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Securities and
Exchange Commission
Washington, D.C. 20549 FORM 10-K [ X ] ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES AND EXCHANGE ACT OF 1934. For the fiscal year
ended December 31, 2003 OR [ ] TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES AND EXCHANGE ACT OF 1934 For the transition
period from   to Commission File Number
000-30571 ARDEN REALTY LIMITED
PARTNERSHIP(Exact name of
registrant as specified in its charter) Maryland(State or
      other jurisdiction ofincorporation or organization)
    
    95-4599813(IRS
      Employer I.D. Number) 11601 Wilshire
Boulevard, 4th FloorLos Angeles,
California 90025-1740(Address and zip code
of principal executive offices) Registrants
telephone number, including area code: (310) 966-2600 Securities registered
pursuant to Section 12(b) of the Act: None Securities registered pursuant
to Section 12(g) of the Act: None


Indicate by checkmark 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 the 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. [ ]

Indicate by check mark whether the registrant
is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [  ] No [ X]

State the aggregate market value of
the voting and non-voting common equity held by non-affiliates of the Registrant: Not
Applicable No market value for the Registrants common equity exists and, therefore,
a market value for such units cannot be determined.

DOCUMENTS INCORPORATED
BY REFERENCE

Part III of this report incorporates
information by reference from Arden Realty, Inc.s definitive Proxy Statement for the
2004 Annual Meeting of Stockholders which the Registrant anticipates will be filed no
later than 120 days after the end of Arden Realty, Inc.s fiscal year pursuant to
Regulation 14A.





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ARDEN REALTY LIMITED
PARTNERSHIPTABLE OF CONTENTS

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EXHIBIT 12.2EXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2

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PART I

Forward-Looking Statements

This
Form 10-K, including the documents incorporated herein by reference, contains
forward-looking statements within the meaning of Section 27A of the Securities Act and
Section 21E of the Exchange Act pertaining to, among other things, our future results of
operations, cash available for distribution, acquisitions, lease renewals, property
development, property renovation, capital requirements and general business, industry and
economic conditions applicable to us. Also, documents we subsequently file with the SEC
and incorporated herein by reference will contain forward-looking statements. Actual
results could differ materially from those projected in the forward-looking statements as
a result of the risk factors set forth below and the matters set forth or incorporated in
this Form 10-K generally. We caution you, however, that this list of factors may not be
exhaustive, particularly with respect to future filings.

ITEM 1. BUSINESS

(a) GENERAL

The
terms us, we and our as used in this report refer to
Arden Realty Limited Partnership. The term Arden Realty refers to Arden
Realty, Inc. We are an operating partnership that owns, manages, leases, develops,
renovates and acquires commercial properties located in Southern California. Arden Realty,
a real estate investment trust, or REIT, is our sole general partner and as of December
31, 2003, owned approximately 97.4% of our common operating partnership units, or common
OP units.

(b) INDUSTRY SEGMENTS

We
are currently involved in only one industry segment, the operation of commercial real
estate located in Southern California. All of the financial information contained in this
report relates to this industry segment.

(c) DESCRIPTION OF BUSINESS

We
are a full-service real estate organization managed by 7 senior executive officers who
have experience in the real estate industry ranging from 13 to 34 years and who
collectively have an average of 18 years of experience. We perform all property
management, construction management, accounting, finance and acquisition and disposition
activities and a majority of our leasing transactions for our portfolio with our staff of
approximately 300 employees.

As
of December 31, 2003, Arden Realty was Southern Californias largest publicly traded
office landlord as measured by total net rentable square feet owned. As of December 31,
2003, our portfolio of primarily suburban office properties consisted of 130 properties
and 215 buildings containing approximately 18.9 million net rentable square feet including
one development property with approximately 283,000 net rentable square feet under
lease-up. As of December 31, 2003, our operating portfolio was 90.4% occupied.

Portfolio
Management

We
perform all portfolio management activities, including management of all lease
negotiations, construction management of tenant improvements or tenant build-outs,
property renovations, capital expenditures and on-site property management for our
portfolio. We directly manage these activities from approximately 45 management offices
located throughout our portfolio. The activities of these management offices are
supervised by four regional offices with oversight by our corporate office to ensure
consistency of the application of our operating policies and procedures. Each regional
office is strategically located within the Southern California submarkets where our
properties are located and is managed by a regional First Vice President who is
responsible for supervising the day-to-day activities of our management offices. Each
regional office is staffed with leasing, property management, building engineering,
construction and information systems specialists, referred to as our Regional Service
Teams. By maintaining a regionally focused organizational structure led by seasoned
managers, we are able to quickly respond to our tenants needs and market
opportunities.

All
of our management and regional offices are networked with our corporate office and have
access to the Internet and our e-mail, accounting and lease management systems. Our
accounting and lease management systems employ the latest technology and allow both
corporate and field personnel access to tenant and prospective tenant-related information
to enhance responsiveness and communication of marketing and leasing activity for each
property.

We
currently lease approximately 60% of our portfolios net rentable space using our
in-house staff. We employ outside brokers who are monitored by our Regional Service Teams
for the remainder of our net rentable space. Our in-house leasing program allows us to
closely monitor rental rates and lease terms for new and renewal leases and reduce
third-party leasing commissions.

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Business
Strategies

Our
primary business strategy is to actively manage our portfolio to achieve gains in rental
rates and occupancy, control operating expenses and maximize income from ancillary
operations and services. When market conditions permit, we may also selectively develop,
renovate or acquire new properties in submarkets that add value and fit strategically into
our portfolio. We may also sell existing properties and place the proceeds into
investments that we believe will generate higher long-term value.

Through
our corporate office and regional offices, we implement our business strategies by:

| | · | using integrated decision making to provide proactive solutions to the space
needs of tenants in the markets where we have extensive real estate and technical expertise;       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | emphasizing quality service and tenant satisfaction and retention;                                                                                                              
| | · | employing intensive property marketing and leasing programs; and                                                                                                                
| | · | implementing cost control management techniques and systems that capitalize on
economies of scale and concentration arising from the size and geographic focus of our
portfolio.

We
believe the implementation of these operating practices has been instrumental in
maximizing the operating results of our portfolio.

Integrated
Decision Making

We
use a multidisciplinary approach to our decision making by having our regional management,
leasing, construction management, acquisition, disposition and finance teams coordinate
their activities to enhance responsiveness to market opportunities and to provide
proactive solutions to the space needs of tenants in the submarkets where we have
extensive real estate and technical expertise. This integrated approach permits us to
analyze the specific requirements of existing and prospective tenants and the economic
terms and costs for each transaction on a timely and efficient basis. We are therefore
able to commit to leasing, development, acquisition or disposition terms quickly, which
facilitates an efficient completion of lease negotiation and tenant build-out, shorter
vacancy periods after lease expirations and the timely completion of development,
acquisition or disposition transactions.

Quality
Service and Tenant Satisfaction

We
strive to provide quality service through our multidisciplinary operating approach
resulting in timely responses to our tenants needs. Our seasoned Regional Service
Teams interact and resolve issues relating to tenant satisfaction and day-to-day
operations. For portfolio-wide operational and administrative functions, our corporate
office provides support to all regional offices and provides immediate response for
critical operational issues. Providing quality service leads to enhanced tenant retention.

Proactive
Marketing and Leasing

The
concentration of many of our properties within particular office submarkets and our
relationships with a broad array of businesses and outside brokers enables us to pursue
proactive marketing and leasing strategies, to effectively monitor the demand of office
space in our existing submarkets, to efficiently examine the office space requirements of
existing and prospective tenants and to offer tenants a variety of space alternatives
across our portfolio.

Cost
Control and Operating Efficiencies

The
size and geographic focus of our portfolio permits us to enhance portfolio value by
controlling operating costs. We seek to capitalize on the economies of scale and
concentration which result from the geographic focus of our portfolio through the
ownership and management of multiple properties within particular submarkets and the
maintenance of standardized processes and systems for cost control at each of our
properties. These cost controls and operating efficiencies allowed us to achieve a 67.9%
ratio of property operating results to total property revenues in 2003.

Operating
Strategies

Based
on our geographic focus in Southern California, experience in the local real estate
markets and our evaluation of current market conditions, we believe the following key
factors provide us with opportunities to maximize returns:

| | · | the broad
 diversification  and balance of the Southern California economy and our tenant base
minimizes our dependence on any one industry segment or limited group of tenants;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | · | the relative resiliency of the Southern California real estate market, as measured by
lower vacancy rates compared to the national average and a lower decline in rental rates
in our key submarkets than the average decreases in rates reported for the nation since
the beginning of the office real estate sector downturn in 2001; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | the limited
construction of new office properties in the Southern California region due to
substantial building construction limitations and a minimal amount of developable land in
many key submarkets.                                                                                                                                  

Internal Operating Strategy

We
believe that opportunities exist to increase cash flow from our existing portfolio. We
intend to pursue internal growth by:

| | · | stabilizing occupancy throughout our portfolio;
| | - | -----------------------------------------------

| | · | capitalizing on economies of scale
and concentration due to the size and geographic focus of our portfolio;
| | - | -----------------------------------------------------------------------------------------------------------

| | · | controlling operating expenses
through active cost control management techniques and systems; and
| | - | -------------------------------------------------------------------------------------------------

| | · | sourcing new and innovative revenue
streams while providing high quality services to our tenants.
| | - | -------------------------------------------------------------------------------------------------

| | Stabilizing Portfolio Occupancy
| | -------------------------------

Various
published reports noted that Southern California achieved approximately 4.1 million square
feet of positive net absorption in 2003 with average rental rates declining less than 2%
during the year. We believe that we have been successful in attracting and retaining a
diverse tenant base by actively managing our properties with an emphasis on tenant
satisfaction and retention. Our in-house leasing teams, working with outside leasing
brokers, continuously monitor each market to identify strong prospective tenants who are
in need of new or additional space. We also strive to be responsive to the needs of
existing tenants through our on-site professional management staff and by providing them
with alternative space within our portfolio to accommodate their changing space
requirements.

| | Capitalizing
on Economies of Scale and Concentration
| | ----------------------------------------------------

In
order to capitalize on economies of scale and concentration arising from the size and
geographic focus of our portfolio, each of our Regional Service Teams is responsible for
several properties, which spreads administrative and maintenance costs over those
properties and reduces per square foot expenses. In addition, contracting in bulk for
parking operations, building services and supplies on a portfolio-wide basis also reduces
our overall operating expenses.

| | Cost
Control Management Techniques and Systems
| | ----------------------------------------------

We
plan to continue controlling our operating expenses through active management at all of
our properties. We focus on cost control in various areas of our operations. We
continuously monitor the operating performance of our properties and employ
energy-enhancing purchasing and expense recovery technologies when appropriate. These
system enhancements include:

| | · | lighting retrofits;
| | - | -------------------

| | · | replacement of inefficient heating,
ventilation and air conditioning systems;
| | - | -----------------------------------------------------------------------------

| | · | computer-driven energy management
systems that monitor and react to the climatic requirements of individual properties;
| | - | -----------------------------------------------------------------------------------------------------------------------

| | · | automated security systems
that allow us to provide security services to our tenants at a lower cost;
| | - | -----------------------------------------------------------------------------------------------------

| | · | online bid purchasing of supplies,
building materials and construction services;
| | - | --------------------------------------------------------------------------------

| | · | enhancement of billing systems,
which enable us to more efficiently recover operating expenses from our tenants; and
| | - | --------------------------------------------------------------------------------------------------------------------

| | · | on-going preventive maintenance
programs to operate our building systems efficiently, thereby reducing operating costs
| | - | ----------------------------------------------------------------------------------------------------------------------

| | Sourcing Additional Revenue While Providing High Quality Services to Tenants
| | ----------------------------------------------------------------------------

We
have invested in energy enhancement programs within our portfolio with the aim of reducing
energy consumption, enhancing efficiency and lowering operating costs. From 2000 through
2002, we were recognized by the Environmental Protection Agency with the national
Commercial Real Estate Partner of the Year award for our performance in the Energy Star
Program. The competition involves top commercial real estate landlords throughout the
United States and rigorous bench-marking procedures

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that track individual building energy
efficiency. Of the 673 total Energy Star designated office buildings awarded nationally
during that three year period, 309 were awarded in California; of those, we had 83
award-winning buildings and were cited for having the most energy efficient buildings
within a single portfolio in the nation.

In
2001, we formed our taxable REIT subsidiary, Next>edge, to market our expertise in
energy solutions and facilities management. In 2002, Next>edge began to assist
companies in increasing their energy efficiency and reducing costs by employing the latest
technologies and the most energy-efficient operational strategies developed to date. These
technologies include lighting, heating, ventilation and air conditioning retrofits, energy
management system installations, on-site distributed generation and cogeneration projects
and solar energy systems.

External
Operating Strategy

We
believe in the diversity and balance of the Southern California commercial real estate
market, and we intend to continue to focus our resources primarily in that region. We have
assembled a management team that has extensive experience and knowledge in that market
which we believe provides us with a competitive advantage in identifying and capitalizing
on selective development, renovation and acquisition opportunities.

Subject
to capital availability and market conditions, our approach is to seek development,
renovation and acquisition opportunities in markets where we have an existing presence and
where the following conditions exist:

| | · | low vacancy rates;
| | - | ------------------

| | · | opportunities for rising
rents due to employment growth and population movements;
| | - | ---------------------------------------------------------------------------------

| | · | a minimal amount of developable land; and
| | - | -----------------------------------------

| | · | significant barriers to entry due to
constraints on new development, including strictentitlement processes, height and
density restrictions or other governmental requirements.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Competition

We
compete with other owners and developers of office properties to attract tenants to our
properties and to obtain suitable land for development. Ownership of competing properties
is currently diversified among many different types, from publicly traded companies and
institutional investors, including other REITs, to small enterprises and individual
owners. No one owner or group of owners currently dominate or significantly influence the
markets in which we operate. See Risk Factors  Competition affects occupancy
levels, rents and the cost of land which could adversely affect our revenues.

California
Electric Utility Deregulation

Problems
associated with deregulation of the electric industry in California have resulted in
significantly higher costs in some areas. All of our properties are currently located in
areas served by utilities that either produce their own electricity, or that have procured
long-term, fixed-rate contracts with commercial electrical providers. While we have no
information suggesting that any future service interruptions are expected, we believe that
higher utility costs may continue as price increases are allowed by the California Public
Utility Commission or other regulatory agencies.

Approximately
27% of our properties and 21% of the total rentable square footage of our portfolio are
subject to leases that require our tenants to pay all utility costs and the remainder
provide that our tenants will reimburse us for utility costs in excess of a base year
amount. See Risk Factors  Rising energy costs and power outages in California
may have an adverse effect on our operations and revenue.

We
are also working with other companies to provide our properties with new applications of
distributed generation, or on-site energy systems, such as solar microturbines, natural
gas reciprocating engines, fuel cells and other green power alternatives.
Lastly, we maintain ongoing communication with our tenants to assist them in ways to lower
consumption in their workplace.

Employees

As
of December 31, 2003, we had approximately 300 full-time employees that perform all of our
property management, construction management, accounting, finance and acquisition and
disposition activities and a majority of our leasing transactions.

Available
Information

We
file with the Securities and Exchange Commission, or SEC, our annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those
reports, proxy statements and registration statements. The public may

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read and copy any
materials we file with the SEC at the SECs Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. The public may also obtain public information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition,
the SEC maintains an internet site at www.sec.gov that contains reports, proxy and
information regarding registrants, including us, that file electronically. This annual
report on Form 10-K and other periodic and current reports, and amendments to those
reports, filed or furnished with the SEC, are also available, free of charge, by viewing
the SEC filings available in the Investor Information section of our website at
www.ardenrealty.com as soon as reasonably practicable after we file or furnish them with
the SEC.

(d) FOREIGN OPERATIONS

We
do not engage in any foreign operations or derive any revenue from foreign sources.

ITEM 2. PROPERTIES

Existing
Portfolio

Our
portfolio consists of 130 primarily office properties, containing approximately 18.9
million net rentable square feet, including one development property with approximately
283,000 net rentable square feet under lease-up, that individually range from
approximately 12,000 to 600,000 net rentable square feet. Of the 129 properties currently
in service in our portfolio, 127, or 98%, are office properties. All of our properties are
located in Southern California and most are in suburban areas in close proximity to main
thoroughfares. We believe that our properties are located within desirable and established
business communities and are well maintained. Our properties offer an array of amenities
including high-speed internet access, security, parking, conference facilities, on-site
management, food services and health clubs.

Following
is a summary of our property portfolio as of December 31, 2003:

|Location              |  | Number of
Properties(1) |  | Number of
Buildings(1) |     | Approximate Net
Rentable Square Feet(1) |     | Property Operating
Results(2), (3)For the Year Ended
December 31, 2003 | 
|--------------------- |  | ----------------------- |  | ---------------------- | --- | --------------------------------------- | --- | ---------------------------------------------------------------------- | 
|
|
|Los Angeles County    |  |                         |  |                        |     |                                         |     |                                                                        | 
|West(4)               |  |                         |  | 30                     |     |                                         | 23  | %                                                                      | 
|North                 |  |                         |  | 27                     |     |                                         | 21  | %                                                                      | 
|South                 |  |                         |  | 16                     |     |                                         | 12  | %                                                                      | 
|                      |  |                         |  |                        |     |                                         |     |                                                                        | 
|Subtotal              |  |                         |  | 73                     |     |                                         | 56  | %                                                                      | 
|                      |  |                         |  |                        |     |                                         |     |                                                                        | 
|Orange County         |  |                         |  | 23                     |     |                                         | 18  | %                                                                      | 
|San Diego County      |  |                         |  | 26                     |     |                                         | 20  | %                                                                      | 
|Ventura/Kern Counties |  |                         |  | 6                      |     |                                         | 5   | %                                                                      | 
|Riverside County(5)   |  |                         |  | 1                      |     |                                         | 1   | %                                                                      | 
|                      |  |                         |  |                        |     |                                         |     |                                                                        | 
|Total                 |  |                         |  | 129                    | (6) |                                         | 100 | %                                                                      | 
|                      |  |                         |  |                        |     |                                         |     |                                                                        | 

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|(1) |  | Includes two properties with approximately 295,000 net rentable square feet held
     for disposition.
|--- |  | ------------------------------------------------------------------------------------------------------

|(2) |  | Property Operating Results is a non-GAAP measure of performance. Property
     Operating Results is used by investors and our management to evaluate and
     compare the performance of our office properties and to determine trends in
     earnings and to compute the fair value of our properties as it is not affected
     by (1) the cost of funds of the property owner, (2) the impact of depreciation
     and amortization expenses as well as gains or losses from the sale of operating
     real estate assets that are included in net income computed in accordance with
     Generally Accepted Accounting Principles, or GAAP, or (3) general and
     administrative expenses and other specific costs such as permanent impairments
     to carrying costs. The cost of funds is eliminated from net income because it is
     specific to the particular financing capabilities and constraints of the owner.
     The cost of funds is also eliminated because it is dependent on historical
     interest rates and other costs of capital as well as past decisions made by us
     regarding the appropriate mix of capital which may have changed or may change in
     the future. Depreciation and amortization expenses as well as gains or losses
     from the sale of operating real estate assets are eliminated because they may
     not accurately represent the actual change in value in our office properties
     that result from use of the properties or changes in market conditions. While
     certain aspects of real property do decline in value over time in a manner that
     is reasonably captured by depreciation and amortization, the value of the
     properties as a whole have historically increased or decreased in value as a
     result of changes in overall economic conditions instead of from actual use of
     the property or the passage of time. Gains and losses from the sale of real
     property vary from property to property and are affected by market conditions at
     the time of sale which will usually change from period to period. These gains
     and losses can create distortions when comparing one period to another or when
     comparing our operating results to the operating results of other real estate
     companies that have not made similarly timed purchases or sales. We believe that
     eliminating these costs from net income is useful because the resulting measure
     captures the actual revenue generated and actual expenses incurred in operating
     our office properties as well as trends in occupancy rates, rental rates and
     operating costs.

However,
the usefulness of Property Operating Results is limited because it excludes general and
administrative costs, interest expense, interest income, depreciation and amortization
expense and gains or losses from the sale of properties, changes in value in our real
estate properties that result from use or permanent impairment to carrying costs as
stipulated by GAAP, the level of capital expenditures and leasing costs necessary to
maintain the operating performance of our properties, all of which are significant
economic costs. Property Operating Results may fail to capture significant trends in these
components of net income which further limits its usefulness.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  | Property
Operating Results is a measure of the operating performance of our office properties but
does not measure our performance as a whole. Property Operating Results is therefore not a
substitute for net income as computed in accordance with GAAP. This measure should be
analyzed in conjunction with net income computed in accordance with GAAP and discussions
elsewhere in Managements Discussion and Analysis of Financial Condition and
Results of Operations regarding the components of net income that are eliminated in
the calculation of Property Operating Results. Other companies may use different methods
for calculating Property Operating Results or similarly entitled measures and,
accordingly, our Property Operating Results may not be comparable to similarly entitled
measures reported by other companies that do not define the measure exactly as we do.

The following is a reconciliation of Property Operating Results to net income computed in
accordance with GAAP (in thousands):
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                          |  | Year Ended December 31, |  
|----------------------------------------- |  | ----------------------- | -
|
|Net Income                                |  |                         | $
|                                          |  |                         |  
|Add:                                      |  |                         |  
|General and administrative expense        |  |                         |  
|Interest expense                          |  |                         |  
|Depreciation and amortization             |  |                         |  
|Minority interest                         |  |                         |  
|Less:                                     |  |                         |  
|Interest and other income                 |  |                         |  
|Gain on sale of discontinued properties . |  |                         |  
|Discontinued operations                   |  |                         |  
|Gain on sale of operating properties      |  |                         |  
|                                          |  |                         |  
|Property Operating Results                |  |                         | $
|                                          |  |                         |  

|(3) |  | Excludes the operating
results of one property sold
during the first quarter of 2003, five properties sold during the second quarter of 2003,
two properties sold during the fourth quarter of 2003 and two properties classified as
held for disposition. The operating results for these properties are reported as part of
discontinued operations in our consolidated statements of income.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Includes a retail property with approximately 37,000 net rentable square feet.
     (5) Includes a retail property with approximately 133,000 net rentable square
     feet.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | Includes a retail property
with approximately 133,000 net rentable square feet.
|--- |  | -------------------------------------------------------------------------------

|(6) |  | Including one development property currently under lease-up, our total portfolio
     consists of 130 properties with 215 buildings and approximately 18.9 million
     rentable square feet.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The
following is a summary of our occupancy and in-place rents as of December 31, 2003:

|Location               |  | PercentOccupied |  | PercentLeased |      | Annualized Base RentPer Leased Square Foot(1) |     
|---------------------- |  | --------------- |  | ------------- | ---- | --------------------------------------------- | ----
|
|Los Angeles County     |  |                 |  |               |      |                                               |     
|West                   |  |                 |  | 92.3          | %(3) |                                               | 94.4
|North                  |  |                 |  | 90.6          | %    |                                               | 92.2
|South                  |  |                 |  | 86.6          | %    |                                               | 87.7
|Orange County          |  |                 |  | 93.2          | %    |                                               | 94.4
|San Diego County       |  |                 |  | 85.3          | %    |                                               | 87.9
|Ventura/Kern Counties  |  |                 |  | 96.9          | %    |                                               | 97.9
|Riverside County       |  |                 |  | 99.4          | %    |                                               | 99.4
|                       |  |                 |  |               |      |                                               |     
|Total/Weighted Average |  |                 |  | 90.4          | %    |                                               | 92.1
|                       |  |                 |  |               |      |                                               |     

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|(1) |  | Based on monthly contractual base rent under existing leases as of
December 31, 2003, multiplied by 12 and divided by leased net rentable square feet; for
those leases where rent has not yet commenced or which are in a free rent period, the
first month in which rent is to be received is used to determine annualized base rent.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Excludes 35 properties and approximately 3.9
million square feet under triple net and modified gross leases.
|--- |  | ------------------------------------------------------------------------------------------------------------

|(3) |  | Excludes a 283,000 net rentable square foot development property under lease-up that as of
February 4, 2004 was 74% leased and 60% occupied.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------

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Development Properties

In addition
to the properties listed above, we currently have one development property
containing approximately 283,000 net rentable square feet under lease-up. This property is
located in the Howard Hughes Center, a 70-acre commercial development located two miles
north of Los Angeles International Airport and immediately adjacent to the San Diego
Freeway (I-405), with on- and off-ramps that directly serve the site.

The
following table summarizes information about this property as of December 31, 2003:

|Property              | SquareFeet | CostsIncurredTo Date(in thousands) | EstimatedTotal Cost(1)(in thousands) | PercentLeased at2/4/04 | ShellCompletionDate | EstimatedStabilizationDate(2) | EstimatedYear 1StabilizedCash PropertyOperatingResults(3)(in thousands) | EstimatedYear 1AnnualCash Yield | EstimatedYear 1AnnualGAAPYield(4)
|--------------------- | ---------- | ---------------------------------- | ------------------------------------ | ---------------------- | ------------------- | ----------------------------- | ----------------------------------------------------------------------- | ------------------------------- | ---------------------------------
|Howard Hughes Center: |            |                                    |                                      |                        |                     |                               |                                                                         |                                 |                                  
|6100 Center Drive     |            |                                    | $                                    | 283,000                |                     | $                             | 75,627                                                                  |                                 | $                                
|                      |            |                                    |                                      |                        |                     |                               |                                                                         |                                 |                                  

---

|(1) |  | Estimated total cost includes purchase and closing costs, capital expenditures,
     tenant improvements, leasing commissions and carrying costs during development,
     as well as an allocation of land and master plan costs.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | We consider a property to be stabilized when the property is at least 95%
     leased.
|--- |  | --------------------------------------------------------------------------------------

|(3) |  | We consider stabilized Cash Property Operating Results to be the rental revenues
     from the property less the operating expenses of the property on a cash basis
     before deducting financing costs (interest and principle payments) after the
     property is at least 95% leased. Property Operating Results are discussed in
     greater detail in Note (2) to the Existing Portfolio summary table above.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Estimated Year 1 Annual GAAP Yield includes an adjustment for straight-line
     rents.
|--- |  | ---------------------------------------------------------------------------------------

In
addition to the property above, we have entitlements and preliminary architectural designs
completed for an additional 475,000 net rentable square feet. We also have construction
entitlements at the Howard Hughes Center for up to 600 hotel rooms. We do not intend to
commence construction on any additional build-to-suit buildings or hotels at the Howard
Hughes Center until development plans and budgets are finalized and build-to-suit tenant
leases are signed with terms allowing us to achieve yields commensurate with each
projects development risk.

In
addition to our development at the Howard Hughes Center, we have completed preliminary
designs and are marketing an approximately 170,000 net rentable square foot build-to-suit
office building at our Long Beach Airport Business Park. Build-to-suit buildings consist
of properties constructed to the tenants specifications in return for the
tenants long-term commitment to the property. Also, as part of our Gateway Towers
acquisition in August 2002, we acquired a 5-acre developable land parcel in Torrance,
California that we are also marketing for a build-to-suit building. We do not intend to
commence construction on these projects until build-to-suit tenant leases are signed with
terms allowing us to achieve yields commensurate with each projects development
risk.

We
expect to finance our development activities over the next 24 months through net cash
provided by operating activities, proceeds from asset sales or proceeds from our lines of
credit.

9

---

Table of Contents

Dispositions

The
following table summarizes our disposition activity during 2003:

|Property                     |  | County         |  | Submarket          |  | Date ofSale       |  | PropertyType |  | SquareFeet |  | Gross SalesPrice($000s)
|---------------------------- |  | -------------- |  | ------------------ |  | ----------------- |  | ------------ |  | ---------- |  | -----------------------
|9201 Sunset                  |  | Los Angeles    |  | West Hollywood     |  | March 11, 2003    |  | Office       |  | 139,711    |  | $                      
|Centrelake Plaza             |  | San Bernardino |  | Inland Empire West |  | April 11, 2003    |  | Office       |  | 110,763    |  |                        
|Havengate Center             |  | San Bernardino |  | Inland Empire West |  | April 11, 2003    |  | Office       |  | 80,557     |  |                        
|HDS Plaza                    |  | San Bernardino |  | Inland Empire West |  | April 11, 2003    |  | Office       |  | 104,178    |  |                        
|Chicago Avenue Business Park |  | Riverside      |  | Inland Empire East |  | April 11, 2003    |  | Office       |  | 47,482     |  |                        
|Lambert Plaza                |  | Orange         |  | North County       |  | May 22, 2003      |  | Office       |  | 32,807     |  |                        
|Pennsfield Plaza             |  | Los Angeles    |  | Simi/Conejo Valley |  | November 5, 2003  |  | Office       |  | 21,202     |  |                        
|Lyons Plaza                  |  | Los Angeles    |  | Simi/Conejo Valley |  | December 11, 2003 |  | Office       |  | 61,203     |  | $                      
|                             |  |                |  |                    |  |                   |  |              |  |            |  |                        
|                             |  |                |  |                    |  |                   |  |              |  | 597,903    |  | $                      
|                             |  |                |  |                    |  |                   |  |              |  |            |  |                        

Acquisitions

The following
table summarizes our acquisition activity during 2003:

|Property                     |  | County    |  | Submarket     |  | Date ofSale       |  | PropertyType |  | SquareFeet |  | GrossPurchasePrice($000s)
|---------------------------- |  | --------- |  | ------------- |  | ----------------- |  | ------------ |  | ---------- |  | -------------------------
|Governor Executive Centre II |  | San Diego |  | Governor Park |  | December 23, 2003 |  | Office       |  | 101,433    |  | $                        
|                             |  |           |  |               |  |                   |  |              |  |            |  |                          

10

---

Table of Contents

The
following table presents specific information regarding our 129 stabilized properties as
of December 31, 2003:

|Property Name                 |  | Submarket                   |  | Location      |  | Year(s)
Built/
Renovated |  | Approximate
Net Rentable
Square Feet | 
|----------------------------- |  | --------------------------- |  | ------------- |  | ------------------------ |  | ------------------------------------ | 
|Los Angeles County            |  |                             |  |               |  |                          |  |                                      | 
|Los Angeles West              | 
|9665 Wilshire                 |  | Beverly Hills/Century City  |  | Beverly Hills |  | 1972/92-93               |  | 158,684                              | 
|Beverly Atrium                |  | Beverly Hills/Century City  |  | Beverly Hills |  | 1989                     |  | 59,650                               | 
|8383 Wilshire                 |  | Beverly Hills/Century City  |  | Beverly Hills |  | 1971/93                  |  | 417,463                              | 
|120 S. Spalding               |  | Beverly Hills/Century City  |  | Beverly Hills |  | 1984                     |  | 60,656                               | 
|9100 Wilshire Blvd            |  | Beverly Hills/Century City  |  | Beverly Hills |  | 1971/90                  |  | 326,227                              | 
|Century Park Center           |  | Beverly Hills/Century City  |  | Los Angeles   |  | 1972/94                  |  | 243,404                              | 
|10350 Santa Monica            |  | Beverly Hills/Century City  |  | Los Angeles   |  | 1979                     |  | 42,292                               | 
|10351 Santa Monica            |  | Beverly Hills/Century City  |  | Los Angeles   |  | 1984                     |  | 96,251                               | 
|Westwood Terrace              |  | Westwood/West Los Angeles   |  | Los Angeles   |  | 1988                     |  | 135,943                              | 
|1950 Sawtelle                 |  | Westwood/West Los Angeles   |  | Los Angeles   |  | 1988/95                  |  | 103,106                              | 
|10780 Santa Monica            |  | Westwood/West Los Angeles   |  | Los Angeles   |  | 1984                     |  | 92,486                               | 
|Wilshire Pacific Plaza        |  | Westwood/West Los Angeles   |  | Los Angeles   |  | 1976/87                  |  | 100,122                              | 
|World Savings Center (2)      |  | Westwood/West Los Angeles   |  | Los Angeles   |  | 1983                     |  | 469,115                              | 
|11075 Santa Monica            |  | Westwood/West Los Angeles   |  | Los Angeles   |  | 1983                     |  | 35,696                               | 
|2730 Wilshire                 |  | Westwood/West Los Angeles   |  | Santa Monica  |  | 1985                     |  | 55,080                               | 
|2800 28th Street              |  | Westwood/West Los Angeles   |  | Santa Monica  |  | 1979                     |  | 103,506                              | 
|1919 Santa Monica             |  | Westwood/West Los Angeles   |  | Santa Monica  |  | 1991                     |  | 43,796                               | 
|2001 Wilshire Blvd            |  | Westwood/West Los Angeles   |  | Santa Monica  |  | 1980                     |  | 101,125                              | 
|Westwood Center               |  | Westwood/West Los Angeles   |  | Santa Monica  |  | 1965/2000                |  | 313,000                              | 
|400 Corporate Pointe          |  | Marina Area/Culver City/LAX |  | Culver City   |  | 1987                     |  | 164,598                              | 
|600 Corporate Pointe          |  | Marina Area/Culver City/LAX |  | Culver City   |  | 1989                     |  | 273,339                              | 
|Bristol Plaza                 |  | Marina Area/Culver City/LAX |  | Culver City   |  | 1982                     |  | 84,014                               | 
|Northpoint                    |  | Marina Area/Culver City/LAX |  | Los Angeles   |  | 1991                     |  | 104,235                              | 
|Howard Hughes Spectrum Club . |  | Marina Area/Culver City/LAX |  | Los Angeles   |  | 1993                     |  | 36,959                               | 
|Howard Hughes Tower           |  | Marina Area/Culver City/LAX |  | Los Angeles   |  | 1987                     |  | 313,833                              | 
|6060 Center Drive             |  | Marina Area/Culver City/LAX |  | Los Angeles   |  | 2000                     |  | 241,928                              | 
|6080 Center Drive             |  | Marina Area/Culver City/LAX |  | Los Angeles   |  | 2002                     |  | 287,148                              | 
|Univision-5999 Center Drive . |  | Marina Area/Culver City/LAX |  | Los Angeles   |  | 2001                     |  | 161,650                              | 
|6100 Wilshire                 |  | Park Mile/West Hollywood    |  | Los Angeles   |  | 1986                     |  | 202,704                              | 
|145 South Fairfax             |  | Park Mile/West Hollywood    |  | Los Angeles   |  | 1984                     |  | 53,994                               | 
|                              |  |                             |  |               | 
|Subtotal/Weighted Average -   | 
|Los Angeles West              |  |                             |  |               |  |                          |  | 4,882,004                           

[Additional columns below.]

|Property Name               |  | Percentage of
Total
Portfolio Net
Rentable
Square Feet |  | Percent
Leased |   | Annualized
Base Rent
($000s) |       | Number of
Leases |   | Annualized
Base Rent
per Leased
Net Rentable
Square
Feet(1) | 
|--------------------------- |  | ------------------------------------------------------ |  | -------------- | - | ---------------------------- | ----- | ---------------- | - | ----------------------------------------------------------- | 
|Los Angeles County          |  |                                                        |  |                |   |                              |       |                  |   |                                                             | 
|Los Angeles West            |  |                                                       
|9665 Wilshire               |  |                                                        |  | 0.9            | % |                              | 100.0 | %                | $ | 6,338                                                       | 
|Beverly Atrium              |  |                                                        |  | 0.3            |   |                              | 99.6  |                  |   | 1,665                                                       | 
|8383 Wilshire               |  |                                                        |  | 2.2            |   |                              | 98.3  |                  |   | 10,581                                                      | 
|120 S. Spalding             |  |                                                        |  | 0.3            |   |                              | 100.0 |                  |   | 2,499                                                       | 
|9100 Wilshire Blvd          |  |                                                        |  | 1.8            |   |                              | 94.9  |                  |   | 8,586                                                       | 
|Century Park Center         |  |                                                        |  | 1.3            |   |                              | 98.3  |                  |   | 5,451                                                       | 
|10350 Santa Monica          |  |                                                        |  | 0.2            |   |                              | 897   |                  |   | 88.3                                                        | 
|10351 Santa Monica          |  |                                                        |  | 0.5            |   |                              | 90.9  |                  |   | 2,006                                                       | 
|Westwood Terrace            |  |                                                        |  | 0.7            |   |                              | 99.6  |                  |   | 3,763                                                       | 
|1950 Sawtelle               |  |                                                        |  | 0.6            |   |                              | 86.4  |                  |   | 2,127                                                       | 
|10780 Santa Monica          |  |                                                        |  | 0.5            |   |                              | 88.7  |                  |   | 2,032                                                       | 
|Wilshire Pacific Plaza      |  |                                                        |  | 0.5            |   |                              | 96.5  |                  |   | 2,392                                                       | 
|World Savings Center(2)     |  |                                                        |  | 2.5            |   |                              | 88.9  |                  |   | 12,247                                                      | 
|11075 Santa Monica          |  |                                                        |  | 0.2            |   |                              | 100.0 |                  |   | 844                                                         | 
|2730 Wilshire               |  |                                                        |  | 0.3            |   |                              | 99.9  |                  |   | 1,502                                                       | 
|2800 28th Street            |  |                                                        |  | 0.6            |   |                              | 97.2  |                  |   | 2,684                                                       | 
|1919 Santa Monica           |  |                                                        |  | 0.2            |   |                              | 95.1  |                  |   | 1,164                                                       | 
|2001 Wilshire Blvd          |  |                                                        |  | 0.5            |   |                              | 95.1  |                  |   | 2,499                                                       | 
|Westwood Center             |  |                                                        |  | 1.7            |   |                              | 99.5  |                  |   | 11,226                                                      | 
|400 Corporate Pointe        |  |                                                        |  | 0.9            |   |                              | 67.3  |                  |   | 2,024                                                       | 
|600 Corporate Pointe        |  |                                                        |  | 1.5            |   |                              | 91.5  |                  |   | 5,465                                                       | 
|Bristol Plaza               |  |                                                        |  | 0.4            |   |                              | 93.8  |                  |   | 1,652                                                       | 
|Northpoint                  |  |                                                        |  | 0.6            |   |                              | 62.5  |                  |   | 1,955                                                       | 
|Howard Hughes Spectrum Club |  |                                                        |  | 0.2            |   |                              | 100.0 |                  |   | 967                                                         | 
|Howard Hughes Tower         |  |                                                        |  | 1.7            |   |                              | 99.0  |                  |   | 8,297                                                       | 
|6060 Center Drive           |  |                                                        |  | 1.3            |   |                              | 100.0 |                  |   | 8,190                                                       | 
|6080 Center Drive           |  |                                                        |  | 1.5            |   |                              | 93.0  |                  |   | 9,654                                                       | 
|Univision-5999 Center Drive |  |                                                        |  | 0.9            |   |                              | 100.0 |                  |   | 4,247                                                       | 
|6100 Wilshire               |  |                                                        |  | 1.1            |   |                              | 94.6  |                  |   | 4,736                                                       | 
|145 South Fairfax           |  |                                                        |  | 0.3            |   |                              | 97.7  |                  |   | 1,152                                                       | 
|                            |  |                                                        |  |                |   |                              |       |                  |   |                                                             | 
|Subtotal/Weighted Average - |  |                                                       
|Los Angeles West            |  |                                                        |  | 26.2           | % |                              | 94.4  | %                | $ | 128,828                                                     | 

11

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Table of Contents

|Property Name                |  | Submarket                   |  | Location        |  | Year(s)
Built/
Renovated |  | Approximate
Net Rentable
Square Feet | 
|---------------------------- |  | --------------------------- |  | --------------- |  | ------------------------ |  | ------------------------------------ | 
|Los Angeles North            |  |                             |  |                 |  |                          |  |                                      | 
|Calabasas Commerce Center    |  | Simi/Conejo Valley          |  | Calabasas       |  | 1990                     |  | 126,771                              | 
|Calabasas Tech               |  | Simi/Conejo Valley          |  | Calabasas       |  | 1990/2001                |  | 273,526                              | 
|Conejo Business Center       |  | Simi/Conejo Valley          |  | Thousand Oaks   |  | 1991                     |  | 69,017                               | 
|Marin Corporate Center       |  | Simi/Conejo Valley          |  | Thousand Oaks   |  | 1986                     |  | 51,360                               | 
|Hillside Corporate Center    |  | Simi/Conejo Valley          |  | Westlake        |  | 1998                     |  | 59,876                               | 
|Westlake - 5601 Lindero      |  | Simi/Conejo Valley          |  | Westlake        |  | 1989                     |  | 105,830                              | 
|Westlake Gardens             |  | Simi/Conejo Valley          |  | Westlake        |  | 1998                     |  | 49,639                               | 
|Westlake Gardens II          |  | Simi/Conejo Valley          |  | Westlake        |  | 1999                     |  | 48,874                               | 
|Woodland Hills               |  | West San Fernando Valley    |  | Woodland Hills  |  | 1972/95                  |  | 224,955                              | 
|Los Angeles Corporate Center |  | San Gabriel Valley          |  | Monterey Park   |  | 1984/86                  |  | 389,293                              | 
|Clarendon Crest              |  | West San Fernando Valley    |  | Woodland Hills  |  | 1990                     |  | 43,063                               | 
|Tourney Pointe               |  | Santa Clarita Valley        |  | Santa Clarita   |  | 1985/98-2000             |  | 219,991                              | 
|16000 Ventura                |  | Central San Fernando Valley |  | Encino          |  | 1980/96                  |  | 174,841                              | 
|15250 Ventura                |  | Central San Fernando Valley |  | Sherman Oaks    |  | 1970/90-91               |  | 110,641                              | 
|Noble Professional Center    |  | Central San Fernando Valley |  | Sherman Oaks    |  | 1985/93                  |  | 51,828                               | 
|Sunset Pointe Plaza          |  | Valencia                    |  | Newhall         |  | 1988                     |  | 58,105                               | 
|                             |  | East San Fernando           |  |                 |  |                          |  |                                      | 
|303 Glenoaks                 |  | Valley/Tri-Cities           |  | Burbank         |  | 1983/96                  |  | 175,289                              | 
|                             |  | East San Fernando           |  |                 |  |                          |  |                                      | 
|601 S. Glenoaks              |  | Valley/Tri-Cities           |  | Burbank         |  | 1990                     |  | 72,524                               | 
|                             |  | East San Fernando           |  |                 |  |                          |  |                                      | 
|Burbank Executive Plaza      |  | Valley/Tri-Cities           |  | Burbank         |  | 1983                     |  | 60,395                               | 
|                             |  | East San Fernando           |  |                 |  |                          |  |                                      | 
|333 N Glenoaks               |  | Valley/Tri-Cities           |  | Burbank         |  | 1978                     |  | 81,243                               | 
|                             |  | East San Fernando           |  |                 |  |                          |  |                                      | 
|425 West Broadway            |  | Valley/Tri-Cities           |  | Glendale        |  | 1984                     |  | 71,589                               | 
|                             |  | East San Fernando           |  |                 |  |                          |  |                                      | 
|Glendale Corporate Center    |  | Valley/Tri-Cities           |  | Glendale        |  | 1985                     |  | 108,209                              | 
|                             |  | East San Fernando           |  |                 |  |                          |  |                                      | 
|70 South Lake                |  | Valley/Tri-Cities           |  | Pasadena        |  | 1982/94                  |  | 100,133                              | 
|                             |  | East San Fernando           |  |                 |  |                          |  |                                      | 
|150 East Colorado Boulevard  |  | Valley/Tri-Cities           |  | Pasadena        |  | 1979/97                  |  | 61,168                               | 
|                             |  | East San Fernando           |  |                 |  |                          |  |                                      | 
|299 N. Euclid                |  | Valley/Tri-Cities           |  | Pasadena        |  | 1983                     |  | 73,522                               | 
|                             |  | East San Fernando           |  |                 |  |                          |  |                                      | 
|5161 Lankershim              |  | Valley/Tri-Cities           |  | North Hollywood |  | 1985/97                  |  | 178,317                              | 
|                             |  | East San Fernando           |  |                 |  |                          |  |                                      | 
|535 N. Brand Blvd            |  | Valley/Tri-Cities           |  | North Hollywood |  | 1973/92/99               |  | 109,187                              | 
|                             |  |                             |  |                 | 
|Subtotal/Weighted Average -  |  |                             |  |                 |  |                          |  |                                      | 
|Los Angeles North            |  |                             |  |                 |  |                          |  | 3,149,186                            | 

[Additional columns below.]

|Property Name                |  | Percentage of
Total
Portfolio Net
Rentable
Square Feet |  | Percent
Leased |   | Annualized
Base Rent
($000s) |       | Number of
Leases |   | Annualized
Base Rent
per Leased
Net Rentable
Square
Feet(1) | 
|---------------------------- |  | ------------------------------------------------------ |  | -------------- | - | ---------------------------- | ----- | ---------------- | - | ----------------------------------------------------------- | 
|Los Angeles North            |  |                                                        |  |                |   |                              |       |                  |   |                                                             | 
|Calabasas Commerce Center    |  |                                                        |  | 0.7            | % |                              | 96.7  | %                | $ | 1,932                                                       | 
|Calabasas Tech               |  |                                                        |  | 1.5            |   |                              | 91.2  |                  |   | 4,487                                                       | 
|Conejo Business Center       |  |                                                        |  | 0.4            |   |                              | 90.7  |                  |   | 1,302                                                       | 
|Marin Corporate Center       |  |                                                        |  | 0.3            |   |                              | 90.6  |                  |   | 1,053                                                       | 
|Hillside Corporate Center    |  |                                                        |  | 0.3            |   |                              | 87.2  |                  |   | 1,324                                                       | 
|Westlake - 5601 Lindero      |  |                                                        |  | 0.6            |   |                              | 95.6  |                  |   | 1,870                                                       | 
|Westlake Gardens             |  |                                                        |  | 0.3            |   |                              | 80.8  |                  |   | 1,079                                                       | 
|Westlake Gardens II          |  |                                                        |  | 0.3            |   |                              | 100.0 |                  |   | 1,290                                                       | 
|Woodland Hills               |  |                                                        |  | 1.2            |   |                              | 84.5  |                  |   | 4,414                                                       | 
|Los Angeles Corporate Center |  |                                                        |  | 2.1            |   |                              | 100.0 |                  |   | 8,662                                                       | 
|Clarendon Crest              |  |                                                        |  | 0.2            |   |                              | 97.9  |                  |   | 878                                                         | 
|Tourney Pointe               |  |                                                        |  | 1.2            |   |                              | 85.0  |                  |   | 3,842                                                       | 
|16000 Ventura                |  |                                                        |  | 0.9            |   |                              | 96.8  |                  |   | 3,706                                                       | 
|15250 Ventura                |  |                                                        |  | 0.6            |   |                              | 86.9  |                  |   | 2,242                                                       | 
|Noble Professional Center    |  |                                                        |  | 0.3            |   |                              | 100.0 |                  |   | 1,175                                                       | 
|Sunset Pointe Plaza          |  |                                                        |  | 0.3            |   |                              | 99.7  |                  |   | 1,493                                                       | 
|303 Glenoaks                 |  |                                                        |  | 0.9            |   |                              | 95.0  |                  |   | 3,725                                                       | 
|601 S. Glenoaks              |  |                                                        |  | 0.4            |   |                              | 74.6  |                  |   | 1,107                                                       | 
|Burbank Executive Plaza      |  |                                                        |  | 0.3            |   |                              | 93.4  |                  |   | 1,308                                                       | 
|333 N Glenoaks               |  |                                                        |  | 0.4            |   |                              | 80.1  |                  |   | 1,322                                                       | 
|425 West Broadway            |  |                                                        |  | 04             |   |                              | 000   |                  |   | 1,543                                                       | 
|Glendale Corporate Center    |  |                                                        |  | 0.6            |   |                              | 82.1  |                  |   | 1,823                                                       | 
|70 South Lake                |  |                                                        |  | 0.5            |   |                              | 100.0 |                  |   | 2,574                                                       | 
|150 East Colorado Boulevard  |  |                                                        |  | 0.3            |   |                              | 100.0 |                  |   | 1,396                                                       | 
|299 N. Euclid                |  |                                                        |  | 0.4            |   |                              | 100.0 |                  |   | 1,730                                                       | 
|5161 Lankershim              |  |                                                        |  | 0.9            |   |                              | 84.3  |                  |   | 3,189                                                       | 
|535 N. Brand Blvd            |  |                                                        |  | 0.6            |   |                              | 96.9  |                  |   | 2,353                                                       | 
|                             |  |                                                        |  |                |   |                              |       |                  |   |                                                            
|Subtotal/Weighted Average -  |  |                                                        |  |                |   |                              |       |                  |   |                                                             | 
|Los Angeles North            |  |                                                        |  | 16.9           | % |                              | 92.2  | %                | $ | 62,819                                                      | 

12

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|Property Name                    |  | Submarket                   |  | Location    |  | Year(s)
Built/
Renovated |  | Approximate
Net Rentable
Square Feet | 
|-------------------------------- |  | --------------------------- |  | ----------- |  | ------------------------ |  | ------------------------------------ | 
|Los Angeles South                |  |                             |  |             |  |                          |  |                                      | 
|Long Beach Airport Bldg D(2)     |  | Long Beach                  |  | Long Beach  |  | 1987/95                  |  | 121,610                              | 
|Long Beach Airport Bldg F & G(2) |  | Long Beach                  |  | Long Beach  |  | 1987/95                  |  | 150,403                              | 
|5000 East Spring(2)              |  | Long Beach                  |  | Long Beach  |  | 1989/95                  |  | 163,358                              | 
|100 Broadway                     |  | Long Beach                  |  | Long Beach  |  | 1987/96                  |  | 191,727                              | 
|1501 Hughes Way                  |  | Long Beach                  |  | Long Beach  |  | 1983/97                  |  | 77,060                               | 
|3901 Via Oro                     |  | Long Beach                  |  | Long Beach  |  | 1986/97                  |  | 53,195                               | 
|Oceangate Tower                  |  | Long Beach                  |  | Long Beach  |  | 1971/93-94               |  | 210,907                              | 
|Continental Grand Plaza          |  | El Segundo                  |  | El Segundo  |  | 1986                     |  | 235,926                              | 
|Grand Avenue Plaza (1970)        |  | El Segundo                  |  | El Segundo  |  | 1980                     |  | 81,448                               | 
|5200 West Century                |  | Marina Area/Culver City/LAX |  | Culver City |  | 1982/98-99               |  | 310,910                              | 
|Skyview Center                   |  | Marina Area/Culver City/LAX |  | Los Angeles |  | 1981/87/95               |  | 391,675                              | 
|South Bay Centre                 |  | Torrance                    |  | Gardena     |  | 1984                     |  | 202,830                              | 
|Pacific Gateway                  |  | Torrance                    |  | Torrance    |  | 1982/90                  |  | 223,731                              | 
|Mariner Court                    |  | Torrance                    |  | Torrance    |  | 1989                     |  | 105,436                              | 
|South Bay Tech                   |  | Torrance                    |  | Torrance    |  | 1984                     |  | 104,815                              | 
|Gateway Towers                   |  | Torrance                    |  | Torrance    |  | 1984/86                  |  | 432,894                              | 
|                                 |  |                             |  |             | 
|Subtotal/Weighted Average -      |  |                             |  |             |  |                          |  |                                      | 
|Los Angeles South                |  |                             |  |             |  |                          |  | 3,057,925                            | 

[Additional columns below.]

|Property Name                    |  | Percentage of
Total
Portfolio Net
Rentable
Square Feet |  | Percent
Leased |   | Annualized
Base Rent
($000s) |       | Number of
Leases |   | Annualized
Base Rent
per Leased
Net Rentable
Square
Feet(1) | 
|-------------------------------- |  | ------------------------------------------------------ |  | -------------- | - | ---------------------------- | ----- | ---------------- | - | ----------------------------------------------------------- | 
|Los Angeles South                |  |                                                        |  |                |   |                              |       |                  |   |                                                             | 
|Long Beach Airport Bldg D (2)    |  |                                                        |  | 0.6            | % |                              | 100.0 | %                | $ | 1,211                                                       | 
|Long Beach Airport Bldg F & G(2) |  |                                                        |  | 0.8            |   |                              | 100.0 |                  |   | 1,354                                                       | 
|5000 East Spring(2)              |  |                                                        |  | 0.9            |   |                              | 79.0  |                  |   | 3,178                                                       | 
|100 Broadway                     |  |                                                        |  | 1.0            |   |                              | 90.8  |                  |   | 4,044                                                       | 
|1501 Hughes Way                  |  |                                                        |  | 0.4            |   |                              | 97.3  |                  |   | 1,385                                                       | 
|3901 Via Oro                     |  |                                                        |  | 0.3            |   |                              | 90.3  |                  |   | 826                                                         | 
|Oceangate Tower                  |  |                                                        |  | 1.1            |   |                              | 91.8  |                  |   | 3,478                                                       | 
|Continental Grand Plaza          |  |                                                        |  | 1.3            |   |                              | 87.6  |                  |   | 5,211                                                       | 
|Grand Avenue Plaza (1970)        |  |                                                        |  | 0.4            |   |                              | 46.2  |                  |   | 810                                                         | 
|5200 West Century                |  |                                                        |  | 1.7            |   |                              | 94.8  |                  |   | 5,298                                                       | 
|Skyview Center                   |  |                                                        |  | 2.1            |   |                              | 73.1  |                  |   | 4,519                                                       | 
|South Bay Centre                 |  |                                                        |  | 1.1            |   |                              | 98.7  |                  |   | 3,933                                                       | 
|Pacific Gateway                  |  |                                                        |  | 1.2            |   |                              | 93.1  |                  |   | 4,383                                                       | 
|Mariner Court                    |  |                                                        |  | 0.6            |   |                              | 94.9  |                  |   | 2,020                                                       | 
|South Bay Tech                   |  |                                                        |  | 0.6            |   |                              | 55.3  |                  |   | 1,040                                                       | 
|Gateway Towers                   |  |                                                        |  | 2.3            |   |                              | 91.6  |                  |   | 9,271                                                       | 
|                                 |  |                                                        |  |                |   |                              |       |                  |   |                                                            
|Subtotal/Weighted Average -      |  |                                                        |  |                |  
|Los Angeles South                |  |                                                        |  | 16.4           | % |                              | 87.7  | %                | $ | 51,961                                                      | 

13

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Table of Contents

|Property Name               |  | Submarket            |  | Location        |  | Year(s)
Built/
Renovated |  | Approximate
Net Rentable
Square Feet | 
|--------------------------- |  | -------------------- |  | --------------- |  | ------------------------ |  | ------------------------------------ | 
|Orange County               |  |                      |  |                 |  |                          |  |                                      | 
|Whittier                    |  | San Gabriel Valley   |  | Whittier        |  | 1982                     |  | 135,415                              | 
|1370 Valley Vista           |  | San Gabriel Valley   |  | Diamond Bar     |  | 1988                     |  | 84,081                               | 
|5832 Bolsa                  |  | West County          |  | Huntington      |  |                          |  |                                      | 
|                            |  |                      |  | Beach           |  | 1985                     |  | 49,355                               | 
|Huntington Beach Plaza      |  | West County          |  | Huntington      |  |                          |  |                                      | 
|                            |  |                      |  | Beach           |  | 1984/96                  |  | 52,186                               | 
|5702 Bolsa                  |  | West County          |  | Huntington      |  |                          |  |                                      | 
|                            |  |                      |  | Beach           |  | 1987/97                  |  | 27,731                               | 
|5672 Bolsa                  |  | West County          |  | Huntington      |  |                          |  |                                      | 
|                            |  |                      |  | Beach           |  | 1987                     |  | 11,968                               | 
|5632 Bolsa                  |  | West County          |  | Huntington      |  |                          |  |                                      | 
|                            |  |                      |  | Beach           |  | 1987                     |  | 21,568                               | 
|Huntington Commerce Center  |  | West County          |  | Huntington      |  |                          |  |                                      | 
|                            |  |                      |  | Beach           |  | 1987                     |  | 67,551                               | 
|City Centre                 |  | West County          |  | Fountain Valley |  | 1982                     |  | 302,519                              | 
|Fountain Valley Plaza       |  | West County          |  | Fountain Valley |  | 1982                     |  | 107,252                              | 
|3300 Irvine Avenue          |  | Greater Airport Area |  | Newport Beach   |  | 1981/97                  |  | 74,224                               | 
|1821 Dyer                   |  | Greater Airport Area |  | Irvine          |  | 1980/88                  |  | 115,061                              | 
|Von Karman Corporate Center |  | Greater Airport Area |  | Irvine          |  | 1981/84                  |  | 451,477                              | 
|Norwalk                     |  | Long Beach           |  | Norwalk         |  | 1978/94                  |  | 122,175                              | 
|91 Freeway Center           |  | Mid-Cities           |  | Artesia         |  | 1986/97                  |  | 93,277                               | 
|1503 South Coast            |  | Greater Airport Area |  | Costa Mesa      |  | 1979/97                  |  | 60,605                               | 
|222 South Harbor (2)        |  | Tri-Freeway Area     |  | Anaheim         |  | 1986/91                  |  | 175,391                              | 
|Crown Cabot Financial       |  | South County         |  | Laguna Niguel   |  | 1989                     |  | 172,900                              | 
|625 The City                |  | Tri-Freeway Area     |  | Orange          |  | 1985/97                  |  | 139,806                              | 
|Orange Financial Center     |  | Central County       |  | Orange          |  | 1985/95                  |  | 305,439                              | 
|Centerpointe La Palma       |  | North County         |  | La Palma        |  | 1986/88/90               |  | 597,550                              | 
|Savi Tech Center            |  | North County         |  | Yorba Linda     |  | 1989                     |  | 341,446                              | 
|Yorba Linda Business Park   |  | North County         |  | Yorba Linda     |  | 1988                     |  | 167,142                              | 
|                            |  |                      |  |                 | 
|Subtotal/Weighted Average - |  |                      |  |                 |  |                          |  |                                      | 
|Orange County               |  |                      |  |                 |  |                          |  | 3,676,119                           

[Additional columns below.]

|Property Name               |  | Percentage of
Total
Portfolio Net
Rentable
Square Feet |  | Percent
Leased |   | Annualized
Base Rent
($000s) |       | Number of
Leases |   | Annualized
Base Rent
per Leased
Net Rentable
Square
Feet(1) | 
|--------------------------- |  | ------------------------------------------------------ |  | -------------- | - | ---------------------------- | ----- | ---------------- | - | ----------------------------------------------------------- | 
|Orange County               |  |                                                        |  |                |   |                              |       |                  |   |                                                             | 
|Whittier                    |  |                                                        |  | 0.7            | % |                              | 100.0 | %                | $ | 3,012                                                       | 
|1370 Valley Vista           |  |                                                        |  | 0.5            |   |                              | 100.0 |                  |   | 1,783                                                       | 
|5832 Bolsa                  |  |                                                        |  | 0.3            |   |                              | 100.0 |                  |   | 799                                                         | 
|Huntington Beach Plaza      |  |                                                        |  | 0.3            |   |                              | 81.6  |                  |   | 739                                                         | 
|5702 Bolsa                  |  |                                                        |  | 0.1            |   |                              | 100.0 |                  |   | 221                                                         | 
|5672 Bolsa                  |  |                                                        |  | 0.1            |   |                              | 100.0 |                  |   | 100                                                         | 
|5632 Bolsa                  |  |                                                        |  | 0.1            |   |                              | 100.0 |                  |   | 179                                                         | 
|Huntington Commerce Center  |  |                                                        |  | 0.4            |   |                              | 99.7  |                  |   | 612                                                         | 
|City Centre                 |  |                                                        |  | 1.6            |   |                              | 64.2  |                  |   | 4,478                                                       | 
|Fountain Valley Plaza       |  |                                                        |  | 0.6            |   |                              | 1000  |                  |   | 2,150                                                       | 
|3300 Irvine Avenue          |  |                                                        |  | 0.4            |   |                              | 96.9  |                  |   | 1,798                                                       | 
|1821 Dyer                   |  |                                                        |  | 0.6            |   |                              | 100.0 |                  |   | 1,549                                                       | 
|Von Karman Corporate Center |  |                                                        |  | 2.4            |   |                              | 96.1  |                  |   | 9,221                                                       | 
|Norwalk                     |  |                                                        |  | 0.7            |   |                              | 97.3  |                  |   | 2,241                                                       | 
|91 Freeway Center           |  |                                                        |  | 0.5            |   |                              | 94.9  |                  |   | 1,753                                                       | 
|1503 South Coast            |  |                                                        |  | 0.3            |   |                              | 77.4  |                  |   | 884                                                         | 
|222 South Harbor (2)        |  |                                                        |  | 0.9            |   |                              | 98.2  |                  |   | 3,429                                                       | 
|Crown Cabot Financial       |  |                                                        |  | 0.9            |   |                              | 100.0 |                  |   | 4,752                                                       | 
|625 The City                |  |                                                        |  | 0.8            |   |                              | 92.2  |                  |   | 2,624                                                       | 
|Orange Financial Center     |  |                                                        |  | 1.6            |   |                              | 96.6  |                  |   | 6,501                                                       | 
|Centerpointe La Palma       |  |                                                        |  | 3.2            |   |                              | 94.1  |                  |   | 10,310                                                      | 
|Savi Tech Center            |  |                                                        |  | 1.8            |   |                              | 100.0 |                  |   | 3,074                                                       | 
|Yorba Linda Business Park   |  |                                                        |  | 0.9            |   |                              | 98.5  |                  |   | 1,470                                                       | 
|                            |  |                                                        |  |                |   |                              |       |                  |   |                                                            
|Subtotal/Weighted Average - |  |                                                        |  |                |   |                              |       |                  |   |                                                             | 
|Orange County               |  |                                                        |  | 19.7           | % |                              | 94.4  | %                | $ | 63,679                                                      | 

14

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Table of Contents

|Property Name                |  | Submarket                  |  | Location   |  | Year(s)
Built/
Renovated |  | Approximate
Net Rentable
Square Feet | 
|---------------------------- |  | -------------------------- |  | ---------- |  | ------------------------ |  | ------------------------------------ | 
|San Diego County             |  |                            |  |            |  |                          |  |                                      | 
|701 B Street (2)             |  | Downtown                   |  | San Diego  |  | 1982/96                  |  | 540,413                              | 
|Foremost Professional Plaza  |  | I-15 Corridor              |  | San Diego  |  | 1992                     |  | 60,534                               | 
|Activity Business Center     |  | I-15 Corridor              |  | San Diego  |  | 1987                     |  | 167,045                              | 
|Bernardo Regency             |  | I-15 Corridor              |  | San Diego  |  | 1986                     |  | 47,916                               | 
|Carlsbad Corporate Center    |  | North Coast                |  | Carlsbad   |  | 1996                     |  | 125,000                              | 
|10180 Scripps Ranch          |  | I-15 Corridor              |  | San Diego  |  | 1978/96                  |  | 43,560                               | 
|Cymer Technology Center      |  | I-15 Corridor              |  | Rancho     |  |                          |  |                                      | 
|                             |  |                            |  | Bernardino |  | 1986                     |  | 155,612                              | 
|Via Frontera                 |  | I-15 Corridor              |  | Rancho     |  |                          |  |                                      | 
|                             |  |                            |  | Bernardino |  | 1982/97                  |  | 77,920                               | 
|Poway Industrial             |  | I-15 Corridor              |  | Poway      |  | 1991/96                  |  | 112,000                              | 
|Balboa Corporate Center      |  | Mission Valley/Kearny Mesa |  | San Diego  |  | 1990                     |  | 69,890                               | 
|Panorama Corporate Center    |  | Mission Valley/Kearny Mesa |  | San Diego  |  | 1991                     |  | 133,149                              | 
|Ruffin Corporate Center      |  | Mission Valley/Kearny Mesa |  | San Diego  |  | 1990                     |  | 45,059                               | 
|Skypark Office Plaza         |  | Mission Valley/Kearny Mesa |  | San Diego  |  | 1986                     |  | 202,164                              | 
|Governor Park Plaza          |  | North City                 |  | San Diego  |  | 1986                     |  | 104,065                              | 
|Westridge                    |  | North City                 |  | San Diego  |  | 1984/96                  |  | 48,955                               | 
|5120 Shoreham                |  | North City                 |  | San Diego  |  | 1984                     |  | 37,759                               | 
|Morehouse Tech Center        |  | North City                 |  | San Diego  |  | 1984                     |  | 181,207                              | 
|Torreyana Science Park       |  | North City                 |  | La Jolla   |  | 1980/97                  |  | 81,204                               | 
|Waples Tech Center           |  | North City                 |  | San Diego  |  | 1990                     |  | 28,119                               | 
|Genesee Executive Plaza      |  | North City                 |  | San Diego  |  | 1984                     |  | 155,820                              | 
|10251 Vista Sorrento         |  | North City                 |  | San Diego  |  | 1981/95                  |  | 69,386                               | 
|Carmel Valley Centre         |  | Del Mar Heights            |  | San Diego  |  | 1987/89                  |  | 107,197                              | 
|Governor Executive Center    |  | Governor Park              |  | San Diego  |  | 1988                     |  | 52,195                               | 
|Governor Executive Center II |  | Governor Park              |  | San Diego  |  | 1989                     |  | 101,433                              | 
|Crossroads                   |  | Mission Valley             |  | San Diego  |  | 1979                     |  | 133,566                              | 
|Carmel View Office Plaza     |  | Rancho Bernardo/Poway      |  | San Diego  |  | 1985                     |  | 77,460                               | 
|                             |  |                            |  |            | 
|Subtotal/Weighted Average -  |  |                            |  |            |  |                          | 
|San Diego County             |  |                            |  |            |  |                          |  | 2,958,628                           

[Additional columns below.]

|Property Name                |  | Percentage of
Total
Portfolio Net
Rentable
Square Feet |  | Percent
Leased |   | Annualized
Base Rent
($000s) |       | Number of
Leases |   | Annualized
Base Rent
per Leased
Net Rentable
Square
Feet(1) | 
|---------------------------- |  | ------------------------------------------------------ |  | -------------- | - | ---------------------------- | ----- | ---------------- | - | ----------------------------------------------------------- | 
|Los Angeles North            |  |                                                        |  |                |   |                              |       |                  |   |                                                             | 
|701 B Street (2)             |  |                                                        |  | 2.9            | % |                              | 84.9  | %                | $ | 10,563                                                      | 
|Foremost Professional Plaza  |  |                                                        |  | 0.3            |   |                              | 98.7  |                  |   | 1,472                                                       | 
|Activity Business Center     |  |                                                        |  | 0.9            |   |                              | 77.2  |                  |   | 1,775                                                       | 
|Bernardo Regency             |  |                                                        |  | 0.3            |   |                              | 89.2  |                  |   | 1,071                                                       | 
|Carlsbad Corporate Center    |  |                                                        |  | 0.7            |   |                              | 100.0 |                  |   | 1,625                                                       | 
|10180 Scripps Ranch          |  |                                                        |  | 0.2            |   |                              | 100.0 |                  |   | 463                                                         | 
|Cymer Technology Center      |  |                                                        |  | 0.8            |   |                              | 100.0 |                  |   | 1,867                                                       | 
|Via Frontera                 |  |                                                        |  | 0.4            |   |                              | 100.0 |                  |   | 855                                                         | 
|Poway Industrial             |  |                                                        |  | 0.6            |   |                              | 100.0 |                  |   | 672                                                         | 
|Balboa Corporate Center      |  |                                                        |  | 0.4            |   |                              | --    |                  |   | --                                                          | 
|Panorama Corporate Center    |  |                                                        |  | 0.7            |   |                              | 88.3  |                  |   | 1,963                                                       | 
|Ruffin Corporate Center      |  |                                                        |  | 0.2            |   |                              | 100.0 |                  |   | 351                                                         | 
|Skypark Office Plaza         |  |                                                        |  | 1.1            |   |                              | 75.9  |                  |   | 2,364                                                       | 
|Governor Park Plaza          |  |                                                        |  | 0.6            |   |                              | 96.3  |                  |   | 2,454                                                       | 
|Westridge                    |  |                                                        |  | 0.3            |   |                              | 100.0 |                  |   | 780                                                         | 
|5120 Shoreham                |  |                                                        |  | 0.2            |   |                              | 100.0 |                  |   | 82.6                                                        | 
|Morehouse Tech Center        |  |                                                        |  | 1.0            |   |                              | 100.0 |                  |   | 3,171                                                       | 
|Torreyana Science Park       |  |                                                        |  | 0.4            |   |                              | 100.0 |                  |   | 1,949                                                       | 
|Waples Tech Center           |  |                                                        |  | 0.2            |   |                              | 99.3  |                  |   | 407                                                         | 
|Genesee Executive Plaza      |  |                                                        |  | 0.8            |   |                              | 88.2  |                  |   | 3,378                                                       | 
|10251 Vista Sorrento         |  |                                                        |  | 0.4            |   |                              | --    |                  |   | --                                                          | 
|Carmel Valley Centre         |  |                                                        |  | 0.6            |   |                              | 92.3  |                  |   | 3,206                                                       | 
|Governor Executive Center    |  |                                                        |  | 0.3            |   |                              | 93.6  |                  |   | 1,293                                                       | 
|Governor Executive Center II |  |                                                        |  | 0.5            |   |                              | 99.4  |                  |   | 2,825                                                       | 
|Crossroads                   |  |                                                        |  | 0.7            |   |                              | 100.0 |                  |   | 2,901                                                       | 
|Carmel View Office Plaza     |  |                                                        |  | 0.4            |   |                              | 100.0 |                  |   | 1,901                                                       | 
|                             |  |                                                        |  |                |   |                              |       |                  |   |                                                            
|Subtotal/Weighted Average -  |  |                                                       
|San Diego County             |  |                                                        |  | 15.9           | % |                              | 87.9  | %                | $ | 50,132                                                      | 

15

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Table of Contents

|Property Name               |  | Submarket   |  | Location    |  | Year(s)
Built/
Renovated |  | Approximate
Net Rentable
Square Feet | 
|--------------------------- |  | ----------- |  | ----------- |  | ------------------------ |  | ------------------------------------ | 
|Ventura & Kern Counties     |  |             |  |             |  |                          |  |                                      | 
|Parkway Center I            |  | Bakersfield |  | Bakersfield |  | 1992/95                  |  | 61,333                               | 
|4900 California             |  | Bakersfield |  | Bakersfield |  | 1983                     |  | 155,189                              | 
|Center Promenade            |  | West County |  | Ventura     |  | 1982                     |  | 174,837                              | 
|1000 Town Center            |  | West County |  | Oxnard      |  | 1989                     |  | 107,656                              | 
|Solar Drive Business Center |  | West County |  | Oxnard      |  | 1982                     |  | 125,132                              | 
|Camarillo Business Park     |  | West County |  | Camarillo   |  | 1984/97                  |  | 154,216                              | 
|                            |  |             |  |             | 
|Subtotal/Weighted Average - |  |             |  |             |  |                          |  |                                     
|Ventura & Kern Counties     |  |             |  |             |  |                          |  | 778,363                             
|                            | 
|Riverside County            | 
|Tower Plaza Retail          |  | Temecula    |  | Temecula    |  | 1970/97                  |  | 133,481                              | 
|                            |  |             |  |             | 
|Subtotal/Weighted Average - |  |             |  |             |  |                          |  |                                     
|Riverside County            |  |             |  |             |  |                          |  | 133,481                             
|                            |  |             |  |             | 
|Portfolio Total/            |  |             |  |             |  |                          |  |                                      | 
|Weighted Average            |  |             |  |             |  |                          |  | 18,635,706                           | 
|                            |  |             |  |             | 

[Additional columns below.]

|Property Name               |  | Percentage of
Total
Portfolio Net
Rentable
Square Feet |  | Percent
Leased |   | Annualized
Base Rent
($000s) |       | Number of
Leases |   | Annualized
Base Rent
per Leased
Net Rentable
Square
Feet(1) | 
|--------------------------- |  | ------------------------------------------------------ |  | -------------- | - | ---------------------------- | ----- | ---------------- | - | ----------------------------------------------------------- | 
|Ventura & Kern Counties     |  |                                                        |  |                |   |                              |       |                  |   |                                                             | 
|Parkway Center I            |  |                                                        |  | 0.3            | % |                              | 95.6  | %                | $ | 1,070                                                       | 
|4900 California             |  |                                                        |  | 0.8            |   |                              | 93.8  |                  |   | 2,483                                                       | 
|Center Promenade            |  |                                                        |  | 1.0            |   |                              | 95.4  |                  |   | 2,988                                                       | 
|1000 Town Center            |  |                                                        |  | 0.6            |   |                              | 100.0 |                  |   | 2,293                                                       | 
|Solar Drive Business Center |  |                                                        |  | 0.7            |   |                              | 100.0 |                  |   | 2,525                                                       | 
|Camarillo Business Park     |  |                                                        |  | 0.8            |   |                              | 94.6  |                  |   | 2,945                                                       | 
|                            |  |                                                        |  |                |   |                              |       |                  |   |                                                            
|Subtotal/Weighted Average - |  |                                                        |  |                |   |                              |       |                  |   |                                                             | 
|Ventura & Kern Counties     |  |                                                        |  | 4.2            | % |                              | 97.9  | %                | $ | 14,304                                                      | 
|                            |  |                                                       
|Riverside County            |  |                                                        |  |                |   |                              |       |                  |   |                                                             | 
|Tower Plaza Retail          |  |                                                        |  | 0.7            | % |                              | 99.4  | %                | $ | 1,692                                                       | 
|                            |  |                                                        |  |                |   |                              |       |                  |   |                                                            
|Subtotal/Weighted Average - |  |                                                        |  |                |   |                              |       |                  |   |                                                             | 
|Riverside County            |  |                                                        |  | 0.7            | % |                              | 99.4  | %                | $ | 1,692                                                       | 
|                            |  |                                                        |  |                |   |                              |       |                  |   |                                                            
|Portfolio Total/            |  |                                                        |  |                |   |                              |       |                  |   |                                                             | 
|Weighted Average            |  |                                                        |  | 100.0          | % |                              | 92.1  | %                | $ | 373,415                                                     | 
|                            |  |                                                        |  |                |   |                              |       |                  |   |                                                            

---

|(1) |  | Calculated as monthly contractual base rent under existing leases as of December
     31, 2003, multiplied by 12 and divided by leased net rentable square feet, for
     those leases where rent has not yet commenced or which are in a free rent
     period, the first month in which rent is to be received is used to determine
     annualized base rent.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | We lease the land underlying these properties or their parking structures
     pursuant to long term ground leases.
|--- |  | -------------------------------------------------------------------------------------------------------------------

16

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Table of Contents

Tenant
Information

As
of December 31, 2003, we had approximately 3,000 tenants, with no one tenant representing
more than 2.2% of the aggregate annualized base rent of our properties, and only 4 tenants
individually representing more than 1.0% of our aggregate annualized base rent. Our
properties are leased to local, national and international companies engaged in a variety
of businesses including financial services, entertainment, health care services,
accounting, law, education, publishing and local, state and federal government entities.

Our
leases are typically structured for terms of three to ten years. Leases typically contain
provisions permitting tenants to renew expiring leases at prevailing market rates.
Approximately 79% of our total rentable square footage is under full service gross leases
under which tenants typically pay for all real estate taxes and operating expenses above
those for an established base year or expense stop. Our remaining square footage is under
triple net and modified gross leases. Triple net and modified gross leases are those where
tenants pay not only base rent, but also some or all real estate taxes and operating
expenses of the leased property. Tenants generally reimburse us the full direct cost,
without regard to a base year or expense stop, for use of lighting, heating and air
conditioning during non-business hours, and for on-site monthly employee and visitor
parking. We are generally responsible for structural repairs.

The
following table presents information as of December 31, 2003 derived from our ten largest
tenants based on the percentage of aggregate portfolio annualized base rent:

|Tenant                            |  | Number of
Locations |  | Weighted
Average
Remaining
Lease Term
in Months |  | Percentage of
Aggregate
Portfolio
Leased
Square Feet |     | Percentage of
Aggregate
Portfolio
Annualized
Base Rent(1) |  | Net Rentable
Square Feet |   | Annualized
Base Rent
(in thousands) |      
|--------------------------------- |  | ------------------- |  | ----------------------------------------------- |  | ---------------------------------------------------- | --- | --------------------------------------------------------- |  | ------------------------ | - | ----------------------------------- | -----
|State of California               |  |                     |  | 28                                              |  |                                                      | 48  |                                                           |  | 2.25                     | % |                                     | 2.18 
|Vivendi Universal                 |  |                     |  | 2                                               |  |                                                      | 76  |                                                           |  | 1.35                     |   |                                     | 2.09 
|University of Phoenix             |  |                     |  | 6                                               |  |                                                      | 35  |                                                           |  | 1.18                     |   |                                     | 1.15 
|Univision Television Group        |  |                     |  | 1                                               |  |                                                      | 214 |                                                           |  | 0.97                     |   |                                     | 1.14 
|Ceridian Corporation              |  |                     |  | 2                                               |  |                                                      | 81  |                                                           |  | 0.89                     |   |                                     | 0.94 
|Atlantic Richfield                |  |                     |  | 1                                               |  |                                                      | 32  |                                                           |  | 0.79                     |   |                                     | 0.77 
|Westfield Corporation             |  |                     |  | 1                                               |  |                                                      | 92  |                                                           |  | 0.61                     |   |                                     | 0.75 
|State Compensation Insurance Fund |  |                     |  | 1                                               |  |                                                      | 51  |                                                           |  | 0.66                     |   |                                     | 0.71 
|U.S. Government                   |  |                     |  | 15                                              |  |                                                      | 30  |                                                           |  | 0.66                     |   |                                     | 0.70 
|Haight, Brown & Bonesteel, LLP .  |  |                     |  | 1                                               |  |                                                      | 91  |                                                           |  | 0.36                     |   |                                     | 0.69 
|                                  |  |                     |  |                                                 |  |                                                      |     |                                                           |  |                          |   |                                    
|Total/Weighted Average(2)         |  |                     |  | 55                                              |  |                                                      | 72  |                                                           |  | 9.72                     | % |                                     | 11.12
|                                  |  |                     |  |                                                 |  |                                                      |     |                                                           |  |                          |   |                                    

---

|(1) |  | Annualized base rent is calculated as monthly contractual base rent under
      existing leases as of December 31, 2003, multiplied by 12; for those leases
      where rent has not yet commenced or which are in a free rent period, the first
      month in which rent is to be received is used to determine annualized base rent.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | The weighted average calculation is based on net rentable square footage leased
      by each tenant.
|--- |  | -----------------------------------------------------------------------------------------------------

17

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Table of Contents

The
following table presents the diversification of the tenants occupying space in our
portfolio by industry as of December 31, 2003:

|North American Industrial Classification System Description (NAICS)      |  | NAICS
Code |  | Occupied
Square
Feet |  | Percentage
of Total
Occupied
Portfolio |           
|------------------------------------------------------------------------ |  | ---------- |  | -------------------- |  | -------------------------------------- | ----------
|Professional, Scientific, and Technical Services                         |  |            |  | 541                  |  |                                        | 4,496,237 
|Finance and Insurance                                                    |  |            |  | 521-525              |  |                                        | 2,675,992 
|Information                                                              |  |            |  | 511-519              |  |                                        | 1,957,019 
|Manufacturing                                                            |  |            |  | 311-339              |  |                                        | 1,341,813 
|Health Care and Social Assistance                                        |  |            |  | 621-624              |  |                                        | 1,057,784 
|Administrative and Support and Waste Management and Remediation Services |  |            |  | 561-562              |  |                                        | 685,729   
|Public Administration                                                    |  |            |  | 921-928              |  |                                        | 785,814   
|Educational Services                                                     |  |            |  | 611                  |  |                                        | 764,151   
|Real Estate, Rental and Leasing                                          |  |            |  | 531-533              |  |                                        | 824,008   
|Wholesale Trade                                                          |  |            |  | 423-425              |  |                                        | 547,385   
|Transportation and Warehousing                                           |  |            |  | 481-493              |  |                                        | 396,205   
|Arts, Entertainment, and Recreation                                      |  |            |  | 711-713              |  |                                        | 324,087   
|Construction                                                             |  |            |  | 236-238              |  |                                        | 255,239   
|Accommodation and Food Services                                          |  |            |  | 721-722              |  |                                        | 194,866   
|Other Services (except Public Administration)                            |  |            |  | 811-814              |  |                                        | 253,959   
|Retail Trade                                                             |  |            |  | 441-454              |  |                                        | 154,722   
|Mining                                                                   |  |            |  | 211-213              |  |                                        | 54,399    
|Management of Companies and Enterprises                                  |  |            |  | 551                  |  |                                        | 21,970    
|Utilities                                                                |  |            |  | 221                  |  |                                        | 8,795     
|Agriculture, Forestry, Fishing and Hunting                               |  |            |  | 111-115              |  |                                        | 6,065     
|Other - Uncategorized                                                    |  |            |  | --                   |  |                                        | 61,515    
|                                                                         |  |            |  |                      |  |                                        |           
|Total Square Feet Occupied                                               |  |            |  |                      |  |                                        | 16,837,934
|                                                                         |  |            |  |                      |  |                                        |           

18

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Table of Contents

Lease
Distribution

The
following table presents information relating to the distribution of the leases for our
129 stabilized properties, based on leased net rentable square feet, as of December 31,
2003:

|Square Feet Under Lease |  | Number
of Leases |  | Percent
of All
Leases |  | Total Leased
Square Feet |        | Percent of
Aggregate
Portfolio
Leased
Square Feet |  | Annualized
Base Rent of
Leases(1)
(000's) |  | Avg. Base
Rent per
Leased
Square Foot
Base Rent |   | Percent of
Aggregate
Portfolio
Annualized |  
|----------------------- |  | ---------------- |  | --------------------- |  | ------------------------ | ------ | ------------------------------------------------- |  | ----------------------------------------- |  | ----------------------------------------------- | - | ----------------------------------------- | -
|2,500 and under         |  |                  |  | 1,549                 |  |                          | 50.29  | %                                                 |  | 2,158,034                                 |  | 12.58                                           | % |                                           | $
|2,501 - 5,000           |  |                  |  | 702                   |  |                          | 22.79  |                                                   |  | 2,434,315                                 |  | 14.19                                           |   |                                           |  
|5,001 - 7,500           |  |                  |  | 295                   |  |                          | 9.58   |                                                   |  | 1,788,606                                 |  | 10.42                                           |   |                                           |  
|7,501 - 10,000          |  |                  |  | 173                   |  |                          | 5.62   |                                                   |  | 1,509,474                                 |  | 8.80                                            |   |                                           |  
|10,001 - 20,000         |  |                  |  | 224                   |  |                          | 7.27   |                                                   |  | 3,141,191                                 |  | 18.31                                           |   |                                           |  
|20,001- 40,000          |  |                  |  | 81                    |  |                          | 2.63   |                                                   |  | 2,248,167                                 |  | 13.10                                           |   |                                           |  
|40,001 and over         |  |                  |  | 56                    |  |                          | 1.82   |                                                   |  | 3,877,858                                 |  | 22.60                                           |   |                                           |  
|                        |  |                  |  |                       |  |                          |        |                                                   |  |                                           |  |                                                 |   |                                          
|Total/Weighted Average  |  |                  |  | 3,080                 |  |                          | 100.00 | %                                                 |  | 17,157,645                                |  | 100.00                                          | % |                                           | $
|                        |  |                  |  |                       |  |                          |        |                                                   |  |                                           |  |                                                 |   |                                          

---

|(1) |  | Base rent is determined as of the date of lease expiration, including all
fixed contractual base rent increases; increases tied to indices such as the Consumer
Price Index are not included.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Lease
Expirations

The
following table presents a summary schedule of the total lease expirations for our 129
stabilized properties for leases in place at December 31, 2003. This table assumes that
none of the tenants exercise renewal options or termination rights, if any, at or prior to
the scheduled expirations:

|Year of Lease Expiration |  | Number of
Leases
Expiring |  | Square
Footage
of
Expiring
Leases |  | Percentage
of Aggregate
Portfolio
Leased
Square Feet |            | Annualized
Base Rent
of
Expiring
Leases(1)
($000s) |  | Average
Annualized
Base Rent per
Square Foot of
Expiring
Leases |   | Average
Percentage of
Aggregate
Portfolio
Annualized
Base Rent |        
|------------------------ |  | ------------------------- |  | --------------------------------- |  | ---------------------------------------------------- | ---------- | -------------------------------------------------- |  | --------------------------------------------------------------- | - | -------------------------------------------------------------- | -------
|Month-to-Month           |  |                           |  | 115                               |  |                                                      | 387,672    |                                                    |  | 2.26                                                            | % | $                                                              | 7,345  
|Q1 2004                  |  |                           |  | 177                               |  |                                                      | 777,830    |                                                    |  | 4.53                                                            |   |                                                                | 15,363 
|Q2 2004                  |  |                           |  | 164                               |  |                                                      | 536,229    |                                                    |  | 3.13                                                            |   |                                                                | 11,929 
|Q3 2004                  |  |                           |  | 183                               |  |                                                      | 875,113    |                                                    |  | 5.10                                                            |   |                                                                | 19,425 
|Q4 2004                  |  |                           |  | 178                               |  |                                                      | 968,647    |                                                    |  | 5.64                                                            |   |                                                                | 18,987 
|                         |  |                           |  |                                   |  |                                                      |            |                                                    |  |                                                                 |   |                                                               
|2004 Sub-Total(2)        |  |                           |  | 702                               |  |                                                      | 3,157,819  |                                                    |  | 18.40                                                           |   |                                                                | 65,704 
|2005                     |  |                           |  | 643                               |  |                                                      | 3,108,096  |                                                    |  | 18.11                                                           |   |                                                                | 66,129 
|2006                     |  |                           |  | 548                               |  |                                                      | 2,660,416  |                                                    |  | 15.51                                                           |   |                                                                | 62,144 
|2007                     |  |                           |  | 370                               |  |                                                      | 1,983,663  |                                                    |  | 11.56                                                           |   |                                                                | 47,029 
|2008                     |  |                           |  | 347                               |  |                                                      | 2,072,137  |                                                    |  | 12.08                                                           |   |                                                                | 51,495 
|2009                     |  |                           |  | 125                               |  |                                                      | 1,032,902  |                                                    |  | 6.02                                                            |   |                                                                | 25,799 
|2010                     |  |                           |  | 73                                |  |                                                      | 912,939    |                                                    |  | 5.32                                                            |   |                                                                | 24,075 
|2011                     |  |                           |  | 34                                |  |                                                      | 555,322    |                                                    |  | 3.24                                                            |   |                                                                | 18,086 
|2012                     |  |                           |  | 33                                |  |                                                      | 473,347    |                                                    |  | 2.76                                                            |   |                                                                | 13,192 
|2013                     |  |                           |  | 27                                |  |                                                      | 342,583    |                                                    |  | 2.00                                                            |   |                                                                | 9,647  
|2014+                    |  |                           |  | 63                                |  |                                                      | 470,749    |                                                    |  | 2.74                                                            |   |                                                                | 13,116 
|                         |  |                           |  |                                   |  |                                                      |            |                                                    |  |                                                                 |   |                                                               
|Total/Weighted Average   |  |                           |  | 3,080                             |  |                                                      | 17,157,645 |                                                    |  | 100.00                                                          | % | $                                                              | 403,761
|                         |  |                           |  |                                   |  |                                                      |            |                                                    |  |                                                                 |   |                                                               

---

|(1) |  | Base rent is determined as of the date of lease expiration, including all
fixed      contractual base rent increases; increases tied to indices such as the
Consumer      Price Index are not included.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Excludes month-to-month leases.
|--- |  | -------------------------------

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ITEM 3. LEGAL PROCEEDINGS

We
are presently subject to various lawsuits, claims and proceedings arising in the ordinary
course of business none of which if determined unfavorably to us is expected to have a
material adverse effect on our cash flows, financial condition or results of operations
during the year ended December 31, 2003.

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

No
matters were submitted to a vote of Arden Realtys stockholders during the fourth
quarter of the year ended December 31, 2003.

PART II

ITEM 5. MARKET FOR
REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

There
is no established trading market for our common equity. As of December 31, 2003, there
were 66,113,199 common OP Units outstanding, of which Arden Realty owned 64,425,450 common
OP Units, all of which correspond to the issued and outstanding common stock of Arden
Realty. A partners percentage is determined by dividing the number of common OP
Units held by the partner by the total number of common OP Units outstanding. As of
December 31, 2003, there were approximately 31 holders of our common OP Units, including
Arden Realty.

Set
forth below are the distributions per common OP Unit paid during our two most recent
fiscal years.

|               | Distributions
Paid
|-------------- | ------------------
|2002           |                   
|First Quarter  |                   
|Second Quarter |                   
|Third Quarter  |                   
|Fourth Quarter |                   
|               |                   
|2003           |                   
|First Quarter  |                   
|Second Quarter |                   
|Third Quarter  |                   
|Fourth Quarter |                   

We
make quarterly distributions to our common OP Unit holders at the discretion of Arden
Realty, our sole general partner. The amount of each quarterly distribution depends on our
funds from operations, financial condition and capital requirements, annual distribution
requirements under the REIT provisions of the Internal Revenue Code and such other factors
as Arden Realty deems relevant.

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ITEM 6. SELECTED
FINANCIAL DATA

You
should read the following consolidated financial and operating data for Arden Realty
Limited Partnership together with our Managements Discussion and Analysis of
Financial Condition and Results of Operations and our consolidated financial
statements included elsewhere in this Form 10-K.

|                                                 | Year Ended December 31, | 
|------------------------------------------------ | ----------------------- | 
|
|
|Operating Data:                                  |                         | 
|Revenues                                         |                         | 
|Property operating expenses                      |                         | 
|General and administrative expense               |                         | 
|Depreciation and amortization                    |                         | 
|Interest expense                                 |                         | 
|Income from continuing operations before         |                         | 
|gain on sale of properties and minority interest |                         | 
|Gain on sale of operating properties             |                         | 
|Income from continuing operations before         |                         | 
|minority interest                                |                         | 
|Minority interest                                |                         | 
|Income from continuing operations                |                         | 
|Discontinued operations                          |                         | 
|Gain on sale of discontinued properties          |                         | 
|Net income                                       |                         | 
|                                                 |                         | 
|Net income allocated to:                         |                         | 
|Preferred partner                                |                         | 
|                                                 |                         | 
|General and limited partners                     |                         | 
|                                                 |                         | 
|Basic net income per common operating            |                         | 
|partnership unit:                                |                         | 
|Income from continuing operations                |                         | 
|Income from discontinued operations .            |                         | 
|                                                 |                         | 
|Net income per common operating                  |                         | 
|partnership unit-basic                           |                         | 
|                                                 |                         | 
|Weighed average number of common                 |                         | 
|operating partnership units-basic                |                         | 
|                                                 |                         | 
|Diluted net income per common operating          |                         | 
|partnership unit:                                |                         | 
|Income from continuing operations                |                         | 
|Income from discontinued operations .            |                         | 
|                                                 |                         | 
|Net income per common operating                  |                         | 
|partnership unit -diluted                        |                         | 
|                                                 |                         | 
|Weighed average number of common                 |                         | 
|operating partnership units-diluted .            |                         | 
|                                                 |                         | 
|Distributions per common operating               |                         | 
|partnership unit                                 |                         | 
|                                                 |                         | 
|Other Data:                                      |                         | 
|Cash provided by operating activities            |                         | 
|Cash used in investing activities                |                         | 
|Cash (used in) provided by financing activities  |                         | 
|Funds from Operations(1)                         |                         | 

---

Selected financial data
continues on next page.

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Table of Contents

|                              | Year Ended December 31, | 
|----------------------------- | ----------------------- | 
|
|Balance Sheet Data:           |                         | 
|Net investment in real estate |                         | 
|Total assets                  |                         | 
|Total indebtedness            |                         | 
|Other liabilities             |                         | 
|Total Partners' Capital       |                         | 

---

|(1) |  | We believe that funds from operations, or FFO, is a useful supplemental measure
    of our operating performance. We compute FFO in accordance with standards
    established by the White Paper on FFO approved by the Board of Governors of the
    National Association of Real Estate Investment Trusts, or NARIET, in April 2002.
    The white paper defines FFO as net income or loss computed in accordance with
    generally accepted accounting principles, or GAAP, excluding extraordinary
    items, as defined by GAAP, and gains and losses from sales of depreciable
    operating property plus real estate-related depreciation and amortization and
    after adjustments for unconsolidated partnerships and joint ventures.
We
believe that FFO, by excluding depreciation costs, the gains or losses from the sale of
operating real estate properties and extraordinary items as defined by GAAP, provides an
additional perspective on our operating results. However, because these items have real
economic effect, FFO is a limited measure of performance.
FFO
captures trends in occupancy rates, rental rates and operating costs. FFO excludes
depreciation and amortization costs and it does not capture the changes in value in our
properties that result from use or changes in market conditions or the level of capital
expenditures and leasing costs necessary to maintain the operating performance of our
properties, all of which are significant economic costs. Therefore, its ability to measure
performance is limited.
Because
FFO excludes significant economic components of net income determined in accordance with
GAAP, FFO should be used as an adjunct to net income and not as an alternative to net
income. FFO should also not be used as an indicator of our financial performance, or as a
substitute for cash flow from operating activities determined in accordance with GAAP or
as a measure of our liquidity. FFO is not by itself indicative of funds available to fund
our cash needs, including our ability to pay dividends or service our debt. Therefore, FFO
only provides investors with an additional performance measure that when combined with
measures computed in accordance with GAAP such as net income, cash flow from operating
activities, investing activities and financing activities provides investors with an
indication of our ability to service debt and to fund acquisitions and other expenditures.
FFO
is used by investors to compare our performance with other real estate companies. Other
real estate investment companies may use different methodologies for calculating FFO and,
accordingly, our FFO may not be comparable to other real estate investment companies. See
a reconciliation of FFO to Net income in Item 7 Managements Discussion and
Analysis of Financial Condition and Results of Operations of this report.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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ITEM
7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Overview

The
following discussion should be read in conjunction with Item 6, Selected Financial
Data, and our historical consolidated financial statements and related notes thereto
included elsewhere in this Form 10-K.

We
are a self-administered and self-managed real estate organization that owns, manages,
leases, develops, renovates and acquires commercial properties located in Southern
California. We are a full-service real estate organization managed by 7 senior executive
officers who have experience in the real estate industry ranging from 13 to 34 years and
who collectively have an average of 18 years of experience. We perform all property
management, construction management, accounting, finance and acquisition and disposition
activities and a majority of our leasing transactions with our staff of approximately 300
employees.

As
of December 31, 2003, Arden Realty was Southern Californias largest publicly traded
office landlord as measured by total net rentable square feet owned. As of that date, our
portfolio consisted of 130 primarily suburban office properties and 215 buildings
containing approximately 18.9 million net rentable square feet including one development
property with approximately 283,000 net rentable square feet under lease-up. As of
December 31, 2003, our operating portfolio was 90.4% occupied.

Our
primary business strategy is to actively manage our portfolio to achieve gains in rental
rates and occupancy, control operating expenses and maximize income from ancillary
operations and services. When market conditions permit, we may also selectively develop or
acquire new properties that add value and fit strategically into our portfolio. We may
also sell existing properties and place the proceeds into investments that we believe will
generate higher long-term value.

Critical
Accounting Policies

Revenue Recognition

Minimum
rent, including rental abatements and contractual fixed increases attributable to
operating leases, is recognized on a straight-line basis over the term of the related
lease.

Allowance for Rents and
Other Receivables

We
periodically evaluate the collectability of amounts due from tenants and maintain an
allowance for doubtful accounts for estimated losses resulting from the inability of
tenants to make required payments under lease agreements. We also maintain an allowance
for deferred rent receivables that arises from the straight-lining of rents. We exercise
judgment in establishing these allowances and consider payment history and current credit
status in formulating these estimates. If estimates differ from actual results, this could
impact our operating results.

Commercial Properties

Our
properties are stated at depreciated cost. Write-downs to estimated fair value are
recognized whenever a propertys estimated undiscounted future cash flows are less
than its book value. We carry properties held for disposition at the lower of their
depreciated cost or fair value less cost to sell. Based on our assessment, no write-downs
to estimated fair value were necessary as of December 31, 2003 and 2002.

Property
acquisitions have been accounted for in accordance with Statement of Financial Accounting
Standards No. 141, Business Combinations since June 30, 2001, the effective
date of this pronouncement. The fair value of the real estate acquired is allocated to the
acquired tangible assets, consisting of land, building and tenant improvements, and
identified intangible assets and liabilities, consisting of the value of above-market and
below-market leases, other value of in-place leases and value of tenant relationships, if
any, based in each case on their fair values.

The
fair value of the tangible assets of an acquired property (which includes land, building
and tenant improvements) is determined by valuing the property as if it were vacant, and
the as-if-vacant value is then allocated to land, building and tenant
improvements based on managements determination of the relative fair values of these
assets. We determine the as-if-vacant fair value of a property using methods similar to
those used by independent appraisers. Factors considered by management in performing these
analyses include an estimate of carrying costs during the expected lease-up periods
considering current market conditions and costs to execute similar leases. In estimating
carrying costs, management includes estimates of lost rental revenue, real estate taxes,
insurance and other operating expenses during the expected lease-up periods based on
current market demand. We also estimate costs to execute similar leases including leasing
commissions, concessions, legal and other related costs.

In
allocating the fair value of the identified intangible assets and liabilities of an
acquired property, above-market and below-market in-place lease values are recorded based
on the present value (using an interest rate which reflects the risks associated with the

23

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leases acquired) of the difference between (i) the contractual amounts to be paid pursuant
to the in-place leases and (ii) managements estimate of fair market lease rates for
the corresponding in-place leases, measured over a period equal to the remaining
non-cancelable term of the lease. The capitalized above-market and below-market lease
values are amortized into rental income over the remaining non-cancelable terms of the
respective leases.

The
aggregate value of other acquired intangible assets, consisting of in-place leases and
tenant relationships, if any, is measured by the excess of (i) the purchase price paid for
a property after adjusting existing in-place leases to market rental rates over (ii) the
estimated fair value of the property as if vacant, determined as set forth above. This
aggregate value is allocated between in-place lease values and tenant relationships based
on managements evaluation of the specific characteristics of each tenants
lease. Should acquisitions of properties result in allocating material amounts to the
value of tenant relationships, an amount would be separately allocated and amortized over
the estimated life of the relationship.

Costs
related to the acquisition, development, construction and improvement of properties are
capitalized. Interest, real estate taxes, insurance and other development related costs
incurred during construction periods are capitalized and depreciated on the same basis as
the related asset.

Repair
and maintenance costs are charged to expenses as incurred and significant replacements and
betterments are capitalized. Repairs and maintenance costs include all costs that do not
extend the useful life of a an asset or increase its operating efficiency. Significant
replacements and betterments represent costs that extend an assets useful life or
increase its operating efficiency.

Depreciation

Depreciation
is calculated under the straight-line method using depreciable lives of ten to forty seven
years for building and building improvements and five-year lives for furniture, fixtures
and equipment. Amortization of tenant improvements is calculated using the straight-line
method over the term of the related lease.

The
carrying amount of all commercial properties is evaluated periodically to determine if
adjustment to the useful life is warranted. During 2001, the useful life of certain
building and building improvements were adjusted to more accurately reflect their
estimated usefulness. The effect of this change in estimate in 2001 was an increase to net
income of approximately $10.1 million or $0.16 per common share. This change in estimate
did not have an impact on our 2001 cash flows.

Costs
associated with leasing properties are capitalized and amortized to expense on a
straight-line basis over the related lease term.

Qualification as a REIT

Since
its taxable year ended December 31, 1996, Arden Realty has been organized and operated,
and intends to continue to operate, so as to qualify for taxation as a REIT under the
Internal Revenue Code. Arden Realtys qualification and taxation as a REIT depends on
its ability to meet, through actual annual operating results, asset diversification,
distribution levels and diversity of stock ownership, numerous requirements established
under highly technical and complex Internal Revenue Code provisions subject to
interpretation.

If
Arden Realty, our sole general partner, failed to qualify as a REIT in any taxable year,
it would be subject to federal income tax, including any applicable alternative minimum
tax, on its taxable income at regular corporate rates. Moreover, unless entitled to relief
under specific statutory provisions, Arden Realty also would be disqualified as a REIT for
the four taxable years following the year during which qualification was lost. For
additional information see Risk Factors  We may suffer adverse tax
consequences and be unable to attract capital if Arden Realty fails to qualify as a
REIT, and We intend to qualify as a partnership, but we cannot guarantee that
we will qualify, elsewhere in this Form 10-K.

Off-Balance Sheet
Arrangements

There
are no off-balance sheet transactions, arrangements or obligations (including contingent
obligations) that have, or are reasonably likely to have a current or future material
effect on the Partnerships financial condition, changes in the financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources.

24

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Results Of Operations

Our
financial position and operating results are primarily comprised of our portfolio of
properties and income derived from those properties. Therefore, the comparability of
financial data from period to period will be affected by the timing of significant
property development, acquisitions and dispositions.

Comparison of the year ended December 31, 2003 to the year ended December 31, 2002
(in thousands, except number of properties and percentages)

|                                              | Year Ended December 31, |  |   |        
|--------------------------------------------- | ----------------------- |  | - | -------
|
|Revenue from rental operations:               |                         |  |   |        
|Scheduled cash rents                          |                         |  | $ | 356,804
|Straight-line rents                           |                         |  |   | 986    
|Tenant reimbursements                         |                         |  |   | 24,683 
|Parking, net of expense                       |                         |  |   | 22,084 
|Other rental operations                       |                         |  |   | 8,978  
|                                              |                         |  |   |        
|Total revenue from rental operations          |                         |  |   | 413,535
|                                              |                         |  |   |        
|Property expenses:                            |                         |  |   |        
|Repairs and maintenance                       |                         |  |   | 42,859 
|Utilities                                     |                         |  |   | 34,253 
|Real estate taxes                             |                         |  |   | 29,488 
|Insurance                                     |                         |  |   | 8,431  
|Ground rent                                   |                         |  |   | 961    
|Administrative                                |                         |  |   | 16,761 
|                                              |                         |  |   |        
|Total property expenses                       |                         |  |   | 132,753
|                                              |                         |  |   |        
|Property operating results(2)                 |                         |  |   | 280,782
|General and administrative                    |                         |  |   | 16,409 
|Interest                                      |                         |  |   | 93,767 
|Depreciation and amortization                 |                         |  |   | 118,114
|Interest and other income                     |                         |  |   | (734   
|                                              |                         |  |   |        
|Income from continuing operations before gain |                         |  |   |        
|on sale of properties and minority interest   |                         |  | $ | 53,226 
|                                              |                         |  |   |        
|Discontinued operations(3)                    |                         |  | $ | 6,934  
|                                              |                         |  |   |        
|Other Data:                                   |                         |  |   |        
|Number of properties:                         |                         |  |   |        
|Acquired during period                        |                         |  |   | 1      
|Completed and placed in service during period |                         |  |   | --     
|Disposed of during period                     |                         |  |   | (8     
|Owned at end of period                        |                         |  |   | 129    
|Net rentable square feet:                     |                         |  |   |        
|Acquired during period                        |                         |  |   | 101    
|Completed and placed in service during period |                         |  |   | --     
|Disposed of during period                     |                         |  |   | 598    
|Owned at end of period                        |                         |  |   | 18,636 

---

|(1) |  | Variances for Revenue from Rental Operations and Property
Operating Expenses are discussed as part of Properties Owned
for all of 2002 and 2003  below.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Property Operating Results are discussed as part of Variances
for Revenue from Rental Operations and Property Operating Expenses below.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Discontinued operations for 2002 and 2003 are discussed
below.
|--- |  | --------------------------------------------------------------

|(4) |  | Excludes one development property containing approximately
283,000 net rentable square feet currently under lease-up.
|--- |  | ---------------------------------------------------------------------------------------------------------------------

25

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Table of Contents

General
and administrative expenses increased approximately $4.6 million, or 39%, in 2003 as
compared to 2002. This increase was primarily due to employee compensation costs,
including employee separation costs in the current year and non-cash compensation costs
associated with annual restricted stock grants issued in 2003 as well as higher corporate
governance costs in 2003.

Interest
expense increased approximately $5.3 million, or 6%, in 2003 as compared to 2002. This
increase was primarily due to an increase in borrowings in the last half of 2002 for
property acquisitions, lower interest capitalized in 2003 and costs associated with
interest rate hedges entered into at the end of 2002 to fix approximately $175 million of
floating rate debt. Capitalized interest in 2003 was lower as we ceased capitalizing
interest on our 6100 Center Drive property in May 2003.

Depreciation
and amortization expense increased by approximately $11.9 million, or 11%, in 2003 as
compared to 2002. The increase was primarily due to depreciation related to five
properties acquired in August 2002, the placement in service of our 6080 Center Drive
development property in the fourth quarter of 2002 and depreciation related to capital
expenditures, tenant improvements and leasing commissions placed in service in 2002 and
2003.

Interest
and other income decreased by approximately $1.8 million, or 71%, in 2003 as compared to
2002, primarily due to the repayment by the borrower of a $13.7 million mortgage note
receivable in the fourth quarter of 2002.

26

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Table of Contents

Variances for Revenue
from Rental Operations and Property Operating Expenses

The
decrease in revenue from rental operations and increase in property operating expenses in
2003 as compared to 2002 was partially due to a 1.1% reduction in the average occupancy
and the timing of lease termination settlements and other non-recurring items in our
portfolio of 122 properties that we owned as part of continuing operations for all of 2002
and 2003.

Following
is a summary of the increase in revenue from rental operations and property operating
expenses that relates to the 18 properties that were either sold, acquired or placed in
service after January 1, 2002, and for the 122 non-development properties we owned for all
of 2002 and 2003 (in thousands, except number of properties).

|                                | Total Variance(1) |  | Properties Sold,
Acquired or
Placed in Service
after January 1, 2002 |        | Non-Development
Properties Owned
for all of
2002 and 2003(2) |  
|------------------------------- | ----------------- |  | -------------------------------------------------------------------- | ------ | ------------------------------------------------------------ | -
|Revenue from Rental Operations: |                   |  |                                                                      |        |                                                              |  
|Scheduled cash rents            |                   |  | $                                                                    | 17,512 |                                                              | $
|Straight-line rents             |                   |  |                                                                      | (3,228 | )                                                            |  
|Tenant reimbursements           |                   |  |                                                                      | 2,548  |                                                              |  
|Parking, net of expense         |                   |  |                                                                      | 1,279  |                                                              |  
|Other rental operations         |                   |  |                                                                      | 937    |                                                              |  
|                                |                   |  |                                                                      |        |                                                              |  
|                                |                   |  | $                                                                    | 19,048 |                                                              | $
|                                |                   |  |                                                                      |        |                                                              |  
|Property Expenses:              |                   |  |                                                                      |        |                                                              |  
|Repairs and maintenance         |                   |  |                                                                      | 5,609  |                                                              |  
|Utilities                       |                   |  |                                                                      | 44     |                                                              |  
|Real estate taxes               |                   |  |                                                                      | 872    |                                                              |  
|Insurance                       |                   |  |                                                                      | 644    |                                                              |  
|Ground rent                     |                   |  |                                                                      | 66     |                                                              |  
|Administrative                  |                   |  |                                                                      | 1,868  |                                                              |  
|                                |                   |  |                                                                      |        |                                                              |  
|                                |                   |  | $                                                                    | 9,103  |                                                              | $
|                                |                   |  |                                                                      |        |                                                              |  
|Other Data:                     |                   |  |                                                                      |        |                                                              |  
|Number of properties            |                   |  |                                                                      |        |                                                              |  
|Net rentable square feet        |                   |  |                                                                      |        |                                                              |  

---

|(1) |  | The components outlined above comprise our Property Operating Results. Property
      Operating Results is a non-GAAP measure of performance. Property Operating
      Results is used by investors and our management to evaluate and compare the
      performance of our office properties and to determine trends in earnings.
      Property Operating Results is also employed by investors as one of the
      components used to estimate the value of our properties. Property Operating
      Results is used for the purposes noted above because it is not affected by (1)
      the cost of funds of the property owner, (2) the impact of depreciation and
      amortization expense as well as gains or losses from the sale of operating real
      estate assets that are included in net income computed in accordance with
      Generally Accepted Accounting Principles, or GAAP or (3) general and
      administrative expenses and other specific costs such as permanent impairments
      to carrying costs. The cost of funds is eliminated from net income because it is
      specific to the particular financing capabilities and constraints of the owner.
      The cost of funds is also eliminated because it is dependent on historical
      interest rates and other costs of capital as well as past decisions made by us
      regarding the appropriate mix of capital, which may have changed or may change
      in the future. Depreciation and amortization expenses as well as gains or losses
      from the sale of operating real estate assets are eliminated because they may
      not accurately represent the actual change in value in our office properties
      that result from use of the properties or changes in market conditions. While
      certain aspects of real property do decline in value over time in a manner that
      is reasonably captured by depreciation and amortization, the value of the
      properties as a whole have historically increased or decreased in value as a
      result of changes in overall economic conditions as well as the actual use of
      the property or the passage of time. Gains and losses from the sale of real
      property vary from property to property and are affected by market conditions at
      the time of sale which will usually change from period to period. These gains
      and losses can create distortions when comparing one period to another or when
      comparing our operating results to the operating results of other real estate
      companies that have not made similarly timed purchases and subsequent sales.
      General and administrative expenses and other owner specific costs such as
      impairment losses are eliminated because these costs are also in large part
      specific to the ownership structure and timing of purchases of the owner. We
      believe that eliminating these costs from net income is useful because the
      resulting measure captures the actual revenue generated and actual expenses
      incurred in operating our office properties as well as trends in occupancy
      rates, rental rates and operating costs.
However,
the usefulness of Property Operating Results is limited because it excludes general and
administrative costs, interest expense, interest income, depreciation and amortization
expense and gains or losses from the sale of properties, changes in value in our real
estate properties that result from use or permanent impairment to carrying costs as
stipulated by GAAP, the level of capital expenditures and leasing costs necessary to
maintain the operating performance of our properties, all of which are significant
economic costs. Property Operating Results may fail to capture significant trends in these
components of net income which further limits its usefulness.
Property
Operating Results is a measure of the operating performance of our office properties but
does not measure our performance as a whole. Property Operating Results is therefore not a
substitute for net income as computed in accordance with GAAP. This measure should be
analyzed in conjunction with net income computed in accordance with GAAP and discussions
elsewhere in Managements Discussion and Analysis of Financial Condition and
Results of Operations regarding the components of net income that are eliminated in
the calculation of Property Operating Results. Other companies may use different methods
for calculating Property Operating Results or similarly entitled measures and,
accordingly, our Property Operating Results may not be comparable to similarly entitled
measures reported by other companies that do not define the measure exactly as we do.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

27

---

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| |  | The
following is a reconciliation of Property Operating Results to net income computed in
accordance with GAAP (in thousands):
| |  | ------------------------------------------------------------------------------------------------------------------------------

|                                          | Year Ended December 31, | 
|----------------------------------------- | ----------------------- | 
|
|Net Income                                |                         | 
|Add:                                      |                         | 
|General and administrative expense        |                         | 
|Interest expense                          |                         | 
|Depreciation and amortization             |                         | 
|                                          |                         | 
|Minority interest                         |                         | 
|Less:                                     |                         | 
|Interest and other income                 |                         | 
|Gain on sale of discontinued properties . |                         | 
|Discontinued operations                   |                         | 
|Gain on sale of operating properties      |                         | 
|                                          |                         | 
|Property Operating Results                |                         | 
|                                          |                         | 

|(2) |  | The operating results for properties included in continuing and discontinued operations that
were owned for all of 2002 and 2003 are discussed below.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------

Discontinued Operations

Financial
Accounting Standards No. 144, (SFAS 144), requires, among other things, that the operating
results of real estate properties classified as held for disposition subsequent to January
1, 2002 be included in discontinued operations in the statements of income for all periods
presented. The table below summarizes the operating results of our two properties
classified as held for disposition as of December 31, 2003 as well as eight properties
sold during 2003.

The
results of operations for the two properties held for disposition as of December 31, 2003
and eight properties sold during 2003 for the years ended December 31, 2003 and 2002 are
as follows (in thousands, except number of properties):

|                              | Year Ended December 31, |  |   |       
|----------------------------- | ----------------------- |  | - | ------
|
|Discontinued Operations:      |                         |  |   |       
|Revenues                      |                         |  | $ | 14,108
|Property operating expenses   |                         |  |   | 4,964 
|                              |                         |  |   |       
|                              |                         |  |   | 9,144 
|Depreciation and amortization |                         |  |   | 2,210 
|                              |                         |  |   |       
|Discontinued operations       |                         |  | $ | 6,934 
|                              |                         |  |   |       
|Other Data:                   |                         |  |   |       
|Number of properties          |                         |  |   | 10    
|Net rentable square feet      |                         |  |   | 893   

The variances in operating results
for the two properties held for disposition as of December 31, 2003 included in
discontinued operations above and which were owned for all of 2002 and 2003 are discussed
as part of Properties Owned for all of 2002 and 2003 immediately below.

28

---

Table of Contents

Properties Owned for all
of 2002 and 2003

Following
is a comparison of property operating data for the 122 non-development properties we owned
for all of 2002 and 2003 reported in continuing and discontinued operations (in thousands,
except number of properties and percentages):

|                               | Year Ended December 31, |  |   |        
|------------------------------ | ----------------------- |  | - | -------
|
|Revenue from rental operations |                         |  | $ | 391,960
|Property expenses              |                         |  |   | 126,041
|                               |                         |  |   |        
|                               |                         |  | $ | 265,919
|                               |                         |  |   |        
|Straight-line rents            |                         |  | $ | 721    
|                               |                         |  |   |        
|Number of properties           |                         |  |   | 122    
|Average occupancy              |                         |  |   | 90.2   
|Net rentable square feet       |                         |  |   | 17,444 

Revenue
from rental operations for these properties increased by approximately $5.1 million, or
1.3%, in 2003 as compared to 2002. The increase was due to an approximate $6.0 million
increase in scheduled cash rents, a $2.3 million increase in tenant reimbursements and a
$923,000 increase in parking income, which were partially offset by an approximate $3.6
million decrease in straight line rents and a $459,000 decrease in other rental
operations. The increase in scheduled cash rents was primarily attributable to sheduled
rent bumps in existing leases that were partially offset by the 1.1% decrease in average
occupancy for these properties. Tenant reimbursements increased primarily due to recovery
billings for higher operating expenses in 2003 as discussed below. Parking income
increased primarily due to an increase in demand for monthly parking in 2003 in some of
our buildings. Straight-line rents decreased primarily due to the decline in occupancy and
the scheduled reversal of straight-line rents for certain older leases. Other rental
operations decreased primarily due to decreases in lease termination settlements in 2003.

Property
expenses for these properties increased by approximately $4.9 million, or 4.1%, in 2003 as
compared to 2002. The increase was primarily due to an approximate $3.6 million increase
in repairs and maintenance, a $1.6 million increase in property administrative expenses
and a $384,000 increase in insurance expense, partially offset by a $783,000 decrease in
real estate taxes. The increase in repairs and maintenance expense was primarily due to
higher contractual costs for janitorial and other contract services as well as the timing
of certain projects. The increase in property administrative expense was primarily due to
higher employee compensation costs, higher property legal expenses and costs associated
with training programs implemented in 2003. The increase in insurance expense was due to
increases in industry-wide rates and premiums related to a $100 million terrorism
insurance policy entered into in the second quarter of 2002. Real estate taxes decreased
due to the timing of final reassessments of some properties in 2002.

29

---

Table of Contents

Comparison
of the year ended December 31, 2002 to the year ended December 31, 2001
(in thousands, except number of properties and percentages)

|                                                      | Year Ended December 31, |  |   |        
|----------------------------------------------------- | ----------------------- |  | - | -------
|
|Revenue from rental operations:                       |                         |  |   |        
|Scheduled cash rents                                  |                         |  | $ | 339,292
|Straight-line rents                                   |                         |  |   | 4,214  
|Tenant reimbursements                                 |                         |  |   | 22,135 
|Parking, net of expense                               |                         |  |   | 20,805 
|Other rental operations                               |                         |  |   | 8,041  
|                                                      |                         |  |   |        
|Total revenue from rental operations                  |                         |  |   | 394,487
|                                                      |                         |  |   |        
|Property expenses:                                    |                         |  |   |        
|Repairs and maintenance                               |                         |  |   | 37,250 
|Utilities                                             |                         |  |   | 34,209 
|Real estate taxes                                     |                         |  |   | 28,616 
|Insurance                                             |                         |  |   | 7,787  
|Ground rent                                           |                         |  |   | 895    
|Administrative                                        |                         |  |   | 14,893 
|                                                      |                         |  |   |        
|Total property expenses                               |                         |  |   | 123,650
|                                                      |                         |  |   |        
|Property operating results(2)                         |                         |  |   | 270,837
|General and administrative                            |                         |  |   | 11,804 
|Interest                                              |                         |  |   | 88,516 
|Depreciation and amortization                         |                         |  |   | 106,182
|Interest and other income                             |                         |  |   | (2,542 
|                                                      |                         |  |   |        
|Income from continuing operations before gain on sale |                         |  |   |        
|of properties and minority interest                   |                         |  | $ | 66,877 
|                                                      |                         |  |   |        
|Discontinued operations(3)                            |                         |  | $ | 8,929  
|                                                      |                         |  |   |        
|Other Data:                                           |                         |  |   |        
|Number of properties:                                 |                         |  |   |        
|Acquired during period                                |                         |  |   | 5      
|Completed and placed in service during period         |                         |  |   | 1      
|Disposed of during period                             |                         |  |   | (3     
|Owned at end of period                                |                         |  |   | 136    
|Net rentable square feet:                             |                         |  |   |        
|Acquired during period                                |                         |  |   | 803    
|Completed and placed in service during period         |                         |  |   | 287    
|Disposed of during period                             |                         |  |   | (205   
|Owned at end of period                                |                         |  |   | 19,132 

---

|(1) |  | Variances for Revenues from Rental Operations and Property Operating
Expenses      are discussed as part of Properties Owned for all of 2001 and 2002     below.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Property Operating Results are discussed as part of Variance for
Revenue      from Rental Operations and Property Operating Expenses below.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Discontinued operations for 2001 and 2002 are discussed below.
|--- |  | --------------------------------------------------------------

|(4) |  | Excludes one development property containing approximately 283,000 net
rentable      square feet under lease-up.
|--- |  | ----------------------------------------------------------------------------------------------------------------

30

---

Table of Contents

General
and administrative expenses increased approximately $721,000, or 7%, in 2002 as compared
to 2001. This increase was primarily due to employee separation costs and higher external
legal and accounting costs in 2002.

Interest
expense increased approximately $1.9 million, or 2%, in 2002 as compared to 2001. This
increase was primarily due to an increase in borrowings in 2002 for property acquisitions
and lower interest capitalized in 2002. Capitalized interest in 2002 was lower as we
ceased capitalizing interest on our 6080 Center Drive in May 2002. The increase in
interest expense was partially offset by lower effective interest rates in 2002.

Depreciation
and amortization expense increased by approximately $8.0 million, or 8%, in 2002 as
compared to 2001. The increase was primarily due to depreciation related to two newly
developed properties placed in service since the fourth quarter of 2001, five properties
acquired during 2002 and depreciation expense recorded in 2002 related to properties
previously held for sale in 2001 for which no depreciation expense was recorded in 2001
while classified as held for sale.

Interest
and other income decreased by approximately $399,000, or 14%, in 2002 as compared to 2001,
primarily due to lower interest income earned in 2002 from our restricted cash balances
required by mortgage loans on lower effective interest rates in 2002. The decrease in
interest income was partially offset by the early repayment of our mortgage notes
receivable in October 2002 which resulted in approximately $375,000 higher net interest
income from these notes.

Variances for Revenue
from Rental Operations and Property Operating Expenses

The
increase in revenue from rental operations and property operating expenses in 2002 as
compared to 2001 was primarily due to a 2.2% reduction in the average occupancy and the
timing of lease termination settlements and other non-recurring items in our portfolio of
128 properties that we owned as part of continuing operations for all of 2002.

Following
is a summary of the increase in revenue from rental operations and property operating
expenses that relates to the 20 properties that were either sold, acquired or placed in
service after January 1, 2001 and for the 128 non-development properties we owned as part
of continuing operations for all of 2001 and 2002 (in thousands, except number of
properties).

|                                | Total Variance(1) |  | Properties Sold,
Acquired or
Placed in Service
after January 1, 2001 |        | Non-Development
Properties Owned
for all of
2001 and 2002(2) |  
|------------------------------- | ----------------- |  | -------------------------------------------------------------------- | ------ | ------------------------------------------------------------ | -
|Revenue from Rental Operations: |                   |  |                                                                      |        |                                                              |  
|Scheduled cash rents            |                   |  | $                                                                    | 4,090  |                                                              | $
|Straight-line rents             |                   |  |                                                                      | (4,566 | )                                                            |  
|Tenant reimbursements           |                   |  |                                                                      | 420    |                                                              |  
|Parking, net of expense         |                   |  |                                                                      | (443   | )                                                            |  
|Other rental operations         |                   |  |                                                                      | (8,790 | )                                                            |  
|                                |                   |  |                                                                      |        |                                                              |  
|                                |                   |  | $                                                                    | (9,289 | )                                                            | $
|                                |                   |  |                                                                      |        |                                                              |  
|Property Expenses:              |                   |  |                                                                      |        |                                                              |  
|Repairs and maintenance         |                   |  |                                                                      | 2,311  |                                                              |  
|Utilities                       |                   |  |                                                                      | 1,691  |                                                              |  
|Real estate taxes               |                   |  |                                                                      | 287    |                                                              |  
|Insurance                       |                   |  |                                                                      | 2,295  |                                                              |  
|Ground rent                     |                   |  |                                                                      | (989   | )                                                            |  
|Administrative                  |                   |  |                                                                      | 890    |                                                              |  
|                                |                   |  |                                                                      |        |                                                              |  
|                                |                   |  | $                                                                    | 6,485  |                                                              | $
|                                |                   |  |                                                                      |        |                                                              |  
|Other Data:                     |                   |  |                                                                      |        |                                                              |  
|Number of properties            |                   |  |                                                                      |        |                                                              |  
|Net rentable square feet        |                   |  |                                                                      |        |                                                              |  

---

|(1) |  | The components outlined above comprise our Property Operating Results. Property
     Operating Results is a non-GAAP measure of performance. Property Operating
     Results is used by investors and our management to evaluate and compare the
     performance of our office properties and to determine trends in earnings.
     Property Operating Results is also employed by investors as one of the
     components used to estimate the value of our properties. Property Operating
     Results is used for the purposes noted above because it is not affected by (1)
     the cost of funds of the property owner, (2) the impact of depreciation and
     amortization expense as well as gains or losses from the sale of operating real
     estate assets that are included in net income computed in accordance with
     Generally Accepted Accounting Principles, or GAAP or (3) general and
     administrative expenses and other specific costs such as permanent impairments
     to carrying costs. The cost of funds is eliminated from net income because it is
     specific to the particular financing capabilities and constraints of the owner.
     The cost of funds is also eliminated because it is dependent on historical
     interest rates and other costs of capital as well as past decisions made by us
     regarding the appropriate mix of capital, which may have changed or may change
     in the future. Depreciation and amortization expenses as well as gains or losses
     from the sale of operating real estate assets are eliminated because they may
     not accurately represent the actual change in value in our office properties
     that result from use of the properties or changes in market conditions. While
     certain aspects of real property do decline in value over time in a manner that
     is reasonably
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

31

---

Table of Contents

| |  | captured by depreciation and amortization, the value of the
     properties as a whole have historically increased or decreased in value as a
     result of changes in overall economic conditions as well as the actual use of
     the property or the passage of time. Gains and losses from the sale of real
     property vary from property to property and are affected by market conditions at
     the time of sale which will usually change from period to period. These gains
     and losses can create distortions when comparing one period to another or when
     comparing our operating results to the operating results of other real estate
     companies that have not made similarly timed purchases and subsequent sales.
     General and administrative expenses and other owner specific costs such as
     impairment losses are eliminated because these costs are also in large part
     specific to the ownership structure and timing of purchases of the owner. We
     believe that eliminating these costs from net income is useful because the
     resulting measure captures the actual revenue generated and actual expenses
     incurred in operating our office properties as well as trends in occupancy
     rates, rental rates and operating costs.
However,
the usefulness of Property Operating Results is limited because it excludes general and
administrative costs, interest expense, interest income, depreciation and amortization
expense and gains or losses from the sale of properties, changes in value in our real
estate properties that result from use or permanent impairment to carrying costs as
stipulated by GAAP, the level of capital expenditures and leasing costs necessary to
maintain the operating performance of our properties, all of which are significant
economic costs. Property Operating Results may fail to capture significant trends in these
components of net income which further limits its usefulness.
Property
Operating Results is a measure of the operating performance of our office properties but
does not measure our performance as a whole. Property Operating Results is therefore not a
substitute for net income as computed in accordance with GAAP. This measure should be
analyzed in conjunction with net income computed in accordance with GAAP and discussions
elsewhere in Managements Discussion and Analysis of Financial Condition and
Results of Operations regarding the components of net income that are eliminated in
the calculation of Property Operating Results. Other companies may use different methods
for calculating Property Operating Results or similarly entitled measures and,
accordingly, our Property Operating Results may not be comparable to similarly entitled
measures reported by other companies that do not define the measure exactly as we do.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The
following is a reconciliation of Property Operating Results to net income computed in
accordance with GAAP (in thousands):
| |  | ------------------------------------------------------------------------------------------------------------------------------

|                                                  | Year Ended December 31, | 
|------------------------------------------------- | ----------------------- | 
|
|Net Income                                        |                         | 
|Add:                                              |                         | 
|General and administrative expense                |                         | 
|Interest expense                                  |                         | 
|Depreciation and amortization                     |                         | 
|Minority interest                                 |                         | 
|Less:                                             |                         | 
|Interest and other income                         |                         | 
|Discontinued operations, net of minority interest |                         | 
|Gain on sale of operating properties              |                         | 
|                                                  |                         | 
|Property Operating Results                        |                         | 
|                                                  |                         | 

|(2) |  | The operating results for properties included in continuing and discontinued
                    operations that were owned for all of 2001 and 2002 are discussed below.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Discontinued Operations

SFAS
144, effective January 1, 2002, requires, among other things, that the operating results
of real estate properties classified as held for disposition subsequent to January 1, 2002
be included in discontinued operations in the statements of income for all periods
presented. The table below summarizes the operating results of two properties classified
as held for disposition as of December 31, 2003 as well as eight properties sold during
2003.

The
results of operations for the two properties classified as held for disposition as of
December 31, 2003 and eight properties sold during 2003 for the years ended December 31,
2002 and 2001 are as follows (in thousands, except number of properties):

|                              | Year Ended December 31, |  |   |       
|----------------------------- | ----------------------- |  | - | ------
|
|Discontinued Operations:      |                         |  |   |       
|Revenues                      |                         |  | $ | 21,732
|Property operating expenses   |                         |  |   | 7,568 
|                              |                         |  |   |       
|                              |                         |  |   | 14,164
|Depreciation and amortization |                         |  |   | 5,235 
|Interest expense              |                         |  |   | --    
|                              |                         |  |   |       
|Discontinued operations       |                         |  | $ | 8,929 
|                              |                         |  |   |       
|Other Data:                   |                         |  |   |       
|Number of properties          |                         |  |   | 10    
|Net rentable square feet      |                         |  |   | 893   

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The variances in operating results
for the two properties held for disposition as of December 31, 2003 included in
discontinued operations above and which were owned for all of 2001 and 2002 are discussed
as part of Properties Owned for all of 2001 and 2002 immediately below.

Properties Owned for all
of 2001 and 2002

Following
is a comparison of property operating data for the 129 non-renovation/non-development
properties we owned for all of 2001 and 2002 reported in continuing and discontinued
operations (in thousands, except number of properties and percentages):

|                               | Year Ended December 31, |  |   |        
|------------------------------ | ----------------------- |  | - | -------
|
|Revenue from rental operations |                         |  | $ | 391,893
|Property expenses              |                         |  |   | 123,700
|                               |                         |  |   |        
|                               |                         |  |   | 268,193
|                               |                         |  |   |        
|Straight-line rents            |                         |  |   | 3,412  
|                               |                         |  |   |        
|Number of properties           |                         |  |   | 129    
|Average occupancy              |                         |  |   | 91.1   
|Net rentable square feet       |                         |  |   | 17,880 

Revenue
from rental operations for these properties decreased by approximately $9.7 million, or
2%, in 2002 as compared to 2001. The decrease was due to a $6.8 million decrease in
revenue from other rental operations, a $4.7 million decrease in straight-line rents and a
$390,000 decrease in parking income that was partially offset by an approximate $1.7
million increase in scheduled cash rents and a $471,000 increase in tenant reimbursements.
The decrease in revenue from other rental operations was primarily attributable to
decreases in lease termination settlements in 2002, while straight-line rents decreased
primarily due to the turning over of straight-line rents for older leases. Parking income
decreased due to the 2.2% decline in average occupancy. Scheduled cash rents increased
primarily due to scheduled rent increases and rental rate growth attained on new and
renewed leases which were partially offset by the decline in average occupancy. Tenant
reimbursements increased primarily due to recovery billings for higher operating expenses
in 2002 as discussed below.

Property
expenses for these properties increased by approximately $4.9 million, or 4%, in 2002 as
compared to 2001. The increase was primarily due to a $2.3 million increase in insurance
expense in 2002, a $1.7 million increase in repairs and maintenance and a $1.6 million
increase in utility expenses which were partially offset by a $990,000 decrease in ground
rent expense. The increase in insurance expense was due to increases in industry-wide
rates in 2002 and premiums related to a $100 million terrorism insurance policy entered
into in the second quarter of 2002. Repairs and maintenance expense increased in 2002
primarily due to higher janitorial costs while utility costs increased due to rate
increases enacted in May 2001. Ground rent expense decreased in 2002 due to lower
operating income from one of our properties with a participating ground lease.

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Liquidity and Capital Resources

Cash
Flows

Cash
provided by operating activities decreased by approximately $18.4 million to $181.7
million in 2003 as compared to $200.1 million in 2002. This decrease was primarily due to
the loss of operating cash flows on eleven properties sold since the beginning of 2002 as
part of our capital recycling program, which have been only partially offset by the
increased cash flows on five properties acquired in the third quarter of 2002 and cash
flows for one development property placed in service subsequent to January 1, 2002. In
addition, in 2002, as a result of collection efforts implemented, we reduced our
outstanding trade receivables by approximately $6.7 million.

Cash
used in investing activities decreased by approximately $192.6 million to $20.4 million in
2003 as compared to $213.0 million in 2002. The decrease was primarily due to the
acquisition of five properties for approximately $135 million in the third quarter of 2002
and the sale of eight properties in 2003 for approximately $91.0 million in net proceeds.
In 2002, we sold three properties for approximately $24.3 million in net proceeds.

Cash
used in financing activities increased by approximately $140.6 million to an outflow of
$160.7 million in 2003 as compared to an outflow of $20.1 million in 2002. This increase
was primarily due to the proceeds from our term loan in the third quarter of 2002 and
higher net repayments in 2003 on our unsecured lines of credit from proceeds generated
from our capital recycling program.

Capital
Commitments

As
of December 31, 2003, we had approximately $9.1 million outstanding in capital commitments
related to tenant improvements, development and property-related capital expenditures. We
expect to fund short term capital commitments through cash flow generated by operating
activities, proceeds from asset sales or our unsecured lines of credit.

Available
Borrowings, Cash Balances and Capital Resources

We
have an unsecured line of credit with a total commitment of $20 million from City National
Bank. This line of credit accrues interest at LIBOR +1.00% or the City National Bank Prime
Rate less 1.875% and is scheduled to mature on August 1, 2004. Proceeds from this line of
credit are used, among other things, to provide funds for tenant improvements and capital
expenditures and provide for working capital and other corporate purposes. As of December
31, 2003, there was $3.0 million outstanding on this line of credit and $17.0 million was
available for additional borrowings.

We
also have an unsecured line of credit with a group of banks led by Wells Fargo. The line
of credit provides for borrowings up to $310 million with an option to increase the amount
to $350 million and bears interest at a rate ranging between LIBOR + 0.80% and LIBOR +
1.25% (including an annual facility fee ranging from 0.15% to 0.40% based on the aggregate
amount of the line of credit) depending on our unsecured debt rating. This new line of
credit amends the previous $275 million unsecured line of credit that was scheduled to
mature in April 2003. This line of credit matures in April 2006. In addition, as long as
we maintain an unsecured debt rating of BBB-/Baa3 or better, the agreement contains a
competitive bid option, whereby the lenders may bid on the interest rate to be charged for
up to $150 million of the unsecured line of credit. We also have the option to convert the
interest rate on this line of credit to the higher of Wells Fargos prime rate or the
Federal Funds rate plus 0.5%. As of December 31, 2003, $158.0 million was outstanding on
this line of credit and $152.0 million was available for additional borrowings.

As
of December 31, 2003, we had approximately $24.4 million in cash and cash equivalents,
including $19.7 million in restricted cash. Restricted cash consisted of $13.7 million in
interest bearing cash deposits required by five of our mortgage loans payable and $6.0
million in cash impound accounts for real estate taxes and insurance as required by
several of our mortgage loans payable.

We
have entered into $150 million of forward-starting hedges during 2003 to effectively fix
the 10-year Treasury rate at an average rate of approximately 4.1% for borrowings that are
anticipated to occur in 2004 to refinance some of our scheduled debt maturities. The
forward-starting interest rate hedges were entered into at current market rates and,
therefore, had no initial cost.

In
October and November of 2003, we also entered into reverse interest rate hedge agreements
to float $100 million of the fixed interest rate associated with the 7.00% senior
unsecured notes due in November of 2007. Under these reverse hedges, we will receive
interest at a fixed rate of 7.00% and pay interest at a variable rate averaging the
six-month LIBOR in arrears plus 3.10%. These interest rate hedges mature at the same time
the notes are due. Including these hedges, our floating-rate debt ratio as of December 31,
2003 was approximately 16%.

34

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Table of Contents

Capital
Recycling Program

During
2003 we sold eight properties pursuant to our capital recycling program totaling
approximately 598,000 square feet for approximately $93.5 million in gross sales proceeds
as follows:

|Property                     |  | County         |  | Submarket          |  | Date ofSale       |  | PropertyType |  | SquareFeet |  | Gross SalesPrice($000s)
|---------------------------- |  | -------------- |  | ------------------ |  | ----------------- |  | ------------ |  | ---------- |  | -----------------------
|9201 Sunset                  |  | Los Angeles    |  | West Hollywood     |  | March 11, 2003    |  | Office       |  | 139,711    |  | $                      
|Centrelake Plaza             |  | San Bernardino |  | Inland Empire West |  | April 11, 2003    |  | Office       |  | 110,763    |  |                        
|Havengate Center             |  | San Bernardino |  | Inland Empire West |  | April 11, 2003    |  | Office       |  | 80,557     |  |                        
|HDS Plaza                    |  | San Bernardino |  | Inland Empire West |  | April 11, 2003    |  | Office       |  | 104,178    |  |                        
|Chicago Avenue Business Park |  | Riverside      |  | Inland Empire East |  | April 11, 2003    |  | Office       |  | 47,482     |  |                        
|Lambert Plaza                |  | Orange         |  | North County       |  | May 22, 2003      |  | Office       |  | 32,807     |  |                        
|Pennsfield Plaza             |  | Los Angeles    |  | Simi/Conejo Valley |  | November 5, 2003  |  | Office       |  | 21,202     |  |                        
|Lyons Plaza                  |  | Los Angeles    |  | Simi/Conejo Valley |  | December 11, 2003 |  | Office       |  | 61,203     |  | $                      
|                             |  |                |  |                    |  |                   |  |              |  |            |  |                        
|                             |  |                |  |                    |  |                   |  |              |  | 597,903    |  | $                      
|                             |  |                |  |                    |  |                   |  |              |  |            |  |                        

The
net proceeds from these dispositions were used to reduce the outstanding balance on our
Wells Fargo unsecured line of credit.

On
December 23, 2003, we acquired Governor Executive Centre II, a 101,433 square foot, 96%
leased, office property located in the Governor Park submarket of San Diego County for
approximately $23.4 million.

35

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Table of Contents

Debt
Summary

Following
is a summary of scheduled principal payments for our total outstanding indebtedness as of
December 31, 2003 (in thousands):

|Year       |  | Amount
|---------- |  | ------
|2004       |  |       
|2005       |  |       
|2006       |  |       
|2007       |  |       
|2008       |  |       
|2009       |  |       
|2010       |  |       
|2011       |  |       
|2012       |  |       
|2013       |  |       
|Thereafter |  |       
|           |  |       
|Total      |  |       
|           |  |       

---

|(1) |  | Includes $158 million outstanding on
 the Wells Fargo unsecured line of credit.
|--- |  | -------------------------------------------------------------------------------

Following
is other information related to our indebtedness as of December 31, 2003 (in thousands,
except percentage and interest rate data):

Unsecured
and Secured Debt:

|               | Balance |  | Percent |           | Weighted
Average
Interest Rate(1) | 
|-------------- | ------- |  | ------- | --------- | --------------------------------- | 
|
|Unsecured Debt |         |  | $       | 784,952   |                                   | 
|Secured Debt   |         |  |         | 564,829   |                                   | 
|               |         |  |         |           |                                   | 
|Total Debt     |         |  | $       | 1,349,781 |                                   | 
|               |         |  |         |           |                                   | 

Floating
and Fixed Rate Debt:

|                      | Balance |  | Percent |           | Weighted
Average
Interest Rate(1) | 
|--------------------- | ------- |  | ------- | --------- | --------------------------------- | 
|
|Floating Rate Debt(2) |         |  | $       | 211,000   |                                   | 
|Fixed Rate Debt(3)    |         |  |         | 1,138,781 |                                   | 
|                      |         |  |         |           |                                   | 
|Total Debt            |         |  | $       | 1,349,781 |                                   | 
|                      |         |  |         |           |                                   | 

---

|(1) |  | Includes
          amortization of prepaid financing costs
|--- |  | ----------------------------------------------------------

|(2) |  | Includes $100 million of fixed rate debt that has been converted to floating
          rate through interest rate hedge agreements.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Includes $175 million of
          floating rate debt that has been fixed through interest rate hedge agreements.
|--- |  | -----------------------------------------------------------------------------------------------------------------

Consolidated
Income Available for Debt Service and Compliance with Principal Financial Covenants

Consolidated
Income Available for Debt Service is a non-GAAP measurement of our performance and
liquidity. Consolidated Income Available for Debt Service is presented below because this
data is used by investors and our management as a supplemental measure to (a) evaluate our
operating performance and compare it to other real estate companies, (b) determine trends
in earnings, (c) determine our ability to service debt and (d) determine our ability to
fund future capital expenditure requirements. As discussed more fully below, Consolidated
Income Available for Debt Service is also used in several financial covenants we are
required to satisfy each quarter under the terms of our principal debt agreements.

Consolidated
Income Available for Debt Service permits investors and management to view income from our
operations on an unleveraged basis before the effects of non-cash depreciation and
amortization expense. By excluding interest expense, Consolidated Income Available for
Debt Service measures our operating performance independent of our capital structure and
indebtedness and, therefore, allows for a more meaningful comparison of our operating
performance between quarters as well as annual periods and to compare our operating
performance to that of other companies, and to more readily identify and evaluate trends
in earnings.

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The
usefulness of Consolidated Income Available for Debt Service is limited because it does
not reflect interest expense, taxes, gains or losses on sales of property, losses on
valuations of derivatives, asset impairment losses, cumulative effect of a change in
accounting principle, extraordinary items as defined by GAAP and depreciation and
amortization costs. These costs have been or may in the future be incurred by us, each of
which affects or could affect our operating performance and ability to finance our
investments at competitive borrowing costs, successfully maintain our REIT status, and
acquire and dispose of real estate properties at favorable prices to us. Some of these
costs also reflect changes in value in our properties that result from use or changes in
market conditions and the level of capital expenditures and leasing costs necessary to
maintain the operating performance of our properties. Due to the significance of the net
income components excluded from Consolidated Income Available for Debt Service, this
measure should not be considered an alternative to (and should be considered in
conjunction with) net income, cash flow from operations, and other performance or
liquidity measures prescribed by GAAP. This measure should also be analyzed in conjunction
with discussions elsewhere in Managements Discussion and Analysis of Financial
Condition and Results of Operations regarding the items eliminated in the
calculation of Consolidated Income Available for Debt Service.

The
reader is cautioned that Consolidated Income Available for Debt Service, as calculated by
Arden Realty, may not be comparable to similar measures reported by other companies (under
names such as or similar to Consolidated Income Available for Debt Service, EBITDA or
adjusted EBITDA) that do not define this measure exactly the same as Arden Realty does.

Arden
Realty calculates Consolidated Income Available for Debt Service as follows:

|                                                   | Year Ended December 31, | 
|-------------------------------------------------- | ----------------------- | 
|
|Net cash provided by operating activities          |                         | 
|Add:                                               |                         | 
|Interest expense                                   |                         | 
|                                                   |                         | 
|Interest expense from discontinued operations      |                         | 
|Gain on repayment of mortgage note receivable      |                         | 
|Less:                                              |                         | 
|Amortization of loan costs and fees                |                         | 
|Amortization of deferred compensation              |                         | 
|Changes in operating assets and liabilities:       |                         | 
|Rent and other receivables                         |                         | 
|Deferred rent                                      |                         | 
|Prepaid financing costs, expenses and other assets |                         | 
|Accounts payable and accrued expenses              |                         | 
|Security deposits                                  |                         | 
|                                                   |                         | 
|Consolidated Income Available for Debt Service     |                         | 
|                                                   |                         | 

|                                               | Year Ended December 31, | 
|---------------------------------------------- | ----------------------- | 
|
|Net Income                                     |                         | 
|Add:                                           |                         | 
|Interest expense                               |                         | 
|Interest expense from discontinued operations  |                         | 
|Depreciation and amortization                  |                         | 
|Minority interest                              |                         | 
|Minority interest from discontinued operations |                         | 
|Depreciation from discontinued operations      |                         | 
|Less:                                          |                         | 
|Gain on sale of discontinued properties        |                         | 
|Gain on sale of operating properties           |                         | 
|                                               |                         | 
|Consolidated Income Available for Debt Service |                         | 
|                                               |                         | 

Consolidated
Income Available for Debt Service is also presented because it is used in ratios contained
in the principal financial covenants of the Indenture governing our publicly traded senior
unsecured notes and our Credit Agreement with a syndicate of banks led by Wells Fargo. As
of December 31, 2003, our senior unsecured notes represented 37% of our total outstanding
debt and

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amounts outstanding under our Wells Fargo unsecured line of credit represented
12% of our total outstanding debt. The Consolidated Income Available for Debt Service
ratios and the other ratios reported below are part of financial covenants we are required
to satisfy each fiscal quarter. We believe information about these ratios is useful to (1)
confirm that we are in compliance with the financial covenants of our principal loan
agreements, (2) evaluate our ability to service our debt, (3) evaluate our ability to fund
future capital expenditures, and (4) compare our ratios to other real estate companies,
including other REITs, that present the same ratios.

If
we were to fail to satisfy these financial covenants, we would be in default under the
terms of the Indenture for the senior unsecured notes and/or the Wells Fargo Credit
Agreement. A default under those agreements could accelerate the obligation to repay such
debt and could cause us to be in default under our other debt agreements. Depending on the
circumstances surrounding such acceleration, we might not be able to repay the debt on
terms that are favorable to us, or at all, which could have a material adverse affect on
our financial condition and our ability to raise capital in the future.

The
reader is cautioned that these ratios, as calculated by us, may not be comparable to
similarly entitled ratios reported by other companies that do not calculate these ratios
exactly the same as we do. These ratios should not be considered as alternatives to the
ratio of earnings to fixed charges.

The
following table summarizes the principal ratios contained in the financial covenants of
our senior unsecured notes and Wells Fargo unsecured line of credit as of December 31,
2003 (in thousands, except percentage and covenant ratio data):

|                                               | 
|---------------------------------------------- | 
|Net investment in real estate                  | 
|Cash and cash equivalents                      | 
|Restricted cash                                | 
|Accumulated depreciation and amortization(1)   | 
|                                               | 
|Total Assets                                   | 
|                                               | 
|Total unencumbered assets                      | 
|                                               | 
|Mortgage loans payable(2)                      | 
|Unsecured lines of credit                      | 
|Unsecured term loan                            | 
|Unsecured senior notes, net of discount        | 
|                                               | 
|Total Outstanding Debt                         | 
|                                               | 
|Consolidated Income Available for Debt Service | 
|                                               | 
|Interest incurred(3)                           | 
|Loan fee amortization(3)                       | 
|                                               | 
|Debt Service(3)                                | 
|                                               | 

|Covenant Ratios                                                             |  | Test              |  | Actual |  
|--------------------------------------------------------------------------- |  | ----------------- |  | ------ | -
|Ratio of Consolidated Income Available for Debt Service  to Debt Service    |  | Greater than 1.5  |  | 2.9    |  
|Ratio of Consolidated Income Available for Debt Service to interest expense |  | Greater than 2.0  |  | 3.0    |  
|Ratio of Consolidated Income Available for Debt Service to fixed charges(4) |  | Greater than 1.75 |  | 2.2    |  
|Total Outstanding Debt/Total Assets                                         |  | Less than 60%     |  | 43     | %
|Secured Debt/Total Assets                                                   |  | Less than 40%     |  | 18     | %
|Unencumbered Assets/Unsecured Debt                                          |  | Greater than 150% |  | 228    | %

---

|(1) |  | Includes accumulated depreciation related to a property currently held for
      disposition.
|--- |  | ---------------------------------------------------------------------------------------------

|(2) |  | Represents 10 secured loans that are secured by 71 properties
      in our portfolio.
|--- |  | -------------------------------------------------------------------------------------

|(3) |  | Represents amounts for the most recent four consecutive quarters. Loan fee
      amortization excludes discount amortization on senior unsecured notes.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Fixed charges consist of interest costs, whether expensed or capitalized,
      principal payments on all debt, an amount equal to $0.3125 per quarter
      multiplied by the weighted average gross leaseable square feet of the portfolio
      at the end of the period and preferred unit distributions.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Total
interest incurred and the amount capitalized was as follows (unaudited and in thousands):

|                        |  | Year Ended December 31, |  
|----------------------- |  | ----------------------- | -
|
|Total interest incurred |  |                         | $
|Amount capitalized      |  |                         |  
|                        |  |                         |  
|Amount expensed         |  |                         | $
|                        |  |                         |  

---

|(1) |  | Includes approximately $2.5 million of interest capitalized on an office
          property that was classified as part of discontinued operations for the year
          ended December 31, 2001.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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Future
Capital Resources

We
may sell assets over the next twelve to twenty-four months. Due to market conditions
beyond our control, it is difficult to predict the actual period and amount of these asset
sales. Also depending on market conditions, at the time any such sales proceeds are
realized, we expect to place such amounts into investments that we believe will generate
higher long-term value, which may include development or redevelopment of office
buildings, acquisitions of existing buildings or repurchases of Arden Realtys common
stock. In addition, we expect to use a portion of any proceeds to pay down portions of our
debt in order to maintain our conservative leverage and coverage ratios.

We
expect to continue meeting our short-term liquidity and capital requirements generally
through net cash provided by operating activities, proceeds from our lines of credit or
from asset sales. We believe that the net cash provided by operating activities will
continue to be sufficient to pay any distributions necessary to enable Arden Realty to
continue qualifying as a REIT. We also believe the foregoing sources of liquidity will be
sufficient to fund our short-term liquidity needs over the next twelve months, including
recurring non-revenue enhancing capital expenditures, tenant improvements and leasing
commissions.

We
expect to meet our long-term liquidity and capital requirements such as scheduled
principal repayments, development costs, property acquisitions, if any, and other
non-recurring capital expenditures through net cash provided by operations, refinancing of
existing indebtedness, proceeds from asset sales and/or the issuance of long-term debt and
equity securities.

Recurring
non-revenue enhancing capital expenditures represent building improvements and leasing
costs required to maintain current revenue. Recurring capital expenditures do not include
immediate building improvements that were taken into consideration when underwriting the
purchase of a building or which are being incurred to bring a building up to our operating
standards or to reach stabilization. We consider a property to be stabilized when the
property is at least 95% leased. Recurring capital expenditures consist primarily of
replacement components such as new elevators, roof replacements and upgrade requirements
required by new safety codes such as new fire-life-emergency systems.

Non-recurring
capital expenditures represent improvement costs incurred to improve a property to our
operating standards or reach stabilization. These costs are normally taken into
consideration during the underwriting process for a given propertys acquisition.
Non-recurring capital expenditures include improvements such as new building expansion and
some renovation costs.

We
capitalize both recurring capital expenditures and non-recurring capital expenditures due
to the probable benefit derived in future years from both non-recurring as well as
recurring capital expenditures.

Contractual
Obligations

As
of December 31, 2003, we were subject to certain contractual payment obligations as
described in the table below.

|                              | Payments Due by Period | 
|----------------------------- | ---------------------- | 
|
|
|Contractual Obligations:      |                        | 
|Long-term debt                |                        | 
|Mortgage debt                 |                        | 
|Unsecured senior notes        |                        | 
|Unsecured term loan           |                        | 
|Unsecured line of credit      |                        | 
|Ground leases                 |                        | 
|Capital commitments           |                        | 
|                              |                        | 
|Total Contractual Obligations |                        | 
|                              |                        | 

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Table of Contents

Funds From Operations

The
following table reflects the calculation of our funds from operations for the years ended
December 31, 2003, 2002, 2001, 2000 and 1999 (in thousands, except percentages):

|                                                  | Year Ended December 31, | 
|------------------------------------------------- | ----------------------- | 
|
|
|Funds from Operations(1):                         |                         | 
|Net income                                        |                         | 
|Depreciation from discontinued operations         |                         | 
|Gain on sale of discontinued properties .         |                         | 
|Depreciation and amortization                     |                         | 
|Gain on sale of operating properties              |                         | 
|Income allocated to Preferred Operating           |                         | 
|Partnership Units                                 |                         | 
|                                                  |                         | 
|Funds from Operations (2)                         |                         | 
|Arden Realty's percentage share (3)               |                         | 
|                                                  |                         | 
|Arden Realty's share of Funds from Operations     |                         | 
|                                                  |                         | 
|Weighted average common shares and                |                         | 
|operating partnership units outstanding - Diluted |                         | 
|                                                  |                         | 

---

|(1) |  | We believe that funds from operations, or FFO, is a useful supplemental measure of our
operating performance. We compute FFO in accordance with standards established by the
White Paper on FFO approved by the Board of Governors of the National Association of Real
Estate Investment Trusts, or NARIET, in April 2002. The White Paper defines FFO as net
income or loss computed in accordance with generally accepted accounting principles, or
GAAP, excluding extraordinary items, as defined by GAAP, and gains and losses from sales
of depreciable operating property plus real estate-related depreciation and amortization
and after adjustments for unconsolidated partnerships and joint ventures.
We
believe that FFO, by excluding depreciation costs, the gains or losses from the sale of
operating real estate properties and the extraordinary items as defined by GAAP, provides
an additional perspective on our operating results. However, because these excluded items
have a real economic effect, FFO is a limited measure of performance.
FFO
captures trends in occupancy rates, rental rates and operating costs. FFO excludes
depreciation and amortization costs and it does not capture the changes in value in our
properties that result from use or changes in market conditions or the level of capital
expenditures and leasing costs necessary to maintain the operating performance of our
properties, all of which are significant economic costs. Therefore, its ability to measure
performance is limited.
Because
FFO excludes significant economic components of net income determined in accordance with
GAAP, FFO should be used as an adjunct to net income and not as an alternative to net
income. FFO should also not be used as an indicator of our financial performance, or as a
substitute for cash flow from operating activities determined in accordance with GAAP or
as a measure of our liquidity. FFO is not by itself indicative of funds available to fund
our cash needs, including our ability to pay dividends or service our debt. Therefore, FFO
only provides investors with an additional performance measure that when combined with
measures computed in accordance with GAAP such as net income, cash flow from operating
activities, investing activities and financing activities provides investors with an
indication of our ability to service debt and to fund acquisitions and other expenditures.
FFO
is used by investors to compare our performance with other REITs. Other REITs may use
different methods for calculating FFO and, accordingly, our FFO may not be comparable to
other REITs.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Includes approximately $2.2 million, $1.2 million, $1.9 million and $586,000 in
                    non-cash compensation expense for the years ended December 31, 2003, 2002, 2001
                    and 2000, respectively.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Represents Arden Realtys weighted average ownership percentage during the
                    respective twelve month period.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------

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Current Economic Climate

Our
short and long-term liquidity, ability to refinance existing indebtedness, ability to
issue long-term debt and equity securities at favorable rates and our dividend policy are
significantly impacted by the operating results of our properties, all of which are
located in Southern California. Our ability to lease available space and increase rates
when leases expire is largely dependent on the demand for office space in the markets
where our properties are located. We believe current uncertainty over the national and
Southern California economic environment is exerting downward pressures on the demand for
Southern California commercial office space. We are expecting continued downward pressures
on occupancy and rental rates and upward pressures on leasing costs due to several factors
including, among others, the following:

| | · | Non-farm job growth in Southern California, which we believe to be a leading
indicator of office demand, was negative in 2003 and is largely dependent on improved
economic activity;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Rental rates decreased in 2003 and are expected to decrease further in 2004 due
to the state of the local economy and competition from other office landlords;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Tenant concessions for new and renewal leases increased in some submarkets in
2003 and are expected to further increase due to competition from other office landlords;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Some tenants are under-utilizing their existing space and can therefore expand
internally before they need new space;
| | - | ---------------------------------------------------------------------------------------------------------------------

| | · | Sublease space is impacting vacancy and rental rates in some submarkets; and
| | - | ----------------------------------------------------------------------------

| | · | Over-building has increased vacancy rates in some submarkets.
| | - | -------------------------------------------------------------

Although
these factors were present during 2003, the occupancy of our portfolio increased 0.3% from
90.1% as of December 31, 2002 to 90.4% as of December 31, 2003.

According
to published reports, overall market rental rates in Southern California declined 1% to 2%
during 2003. Given the current trends, including the expected continued occupancy
pressures and more aggressive pricing from competing landlords and sublease space, we
expect market rates may decline by up to an additional 2% in 2004. Concessions also rose
during 2003. As occupancy pressures continue, we expect concessions in either free rent or
higher tenant improvement allowances to continue until vacancies decline to a level where
landlords regain pricing power.

The
timing and extent of future changes in the national and local economy and their effects on
our properties and results of operations are difficult to accurately predict. It is
possible, however, that these national and regional issues may more directly affect us and
our operating results in the future, making it more difficult for us to lease and renew
available space, to increase or maintain rental rates as leases expire and to collect
amounts due from our tenants. For additional information, see Risk Factors 
Further declines in the economic activity of Southern California will adversely affect our
operating results,  The financial condition and solvency of our tenants
may reduce our cash flow, and - Rising energy costs and power outages in
California may have an adverse effect on our operations and revenue.

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ITEM 7A. QUANTITATIVE
AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Market
risk is the exposure or loss resulting from changes in interest rates, foreign currency
exchange rates, commodity prices and equity prices. The primary market risk to which we
are exposed is interest rate risk, which is sensitive to many factors, including
governmental monetary and tax policies, domestic and international economic and political
considerations and other factors that are beyond our control.

Interest
Rate Risk

In
order to modify and manage the interest characteristics of our outstanding debt and limit
the effects of interest rates on our operations, we may use a variety of financial
instruments, including interest rate hedges, caps, floors and other interest rate exchange
contracts. The use of these types of instruments to hedge our exposure to changes in
interest rates carries additional risks such as counter-party credit risk and legal
enforceability of hedging contracts. We do not enter into any transactions for speculative
or trading purposes. During 2003, we entered into $150 million of forward-starting
interest rate hedge agreements effectively fixing the 10-year Treasury Rate at
approximately 4.1% for borrowings that are anticipated to occur in 2004 to refinance some
of our scheduled debt maturities. In October and November of 2003, we also entered into
reverse interest rate hedge agreements to float $100 million of the fixed interest rate
associated with the 7.00% senior unsecured notes due in November 2007. Under these reverse
hedges, we will receive interest at a fixed rate of 7.00% and pay interest at a variable
rate averaging six-month LIBOR in arrears plus 3.10%.

Some
of our future earnings, cash flows and fair values relating to financial instruments are
dependent upon prevailing market rates of interest, such as LIBOR. Based on interest rates
and outstanding balances as of December 31, 2003, a 1% increase in interest rates on our
$211.0 million of floating rate debt would decrease annual future earnings and cash flows
by approximately $2.1 million and would not have an impact on the fair value of the
floating rate debt. A 1% decrease in interest rates on our $211.0 million of floating rate
debt would increase annual future earnings and cash flows by approximately $2.1 million
and would not have an impact on the fair value of the floating rate debt. The weighted
average interest rate on our floating debt as of December 31, 2003 was 3.93%.

Our
fixed rate debt, including $175.0 million in floating rate debt swapped to fixed through
interest rate hedges, totaled $1,138.8 million as of December 31, 2003 with a weighted
average interest rate of 7.46% and a total fair value of approximately $1,198.5 million. A
1% decrease in interest rates on our $1,138.8 million of fixed rate debt would increase
its fair value by approximately $55.2 million and would not have an impact on annual
future earnings and cash flows. A 1% increase in interest rates on our $1,138.8 million of
fixed rate debt would decrease its fair value by approximately $52.1 million and would not
have an impact of annual future earnings and cash flows.

These
amounts are determined by considering the impact of hypothetical interest rates on our
borrowing cost. These analyses do not consider the effects of the reduced level of overall
economic activity that could exist in that environment. Further, in the event of a change
of this magnitude, we would consider taking actions to further mitigate our exposure to
any such change. Due to the uncertainty of the specific actions that would be taken and
their possible effects, however, this sensitivity analysis assumes no changes in our
capital structure.

RISK FACTORS

In
addition to the other information contained or incorporated by reference in this Form
10-K, readers should carefully consider the following risk factors.

Real Estate Investment
Risks

An
inability to retain tenants or rent space upon lease expirations may adversely affect our
revenues and our ability to service our debt.

Through
2008, 2,725 leases, including month-to-month leases, comprising approximately 78% of our
leased net rentable square footage and approximately 74% of our annualized base rents at
December 31, 2003 will expire as follows:

|Year |  | Number of
Leases Expiring |  |     | Percentage of
Aggregate Portfolio
Leased Square Feet |  |  | Percentage of
Aggregate
Portfolio
Annualized
Base Rent |  
|---- |  | ------------------------- |  | --- | ---------------------------------------------------- |  |  | ------------------------------------------------------ | -
|2004 |  |                           |  | 817 |                                                      |  |  | 20.7                                                   | %
|2005 |  |                           |  | 643 |                                                      |  |  | 18.1                                                   |  
|2006 |  |                           |  | 548 |                                                      |  |  | 15.5                                                   |  
|2007 |  |                           |  | 370 |                                                      |  |  | 11.6                                                   |  
|2008 |  |                           |  | 347 |                                                      |  |  | 12.1                                                   |  

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If
we are unable to promptly relet or renew leases for all or a substantial portion of this
space, or if the rent upon renewal or reletting are significantly lower than expected, our
cash flow and business could be adversely affected which would limit our ability to
service our debts.

Lack
of non-farm job growth in Southern California or a deterioration of the local and national
economy will adversely affect our operating results.

All
of our properties are located in Southern California. In 2003, the Southern California
economy experienced negative job growth. We believe non-farm job growth to be a leading
indicator of office demand for the region. During 2004, a total of approximately 3.5
million square feet of occupied space, representing approximately 19.0% of our total net
rentable space, including month-to-month leases, will expire. Further negative non-farm
job growth in our submarkets or a deterioration of local and national economy may result
in further erosion of occupancy and rental rates and would most likely negatively affect
our operating performance and property values.

Competition
affects occupancy levels, rents and cost of land which could adversely affect our
revenues.

Many
office properties compete with our properties in attracting tenants to lease space. Some
of the competing properties may be newer, better located or owned by parties better
capitalized than we are. Although ownership of these competing properties is currently
diversified among many different types of owners, from publicly traded companies and
institutional investors to small enterprises and individual owners, and no one or group of
owners currently dominate or significantly influence the market, consolidation of owners
could create efficiencies and marketing advantages for the consolidated group that could
adversely affect us. These competitive advantages, the number of competitors and the
number of competitive commercial properties in a particular area could have a material
adverse effect on the rents we can charge, our ability to lease space in our existing
properties or at newly acquired or developed properties and the prices we have to pay for
developable land.

The
financial condition and solvency of our tenants may reduce our cash flow.

Tenants
may experience a downturn in their business which may cause them to miss rental payments
when due or to seek the protection of bankruptcy laws, which could result in rejection and
termination of their leases or a delay in recovering possession of their premises.
Although we have not experienced material losses from tenant bankruptcies, we cannot
assure you that tenants will not file for bankruptcy protection in the future or, if any
tenants file, that they will affirm their leases and continue to make rental payments in a
timely manner.

Because
real estate investments are illiquid, we may not be able to sell properties when
appropriate.

Equity
real estate investments are relatively illiquid. That illiquidity will tend to limit our
ability to sell properties promptly in response to changes in economic or other
conditions. In addition, the Internal Revenue Code of 1986, as amended, may under
specified circumstances impose a 100% prohibited transaction tax on the profits derived
from our sale of properties held for fewer than four years, which could affect our ability
to sell our properties.

Rising
energy costs and power outages in California may have an adverse effect on our operations
and revenue.

Problems
associated with deregulation of the electric industry in California have resulted in
significantly higher costs in some areas. All of our properties are currently located in
areas served by utilities that either produce their own electricity, or that have procured
long-term, fixed rate contracts with commercial electrical providers. While we have no
information suggesting that any future service interruptions are expected, we believe that
higher utility costs may continue as price increases are allowed by the California Public
Utility Commission or other regulatory agencies.

Approximately
27% of our buildings and 21% of the total rentable square footage of our portfolio are
subject to leases that require our tenants to pay all utility costs. The remainder of our
leases provide that tenants will reimburse us for utility costs in excess of a base year
amount.

Although
we have not experienced any material losses resulting from electric deregulation, it is
possible that some or all of our tenants will not fulfill their lease obligations and reimburse
us for their share of any significant electric rate increases and that we will not be able
to retain or replace our tenants if energy problems in California continue.

Increases
in taxes and regulatory compliance costs may reduce our revenue.

Except
for our triple net leases, we may not be able to pass all real estate tax increases
through to some or all of our tenants. Therefore, any tax increases may adversely affect
our cash flow and our ability to pay or refinance our debt obligations. Our properties are
also subject to various federal, California and local regulatory requirements, such as
requirements of the Americans with Disabilities Act, and California and local fire and
life safety requirements. Failure to comply with these requirements could result in

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the
imposition of fines by governmental authorities or awards of damages to private litigants.
We believe that our properties are currently in substantial compliance with these
regulatory requirements. We cannot assure you, however, that these requirements will not
be changed or that new requirements will not be imposed that would require significant
unanticipated expenditures by us and could have an adverse effect on our cash flow, the
amounts available for distributions and on our business.

We
may acquire properties through partnerships or joint ventures with third parties that
could result in financial dependency and management conflicts.

We
may participate with other entities in property ownership through joint ventures or
partnerships in the future. Depending on the characteristics and business objectives of
the joint venture or partnership, we may not have voting control over the joint venture or
partnership. Partnership or joint venture investments may, under certain circumstances,
involve risks not otherwise present, including:

| | · | our partners or co-venturers might become bankrupt;
| | - | ---------------------------------------------------

| | · | our partners or co-venturers might at any time have economic or other business interests
or goals which are inconsistent with our business interests or goals; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | our partners or co-venturers may be in a position to take action contrary to our  instructions or requests  contrary to our
              policies or objectives.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

Neither
our partnership agreement nor our governing documents prevent us from participating in
joint ventures with our affiliates. Because a joint venture with an affiliate may not be
negotiated in a traditional arms length transaction, terms of the joint venture may
not be as favorable to us as we could obtain if we entered into a joint venture with an
outside third party.

We
may not be able to successfully integrate or finance our acquisitions.

As
we acquire additional properties, we will be subject to risks associated with managing new
properties, including building systems not operating as expected, delay in or failure to
lease vacant space and tenants failing to renew leases as they expire. In addition, our
ability to manage our growth effectively will require us to successfully integrate our new
acquisitions into our existing accounting systems and property management structure. We
cannot assure you that we will be able to succeed with that integration or effectively
manage additional properties or that newly acquired properties will perform as expected.
Changing market conditions, including competition from other purchasers of suburban office
properties, may diminish our opportunities for attractive additional acquisitions.
Moreover, acquisition costs of a property may exceed original estimates, possibly making
the property uneconomical.

Our
acquisitions and renovations may not perform as expected.

Although
we currently have no plans to significantly expand or renovate our properties, we may do
so in the future. Expansion and renovation projects may inconvenience and displace
existing tenants, require us to engage in time consuming up-front planning and engineering
activities and expend capital, and require us to obtain various government and other
approvals, the receipt of which cannot be assured. While our policies with respect to
expansion and renovation activities are intended to limit some of the risks otherwise
associated with these activities, we will nevertheless incur risks, including expenditures
of funds on, and devotion of our time to, projects that may not be completed.

Our
development activities may be more expensive than anticipated and may not yield our
anticipated results.

We
currently have one development property under lease-up at the Howard Hughes Center in Los
Angeles, California. The estimated total costs for this property is approximately $81.5
million. In addition, we have preliminary architectural designs completed for an
additional 475,000 net rentable square feet and have completed preliminary designs on a
build-to-suit office building at our Long Beach Airport Business Park. We have
entitlements for up to 600 hotel rooms at the Howard Hughes Center. Also, as part of our
Gateway Towers acquisition in August 2002, we acquired a 5-acre developable land parcel in
Torrance, California that we are also marketing for a build-to-suit building. We do not
intend to commence construction on any of these projects until development plans and
budgets are finalized and build-to-suit tenant leases are signed with terms allowing us to
achieve yields commensurate with each projects development risk. We also intend to
review, from time to time, other opportunities for developing and constructing office
buildings and other commercial properties in accordance with our development and
underwriting policies.

We
expect to finance our development activities over the next 24 months through net cash
provided by operating activities, proceeds from asset sales or proceeds from our lines of
credit.

Risks
associated with our development activities may include:

| | · | abandonment of development opportunities due to a lack of financing or other reasons;
| | - | -------------------------------------------------------------------------------------

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| | · | construction costs of a property exceeding original estimates, possibly making the property uneconomical;
| | - | ---------------------------------------------------------------------------------------------------------

| | · | occupancy rates and rents at a newly completed property may not be sufficient to make the property profitable;
| | - | --------------------------------------------------------------------------------------------------------------

| | · | construction  and lease-up may not be completed on schedule,  resulting in increased debt service expense and  construction costs; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------

| | · | development activities would also be subject to risks relating to the inability to obtain,
or delays in obtaining, all necessary zoning, land-use, building, occupancy and other
required governmental permits and authorizations.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We
are not subject to any limit on the amount or percentage of our assets that may be
invested in any single property or any single geographic area.

Our
governing documents do not restrict the amount or percentage of our assets that we may
invest in a single property or geographic area. All of our properties are currently in
Southern California and we have no immediate plans to invest outside of Southern
California. Although the overall Southern California economy is diverse and well balanced,
the geographic concentration of our portfolio my make us more susceptible to changes
affecting the Southern California economy and real estate markets or damages from regional
events such as earthquakes.

We
may not be able to expand into new markets successfully.

While
our business is currently limited to the Southern California market, it is possible that
we will in the future expand our business to new geographic markets. We will not initially
possess the same level of familiarity with new markets outside of Southern California,
which could adversely affect our ability to manage, lease, develop or acquire properties
in new localities.

Financing Risks

Our
amount of debt could limit our operational flexibility or otherwise adversely affect our
financial condition.

As
of December 31, 2003, we had total debt of approximately $1.3 billion, consisting of
approximately $564.8 million in secured debt and approximately $785.0 million of unsecured
debt. See Managements Discussion and Analysis of Financial Condition and
Results of Operations  Liquidity and Capital Resources.

Our
indebtedness could:

| | · | require us to dedicate a substantial portion of our cash flow to pay our debt, thereby
reducing the availability of our cash flow to fund distributions, working capital, capital
expenditures, acquisition and development activity and other business purposes;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | make it more difficult for us to satisfy our debt obligations;
| | - | --------------------------------------------------------------

| | · | limit our ability to refinance our debt and obtain additional debt financing; and
| | - | ---------------------------------------------------------------------------------

| | · | increase our vulnerability to general adverse economic and real estate industry conditions
and limit our flexibility in planning for, or reacting to, changes in our business and the
real estate industry.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Despite
current indebtedness levels, we may still be able to incur substantially more debt in the
future, which would increase the risks associated with our substantial leverage. Neither
our partnership agreement nor our governing documents limit the amount or the percentage
of indebtedness that we may incur. We may borrow up to a maximum of $330 million under our
two lines of credit. As of December 31, 2003, we had the ability to borrow an additional
$169.0 million under these two lines of credit. If new debt is added to our current debt
levels, the related risks that we now face could intensify and could increase the risk of
default on our indebtedness.

Scheduled
debt payments could adversely affect our financial condition.

Our
cash flow could be insufficient to meet required payments of principal and interest when
due. In addition, we may not be able to refinance existing indebtedness, which in
virtually all cases requires substantial principal payments at maturity, and, if we can
refinance, the terms of the refinancing might not be as favorable as the terms of our
existing indebtedness. As of December 31, 2003, approximately $184.5 million of principal
will be coming due over the next twelve months. If principal payments cannot be
refinanced, extended or paid with proceeds of other capital transactions, such as new
equity capital, our cash flow will not be sufficient in all years to repay all maturing
debt and continue to service and repay our debt obligations.

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Rises
in interest rates could adversely affect our financial condition.

An
increase in prevailing interest rates would have an immediate effect on the interest rates
charged on our variable rate debt which rise and fall upon changes in interest rates. At
December 31, 2003, approximately 16% of our debt was variable rate debt. Increases in
interest rates would also impact the refinancing of our fixed rate debt. If interest rates
are higher when our fixed debt becomes due, we may be forced to borrow at the higher
rates. If prevailing interest rates or other factors result in higher interest rates, the
increased interest expense would adversely affect our cash flow and our ability to service
our debt, including the exchange notes. As a protection against rising interest rates, we
may enter into agreements such as interest rate swaps, caps, floors and other interest
rate exchange contracts. These agreements, however, increase our risks as to the other
parties to the agreements not performing or that the agreements could be unenforceable.
During 2003, we entered into $150 million of forward-starting interest rate hedge
agreements effectively fixing the 10-year Treasury Rate at approximately 4.1% for
borrowings that are anticipated to occur in 2004 to refinance some of our scheduled debt
maturities. In October and November of 2003, we also entered into reverse interest rate
hedge agreements to float $100 million of the fixed interest rate associated with the
7.00% senior unsecured notes due in November 2007. Under these reverse hedges, we will
receive interest at a fixed rate of 7.00% and pay interest at a variable rate averaging
six-month LIBOR in arrears plus 3.10%.

Many
of our properties are subject to mortgage financing which could result in foreclosure if
we are unable to pay or refinance the mortgages when due.

We
currently have outstanding five mortgage financings totaling $547.0 million that are
secured by 67 of our properties. The properties in each of these financings are fully
cross-collateralized and cross-defaulted. To the extent two or more mortgages are
cross-defaulted, a default in one mortgage will trigger a default in the other mortgages.
The cross-defaults can give the lender a number of remedies depending on the circumstances
such as the right to increase the interest rate, demand additional collateral, accelerate
the maturity date of the mortgages or foreclose on and sell the properties. To the extent
two or more mortgages are cross-collateralized, a default in one mortgage will allow the
mortgage lender to foreclose upon and sell the properties that are not the primary
collateral for the loan in default. Four additional properties are subject to single
property mortgages totaling approximately $17.8 million at December 31, 2003. If we are
unable to meet our obligations under these mortgages, we could be forced to pay higher
interest rates or provide additional collateral or the properties subject to the mortgages
could be foreclosed upon and sold, which could have a material adverse effect on us and
our ability to pay or refinance our debt obligations.

Tax Risks

Our
partnership agreement restricts our ability to accumulate cash that might be used in
future periods to make debt payments or to fund future growth.

In
order to qualify as a REIT and avoid federal income tax liability, Arden Realty must
distribute to its stockholders at least 90% of its net taxable income, excluding net
capital gain, and to avoid income taxation, its distributions must not be less than 100%
of its net taxable income, including capital gains. To avoid excise tax liability, its
distributions to its stockholders for the year must exceed the sum of 85% of its ordinary
income, 95% of its capital gain net income, and any undistributed taxable income from
prior years. As a result of these distribution requirements, we do not expect to
accumulate significant amounts of cash. Accordingly, these distributions could
significantly reduce the cash available to us in subsequent periods to make payments on
our debt obligations and to fund future growth.

We
intend to qualify as a partnership, but we cannot guarantee that we will qualify.

We
intend to qualify as a partnership for federal income tax purposes. However, if we are a
publicly traded partnership, we would be treated as a corporation instead of a
partnership for federal income tax purposes unless at least 90% of our income is
qualifying income as defined in the Internal Revenue Code. The income requirements
applicable to REITs and the definition of qualifying income for purposes of
this 90% test are similar in most respects. Qualifying income for the 90% test generally
includes passive income, such as specified types of real property rents, dividends and
interest. We believe that we would meet this 90% test, but we cannot guarantee that we
would. If we were to be taxed as a corporation, we would incur substantial tax liabilities
and Arden Realty would fail to qualify as a REIT for federal income tax purposes.

We
may suffer adverse tax consequences and be unable to attract capital if Arden Realty fails
to qualify as a REIT.

We
believe that since its taxable year ended December 31, 1996, Arden Realty has been
organized and operated, and intends to continue to operate, so as to qualify for taxation
as a REIT under the Internal Revenue Code. Although we believe that Arden Realty has been
and will continue to be organized and has operated and will continue to operate so as to
qualify for taxation as a REIT, we cannot assure you that it has been or will continue to
be organized or operated in a manner so as to qualify or remain so qualified. For Arden
Realty to qualify as a REIT, it must satisfy numerous requirements established under
highly technical and complex Internal Revenue Code provisions for which there are only
limited judicial and administrative interpretations and tests regarding various factual
matters and circumstances not entirely within Arden Realtys control. The complexity
of these provisions and of the applicable Treasury Regulations that have been promulgated
under the Internal Revenue Code is greater in the case of a

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REIT, like Arden Realty, that
holds its assets through an investment in a partnership. No assurance can be given that
legislation, new regulations, administrative interpretations or court decisions will not
significantly change the tax laws with respect to our qualification as a REIT or the
federal income tax consequences of qualification. We are, however, not aware of any
pending legislation that would adversely affect Arden Realtys ability to qualify as
a REIT. Arden Realtys qualification and taxation as a REIT depends on its ability to
meet, through actual annual operating results, asset diversification, distribution levels
and diversity of stock ownership, the various qualification tests imposed under the
Internal Revenue Code, the results of which have not been and will not be reviewed by its
tax counsel.

If
Arden Realty failed to qualify as a REIT in any taxable year, it would be subject to
federal income tax, including any applicable alternative minimum tax, on its taxable
income at regular corporate rates. Moreover, unless entitled to relief under specific
statutory provisions, it also would be disqualified as a REIT for the four taxable years
following the year during which qualification was lost. If it were disqualified as a REIT,
its ability to raise additional capital could be significantly impaired. This could reduce
the funds it would have available to pay distributions to its stockholders and to service
its debt.

Even
if Arden Realty qualifies for and maintains its REIT status, it will be subject to certain
federal, state and local taxes on its income and property. For example, if it has net
income from a prohibited transaction, specifically sales or other taxable dispositions of
property held primarily for sale to customers in the ordinary course of business, that
income will be subject to a 100% tax.

Other Risks

We
are subject to agreements and policies that may deter change in control offers that might
be attractive to Arden Realtys stockholders.

Certain
provisions of Arden Realtys charter and bylaws may delay, defer or prevent a third
party from making offers to acquire Arden Realty or control over Arden Realty. For
example, such provisions may:

| | · | deter tender offers for Arden Realty's common stock, which offers may be attractive to the stockholders; and
| | - | ------------------------------------------------------------------------------------------------------------

| | · | deter purchases of large blocks of common stock, thereby limiting the opportunity for
stockholders to receive a premium for their common stock over then-prevailing market
prices.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Arden
Realtys charter contains a provision designed to prevent a concentration of
ownership among its stockholders that would cause it to fail to qualify as a REIT. Under
the Internal Revenue Code, not more than 50% in value of its outstanding shares of common
stock may be owned, actually or constructively, by five or fewer individuals, including
specific kinds of entities, at any time during the last half of Arden Realtys
taxable year. In addition, if Arden Realty, or an owner of 10% or more of its common
stock, actually or constructively owns 10% or more of a tenant of Arden Realtys, or
a tenant of any partnership in which Arden Realty is a partner, the rent received by Arden
Realty from that tenant will not be qualifying income for purposes of the REIT gross
income tests. In order to protect Arden Realty against the risk of losing REIT status, the
ownership limit included in its charter limits actual or constructive ownership of its
outstanding shares of common stock by any single stockholder to 9.0%, by value or by
number of shares, whichever is more restrictive, of the then outstanding shares of common
stock. Actual or constructive ownership of shares of common stock in excess of the
ownership limit will cause the violative transfer or ownership to be void with respect to
the transferee or owner as to that number of shares in excess of the ownership limit and
such shares will be automatically transferred to a trust for the exclusive benefit of one
or more qualified charitable organizations. That transferee or owner will have no right to
vote such shares or be entitled to dividends or other distributions with respect to such
shares.

Although
Arden Realtys Board of Directors presently has no intention of doing so, except as
described below, its Board of Directors could waive this restriction with respect to a
particular stockholder if it were satisfied, based upon the advice of counsel or a ruling
from the Internal Revenue Service, that ownership by such stockholder in excess of the
ownership limit would not jeopardize Arden Realtys status as a REIT and its Board of
Directors otherwise decided such action would be in its best interests. Arden
Realtys Board of Directors has waived its ownership limit with respect to Mr. Ziman,
Arden Realtys Chairman and CEO, and certain family members and affiliates and has
permitted these parties to actually and constructively own up to 13.0% of the outstanding
shares of common stock.

Arden
Realtys charter authorizes its Board of Directors to cause Arden Realty to issue
authorized but unissued shares of common stock or preferred stock and to reclassify any
unissued shares of common stock or classify any unissued and reclassify any previously
classified but unissued shares of preferred stock and, with respect to the preferred
stock, to set the preferences, rights and other terms of such classified or unclassified
shares. Although its Board of Directors has no such intention at the present time, it
could establish a series of preferred stock that could, depending on the terms of such
series, delay, defer or prevent a transaction or a change in control that might involve a
premium price for the common stock or otherwise be in the best interest of Arden
Realtys stockholders.

Arden
Realtys Board of Directors is divided into three classes of directors. Directors of
each class are chosen for three-year terms upon the expiration of their current terms and
each year one class of directors will be elected by the stockholders. The staggered

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terms
of directors may reduce the possibility of a tender offer or an attempt to change control
even though a tender offer or change in control might be in the best interest of Arden
Realtys stockholders.

Losses
in excess of our insurance coverage or uninsured losses could adversely affect our cash
flow.

We
carry comprehensive liability, fire, extended coverage, terrorism and rental loss
insurance policies which currently cover all of our properties with specifications and
insured limits that we believe are adequate and appropriate under the circumstances. Some
losses, however, are generally not insured against because it is not economically feasible
to do so. Should an uninsured loss or a loss in excess of insured limits occur, we could
lose our capital invested in the property, as well as the anticipated future revenue from
the property and, in the case of debt which is recourse to us, we would remain obligated
for any mortgage debt or other financial obligations related to the property. Any loss
would adversely affect our cash flow with respect to the property subject to the loss.
Moreover, we would generally be liable for any unsatisfied obligations other than
non-recourse obligations with respect to the property subject to the loss.

Lack
of availability of insurance coverage for biological, chemical or nuclear terrorist
attacks could adversely affect our financial condition.

Our
current terrorism insurance policy, which expires in March 2005, specifically excludes
biological, chemical or nuclear terrorist acts. We have been notified by our insurance
broker that in the aftermath of the September 11th attacks, insurance carriers will
continue to exclude these types of attacks from terrorism insurance policies or offer
coverage for biological, chemical or nuclear attacks coverages at prohibitive costs.
Although we did not derive more than 4.0% of our 2003 net operating income from any one of
the properties in our portfolio, a biological, chemical or nuclear terrorist attack
damaging several of our properties or negatively impacting the financial condition of our
tenants could materially deteriorate our operating results and overall financial
condition.

An
earthquake could adversely affect our business.

All
of our properties are located in Southern California which is a high risk geographical
area for earthquakes. Depending upon its magnitude, an earthquake could severely damage
our properties which would adversely affect our business. We maintain earthquake insurance
for our properties and the resulting business interruption. We cannot assure you that our
insurance will be sufficient if there is a major earthquake.

Our
properties may be subject to environmental liabilities.

Under
federal, state and local environmental laws, a current or previous owner or operator of
real estate may be required to investigate and clean up hazardous or toxic substances or
petroleum product releases at the property and may be held liable to a governmental entity
or to third parties for property damage and for investigation and clean-up costs in
connection with the contamination. These laws typically impose clean-up responsibility and
liability without regard to whether the owner knew of or caused the presence of the
contaminants, and the liability under these laws has been interpreted to be joint and
several unless the harm is divisible and there is a reasonable basis for allocation of
responsibility. These costs may be substantial, and the presence of these substances, or
the failure to remediate the contamination on the property, may adversely affect the
owners ability to sell or rent the property or to borrow against the property.
Persons who arrange for the disposal or treatment of hazardous or toxic substances at a
disposal or treatment facility also may be liable for the costs of removal or remediation
of a release of hazardous or toxic substances at the disposal or treatment facility,
whether or not the facility is owned or operated by that person. Some laws create a lien
on the contaminated site in favor of the government for damages and costs incurred in
connection with the contamination. Finally, third parties may have claims against the
owner of the site based on damages and costs resulting from environmental contamination
emanating from that site.

Specific
federal, state and local laws, regulations and ordinances govern the removal,
encapsulation or disturbance of asbestos-containing materials when those materials are in
poor condition or in the event of construction, remodeling, renovation or demolition of a
building. These laws may impose liability for release of asbestos-containing material and
may provide for third parties to seek recovery from owners or operators of real properties
for personal injury associated with asbestos-containing materials. In connection with the
ownership and operation of our properties, we may be potentially liable for those costs.

In
the past few years, independent environmental consultants have conducted or updated Phase
I environmental assessments and other environmental investigations as appropriate at some
of our properties. The environmental site assessments and investigations have identified a
total of 30 properties in our portfolio, representing approximately 32% of the total
rentable square feet in the portfolio, affected by environmental concerns. These
environmental concerns include properties that may be impacted by known or suspected (a)
contamination caused by third party sources or (b) soil and/or groundwater contamination
which has been remediated, and (c) those containing underground storage tanks or asbestos.

Of
these properties, two are believed to be affected by contamination caused by third party
sources and also houses an underground storage tank, three contain friable asbestos,
sixteen contain non-friable asbestos, and nine house underground storage tanks only. The
properties affected by contamination are primarily affected by petroleum and solvent
substances, and in each case a third party has indemnified us for any and all problems
associated with this contamination. With regard to those properties affected by

48

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asbestos,
asbestos does not pose a health hazard if it is not disturbed in such a way to cause an
airborne release of asbestos. Asbestos is friable when it can be crumbled, pulverized or
reduced to powder by hand pressure, and non-friable when hand pressure cannot release
encapsulated asbestos fibers. Friable asbestos is more likely to be released into the air
than no-friable asbestos. We manage all asbestos in ways that minimize its potential to
become airborne or otherwise threaten human health. Regarding underground storage tanks,
subsurface leakage of the materials contained within the tank constitutes the primary risk
posed by these devices. We comply with all applicable laws, including double-wall
construction, testing protocols, placement of tanks within bermed areas, and the
installation of leak and spill detection equipment, to minimize the risks posed by
underground storage tanks.

The
environmental site assessments and investigations have not, however, revealed any
environmental liability that we believe would have a material adverse effect on our
business, assets or results of operations taken as a whole, nor are we aware of any
material environmental liability. Nevertheless, it is possible that our environmental site
assessments do not reveal all environmental liabilities or that there are material
environmental liabilities of which we are unaware.

We
believe that our properties are in compliance in all material respects with all federal,
state and local laws regarding hazardous or toxic substances or petroleum products, except
as noted above. We have not been notified by any governmental authority, and are not
otherwise aware, of any material noncompliance, liability or claim relating to hazardous
or toxic substances or petroleum products in connection with any of our present
properties, other than as noted above. It is possible that future laws will impose
material environmental liabilities on us and that the current environmental condition of
our properties will be affected by tenants, by the condition of land or operations in the
vicinity of our properties, such as the presence of underground storage tanks, or by third
parties unrelated to us.

We
may incur increased costs as a result of recently enacted and proposed changes in laws and
regulations.

Recently
enacted and proposed changes in the law and regulations affecting public companies,
including the provisions of the Sarbanes-Oxley Act of 2002 and rules proposed by the SEC
and by the New York Stock Exchange, could result in increased costs to us as we evaluate
the implications of any new rules and respond to their requirements. The new rules could
make it more difficult or more costly for us to obtain certain types of insurance,
including director and officer liability insurance, and we may be forced to accept reduced
policy limits and coverage or incur substantially higher costs to obtain the same or
similar coverage. The impact of these events could also make it more difficult for us to
attract and retain qualified persons to serve on our board of directors, our board of
committees or as executive officers. We are presently evaluating and monitoring
developments with respect to new and proposed rules and cannot predict or estimate the
amount of additional costs we may incur or the timing of such costs.

ITEM 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA

The
financial statements and supplementary data required by Regulation S-X are included in
this Report on Form 10-K commencing on page F-1.

ITEM 9. CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM
9A. CONTROLS AND PROCEDURES

We
maintain disclosure controls and procedures that are designed to ensure that information
required to be disclosed in our Exchange Act reports is recorded, processed, summarized
and reported within the time periods specified in the SECs rules and forms, and that
such information is accumulated and communicated to our management, including Arden
Realtys Chief Executive Officer and Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosure. In designing and evaluating the
disclosure controls and procedures, our management was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures. Our
disclosure controls and procedures are designed to provide a reasonable level of assurance
of reaching our desired disclosure control objectives. Also, we have an investment in an
unconsolidated entity. Because we do not control or manage this entity, our disclosure
controls and procedures with respect to such entity is necessarily substantially more
limited than those we maintain with respect to our consolidated subsidiaries.

As
required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and
with the participation of Arden Realtys management, including its Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures as of the end of the fourth quarter of the year
ended December 31, 2003 covered by this report. Based on the foregoing, Arden
Realtys Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were effective and were operating at the reasonable
assurance level.

There
has been no change in our internal controls over financial reporting during our most
recent fiscal quarter or fiscal year that has materially affected, or is reasonably likely
to materially affect, our internal controls over financial reporting.

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PART III

The
information required by Part III is incorporated by reference from Arden Realtys definitive
proxy statement for its 2004 Annual Meeting of Stockholders.

ITEM 10. DIRECTORS AND
EXECUTIVE OFFICERS OF THE REGISTRANT

The
information contained in the sections captioned Proposal I; Election of
Directors and Section 16(a) Beneficial Ownership Reporting Compliance of
the definitive proxy statement is incorporated herein by reference.

ITEM 11. EXECUTIVE
COMPENSATION

The
information contained in the section captioned Executive Compensation of the
definitive proxy statement is incorporated herein by reference.

ITEM 12. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Equity Compensation Plan
Information

The
following table provides information as of December 31, 2003 with respect to shares of
Arden Realtys common stock that may be issued under its existing equity compensation
plans (in thousands, except per share amounts):

|Plan Category                                          |  | Number of shares of
common stock to be issued
upon exercise of
outstanding options,
warrants and rights |       | Weighted-average
exercise price of
outstanding options,
warrants and rights |  | Number of shares of common
stock remaining available
for future issuance under
equity compensation plans
(excluding shares reflected
in column (a)) (1)
|------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------- | ----- | --------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
|
|Equity Compensation plans approved by shareholders     |  |                                                                                                         | 3,236 |                                                                             |  |                                                                                                                                                        
|Equity Compensation plans not approved by shareholders |  |                                                                                                         | 190   | (2)                                                                         |  |                                                                                                                                                        
|                                                       |  |                                                                                                         |       |                                                                             |  |                                                                                                                                                        
|Total                                                  |  |                                                                                                         | 3,426 |                                                                             |  |                                                                                                                                                        
|                                                       |  |                                                                                                         |       |                                                                             |  |                                                                                                                                                        

---

|(1) |  | Includes shares available
for issuance under restricted stock grants.
|--- |  | ---------------------------------------------------------------------

|(2) |  | On October 15, 1997, 10,000 options with an exercise price of $32.25, on
                    December 15, 1998, 40,000 options with an exercise price of $22.50, and on
                    November 30, 1999, 10,000 options with an exercise price of $19.25 were granted
                    to each of Arden Realtys non-employee directors: Carl D. Covitz, Larry S.
                    Flax, Steven C. Good and Kenneth B. Roath; Peter S. Gold participated only in
                    the 1998 and 1999 grants. All of these options were granted with an exercise
                    price equal to fair market value on the date of grant, vest during the
                    non-employee directors continued service with Arden over a three-year
                    period, with one third of the options vesting on each anniversary of the grant
                    date and expire ten years from the anniversary of the grant date, subject to
                    earlier termination upon the happening of certain events. From these grants, Mr.
                    Roath and Mr. Good exercised 50,000 and 40,000 options, respectively, during
                    2003. In addition, Mr. Roath forfeited 10,000 options upon his retirement in
                    2003.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The
other information contained in the section captioned Security Ownership of Principal
Stockholders and Management of the definitive proxy statement is incorporated herein
by reference.

ITEM 13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS

The
information contained in the section captioned Certain Relationships and Related
Transactions of the definitive proxy statement is incorporated herein by reference.

ITEM 14. PRINCIPAL
ACCOUNTANT FEES AND SERVICES

The
information contained in the section captioned Principal Accountant Fees and
Services of the definitive proxy statement is incorporated herein by reference.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Financial Statements

The following consolidated financial
information is included as a separate section of this Annual Report on Form 10-K:

|                                                                                                  | PAGE NO.
|------------------------------------------------------------------------------------------------- | --------
|Report of Independent Auditors                                                                    | F-1     
|Consolidated Balance Sheets as of December 31, 2003 and 2002                                      | F-2     
|Consolidated Statements of Income for the years ended December 31, 2003, 2002 and 2001            | F-3     
|Consolidated Statements of Partners' Capital for the years ended December 31, 2003, 2002 and 2001 | F-4     
|Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001        | F-5     
|Notes to Financial Statements                                                                     | F-6     

All
other schedules are omitted since the required information is not present in amounts
sufficient to require submission of the schedule or because the information required is
included in the financial statements and notes thereto.

(b) Reports on Form 8-K

None.

(c) Exhibits

|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                                                                                        
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              |  |                                                                                                                                                                                                                                                                                                                                                                                    
|3.1*          |  | Second Amended and Restated Agreement of Limited Partnership of Arden Realty Limited
               Partnership, dated September 7, 1999, filed as an exhibit to Arden Realty's quarterly
               report on Form 10-Q filed on November 15, 1999.                                                                                                                           
|3.2*          |  | Admission of New Partners and Amendment to Limited Partnership Agreement entered into as of
               December 20, 2000, by and between Arden Realty Limited Partnership and the persons
               identified as the "New Partners" therein, filed as an exhibit to Arden Realty Limited
               Partnership's annual report on Form 10-K filed on March 30, 2001.
|3.3*          |  | Second Amendment to Limited Partnership Agreement entered into as of September 13, 2003, by
               Arden Realty Limited Partnership, filed as an exhibit to Arden Realty Limited Partnership's
               quarterly report on Form 10-Q filed on November 13, 2003.                                                                                                    
|4.1*          |  | Indenture between Arden Realty Limited Partnership and The Bank of New York, as trustee,
               dated March 14, 2000 as filed as an exhibit to Arden Realty Limited Partnership's
               registration statement on Form S-4 (No. 333-35406).                                                                                                                       
|4.2*          |  | Form of Arden Realty Limited Partnership's unsecured 8.875% senior note due 2005, dated
               March 17, 2000 filed as an exhibit to Arden Realty Limited Partnership's registration
               statement on Form S-4 (No. 333-35406).                                                                                                                                 
|4.3*          |  | Form of Arden Realty Limited Partnership's unsecured 9.150% senior note due 2010, dated
               March 17, 2000 filed as an exhibit to Arden Realty Limited Partnership's registration
               statement on Form S-4 (No. 333-35406).                                                                                                                                 

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|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                                      
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              |  |                                                                                                                                                                                                                                                                                                                                  
|4.4*          |  | Form of Arden Realty Limited Partnership's unsecured 8.50% senior note due 2010, dated
               November 20, 2000 as filed as an exhibit to Arden Realty Limited Partnership's registration
               statement on Form S-4 (No. 333-53376).                                                                          
|4.5*          |  | Form of Arden Realty Limited Partnership's 7.00% Note due 2007, dated November 9, 2002 as
               filed as an exhibit to Arden Realty Limited Partnership's current report on Form 8-K filed
               on November 9, 2001.                                                                                          
|4.6*          |  | Officers' certificate dated March 17, 2000 with respect to the terms of Arden Realty
               Limited Partnership's 8.875% senior note due 2005 and 9.150% Senior Notes due 2010 as filed
               as an exhibit to Arden Realty's annual report on Form 10-K filed on April 1, 2002.                                
|4.7*          |  | Officers' certificate dated November 20, 2000 with respect to the terms of Arden Realty
               Limited Partnership's 8.50% Senior Notes due 2010 as filed as an exhibit to Arden Realty's
               annual report on Form 10-K filed on April 1, 2002.                                                              
|4.8*          |  | Officer's certificate dated November 9, 2001 with respect to the terms of Arden Realty
               Limited Partnership's 7.00% Note due 2007, filed as an exhibit to Arden Realty Limited
               Partnership's current report on Form 8-K filed on November 9, 2001.                                                  
|4.9*          |  | Second Amendment to Rights Agreement, dated as of June 19, 2003, between Arden Realty and
               The Bank of New York, filed as an exhibit to Arden Realty's  current report on Form 8-K
               dated July 1, 2003.                                                                                              
|10.1*^        |  | 1996 Stock Option and Incentive Plan of Arden Realty, Inc. and Arden Realty Limited
               Partnership as filed as an exhibit to Arden Realty's registration statement on Form S-11
               (No. 333-08163).                                                                                                      
|10.2*^        |  | Amendment Number 1 to the 1996 Stock Option and Incentive Plan of Arden Realty, Inc. and
               Arden Realty Limited Partnership as filed as an exhibit to Arden Realty's Schedule 14A
               filed on June 23, 1998.                                                                                            
|10.3*^        |  | Form of Officers and Directors Indemnification Agreement as filed as an exhibit to Arden
               Realty's registration statement on Form S-11 (No. 333-08163).                                                                                                                                                            
|10.4*         |  | Loan Agreement dated June 8, 1998 by and between Arden Realty Finance III, L.L.C., a
               Delaware limited liability company and Lehman Brothers Realty Corporation, a Delaware
               corporation filed as an exhibit to Arden Realty's quarterly report on Form 10-Q filed on
               August 14, 1998.
|10.5*         |  | Mortgage Note, dated June 8, 1998 for $136,100,000 by and between Arden Realty Finance III,
               L.L.C., a Delaware limited liability company, and Lehman Brothers Realty Corporation, a
               Delaware corporation. (Exhibit B. to Exhibit 10.4 above).                                                      
|10.6*         |  | Tenant Estoppel Certificate (Exhibit C. to Exhibit 10.4 above).                                                                                                                                                                                                                                                                  
|10.7*         |  | Subordination, Non-Disturbance and Attornment Agreement (Exhibit D. to Exhibit 10.4 above).                                                                                                                                                                                                                                      

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|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.8*         |  | Deed of Trust, Assignment of Rents and Leases, Security Agreement, and Fixture Filing dated
               as of June 8, 1998 made by Arden Realty Finance III, L.L.C. as Grantor, to Commonwealth
               Land Title Company as Trustee for the benefit of Lehman Brothers Realty Corporation as
               Beneficiary, filed as an exhibit to Arden Realty's quarterly report on Form 10-Q filed on
               August 14, 1998.                                                                
|10.9*         |  | Assignment of Leases and Rents dated June 8, 1998, by and between Arden Realty Finance III,
               L.L.C., a Delaware limited liability company and Lehman Brothers Realty Corporation, a
               Delaware corporation, its successors and assigns filed as an exhibit to Arden Realty's
               quarterly report on Form 10-Q filed on August 14, 1998.                                                                                                                                   
|10.10*        |  | Collateral Assignment of Management Agreement and Subordination Agreement dated as of
               June 8, 1998 among Arden Realty Finance III, L.L.C., a Delaware limited liability company
               ("Borrower"), Lehman Brothers Realty Corporation, a Delaware corporation, ("Lender"), and
               Arden Realty Limited Partnership, a Maryland limited partnership ("Manager"), filed as an
               exhibit to Arden Realty's quarterly report on Form 10-Q filed on August 14, 1998.
|10.11*        |  | Security Agreement entered into as of June 8, 1998 by and between Arden Realty Finance III,
               L.L.C., a Delaware limited liability company and Lehman Brothers Realty Corporation, a
               Delaware corporation, filed as an exhibit to Arden Realty's quarterly report on Form 10-Q
               filed on August 14, 1998.                                                                                                                                                              
|10.12*        |  | Environmental Indemnity Agreement dated June 8, 1998 by Arden Realty Finance III, L.L.C., a
               Delaware limited liability company, in favor of Lehman Brothers Realty Corporation, a
               Delaware corporation, filed as an exhibit to Arden Realty's quarterly report on Form 10-Q
               filed on August 14, 1998.                                                                                                                                                               
|10.13*        |  | Letter Agreement dated June 8, 1998 between Lehman Brothers Realty Corporation, Arden
               Realty Finance III, L.L.C., Arden Realty and Arden Realty Limited Partnership, filed as an
               exhibit to Arden Realty's quarterly report on Form 10-Q filed on August 14, 1998.                                                                                                                                                                                                                 
|10.14*        |  | Loan Agreement by and between Arden Realty Finance IV, LLC, a Delaware limited liability
               company and Lehman Brothers Realty Corporation, a Delaware corporation, filed as an exhibit
               to Arden Realty's quarterly report on Form 10-Q filed on August 14, 1998.                                                                                                                                                                                                                     
|10.15*        |  | Mortgage Note, dated June 8, 1998 for $100,600,000 by and between Arden Realty Finance IV,
               L.L.C., a Delaware limited liability company ("Maker"), and Lehman Brothers Realty
               Corporation, a Delaware corporation (Exhibit B to Exhibit 10.14 above).                                                                                                                                                                                                                              
|10.16*        |  | Tenant Estoppel Certificate (Exhibit C. to Exhibit 10.14 above).                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.17*        |  | Subordination, Non-Disturbance and Attornment Agreement (Exhibit D. to Exhibit 10.14 above).                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.18*        |  | Deed of Trust, Assignment of Rents and Leases, Security Agreement, and Fixture Filing dated
               as of June 8, 1998 made by Arden Realty Finance IV, L.L.C. as Grantor, to Commonwealth Land
               Title Company as Trustee for the benefit of Lehman Brothers Realty Corporation as
               Beneficiary, filed as an exhibit to Arden Realty's quarterly report on Form 10-Q filed on
               August 14, 1998.                                                                 
|10.19*        |  | Assignment of Leases and Rents dated June 8, 1998, by and between Arden Realty Finance IV,
               L.L.C., a Delaware limited liability company ("Assignor"), and Lehman Brothers Realty
               Corporation, a Delaware corporation, its successors and assigns ("Assignee"), filed as an
               exhibit to Arden Realty's quarterly report on Form 10-Q filed on August 14, 1998.                                                                                                        

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|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.20*        |  | Collateral Assignment of Management Agreement and Subordination Agreement dated as of
               June 8, 1998 among Arden Realty Finance IV, L.L.C., a Delaware limited liability company
               ("Borrower"), Lehman Brothers Realty Corporation, a Delaware corporation, ("Lender"), and
               Arden Realty Limited Partnership, filed as an exhibit to Arden Realty's quarterly report on
               Form 10-Q filed on August 14, 1998.
|10.21*        |  | Security Agreement entered into as of June 8, 1998 by and between Arden Realty Finance IV,
               L.L.C., a Delaware limited liability company ("Debtor"), and Lehman Brothers Realty
               Corporation, a Delaware corporation ("Secured Party"), filed as an exhibit to Arden
               Realty's quarterly report on Form 10-Q filed on August 14, 1998.                                                                                    
|10.22*        |  | Environmental Indemnity Agreement dated June 8, 1998 by Arden Realty Finance IV, L.L.C., a
               Delaware limited liability company ("Indemnitor"), in favor of Lehman Brothers Realty
               Corporation, a Delaware corporation ("Lender"), filed as an exhibit to Arden Realty's
               quarterly report on Form 10-Q filed on August 14, 1998.                                                                                         
|10.23*        |  | Letter Agreement dated June 8, 1998 between Lehman Brothers Realty Corporation, Arden
               Realty Finance IV, L.L.C., Arden Realty and Arden Realty Limited Partnership, filed as an
               exhibit to Arden Realty's quarterly report on Form 10-Q filed on August 14, 1998.                                                                                                                                                                     
|10.24*^       |  | Amended and Restated Employment Agreement dated August 4, 1998, between Arden Realty and
               Mr. Richard S. Ziman, filed as an exhibit to Arden Realty's quarterly report on Form 10-Q/A
               on December 15, 1998.                                                                                                                                                                                                                            
|10.25*^       |  | Amended and Restated Employment Agreement dated August 4, 1998, between Arden Realty and
               Mr. Victor J. Coleman, filed as an exhibit to Arden Realty's quarterly report on
               Form 10-Q/A filed on December 15, 1998.                                                                                                                                                                                                                     
|10.26*^       |  | Amended and Restated Employment Agreement dated August 4, 1998, between Arden Realty and
               Mr. Herbert Porter, filed as an exhibit to Arden Realty's quarterly report on Form 10-Q/A
               filed on December 15, 1998.                                                                                                                                                                                                                        
|10.27*^       |  | Amended and Restated Employment Agreement dated January 1, 1999, between Arden Realty and
               Mr. Robert Peddicord, filed as a exhibit to Arden Realty's quarterly report on Form 10-Q
               filed on August 8, 2000.                                                                                                                                                                                                                           
|10.28*        |  | Miscellaneous Rights Agreement among Arden Realty, Arden Realty Limited Partnership, NAMIZ,
               Inc. and Mr. Ziman, filed as an exhibit to Arden Realty's registration statement on
               Form S-11 (No. 333-08163).                                                                                                                                                                                                                            
|10.29*        |  | Credit Facility documentation consisting of Second Amended and Restated Revolving Credit
               Agreement by and among Arden Realty Limited Partnership and a group of banks led by Wells
               Fargo Bank as filed as an exhibit to Arden Realty's quarterly report on Form 10-Q filed on
               May 12, 2000.                                                                                                                            
|10.30*        |  | Mortgage Financing documentation consisting of Loan Agreement by and between Arden Realty's
               special purpose financing subsidiary and Lehman Brothers Realty Corporation (the Loan
               Agreement includes the Mortgage Note, Deed of Trust, and form of Tenant Estoppel
               Certificate and Agreement as exhibits) as filed as an exhibit to Arden Realty's
               registration statement on Form S-11 (No. 333-30059). 
|10.31*        |  | Promissory Note, dated as of March 30, 1999, between Massachusetts Mutual Life Insurance
               Company and Arden Realty Finance V, L.L.C. filed as an exhibit to Arden Realty's current
               report on Form 8-K filed on April 20, 1999.                                                                                                                                                                                                         

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|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                                                   
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              |  |                                                                                                                                                                                                                                                                                                                                               
|10.32*        |  | Deed of Trust and Security Agreement, dated as of March 30, 1999, with Arden Realty Finance
               V, L.L.C. as the Trustor and Massachusetts Mutual Life Insurance Company as the Beneficiary
               filed as an exhibit to Arden Realty's current report on Form 8-K filed on April 20, 1999.                               
|10.33*        |  | Assignment of Leases and Rents, dated as of March 30, 1999, between Massachusetts Mutual
               Life Insurance Company and Arden Realty Finance V, L.L.C. filed as an exhibit to Arden
               Realty's current report on Form 8-K filed on April 20, 1999.                                                                    
|10.34*        |  | Subordination of Management Agreement, dated as of March 30, 1999, between Massachusetts
               Mutual Life Insurance Company and Arden Realty Finance V. L.L.C. filed as an exhibit to
               Arden Realty's current report on Form 8-K filed on April 20, 1999.                                                             
|10.35*        |  | Environmental Indemnification and Hold Harmless Agreement, dated as of March 30, 1999,
               between Massachusetts Mutual Life Insurance Company and Arden Realty Finance V, L.L.C.
               filed as an exhibit to Arden Realty's current report on Form 8-K filed on April 20, 1999.                                         
|10.42*^       |  | Amended and Restated Employment Agreement dated May 27, 1999, between Arden Realty and
               Mr. Randy J. Noblitt as filed as an exhibit to Arden Realty Limited Partnership's
               registration statement on Form S-4 (No. 333-53376).                                                                                    
|10.43*^       |  | Amended and Restated Employment Agreement dated July 27, 2000, by and between Arden Realty
               and Mr. Richard S. Ziman as filed as an exhibit to Arden Realty Limited Partnership's
               registration statement on Form S-4 (No. 333-53376).                                                                            
|10.44*^       |  | Amended and Restated Employment Agreement dated July 27, 2000, by and between Arden Realty
               and Mr. Victor J. Coleman as filed as an exhibit to Arden Realty Limited Partnership's
               registration statement on Form S-4 (No. 333-53376).                                                                           
|10.45*^       |  | Amendment to the 1996 Stock Option and Incentive Plan of Arden Realty, Inc. and Arden
               Realty Limited Partnership as filed as an exhibit to Arden Realty's Schedule 14A filed on
               April 25, 2000.                                                                                                                 
|10.46*^       |  | Amended and Restated Employment Agreement dated June 2, 1999, between Arden Realty and
               Mr. Richard S. Davis as filed as an exhibit to Arden Realty Limited Partnership's annual
               report on Form 10-K filed on April 1, 2002.                                                                                     
|10.47*^       |  | Second Amended and Restated 1996 Stock Option and Incentive Plan of Arden Realty Limited
               Partnership and Arden Realty Limited Partnership dated September 20, 2001 as filed as an
               exhibit to Arden Realty's quarterly report on Form 10-Q filed on November 14, 2001.                                           
|10.48*^       |  | Form of Promissory Note entered into on July 19, 2001 and September 28, 2001 between Arden
               Realty Limited Partnership and Andrew Sobel and Robert
               Peddicord, respectively, as filed as an exhibit to Arden Realty Limited Partnership's
               quarterly report on Form 10-Q filed on November 14, 2001.
|10.49*^       |  | Amended and Restated Employment Agreement dated March 29, 2002, between Mr. Andrew Sobel
               and Arden Realty as filed as an exhibit to Arden Realtys quarterly report on
               Form 10-Q filed on August 14, 2002.                                                                                                      
|10.51*        |  | Term Loan Agreement between Arden Realty Limited Partnership and Wells Fargo Bank, National
               Association dated as of June 12, 2002 as filed as an exhibit to Arden Realty Limited
               Partnership's quarterly report on Form 10-Q filed on August 14, 2002.                                                          
|10.52*        |  | Third Amended and Restated Revolving Credit Agreement between Arden Realty Limited
               Partnership and a group of lenders led by Wells Fargo Bank dated as of August 9, 2002 as
               filed as an exhibit to Arden Realty Limited Partnership's quarterly report on Form 10-Q
               filed on November 12, 2002.  

55

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Table of Contents

|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                             
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              |  |                                                                                                                                                                                                                                                                                                         
|10.53*        |  | Amendment to Term Loan Agreement between Arden Realty Limited Partnership and Wells Fargo
               Bank, National Association dated as of September 19, 2002 as filed as an exhibit to Arden
               Realty Limited Partnership's quarterly report on Form 10-Q filed on November 12, 2002.
|10.54*^       |  | Amended and Restated Employment Agreement dated May 27, 1999, by and between Arden Realty
               Limited Partnership and Mr. David Swartz as filed as an exhibit to Arden Realty Limited
               Partnership's annual report on Form 10-K filed on March 27, 2003.                       
|12.1          |  | Statement regarding computation of ratios.                                                                                                                                                                                                                                                              
|21.1          |  | Subsidiaries of Arden Realty Limited Partnership.                                                                                                                                                                                                                                                       
|23.1          |  | Consent of independent auditors.                                                                                                                                                                                                                                                                        
|31.1          |  | Certificate of Chief Executive Officer, pursuant to Rule 13a-14 promulgated under the Exchange Act,
               as created by Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                         
|31.2          |  | Certificate of Chief Financial Officer, pursuant to Rule 13a-14 promulgated under the Exchange Act,
               as created by Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                         
|32.1          |  | Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as created by
               Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                               
|32.2          |  | Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as created by
               Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                               

---

|(*) |  | Incorporated by reference.
|--- |  | --------------------------

|(^) |  | Management contract or
compensatory plan or arrangement required to be identified by Item 15(a)3.
|--- |  | -------------------------------------------------------------------------------------------------

56

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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 on March 15, 2004.

| |  | Arden Realty Limited Partnership
By: Arden Realty, Inc.Its: General PartnerBY: /S/ RICHARD S. ZIMAN
Richard S. ZimanChairman of the Board and Chief Executive Officer
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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.

|                                                      |  |                                                                  |  |               
|----------------------------------------------------- |  | ---------------------------------------------------------------- |  | --------------
|Name                                                  |  | Title                                                            |  | Date          
|                                                      |  |                                                                  |  |               
|                                                      |  |                                                                  |  |               
|/s/ RICHARD S. ZIMAN
Richard S. Ziman   |  | Chairman of the Board,
      ChiefExecutive Officer and Director |  | March 15, 2004
|                                                      |  |                                                                  |  |               
|/s/ VICTOR J. COLEMAN
Victor J. Coleman |  | President, Chief
      OperatingOfficer and Director             |  | March 15, 2004
|                                                      |  |                                                                  |  |               
|/s/ ANDREW J. SOBEL 
Andrew J. Sobel    |  | Executive Vice
      PresidentStrategic Planning and Operations  |  | March 15, 2004
|                                                      |  |                                                                  |  |               
|/s/ RICHARD S. DAVIS
Richard S. Davis   |  | Senior Vice
      President, andChief Financial Officer          |  | March 15, 2004
|                                                      |  |                                                                  |  |               
|/s/ LARRY S. FLAX
Larry S. Flax         |  | Director                                                         |  | March 15, 2004
|                                                      |  |                                                                  |  |               
|/s/ CARL D. COVITZ
Carl D. Covitz       |  | Director                                                         |  | March 15, 2004
|                                                      |  |                                                                  |  |               
|/s/ PETER S. GOLD
Peter S. Gold         |  | Director                                                         |  | March 15, 2004
|                                                      |  |                                                                  |  |               
|/s/ STEVEN C. GOOD
Steven C. Good       |  | Director                                                         |  | March 15, 2004

57

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REPORT OF INDEPENDENT
AUDITORS

The PartnersArden Realty
Limited Partnership

We
have audited the accompanying consolidated balance sheets of Arden Realty Limited
Partnership as of December 31, 2003 and 2002 and the related consolidated statements of
income, partners capital, and cash flows for each of the three years in the period
ended December 31, 2003. These financial statements are the responsibility of the
management of Arden Realty Limited Partnership. Our responsibility is to express an
opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the
United States. 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 consolidated financial position of Arden Realty Limited Partnership at
December 31, 2003 and 2002 and the consolidated results of its operations and its cash
flows for each of the three years in the period ended December 31, 2003, in conformity
with accounting principles generally accepted in the United States.

As
discussed in Note 3 to the financial statements, on January 1, 2002, Arden Realty Limited
Partnership adopted Statement of Financial Accounting Standards No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets.

|Los Angeles, California February 3, 2004 |  | BY: /S/ ERNST & YOUNG LLP
|---------------------------------------- |  | -------------------------

F-1

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Table of Contents

ARDEN REALTY LIMITED
PARTNERSHIPCONSOLIDATED BALANCE SHEETS(in thousands, except
share data)

|                                                                        | December 31, | 
|----------------------------------------------------------------------- | ------------ | 
|
|Assets                                                                  |              | 
|Investment in real estate:                                              |              | 
|Land                                                                    |              | 
|Buildings and improvements                                              |              | 
|Tenant improvements and leasing commissions                             |              | 
|                                                                        |              | 
|                                                                        |              | 
|Less:  accumulated depreciation and amortization                        |              | 
|                                                                        |              | 
|                                                                        |              | 
|Properties under development                                            |              | 
|Land available for development                                          |              | 
|Properties held for disposition, net                                    |              | 
|                                                                        |              | 
|Net investment in real estate                                           |              | 
|                                                                        |              | 
|Cash and cash equivalents                                               |              | 
|Restricted cash                                                         |              | 
|Rent and other receivables, net of allowance of $4,041 and $4,001 at    |              | 
|December 31, 2003 and 2002, respectively                                |              | 
|Due from general partner                                                |              | 
|Deferred rent, net of allowance of $2,216 and $1,627 at December 31,    |              | 
|2003 and 2002, respectively                                             |              | 
|Prepaid financing costs, expenses and other assets, net of accumulated  |              | 
|amortization of $13,781 and $10,181 at December 31, 2003 and 2002,      |              | 
|respectively                                                            |              | 
|                                                                        |              | 
|Total assets                                                            |              | 
|                                                                        |              | 
|                                                                        |              | 
|Liabilities                                                             |              | 
|Mortgage loans payable                                                  |              | 
|Unsecured lines of credit                                               |              | 
|Unsecured term loan                                                     |              | 
|Unsecured senior notes, net of discount                                 |              | 
|Accounts payable and accrued expenses                                   |              | 
|Security deposits                                                       |              | 
|                                                                        |              | 
|Total liabilities                                                       |              | 
|                                                                        |              | 
|Minority interest                                                       |              | 
|                                                                        |              | 
|Partners' Capital                                                       |              | 
|Preferred partner, 2,000,000 Series B Cumulative Redeemable Preferred   |              | 
|units outstanding at December 31, 2003 and 2002                         |              | 
|General and limited partners, 66,113,199 and 64,701,042 common OP units |              | 
|outstanding at December 31, 2003 and 2002, respectively                 |              | 
|Deferred compensation                                                   |              | 
|Accumulated other comprehensive loss                                    |              | 
|                                                                        |              | 
|Total partners' capital                                                 |              | 
|                                                                        |              | 
|Total liabilities and partners' capital                                 |              | 
|                                                                        |              | 

See accompanying notes to
financial statements.

F-2

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Table of Contents

ARDEN REALTY LIMITED
PARTNERSHIPCONSOLIDATED
STATEMENTS OF INCOME (in thousands, except
per share amounts)

|                                                                        |  | Year Ended December 31, |  
|----------------------------------------------------------------------- |  | ----------------------- | -
|
|Property revenues                                                       |  |                         | $
|Property operating expenses                                             |  |                         |  
|                                                                        |  |                         |  
|                                                                        |  |                         |  
|                                                                        |  |                         |  
|General and administrative expenses                                     |  |                         |  
|Interest                                                                |  |                         |  
|Depreciation and amortization                                           |  |                         |  
|Interest and other income                                               |  |                         |  
|                                                                        |  |                         |  
|Income from continuing operations before gain on sale of                |  |                         |  
|properties and minority interest                                        |  |                         |  
|Gain on sale of operating properties                                    |  |                         |  
|                                                                        |  |                         |  
|Income from continuing operations before minority interest              |  |                         |  
|Minority interest                                                       |  |                         |  
|                                                                        |  |                         |  
|Income from continuing operations                                       |  |                         |  
|Discontinued operations                                                 |  |                         |  
|Gain on sale of discontinued properties                                 |  |                         |  
|                                                                        |  |                         |  
|Net income                                                              |  |                         | $
|                                                                        |  |                         |  
|                                                                        |  |                         |  
|Net income allocated to:                                                |  |                         |  
|Preferred partner                                                       |  |                         | $
|                                                                        |  |                         |  
|General and limited partners                                            |  |                         | $
|                                                                        |  |                         |  
|                                                                        |  |                         |  
|Basic net income per common operating partnership unit:                 |  |                         |  
|Income from continuing operations                                       |  |                         | $
|Income from discontinued operations                                     |  |                         |  
|                                                                        |  |                         |  
|Net income per common operating partnership unit  basic                 |  |                         | $
|                                                                        |  |                         |  
|                                                                        |  |                         |  
|                                                                        |  |                         |  
|Weighted average number of common operating partnership units - basic   |  |                         |  
|                                                                        |  |                         |  
|                                                                        |  |                         |  
|Diluted net income per common operating partnership unit:               |  |                         |  
|Income from continuing operations                                       |  |                         | $
|Income from discontinued operations                                     |  |                         |  
|                                                                        |  |                         |  
|Net income per common operating partnership unit - diluted              |  |                         | $
|                                                                        |  |                         |  
|                                                                        |  |                         |  
|Weighted average number of common operating partnership units - diluted |  |                         |  
|                                                                        |  |                         |  

See accompanying notes to
financial statements.

F-3

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Table of Contents

ARDEN REALTY LIMITED
PARTNERSHIPCONSOLIDATED
STATEMENTS OF PARTNERS CAPITAL(in thousands, except
share amounts)

|                                        | Preferred
Partner |  | Limited
Partner |        | General
Partner |   | Deferred
Compensation |   | Total |           | Accumulated
Other
Comprehensive
Loss |  
|--------------------------------------- | ----------------- |  | --------------- | ------ | --------------- | - | --------------------- | - | ----- | --------- | ------------------------------------ | -
|Balance at January 1, 2001              |                   |  | $               | 50,000 |                 | $ | 54,629                |   | $     | 1,373,646 |                                      | $
|Common OP Units converted               |                   |  |                 | --     |                 |   | (6,586                | ) |       | 6,586     |                                      |  
|Distributions                           |                   |  |                 | (4,312 | )               |   | (4,182                | ) |       | (123,234  | )                                    |  
|Stock compensation                      |                   |  |                 | --     |                 |   | --                    |   |       | 2,533     |                                      |  
|Amortization of stock compensation      |                   |  |                 | --     |                 |   | --                    |   |       | --        |                                      |  
|Stock options exercised                 |                   |  |                 | --     |                 |   | --                    |   |       | 463       |                                      |  
|Net income                              |                   |  |                 | 4,312  |                 |   | 3,283                 |   |       | 98,662    |                                      |  
|Redemption adjustment                   |                   |  |                 | --     |                 |   | 1,582                 |   |       | (1,582    | )                                    |  
|                                        |                   |  |                 |        |                 |   |                       |   |       |           |                                      |  
|Balance at December 31, 2001            |                   |  |                 | 50,000 |                 |   | 48,726                |   |       | 1,357,074 |                                      |  
|Common OP Units converted               |                   |  |                 | --     |                 |   | (2,270                | ) |       | 2,270     |                                      |  
|Distributions                           |                   |  |                 | --     |                 |   | (3,527                | ) |       | (129,153  | )                                    |  
|Stock compensation                      |                   |  |                 | --     |                 |   | --                    |   |       | 4,815     |                                      |  
|Amortization of stock compensation      |                   |  |                 | --     |                 |   | --                    |   |       | --        |                                      |  
|Forfeitures                             |                   |  |                 | --     |                 |   | --                    |   |       | (1,245    | )                                    |  
|Stock options exercised                 |                   |  |                 | --     |                 |   | --                    |   |       | 9,078     |                                      |  
|Stock repurchases                       |                   |  |                 | --     |                 |   | --                    |   |       | (40,693   | )                                    |  
|Unrealized loss on interest rate hedges |                   |  |                 | --     |                 |   | --                    |   |       | --        |                                      |  
|Net income                              |                   |  |                 | 4,312  |                 |   | 1,944                 |   |       | 71,407    |                                      |  
|                                        |                   |  |                 |        |                 |   |                       |   |       |           |                                      |  
|Comprehensive income                    |                   |  |                 | --     |                 |   | --                    |   |       | --        |                                      |  
|Redemption adjustment                   |                   |  |                 | --     |                 |   | (6,845                | ) |       | 6,845     |                                      |  
|                                        |                   |  |                 |        |                 |   |                       |   |       |           |                                      |  
|Balance at December 31,2002             |                   |  |                 | 50,000 |                 |   | 38,028                |   |       | 1,280,398 |                                      |  
|Common OP Units converted               |                   |  |                 | --     |                 |   | (495                  | ) |       | 495       |                                      |  
|Distributions                           |                   |  |                 | (4,312 | )               |   | (3,443                | ) |       | (128,068  | )                                    |  
|Stock compensation                      |                   |  |                 | --     |                 |   | --                    |   |       | 6,279     |                                      |  
|Amortization of stock compensation      |                   |  |                 | --     |                 |   | --                    |   |       | --        |                                      |  
|Stock option expense                    |                   |  |                 | --     |                 |   | --                    |   |       | 41        |                                      |  
|Forfeitures                             |                   |  |                 | --     |                 |   | --                    |   |       | (41       | )                                    |  
|Stock options exercised                 |                   |  |                 | --     |                 |   | --                    |   |       | 27,946    |                                      |  
|Unrealized gain on interest rate hedges |                   |  |                 | --     |                 |   | --                    |   |       | --        |                                      |  
|Net income                              |                   |  |                 | 4,312  |                 |   | 1,604                 |   |       | 60,078    |                                      |  
|                                        |                   |  |                 |        |                 |   |                       |   |       |           |                                      |  
|Comprehensive income                    |                   |  |                 | --     |                 |   | --                    |   |       | --        |                                      |  
|Redemption adjustment                   |                   |  |                 | --     |                 |   | 15,512                |   |       | (15,512   | )                                    |  
|                                        |                   |  |                 |        |                 |   |                       |   |       |           |                                      |  
|Balance at December 31,2003             |                   |  | $               | 50,000 |                 | $ | 51,206                |   | $     | 1,231,616 |                                      | $
|                                        |                   |  |                 |        |                 |   |                       |   |       |           |                                      |  

See accompanying notes to
financial statements.

F-4

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Table of Contents

ARDEN REALTY LIMITED
PARTNERSHIPMCONSOLIDATED
STATEMENTS OF CASH FLOWS(in thousands)

|                                                                                  |  | Year Ended December 31, |  
|--------------------------------------------------------------------------------- |  | ----------------------- | -
|
|Operating Activities:                                                             |  |                         |  
|Net income                                                                        |  |                         | $
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                         |  
|Minority interest                                                                 |  |                         |  
|Depreciation and amortization, including discontinued operations                  |  |                         |  
|Amortization of loan costs and fees                                               |  |                         |  
|Gain on sale of property                                                          |  |                         |  
|Gain on repayment of mortgage loan receivable                                     |  |                         |  
|Amortization of deferred compensation                                             |  |                         |  
|Changes in operating assets and liabilities:                                      |  |                         |  
|Rent and other receivables                                                        |  |                         |  
|Due from general partner                                                          |  |                         |  
|Deferred rent                                                                     |  |                         |  
|Prepaid financing costs, expenses and other assets                                |  |                         |  
|Accounts payable and accrued expenses                                             |  |                         |  
|Security deposits                                                                 |  |                         |  
|                                                                                  |  |                         |  
|Net cash provided by operating activities                                         |  |                         |  
|                                                                                  |  |                         |  
|Investing Activities:                                                             |  |                         |  
|Acquisitions and improvements to commercial properties                            |  |                         |  
|Proceeds from sales of properties                                                 |  |                         |  
|Proceeds from repayment of mortgage note receivable                               |  |                         |  
|                                                                                  |  |                         |  
|Net cash used in investing activities                                             |  |                         |  
|                                                                                  |  |                         |  
|Financing Activities:                                                             |  |                         |  
|Proceeds from term loan                                                           |  |                         |  
|Repayment of mortgage loans                                                       |  |                         |  
|Proceeds from unsecured lines of credit                                           |  |                         |  
|Repayments of unsecured lines of credit                                           |  |                         |  
|Proceeds from issuances of unsecured senior notes, net of discount                |  |                         |  
|Decrease (increase) in restricted cash                                            |  |                         |  
|Proceeds from issuance of common operating partnership units                      |  |                         |  
|Repurchase of common operating partnership units                                  |  |                         |  
|Distributions to minority interests                                               |  |                         |  
|Distributions to preferred operating partnership unit holders                     |  |                         |  
|Distributions and redemptions paid to common operating partnership holders        |  |                         |  
|                                                                                  |  |                         |  
|Net cash used in financing activities                                             |  |                         |  
|                                                                                  |  |                         |  
|Net increase (decrease) in cash and cash equivalents                              |  |                         |  
|Cash and cash equivalents at beginning of period                                  |  |                         |  
|                                                                                  |  |                         |  
|Cash and cash equivalents at end of period                                        |  |                         | $
|                                                                                  |  |                         |  
|                                                                                  |  |                         |  
|Supplemental Disclosure of Cash Flow Information:                                 |  |                         |  
|Cash paid during the period for interest, net of amount capitalized               |  |                         | $
|                                                                                  |  |                         |  

See accompanying notes to
financial statements.

F-5

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Table of Contents

ARDEN REALTY LIMITED
PARTNERSHIPNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

1.
Business

Description
of Business

The
terms us, we and our as used in this report refer to
Arden Realty Limited Partnership. The term Arden Realty refers to Arden
Realty, Inc.

Organization
and Formation of the Company

We
are an operating partnership that owns, manages, leases, develops, renovates and acquires
commercial properties located in Southern California. Arden Realty, a real estate
investment trust, or REIT, is our sole general partner and, as of December 31, 2003, owned
97.4% of our common operating partnership units, or common OP Units. Arden Realty conducts
substantially all of its operations through us and our subsidiaries. Commencing with its
taxable year ended December 31, 1996, Arden Realty has operated and qualified as a REIT
for federal income tax purposes.

As
of December 31, 2003, our portfolio was comprised of 130 primarily suburban office
properties, consisting of 215 buildings with approximately 18.9 million net rentable
square feet including one development project with approximately 283,000 net rentable square feet
currently under lease-up. As of December 31, 2003, our operating portfolio was 90.4%
occupied.

Arden
Realtys interest in us entitles it to share in our cash distributions, and in our
profits and losses in proportion to its percentage ownership. Certain individuals and
entities own our remaining common OP Units, including Messrs. Ziman and Coleman, Arden
Realtys Chairman and Chief Executive Officer and President and Chief Operating
Officer, respectively, together with other entities and persons. Each limited partner
holding common OP Units is entitled to cause us to redeem the limited partners
common OP Units for cash. We may, however, elect to exchange those common OP Units for
shares of Arden Realtys common stock on a one-for-one basis, subject to certain
limitations instead of paying cash. With each redemption or exchange of common OP Units,
Arden Realtys percentage interest in us will increase.

As
our sole general partner, Arden Realty generally has the exclusive power under our
partnership agreement to manage us and conduct our business, subject to limited
exceptions. Arden Realtys board of directors manages our affairs. Our existence as a
limited partnership cannot be terminated until 2096 without the approval of a majority of
our partners or in connection with the sale of all or substantially all of our assets, a
business combination, a judicial decree or the redemption of all the common OP Units held
by our limited partners.

We
are a Maryland limited partnership. Arden Realty is a Maryland corporation. Arden
Realtys common stock is listed on the New York Stock Exchange under the symbol
ARI.

2.
Basis of Presentation and Summary of Significant Accounting Policies

Basis
of Presentation

The
accompanying consolidated financial statements include the accounts of Arden Realty, Inc.,
us and our other subsidiaries. All significant intercompany balances and transactions have
been eliminated in consolidation.

We
consolidate all entities for which we have controlling financial interest as measured by a
majority of the voting interest. For entities in which the controlling financial interest
is not clearly indicated by ownership of a majority of the voting interest, we would
consolidate those entities that we control by agreement. We also consolidate all variable
interest entities for which we are the primary beneficiary.

We
and Arden Realty currently own 100% of all of our consolidated subsidiaries and do not
have any unconsolidated investments other than an investment in the securities of a
non-publicly traded company. This investment represents approximately 5.5% of the total
equity outstanding for this particular company. Because we do not control this company
contractually nor exert significant influence over its operating and financial policies,
we account for this investment under the cost method of accounting.

Risks
and Uncertainties

The
preparation of financial statements, in conformity with accounting principles generally
accepted in the United States, requires us 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.

F-6

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Table of Contents

Our
properties are all located in Southern California. As a result of our geographic
concentration, the operations of these properties could be affected by the economic
conditions in this region.

Segment
Information

We
view our operations as principally one segment, the operation of commercial real estate
located in Southern California, and the financial information disclosed herein represents
all of the financial information related to this principal operating segment.

Commercial
Properties

Our
properties are stated at depreciated cost. Write-downs to estimated fair value are
recognized whenever a propertys estimated undiscounted future cash flows are less
than its book value. We carry properties held for disposition at the lower of their
depreciated cost or fair value less cost to sell. Based on our assessment, no write-downs
to estimated fair value were necessary as of December 31, 2003 and 2002.

Property
acquisitions have been accounted for in accordance with Statement of Financial Accounting
Standards No. 141, Business Combinations since June 30, 2001, the effective date of this
pronouncement. The fair value of the real estate acquired is allocated to the acquired
tangible assets, consisting of land, building and tenant improvements, and identified
intangible assets and liabilities, consisting of the value of above-market and
below-market leases, other value of in-place leases and value of tenant relationships, if
any, based in each case on their fair values.

The
fair value of the tangible assets of an acquired property (which includes land, building
and tenant improvements) is determined by valuing the property as if it were vacant, and
the as-if-vacant value is then allocated to land, building and tenant
improvements based on managements determination of the relative fair values of these
assets. We determine the as-if-vacant fair value of a property using methods similar to
those used by independent appraisers. Factors considered by management in performing these
analyses include an estimate of carrying costs during the expected lease-up periods
considering current market conditions and costs to execute similar leases. In estimating
carrying costs, management includes estimates of lost rental revenue, real estate taxes,
insurance and other operating expenses during the expected lease-up periods based on
current market demand. We also estimate costs to execute similar leases including leasing
commissions, concessions, legal and other related costs.

In
allocating the fair value of the identified intangible assets and liabilities of an
acquired property, above-market and below-market in-place lease values are recorded based
on the present value (using an interest rate which reflects the risks associated with the
leases acquired) of the difference between (i) the contractual amounts to be paid pursuant
to the in-place leases and (ii) managements estimate of fair market lease rates for
the corresponding in-place leases, measured over a period equal to the remaining
non-cancelable term of the lease. The capitalized above-market and below-market lease
values are amortized into rental income over the remaining non-cancelable terms of the
respective leases.

The
aggregate value of other acquired intangible assets, consisting of in-place leases and
tenant relationships, if any, is measured by the excess of (i) the purchase price paid for
a property after adjusting existing in-place leases to market rental rates over (ii) the
estimated fair value of the property as if vacant, determined as set forth above. This
aggregate value is allocated between in-place lease values and tenant relationships based
on managements evaluation of the specific characteristics of each tenants
lease. Should acquisitions of properties result in allocating material amounts to the
value of tenant relationships, an amount would be separately allocated and amortized over
the estimated life of the relationship.

Costs
related to the acquisition, development, construction and improvement of properties are
capitalized. Interest, real estate taxes, insurance and other development related costs
incurred during construction periods are capitalized and depreciated on the same basis as
the related asset.

Repair
and maintenance costs are charged to expenses as incurred and significant replacements and
betterments are capitalized. Repairs and maintenance costs include all costs that do not
extend the useful life of a an asset or increase its operating efficiency. Significant
replacements and betterments represent costs that extend an assets useful life or
increase its operating efficiency.

Depreciation

Depreciation
is calculated under the straight-line method using depreciable lives of ten to forty seven
years for building and building improvements and five-year lives for furniture, fixtures
and equipment. Amortization of tenant improvements is calculated using the straight-line
method over the term of the related lease.

The
carrying amount of all commercial properties is evaluated periodically to determine if
adjustment to the useful life is warranted. During 2001, the useful life of certain
building and building improvements were adjusted to more accurately reflect their

F-7

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Table of Contents

estimated usefulness. The effect of this change in estimate in 2001 was an increase to net
income of approximately $10.1 million or $0.16 per common share. This change in estimate
did not have an impact on our 2001 cash flows.

Costs
associated with leasing properties are capitalized and amortized to expense on a
straight-line basis over the related lease term.

Cash
Equivalents

Cash
equivalents consist of highly liquid investments with original maturities of three months
or less when acquired.

Restricted
Cash

Restricted
cash at December 31, 2003 and 2002 consisted of $13.7 million in cash deposits as required
by certain of our mortgage loans payable and $6.0 million and $6.8 million, respectively,
in impound accounts for real estate taxes and insurance, as required by certain of our
mortgage loans payable.

Prepaid
Financing Costs

Costs
associated with obtaining long-term financing are capitalized and amortized to interest
expense over the term of the related loan.

Revenue
Recognition

Minimum
rent, including rental abatements and contractual fixed increases attributable to
operating leases, is recognized on a straight-line basis over the term of the related
lease. Amounts expected to be received in later years are included in deferred rents.
Property operating expense reimbursements due from tenants for common area maintenance,
real estate taxes and other recoverable costs are recognized in the period the related
expenses are incurred.

The
Partnership recognizes gains on sales of real estate pursuant to the provisions of SFAS
No. 66 Accounting for Sales for Real Estate. The specific timing of a sale is
measured against various criteria in SFAS No. 66 related to the terms of the transaction
and any continuing involvement in the form of management or financial assistance
associated with the property. If the sales criteria are not met, the Partnership defers
gain recognition and accounts for the continued operations of the property by applying the
finance, installment or cost recovery methods, as appropriate, until the sales criteria
are met.

Allowance
for Rents and Other Receivables

We
periodically evaluate the collectibility of amounts due from tenants and maintain an
allowance for doubtful accounts for estimated losses resulting from the inability of
tenants to make required payments under lease agreements. We also maintain an allowance
for deferred rent receivable that arises from the straight-lining of rents. We exercise
judgment in establishing these allowances and consider payment history and current credit
status in developing these estimates.

Income
Taxes

Our
taxable income is reportable by our partners on their separate tax returns. Accordingly,
no provision has been made for income taxes in the accompanying statements of income.

Fair
Value of Financial Instruments

Our
disclosures of estimated fair value of financial instruments at December 31, 2003 and 2002
were determined using available market information and appropriate valuation methods.
Considerable judgment is necessary to interpret market data and develop estimated fair
value. The use of different market assumptions or estimation methods may have a material
effect on the estimated fair value amounts.

Our
cash equivalents, mortgage notes receivable, unsecured lines of credit, interest rate
hedge agreements, accounts payable and other financial instruments are carried at amounts
that reasonably approximate their fair value amounts.

F-8

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Table of Contents

The
estimated fair value of our mortgage loans payable and unsecured senior notes is as
follows (in thousands):

|                       | December 31, 2003 |  | December 31, 2002 |        
|---------------------- | ----------------- |  | ----------------- | -------
|
|Mortgage loans payable |                   |  | $                 | 564,829
|Unsecured senior notes |                   |  | $                 | 498,952
|                       |                   |  |                   |        

The
estimated fair value is based on interest rates available at each of the dates presented
for issuance of debt with similar terms and remaining maturities. The estimated fair value
amounts of our notes payable above are not necessarily indicative of the amounts that we
could realize in a current market exchange.

Interest
Rate Hedge Agreements

We
have periodically entered into interest rate hedge agreements to effectively convert
floating rate debt into fixed rate debt. Net amounts received or paid under these
agreements are recognized as an adjustment to interest expense when such amounts are
incurred or earned. Our objective in using interest rate hedge agreements is to limit our
exposure to interest rate movements.

During
2002, such agreements were used to fix the floating interest rate associated with $50
million of the Wells Fargo unsecured line of credit and the entire $125 million balance of
the unsecured term loan. Since June of 2003, we have also entered into $150 million of
forward-starting hedges that effectively fixed the 10-year Treasury rate at an average
rate of approximately 4.1% for borrowings that are anticipated to occur in 2004 to
refinance some of our scheduled debt maturities. The forward-starting interest rate hedges
were entered into at current market rates and, therefore, had no initial cost.

In
October and November of 2003, we also entered into reverse interest rate hedge agreements
to float $100 million of the fixed interest rate associated with the 7.00% senior
unsecured notes due in November of 2007. Under these reverse hedges, we will receive
interest at a fixed rate of 7.00% and pay interest at a variable rate averaging the
six-month LIBOR in arrears plus 3.10%. The interest rate hedges mature at the same time
the notes are due. These hedges qualify as fair value hedges for accounting purposes. Net
semi-annual interest payments will be recognized as increases or decreases in interest
expense. The fair value of the interest rate hedges will be recognized on our balance
sheet and the carrying value of the senior unsecured notes will be increased or decreased
by an offsetting amount.

Statement
of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and
Hedging Activities (SFAS 133), as amended and interpreted, establishes accounting
and reporting standards for derivative instruments and for hedging activities. The
accounting for changes in the fair value of derivatives depends on the intended use of the
derivative and the resulting destination. Derivatives used to hedge the exposure to
changes in the fair value of an asset, liability, or firm commitment attributable to a
particular risk, are considered fair value hedges. Derivatives used to hedge the exposure
to variability in expected future cash flows, or other types of forecasted transactions,
are considered cash flow hedges.

For
derivatives designated as fair value hedges, changes in the fair value of the derivative
and the hedged item related to the hedged risk are recognized in earnings. For derivatives
designated as cash flow hedges, the effective portion of changes in the fair value of the
derivative is initially reported in other comprehensive income (loss), outside of earnings
and subsequently reclassified to earnings when the hedged transaction affects earnings.

Under
SFAS 133, our $175 million in floating-to-fixed hedges and our $150 million in
forward-starting hedges outstanding as of December 31, 2003 are classified as cash flow
hedges with their fair value of approximately $601,000 reported in accumulated other
comprehensive loss on our balance sheet. The estimated fair value of these interest rate
hedge agreements are dependent on changes in market interest rates and other market
factors that affect the value of such agreements. Consequently, the estimated current fair
value may significantly change during the term of the agreements. Any estimated gain or
loss from these agreements will be amortized into earnings as we recognize the interest
expense for the underlying floating-rate loans at the fixed interest rate provided under
our agreements in the case of the fixed-to-floating hedges or as part of interest expense
for future borrowings in the case of the forward-starting hedges. If the underlying debt
related to these hedges were to be repaid prior to maturity, we would recognize into
interest expense any unamortized gain or loss at the time of such early repayment.

Under
SFAS 133, our $100 million in fixed-to-floating hedges are classified as fair value hedges
with their fair value of approximately $506,000 reported in both the unsecured senior
notes and prepaid financing costs, expenses and other assets line items on our balance
sheet. The estimated fair value of these interest rate hedge agreements are dependent on
changes in market interest rates and other market factors that affect the value of such
agreements. Consequently, the estimated current fair value may significantly change during
the term of the agreements. Any estimated gain or loss from these agreements will be
amortized into earnings as we recognize the interest expense for the underlying fixed-rate
loan at the floating interest rate provided under our agreements in the case of the
floating-to-fixed hedges. If the underlying debt related to these hedges were to be repaid
prior to maturity, we would recognize into interest expense any unamortized gain or loss
at the time of such early repayment.

F-9

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Table of Contents

New
Accounting Standards

In
December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure (SFAS 148) which amends SFAS 123,
Accounting for Stock-Based Compensation. SFAS 148 provides alternative methods
of transition for a voluntary change to the fair value based method of accounting for
stock-based compensation and requires disclosure in both annual and interim financial
statements about the method of accounting for stock-based compensation and the effect of
the method used on reported results. We have adopted the disclosure provisions of SFAS 148
(see footnote 11). Beginning January 1, 2003, we adopted the prospective transition method
for all new stock compensation awards. The adoption of SFAS 148 did not have a significant
impact on our consolidated financial statements during 2003.

In
January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of Variable
Interest Entities (FIN 46). FIN 46 clarifies the application of Accounting Research
Bulletin No. 51, Consolidated Financial Statements and provides guidance on
the identification of entities for which control is achieved through means other than
through voting rights and how to determine when and which business enterprise should
consolidate such an entity. This new model for consolidation applies to an entity which
either (1) the equity investors (if any) do not have a controlling financial interest or
(2) the equity investment at risk is insufficient to finance that entitys activities
without receiving additional subordinated financial support from other parties. Certain
provisions of this interpretation are effective for 2003. The adoption of these provisions
of this statement did not have a significant impact on our consolidated financial
statements during 2003.

In
May 2003, the FASB issued FASB Statement No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity (SFAS
150). SFAS 150 affects an issuers accounting for certain types of freestanding
financial instruments. In addition to its requirements for the classification and
measurement of financial instruments in its scope, SFAS 150 also requires disclosures
about alternative ways of settling the instruments and capital structure of entities, all
of whose shares are mandatorily redeemable. We adopted SFAS 150 in the third quarter of
2003 except as it applies to noncontrolling interests that are classified as equity under
SFAS 150 in the financial statements of the subsidiary which has been deferred
indefinitely. The adoption of this statement did not have a significant impact on our
consolidated financial statements during 2003.

Reclassifications

Certain
prior year amounts have been reclassified to confirm with the current year presentation.

3.
Commercial Properties

Property
Dispositions

|Property                     |  | County         |  | Submarket          |  | Date ofSale       |  | PropertyType |  | SquareFeet |  | Gross SalesPrice($000s)
|---------------------------- |  | -------------- |  | ------------------ |  | ----------------- |  | ------------ |  | ---------- |  | -----------------------
|9201 Sunset                  |  | Los Angeles    |  | West Hollywood     |  | March 11, 2003    |  | Office       |  | 139,711    |  | $                      
|Centrelake Plaza             |  | San Bernardino |  | Inland Empire West |  | April 11, 2003    |  | Office       |  | 110,763    |  |                        
|Havengate Center             |  | San Bernardino |  | Inland Empire West |  | April 11, 2003    |  | Office       |  | 80,557     |  |                        
|HDS Plaza                    |  | San Bernardino |  | Inland Empire West |  | April 11, 2003    |  | Office       |  | 104,178    |  |                        
|Chicago Avenue Business Park |  | Riverside      |  | Inland Empire East |  | April 11, 2003    |  | Office       |  | 47,482     |  |                        
|Lambert Plaza                |  | Orange         |  | North County       |  | May 22, 2003      |  | Office       |  | 32,807     |  |                        
|Pennsfield Plaza             |  | Los Angeles    |  | Simi/Conejo Valley |  | November 5, 2003  |  | Office       |  | 21,202     |  |                        
|Lyons Plaza                  |  | Los Angeles    |  | Simi/Conejo Valley |  | December 11, 2003 |  | Office       |  | 61,203     |  | $                      
|                             |  |                |  |                    |  |                   |  |              |  |            |  |                        
|                             |  |                |  |                    |  |                   |  |              |  | 597,903    |  | $                      
|                             |  |                |  |                    |  |                   |  |              |  |            |  |                        

Property Acquisitions

|Property                     |  | County    |  | Submarket     |  | Date ofSale       |  | PropertyType |  | SquareFeet |  | GrossPurchasePrice($000s)
|---------------------------- |  | --------- |  | ------------- |  | ----------------- |  | ------------ |  | ---------- |  | -------------------------
|Governor Executive Centre II |  | San Diego |  | Governor Park |  | December 23, 2003 |  | Office       |  | 101,433    |  | $                        
|                             |  |           |  |               |  |                   |  |              |  |            |  |                          

F-10

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Table of Contents

Discontinued
Operations and Properties held for Disposition

SFAS
144, effective January 1, 2002, requires, among other things, that the operating results
of real estate properties classified as held for disposition subsequent to January 1, 2002
be included in discontinued operations in the statements of income for all periods
presented. SFAS 144 provides that long-lived assets classified as held for disposition as
a result of disposal activities that were initiated prior to January 1, 2002, are to be
accounted for in accordance with Financial Accounting Standards No. 121 (SFAS 121).
Accordingly, the operating results for the properties classified as held for disposition
prior to January 1, 2002 and sold prior to December 31, 2002 are included in income from
continuing operations for the years ended December 31, 2002 and 2001. In order to increase
the comparability of our consolidated statements of income for the years ended December
31, 2003, 2002 and 2001, the tables below summarize the operating results of two
properties classified as discontinued operations at December 31, 2003 and eight properties
sold during 2003.

As
of December 31, 2003, properties held for disposition consisted of two properties with
approximately 295,000 square feet.

The
results of operations for the two properties held for disposition as of December 31, 2003
and eight properties sold during 2003 classified as discontinued operations for the years
ended December 31, 2003, 2002 and 2001 are as follows (in thousands):

|                                        |  | For the Years Ended December 31, |  
|--------------------------------------- |  | -------------------------------- | -
|
|Revenues                                |  |                                  | $
|Property Operating expenses             |  |                                  |  
|Depreciation and amortization           |  |                                  |  
|Interest Expense                        |  |                                  |  
|                                        |  |                                  |  
|Discontinued operations                 |  |                                  | $
|                                        |  |                                  |  
|Gain on sale of discontinued properties |  |                                  | $
|                                        |  |                                  |  

Capitalized
Interest

We
capitalize interest and taxes related to buildings under construction and renovation to
the extent those assets qualify for capitalization.

Total
interest incurred and the amount capitalized was as follows (in thousands):

|                        |  | For the Years Ended December 31, |  
|----------------------- |  | -------------------------------- | -
|
|Total interest incurred |  |                                  | $
|Amount capitalized      |  |                                  |  
|                        |  |                                  |  
|Amount expensed         |  |                                  | $
|                        |  |                                  |  

---

|(1) |  | Excludes approximately $2.5 million of interest capitalized on an office
                    property which was classified as part of discontinued operations for the year
                    ended December 31, 2001.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Future
Minimum Lease Payments

Future
minimum lease payments to be received under noncancelable operating leases existing as of
December 31, 2003, are as follows (in thousands):

|2004       | $ | 346,429   | 
|---------- | - | --------- | 
|2005       |   | 297,034   | 
|2006       |   | 236,734   | 
|2007       |   | 186,741   | 
|2008       |   | 138,530   | 
|Thereafter |   | 343,195   | 
|           |   |          
|Total      | $ | 1,548,663 | 
|           |   |          

The
above future minimum lease payments do not include payments received for tenant
reimbursements of specified operating expenses.

F-11

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Table of Contents

We
lease the land underlying the office buildings or parking structures at six of our
buildings. Ground lease expense, including amounts netted against parking revenues, was
approximately $2.0 million, $1.9 million and $2.9 million for the years ended December 31,
2003, 2002 and 2001, respectively. Future minimum ground lease payments due under existing
ground leases are as follows (in thousands):

|2004       | $ | 1,785   | 
|---------- | - | ------- | 
|2005       |   | 1,815   | 
|2006       |   | 1,840   | 
|2007       |   | 1,865   | 
|2008       |   | 1,865   | 
|Thereafter |   | 110,922 | 
|           |   |        
|Total      | $ | 120,092 | 
|           |   |        

4.
Mortgage Notes Receivable

In
September 1997, we purchased two mortgage notes receivable, secured by a single commercial
office property, with an aggregate balance of approximately $17.6 million, for
approximately $14.4 million. The notes bore interest at the Eleventh District Cost of
Funds (as defined) plus 3.25% per annum, required monthly payments of principal, interest,
and additional net cash flow from the office property and matured on May 31, 2004. These
notes were repaid in full by the borrower in October 2002. As a result of this redemption,
we recognized as income the unamortized purchase discount on these notes at the time of
repurchase totaling approximately $750,000.

5. Mortgage Loans and
Unsecured Indebtedness

A
summary of mortgage loans payable, unsecured lines of credit and unsecured senior notes is
as follows:

|Type of Debt                  |  | December 31,2003 |   | December 31,2002 |  | Stated Annual
Interest Rate at
December 31, 2003 |           | Fixed/FloatingRate |  | Number of
Properties
Securing Loan |   | MaturityDate |                          
|----------------------------- |  | ---------------- | - | ---------------- |  | ------------------------------------------------ | --------- | ------------------ |  | ---------------------------------- | - | ------------ | -------------------------
|
|Mortgage Loans Payable:       |  |                  |   |                  |  |                                                  |           |                    |  |                                    |   |              |                          
|Fixed Rate                    |  |                  |   |                  |  |                                                  |           |                    |  |                                    |   |              |                          
|Mortgage Financing I(1)       |  |                  | $ | 175,000          |  | $                                                | 175,000   |                    |  | 7.52                               | % |              | Fixed                    
|Mortgage Financing III(2)     |  |                  |   | 134,544          |  |                                                  | 136,100   |                    |  | 6.74                               | % |              | Fixed                    
|Mortgage Financing IV(2)      |  |                  |   | 109,960          |  |                                                  | 111,200   |                    |  | 6.61                               | % |              | Fixed                    
|Mortgage Financing V(2)       |  |                  |   | 105,899          |  |                                                  | 108,153   |                    |  | 6.94                               | % |              | Fixed                    
|Mortgage Financing VI(2)      |  |                  |   | 21,578           |  |                                                  | 21,816    |                    |  | 7.54                               | % |              | Fixed                    
|Activity Business Center(2)   |  |                  |   | 7,394            |  |                                                  | 7,580     |                    |  | 8.85                               | % |              | Fixed                    
|145 South Fairfax(2)          |  |                  |   | 3,912            |  |                                                  | 3,952     |                    |  | 8.93                               | % |              | Fixed                    
|Marin Corporate Center(2)     |  |                  |   | 2,724            |  |                                                  | 2,850     |                    |  | 9.00                               | % |              | Fixed                    
|Conejo Business Center(2)     |  |                  |   | 2,699            |  |                                                  | 2,795     |                    |  | 8.75                               | % |              | Fixed                    
|Conejo Business Center(2)     |  |                  |   | 1,149            |  |                                                  | 1,208     |                    |  | 7.88                               | % |              | Fixed                    
|                              |  |                  |   |                  |  |                                                  |           |                    |  |                                    |   |              |                          
|                              |  |                  |   | 564,829          |  |                                                  | 570,654   |                    |  |                                    |   |              |                          
|Unsecured Lines of Credit:    |  |                  |   |                  |  |                                                  |           |                    |  |                                    |   |              |                          
|Floating Rate                 |  |                  |   |                  |  |                                                  |           |                    |  |                                    |   |              |                          
|Wells Fargo - $310 mm(1)      |  |                  |   | 158,000          |  |                                                  | 208,587   |                    |  | 2.78                               | % |              | LIBOR + 1.00% (Notes 4,5)
|City National Bank - $20mm(1) |  |                  |   | 3,000            |  |                                                  | --        |                    |  |                                    |   |              | (Note 6)                 
|                              |  |                  |   |                  |  |                                                  |           |                    |  |                                    |   |              |                          
|                              |  |                  |   | 161,000          |  |                                                  | 208,587   |                    |  |                                    |   |              |                          
|Unsecured Term Loan:          |  |                  |   |                  |  |                                                  |           |                    |  |                                    |   |              |                          
|Fixed Rate                    |  |                  |   |                  |  |                                                  |           |                    |  |                                    |   |              |                          
|Wells Fargo - $125 mm(1)      |  |                  |   | 125,000          |  |                                                  | 125,000   |                    |  | 4.14                               | % |              | Fixed (Note 7)           
|                              |  |                  |   |                  |  |                                                  |           |                    |  |                                    |   |              |                          
|Unsecured Senior Notes:       |  |                  |   |                  |  |                                                  |           |                    |  |                                    |   |              |                          
|Fixed Rate                    |  |                  |   |                  |  |                                                  |           |                    |  |                                    |   |              |                          
|2005 Notes(8)                 |  |                  |   | 199,872          |  |                                                  | 199,769   |                    |  | 8.88                               | % |              | Fixed                    
|2007 Notes(8)                 |  |                  |   | 149,907          |  |                                                  | 149,245   |                    |  | 7.00                               | % |              | Fixed                    
|2010 Notes(8)                 |  |                  |   | 49,744           |  |                                                  | 49,704    |                    |  | 9.15                               | % |              | Fixed                    
|2010 Notes(8)                 |  |                  |   | 99,429           |  |                                                  | 99,345    |                    |  | 8.50                               | % |              | Fixed                    
|                              |  |                  |   |                  |  |                                                  |           |                    |  |                                    |   |              |                          
|                              |  |                  |   | 498,952          |  |                                                  | 498,063   |                    |  |                                    |   |              |                          
|                              |  |                  |   |                  |  |                                                  |           |                    |  |                                    |   |              |                          
|Total Debt                    |  |                  | $ | 1,349,781        |  | $                                                | 1,402,304 |                    |  |                                    |   |              |                          
|                              |  |                  |   |                  |  |                                                  |           |                    |  |                                    |   |              |                          

---

|(1) |  | Requires monthly payments of interest only, with outstanding principal balance
          due upon maturity.
|--- |  | -----------------------------------------------------------------------------------------------------------

|(2) |  | Requires monthly payments of principal and interest.
|--- |  | ----------------------------------------------------

F-12

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Table of Contents

|(3) |  | Both mortgage loans are secured by the Conejo Business Center property.
|--- |  | -----------------------------------------------------------------------

|(4) |  | This
          line of credit also has an annual 20 basis points facility fee on the entire
          $310 million commitment amount.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | In 2002, we entered into interest rate hedge
agreements that fixed the interest rate on $50 million of the outstanding balance
on this line of credit at 4.06% through April of 2006.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) |  | In December 2003, we expanded this line of credit to $20 million from $10
                    million at an interest rate of LIBOR + 1.00% or Prime Rate  1.875%.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) |  | In 2002, we entered into interest rate hedge agreements that fixed the interest
                    rate on the entire balance of this loan at 3.64% in 2003, 4.25% in 2004, 4.75%
                    in 2005 and 4.90% in 2006.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) |  | Requires semi-annual interest payments only, with principal balance due upon
                    maturity.
|--- |  | ----------------------------------------------------------------------------------------------------------

|(9) |  | During the fourth quarter of 2003, we entered into interest rate hedge
                    agreements to float the interest rate on $100 million of the outstanding balance
                    of these notes at a rate of LIBOR + 3.1% through November 2007.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We
have an unsecured line of credit with a total commitment of $20
million from City National Bank. This line of credit accrues interest at LIBOR + 1.00% or
the City National Bank Prime Rate less 1.875% and is scheduled to mature on August 1,
2004. Proceeds from this line of credit are used, among other things, to provide funds for
tenant improvements and capital expenditures and provide for working capital and other
corporate purposes. As of December 31, 2003 and 2002, there was $3.0 million and no
amounts outstanding on this line of credit, respectively, and $17.0 million and $10.0
million was available for additional borrowings, respectively.

We
also have an unsecured line of credit with a group of banks led by Wells Fargo. The line
of credit provides for borrowings up to $310 million with an option to increase the amount
to $350 million and bears interest at a rate ranging between LIBOR + 0.80% and LIBOR +
1.25% (including an annual facility fee ranging from 0.15% to 0.40% based on the aggregate
amount of the line of credit) depending on our unsecured debt rating. This new line of
credit amends the previous $275 million unsecured line of credit that was scheduled to
mature in April 2003. This line of credit matures in April 2006. In addition, as long as
we maintain an unsecured debt rating of BBB-/Baa3 or better, the agreement contains a
competitive bid option, whereby the lenders may bid on the interest rate to be charged for
up to $150 million of the unsecured line of credit. We also have the option to convert the
interest rate on this line of credit to the higher of Wells Fargos prime rate or the
Federal Funds rate plus 0.5%. As of December 31, 2003 and 2002, $158.0 million and $208.6
million was outstanding on this line of credit, respectively, and $152.0 million and
$111.4 million was available for additional borrowings, respectively.

We
have entered into $150 million of forward-starting hedges during 2003 to effectively fix
the 10-year Treasury rate at an average rate of approximately 4.1% for borrowings that are
anticipated to occur in 2004 to refinance some of our scheduled debt maturities. The
forward-starting interest rate hedges were entered into at current market rates and,
therefore, had no initial cost.

In
October and November of 2003, we also entered into reverse interest rate hedge agreements
to float $100 million of the fixed interest rate associated with the 7.00% senior
unsecured notes due in November of 2007. Under these reverse hedges, we will receive
interest at a fixed rate of 7.00% and pay interest at a variable rate averaging six-month
LIBOR in arrears plus 3.10%. These interest rate hedges mature at the same time the notes
are due. Including these hedges, our floating-rate debt ratio as of December 31, 2003 was
approximately 16%.

Following
is a summary of scheduled principal payments for our total debt outstanding as of December
31, 2003 (in thousands):

|Year       | Amount |          
|---------- | ------ | ---------
|2004       | $      | 184,466  
|2005       |        | 207,470  
|2006       |        | 297,859  
|2007       |        | 158,961  
|2008       |        | 230,985  
|Thereafter |        | 270,040  
|           |        |          
|Total      | $      | 1,349,781
|           |        |          

---

|(1) |  | Includes $158 million outstanding on our Wells Fargo unsecured line of credit.
|--- |  | ------------------------------------------------------------------------------

6. Partners Capital

A
common Operating Partnership unit, or common OP Unit, and a share of Arden Realtys
common stock have essentially the same economic characteristics as they share equally in
our total net income or loss and distributions. A common OP Unit may be redeemed for cash
or, at our election, for shares of Arden Realtys common stock on a one-for-one
basis.

During
the year ended December 31, 2003, Arden Realty redeemed an aggregate of 29,076 common OP
units for shares of its common stock.

Included
in our partners capital balance is $50 million of 8.625% Series B Cumulative
Redeemable Preferred Operating Partnership Units, or Preferred OP Units. These Preferred
OP Units were issued in September of 1999, are callable by us after five years and are
exchangeable after ten years by the holder into Arden Realtys 8.625% Series B
Cumulative Redeemable Preferred

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Stock, on a one-for-one basis. The Preferred OP Units have
no stated maturity or mandatory redemption and are subordinate to all debt.

During
2003, Arden Realty issued a total of 252,500 restricted stock awards to several key
executive officers and employees. Holders of these shares have full voting rights and will
receive any dividends but are prohibited from selling or transferring unvested shares. The
fair market value on the dates of grants for these restricted shares ranged from $20.81 to
$30.02. These restricted shares vest equally on the anniversary date of the awards over
either 3 or 4 years, except for 33,500 of these shares which vest after 3 years (cliff
vesting).

We
recorded deferred compensation of approximately $6.3 million during 2003 for the grants
described above based upon the market value of these shares on the dates of the awards and
will amortize the compensation charges to expense on a straight-line basis over the
respective vesting periods.

On
July 24, 2002 Arden Realtys Board of Directors authorized a common stock repurchase
program pursuant to which it was authorized to purchase up to $75 million of its common
stock over the following 12 months. As part of this repurchase program, Arden Realty
acquired 1,796,000 shares of its common stock at an average price of approximately $22.66
per share during the year ended December 31, 2002. No shares were repurchased during the
year ended December 31, 2003. In 2003, Arden Realtys Board of Directors extended
this repurchase program for an additional 12 months.

In
2003, we made distributions totaling $2.02 per common OP unit.

7.
Commitments and Contingencies

Capital
Commitments

As
of December 31, 2003, we had approximately $9.1 million outstanding in capital commitments
related to tenant improvements, renovation costs and general property-related capital
expenditures.

Litigation

We
are presently subject to various lawsuits, claims and proceedings of a nature considered
normal to our ordinary course of business, none of which if determined unfavorably to us
is expected to have a material adverse effect on our cash flows, financial condition or
results from operations. There were no material changes in our legal procedures during the
year ended December 31, 2003.

Concentration
of Credit Risk

We
maintain our cash and cash equivalents at financial institutions. The combined account
balances at each institution periodically exceed FDIC insurance coverage, and as a result,
there is a concentration of credit risk related to amounts on deposit in excess of FDIC
insurance coverage. Management believes that the risk is not significant.

We
generally do not require collateral or other security from our tenants, other than
security deposits or letters of credit.

8.
Related Party Transactions

Promissory
Notes Receivable from Officers

In
March 2002, Mr. Andrew Sobel, our Executive Vice President  Strategic Planning and
Operations, replaced a note due to us in the amount of $194,936 bearing interest at 6.56%
per annum that matured in February of 2002 with a new note for the same principal amount
bearing interest at LIBOR + 1.10% per annum and maturing in March 2007.

On
July 19, 2001 and September 28, 2001, four officers executed promissory notes totaling
approximately $416,000 primarily for the purpose of meeting payroll taxes due upon the
vesting of stock grants. These notes mature between July 19, 2006 and September 28, 2011
and bear interest at an annual rate of between 5.75% and 6.00%. In February 2002, two of
these notes to us totaling approximately $125,000 were repaid in full, including accrued
interest. The remaining loans are personally guaranteed by the respective officers and are
included as part of other receivables in our balance sheets at December 31, 2003 and 2002.

We
lease approximately 5,600 square feet of office space to two companies in which three of
our officers have investment interests. The total annual rents from these leases is
approximately $127,000.

We
also lease approximately 28,300 square feet to a company related to one of our independent
directors. The total annual rents from this lease is approximately $408,000.

F-14

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9. Revenue from Rental
Operations and Property Operating Expenses

Revenue
from rental operations and property operating expenses for the years ended December 31,
2003, 2002 and 2001 are summarized as follows ($000s):

|                                | 2003 |  | 2002 |         | 2001 |  
|------------------------------- | ---- |  | ---- | ------- | ---- | -
|Revenue from rental operations: |      |  |      |         |      |  
|Scheduled cash rents            |      |  | $    | 356,804 |      | $
|Straight-line rents             |      |  |      | 986     |      |  
|Tenant reimbursements           |      |  |      | 24,683  |      |  
|Parking, net of expense         |      |  |      | 22,084  |      |  
|Other rental operations         |      |  |      | 8,978   |      |  
|                                |      |  |      |         |      |  
|                                |      |  |      | 413,535 |      |  
|                                |      |  |      |         |      |  
|Property expenses:              |      |  |      |         |      |  
|Repairs and maintenance         |      |  |      | 42,859  |      |  
|Utilities                       |      |  |      | 34,253  |      |  
|Real estate taxes               |      |  |      | 29,488  |      |  
|Insurance                       |      |  |      | 8,431   |      |  
|Ground rent                     |      |  |      | 961     |      |  
|Administrative                  |      |  |      | 16,761  |      |  
|                                |      |  |      |         |      |  
|                                |      |  |      | 132,753 |      |  
|                                |      |  |      |         |      |  
|                                |      |  | $    | 280,782 |      | $
|                                |      |  |      |         |      |  

10. Earnings Per Share

The
following table sets forth the computation of basic and diluted net income per share for
the years ended December 31, 2003, 2002 and 2001 (in thousands, except per share amounts):

|                                                  | 2003 |  | 2002 |        | 2001 |  
|------------------------------------------------- | ---- |  | ---- | ------ | ---- | -
|Income from continuing operations                 |      |  | $    | 53,123 |      | $
|Discontinued operations, net of minority interest |      |  |      | 6,934  |      |  
|Gain on sale of discontinued properties           |      |  |      | 5,937  |      |  
|                                                  |      |  |      |        |      |  
|Net income                                        |      |  | $    | 65,994 |      | $
|                                                  |      |  |      |        |      |  
|                                                  |      | 
|Net income allocated to:                          |      | 
|Preferred partner                                 |      |  | $    | 4,312  |      | $
|                                                  |      |  |      |        |      |  
|General and limited partners                      |      |  | $    | 61,682 |      | $
|                                                  |      |  |      |        |      |  
|                                                  |      | 
|Weighted average shares - basic                   |      |  |      | 65,251 |      |  
|Weighted average diluted stock options            |      |  |      | 262    |      |  
|                                                  |      |  |      |        |      |  
|Weighted average shares - diluted                 |      |  |      | 65,513 |      |  
|                                                  |      |  |      |        |      |  
|                                                  |      | 
|Basic net income per common share:                |      | 
|Income from continuing operations                 |      |  | $    | 0.75   |      | $
|Income from discontinued operations               |      |  |      | 0.20   |      |  
|                                                  |      |  |      |        |      |  
|Net income per common share - basic               |      |  | $    | 0.95   |      | $
|                                                  |      |  |      |        |      |  
|                                                  |      | 
|Diluted net income per common share:              |      | 
|Income from continuing operations                 |      |  | $    | 0.74   |      | $
|Income from discontinued operations               |      |  |      | 0.20   |      |  
|                                                  |      |  |      |        |      |  
|Net income per common share - diluted             |      |  | $    | 0.94   |      | $
|                                                  |      |  |      |        |      |  

See
discussion of discontinued operations in footnote 3 above.

11. Stock Option Plan

Prior
to January 1, 2003 we elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25) and related interpretations
in accounting for Arden Realtys employee and directors stock options because, as
discussed below, the alternative fair value accounting provided for under FASB Statement
No. 123, Accounting for Stock-Based Compensation (Statement 123) requires use
of option valuation models that were not developed for use in valuing employee stock
options. Under APB 25, because the exercise price of employee and director stock options
we granted equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.

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Table of Contents

Beginning
on January 1, 2003, we adopted the provisions of SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure under which we began
expensing the costs of new stock options granted to employees in 2003 by Arden Realty in
accordance with SFAS No. 123, Accounting for Stock-Based Compensation. We used
the Black-Scholes option valuation model to estimate the fair value of the stock options
granted in 2003 with the following weighted-average assumptions for 2003: risk-free
interest rate of 2.92%, dividend yield of 9.70% and a volatility factor of the expected
market price for Arden Realtys common stock of 0.186. During the twelve months ended December 31,
2003, we recognized approximately $41,000 of stock option based employee compensation costs.

Arden
Realty established a stock option plan for the purpose of attracting and retaining
executive officers, directors and other key employees. As of December 31, 2003, 6,500,000
of its authorized shares of common stock have been reserved for issuance under that plan.

All
holders of the above options have a ten-year period to exercise such options and all
options were granted at exercise prices equal to the market prices at the date of the
grant.

Pro
forma information regarding net income and earnings per share is required by Statement
123, and has been determined as if we had accounted for its employee stock options under
the fair value method of that statement. The fair value for these options was estimated at
the date of grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 2002 and 2001, respectively: risk-free interest rate of
4.28% and 4.39%, dividend yield of 7.80% and 7.60% and a volatility factor of the expected
market price of Arden Realtys common stock of 0.190 and 0.191. The weighted average expected life of
the options is approximately 7 to 10 years.

The
Black-Scholes option valuation model was developed for use in estimating the fair value of
traded options which have no vesting restriction and are fully transferable. In addition,
option valuation models require the input of highly subjective assumptions including the
expected stock price volatility. Because our employee and director stock options have
characteristics significantly different from those of traded options, and because changes
in the subjective input assumptions can materially affect the fair value estimate, in
managements opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of our employee and director stock options.

For
purposes of pro forma disclosures, the estimated fair value of the options is amortized to
expense over the options vesting periods. Our pro forma information for the years
ended December 31, 2003, 2002 and 2001 follows (in thousands, except earnings per share
information):

|                                                                   | 2003 |  | 2002 |        | 2001 |  
|------------------------------------------------------------------ | ---- |  | ---- | ------ | ---- | -
|Net income allocated to general partner                            |      |  | $    | 61,682 |      | $
|Stock based employee compensation costs assuming fair value method |      |  |      | 843    |      |  
|                                                                   |      |  |      |        |      |  
|Pro forma net income                                               |      |  | $    | 60,839 |      | $
|                                                                   |      |  |      |        |      |  
|Pro forma net income per common OP unit- diluted                   |      |  | $    | 0.93   |      | $
|                                                                   |      |  |      |        |      |  

A
summary of Arden Realtys stock option activity, and related information for the
years ended December 31, 2003, 2002 and 2001 follows:

|                                 | 2003 |  | 2002 |        | 2001 |  
|-------------------------------- | ---- |  | ---- | ------ | ---- | -
|
|Outstanding, beginning of period |      |  |      | 4,479  |      | $
|Granted                          |      |  |      | 268    |      |  
|Exercised                        |      |  |      | (1,162 | )    |  
|Forfeited                        |      |  |      | (159   | )    |  
|                                 |      |  |      |        |      |  
|Outstanding at end of year       |      |  |      | 3,426  |      | $
|                                 |      |  |      |        |      |  
|Exercisable at end of the period |      |  |      | 2,948  |      | $
|                                 |      |  |      |        |      |  
|Weighted-average fair value of   |      |  |      |        |      |  
|options granted                  |      |  | $    | 0.49   |      |  
|                                 |      |  |      |        |      |  

Exercise
prices for options outstanding as of December 31, 2003 ranged from $19.13 to $32.25. The
weighted average remaining contractual life of those options is 6 years.

12. Employee Retirement
Savings Plan

Effective
June 12, 1997, we adopted a retirement savings plan pursuant to Section 401(k) of the
Internal Revenue Code whereby participants may contribute a portion of their compensation
to their respective retirement accounts in an amount not to exceed the maximum allowed
under the Internal Revenue Code. The plan provides for matching contributions by us, which
amounted to approximately $888,000 in 2003, $844,000 in 2002 and $803,000 in 2001. Plan
participants are immediately vested in their contributions and are vested equally over
four years in matching contributions by us.

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Table of Contents

13. Subsequent Events

On
February 4, 2004, we sold an approximate 134,000 square foot retail property located in
Riverside County for approximately $17.5 million. This property was classified as held for
disposition in our balance sheet at December 31, 2003. The net proceeds from this
disposition were used to reduce the outstanding balance on the Wells Fargo unsecured line
of credit (unaudited).

On
February 27, 2004, Arden Realty issued a total of 38,000 restricted stock awards to
several key executive officers and employees. Holders of these shares have full voting
rights and will receive any dividends but are prohibited from selling or transferring
unvested shares. The fair market value on the date of the grant for these restricted
shares was $31.60. These restricted shares vest equally over 3 years.

We
have a $2.7 million investment in the securities of a non-publicly traded company formed
in 2000 to provide distributed energy generation to commercial real estate owners. On
March 8, 2004, we received information from the company that they are currently assessing
their business and financing strategies. The ultimate outcome of their analysis on the
companys operations and the recoverability of our investment is currently uncertain.
No adjustments have been made in these financial statements as a result of this
uncertainty. (unaudited)

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14. Quarterly Results

Following
is a quarterly summary of our revenue and expenses for the years ended December 31, 2003
and 2002. Revenue and expenses may fluctuate significantly from quarter to quarter due to
our development, renovation, acquisition and sales activity (unaudited).

|                                    | For the Quarter Ended (in thousands, except per share amounts) | 
|----------------------------------- | -------------------------------------------------------------- | 
|
|Revenue                             |                                                                | 
|Property operating expenses         |                                                                | 
|General and administrative          |                                                                | 
|Interest expense                    |                                                                | 
|Depreciation and amortization       |                                                                | 
|Interest and other income           |                                                                | 
|Minority interest                   |                                                                | 
|Discontinued operations             |                                                                | 
|(Loss) Gain on sale of discontinued |                                                                | 
|properties                          |                                                                | 
|                                    |                                                                | 
|Net Income                          |                                                                | 
|                                    |                                                                | 
|Net income per common operating     |                                                                | 
|partnership unit:                   |                                                                | 
|Basic                               |                                                                | 
|                                    |                                                                | 
|Diluted                             |                                                                | 
|                                    |                                                                | 

|                                | For the Quarter Ended (in thousands, except per share amounts) | 
|------------------------------- | -------------------------------------------------------------- | 
|
|Revenue                         |                                                                | 
|Property operating expenses     |                                                                | 
|General and administrative      |                                                                | 
|Interest expense                |                                                                | 
|Depreciation and amortization   |                                                                | 
|                                |                                                                | 
|Interest and other income       |                                                                | 
|Gain on sale of properties      |                                                                | 
|Minority interest               |                                                                | 
|Discontinued operations         |                                                                | 
|                                |                                                                | 
|Net Income                      |                                                                | 
|                                |                                                                | 
|Net income per common operating |                                                                | 
|partnership unit:               |                                                                | 
|Basic                           |                                                                | 
|                                |                                                                | 
|Diluted                         |                                                                | 
|                                |                                                                | 

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Table of Contents

15. Schedule of
Commercial Properties and Accumulated DepreciationDecember 31, 2003
(in thousands, except square foot data)

|                             |  | Initial Costs |  | Basis Step Up |  |  
|---------------------------- |  | ------------- |  | ------------- |  | -
|
|Century Park Center          |  |               |  | 243,404       |  | $
|Beverly Atrium               |  |               |  | 59,650        |  |  
|Woodland Hills               |  |               |  | 224,955       |  |  
|222 South Harbor             |  |               |  | 175,391       |  |  
|425 West Broadway            |  |               |  | 71,589        |  |  
|1950 Sawtelle                |  |               |  | 103,106       |  |  
|Bristol Plaza                |  |               |  | 84,014        |  |  
|16000 Ventura                |  |               |  | 174,841       |  |  
|5000 East Spring             |  |               |  | 163,358       |  |  
|70 South Lake                |  |               |  | 100,133       |  |  
|Westwood Terrace             |  |               |  | 135,943       |  |  
|Westlake - 5601 Lindero      |  |               |  | 105,830       |  |  
|6100 Wilshire                |  |               |  | 202,704       |  |  
|Calabasas Commerce Center    |  |               |  | 126,771       |  |  
|Long Beach Airport - DF&G    |  |               |  | 272,013       |  |  
|Skyview Center               |  |               |  | 391,675       |  |  
|400 Corporate Pointe         |  |               |  | 164,598       |  |  
|5832 Bolsa                   |  |               |  | 49,355        |  |  
|9665 Wilshire                |  |               |  | 158,684       |  |  
|701 B Street                 |  |               |  | 540,413       |  |  
|100 Broadway                 |  |               |  | 191,727       |  |  
|Norwalk                      |  |               |  | 122,175       |  |  
|303 Glenoaks                 |  |               |  | 175,289       |  |  
|10351 Santa Monica           |  |               |  | 96,251        |  |  
|2730 Wilshire                |  |               |  | 55,080        |  |  
|Grand Avenue Plaza (1970)    |  |               |  | 81,448        |  |  
|Burbank Executive Plaza      |  |               |  | 60,395        |  |  
|333 N. Glenoaks              |  |               |  | 81,243        |  |  
|Center Promenade             |  |               |  | 174,837       |  |  
|Los Angeles Corporate Center |  |               |  | 389,293       |  |  
|5200 West Century            |  |               |  | 310,910       |  |  
|15250 Ventura                |  |               |  | 110,641       |  |  
|10350 Santa Monica           |  |               |  | 42,292        |  |  
|535 N. Brand Blvd            |  |               |  | 109,187       |  |  
|10780 Santa Monica           |  |               |  | 92,486        |  |  
|4900 California              |  |               |  | 155,189       |  |  
|Whittier                     |  |               |  | 135,415       |  |  

[Additional columns below.]

|                             | Total Costs |  |   |        |  |  
|---------------------------- | ----------- |  | - | ------ |  | -
|
|                             |             |  |   |        |  |  
|Century Park Center          |             |  | $ | 7,189  |  | $
|Beverly Atrium               |             |  |   | 4,237  |  |  
|Woodland Hills               |             |  |   | 6,931  |  |  
|222 South Harbor             |             |  |   | 609    |  |  
|425 West Broadway            |             |  |   | 1,805  |  |  
|1950 Sawtelle                |             |  |   | 1,988  |  |  
|Bristol Plaza                |             |  |   | 2,077  |  |  
|16000 Ventura                |             |  |   | 1,885  |  |  
|5000 East Spring             |             |  |   | --     |  |  
|70 South Lake                |             |  |   | 1,360  |  |  
|Westwood Terrace             |             |  |   | 2,103  |  |  
|Westlake - 5601 Lindero      |             |  |   | 2,576  |  |  
|6100 Wilshire                |             |  |   | 1,200  |  |  
|Calabasas Commerce Center    |             |  |   | 1,262  |  |  
|Long Beach Airport - DF&G    |             |  |   | --     |  |  
|Skyview Center               |             |  |   | 6,514  |  |  
|400 Corporate Pointe         |             |  |   | 3,457  |  |  
|5832 Bolsa                   |             |  |   | 705    |  |  
|9665 Wilshire                |             |  |   | 6,836  |  |  
|701 B Street                 |             |  |   | 3,786  |  |  
|100 Broadway                 |             |  |   | 4,570  |  |  
|Norwalk                      |             |  |   | 4,508  |  |  
|303 Glenoaks                 |             |  |   | 6,500  |  |  
|10351 Santa Monica           |             |  |   | 3,080  |  |  
|2730 Wilshire                |             |  |   | 3,515  |  |  
|Grand Avenue Plaza (1970)    |             |  |   | 620    |  |  
|Burbank Executive Plaza      |             |  |   | 1,100  |  |  
|333 N. Glenoaks              |             |  |   | 1,500  |  |  
|Center Promenade             |             |  |   | 2,310  |  |  
|Los Angeles Corporate Center |             |  |   | 26,781 |  |  
|5200 West Century            |             |  |   | 2,080  |  |  
|15250 Ventura                |             |  |   | 2,560  |  |  
|10350 Santa Monica           |             |  |   | 861    |  |  
|535 N. Brand Blvd            |             |  |   | 1,600  |  |  
|10780 Santa Monica           |             |  |   | 2,625  |  |  
|4900 California              |             |  |   | 4,680  |  |  
|Whittier                     |             |  |   | 3,575  |  |  

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|                            |  | Initial Costs |  | Basis Step Up |  | 
|--------------------------- |  | ------------- |  | ------------- |  | 
|
|                            |  |               |  |               |  | 
|Clarendon Crest             |  |               |  | 43,063        |  | 
|Noble Professional Center   |  |               |  | 51,828        |  | 
|South Bay Centre            |  |               |  | 202,830       |  | 
|8383 Wilshire               |  |               |  | 417,463       |  | 
|Parkway Center I            |  |               |  | 61,333        |  | 
|Centerpointe La Palma       |  |               |  | 597,550       |  | 
|299 N. Euclid               |  |               |  | 73,522        |  | 
|2800 28th Street            |  |               |  | 103,506       |  | 
|1000 Town Center            |  |               |  | 107,656       |  | 
|Mariner Court               |  |               |  | 105,436       |  | 
|Pacific Gateway             |  |               |  | 223,731       |  | 
|1821 Dyer                   |  |               |  | 115,061       |  | 
|Crown Cabot Financial       |  |               |  | 172,900       |  | 
|120 S. Spalding             |  |               |  | 60,656        |  | 
|South Bay Tech              |  |               |  | 104,815       |  | 
|1370 Valley Vista           |  |               |  | 84,081        |  | 
|Foremost Professional Plaza |  |               |  | 60,534        |  | 
|Northpoint                  |  |               |  | 104,235       |  | 
|Conejo Business Center      |  |               |  | 69,017        |  | 
|Marin Corporate Center      |  |               |  | 51,360        |  | 
|145 South Fairfax           |  |               |  | 53,994        |  | 
|Bernardo Regency            |  |               |  | 47,916        |  | 
|City Centre                 |  |               |  | 302,519       |  | 
|Wilshire Pacific Plaza      |  |               |  | 100,122       |  | 
|Glendale Corporate Center   |  |               |  | 108,209       |  | 
|World Savings Center        |  |               |  | 469,115       |  | 
|Sunset Point Plaza          |  |               |  | 58,105        |  | 
|Activity Business Center    |  |               |  | 167,045       |  | 
|Westlake Gardens            |  |               |  | 49,639        |  | 
|9100 Wilshire Boulevard     |  |               |  | 326,227       |  | 
|Westwood Center             |  |               |  | 313,000       |  | 
|1919 Santa Monica           |  |               |  | 43,796        |  | 
|600 Corporate Pointe        |  |               |  | 273,339       |  | 
|150 East Colorado Boulevard |  |               |  | 61,168        |  | 
|5161 Lankershim             |  |               |  | 178,317       |  | 

[Additional columns below.]

|                            | Total Costs |  |  |        |  | 
|--------------------------- | ----------- |  |  | ------ |  | 
|
|                            |             |  |  |        |  | 
|Clarendon Crest             |             |  |  | 1,300  |  | 
|Noble Professional Center   |             |  |  | 1,657  |  | 
|South Bay Centre            |             |  |  | 4,775  |  | 
|8383 Wilshire               |             |  |  | 13,570 |  | 
|Parkway Center I            |             |  |  | 1,480  |  | 
|Centerpointe La Palma       |             |  |  | 16,011 |  | 
|299 N. Euclid               |             |  |  | 1,050  |  | 
|2800 28th Street            |             |  |  | 2,937  |  | 
|1000 Town Center            |             |  |  | 2,800  |  | 
|Mariner Court               |             |  |  | 2,350  |  | 
|Pacific Gateway             |             |  |  | 6,287  |  | 
|1821 Dyer                   |             |  |  | 1,808  |  | 
|Crown Cabot Financial       |             |  |  | 7,056  |  | 
|120 S. Spalding             |             |  |  | 2,775  |  | 
|South Bay Tech              |             |  |  | 1,600  |  | 
|1370 Valley Vista           |             |  |  | 2,698  |  | 
|Foremost Professional Plaza |             |  |  | 2,049  |  | 
|Northpoint                  |             |  |  | 1,800  |  | 
|Conejo Business Center      |             |  |  | 2,489  |  | 
|Marin Corporate Center      |             |  |  | 1,956  |  | 
|145 South Fairfax           |             |  |  | 1,825  |  | 
|Bernardo Regency            |             |  |  | 1,625  |  | 
|City Centre                 |             |  |  | 8,250  |  | 
|Wilshire Pacific Plaza      |             |  |  | 3,750  |  | 
|Glendale Corporate Center   |             |  |  | 2,750  |  | 
|World Savings Center        |             |  |  | --     |  | 
|Sunset Point Plaza          |             |  |  | 2,075  |  | 
|Activity Business Center    |             |  |  | 3,650  |  | 
|Westlake Gardens            |             |  |  | 1,831  |  | 
|9100 Wilshire Boulevard     |             |  |  | 16,250 |  | 
|Westwood Center             |             |  |  | 3,159  |  | 
|1919 Santa Monica           |             |  |  | 2,580  |  | 
|600 Corporate Pointe        |             |  |  | 8,575  |  | 
|150 East Colorado Boulevard |             |  |  | 1,988  |  | 
|5161 Lankershim             |             |  |  | 5,016  |  | 

F-20

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Table of Contents

|                           |  | Initial Costs |  | Basis Step Up |  | 
|-------------------------- |  | ------------- |  | ------------- |  | 
|
|                           |  |               |  |               |  | 
|1501 Hughes Way            |  |               |  | 77,060        |  | 
|3901 Via Oro               |  |               |  | 53,195        |  | 
|Huntington Beach Plaza     |  |               |  | 52,186        |  | 
|Fountain Valley Plaza      |  |               |  | 107,252       |  | 
|3300 Irvine Avenue         |  |               |  | 74,224        |  | 
|Von Karman CorporateCenter |  |               |  | 451,477       |  | 
|1503 South Coast           |  |               |  | 60,605        |  | 
|625 The City               |  |               |  | 139,806       |  | 
|Orange Financial Center    |  |               |  | 305,439       |  | 
|Carlsbad Corporate Center  |  |               |  | 125,000       |  | 
|Balboa Corporate Center    |  |               |  | 69,890        |  | 
|Panorama Corporate Center  |  |               |  | 133,149       |  | 
|Ruffin Corporate Center    |  |               |  | 45,059        |  | 
|Skypark Office Plaza       |  |               |  | 202,164       |  | 
|Governor Park Plaza        |  |               |  | 104,065       |  | 
|5120 Shoreham              |  |               |  | 37,759        |  | 
|Morehouse Tech Center      |  |               |  | 181,207       |  | 
|Torreyana Science Park     |  |               |  | 81,204        |  | 
|Waples Tech Center         |  |               |  | 28,119        |  | 
|10251 Vista Sorrento       |  |               |  | 69,386        |  | 
|Camarillo Business Park    |  |               |  | 154,216       |  | 
|5702 Bolsa                 |  |               |  | 27,731        |  | 
|5672 Bolsa                 |  |               |  | 11,968        |  | 
|5632 Bolsa                 |  |               |  | 21,568        |  | 
|Huntington Commerce Center |  |               |  | 67,551        |  | 
|Savi Tech Center           |  |               |  | 341,446       |  | 
|Yorba Linda Business Park  |  |               |  | 167,142       |  | 
|Cymer Technology Center    |  |               |  | 155,612       |  | 
|Poway Industrial           |  |               |  | 112,000       |  | 
|10180 Scripps Ranch        |  |               |  | 43,560        |  | 
|Via Frontera               |  |               |  | 77,920        |  | 
|Westridge                  |  |               |  | 48,955        |  | 

[Additional columns below.]

|                           | Total Costs |  |  |        |  | 
|-------------------------- | ----------- |  |  | ------ |  | 
|
|                           |             |  |  |        |  | 
|1501 Hughes Way            |             |  |  | 1,348  |  | 
|3901 Via Oro               |             |  |  | 692    |  | 
|Huntington Beach Plaza     |             |  |  | 1,109  |  | 
|Fountain Valley Plaza      |             |  |  | 2,949  |  | 
|3300 Irvine Avenue         |             |  |  | 2,215  |  | 
|Von Karman CorporateCenter |             |  |  | 11,513 |  | 
|1503 South Coast           |             |  |  | 1,570  |  | 
|625 The City               |             |  |  | 4,792  |  | 
|Orange Financial Center    |             |  |  | 10,379 |  | 
|Carlsbad Corporate Center  |             |  |  | 3,722  |  | 
|Balboa Corporate Center    |             |  |  | 2,759  |  | 
|Panorama Corporate Center  |             |  |  | 6,512  |  | 
|Ruffin Corporate Center    |             |  |  | 1,766  |  | 
|Skypark Office Plaza       |             |  |  | 5,733  |  | 
|Governor Park Plaza        |             |  |  | 3,382  |  | 
|5120 Shoreham              |             |  |  | 1,224  |  | 
|Morehouse Tech Center      |             |  |  | 6,841  |  | 
|Torreyana Science Park     |             |  |  | 5,035  |  | 
|Waples Tech Center         |             |  |  | 1,010  |  | 
|10251 Vista Sorrento       |             |  |  | 1,839  |  | 
|Camarillo Business Park    |             |  |  | 3,522  |  | 
|5702 Bolsa                 |             |  |  | 589    |  | 
|5672 Bolsa                 |             |  |  | 254    |  | 
|5632 Bolsa                 |             |  |  | 458    |  | 
|Huntington Commerce Center |             |  |  | 992    |  | 
|Savi Tech Center           |             |  |  | 8,280  |  | 
|Yorba Linda Business Park  |             |  |  | 2,629  |  | 
|Cymer Technology Center    |             |  |  | 5,446  |  | 
|Poway Industrial           |             |  |  | 1,876  |  | 
|10180 Scripps Ranch        |             |  |  | 1,165  |  | 
|Via Frontera               |             |  |  | 1,792  |  | 
|Westridge                  |             |  |  | 1,807  |  | 

F-21

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Table of Contents

|                              |  | Initial Costs |  | Basis Step Up |  |  
|----------------------------- |  | ------------- |  | ------------- |  | -
|
|                              |  |               |  |               |  |  
|Tower Plaza Retail            |  |               |  | 133,481       |  |  
|6060 Center Drive             |  |               |  | 241,928       |  |  
|Howard Hughes - Spectrum Club |  |               |  | 36,959        |  |  
|6080 Center Drive             |  |               |  | 287,148       |  |  
|Univision - 5999 Center Drive |  |               |  | 161,650       |  |  
|11075 Santa Monica            |  |               |  | 35,696        |  |  
|Continental Grand Plaza       |  |               |  | 235,926       |  |  
|Calabasas Tech                |  |               |  | 273,526       |  |  
|Oceangate Tower               |  |               |  | 210,907       |  |  
|Genesee Executive Plaza       |  |               |  | 155,820       |  |  
|Solar Drive Business Center   |  |               |  | 125,132       |  |  
|91 Freeway Center             |  |               |  | 93,277        |  |  
|601 S. Glenoaks               |  |               |  | 72,524        |  |  
|Tourney Pointe                |  |               |  | 219,991       |  |  
|Hillside Corporate Center     |  |               |  | 59,876        |  |  
|Westlake Gardens II           |  |               |  | 48,874        |  |  
|Howard Hughes Tower           |  |               |  | 313,833       |  |  
|2001 Wilshire Blvd            |  |               |  | 101,125       |  |  
|Carmel Valley Centre          |  |               |  | 107,197       |  |  
|Carmel View Office Plaza      |  |               |  | 77,460        |  |  
|Crossroads                    |  |               |  | 133,566       |  |  
|Governor Executive Center     |  |               |  | 52,195        |  |  
|Gateway Towers                |  |               |  | 432,894       |  |  
|Governor Executive Center II  |  |               |  | 101,433       |  |  
|                              |  |               |  |               |  |  
|                              |  |               |  | 18,635,706    |  | $
|                              |  |               |  |               |  |  

[Additional columns below.]

|                              | Total Costs |  |   |         |  |  
|----------------------------- | ----------- |  | - | ------- |  | -
|
|                              |             |  |   |         |  |  
|Tower Plaza Retail            |             |  |   | 4,531   |  |  
|6060 Center Drive             |             |  |   | 4,300   |  |  
|Howard Hughes - Spectrum Club |             |  |   | 2,500   |  |  
|6080 Center Drive             |             |  |   | 5,082   |  |  
|Univision - 5999 Center Drive |             |  |   | 1,529   |  |  
|11075 Santa Monica            |             |  |   | 1,225   |  |  
|Continental Grand Plaza       |             |  |   | 7,125   |  |  
|Calabasas Tech                |             |  |   | 11,513  |  |  
|Oceangate Tower               |             |  |   | 3,080   |  |  
|Genesee Executive Plaza       |             |  |   | 6,750   |  |  
|Solar Drive Business Center   |             |  |   | 4,250   |  |  
|91 Freeway Center             |             |  |   | 2,900   |  |  
|601 S. Glenoaks               |             |  |   | 2,450   |  |  
|Tourney Pointe                |             |  |   | 6,047   |  |  
|Hillside Corporate Center     |             |  |   | 2,213   |  |  
|Westlake Gardens II           |             |  |   | 1,832   |  |  
|Howard Hughes Tower           |             |  |   | 5,830   |  |  
|2001 Wilshire Blvd            |             |  |   | 5,007   |  |  
|Carmel Valley Centre          |             |  |   | 4,900   |  |  
|Carmel View Office Plaza      |             |  |   | 3,100   |  |  
|Crossroads                    |             |  |   | 3,950   |  |  
|Governor Executive Center     |             |  |   | 1,500   |  |  
|Gateway Towers                |             |  |   | 5,585   |  |  
|Governor Executive Center II  |             |  |   | 1,959   |  |  
|                              |             |  |   |         |  |  
|                              |             |  | $ | 475,115 |  | $
|                              |             |  |   |         |  |  

---

|(1) |  | The depreciable live for buildings and improvements and furniture, fixtures and
                    equipment range from five to forty seven years. Tenant improvements and leasing
                    costs are depreciated over the remaining term of the lease.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Amounts shown net of write-offs of fully depreciated assets and include total
                    capitalized interest of $53.7 million.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | All of these properties are
                    collateral for our $547.0 million mortgage financings. The encumbrance allocated
                    to an individual
property is based on the related individual release price
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-22

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Table of Contents

ARDEN REALTY LIMITED
PARTNERSHIP

15. Schedule of
Commercial Properties and Accumulated Depreciation (continued)

The
changes in our investment in commercial properties and related accumulated depreciation
for each of the periods in the three years ended December 31, 2003, 2002 and 2001 are as
follows (in thousands):

|                                               |  | ARDEN REALTY LIMITED PARTNERSHIPFor the Years Ended December 31, |  
|---------------------------------------------- |  | ---------------------------------------------------------------- | -
|
|Commercial Properties:                         |  |                                                                  |  
|Balance at beginning of period                 |  |                                                                  | $
|Improvements                                   |  |                                                                  |  
|Disposition of property                        |  |                                                                  |  
|Write offs of fully depreciated assets         |  |                                                                  |  
|Acquisition of properties                      |  |                                                                  |  
|Transfers from (to) properties under           |  |                                                                  |  
|development and land available for development |  |                                                                  |  
|Reclassification to other assets               |  |                                                                  |  
|                                               |  |                                                                  |  
|Balance at end of period                       |  |                                                                  | $
|                                               |  |                                                                  |  
|Accumulated Depreciation:                      |  |                                                                  |  
|Balance at beginning of period                 |  |                                                                  | $
|Depreciation for period                        |  |                                                                  |  
|Disposition of property                        |  |                                                                  |  
|Write offs of fully depreciated assets         |  |                                                                  |  
|Transfers to (from) properties under           |  |                                                                  |  
|development and land available for development |  |                                                                  |  
|Reclassification to other assets               |  |                                                                  |  
|                                               |  |                                                                  |  
|Balance at end of period                       |  |                                                                  | $
|                                               |  |                                                                  |  

F-23

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