed by Cabot Industrial Trust subsequent to the Formation Transactions.

6.   Subsequent Events

Formation Transactions
Under the provisions of an agreement executed by the Partnership and several
other investors, Cabot Partners contributed its Advisory Contracts and certain
of its other net assets to Cabot Industrial Properties, L.P. (the Operating
Partnership), a subsidiary partnership of Cabot Industrial Trust (the Company)
and received 1,819,587 Units from the Operating Partnership. The Units are
convertible into common shares of the Company on a one-to-one basis subject to
certain limitations. As of February 4, 1998, the common shares had a fair market
value of $20 per share. The remainder of the Partnership's net assets will be
distributed to its partners. The impact of these proposed transactions is not
reflected in the accompanying financial statements.

The cumulative unpaid and unrecognized return discussed in Note 1 was settled
through the distribution of Units received in conjunction with these
transactions.

                                      37
<PAGE>
 
                       Cabot Partners Limited Partnership

                         Notes to Financial Statements

                             (Dollars in thousands)


6.   Subsequent Events (Continued)

Sales of Assets Under Management
Under the terms of the investment advisory agreements, investors have the right
to terminate the Partnership as advisor with 30 days notice. In addition, a
significant portion of the Partnership's assets under management may be
transferred to other advisors or sold as a part of the investor's investment
strategy.

During 1997, all the properties of three portfolios have been sold. These
portfolios accounted for advisory and property management fees of $2,985, $3,249
and $3,295 for the years ended December 31, 1997, 1996 and 1995, respectively.

                                      38
<PAGE>
 
ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          ---------------------------------------------------------------
          FINANCIAL DISCLOSURE
          --------------------

None.

                                   PART III
                                        
Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
          ----------------------------------------------

The information called for by Item 10 with respect to executive officers of the
Registrant appears in Item 4A under Part I of this Report and is incorporated
herein by reference.

<TABLE>
<CAPTION>
                                             Positions with Company, Business Experience
              Name                  Age                  and Other Positions
------------------------------------------------------------------------------------------
<S>                               <C>       <C>
Noah T. Herndon                     66      Mr. Herndon has been a Trustee of the Company
                                            since February 1998.  Mr. Herndon is a
                                            Partner of Brown Brothers Harriman & Co.,
                                            where he has worked since 1958.  Mr. Herndon
                                            is a Director of Scully Signal Company,
                                            Standard Mutual Insurance Company, Watts
                                            Industries, Inc., and Zoll Medical
                                            Corporation.   He is Trustee and Treasurer of
                                            Dumaines Trust, and Trustee of  The Carroll
                                            School.
 
Maurice Segall                      68      Mr. Segall has been a Trustee of the Company
                                            since February 1998.  Mr. Segall has been a
                                            senior lecturer at the MIT-Sloan School of
                                            Management and a senior advisor to the Boston
                                            Consulting Group since 1989.  Until 1989, he
                                            was Chairman, President and Chief Executive
                                            Corporate Officer of Zayre Corporation, which
                                            he joined as President and Chief Executive
                                            Officer in 1978.  Mr. Segall is a Director of
                                            AMR Corporation and Harcourt General, Inc.
                                            He is a Trustee of Massachusetts General
                                            Hospital, Beth Israel Hospital and the Boston
                                            Museum of Fine Arts.
</TABLE>

                                      39
<PAGE>
 
<TABLE>
<CAPTION>
                                             Positions with Company, Business Experience
              Name                  Age                  and Other Positions
------------------------------------------------------------------------------------------
<S>                               <C>       <C>
Ronald L. Skates                   56       Mr. Skates has been a Trustee of the Company
                                            since February 1998.  Mr. Skates has been
                                            President, Chief Executive Officer and
                                            Director of Data General Corporation since
                                            1989.  Prior to joining Data General
                                            Corporation in 1986, Mr. Skates was a Partner
                                            of Price Waterhouse LLP, certified public
                                            accountants.  He is a member of the American
                                            Institute of Certified Public Accountants and
                                            the Massachusetts Society of Certified Public
                                            Accountants.  He is also a Trustee of
                                            Massachusetts General Hospital, an Overseer
                                            of the Boston Museum of Fine Arts, and Vice
                                            Chairman and a Director of the Massachusetts
                                            High Technology Council.
 
W. Nicholas Thorndike              65       Mr. Thorndike has served as a Trustee of the
                                            Company since February 1998.  Mr. Thorndike
                                            retired in 1988 from Wellington Management
                                            Company/Thorndike, Doran, Paine and Lewis
                                            where he was Chairman of the Board and
                                            Managing Partner.  Mr. Thorndike serves as a
                                            Director of Courier Corporation, Data General
                                            Corporation, the Providence Journal (where he
                                            is Chairman of the Executive Committee), and
                                            Bradley Real Estate Inc.  He also serves as a
                                            Trustee of Massachusetts General Hospital,
                                            having served as Chairman of the Board from
                                            1987 to 1992 and President from 1992 to 1994,
                                            and serves as Trustee of Eastern Utilities
                                            Associates, Northeastern University and the
                                            Putnam Funds.
</TABLE>

                                       40
<PAGE>
 
<TABLE>
<CAPTION>
                                             Positions with Company, Business Experience
              Name                  Age                  and Other Positions
-----------------------------------------------------------------------------------------
<S>                               <C>       <C>
Ferdinand Colloredo-Mansfeld       58       Ferdinand Colloredo-Mansfeld has served as
                                            Chairman of the Board of Trustees and Chief
                                            Executive Officer of the Company since its
                                            formation in October 1997.  See the
                                            description of Mr. Colloredo-Mansfeld's
                                            background set forth under Item 4A of this
                                            report.

Robert E. Patterson                53       Mr. Patterson has served as President and a
                                            Trustee of the Company since October 1997.
                                            See the description of Mr. Patterson's
                                            background set forth under Item 4A of this
                                            report.
 
Christopher C. Milliken            52       Mr. Milliken has been a Trustee of the
                                            Company since February 1998.  He has been the
                                            Senior Vice President, Operations of the
                                            Boise Cascade Office Products Corporation
                                            since 1995, previously having served as
                                            Eastern Region Manager from 1990.  Prior to
                                            beginning his career at Boise Cascade Office
                                            Products Corporation in 1977, Mr. Milliken
                                            served in various merchandise management
                                            positions at Marshall Field & Company from
                                            1970 to 1977.
</TABLE>

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires Trustees,
executive officers and beneficial owners of more than ten percent of the Common
Shares to file initial reports of ownership and reports of changes in ownership
with the Securities and Exchange Commission and to provide the Company with
copies of such reports.  The Company was not subject to Section 16(a) during
1997.

ITEM 11.  EXECUTIVE COMPENSATION
          ----------------------

Summary Compensation Table
--------------------------

The Company was organized in October 1997 and did not pay any compensation to
its executive officers during 1997.  The following table sets forth information
concerning the base compensation to be paid, and the initial amounts of options
to purchase Units granted, to Ferdinand Colloredo-Mansfeld, Robert E. Patterson,
Franz Colloredo-Mansfeld, Andrew D. Ebbott, Howard B. Hodgson, Jr., Eugene F.
Reilly and Neil E. Waisnor (collectively, the 

                                       41
<PAGE>
 
"Named Executive Officers") during the fiscal year ending December 31, 1998.

<TABLE>
<CAPTION>
                                                                           Long-Term
                                                        Annual            Compensation
                                                     Compensation            Awards
-------------------------------------------------------------------------------------------
                                                                           Securities
                                         Fiscal                            Underlying 
Name and Principal Position               Year          Salary             Options(#)
-------------------------------------------------------------------------------------------
<S>                                    <C>         <C>               <C>
Ferdinand Colloredo-Mansfeld
   Chairman of the Board and
    Chief Executive Officer              1998          $265,000              350,000
                                                                         
Robert E. Patterson                                                      
   President                             1998          $245,000              275,000
                                                                         
Franz Colloredo-Mansfeld                                                 
   Chief Financial Officer               1998          $175,000              250,000
                                                                         
Andrew D. Ebbott                                                         
   Senior Vice President                                                 
   Director of Acquisitions              1998          $175,000              200,000
                                                                         
Howard B. Hodgson, Jr.                                                   
   Senior Vice President                 1998          $175,000              200,000
   Director of Real Estate Operations                                    
                                                                         
Eugene F. Reilly                                                         
   Senior Vice President                                                 
   Director of Leasing, Marketing                                        
    and Development                      1998          $175,000              200,000
                                                                         
Neil E. Waisnor                                                          
   Senior Vice President                 1998          $175,000              200,000
   Finance, Treasurer and Secretary
</TABLE>

                                       42
<PAGE>
 
Option Grants
-------------

The following table sets forth certain information concerning grants of options
to purchase Units to the Named Executive Officers made in February 1998.

<TABLE>
<CAPTION>
                                                     Individual Grants(1)                                    Potential Realizable
                                    ------------------------------------------------------------------       Value at Annual Rates
                                                                                                                of Stock Price
                                                                                                            Appreciation for Option
                                                                                                                    Term(2)
                                ----------------------------------------------------------------------------------------------------

                                      Number of
                                      Securities      Percent of Total      Exercise or
                                      Underlying       Options Granted       Base Price
                                       Options         to Employees(3)       per Share      Expiration
Name                                   Granted                                                 Date           5%             10%
------------------------------------------------------------------------------------------------------------------------------------

<S>                                 <C>               <C>                   <C>             <C>           <C>            <C>
Ferdinand Colloredo-Mansfeld               350,000         17.1%                  $20.00        2/4/08    $4,402,262     $11,156,197

Robert E. Patterson                        275,000         13.4%                  $20.00        2/4/08     3,458,920       8,765,584

Franz Colloredo-Mansfeld                   250,000         12.2%                  $20.00        2/4/08     3,144,473       7,968,712

Andrew D. Ebbott                           200,000          9.8%                  $20.00        2/4/08     2,515,579       6,374,971

Howard B. Hodgson, Jr.                     200,000          9.8%                  $20.00        2/4/08     2,515,579       6,374,971

Eugene F. Reilly                           200,000          9.8%                  $20.00        2/4/08     2,515,579       6,374,971

Neil E. Waisnor                            200,000          9.8%                  $20.00        2/4/08     2,515,579       6,374,971

</TABLE>

(1)  Options granted under the Company's Long Term Incentive Plan upon the
     closing of the Company's initial public offering in February 1998.  Options
     vest in four equal annual installments beginning on the first anniversary
     of the date of grant.
(2)  Hypothetical gains based on assumed rates of annual compounded share price
     appreciation of 5% and 10% from the date of grant over the full option
     term.  The 5% and 10% assumed rates of appreciation are mandated by the
     rules of the Securities and Exchange Commission and do not represent the
     Company's estimate or projection of future increases in the price of its
     Common Shares or the Units.
(3)  Based on an aggregate of options to purchase 2,045,600 Units granted to
     employees upon the closing of the Company's initial public offering.

Employment Contracts and Termination of Employment and Change-in-Control
------------------------------------------------------------------------
Arrangements
------------

Employment Agreements

Messrs. Ferdinand Colloredo-Mansfeld, Robert E. Patterson and Franz Colloredo-
Mansfeld and each of the other Named Executive Officers have entered into
employment agreements with the Company and the Operating Partnership.  Each of
the agreements with Messrs. Ferdinand Colloredo-Mansfeld, Robert E. Patterson
and Franz Colloredo-Mansfeld is for an initial term of three years, which will
be automatically extended for successive one-year periods unless otherwise
terminated.  The agreements with each of the other Named Executive Officers are
for initial terms of two years, which will be automatically extended for
successive one-year periods unless otherwise terminated.  The agreements each
provide for base annual compensation in the amounts set forth in the Summary
Compensation Table above and a cash bonus to be determined by the Board of
Trustees or the Executive Compensation Committee thereof.   The base annual
compensation may be increased in subsequent years by action of the Board of
Trustees or the Executive Compensation Committee.  Each of the employment
agreements provides for severance payments equal to three times current base
salary plus the amount of any bonus paid for the preceding year and  including
certain tax reimbursements, in the event of termination by the Company without
cause or by the employee after a change in control of the Company.   Each
executive is required under the terms of his employment agreement to devote
substantially all of his business time to the affairs of the Company.  The
agreements also prohibit each executive from engaging, directly or indirectly,
during the term of his employment in activities that compete with those of the
Company or the Operating Partnership.

                                       43
<PAGE>
 
Long Term Incentive Plan

The Board of Trustees has adopted the Cabot Industrial Trust Long Term Incentive
Plan (the "Long Term Incentive Plan") for the purpose of attracting and
retaining highly qualified executive officers, Trustees and employees.  The Long
Term Incentive Plan is administered by the Executive Compensation Committee of
the Board of Trustees, except that the Board of Directors of Cabot Advisors,
Inc. (the "Management Company") or a committee thereof selects those employees
of the Management Company who are eligible for awards under the Long Term
Incentive Plan.  As used in this summary, the term "Administrator" means the
applicable Board or committee or its delegate, as appropriate.  Officers and
other employees of the Company, the Operating Partnership and designated
subsidiaries, including the Management Company, and members of the Board of
Trustees who are not employees of the Company ("Non-employee Trustees") are
eligible to participate in the Long Term Incentive Plan.  Certain awards are
made to the Non-employee Trustees automatically and the applicable Administrator
selects other individuals for  participation in the Long Term Incentive Plan
("Participants").  No options or other incentive award may be granted under the
Long Term Incentive Plan after the tenth anniversary of the date of its
adoption.

Options awarded to Participants in the Long Term Incentive Plan who are Non-
employee Trustees or employees of the Company relate to Common Shares.  Options
awarded to Participants in the Plan who are employees of the Operating
Partnership or the Management Company relate to Units.  The Long Term Incentive
Plan authorizes the issuance of up to 4,347,500 Common Shares and Units.  The
number of Common Shares and Units available may increase on each January 1 to an
amount equal to 10% of the aggregate number of outstanding Common Shares and
Units on such date.  The number of Common shares or Units underlying awards made
to any one individual in any one-year period may not exceed 500,000 Common
Shares or 500,000 Units or any combination thereof.  The Long Term Incentive
Plan provides for the grant of (i) Common Share options intended to qualify as
incentive options under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), (ii) Common Share options and Unit options not intended to
qualify as incentive options under Section 422 of the Code and (iii) dividend
equivalent rights and distribution equivalent rights which entitle a Participant
to be credited with additional Common Share or Unit rights.

In connection with the grant of options under the Long Term Incentive Plan other
than options to Non-employee Trustees, the Administrator determines the terms of
the option, including the option exercise price and any vesting requirements and
whether a dividend equivalent right or a distribution equivalent right shall be
awarded in conjunction, respectively, with a Common Share option or a Unit
option.  The Administrator has authority to award options at less than fair
market value (as defined in the Long Term Incentive Plan) but at this time has
no intention of doing so.  At the time of a Non-employee Trustee's initial
election or appointment as a Trustee, such Trustee automatically receives an
option to purchase 10,000 Common Shares.  Thereafter, at the closing of the
annual meeting of the Trust's shareholders, each continuing Non-employee Trustee
shall receive an option to purchase an additional 4,000 Common Shares.  Upon the
closing of the Company's initial public offering in February 1998, options for a
total of 2,095,600 Common Shares and units were granted to employees, officers
and Non-employee Trustees, including the officers named in Summary Compensation
Table above, with an exercise price equal to the offering price of $20.00.  The
initial options granted to officers and employees under the Long Term Incentive
Plan have ten-year terms and become exercisable in four equal 

                                       44
<PAGE>
 
annual installments commencing on the first anniversary of the date of grant,
subject to acceleration of vesting upon a change in control of the company (as
defined in the Long Term Incentive Plan).

A Common Share option granted under the Long Term Incentive Plan may be
exercised for any number of whole Common Shares up to the full number of Common
Shares for which the option could be exercised.  A Unit option may be exercised
for any number of whole units up to the full number of Units for which the
option could be exercised.  A holder of any option has no rights as an owner
with respect to the Common Shares or Units, as applicable, subject to his or her
option until the option is exercised.  To the extent an option has not become
exercisable at the time of the holder's termination of employment, it will be
forfeited unless the Administrator has previously exercised its reasonable
discretion to make such option exercisable, and all vested options which are not
exercised by the expiration date described in the Long Term Incentive Plan will
be forfeited.  Any Common Shares or Units subject to an option which is
forfeited (or which expires without exercise) will again be available for grant
under the Long Term Incentive Plan.  Payment of the exercise price of an option
granted under the Long Term Incentive Plan may be made in cash or by exchanging
Common Shares, in the case of Common Share options, or Units, in the case of
Unit options, that have, in either case, been upheld by the Participant for at
least six months, or in any combination thereof, as determined by the
Administrator.

Savings Plan

The Company has assumed, and the Operating Partnership and certain subsidiaries,
including the Management Company (each a "Participating Employer"), have
adopted, the Cabot Partners Employee Savings Plan (the "401(k) Plan").  Prior
service with Cabot Partners will be credited in full as service with the Company
or a Participating Employer for all purposes under the 401(k) Plan, including
eligibility and vesting.

The 401(k) Plan permits each participating employee to defer up to 15% of
compensation, subject to the annual statutory limitation prescribed by Section
402(g) of the Code, on a pre-tax basis.  The Company and the Participating
Employers make matching contributions equal to 100% of the amount deferred, up
the lesser of 6% of compensation or $1,800.  The Company and the Participating
Employers may also make annual contributions if the Company achieves certain
performance objectives determined on an annual basis by the Executive
Compensation Committee.  Matching and discretionary contributions are made in
cash or Common Shares.


                                       45
<PAGE>
 
Compensation of Trustees

Independent Trustees receive an annual retainer of $18,000 and per meeting
compensation of $1,000.  The Chairman of the Audit Committee and the Executive
Compensation Committee each receive an additional $1,000 annually for their
services in such capacities, and each Trustee is reimbursed for out-of-town
travel expenses incurred in connection with attendance at Board and committee
meetings.  Each Independent Trustee also receives, under the Company's Long Term
Incentive Plan, an initial grant of options to purchase 10,000 Common Shares on
the date they become a Trustee, and an additional annual grant of options to
purchase 4,000 Common Shares each year on the date of the Company's annual
meeting of shareholders provided they have been reelected or are continuing to
serve as Trustees following such meeting.  The exercise price per share for
options granted to Independent Trustees is the market price of a Common Share,
as defined in the Long Term Incentive Plan, on the date of grant.  Options
granted to Independent Trustees become exercisable on the first anniversary of
the date of grant.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
            --------------------------------------------------------------

Principal and Management Shareholders

The following table sets forth, as of April 17, 1998, the beneficial ownership
of Common Shares of (i) each person known by the Company to own more than 5% of
the Common Shares, (ii) each Trustee and nominee, (iii) each person named in the
Summary Compensation Table above, and (iv) all Trustees and executive officers
of the Company as a group. The table also sets forth the number of limited
partnership units (the "Units") of the Operating Partnership owned by each
beneficial owner of Units that, upon exchange of Units for Common Shares, would
own more than 5% of the Common Shares, and by the persons and group specified in
clauses (ii) through (iv) above. Pursuant to the Amended and Restated Agreement
of Limited Partnership of the Operating Partnership (the "Operating Partnership
Agreement"), the Units are exchangeable for Common Shares on a one-for-one basis
or the cash equivalent thereof (as determined by the Company) beginning February
4, 1999, or such earlier date as the Company may authorize. Unless otherwise
indicated, the persons and entities named below have sole voting and investment
power with respect to all Common Shares and Units shown as beneficially owned by
them.

                                       46
<PAGE>
 
<TABLE>
<CAPTION>
                                                                         Percent of
                                                                         All Common      Percent of
                                                                         Shares and      All Common
Beneficial Owner(1)                    Common Shares      Units           Units(2)       Shares (3)
----------------------------------------------------------------------------------------------------
<S>                                    <C>             <C>             <C>             <C>
Ferdinand Colloredo-Mansfeld                    1,050       1,331,657            3.1%            6.7%
 
Robert E. Patterson                            14,000         128,590        *               *
 
Franz Colloredo-Mansfeld                        4,000          25,991        *               *
 
Andrew D. Ebbott                                1,000          36,499        *               *
 
Howard B. Hodgson Jr.                           1,000          36,499        *               *
 
Eugene F. Reilly                                   --          30,416        *               *
 
Neil E. Waisnor                                    --          36,499        *               *
 
Noah T. Herndon                                 5,000              --        *               *
 
Christopher C. Milliken                           100              --        *               *
 
Maurice Segall                                  2,500              --        *               *
 
W. Nicholas Thorndike                           5,000              --        *               *
 
Ronald L. Skates                               10,000              --        *               *
 
IBM Retirement Plan Trust(4)                       --      10,246,244           23.5%           35.5%
 
Pennsylvania Public School
 Employees' Retirement System(5)                   --       5,502,973           12.6%           22.8%
 
New York State Teachers' Retirement
 System(6)                                  2,186,947       3,764,579           13.7%           26.6%
 
State of Wisconsin Investment
 Board(7)                                   2,959,534              --            6.8%           15.9%
 
Leland Stanford Jr. Endowment Fund(8)              --       2,367,923            5.4%           11.3%
                                      
The Prudential Insurance Company of
 America(9)                                 2,504,699              --            5.8%           13.5%
 
Argo Partnership II, L.P.(10)               1,586,484              --            3.6%            8.5%
 
Morgan Stanley Asset Management
 Inc.(11)                                   1,000,000              --            2.3%            5.4%
 
All Trustees and executive officers
 as a group (12 persons)                       43,650       1,626,151            3.8%            8.3%
 
</TABLE>

                                       47
<PAGE>
 
*  Less than 1%

(1)  Unless otherwise indicated, the address of each named person or the title
     holding entity is c/o Cabot Industrial Trust, Two Center Plaza, Suite 200,
     Boston, Massachusetts 02108.
(2)  Assumes all Units exchanged for Common Shares on a one-for-one basis
     (without regard to the prohibition on exchange of 22,699,884 and 2,228,719
     Units until February 4, 1999 and 2000 respectively).
(3)  Assumes that all Units beneficially owned by the identified person or group
     (and no other person) are exchanged for Common Shares on a one-for-one
     basis (without regard to the prohibition on exchange of 22,699,884 and
     2,228,719 units until February 4, 1999 and 2000, respectively).
(4)  Information based on a Schedule 13G dated April 22, 1998 filed with the
     Securities and Exchange Commission. The address of IBM Retirement Plan
     Trust is 3001 Summer Street, Stamford, Connecticut 06905.
(5)  Units held of record by Keystone-Illinois Property Holding Corp., Keystone-
     New Jersey Property Holding Corp. and Keystone-Ohio Property Holding Corp.
     which are each owned by Pennsylvania Public School Employees' Retirement
     System.  The business address of the Unitholders is 875 North Michigan
     Avenue, Suite 4114, Chicago, Illinois 60611.
(6)  Common Shares and Units held of record by the three title holding entities
     and six title holding entities, respectively, which are each wholly owned
     by New York State Teachers' Retirement System.  The business address of
     these entities is c/o Bankers Trust Company, 14 Wall Street, New York, New
     York 10005.
(7)  Information based on a Schedule 13G dated March 10, 1998 filed with the
     Securities and Exchange Commission. The address of State of Wisconsin
     Investment Board is P.O. Box 7842, Madison, Wisconsin 53707.
(8)  Units held of record by CP REPROP Corp. which is wholly owned by the Leland
     Stanford Jr. Endowment Fund.  The business address of the entities is c/o
     Stanford Management Company, 2770 Sand Hill Road, Menlo Park, California
     94025.
(9)  Includes 950 shares with respect to which The Prudential Insurance Company
     of America ("Prudential") has shared voting and investment power.
     Information based on a Schedule 13G dated March 9, 1998 filed with the
     Securities and Exchange Commission. Prudential's address is 751 Broad
     Street, Newark, New Jersey 07102-3777.
(10) Common Shares held of record by West Coast Industrial, L.I.C. which are
     beneficially owned by its managing member, Argo Partnership II, L.P.  The
     business address of this Unitholder is c/o The O'Connor Group, 399 Park,
     Avenue, New York, New York 10022.
(11) Common Shares held of record by Morgan Stanley Asset Management Inc.
     ("MSAM") as advisor to Stichting Bedrijspensioenfonds Voor De
     Metaalnijhwerheld, Stichting Pensiocnfonds ABP, MS Real Estate Special
     Situations Inc., The Morgan Stanley Real Estate Special Situations Funds I,
     L.P., The Morgan Stanley Real Estate Special Situations Fund II, L.P. and
     Morgan Stanley Real Estate Special Situations Real Estate Investors, L.P.
     MSAM and Morgan Stanley, Dean Witter, Discover & Co., as the owner of all
     of the common stock of MSAM, are deemed beneficially to own the Common
     Shares beneficially owned by these entities.  MSAM maintains its principal
     office at 1221 Avenue of the Americas, New York, New York 10020 and Morgan
     Stanley, Dean Witter, Discover & Co. maintains its principal office at 1585
     Broadway, New York, New York 10036.  MSAM and Morgan Stanley, Dean Witter,
     Discover & Co. disclaim beneficial ownership of such Common Shares.

                                       48
<PAGE>
 
ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
            ----------------------------------------------

Formation Transactions

In connection with the formation of the Company and the Operating Partnership in
October 1997, certain Trustees and executive officers, members of their family
and certain other persons (collectively, the "Cabot Group Participants")
received a total of 1,705,506 Units in exchange for their interests in C-M
Holdings L.P. and its affiliated partnerships ("C-M Property Partnerships")
and/or Cabot Partners, respectively. These Units (representing approximately
3.9% of the common equity of the Company on a fully diluted basis had a total
value of approximately $34.1 million, based on the initial public offering price
of the Company's Common Shares of $20.00 per share (the "Offering Price"). The
Cabot Group Participants' partnership interests for the C-M Property
Partnerships and Cabot Partners had an aggregate net book value of $5.1 million
as of September 30, 1997. The aggregate cost to the Cabot Group Participants for
these partnership interests was $8.8 million, resulting in an unrealized gain of
approximately $25.3 million. The C-M Property Partnerships are owned by
Ferdinand Colloredo-Mansfeld, the Company's Chairman and Chief Executive
Officer, and members of his immediate family, including Franz Colloredo-
Mansfeld, the Company's Chief Financial Officer, with Ferdinand Colloredo-
Mansfeld owning a 97% partnership interest therein and Franz Colloredo-Mansfeld
and other family members holding 1% and 2% partnership interest therein,
respectively. Of the total number of Units received by the Cabot Group
Participants in connection with the formation of the Company and the Operating
Partnership, (i) Ferdinand Colloredo-Mansfeld received 1,331,657 Units having a
value, based on the Offering Price, of approximately $26.6 million in exchange
for his partnership interests in the C-M Property Partnerships and Cabot
Partners, which had an aggregate cost of approximately $4.7 million and $3.9
million, respectively, (ii) Robert E. Patterson, President of the Company,
received 128,590 Units having a value, on such basis, of approximately $2.6
million in exchange for his partnership interests in Cabot Partners, which had
an aggregate cost of $59,000, and (iii) the other executive officers of the
Company received 165,904 Units having a value, on such basis, of approximately
$3.3 million in exchange for partnership interests in the C-M Property
Partnerships and Cabot Partners, which had an aggregate cost of $62,000. In
addition, the Company reimbursed or will reimburse Cabot Partners for
approximately $1.2 million of out-of-pocket expenses incurred by Cabot Partners
in connection with the formation of the Company pursuant to the terms of the
Contribution Agreement, dated October 10, 1997, entered into in connection with
the formation of the Company.

In addition, the Contributing Investors (as defined below) received a total of
22,598,735 Units and 8,961,714 Common Shares in exchange for their interests in
the certain properties that were contributed to the Company and/or the Operating
Partnership in connection with their formation.  These Units and Common Shares
(representing approximately 72.6% of the common equity of the Company on a fully
diluted basis) had a total value of approximately $631.2 million based on the
Offering Price, compared to the aggregate cost of such properties of
approximately $655.9 million.  The Contributing Investors include CP Investment
Properties, Inc. (the title holding entity of IBM Retirement Plan Trust), nine
title holding entities of New York Teachers' Retirement System, State of
Wisconsin Investment Board, CP REPROP Corp. (the title holding entity of the
Leland Stanford Jr. Endowment Fund), West Coast Industrial, L.L.C. (the title
holding entity of Argo Partnership II, L.P.), Keystone-New Jersey Property

                                       49
<PAGE>
 
Holding corp., Keystone-Ohio Property Holding Corp. and Keystone-Illinois
Property Holding Corp. (the title holding entities of Pennsylvania Public School
Employes' Retirement System), Herrod Associates and the Prudential Insurance
Company of America.

The Units received by the Cabot Group Participants and the Contributing
Investors in connection with the formation of the Company and the Operating
Partnership may, in accordance with the Operating Partnership Agreement, be
exchanged in whole or in part for Common Shares on a one-for-one basis or, at
the election of the Company, the cash equivalent thereof, at any time commencing
February 4, 1999 in the case of the Contributing Investors or February 4, 2000
in the case of the Cabot Group Participants.  The Company currently expects that
it will not elect to pay cash for Units in connection with any such exchange
request, but instead will issue Common Shares in exchange for such Units.  The
receipt and retention of the Units in exchange for contributed assets may
provide the Cabot Group Participants and certain of the Contributing Investors
with continued deferral of the taxable gain associated with dispositions of
those assets.

In connection with the formation of the Management Company in December 1997,
Cabot Partners contributed to the Management Company certain advisory contracts
and other assets relating to properties that were not contributed to the Company
or the Operating partnership.  The Operating Partnership owns all of the non-
voting preferred stock of the Management Company, is entitled to receive
quarterly cash dividends equal to 95% of the Management Company's net operating
cash flow and is senior in liquidation or dissolution to the extent of the
liquidation preference of the preferred stock to the Management Company common
equity.  Ferdinand Colloredo-Mansfeld acquired all of the voting common shares
of the Management Company for a cash purchase price of $100,000 and is entitled 
to receive quarterly cash dividends equal to 5% of the Management Company's net
operating cash flow.

Private Placement

Concurrently with the Company's initial public offering, the Company sold $20
million of Common Shares at the Offering Price in a private offering to the
following investors, for whom Morgan Stanley Asset Management Inc. acted as
advisor:  Stichting Bedrijspensioenfonds Voor De Metaalnijhverheid, Stichting
Pensioenfonds ABP, MS Real Estate Special Situations Inc., The Morgan Stanley
Real Estate Special Situations Funds I, L.P., The Morgan Stanley Real Estate
Special Situations Fund II, L.P. and Morgan  Stanley Real Estate Special
Situations Real Estate Investors, L.P.  Under the agreements relating to the
sale of such shares, the Company has agreed to file a registration statement
with the Securities and Exchange Commission 180 days after the closing of the
Company's initial public offering for the purpose of registering resales,
subject to certain exceptions, of such Common Shares and to reimburse such
parties for up to $25,000 in related legal expenses.

                                       50
<PAGE>
 
Repayment of Debt

Approximately $18.3 million of indebtedness secured by the properties
contributed by the C-M Property Partnerships was assumed by the Operating
Partnership, and approximately $13.1 million of such indebtedness was repaid
from the proceeds of the Company's initial public offering.

Indemnification

The Company has entered into indemnification agreements with each of its
executive officers and Trustees that require that the Company indemnify such
persons to the fullest extent permitted by Maryland law and reimburse them for
legal and related expenses as incurred in connection with litigation to which
they may become subject as a result of their positions with the Company, subject
to an obligation to reimburse the Company if it is ultimately determined that
indemnification is not permitted in the circumstances.  Although the
indemnification agreements provide substantially the same scope of
indemnification as that to which the Company's officers and Trustees are
entitled under the Company's Bylaws and applicable Maryland law, such agreements
may provide greater assurance to Trustees and executive officers that
indemnification will be available because, as contracts, they cannot be modified
unilaterally in the future by the Board of Trustees or the shareholders to
eliminate the rights they provide.

                                       51
<PAGE>
 
                                    PART IV

ITEM 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
            ---------------------------------------------------------------

(a) The following documents are filed as part of this report:

<TABLE> 
<CAPTION> 
        
EXHIBIT                                                                                SEQUENTIAL
NUMBER     DOCUMENT DESCRIPTION                                                        PAGE NO.
------     --------------------                                                        --------             
<C>        <S> 
3.1        Amended and Restated Cabot Industrial Trust Declaration of Trust,
           dated January 26, 1998. Incorporated by reference to Exhibit 3.1 to the
           Registrant's Form S-11 Registration Statement (File No. 333-38383);
           the "Form S-11").
3.2        Bylaws of the Company. Incorporated by reference to Exhibit 3.2 to
           the Registrant's Form S-11.
3.3        Form of Registration Rights and Lock-Up Agreement, dated as of
           February 4, 1998, between the Company, the Contributing Investors and
           various other persons identified therein (included as Exhibit B to
           Exhibit 4.1). Incorporated by reference to Exhibit 3.3 to the
           Registrant's Form S-11.
3.4        Second Amended and Restated Agreement of Limited Partnership
           Agreement of Cabot Industrial Properties, L.P., dated February 4,
           1998. Incorporated by reference to Exhibit 3.5 to the Registrant's
           Form S-11.
4.1        Contribution Agreement relating to the Capitalization of Cabot
           Industrial Trust, dated as of October 10, 1997, among the Company,
           the Operating Partnership, Cabot Partners and Various Contributors
           and Title Holding Entities Identified Therein. Incorporated by
           reference to Exhibit 4.1 to the Registrant's Form S-11.
10.1       Form of Indemnification Agreement between the Company and the Trustees.
           Incorporated by reference to Exhibit 10.1 to the Registrant's Form S-11.
10.2       Share Purchase Agreement, dated as of December 17, 1997,  between the
           Company and Morgan Stanley Asset Management Inc., on behalf of
           certain of its institutional investors. Incorporated by reference to
           Exhibit 10.2 to the Registrant's Form S-11.
10.3       Form of Registration Rights and Lock-Up Agreement, between the
           Company and Morgan Stanley Asset Management Inc., on behalf of
           certain of its institutional investors. Incorporated by reference to
           Exhibit 10.3 to the Registrant's Form S-11.
10.4       Cabot Industrial Trust Long Term Incentive Plan. Incorporated by
           reference to Exhibit 10.4 to the Registrant's Form S-11.
10.5       Form of Employment Agreement between Cabot Industrial Properties,
           L.P. and Ferdinand Colloredo-Mansfeld. Incorporated by reference to
           Exhibit 10.5 to the Registrant's Form S-11.
10.6       Form of Employment Agreement between Cabot Industrial Properties,
           L.P. and Robert E. Patterson. Incorporated by reference to Exhibit
           10.6 to the Registrant's Form S-11.
10.7       Form of Employment Agreement between Cabot Industrial Properties,
           L.P. and Franz Colloredo-Mansfeld. Incorporated by reference to
           Exhibit 10.7 to the Registrant's Form S-11.
10.8       Form of Employment Agreement between Cabot Industrial Properties,
           L.P. and Andrew D. Ebbott, Howard B. Hodgson, Jr., Neil E. Waisnor or
           Eugene F. Reilly. Incorporated by reference to Exhibit 10.8 to the
           Registrant's Form S-11.
10.9*      Revolving Credit Agreement between the Operating Partnership and 
           Morgan Guaranty Trust Company of New York, dated March 27, 1998.
24         Power of Attorney (included on the signature page to the Company's 
           Form 10-K as filed March 31, 1998).
27*        Financial Data Schedule.
99.1       Pro Forma Condensed Combined Balance Sheet (unaudited)
99.2       Existing Investment Property Group Combined Financial Statements
99.3       New Investors Property Group Financial Statements- 
           Orlando Central Park and 500 Memorial Drive 
           Knickerbocker Properties, Inc. II 
           Pennsylvania Public School Employes' Retirement System Industrial
              Properties Portfolio 
           Prudential Properties Group 
           West Coast Industrial, LLC 
           The 4 B's  
</TABLE> 
------------
* Previously filed.

                                      52

 
<PAGE>
 
 
                                   SIGNATURES
                                        

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                                  CABOT INDUSTRIAL TRUST

                                                  By     /s/ Robert E. Patterson
                                                         _______________________
                                                  Title: President
                                                         _______________________
         
                                                  Date:  August 21, 1998

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

<TABLE> 
<CAPTION> 
                                   Title                                Date
                                   -----                                ----
<S>                              <C>                                  <C>
/s/            *
________________________________   Chairman of the Board and            August 21, 1998
Ferdinand Colloredo-Mansfeld       Chief Executive Officer
                                   Trustee 

/s/ ROBERT E. PATTERSON
________________________________   President and Trustee                August 21, 1998
Robert E. Patterson


/s/            *
________________________________   Chief Financial Officer              August 21, 1998
Franz Colloredo-Mansfeld


/s/ Neil E. Waisnor
________________________________   Senior Vice President--Finance,      August 21, 1998
Neil E. Waisnor                    Treasurer and Secretary
                                   Chief Accounting Officer  

/s/            *
________________________________                    
Noah T. Herndon                    Trustee                              August 21, 1998
                               

/s/            *
________________________________                                        
Christopher C. Milliken            Trustee                              August 21, 1998
                            

/s/            *
________________________________                                        
Maurice Segall                     Trustee                              August 21, 1998


/s/            *
________________________________                                        
W. Nicholas Thorndike              Trustee                              August 21, 1998
                               

/s/            *
________________________________                                        
Ronald L. Skates                   Trustee                              August 21, 1998

</TABLE>

* By Neil E. Waisnor pursuant to a Power of Attorney filed March 31, 1998.

                                      53