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(ARDEN LOGO)   Securities and Exchange Commission Washington, D.C. 20549
 FORM 10-K þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934.
 For the fiscal year ended December 31, 2004 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934 For the transition period from            to Commission File Number 000-30571 ARDEN REALTY LIMITED PARTNERSHIP  Maryland
    
    95-4599813(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 11601 Wilshire Boulevard, 4th Floor
Los 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 þ No o 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. o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Act). Yes o No þ 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 of 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 2005 Annual Meeting of Stockholders.




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ARDEN REALTY LIMITED PARTNERSHIP
TABLE OF CONTENTS ITEM NO.
    
    PAGE NO.PART I1. Business
    
    
    32. Properties
    
    
    73. Legal Proceedings
    
    
    204. Submission of Matters to a Vote of Security Holders
    
    
    20PART II5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
    
    
    206. Selected Financial Data
    
    
    217. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    237A. Quantitative and Qualitative Disclosure about Market Risk
    
    
    408. Financial Statements and Supplementary Data
    
    
    479. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    489A. Controls and Procedures
    
    
    489B. Other Information
    
    
    49PART III10. Directors and Executive Officers of the Registrant
    
    
    4911. Executive Compensation
    
    
    4912. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    4913. Certain Relationships and Related Transactions
    
    
    4914. Principal Accountant Fees and Services
    
    
    49PART IV15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
    
    
    50Signatures
    
    
    56EX-12.1EX-23.1EX-31.1EX-31.2EX-32.1EX-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, 2004, owned approximately 97.5% of our common operating partnership
units, or common OP units. (b) INDUSTRY SEGMENTS We are currently involved primarily in one industry segment, the operation of commercial real
estate located in Southern California. The financial information contained in this report relates
primarily to this industry segment. (c) DESCRIPTION OF BUSINESS We are a full-service real estate organization managed by 6 senior executive officers who have
experience in the real estate industry ranging from 14 to 35 years and who collectively have an
average of 20 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, 2004, Arden Realty was Southern Californias largest publicly traded office
landlord as measured by total net rentable square feet owned. As of December 31, 2004, our
portfolio of primarily suburban office properties consisted of 120properties and 197
buildings containing approximately 18.2 million net rentable square feet and our operating
portfolio was 91.2% occupied. Portfolio Management We perform all portfolio management activities, including on-site property management,
management of all lease negotiations, construction management of tenant improvements or tenant
build-outs, property renovations and capital expenditures for our portfolio. We directly manage
these activities from approximately 40 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 consistent 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 59% 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. 3




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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 use the net proceeds to repay outstanding indebtedness or place 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 expertise and
relationships;
    emphasizing quality service, 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 and our technical expertise in reducing energy consumption expenses. 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. We believe 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 for office space in our
existing submarkets, to efficiently identify 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 provides us with the opportunity 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 67.3% ratio of property operating results to total
property revenues in 2004. 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: 4




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
    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;
    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 this internal
growth by:  
    stabilizing occupancy throughout our portfolio and increasing rental rates, as market conditions permit;
    maintaining or increasing the retention rate of expiring leases;
    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 Occupancy and Increasing Rental Rates Various published reports noted that Southern California achieved approximately 6.7 million
square feet of positive net absorption in 2004 with average rental rates increasing approximately
3-4%. 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 management staff and
by providing alternatives within our portfolio to accommodate their changing space requirements.
We strive to achieve growth in rental revenues by negotiating annual or mid-term increases in
rental rates in a majority of our leases. Retaining Existing Tenants We also seek to retain our existing tenants when leases expire. Retention of existing tenants
reduces the costs of lease rollover by eliminating the down-time required to find a replacement
tenant and reducing build-out costs required for new tenants. 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. During 2004, we retained approximately 64%
of our leases that were scheduled to expire. 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, construction
materials, 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 and roving security systems that allow us to provide security services to our tenants at a lower cost; 5




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
    online competitive bid purchasing of supplies, building materials and construction services;
    enhancement of billing systems, which enables 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 operate one of the most energy efficient office portfolios in the country. We have
invested in energy enhancement programs within our portfolio with the aim of reducing energy
consumption, enhancing efficiency and lowering operating costs. We also participate annually in
the Environmental Protection Agencys, or the EPA, Energy Star Program. This program involves top
commercial real estate landlords throughout the United States and rigorous bench-marking procedures
that track individual building energy efficiency. Currently, of the 906 total Energy Star
designated office buildings awarded nationally during 2004, 125 were awarded in California; of
those, we had 62 EPA Energy Star Certified buildings in our portfolio. We have formed a taxable REIT subsidiary, Next>edge, to market our expertise in energy
solutions and facilities management. Next>edge has begun 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 economy and commercial real
estate market, and we intend to continue to focus our resources primarily in this region. We have
assembled a management team that has extensive experience and knowledge in this 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 strict entitlement processes, height and density restrictions or other
governmental requirements. Competition We compete with other owners of office properties to attract tenants to our properties, to
acquire new 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 over the past few seasons. 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 26% of our properties and 19% 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. 6




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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 photovoltaic panels, micro-turbine
units, 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, 2004, we had approximately 300 full-time employees that perform all of our
property and construction management, accounting, finance, 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 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 120 primarily office properties, containing approximately 18.2
million net rentable square feet that individually range from approximately 12,000 to 600,000 net
rentable square feet. Of the 120 properties currently in service in our portfolio, 119, or 99%, 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, 2004: Property OperatingResults(2), (3)Number of
    
    
    Number of
    
    
    Approximate Net
    
    
    For the Year EndedLocation
    
    Properties(1)
    
    
    Buildings(1)
    
    
    Rentable Square Feet(1)
    
    
    December 31, 2004($000s and unaudited)Total
    
    
    % of Total
    
    
    Total
    
    
    % of Total
    
    
    Total
    
    
    % of Total
    
    
    Total
    
    
    % of TotalLos Angeles CountyWest(4)
    
    
    30
    
    
    
    25
    %
    
    
    32
    
    
    
    16
    %
    
    
    5,044,621
    
    
    
    28
    %
    
    $
    107,688
    
    
    
    39
    %North
    
    
    28
    
    
    
    23
    %
    
    
    44
    
    
    
    22
    %
    
    
    3,468,768
    
    
    
    19
    %
    
    
    44,962
    
    
    
    16
    %South
    
    
    13
    
    
    
    11
    %
    
    
    17
    
    
    
    9
    %
    
    
    2,851,215
    
    
    
    15
    %
    
    
    37,052
    
    
    
    14
    %Subtotal
    
    
    71
    
    
    
    59
    %
    
    
    93
    
    
    
    47
    %
    
    
    11,364,604
    
    
    
    62
    %
    
    
    189,702
    
    
    
    69
    %Orange County
    
    
    20
    
    
    
    17
    %
    
    
    51
    
    
    
    26
    %
    
    
    3,255,079
    
    
    
    18
    %
    
    
    39,602
    
    
    
    14
    %San Diego County
    
    
    23
    
    
    
    19
    %
    
    
    35
    
    
    
    18
    %
    
    
    2,695,678
    
    
    
    15
    %
    
    
    36,418
    
    
    
    13
    %Ventura/Kern Counties
    
    
    6
    
    
    
    5
    %
    
    
    17
    
    
    
    9
    %
    
    
    795,299
    
    
    
    4
    %
    
    
    9,831
    
    
    
    4
    %Subtotal
    
    
    120
    
    
    
    100
    %
    
    
    196
    
    
    
    100
    %
    
    
    18,110,660
    
    
    
    99
    %
    
    $
    275,553
    
    
    
    100
    %Renovation Building (5)
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    99,119
    
    
    
    1
    %
    
    
    5
    
    
    
    Total
    
    
    120
    
    
    
    100
    %
    
    
    197
    
    
    
    100
    %
    
    
    18,209,779
    
    
    
    100
    %
    
    $
    275,558
    
    
    
    100
    %
   (1)
    
    Includes one property with approximately 167,000 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 7




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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. 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 31,2004
    
    
    2003
    
    
    2002Net Income
    
    $
    79,791
    
    
    $
    65,994
    
    
    $
    77,663Add:General and administrative expense
    
    
    19,503
    
    
    
    15,217
    
    
    
    11,219Interest expense
    
    
    88,856
    
    
    
    93,093
    
    
    
    87,827Depreciation and amortization
    
    
    121,687
    
    
    
    111,952
    
    
    
    100,317Minority interest
    
    
    186
    
    
    
    103
    
    
    
    110Interest and other loss
    
    
    508
    
    
    
    401
    
    
    
    Impairment on investment in securities
    
    
    2,700
    
    
    
    
    
    
    
    Less:Interest and other income
    
    
    
    
    
    
    
    
    
    
    (2,063
    )Gain on sale of discontinued properties
    
    
    (30,473
    )
    
    
    (5,937
    )
    
    
    Discontinued operations
    
    
    (7,200
    )
    
    
    (13,037
    )
    
    
    (15,990
    )Gain on sale of operating properties
    
    
    
    
    
    
    
    
    
    
    (1,967
    )Property Operating Results
    
    $
    275,558
    
    
    $
    267,786
    
    
    $
    257,116
  (3)
    Excludes the operating results of two properties sold during the first quarter of
2004, one property sold during the third quarter of 2004, nine properties sold during the
fourth quarter of 2004 and one property 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)
    Comprised of one building in a business park containing a total of four buildings.
After completion of the renovation, the total square footage of this building will expand
to 130,000 square feet. The following is a summary of our occupancy and in-place rents as of December 31, 2004: Percent
    
    
    Percent
    
    
    Annualized Base RentLocation
    
    Occupied
    
    
    Leased
    
    
    Per Leased Square Foot(1)Portfolio
    
    
    Full ServiceTotal
    
    
    Gross Leases(2)Los Angeles CountyWest
    
    
    93.5
    %
    
    
    94.8
    %
    
    $
    27.80
    
    
    $
    27.81North
    
    
    91.9
    %
    
    
    94.7
    %
    
    
    22.26
    
    
    
    22.96South
    
    
    89.5
    %
    
    
    91.0
    %
    
    
    19.03
    
    
    
    20.15Subtotal/Weighted Average
    
    
    92.0
    %
    
    
    93.8
    %
    
    $
    23.96
    
    
    $
    24.67Orange County
    
    
    90.0
    %
    
    
    91.3
    %
    
    $
    18.69
    
    
    $
    22.31San Diego County
    
    
    87.8
    %
    
    
    88.5
    %
    
    
    19.87
    
    
    
    24.26Ventura/Kern Counties
    
    
    95.0
    %
    
    
    96.1
    %
    
    
    18.84
    
    
    
    19.61Subtotal/Weighted Average
    
    
    91.2
    %
    
    
    92.7
    %
    
    $
    22.21
    
    
    $
    24.08Renovation Building
    
    
    
    
    
    
    100.0
    %
    
    $
    17.40
    
    
    $
    Total/Weighted Average
    
    
    90.5
    %
    
    
    92.7
    %
    
    $
    22.18
    
    
    $
    24.08
 8




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##### Table of Contents



(1)
    
    Based on monthly contractual base rent under existing leases as of December 31,
2004, 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 31 properties and approximately 3.5 million square feet under triple net
and modified gross leases. Renovation Summary The following table summarizes information about the building under renovation as of December
31, 2004: EstimatedYear 1StabilizedCosts
    
    
    
    
    
    
    
    
    
    Estimated
    
    Cash Property
    
    Estimated
    
    EstimatedIncurred
    
    Estimated
    
    
    
    
    
    Construction
    
    Operating
    
    Year 1
    
    Year 1Square
    
    To Date
    
    Total Cost(1)
    
    Percent
    
    Completion
    
    Results(2)
    
    Annual
    
    AnnualBuilding
    
    Feet
    
    (in thousands)
    
    (in thousands)
    
    Leased
    
    Date
    
    (in thousands)
    
    Cash Yield
    
    GAAP Yield(3)22745 Savi Ranch Parkway
    
    
    130,000
    
    
    $
    7,659
    
    
    $
    9,705
    
    
    
    100
    %
    
    1st Qtr 2005
    
    $
    1,881
    
    
    
    9.6
    %
    
    
    11.2
    %
   (1)
    
    Estimated total cost includes capital expenditures, tenant improvements, leasing
commissions and carrying costs during renovation.(2)
    
    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 principal 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.(3)
    
    Estimated Year 1 Annual GAAP Yield includes an adjustment for straight-line rents. This renovation was completed on February 15, 2005. In addition to the renovation building above, we have preliminary architectural designs
completed for an additional 475,000 net rentable square feet of office space at the Howard Hughes
Center in Los Angeles, California. We also have construction entitlements at the Howard Hughes
Center for up to 600 hotel rooms. Build-to-suit projects consist of properties constructed to the
tenants specifications in return for the tenants long-term commitment to the property. We do not
intend to commence construction on any additional build-to-suit or multi-tenant projects at the
Howard Hughes Center until development plans and budgets are finalized with terms allowing us to
achieve yields commensurate with the 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. We also have a 5-acre developable land parcel in
Torrance, California that we intend to market for a build-to-suit building. We currently 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 the projects development risk. We expect to finance our development/renovation activities over the next 24 months through net
cash provided by operating activities, proceeds from asset sales, proceeds from our lines of credit
or other secured borrowings. 9




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##### Table of Contents



Dispositions The following table summarizes our disposition activity during 2004: Gross SalesDate of
    
    Property
    
    Square
    
    PriceProperty
    
    County
    
    Submarket
    
    Sale
    
    Type
    
    Feet
    
    ($000s)Tower Plaza Retail
    
    Riverside
    
    Temecula
    
    February 4, 2004
    
    Retail
    
    
    133,481
    
    
    
    $ 17,050Univision  5999 Center
Drive
    
    Los Angeles
    
    Culver City/Fox Hills
    
    March 16, 2004
    
    Office
    
    
    161,650
    
    
    
    52,50010251 Vista Sorrento
    
    San Diego
    
    Sorrento Mesa
    
    August 24, 2004
    
    Office
    
    
    69,386
    
    
    
    9,250Waples Tech Center
    
    San Diego
    
    Sorrento Mesa
    
    December 29,
2004
    
    Office
    
    
    28,119
    
    
    
    (A
    )Morehouse Center
    
    San Diego
    
    Sorrento Mesa
    
    December 29,
2004
    
    Office
    
    
    181,207
    
    
    
    (A
    )91 Freeway Center
    
    Los Angeles
    
    Artesia
    
    December 29,
2004
    
    Office
    
    
    93,277
    
    
    
    (A
    )Norwalk
    
    Los Angeles
    
    Norwalk
    
    December 29,
2004
    
    Office
    
    
    122,175
    
    
    
    (A
    )1501 Hughes Way
    
    Los Angeles
    
    Suburban Long Beach
    
    December 29,
2004
    
    Office
    
    
    77,060
    
    
    
    (A
    )3901 Via Oro
    
    Los
Angeles
    
    Suburban Long Beach
    
    December 29,
2004
    
    Office
    
    
    53,195
    
    
    
    (A
    )Glendale Corporate
Center
    
    Los Angeles
    
    Glendale
    
    December 29,
2004
    
    Office
    
    
    108,209
    
    
    
    (A
    )Whittier
    
    Los Angeles
    
    Whittier
    
    December 29,
2004
    
    Office
    
    
    135,415
    
    
    
    (A
    )South Bay Tech
    
    Los Angeles
    
    190th Corridor
    
    December 29,
2004
    
    Office
    
    
    104,815
    
    
    
    (A
    )Sub-total
    
    
    
    
    
    
    
    
    
    
    1,267,989
    
    
    
    $  78,800(A) Portfolio sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    126,0001,267,989
    
    
    
    $204,800
 Acquisitions The following table summarizes our acquisition activity during 2004: GrossPurchaseDate of
    
    
    
    
    
    
    
    PriceProperty
    
    County
    
    Submarket
    
    Purchase
    
    Property Type
    
    Square Feet
    
    ($000s)Homestore
    
    Los Angeles
    
    Westlake Village
    
    October 4, 2004
    
    Office
    
    
    137,762
    
    
    $
    32,300Warner Corporate
Center
    
    Los Angeles
    
    Woodland Hills
    
    October 11,
2004
    
    Office
    
    
    253,000
    
    
    
    64,500390,762
    
    
    $
    96,800
 10




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##### Table of Contents



The following table presents specific information regarding our 120 properties as of
December 31, 2004: AnnualizedPercentage of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Base RentTotal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    per LeasedYear(s)
    
    
    Approximate
    
    
    Portfolio Net
    
    
    
    
    
    
    Annualized
    
    
    
    
    
    
    Net RentableBuilt/
    
    
    Net Rentable
    
    
    Rentable
    
    
    Percent
    
    
    Base Rent
    
    
    Number of
    
    
    SquareProperty Name
    
    Major Area
    
    Submarket
    
    Renovated
    
    
    Square Feet
    
    
    Square Feet
    
    
    Leased
    
    
    ($000s)
    
    
    Leases
    
    
    Feet(1)Los Angeles CountyLos Angeles West145 South Fairfax
    
    Hollywood/Wilshire Corridor
    
    Miracle Mile
    
    
    1984
    
    
    
    54,398
    
    
    
    0.3
    %
    
    
    95.5
    %
    
    $
    1,032
    
    
    
    13
    
    
    $
    19.866100 Wilshire
    
    Hollywood/Wilshire Corridor
    
    Miracle Mile
    
    
    1986
    
    
    
    202,675
    
    
    
    1.1
    
    
    
    100.0
    
    
    
    5,051
    
    
    
    57
    
    
    
    24.43120 S. Spalding
    
    West Los Angeles
    
    Beverly Hills Triangle
    
    
    1984
    
    
    
    64,877
    
    
    
    0.4
    
    
    
    97.5
    
    
    
    2,700
    
    
    
    15
    
    
    
    42.678383 Wilshire
    
    West Los Angeles
    
    Beverly Hills
    
    
    1971/93
    
    
    
    424,588
    
    
    
    2.3
    
    
    
    91.7
    
    
    
    10,100
    
    
    
    134
    
    
    
    25.939100 Wilshire
    
    West Los Angeles
    
    Beverly Hills
    
    
    1971/90
    
    
    
    328,697
    
    
    
    1.8
    
    
    
    92.7
    
    
    
    8,300
    
    
    
    76
    
    
    
    27.259665 Wilshire
    
    West Los Angeles
    
    Beverly Hills Triangle
    
    
    1972/92-93
    
    
    
    159,645
    
    
    
    0.9
    
    
    
    100.0
    
    
    
    6,140
    
    
    
    24
    
    
    
    38.34Beverly Atrium
    
    West Los Angeles
    
    Beverly Hills
    
    
    1989
    
    
    
    59,582
    
    
    
    0.3
    
    
    
    96.6
    
    
    
    1,718
    
    
    
    15
    
    
    
    29.85Wilshire Pacific Plaza
    
    West Los Angeles
    
    Brentwood
    
    
    1976/87
    
    
    
    101,229
    
    
    
    0.6
    
    
    
    99.6
    
    
    
    2,561
    
    
    
    43
    
    
    
    25.39World Savings Center (2)
    
    West Los Angeles
    
    Brentwood
    
    
    1983
    
    
    
    473,581
    
    
    
    2.6
    
    
    
    86.4
    
    
    
    12,440
    
    
    
    54
    
    
    
    30.4110350 Santa Monica
    
    West Los Angeles
    
    West Los Angeles
    
    
    1979
    
    
    
    42,696
    
    
    
    0.2
    
    
    
    92.5
    
    
    
    902
    
    
    
    17
    
    
    
    22.8410351 Santa Monica
    
    West Los Angeles
    
    West Los Angeles
    
    
    1984
    
    
    
    96,899
    
    
    
    0.5
    
    
    
    87.3
    
    
    
    1,998
    
    
    
    14
    
    
    
    23.63Century Park Center
    
    West Los Angeles
    
    West Los Angeles
    
    
    1972/94
    
    
    
    235,178
    
    
    
    1.3
    
    
    
    100.0
    
    
    
    5,606
    
    
    
    98
    
    
    
    23.33400 Corporate Pointe
    
    West Los Angeles
    
    Culver City/Fox Hills
    
    
    1987
    
    
    
    165,487
    
    
    
    0.9
    
    
    
    85.9
    
    
    
    2,732
    
    
    
    19
    
    
    
    19.23600 Corporate Pointe
    
    West Los Angeles
    
    Culver City/Fox Hills
    
    
    1989
    
    
    
    275,113
    
    
    
    1.5
    
    
    
    95.1
    
    
    
    5,523
    
    
    
    19
    
    
    
    21.106060 Center Drive
    
    West Los Angeles
    
    Culver City/Fox Hills
    
    
    1999
    
    
    
    256,665
    
    
    
    1.4
    
    
    
    99.1
    
    
    
    8,280
    
    
    
    8
    
    
    
    32.556080 Center Drive
    
    West Los Angeles
    
    Culver City/Fox Hills
    
    
    2001
    
    
    
    286,568
    
    
    
    1.6
    
    
    
    93.2
    
    
    
    9,643
    
    
    
    15
    
    
    
    36.116100 Center Drive
    
    West Los Angeles
    
    Culver City/Fox Hills
    
    
    2002
    
    
    
    284,798
    
    
    
    1.6
    
    
    
    99.4
    
    
    
    7,278
    
    
    
    24
    
    
    
    25.72Bristol Plaza
    
    West Los Angeles
    
    Culver City/Fox Hills
    
    
    1982
    
    
    
    84,033
    
    
    
    0.5
    
    
    
    95.3
    
    
    
    1,640
    
    
    
    28
    
    
    
    20.47Howard Hughes Spectrum Club
    
    West Los Angeles
    
    Culver City/Fox Hills
    
    
    1993
    
    
    
    36,959
    
    
    
    0.2
    
    
    
    100.0
    
    
    
    967
    
    
    
    1
    
    
    
    26.16Howard Hughes Tower
    
    West Los Angeles
    
    Culver City/Fox Hills
    
    
    1987
    
    
    
    316,014
    
    
    
    1.7
    
    
    
    87.0
    
    
    
    7,541
    
    
    
    33
    
    
    
    27.44Northpoint
    
    West Los Angeles
    
    Culver City/Fox Hills
    
    
    1991
    
    
    
    105,145
    
    
    
    0.6
    
    
    
    94.1
    
    
    
    2,638
    
    
    
    7
    
    
    
    26.671919 Santa Monica
    
    West Los Angeles
    
    Santa Monica
    
    
    1991
    
    
    
    43,766
    
    
    
    0.2
    
    
    
    85.2
    
    
    
    947
    
    
    
    7
    
    
    
    25.412001 Wilshire Blvd.
    
    West Los Angeles
    
    Santa Monica
    
    
    1980
    
    
    
    99,565
    
    
    
    0.5
    
    
    
    100.0
    
    
    
    2,805
    
    
    
    23
    
    
    
    27.472730 Wilshire
    
    West Los Angeles
    
    Santa Monica
    
    
    1985
    
    
    
    55,531
    
    
    
    0.3
    
    
    
    100.0
    
    
    
    1,553
    
    
    
    26
    
    
    
    27.572800 28th Street
    
    West Los Angeles
    
    Santa Monica
    
    
    1979
    
    
    
    106,481
    
    
    
    0.6
    
    
    
    95.9
    
    
    
    2,456
    
    
    
    42
    
    
    
    24.0610780 Santa Monica
    
    West Los Angeles
    
    West Los Angeles
    
    
    1984
    
    
    
    93,211
    
    
    
    0.5
    
    
    
    97.0
    
    
    
    2,193
    
    
    
    33
    
    
    
    24.261950 Sawtelle
    
    West Los Angeles
    
    West Los Angeles
    
    
    1988/95
    
    
    
    104,171
    
    
    
    0.6
    
    
    
    98.0
    
    
    
    2,367
    
    
    
    42
    
    
    
    23.1711075 Santa Monica
    
    West Los Angeles
    
    West Los Angeles
    
    
    1983
    
    
    
    35,996
    
    
    
    0.2
    
    
    
    99.1
    
    
    
    877
    
    
    
    8
    
    
    
    24.57Westwood Center
    
    West Los Angeles
    
    Westwood
    
    
    1965/2000
    
    
    
    314,366
    
    
    
    1.7
    
    
    
    99.6
    
    
    
    11,366
    
    
    
    45
    
    
    
    36.30Westwood Terrace
    
    West Los Angeles
    
    West Los Angeles
    
    
    1988
    
    
    
    136,707
    
    
    
    0.8
    
    
    
    98.3
    
    
    
    3,549
    
    
    
    22
    
    
    
    26.41Subtotal/Weighted Average  Los Angeles West
    
    
    5,044,621
    
    
    
    27.7
    %
    
    
    94.8
    %
    
    $
    132,903
    
    
    
    962
    
    
    $
    27.80
 11




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##### Table of Contents



AnnualizedBase RentPercentage of Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    per LeasedYear(s)
    
    
    Approximate
    
    
    Portfolio Net
    
    
    
    
    
    
    Annualized
    
    
    
    
    
    
    Net RentableBuilt/
    
    
    Net Rentable
    
    
    Rentable
    
    
    Percent
    
    
    Base Rent
    
    
    Number of
    
    
    SquareProperty Name
    
    Major Area
    
    Submarket
    
    Renovated
    
    
    Square Feet
    
    
    Square Feet
    
    
    Leased
    
    
    ($000s)
    
    
    Leases
    
    
    Feet(1)Los Angeles North303 Glenoaks
    
    Glendale/Tri-Cities
    
    Burbank
    
    
    1983/96
    
    
    
    177,898
    
    
    
    1.0
    %
    
    
    99.4
    %
    
    $
    4,028
    
    
    
    28
    
    
    $
    22.78333 N. Glenoaks
    
    Glendale/Tri-Cities
    
    Burbank
    
    
    1978
    
    
    
    82,939
    
    
    
    0.5
    
    
    
    98.0
    
    
    
    1,921
    
    
    
    17
    
    
    
    23.62601 S. Glenoaks
    
    Glendale/Tri-Cities
    
    Burbank
    
    
    1990
    
    
    
    74,745
    
    
    
    0.4
    
    
    
    87.4
    
    
    
    1,206
    
    
    
    18
    
    
    
    18.45Burbank Executive Plaza
    
    Glendale/Tri-Cities
    
    Burbank
    
    
    1983
    
    
    
    63,320
    
    
    
    0.3
    
    
    
    99.0
    
    
    
    1,437
    
    
    
    19
    
    
    
    22.92425 West Broadway
    
    Glendale/Tri-Cities
    
    Glendale
    
    
    1984
    
    
    
    72,317
    
    
    
    0.4
    
    
    
    94.9
    
    
    
    1,456
    
    
    
    14
    
    
    
    21.21535 N. Brand Blvd.
    
    Glendale/Tri-Cities
    
    Glendale
    
    
    1973/92/99
    
    
    
    109,104
    
    
    
    0.6
    
    
    
    96.6
    
    
    
    2,233
    
    
    
    44
    
    
    
    21.195161 Lankershim
    
    Glendale/Tri-Cities
    
    North Hollywood
    
    
    1985/97
    
    
    
    180,940
    
    
    
    1.0
    
    
    
    99.4
    
    
    
    3,964
    
    
    
    9
    
    
    
    22.0570 South Lake
    
    Glendale/Tri-Cities
    
    Pasadena
    
    
    1982/94
    
    
    
    101,236
    
    
    
    0.5
    
    
    
    99.9
    
    
    
    2,627
    
    
    
    19
    
    
    
    25.97150 East Colorado Boulevard.
    
    Glendale/Tri-Cities
    
    Pasadena
    
    
    1979/97
    
    
    
    61,657
    
    
    
    0.3
    
    
    
    100.0
    
    
    
    1,447
    
    
    
    20
    
    
    
    23.47299 N. Euclid
    
    Glendale/Tri-Cities
    
    Pasadena
    
    
    1983
    
    
    
    74,573
    
    
    
    0.4
    
    
    
    100.0
    
    
    
    1,890
    
    
    
    4
    
    
    
    25.30Calabasas Commerce Center
    
    San Fernando Valley
    
    Calabasas
    
    
    1990
    
    
    
    126,771
    
    
    
    0.7
    
    
    
    100.0
    
    
    $
    2,323
    
    
    
    12
    
    
    
    18.32Calabasas Tech
    
    San Fernando Valley
    
    Calabasas
    
    
    1990/2001
    
    
    
    283,692
    
    
    
    1.5
    
    
    
    90.3
    
    
    
    4,837
    
    
    
    17
    
    
    
    18.8916000 Ventura
    
    San Fernando Valley
    
    Encino
    
    
    1980/96
    
    
    
    175,275
    
    
    
    1.0
    
    
    
    93.2
    
    
    
    3,628
    
    
    
    45
    
    
    
    22.2115250 Ventura
    
    San Fernando Valley
    
    Sherman Oaks
    
    
    1970/90-91
    
    
    
    112,142
    
    
    
    0.6
    
    
    
    93.1
    
    
    
    2,438
    
    
    
    41
    
    
    
    23.35Noble Professional Center
    
    San Fernando Valley
    
    Sherman Oaks
    
    
    1985/93
    
    
    
    52,599
    
    
    
    0.3
    
    
    
    92.8
    
    
    
    1,129
    
    
    
    18
    
    
    
    23.11Sunset Pointe Plaza
    
    San Fernando Valley
    
    Valencia
    
    
    1988
    
    
    
    59,186
    
    
    
    0.3
    
    
    
    99.7
    
    
    
    1,500
    
    
    
    27
    
    
    
    25.42Tourney Pointe
    
    San Fernando Valley
    
    Valencia
    
    
    1985/98-2000
    
    
    
    219,673
    
    
    
    1.2
    
    
    
    92.1
    
    
    
    4,196
    
    
    
    38
    
    
    
    20.74Homestore
    
    San Fernando Valley
    
    Westlake Village
    
    
    2000
    
    
    
    137,762
    
    
    
    0.8
    
    
    
    100.0
    
    
    
    3,036
    
    
    
    1
    
    
    
    22.04Westlake  5601 Lindero
    
    San Fernando Valley
    
    Westlake Village
    
    
    1989
    
    
    
    106,144
    
    
    
    0.6
    
    
    
    95.3
    
    
    
    1,894
    
    
    
    5
    
    
    
    18.73Clarendon Crest
    
    San Fernando Valley
    
    Woodland Hills
    
    
    1990
    
    
    
    43,222
    
    
    
    0.2
    
    
    
    97.9
    
    
    
    887
    
    
    
    18
    
    
    
    20.95Warner Corporate Center
    
    San Fernando Valley
    
    Woodland Hills
    
    
    1988
    
    
    
    253,000
    
    
    
    1.4
    
    
    
    98.9
    
    
    
    6,433
    
    
    
    34
    
    
    
    25.71Woodland Hills
    
    San Fernando Valley
    
    Woodland Hills
    
    
    1972/95
    
    
    
    229,616
    
    
    
    1.3
    
    
    
    93.0
    
    
    
    4,874
    
    
    
    73
    
    
    
    22.82Los Angeles Corporate Center
    
    San Gabriel Valley
    
    Monterey Park
    
    
    1984/86
    
    
    
    389,615
    
    
    
    2.1
    
    
    
    90.6
    
    
    
    7,552
    
    
    
    45
    
    
    
    21.40Conejo Business Center
    
    Ventura
    
    Newbury Park/Thousand Oaks
    
    
    1991
    
    
    
    69,425
    
    
    
    0.4
    
    
    
    92.9
    
    
    
    1,375
    
    
    
    29
    
    
    
    21.32Hillside Corporate Center
    
    Ventura
    
    Newbury Park/Thousand Oaks
    
    
    1998
    
    
    
    61,000
    
    
    
    0.3
    
    
    
    97.3
    
    
    
    1,564
    
    
    
    10
    
    
    
    26.36Marin Corporate Center
    
    Ventura
    
    Newbury Park/Thousand Oaks
    
    
    1986
    
    
    
    51,776
    
    
    
    0.3
    
    
    
    64.9
    
    
    
    778
    
    
    
    27
    
    
    
    23.14Westlake Gardens
    
    Ventura
    
    Westlake Village
    
    
    1998
    
    
    
    50,267
    
    
    
    0.3
    
    
    
    94.0
    
    
    
    1,288
    
    
    
    19
    
    
    
    27.27Westlake Gardens II
    
    Ventura
    
    Westlake Village
    
    
    1999
    
    
    
    48,874
    
    
    
    0.3
    
    
    
    93.1
    
    
    
    1,229
    
    
    
    4
    
    
    
    27.02Subtotal/Weighted Average  Los Angeles North
    
    
    3,468,768
    
    
    
    19.0
    %
    
    
    94.7
    %
    
    $
    73,170
    
    
    
    655
    
    
    $
    22.26
 12




---



##### Table of Contents



AnnualizedPercentage of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Base RentTotal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    per LeasedYear(s)
    
    
    Approximate
    
    
    Portfolio Net
    
    
    
    
    
    
    Annualized
    
    
    Number
    
    
    Net RentableBuilt/
    
    
    Net Rentable
    
    
    Rentable
    
    
    Percent
    
    
    Base Rent
    
    
    of
    
    
    SquareProperty Name
    
    Major Area
    
    Submarket
    
    Renovated
    
    
    Square Feet
    
    
    Square Feet
    
    
    Leased
    
    
    ($000s)
    
    
    Leases
    
    
    Feet(1)Los Angeles SouthSouth Bay Centre
    
    South Bay
    
    190th Corridor
    
    
    1984
    
    
    
    204,197
    
    
    
    1.1
    %
    
    
    100.0
    %
    
    $
    4,150
    
    
    
    36
    
    
    $
    20.30Pacific Gateway
    
    South Bay
    
    190th Corridor
    
    
    1982/90
    
    
    
    225,805
    
    
    
    1.2
    
    
    
    97.4
    
    
    
    4,617
    
    
    
    40
    
    
    
    20.99Gateway Towers
    
    South Bay
    
    190th Corridor
    
    
    1984/86
    
    
    
    433,545
    
    
    
    2.4
    
    
    
    95.3
    
    
    
    9,448
    
    
    
    74
    
    
    
    22.88100 West Broadway
    
    South Bay
    
    Downtown Long Beach
    
    
    1987/96
    
    
    
    191,371
    
    
    
    1.1
    
    
    
    68.8
    
    
    
    2,537
    
    
    
    39
    
    
    
    19.26Oceangate Tower
    
    South Bay
    
    Downtown Long Beach
    
    
    1971/93-94
    
    
    
    218,554
    
    
    
    1.2
    
    
    
    79.7
    
    
    
    3,067
    
    
    
    40
    
    
    
    17.62Continental Grand Plaza
    
    South Bay
    
    El Segundo
    
    
    1986
    
    
    
    237,494
    
    
    
    1.3
    
    
    
    93.6
    
    
    
    5,310
    
    
    
    37
    
    
    
    23.90Grand Avenue Plaza
    
    South Bay
    
    El Segundo
    
    
    1980
    
    
    
    82,872
    
    
    
    0.5
    
    
    
    88.2
    
    
    
    1,334
    
    
    
    16
    
    
    
    18.265200 West Century
    
    South Bay
    
    LAX
    
    
    1982/98-99
    
    
    
    312,700
    
    
    
    1.7
    
    
    
    93.0
    
    
    
    5,325
    
    
    
    30
    
    
    
    18.30Skyview Center
    
    South Bay
    
    LAX
    
    
    1981/87/95
    
    
    
    398,261
    
    
    
    2.2
    
    
    
    81.6
    
    
    
    5,175
    
    
    
    53
    
    
    
    15.92Long Beach Airport Bldg D (2)
    
    South Bay
    
    Suburban Long Beach
    
    
    1987/95
    
    
    
    121,610
    
    
    
    0.7
    
    
    
    100.0
    
    
    
    1,211
    
    
    
    1
    
    
    
    9.96Long Beach Airport Bldg F & G (2)
    
    South Bay
    
    Suburban Long Beach
    
    
    1987/95
    
    
    
    150,403
    
    
    
    0.8
    
    
    
    100.0
    
    
    
    1,354
    
    
    
    1
    
    
    
    9.005000 East Spring(2)
    
    South Bay
    
    Suburban Long Beach
    
    
    1989/95
    
    
    
    168,967
    
    
    
    0.9
    
    
    
    96.9
    
    
    
    3,693
    
    
    
    44
    
    
    
    22.55Mariner Court
    
    South Bay
    
    Torrance
    
    
    1989
    
    
    
    105,436
    
    
    
    0.6
    
    
    
    98.7
    
    
    
    2,150
    
    
    
    38
    
    
    
    20.67Subtotal/Weighted Average  Los Angeles South
    
    
    2,851,215
    
    
    
    15.7
    %
    
    
    91.0
    %
    
    $
    49,371
    
    
    
    449
    
    
    $
    19.03
 13




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##### Table of Contents



AnnualizedPercentage of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Base RentTotal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    per LeasedYear(s)
    
    
    Approximate
    
    
    Portfolio Net
    
    
    
    
    
    
    Annualized
    
    
    
    
    
    
    Net RentableBuilt/
    
    
    Net Rentable
    
    
    Rentable
    
    
    Percent
    
    
    Base Rent
    
    
    Number of
    
    
    SquareProperty Name
    
    Major Area
    
    Submarket
    
    Renovated
    
    
    Square Feet
    
    
    Square Feet
    
    
    Leased
    
    
    ($000s)
    
    
    Leases
    
    
    Feet(1)Orange County1370 Valley Vista
    
    LA Central
    
    Diamond Bar
    
    
    1988
    
    
    
    81,962
    
    
    
    0.4
    %
    
    
    100.0
    %
    
    $
    1,814
    
    
    
    13
    
    
    $
    21.39Anaheim City Centre (2)
    
    Orange County
    
    Central County
    
    
    1986/91
    
    
    
    177,266
    
    
    
    1.0
    
    
    
    100.0
    
    
    
    3,569
    
    
    
    27
    
    
    
    19.72City Centre I
    
    Orange County
    
    Central County
    
    
    1985/97
    
    
    
    141,903
    
    
    
    0.8
    
    
    
    100.0
    
    
    
    2,849
    
    
    
    33
    
    
    
    19.85Orange Financial Center
    
    Orange County
    
    Central County
    
    
    1985/95
    
    
    
    307,920
    
    
    
    1.7
    
    
    
    94.4
    
    
    
    6,522
    
    
    
    38
    
    
    
    22.43Fountain Valley City Centre
    
    Orange County
    
    Greater Airport
    
    
    1982
    
    
    
    303,267
    
    
    
    1.7
    
    
    
    63.4
    
    
    
    4,591
    
    
    
    18
    
    
    
    23.86Fountain Valley Plaza
    
    Orange County
    
    Greater Airport
    
    
    1982
    
    
    
    107,313
    
    
    
    0.6
    
    
    
    37.9
    
    
    
    843
    
    
    
    4
    
    
    
    20.73Irvine Corporate Center
    
    Orange County
    
    Greater Airport
    
    
    1980/88
    
    
    
    126,781
    
    
    
    0.7
    
    
    
    100.0
    
    
    
    1,446
    
    
    
    5
    
    
    
    11.34Newport Irvine Center
    
    Orange County
    
    Greater Airport
    
    
    1981/97
    
    
    
    75,184
    
    
    
    0.4
    
    
    
    88.6
    
    
    
    1,642
    
    
    
    28
    
    
    
    24.65South Coast Executive Center
    
    Orange County
    
    Greater Airport
    
    
    1979/97
    
    
    
    61,292
    
    
    
    0.3
    
    
    
    94.3
    
    
    
    1,068
    
    
    
    25
    
    
    
    18.48Von Karman Corporate Center
    
    Orange County
    
    Greater Airport
    
    
    1981/84
    
    
    
    452,378
    
    
    
    2.5
    
    
    
    86.8
    
    
    
    8,419
    
    
    
    31
    
    
    
    21.44Centerpointe La Palma
    
    Orange County
    
    North County
    
    
    1986/88/90
    
    
    
    603,582
    
    
    
    3.3
    
    
    
    97.8
    
    
    
    11,074
    
    
    
    98
    
    
    
    18.76Savi Tech Center
    
    Orange County
    
    North County
    
    
    1989
    
    
    
    242,327
    
    
    
    1.3
    
    
    
    100.0
    
    
    
    2,538
    
    
    
    3
    
    
    
    10.47Yorba Linda Business Park
    
    Orange County
    
    North County
    
    
    1988
    
    
    
    165,710
    
    
    
    0.9
    
    
    
    98.3
    
    
    
    1,483
    
    
    
    60
    
    
    
    9.10Crown Cabot Financial Center
    
    Orange County
    
    South County
    
    
    1989
    
    
    
    174,222
    
    
    
    1.0
    
    
    
    97.4
    
    
    
    4,829
    
    
    
    41
    
    
    
    28.465632 Bolsa
    
    Orange County
    
    West County
    
    
    1987
    
    
    
    21,568
    
    
    
    0.1
    
    
    
    100.0
    
    
    
    184
    
    
    
    1
    
    
    
    8.525672 Bolsa
    
    Orange County
    
    West County
    
    
    1987
    
    
    
    12,110
    
    
    
    0.1
    
    
    
    100.0
    
    
    
    103
    
    
    
    1
    
    
    
    8.525702 Bolsa
    
    Orange County
    
    West County
    
    
    1987/97
    
    
    
    27,731
    
    
    
    0.1
    
    
    
    100.0
    
    
    
    227
    
    
    
    2
    
    
    
    8.175832 Bolsa
    
    Orange County
    
    West County
    
    
    1985
    
    
    
    49,355
    
    
    
    0.3
    
    
    
    100.0
    
    
    
    829
    
    
    
    1
    
    
    
    16.80Huntington Beach Plaza
    
    Orange County
    
    West County
    
    
    1984/96
    
    
    
    53,459
    
    
    
    0.3
    
    
    
    89.6
    
    
    
    850
    
    
    
    18
    
    
    
    17.75Huntington Commerce Center
    
    Orange County
    
    West County
    
    
    1987
    
    
    
    69,749
    
    
    
    0.4
    
    
    
    98.4
    
    
    
    638
    
    
    
    23
    
    
    
    9.29Subtotal/Weighted Average  Orange County
    
    
    3,255,079
    
    
    
    17.9
    %
    
    
    91.3
    %
    
    $
    55,518
    
    
    
    470
    
    
    $
    18.69
 14




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##### Table of Contents



AnnualizedPercentage of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Base RentTotal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    per LeasedYear(s)
    
    
    Approximate
    
    
    Portfolio Net
    
    
    
    
    
    
    Annualized
    
    
    
    
    
    
    Net RentableBuilt/
    
    
    Net Rentable
    
    
    Rentable
    
    
    Percent
    
    
    Base Rent
    
    
    Number of
    
    
    SquareProperty Name
    
    Major Area
    
    Submarket
    
    Renovated
    
    
    Square Feet
    
    
    Square Feet
    
    
    Leased
    
    
    ($000s)
    
    
    Leases
    
    
    Feet(1)San Diego CountyCarlsbad Corporate Center
    
    San Diego County
    
    Carlsbad
    
    
    1996
    
    
    
    129,000
    
    
    
    0.7
    %
    
    
    100.0
    %
    
    $
    445
    
    
    
    1
    
    
    $
    3.45Carmel Valley Center
    
    San Diego County
    
    Del Mar Heights
    
    
    1987/89
    
    
    
    109,518
    
    
    
    0.6
    
    
    
    93.8
    
    
    
    3,410
    
    
    
    17
    
    
    
    33.20701 B Street(2)
    
    San Diego County
    
    Downtown
    
    
    1982/96
    
    
    
    548,310
    
    
    
    3.0
    
    
    
    87.3
    
    
    
    11,023
    
    
    
    70
    
    
    
    23.045120 Shoreham
    
    San Diego County
    
    Governor Park
    
    
    1984
    
    
    
    37,813
    
    
    
    0.2
    
    
    
    100.0
    
    
    
    842
    
    
    
    7
    
    
    
    22.24Governor Executive Centre
    
    San Diego County
    
    Governor Park
    
    
    1988
    
    
    
    52,828
    
    
    
    0.3
    
    
    
    85.1
    
    
    
    1,175
    
    
    
    10
    
    
    
    26.12Governor Executive Centre II
    
    San Diego County
    
    Governor Park
    
    
    1989
    
    
    
    101,433
    
    
    
    0.6
    
    
    
    100.0
    
    
    
    3,006
    
    
    
    17
    
    
    
    29.64Governor Park Plaza
    
    San Diego County
    
    Governor Park
    
    
    1986
    
    
    
    104,441
    
    
    
    0.6
    
    
    
    94.0
    
    
    
    2,485
    
    
    
    19
    
    
    
    25.3110180 Scripps Ranch
    
    San Diego County
    
    Scripps Ranch
    
    
    1978/96
    
    
    
    43,560
    
    
    
    0.2
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Activity Business Center
    
    San Diego County
    
    Miramar
    
    
    1987
    
    
    
    167,170
    
    
    
    0.9
    
    
    
    72.3
    
    
    
    1,652
    
    
    

    41
    
    
    
    13.66Balboa Corporate Center
    
    San Diego County
    
    Kearney Mesa
    
    
    1990
    
    
    
    70,987
    
    
    
    0.4
    
    
    
    75.8
    
    
    
    777
    
    
    
    2
    
    
    
    14.44Panorama Corporate Center
    
    San Diego County
    
    Kearney Mesa
    
    
    1991
    
    
    
    130,396
    
    
    
    0.7
    
    
    
    99.6
    
    
    
    2,392
    
    
    
    3
    
    
    
    18.42Ruffin Corporate Center
    
    San Diego County
    
    Kearney Mesa
    
    
    1990
    
    
    
    45,059
    
    
    
    0.2
    
    
    
    100.0
    
    
    
    378
    
    
    
    1
    
    
    
    8.40Skypark Office Plaza
    
    San Diego County
    
    Kearney Mesa
    
    
    1986
    
    
    
    203,946
    
    
    
    1.1
    
    
    
    96.9
    
    
    
    4,423
    
    
    
    24
    
    
    
    22.39Crossroads
    
    San Diego County
    
    Mission Valley
    
    
    1979
    
    
    
    134,477
    
    
    
    0.7
    
    
    
    65.8
    
    
    
    2,093
    
    
    
    8
    
    
    
    23.64Poway Industrial
    
    San Diego County
    
    Rancho Bernardo/Poway
    
    
    1991/96
    
    
    
    112,000
    
    
    
    0.6
    
    
    
    100.0
    
    
    
    672
    
    
    
    1
    
    
    
    6.00Bernardo Regency
    
    San Diego County
    

    Rancho Bernardo/Poway
    
    
    1986
    
    
    
    48,052
    
    
    
    0.3
    
    
    
    93.3
    
    
    
    1,145
    
    
    
    16
    
    
    
    25.54Carmel View Office Plaza
    
    San Diego County
    
    Rancho Bernardo/Poway
    
    
    1985
    
    
    
    77,672
    
    
    
    0.4
    
    
    
    84.1
    
    
    
    1,497
    
    
    
    16
    
    
    
    22.92Cymer Technology Center
    
    San Diego County
    
    Rancho Bernardo/Poway
    
    
    1986
    
    
    
    155,612
    
    
    
    0.9
    
    
    
    100.0
    
    
    
    1,923
    
    
    
    2
    
    
    
    12.36Foremost Professional Plaza
    
    San Diego County
    
    Rancho Bernardo/Poway
    
    
    1992
    
    
    
    60,311
    
    
    
    0.3
    
    
    
    73.6
    
    
    
    1,113
    
    
    
    29
    
    
    
    25.06Via Frontera
    
    San Diego County
    
    Rancho Bernardo/Poway
    
    
    1982/97
    
    
    
    77,920
    
    
    
    0.4
    
    
    
    100.0
    
    
    
    914
    
    
    
    6
    
    
    
    11.60Westridge
    
    San Diego County
    
    Sorrento Mesa
    
    
    1984/96
    
    
    
    48,955
    
    
    
    0.3
    
    
    
    82.4
    
    
    
    551
    
    
    
    3
    
    
    
    13.65Torreyana Science Park
    
    San Diego County
    
    Torrey Pines
    
    
    1980/97
    
    
    
    81,204
    
    
    
    0.5
    
    
    
    100.0
    
    
    
    2,008
    
    
    
    1
    
    
    
    24.72Genesee Executive Plaza
    
    San Diego County
    
    University Towne Centre
    
    
    1984
    
    
    
    155,014
    
    
    
    0.9
    
    
    
    87.5
    
    
    
    3,493
    
    
    
    23
    
    
    
    25.75Subtotal/Weighted Average  San Diego County
    
    
    
    
    
    
    
    
    2,695,678
    
    
    
    14.8
    %
    
    
    88.5
    %
    
    $
    47,417
    
    
    
    317
    
    
    $
    19.87




---



##### Table of Contents



AnnualizedPercentage of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Base RentTotal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    per LeasedYear(s)
    
    
    Approximate
    
    
    Portfolio Net
    
    
    
    
    
    
    Annualized
    
    
    
    
    
    
    Net RentableBuilt/
    
    
    Net Rentable
    
    
    Rentable
    
    
    Percent
    
    
    Base Rent
    
    
    Number of
    
    
    SquareProperty Name
    
    Submarket
    
    Location
    
    Renovated
    
    
    Square Feet
    
    
    Square Feet
    
    
    Leased
    
    
    ($000s)
    
    
    Leases
    
    
    Feet(1)Ventura & Kern Counties4900 California
    
    Kern County
    
    Bakersfield
    
    
    1983
    
    
    
    155,791
    
    
    
    0.9
    %
    
    
    95.6
    %
    
    $
    2,385
    
    
    
    23
    
    
    $
    16.01Parkway Center I
    
    Kern County
    
    Bakersfield
    
    
    1992/95
    
    
    
    61,289
    
    
    
    0.3
    
    
    
    90.8
    
    
    
    1,038
    
    
    
    11
    
    
    
    18.64Camarillo Business Park
    
    Ventura
    
    Camarillo
    
    
    1984/97
    
    
    
    154,298
    
    
    
    0.8
    
    
    
    97.5
    
    
    
    3,134
    
    
    
    29
    
    
    
    20.831000 Town Center
    
    Ventura
    
    Oxnard
    
    
    1989
    
    
    
    108,508
    
    
    
    0.6
    
    
    
    99.8
    
    
    
    2,379
    
    
    
    10
    
    
    
    21.96Solar Drive Business Center
    
    Ventura
    
    Oxnard
    
    
    1982
    
    
    
    138,341
    
    
    
    0.8
    
    
    
    98.0
    
    
    
    2,494
    
    
    
    36
    
    
    
    18.39Center Promenade
    
    Ventura
    
    Ventura
    
    
    1988
    
    
    
    177,072
    
    
    
    1.0
    
    
    
    93.4
    
    
    
    2,969
    
    
    
    61
    
    
    
    17.96Subtotal/Weighted Average  Ventura & Kern Counties
    
    
    
    
    
    
    
    
    795,299
    
    
    
    4.4
    %
    
    
    96.1
    %
    
    $
    14,399
    
    
    
    170
    
    
    $
    18.84Renovation BuildingSavi Tech Center(3)
    
    Orange County
    
    North County
    
    
    1989
    
    
    
    99,119
    
    
    
    0.5
    %
    
    
    100.0
    %
    
    $
    2,262
    
    
    
    1
    
    
    $
    17.40Portfolio Total/ Weighted Average
    
    
    
    
    
    
    
    
    18,209,779
    
    
    
    100.0
    %
    
    
    92.7
    %
    
    $
    375,040
    
    
    
    3,024
    
    
    $
    22.18
   (1)
    
    Calculated as monthly contractual base rent under existing leases as of December
31, 2004, 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.(3)
    
    Comprised of one building in a business park containing a total of four buildings.
After completion of the renovation, the total square footage of this building will
expand to 130,000 square feet. The annualized base rent and the annualized base rent per
leased net rentable square feet amounts are calculated based on the expanded square
footage of 130,000 square feet.




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##### Table of Contents



Tenant Information As of December 31, 2004, 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 2 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
81% 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 of 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 to our buildings. The following table presents information as of December 31, 2004 derived from our ten largest
tenants based on the percentage of aggregate portfolio annualized base rent: Weighted
    
    
    Percentage of
    
    
    Percentage ofAverage
    
    
    Aggregate
    
    
    AggregateRemaining
    
    
    Portfolio
    
    
    Portfolio
    
    
    
    
    
    
    AnnualizedNumber of
    
    
    Lease Term
    
    
    Leased
    
    
    Annualized
    
    
    Net Rentable
    
    
    Base RentTenant
    
    Locations
    
    
    in Months
    
    
    Square Feet
    
    
    Base Rent(1)
    
    
    Square Feet
    
    
    (in thousands)Vivendi Universal
    
    
    2
    
    
    
    64
    
    
    
    1.38
    %
    
    
    2.14
    %
    
    
    231,681
    
    
    $
    7,980State of California
    
    
    18
    
    
    
    51
    
    
    
    1.63
    
    
    
    1.61
    
    
    
    274,065
    
    
    
    5,992University of Phoenix
    
    
    6
    
    
    
    52
    
    
    
    0.99
    
    
    
    1.00
    
    
    
    166,195
    
    
    
    3,733Ceridian Corporation
    
    
    2
    
    
    
    64
    
    
    
    0.91
    
    
    
    0.99
    
    
    
    152,612
    
    
    
    3,706Atlantic Richfield
    
    
    1
    
    
    
    21
    
    
    
    0.86
    
    
    
    0.93
    
    
    
    143,885
    
    
    
    3,465Pepperdine University
    
    
    1
    
    
    
    167
    
    
    
    0.68
    
    
    
    0.87
    
    
    
    113,488
    
    
    
    3,251Homestore.com, Inc
    
    
    1
    
    
    
    37
    
    
    
    0.82
    
    
    
    0.82
    
    
    
    137,762
    
    
    
    3,036Walt Disney Pictures and Television
    
    
    1
    
    
    
    43
    
    
    
    0.76
    
    
    
    0.78
    
    
    
    128,258
    
    
    
    2,894Haight, Brown & Bonesteel, LLP
    
    
    2
    
    
    
    77
    
    
    
    0.38
    
    
    
    0.73
    
    
    
    63,262
    
    
    
    2,736Westfield Corporation
    
    
    1
    
    
    
    100
    
    
    
    0.58
    
    
    
    0.73
    
    
    
    96,876
    
    
    
    2,725Total/Weighted Average(2)
    
    
    35
    
    
    
    63
    
    
    
    8.99
    %
    
    
    10.60
    %
    
    
    1,508,084
    
    
    $
    39,518
   (1)
    
    Annualized base rent is calculated as monthly contractual base rent under existing
leases as of December 31, 2004, 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, 2004: Percentage ofOccupied
    
    
    TotalNAICS
    
    
    Square
    
    
    OccupiedNorth American Industrial Classification System Description (NAICS)
    
    Code
    
    
    Feet
    
    
    PortfolioProfessional, Scientific, and Technical Services
    
    
    541
    
    
    
    4,278,468
    
    
    
    25.91
    %Finance and Insurance
    
    
    521-525
    
    
    
    2,838,317
    
    
    
    17.19Information
    
    
    511-519
    
    
    
    1,625,403
    
    
    
    9.84Manufacturing
    
    
    311-339
    
    
    
    1,282,143
    
    
    
    7.77Health Care and Social Assistance
    
    
    621-624
    
    
    
    1,107,178
    
    
    
    6.71Educational Services
    
    
    611
    
    
    
    750,882
    
    
    
    4.55Administrative and Support and Waste Management and Remediation Services
    
    
    561-562
    
    
    
    742,831
    
    
    
    4.50Real Estate, Rental and Leasing
    
    
    531-533
    
    
    
    709,020
    
    
    
    4.29Public Administration
    
    
    921-928
    
    
    
    638,857
    
    
    
    3.87Wholesale Trade
    
    
    423-425
    
    
    
    564,150
    
    
    
    3.42Construction
    
    
    236-238
    
    
    
    334,098
    
    
    
    2.02Transportation and Warehousing
    
    
    481-493
    
    
    
    319,070
    
    
    
    1.93Other Services (except Public Administration)
    
    
    811-814
    
    
    
    295,987
    
    
    
    1.79Arts, Entertainment, and Recreation
    
    
    711-713
    
    
    
    287,027
    
    
    
    1.74Accommodation and Food Services
    
    
    721-722
    
    
    
    180,608
    
    
    
    1.09Retail Trade
    
    
    441-454
    
    
    
    112,738
    
    
    
    0.68Mining
    
    
    211-213
    
    
    
    41,291
    
    
    
    0.25Management of Companies and Enterprises
    
    
    551
    
    
    
    34,410
    
    
    
    0.21Utilities
    
    
    221
    
    
    
    8,975
    
    
    
    0.05Agriculture, Forestry, Fishing and Hunting
    
    
    111-115
    
    
    
    6,261
    
    
    
    0.04Other  Uncategorized
    
    
    
    
    
    
    352,346
    
    
    
    2.15Total Square Feet Occupied
    
    
    
    
    
    
    16,510,060
    
    
    
    100.00
    %
 18




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##### Table of Contents



Lease Distribution The following table presents information relating to the distribution of the leases for our
120 properties, based on leased net rentable square feet, as of December 31, 2004: Percent of
    
    
    
    
    
    
    
    
    
    
    Percent ofAggregate
    
    
    Annualized
    
    
    Avg. Base
    
    
    AggregatePercent
    
    
    
    
    
    
    Portfolio
    
    
    Base Rent of
    
    
    Rent per
    
    
    PortfolioNumber
    
    
    of All
    
    
    Total Leased
    
    
    Leased
    
    
    Leases(1)
    
    
    Leased
    
    
    AnnualizedSquare Feet Under Lease
    
    of Leases
    
    
    Leases
    
    
    Square Feet
    
    
    Square Feet
    
    
    (000's)
    
    
    Square Foot
    
    
    Base Rent2,500 and under
    
    
    1,490
    
    
    
    49.29
    %
    
    
    2,114,663
    
    
    
    12.60
    %
    
    $
    50,567
    
    
    $
    23.91
    
    
    
    12.42
    %2,501 - 5,000
    
    
    704
    
    
    
    23.29
    
    
    
    2,447,176
    
    
    
    14.58
    
    
    
    60,844
    
    
    
    24.86
    
    
    
    14.955,001 - 7,500
    
    
    299
    
    
    
    9.89
    
    
    
    1,813,171
    
    
    
    10.80
    
    
    
    46,939
    
    
    
    25.89
    
    
    
    11.537,501 - 10,000
    
    
    164
    
    
    
    5.43
    
    
    
    1,432,241
    
    
    
    8.54
    
    
    
    36,027
    
    
    
    25.15
    
    
    
    8.8510,001 - 20,000
    
    
    241
    
    
    
    7.97
    
    
    
    3,405,929
    
    
    
    20.30
    
    
    
    85,663
    
    
    
    25.15
    
    
    
    21.0420,001- 40,000
    
    
    78
    
    
    
    2.58
    
    
    
    2,118,322
    
    
    
    12.62
    
    
    
    51,036
    
    
    
    24.09
    
    
    
    12.5440,001 and over
    
    
    47
    
    
    
    1.55
    
    
    
    3,451,173
    
    
    
    20.56
    
    
    
    76,002
    
    
    
    22.02
    
    
    
    18.67Total/Weighted Average
    
    
    3,023
    
    
    
    100.00
    %
    
    
    16,782,675
    
    
    
    100.00
    %
    
    $
    407,078
    
    
    $
    24.26
    
    
    
    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 120
properties for leases in place at December 31, 2004. This table assumes that none of the tenants
exercise renewal options or termination rights, if any, at or prior to the scheduled expirations: AverageAnnualized
    
    
    Annualized
    
    
    Percentage ofSquare
    
    
    Percentage
    
    
    Base Rent
    
    
    Base Rent per
    
    
    AggregateNumber of
    
    
    Footage
    
    
    of Aggregate
    
    
    of Expiring
    
    
    Square Foot of
    
    
    PortfolioLeases
    
    
    of Expiring
    
    
    Leased
    
    
    Leases(1)
    
    
    Expiring
    
    
    AnnualizedYear of Lease Expiration
    
    Expiring
    
    
    Leases
    
    
    Square Feet
    
    
    ($000s)
    
    
    Leases
    
    
    Base RentMonth-to-Month
    
    
    113
    
    
    
    499,517
    
    
    
    2.98
    %
    
    $
    8,878
    
    
    $
    17.77
    
    
    
    2.18
    %Q1 2005
    
    
    136
    
    
    
    465,009
    
    
    
    2.77
    
    
    
    9,421
    
    
    
    20.26
    
    
    
    2.31Q2 2005
    
    
    160
    
    
    
    623,578
    
    
    
    3.72
    
    
    
    13,792
    
    
    
    22.12
    
    
    
    3.39Q3 2005
    
    
    167
    
    
    
    624,148
    
    
    
    3.72
    
    
    
    14,522
    
    
    
    23.27
    
    
    
    3.57Q4 2005
    
    
    188
    
    
    
    802,859
    
    
    
    4.78
    
    
    
    17,347
    
    
    
    21.61
    
    
    
    4.262005 Sub-Total(2).
    
    
    651
    
    
    
    2,515,594
    
    
    
    14.99
    
    
    
    55,082
    
    
    
    21.90
    
    
    
    13.532006
    
    
    596
    
    
    
    2,513,849
    
    
    
    14.98
    
    
    
    59,551
    
    
    
    23.69
    
    
    
    14.632007
    
    
    529
    
    
    
    2,416,185
    
    
    
    14.40
    
    
    
    56,854
    
    
    
    23.53
    
    
    
    13.972008
    
    
    392
    
    
    
    2,355,397
    
    
    
    14.03
    
    
    
    58,662
    
    
    
    24.91
    
    
    
    14.412009
    
    
    344
    
    
    
    2,139,029
    
    
    
    12.74
    
    
    
    51,137
    
    
    
    23.91
    
    
    
    12.562010
    
    
    159
    
    
    
    1,615,217
    
    
    
    9.62
    
    
    
    39,338
    
    
    
    24.35
    
    
    
    9.662011
    
    
    53
    
    
    
    704,942
    
    
    
    4.20
    
    
    
    22,102
    
    
    
    31.35
    
    
    
    5.432012
    
    
    54
    
    
    
    855,313
    
    
    
    5.10
    
    
    
    20,291
    
    
    
    23.72
    
    
    
    4.982013
    
    
    34
    
    
    
    411,142
    
    
    
    2.45
    
    
    
    12,195
    
    
    
    29.66
    
    
    
    3.002014+
    
    
    98
    
    
    
    756,490
    
    
    
    4.51
    
    
    
    22,988
    
    
    
    30.39
    
    
    
    5.65Total/Weighted Average
    
    
    3,023
    
    
    
    16,782,675
    
    
    
    100.00
    %
    
    $
    407,078
    
    
    $
    24.26
    
    
    
    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.(2)
    
    Excludes month-to-month leases. 19




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##### Table of Contents



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, 2004. 
 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, 2004. 
 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, 2004, there
were 67,997,458 common OP Units, of which Arden Realty owned 66,325,709 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, 2004, there were approximately 31
holders of our common OP Units, including Arden Realty. Set forth blow are the distributions per common OP Units paid during our two most recent
fiscal years. DistributionsPaid2003First Quarter
    
    $
    0.505Second Quarter
    
    $
    0.505Third Quarter
    
    $
    0.505Fourth Quarter
    
    $
    0.5052004First Quarter
    
    $
    0.505Second Quarter
    
    $
    0.505Third Quarter
    
    $
    0.505Fourth Quarter
    
    $
    0.505
 We pay quarterly cash dividends 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, capital requirements and annual distribution requirements
under the REIT provisions of the Internal Revenue Code and such other factors as Arden Realty deems
relevant. 20




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##### Table of Contents



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 31,2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000(in thousands, except ratio and per share amounts)Operating Data:Property revenues
    
    $
    409,193
    
    
    $
    393,765
    
    
    $
    374,135
    
    
    $
    382,839
    
    
    $
    351,924Interest and other (loss) income
    
    
    (508
    )
    
    
    (401
    )
    
    
    2,063
    
    
    
    2,135
    
    
    
    3,290Property operating expenses
    
    
    (133,635
    )
    
    
    (125,979
    )
    
    
    (117,019
    )
    
    
    (110,421
    )
    
    
    (100,574
    )General and administrative expense
    
    
    (19,503
    )
    
    
    (15,217
    )
    
    
    (11,219
    )
    
    
    (10,436
    )
    
    
    (8,073
    )Depreciation and amortization
    
    
    (121,687
    )
    
    
    (111,952
    )
    
    
    (100,317
    )
    
    
    (92,613
    )
    
    
    (78,672
    )Interest expense
    
    
    (88,856
    )
    
    
    (93,093
    )
    
    
    (87,827
    )
    
    
    (85,949
    )
    
    
    (78,495
    )Income from continuing operations before gain on
sale of operating properties, impairment on
investment in securities, and minority interest
    
    
    45,004
    
    
    
    47,123
    
    
    
    59,816
    
    
    
    85,555
    
    
    
    89,400Gain on sale of operating properties(1).
    
    
    
    
    
    
    
    
    
    
    1,967
    
    
    
    4,591
    
    
    
    2,132Income from continuing operations before
impairment on investment securities and minority
interest
    
    
    45,004
    
    
    
    47,123
    
    
    
    61,783
    
    
    
    90,146
    
    
    
    91,532Impairment on investment in securities
    
    
    (2,700
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Minority interest
    
    
    (186
    )
    
    
    (103
    )
    
    
    (110
    )
    
    
    (127
    )
    
    
    (144
    )Income from continuing operations
    
    
    42,118
    
    
    
    47,020
    
    
    
    61,673
    
    
    
    90,019
    
    
    
    91,388Discontinued operations
    
    
    7,200
    
    
    
    13,037
    
    
    
    15,990
    
    
    
    16,238
    
    
    
    13,821Gain on sale of discontinued properties
    
    
    30,473
    
    
    
    5,937
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    79,791
    
    
    $
    65,994
    
    
    $
    77,663
    
    
    $
    106,257
    
    
    $
    105,209Net income allocated to:Preferred partner
    
    $
    4,309
    
    
    $
    4,312
    
    
    $
    4,312
    
    
    $
    4,312
    
    
    $
    4,312General and limited partners
    
    $
    75,482
    
    
    $
    61,682
    
    
    $
    73,351
    
    
    $
    101,945
    
    
    $
    100,897Basic net income per common operating partnership
unit:Income from continuing operations
    
    $
    0.57
    
    
    $
    0.66
    
    
    $
    0.87
    
    
    $
    1.30
    
    
    $
    1.33Income from discontinued operations
    
    
    0.56
    
    
    
    0.29
    
    
    
    0.24
    
    
    
    0.25
    
    
    
    0.21Net income per common operating partnership
unit-basic
    
    $
    1.13
    
    
    $
    0.95
    
    
    $
    1.11
    
    
    $
    1.55
    
    
    $
    1.54Weighed average number of common operating
partnership units-basic
    
    
    67,047
    
    
    
    65,251
    
    
    
    65,898
    
    
    
    65,872
    
    
    
    65,568Diluted net income per common operating
partnership unit:Income from continuing operations
    
    $
    0.56
    
    
    $
    0.65
    
    
    $
    0.87
    
    
    $
    1.30
    
    
    $
    1.32Income from discontinued operations
    
    
    0.56
    
    
    
    0.29
    
    
    
    0.24
    
    
    
    0.24
    
    
    
    0.21Net income per common operating partnership unit
-diluted
    
    $
    1.12
    
    
    $
    0.94
    
    
    $
    1.11
    
    
    $
    1.54
    
    
    $
    1.53Weighed average number of common operating
partnership units -diluted
    
    $
    67,415
    
    
    $
    65,513
    
    
    $
    66,098
    
    
    $
    66,132
    
    
    $
    65,759Distributions per common operating partnership unit
    
    $
    2.02
    
    
    $
    2.02
    
    
    $
    2.01
    
    
    $
    1.94
    
    
    $
    1.84Other Data:Cash provided by operating activities
    
    $
    185,133
    
    
    $
    181,653
    
    
    $
    200,114
    
    
    $
    204,839
    
    
    $
    194,258Cash used in investing activities
    
    $
    (11,237
    )
    
    $
    (20,355
    )
    
    $
    (213,002
    )
    
    $
    (115,854
    )
    
    $
    (216,024
    )Cash (used in) provided by financing activities
    
    $
    (165,563
    )
    
    $
    (160,654
    )
    
    $
    (20,090
    )
    
    $
    (57,376
    )
    
    $
    20,142Funds from Operations(2)
    
    $
    171,591
    
    
    $
    176,069
    
    
    $
    182,801
    
    
    $
    199,173
    
    
    $
    186,032
   Selected financial data continues on next page. 21




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##### Table of Contents



Year Ended December 31,2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Balance Sheet Data:Net investment in real estate
    
    $
    2,551,981
    
    
    $
    2,646,699
    
    
    $
    2,741,624
    
    
    $
    2,622,980
    
    
    $
    2,603,566Total assets
    
    $
    2,659,997
    
    
    $
    2,746,405
    
    
    $
    2,835,837
    
    
    $
    2,763,701
    
    
    $
    2,706,967Total indebtedness
    
    $
    1,326,084
    
    
    $
    1,349,781
    
    
    $
    1,402,304
    
    
    $
    1,251,483
    
    
    $
    1,177,769Other liabilities
    
    $
    83,939
    
    
    $
    76,638
    
    
    $
    76,350
    
    
    $
    62,685
    
    
    $
    56,885Total partners capital
    
    $
    1,247,297
    
    
    $
    1,317,269
    
    
    $
    1,354,399
    
    
    $
    1,446,667
    
    
    $
    1,469,402
   (1)
    
    Beginning with the adoption of the Statement of Financial Accounting Standard No.
144 in 2002, the operating results and gains and losses of real estate properties
classified as held for disposition are included in discontinued operations.(2)
    
    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 NAREIT, 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 companies may use different methodologies for calculating FFO and, accordingly,
our FFO may not be comparable to other real estate 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. 22




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##### Table of Contents



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 thisForm 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 6 senior executive officers who have
experience in the real estate industry ranging from 14 to 35 years and who collectively have an
average of 20 years of experience. We perform all property management, construction management,
accounting, finance, acquisition and disposition activities and a majority of our leasing
transactions with our staff of approximately 300 employees. As of December 31, 2004, 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 120 primarily suburban office properties and 197 buildings containing approximately
18.2 million net rentable square feet. As of December 31, 2004, our operating portfolio was 91.2%
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
use the net proceeds to repay outstanding indebtedness or place into investments that we believe
will generate higher long-term value. Critical Accounting Policies The preparation of financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, and the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses for the
reporting periods. Certain accounting policies are considered to be critical accounting estimates,
as they require management to make assumptions about matters that are highly uncertain at the time
the estimate is made and changes in the accounting estimate are reasonably likely to occur from
period to period. Management believes the following critical accounting policies reflect the
Companys more significant judgments and estimates used in the preparation of the consolidated
financial statements. For a summary of all the Companys significant accounting policies see note 2
to the Companys consolidated financial statements included elsewhere in this report. We
periodically evaluate our estimates and assumptions used in the preparation of our financial
statements including our reported operating results. Because over 97% of our assets as of December
31, 2004 and 2003, respectively, consists of investments in real estate and amounts due from
tenants, our primary evaluations consist of recoverability of amounts invested in real estate
properties and collectability of amounts due from tenants. Revenue Recognition We recognize minimum rent, including rental abatements and contractual fixed increases
attributable to operating leases, on a straight-line basis over the term of the related lease. The
amount by which straight-line rental income differs from cash rents billed under the lease is
included in deferred rents. Allowance for Rents and Other Receivables We periodically evaluate the collectability of amounts due from particular tenants based on a
variety of factors including the tenants payment history, our observation of space utilization,
periodic discussions with the tenants regarding the tenants short and long-term business plan for
the space under contract, the overall financial health of the business and/or parent company,
available financial and other information regarding the tenant or its parent company and the amount
of lease security on hand. Based on these factors, unless collection is reasonably assured, we
fully reserve amounts due that are in excess of the lease security we hold. All of our allowances
are tenant specific. As of December 31, 2004 and 2003 we had a total of $5.7 million and $6.3 million in our
allowance for doubtful accounts and other reserves, respectively, representing approximately 10%
and 12% of the total rent and deferred rent balance outstanding at each respective balance sheet
date. Including security deposits and existing letters of credit, as of December 31, 2004 and
2003, we had a total of $39.3 million and $33.5 million of total lease security available,
respectively. For the years ended December 31, 2004, 2003 and 2002 our bad debt expense related to
losses for uncollected rents, deferred rents, tenants reimbursements and other uncollectible
charges were approximately 0.3%, 0.6% and 1.4% of total gross revenue, respectively, for each of
those years. Our allowances have historically proved to be adequate; however, due to the
uncertainty inherent in the tenant specific evaluation process, our allowance for doubtful accounts
may not prove to be sufficient in all future periods. 23




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##### Table of Contents



Commercial Properties Impairment of Assets The recoverability of amounts invested in real estate properties is highly dependent on the
assumptions we use. For properties we intend to hold and operate, we recognize a write-down to
estimated fair value whenever a propertys estimated undiscounted future cash flows are less than
its depreciated cost. For properties we intend to sell, we recognize a write-down to estimated
fair value whenever a propertys estimated sales price less costs to sell are less than its
depreciated costs. We determine fair value of our properties using methods similar to those used by independent
appraisers, including comparison of carrying costs on a per square foot basis to sales price on a
per square foot basis on recently transacted properties that are similar in quality and location
and also by comparing carrying costs to acquisition offers from prospective buyers. Based on our
assessment, no write-downs to estimated fair value were necessary as of December 31, 2004 and 2003. Due to the availability of comparable sales information in most of our sub-markets,
historically our fair value estimates have proven to be accurate. However, our estimates may vary
from actual values, especially for real estate assets located in sub-markets where quoted per
square foot market prices for comparable properties may not be readily available or real estate
assets that become impaired due to non-recurring circumstances such as previously unknown
environmental issues or casualty losses that result in damages in excess of our insurance coverage
amount. Property Acquisitions The amounts paid for properties acquired are allocated between the tangible and intangible
assets. Tangible assets include land, building and tenant improvements. Intangible assets include
the value of in place leases. To arrive at the value of in place leases, we compare estimates of
current market rents to the in place rents. We also make assumptions regarding the amount of time
that currently occupied space would remain vacant if we had to replace the existing tenants under
current market conditions. We also reduce the value of each lease using a discount rate that we
deem to be commensurate with each tenants credit profile. The assumptions we use are based on
available market information,from independent sources and our own market knowledge and experience. The fair market value that we assign to acquired leases is amortized over the remaining lease
terms. The tangible assets assigned to building improvements are depreciated over a much longer
period of time, normally forty years. Consequently, the assumptions we use in this allocation have
a significant impact on the operating results that we will report in future periods. We cannot
guarantee that the initial assumptions that we use to any propertys purchase price will prove to
be accurate. We also would not revise these estimates in future periods if our initial amounts were
proven to be inaccurate. Qualification as a REIT Since our taxable year ended December 31, 1996, Arden Realty has been organized and operated,
and intend 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 our
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 our
financial condition, changes in the financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources. 24




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##### Table of Contents



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, 2004 to the year ended December 31, 2003
(in thousands, except number of properties and percentages) Year Ended December 31,
    
    
    
    
    
    
    Percent2004
    
    
    2003
    
    
    Change
    
    
    ChangeRevenue from rental operations:Scheduled cash rents
    
    $
    351,465
    
    
    $
    339,009
    
    
    $
    12,456
    
    
    
    4
    %Straight-line rents
    
    
    2,020
    
    
    
    915
    
    
    
    1,105
    
    
    
    121Tenant reimbursements
    
    
    20,129
    
    
    
    23,355
    
    
    
    (3,226
    )
    
    
    (14
    )Parking, net of expense
    
    
    23,816
    
    
    
    21,635
    
    
    
    2,181
    
    
    
    10Other rental operations
    
    
    11,763
    
    
    
    8,851
    
    
    
    2,912
    
    
    
    33Total revenue from rental operations
    
    
    409,193
    
    
    
    393,765
    
    
    
    15,428
    
    
    
    4Property expenses:Repairs and maintenance
    
    
    44,281
    
    
    
    40,738
    
    
    
    3,543
    
    
    
    9Utilities
    
    
    32,835
    
    
    
    32,497
    
    
    
    338
    
    
    
    1Real estate taxes
    
    
    30,569
    
    
    
    28,156
    
    
    
    2,413
    
    
    
    9Insurance
    
    
    7,506
    
    
    
    7,909
    
    
    
    (403
    )
    
    
    (5
    )Ground rent
    
    
    746
    
    
    
    961
    
    
    
    (215
    )
    
    
    (22
    )Administrative
    
    
    17,698
    
    
    
    15,718
    
    
    
    1,980
    
    
    
    13Total property expenses
    
    
    133,635
    
    
    
    125,979
    
    
    
    7,656
    
    
    
    6Property operating results(1)
    
    
    275,558
    
    
    
    267,786
    
    
    
    7,772
    
    
    
    3General and administrative
    
    
    19,503
    
    
    
    15,217
    
    
    
    4,286
    
    
    
    28Interest
    
    
    88,856
    
    
    
    93,093
    
    
    
    (4,237
    )
    
    
    (5
    )Depreciation and amortization
    
    
    121,687
    
    
    
    111,952
    
    
    
    9,735
    
    
    
    9Interest and other loss
    
    
    508
    
    
    
    401
    
    
    
    107
    
    
    
    27Income from continuing operations
before gain on sale of properties
and minority interest
    
    $
    45,004
    
    
    $
    47,123
    
    
    $
    (2,119
    )
    
    
    (4
    )%Discontinued operations
    
    $
    7,200
    
    
    $
    13,037
    
    
    $
    (5,837
    )
    
    
    (45
    )%Number of properties:Acquired during period
    
    
    2
    
    
    
    1Completed and placed in service during
period
    
    
    1
    
    
    
    Disposed of during period
    
    
    (12
    )
    
    
    (8
    )Owned at end of period
    
    
    120
    
    
    
    129Net rentable square feet:Acquired during period
    
    
    391
    
    
    
    101Completed and placed in service during
period
    
    
    283
    
    
    
    Expansion space placed in service
    
    
    168
    
    
    
    Disposed of during period
    
    
    (1,268
    )
    
    
    (598
    )Owned at end of period
    
    
    18,210
    
    
    
    18,636Same Property Portfolio(2):Revenue from rental operations
    
    $
    397,842
    
    
    $
    394,449
    
    
    $
    3,393
    
    
    
    1
    %Property expenses
    
    
    129,822
    
    
    
    125,953
    
    
    
    3,869
    
    
    
    3$
    268,020
    
    
    $
    268,496
    
    
    $
    (476
    )
    
    
    
    %Straight-line rents
    
    $
    315
    
    
    $
    592Number of properties
    
    
    116Number of buildings
    
    
    192Average occupancy
    
    
    90.0
    %
    
    
    89.3
    %Net rentable square feet
    
    
    17,334
 25




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##### Table of Contents



(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.The following is a reconciliation of Property Operating Results to net income computed in
accordance with GAAP (in thousands): Year Ended December 31,2004
    
    
    2003
    
    
    2002Net Income
    
    $
    79,791
    
    
    $
    65,994
    
    
    $
    77,663Add:General and administrative expense
    
    
    19,503
    
    
    
    15,217
    
    
    
    11,219Interest expense
    
    
    88,856
    
    
    
    93,093
    
    
    
    87,827Depreciation and amortization
    
    
    121,687
    
    
    
    111,952
    
    
    
    100,317Minority interest
    
    
    186
    
    
    
    103
    
    
    
    110Interest and other loss
    
    
    508
    
    
    
    401
    
    
    
    Impairment on investment in securities
    
    
    2,700
    
    
    
    
    
    
    
    Less:Interest and other income
    
    
    
    
    
    
    
    
    
    
    (2,063
    )Gain on sale of discontinued properties
    
    
    (30,473
    )
    
    
    (5,937
    )
    
    
    Discontinued operations
    
    
    (7,200
    )
    
    
    (13,037
    )
    
    
    (15,990
    )Gain on sale of operating properties
    
    
    
    
    
    
    
    
    
    
    (1,967
    )Property Operating Results
    
    $
    275,558
    
    
    $
    267,786
    
    
    $
    257,116
   (2)
    
    Consists of non-development/renovation properties classified as part of continuing
and discontinued operations that were owned for the entirety of the periods presented. 26




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VARIANCES FOR RESULTS OF OPERATIONS Our Property Operating Results for the year ended December 31, 2004 compared to 2003 were
primarily affected by our acquisitions and development activities since January 1, 2003. As a result of these changes within our portfolio of properties since January 1,2003, we do
not believe the Property Operating Results presented above are comparable from period to period.
Therefore, in the table above, we have also presented the Property Operating Results for our same
property portfolio. Revenue from Rental Operations Revenue from rental operations increased approximately $15.4 million, or 4%, for the year
ended December 31, 2004 compared to 2003. This increase was primarily due to our December 2003
acquisition of a 101,000 square foot office property in San Diego County in December of 2003,
revenues from our 6100 Center Drive development property which was placed in service during the
second quarter of 2004, two office properties acquired in Los Angeles County in October of 2004
totaling approximately 391,000 square feet, an 0.8% point overall occupancy gain in 2004. Revenue from rental operations for the same store portfolio increased by approximately $3.4
million, or 1%, in 2004 as compared to 2003. The increase was due to an approximate $2.9 million
increase in scheduled cash rents, a $2.9 million increase in other rental operations and a $1.6
million increase in parking income, all of which were partially offset by an approximate $3.7
million decrease in tenant reimbursements. The increase in scheduled cash rents was primarily
attributable to scheduled rent increases in existing leases and by the 0.7% increase in average
occupancy for these properties. Other rental operations increased primarily due to higher lease
termination fees in 2004 and lower bad debt expense as a result of a reduced level of defaults in
2004. Parking income increased in 2004 primarily due to an increase in occupancy in 2004 and
higher special event parking. Tenant reimbursements decreased primarily due to the resetting of
base years for new leases in 2004. Property Expenses Property expenses increased approximately $7.7 million, or 6%, for the year ended December 31,
2004 compared to 2003. This increase was partially due to our acquisition and development
activities, gains in occupancy and increases in operating expenses for the same property portfolio
described below. Property expenses for the same store portfolio increased by approximately $3.9 million, or 3%,
in 2004 as compared to 2003. The increase was primarily due to an approximate $2.9 million
increase in repairs and maintenance, a $1.6 million increase in real estate taxes and a $1.3
million increase in property administrative expenses, all of which were partially offset by a $1.2
million decrease in utilities expense and a $0.5 million decrease in insurance expense. The
increase in repairs and maintenance expense was primarily due to higher costs for contracted
services and the timing of certain projects. The increase in real estate taxes was primarily due
to the timing of reassessments and property tax refunds received in 2003 as well as new property
tax measures implemented in Los Angeles County. The increase in property administrative expense
was primarily due to higher employee compensation costs and higher property legal expenses. The
decrease in utilities expense was primarily due to lower than anticipated usage in 2004 as a result
of a mild summer, partially offset by an increase in occupancy. The decrease in insurance expense
was primarily due to lower premiums on a new insurance policy which began in March 2004. General and Administrative General and administrative expenses increased approximately $4.3 million in 2004 as compared
to 2003. This increase was primarily related to higher personnel costs associated with annual merit
increases, non-cash compensation expense associated with restricted stock grants issued in 2004 and
2003 and Section 404 implementation costs in 2004. Interest Expense Interest expense decreased approximately $4.2 million, or 5%, in 2004 as compared to 2003.
This decrease was primarily due to a lower cost of debt in 2004 due to the refinancing of a $175
million, 7.52% secured loan with proceeds from property dispositions and from the issuance of $200
million, 5.20% (5.45% effective rate) unsecured senior notes in August 2004, partially offset by
lower capitalized interest in 2004. Capitalized interest was lower in 2004 as we stopped
capitalizing interest on our 6100 Center Drive development property in May 2003. Depreciation and Amortization Depreciation and amortization expense increased by approximately $9.7 million, or 9%, in 2004
as compared to 2003. The increase was primarily due to depreciation related to a property acquired
in December 2003, two properties acquired in October 2004, a development property placed in service
in the second quarter of 2004 and depreciation related to capital expenditures, tenant improvements
and leasing commissions placed in service in 2003 and 2004. 27




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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 results of operations for the properties disposed of or held for disposition during the
years ended December 31, 2004 and 2003 are as follows (in thousands, except number of properties): Year Ended December 31,
    
    
    
    
    
    
    Percent2004
    
    
    2003
    
    
    Change
    
    
    ChangeDiscontinued Operations:Revenues
    
    $
    20,533
    
    
    $
    33,794
    
    
    $
    (13,261
    )
    
    
    (39
    )%Property operating expenses
    
    
    7,781
    
    
    
    11,711
    
    
    
    (3,930
    )
    
    
    (34
    )12,752
    
    
    
    22,083
    
    
    
    (9,331
    )
    
    
    (42
    )Depreciation and amortization
    
    
    4,895
    
    
    
    8,372
    
    
    
    (3,477
    )
    
    
    (42
    )Interest expense
    
    
    659
    
    
    
    674
    
    
    
    (15
    )
    
    
    (2
    )Interest and other income
    
    
    (2
    )
    
    
    
    
    
    
    (2
    )
    
    
    100Discontinued operations
    
    $
    7,200
    
    
    $
    13,037
    
    
    $
    (5,837
    )
    
    
    (45
    )%Gain on sale of discontinued properties
    
    $
    30,473
    
    
    $
    5,937
    
    
    $
    24,536
    
    
    
    413
    %Properties sold
    
    
    12
    
    
    
    8Properties held for disposition at
end of period
    
    
    1
    
    
    
    2
 28




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##### Table of Contents



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,
    
    
    
    
    
    
    Percent2003
    
    
    2002
    
    
    Change
    
    
    ChangeRevenue from rental operations:Scheduled cash rents
    
    $
    339,009
    
    
    $
    320,505
    
    
    $
    18,504
    
    
    
    6
    %Straight-line rents
    
    
    915
    
    
    
    4,629
    
    
    
    (3,714
    )
    
    
    (80
    )Tenant reimbursements
    
    
    23,355
    
    
    
    21,161
    
    
    
    2,194
    
    
    
    10Parking, net of expense
    
    
    21,635
    
    
    
    20,350
    
    
    
    1,285
    
    
    
    6Other rental operations
    
    
    8,851
    
    
    
    7,490
    
    
    
    1,361
    
    
    
    18Total revenue from rental operations
    
    
    393,765
    
    
    
    374,135
    
    
    
    19,630
    
    
    
    5Property expenses:Repairs and maintenance
    
    
    40,738
    
    
    
    35,294
    
    
    
    5,444
    
    
    
    15Utilities
    
    
    32,497
    
    
    
    32,338
    
    
    
    159
    
    
    
    0Real estate taxes
    
    
    28,156
    
    
    
    27,290
    
    
    
    866
    
    
    
    3Insurance
    
    
    7,909
    
    
    
    7,291
    
    
    
    618
    
    
    
    8Ground rent
    
    
    961
    
    
    
    895
    
    
    
    66
    
    
    
    7Administrative
    
    
    15,718
    
    
    
    13,911
    
    
    
    1,807
    
    
    
    13Total property expenses
    
    
    125,979
    
    
    
    117,019
    
    
    
    8,960
    
    
    
    8Property operating results(1)
    
    
    267,786
    
    
    
    257,116
    
    
    
    10,670
    
    
    
    4General and administrative
    
    
    15,217
    
    
    
    11,219
    
    
    
    3,998
    
    
    
    36Interest
    
    
    93,093
    
    
    
    87,827
    
    
    
    5,266
    
    
    
    6Depreciation and amortization
    
    
    111,952
    
    
    
    100,317
    
    
    
    11,635
    
    
    
    12Interest and other loss (income)
    
    
    401
    
    
    
    (2,063
    )
    
    
    (2,464
    )
    
    
    (119
    )Income from continuing operations
before gain on sale of properties
and minority interest
    
    $
    47,123
    
    
    $
    59,816
    
    
    $
    (12,693
    )
    
    
    (21
    )%Discontinued operations
    
    $
    13,037
    
    
    $
    15,990
    
    
    $
    (2,953
    )
    
    
    (18
    )%Number of properties:Acquired during period
    
    
    1
    
    
    
    5Completed and placed in service during
period
    
    
    
    
    
    
    1Disposed of during period
    
    
    (8
    )
    
    
    (3
    )Owned at end of period
    
    
    129
    (2)
    
    
    136Net rentable square feet:Acquired during period
    
    
    101
    
    
    
    803Completed and placed in service during
period
    
    
    
    
    
    
    287Disposed of during period
    
    
    (597
    )
    
    
    (205
    )Owned at end of period
    
    
    18,636

(2)
    
    
    19,132Same Store Portfolio(3):Revenue from rental operations
    
    $
    391,960
    
    
    $
    386,826
    
    
    $
    5,134
    
    
    
    1
    %Property expenses
    
    
    126,041
    
    
    
    121,112
    
    
    
    4,929
    
    
    
    4$
    265,919
    
    
    $
    265,714
    
    
    $
    205
    
    
    
    
    %Straight-line rents
    
    $
    721
    
    
    $
    4,312Number of properties
    
    
    122
    
    
    
    122Average occupancy
    
    
    90.2
    %
    
    
    91.3
    %Net rentable square feet
    
    
    17,444
    
    
    
    17,444
 29




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##### Table of Contents



(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.The following is a reconciliation of Property Operating Results to net income computed in
accordance with GAAP (in thousands): 2003
    
    
    2002
    
    
    2001Net Income
    
    $
    65,994
    
    
    $
    77,663
    
    
    $
    106,257Add:General and administrative expense
    
    
    15,217
    
    
    
    11,219
    
    
    
    10,436Interest expense
    
    
    93,093
    
    
    
    87,827
    
    
    
    85,949Depreciation and amortization
    
    
    111,952
    
    
    
    100,317
    
    
    
    92,613Interest and other loss
    
    
    401
    
    
    
    
    
    
    
    Minority interest
    
    
    103
    
    
    
    110
    
    
    
    127Less:Interest and other income
    
    
    
    
    
    
    (2,063
    )
    
    
    (2,135
    )Discontinued operations
    
    
    (13,037
    )
    
    
    (15,990
    )
    
    
    (16,238
    )Gain on sale of discontinued properties
    
    
    (5,937
    )
    
    
    
    
    
    
    Gain on sale of operating properties
    
    
    
    
    
    
    (1,967
    )
    
    
    (4,591
    )Property Operating Results
    
    $
    267,786
    
    
    $
    257,116
    
    
    $
    272,418
  (2)
    
    Excludes one development property containing approximately 283,000 net rentable
square feet under lease-up.(3)
    
    Consists of non-development/renovation properties classified as part of continuing
and discontinued operations that were owned for the entirety of the periods presented. 30




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##### Table of Contents



VARIANCES FOR RESULTS OF OPERATIONS Our Property Operating Results for the year ended December 31, 2003 compared to 2002 were
primarily affected by our acquisitions and development activities since January 1, 2002. As a result of these changes within our portfolio of properties since January 1,2002, we do
not believe the Property Operating Results presented above are comparable from period to period.
Therefore, in the table above, we have also presented the Property Operating Results for our same
property portfolio. Revenue from Rental Operations Revenue from rental operations increased approximately $19.6 million, or 5%, for the year
ended December 31, 2003 compared to 2002. This increase was primarily due to our August 2002
acquisitions of a 430,000 square foot office property in Los Angeles County and four office
properties in San Diego County totaling approximately 370,000 square feet and a December 2003
acquisition of a 101,000 square foot office property in San Diego County and the placement in
service of our 6080 Center Drive development property in December of 2002. Revenue from rental operations for the same store portfolio increased by approximately $5.1
million, or 1%, 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 $0.9
million increased in parking income, all of which were partially offset by an approximate $3.6
million decrease in straight-line rents and a $0.5 million decrease in other rental operations.
The increase in scheduled cash rents was primarily attributable to scheduled rent increases in
existing leases that were partially offset by the 1.1% decrease in average occupancy for these
properties. Tenant reimbursement 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 Property expenses increased approximately $9.0 million, or 8%, for the year ended December 31,
2003 compared to 2002. This increase was partially due our acquisition and development activities
described above. Property expenses for the same store portfolio increased by approximately $4.9 million, or 4%,
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 $0.4 million increase in insurance expense, partially offset by a $0.8 million 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. General and Administrative General and administrative expenses increased approximately $4.0 million or, 36% 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 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 swaps
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 Depreciation and amortization expense increased by approximately $11.6 million, or 12%, 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. 31




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##### Table of Contents



Interest and Other Loss (Income) Interest and other loss (income) decreased by approximately $2.5 million, or 119%, 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 and the reclassification of the operating results for
Next>edge, our taxable REIT subsidiary that provides energy consulting services, into interest
and other income for the years ended December 31, 2003 and 2002. 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 results of operations for the properties disposed of or held for disposition during the
years ended December 31, 2003 and 2002 are as follows (in thousands, except number of properties): Year Ended December 31,
    
    
    
    
    
    
    Percent2003
    
    
    2002
    
    
    Change
    
    
    ChangeDiscontinued Operations:Revenues
    
    $
    33,794
    
    
    $
    41,978
    
    
    $
    (8,184
    )
    
    
    (19
    )%Property operating expenses
    
    
    11,711
    
    
    
    14,199
    
    
    
    (2,488
    )
    
    
    (18
    )22,083
    
    
    
    27,779
    
    
    
    (5,696
    )
    
    
    (21
    )Depreciation and amortization
    
    
    8,372
    
    
    
    11,100
    
    
    
    (2,728
    )
    
    
    (25
    )Interest expense
    
    
    674
    
    
    
    689
    
    
    
    (15
    )
    
    
    (2
    )Discontinued operations
    
    $
    13,037
    
    
    $
    15,990
    
    
    $
    (2,953
    )
    
    
    (18
    )%Gain on sale of discontinued properties
    
    $
    5,937
    
    
    $
    
    
    
    $
    5,937
    
    
    
    100
    %Properties sold
    
    
    8
    
    
    
    3Properties held for disposition at end
of period
    
    
    2
    
    
    
    1
 32




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##### Table of Contents



Liquidity and Capital Resources Cash Flows Cash provided by operating activities increased by approximately $3.4 million to $185.1
million in 2004 as compared to $181.7 million in 2003. This increase was primarily due to lower
financing costs in 2004 as a result of a $175 million 7.52% loan and a $50 million, 8.675%
preferred equity issuance that were refinanced at lower carrying costs. In addition, our cash flow
from operations was affected by the timing of our acquisitions and dispositions in 2004. Although
during 2004 we had net property sales, $126 million of our $204.8 million in dispositions occurred
in December of 2004. Cash used in investing activities decreased by approximately $9.2 million to $11.2 million in
2004 as compared to $20.4 million in 2003. The decrease was primarily due to higher net selling
activities in 2004. In 2004, our cash flow used in investing activities was also affected by a
higher level of tenant improvement and leasing commission expenditures as a result of
approximately 485,000 square feet of additional leasing completed in 2004 over 2003. Cash used in financing activities increased by approximately $4.9 million to $165.6 million in
2004 as compared to $160.7 million in 2003. This increase was primarily due to higher net debt
repayments in 2004 with proceeds generated from our capital recycling program. Cash Balances and Available Borrowings As of December 31, 2004, we had approximately $27.8 million in cash and cash equivalents,
including $14.8 million in restricted cash. Restricted cash consisted of $9.7 million in interest
bearing cash deposits required by four of our mortgage loans and $5.1 million in cash impound
accounts for real estate taxes and insurance as required by several of our mortgage loans. We have access to a total of $330 million under two unsecured lines of credit. As of December
31, 2004, $121.5 million was outstanding and $208.5 million was available under these unsecured
lines of credit. Capital Recycling Program Under our capital recycling program, we evaluate our existing portfolio of properties and
current market opportunities to determine if the sale or purchase of properties would improve the
overall quality or return on invested capital of our existing portfolio. Proceeds from sales of
properties may be used to pay down our borrowings until we identify attractive properties to
purchase, renovate or develop. During 2004, we sold twelve properties totaling approximately 1.3
million square feet for approximately $204.8 million in gross sales proceeds. In October 2004, we
acquired two office properties consisting of approximately 391,000 square feet for approximately
$96.8 million. For additional information regarding the properties acquired and sold, see the
accompanying notes to our financial statements elsewhere in this report. Debt Summary Following is a summary of scheduled principal payments for our total outstanding indebtedness
as of December 31, 2004 (in thousands): Year
    
    Amount2005
    
    $
    216,8712006
    
    
    251,1012007
    
    
    158,0352008
    
    
    230,7262009
    
    
    112,2912010
    
    
    150,3072011
    
    
    200,5382012
    
    
    7682013
    
    
    8452014
    
    
    914Thereafter
    
    
    3,688Total
    
    $
    1,326,084
 33




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##### Table of Contents



Following is other information related to our indebtedness as of December 31, 2004 (in
thousands, except percentage and interest rate data): Unsecured and Secured Debt: WeightedWeighted
    
    
    AverageAverage
    
    
    MaturityBalance
    
    
    Percent
    
    
    Interest Rate(1)
    
    
    (in years)(000's)Unsecured Debt
    
    $
    943,445
    
    
    
    71
    %
    
    
    6.79
    %
    
    
    3.2Secured Debt
    
    
    382,639
    
    
    
    29
    
    
    
    7.16
    
    
    
    3.8Total Debt
    
    $
    1,326,084
    
    
    
    100
    %
    
    
    6.90
    
    
    
    3.4
 Floating and Fixed Rate Debt: WeightedWeighted
    
    
    AverageAverage
    
    
    MaturityBalance
    
    
    Percent
    
    
    Interest Rate(1)
    
    
    (in years)(000's)Floating Rate Debt(2)
    
    $
    171,500
    
    
    
    13
    %
    
    
    5.88
    %
    
    
    2.1Fixed Debt(3)
    
    
    1,154,584
    
    
    
    87
    
    
    
    7.05
    
    
    
    3.5Total Debt
    
    $
    1,326,084
    
    
    
    100
    %
    
    
    6.90
    %
    
    
    3.4
   (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. Interest Incurred: Year Ended December 31,2004
    
    
    2003
    
    
    2002Total interest incurred(1)
    
    $
    90,451
    
    
    $
    96,263
    
    
    $
    94,162Amount capitalized
    
    
    (936
    )
    
    
    (2,496
    )
    
    
    (5,646
    )Amount expensed(1)
    
    $
    89,515
    
    
    $
    93,767
    
    
    $
    88,516
   (1)
    
    Includes interest expense for a property currently classified as held for
disposition. 34




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##### Table of Contents



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. 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 effect 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 we do. We calculate Consolidated Income Available for Debt Service as follows: Year Ended December 31,2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Net cash provided by operating activities
    
    $
    184,907
    
    
    $
    181,482
    
    
    $
    199,922
    
    
    $
    204,667
    
    
    $
    192,152Add:Interest expense
    
    
    88,856
    
    
    
    93,093
    
    
    
    87,827
    
    
    
    85,949
    
    
    
    78,495Interest expense from discontinued operations
    
    
    659
    
    
    
    674
    
    
    
    689
    
    
    
    (1,754
    )
    
    
    (89
    )Gain on repayment on mortgage note receivable
    
    
    
    
    
    
    
    
    
    
    750
    
    
    
    
    
    
    
    Less:Amortization of loan costs and fees
    
    
    (3,801
    )
    
    
    (3,972
    )
    
    
    (3,807
    )
    
    
    (3,568
    )
    
    
    (3,568
    )Straight-line rent
    
    
    (1,841
    )
    
    
    (1,732
    )
    
    
    (5,465
    )
    
    
    (9,208
    )
    
    
    (8,077
    )Changes in operating assets and liabilities:Rent and other receivables
    
    
    2,265
    
    
    
    771
    
    
    
    (6,768
    )
    
    
    (3,775
    )
    
    
    1,080Deferred rent
    
    
    1,015
    
    
    
    557
    
    
    
    4,657
    
    
    
    7,401
    
    
    
    7,656Prepaid financing costs, expenses and other assets
    
    
    4,783
    
    
    
    1,494
    
    
    
    2,997
    
    
    
    4,366
    
    
    
    7,480Accounts payable and accrued expenses
    
    
    (3,338
    )
    
    
    2,365
    
    
    
    (9,729
    )
    
    
    (4,388
    )
    
    
    (11,359
    )Security deposits
    
    
    (3,285
    )
    
    
    (1,676
    )
    
    
    (962
    )
    
    
    (213
    )
    
    
    (3,397
    )Consolidated Income Available for Debt Service
    
    $
    270,220
    
    
    $
    273,056
    
    
    $
    270,111
    
    
    $
    279,477
    
    
    $
    260,373
 35




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##### Table of Contents



Year Ended December 31,2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Net Income
    
    $
    73,775
    
    
    $
    58,509
    
    
    $
    70,175
    
    
    $
    97,759
    
    
    $
    96,710Add:Interest expense
    
    
    88,856
    
    
    
    93,093
    
    
    
    87,827
    
    
    
    85,949
    
    
    
    78,495Interest expense from discontinued operations
    
    
    659
    
    
    
    674
    
    
    
    689
    
    
    
    (1,754
    )
    
    
    (89
    )Depreciation and amortization
    
    
    121,687
    
    
    
    111,952
    
    
    
    100,317
    
    
    
    92,613
    
    
    
    78,672Minority interest
    
    
    5,255
    
    
    
    5,375
    
    
    
    5,816
    
    
    
    7,046
    
    
    
    7,158Minority interest from discontinued operations
    
    
    947
    
    
    
    499
    
    
    
    420
    
    
    
    519
    
    
    
    455Amortization of deferred compensation
    
    
    3,760
    
    
    
    2,251
    
    
    
    1,199
    
    
    
    1,938
    
    
    
    586Depreciation from discontinued operations
    
    
    4,895
    
    
    
    8,372
    
    
    
    11,100
    
    
    
    9,206
    
    
    
    8,595Impairment on investment in securities
    
    
    2,700
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Less:Gain on sale of discontinued properties
    
    
    (30,473
    )
    
    
    (5,937
    )
    
    
    
    
    
    
    
    
    
    
    Gain on sale of operating properties
    
    
    
    
    
    
    
    
    
    
    (1,967
    )
    
    
    (4,591
    )
    
    
    (2,132
    )Straight-line rent
    
    
    (1,841
    )
    
    
    (1,732
    )
    
    
    (5,465
    )
    
    
    (9,208
    )
    
    
    (8,077
    )Consolidated Income Available for Debt Service
    
    $
    270,220
    
    
    $
    273,056
    
    
    $
    270,111
    
    
    $
    279,477
    
    
    $
    260,373
 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, 2004, our senior unsecured notes represented approximately 53% of our
total outstanding debt and amounts outstanding under our Wells Fargo unsecured line of credit
represented approximately 9% 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. 36




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##### Table of Contents



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, 2004 (in
thousands, except percentage and covenant ratio data): Net investment in real estate
    
    $
    2,551,981Cash and cash equivalents
    
    
    13,040Restricted cash
    
    
    14,788Accumulated depreciation and amortization
    
    
    488,808Total Assets
    
    $
    3,068,617Total unencumbered assets
    
    $
    2,097,592Mortgage loans payable(1)
    
    $
    382,639Unsecured lines of credit
    
    
    121,500Unsecured term loan
    
    
    125,000Unsecured senior notes, net of discount
    
    
    696,945Total Outstanding Debt
    
    $
    1,326,084Consolidated Income Available for Debt Service(2)
    
    $
    270,220Interest incurred(2)
    
    $
    90,451Loan fee amortization(2)
    
    
    (3,332
    )Debt Service(2)
    
    $
    87,119
 Senior Unsecured Notes Covenant Ratios
    
    Test
    
    ActualRatio of Consolidated Income Available for Debt Service to Debt Service
    
    Greater than 1.5
    
    
    3.1Total Outstanding Debt/Total Assets
    
    Less than 60%
    
    
    43
    %Secured Debt/Total Assets
    
    Less than 40%
    
    
    12
    %Unencumbered Assets/Unsecured Debt
    
    Greater than 150%
    
    
    222
    %
 Wells Fargo Unsecured Line of Credit Covenant Ratios
    
    Test
    
    ActualRatio of Consolidated Income Available for Debt Service to interest expense
(3)
    
    Greater than 2.0
    
    3.0Ratio of Consolidated Income Available for Debt Service to fixed charges (4)
    
    Greater than 1.75
    
    2.2
   (1)
    
    Represents 9 secured loans that are secured by 53 properties in our portfolio.(2)
    
    Represents amounts for the most recent four consecutive quarters. Loan fee amortization
excludes discount amortization on senior unsecured notes.(3)
    
    Interest expense consists of interest expense plus capitalized interest and less amortization
of loan fees and discounts.(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. Future Capital Resources Depending on market conditions, we may sell assets over the next twelve to twenty-four months
and it is difficult to predict the actual period and amount of these potential asset sales. At the
time of any such sales, depending on market conditions, sales proceeds may be placed 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, sales proceeds and short-term
borrowings, if necessary, 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 37




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##### Table of Contents



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 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, 2004, we were subject to significant contractual payment obligations as
described in the table below. Payments Due by PeriodTotal
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    Thereafter(in thousands)Contractual Obligations:Long-term debt
Mortgage debt
    
    $
    382,639
    
    
    $
    7,436
    
    
    $
    15,140
    
    
    $
    8,710
    
    
    $
    231,109
    
    
    $
    112,674
    
    
    $
    7,570Unsecured senior notes(1)
    
    
    700,000
    
    
    
    200,000
    
    
    
    
    
    
    
    150,000
    
    
    
    
    
    
    
    
    
    
    
    350,000Unsecured term loan
    
    
    125,000
    
    
    
    
    
    
    
    125,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unsecured line of credit
    
    
    121,500
    
    
    
    10,000
    
    
    
    111,500
    
    
    
    
    
    
    
    

    
    
    
    
    
    
    
    Ground leases
    
    
    118,306
    
    
    
    1,815
    
    
    
    1,840
    
    
    
    1,865
    
    
    
    1,865
    
    
    
    1,865
    
    
    
    109,056Operating leases
    
    
    18,340
    
    
    
    2,020
    
    
    
    2,020
    
    
    
    2,020
    
    
    
    2,020
    
    
    
    2,020
    
    
    
    8,240Capital commitments
    
    
    26,498
    
    
    
    26,498
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Contractual Obligations
    
    $
    1,492,283
    
    
    $
    247,769
    
    
    $
    255,500
    
    
    $
    162,595
    
    
    $
    234,994
    
    
    $
    116,559
    
    
    $
    474,866
   (1)
    
    Excludes amortization of discount on unsecured senior notes. 38




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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, 2004, 2003, 2002, 2001 and 2000 (in thousands, except percentages): Year Ended December 31,2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000(in thousands, except ratio and per share amounts)Funds from Operations(1)Net income
    
    $
    79,791
    
    
    $
    65,994
    
    
    $
    77,663
    
    
    $
    106,257
    
    
    $
    105,209Depreciation from discontinued operations
    
    
    4,895
    
    
    
    8,372
    
    
    
    11,100
    
    
    
    9,206
    
    
    
    8,595Gain on sale of discontinued properties
    
    
    (30,473
    )
    
    
    (5,937
    )
    
    
    
    
    
    
    
    
    
    
    Depreciation and amortization
    
    
    121,687
    
    
    
    111,952
    
    
    
    100,317
    
    
    
    92,613
    
    
    
    78,672Gain on sale of operating properties
    
    
    
    
    
    
    
    
    
    
    (1,967
    )
    
    
    (4,591
    )
    
    
    (2,132
    )Income allocated to Preferred Operating
Partnership Units
    
    
    (4,309
    )(2)
    
    
    (4,312
    )
    
    
    (4,312
    )
    
    
    (4,312
    )
    
    
    (4,312
    )Funds from Operations(3)
    
    
    171,591
    
    
    
    176,069
    
    
    
    182,801
    
    
    
    199,173
    
    
    
    186,032Arden Realtys percentage share (4)
    
    
    97.5
    %
    
    
    97.4
    %
    
    
    97.3
    %
    
    
    96.8
    %
    
    
    96.7
    %Arden Realtys share of Funds from Operations
    
    $
    167,301
    
    
    $
    171,491
    
    
    $
    177,865
    
    
    $
    192,799
    
    
    $
    179,893Weighted average common shares and operating
partnership units outstanding  Diluted
    
    
    67,415
    
    
    
    65,513
    
    
    
    66,098
    
    
    
    66,132
    
    
    
    65,759
   (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 NAREIT, 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 real estate companies. Other
real estate companies may use different methods for calculating FFO and, accordingly, our
FFO may not be comparable to other real estate companies.(2)
    
    Includes approximately $1.1 million allocated to the preferred partners relating to
the original issuance costs of the Preferred Operating Partnership Units which were
redeemed on September 28, 2004.(3)
    
    Includes approximately $3.8 million, $2.2 million, $1.2 million, $1.9 million and
$586,000 in non-cash compensation expense for the years ended December 31, 2004, 2003,
2002, 2001 and 2000, respectively.(4)
    
    Represents Arden Realtys weighted average ownership percentage during the
respective twelve month period. 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. 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  Lack of non-farm job growth in Southern California
or a deterioration of the local and national economy 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. 39




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##### Table of Contents



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. 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 2004, we entered into $300
million of forward-starting interest rate hedge agreements effectively fixing the 10-year Treasury
Rate at approximately 4.37% for borrowings that are anticipated to occur in 2005 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 the 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, 2004, a 1% increase in interest rates on our $171.5 million
of floating rate debt, including $100 million in fixed rate debt swapped to floating through
interest rate hedges, would decrease annual future earnings and cash flows by approximately $1.7
million and would not have an impact on the fair value of the floating rate debt. A 1% decrease in
interest rates on our $171.5 million of floating rate debt would increase annual future earnings
and cash flows by approximately $1.7 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, 2004
was 5.88%. Our fixed rate debt, including $175.0 million in floating rate debt swapped to fixed through
interest rate hedges, totaled $1,154.6 million as of December 31, 2004 with a weighted average
interest rate of 7.05% and a total fair value of approximately $1,177.0 million. A 1% decrease in
interest rates on our $1,154.6 million of fixed rate debt would increase its fair value by
approximately $36.3 million and would not have an impact on annual future earnings and cash flows.
A 1% increase in interest rates on our $1,154.6 million of fixed rate debt would decrease its fair
value by approximately $34.4 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 2009, 2,625 leases, including month-to-month leases, comprising approximately 74% of
our leased net rentable square footage and approximately 71% of our annualized base rents at
December 31, 2004 are scheduled to expire as follows: Percentage ofPercentage of
    
    Aggregate PortfolioNumber of
    
    Aggregate Portfolio
    
    AnnualizedYear
    
    Leases Expiring
    
    Leased Square Feet
    
    Base Rent2005
    
    764
    
    18.0%
    
    15.7%2006
    
    596
    
    15.0%
    
    14.6%2007
    
    529
    
    14.4%
    
    14.0%2008
    
    392
    
    14.0%
    
    14.4%2009
    
    344
    
    12.8%
    
    12.6%
 If we are unable to promptly renew or relet 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
debt. 40




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##### Table of Contents



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 2004, the Southern California
economy experienced a 0.8% increase in job growth representing approximately 55,000 non-farm jobs.
We believe non-farm job growth to be a leading indicator of office demand for the region. During
2005, a total of approximately 3.0 million square feet of occupied space, representing
approximately 18.0% of our total net rentable space, including month-to-month leases, will expire.
Negative non-farm job growth in our submarkets or a deterioration of the local and/or national
economy may result in a decline in occupancy and rental rates and may cause tenant concessions to
increase 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 may 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 26% of our buildings and 19% 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 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. 41




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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 the partnership agreement of our Operating Partnership 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 have preliminary architectural designs completed for an additional 475,000 net rentable
square feet at the Howard Hughes Center in Los Angeles, California 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. We also have 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, proceeds from our lines of credit or
other secured borrowings. Risks associated with our development activities may include:  
    abandonment of development opportunities due to a lack of financing or other reasons;
    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; 42




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
    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 may 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, 2004, we had total debt of approximately $1.3 billion, consisting of
approximately $382.6 million in secured debt and approximately $943.4 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, 2004, we had the ability to borrow an additional $208.5 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 March
10, 2005, approximately $102.4 million of principal will be coming due over the next eighteen
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. 43




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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, 2004, approximately 13% 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. As a protection against rising interest
rates, we may enter into agreements such as interest rate hedges, 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 2004, we
entered into $300 million of forward-starting interest rate hedge agreements effectively fixing the
10-year Treasury Rate at approximately 4.37% for borrowings that are anticipated to occur in 2005
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 the 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 four mortgage financings totaling approximately $365.3 million
that are secured by 49 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 $17.3 million at December 31, 2004. 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 it 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 our 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 have 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 REIT, like Arden Realty,
that holds its assets through an investment in a partnership. No assurance can be given that
legislation, new 44




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regulations, administrative interpretations or court decisions will not significantly change
the tax laws with respect to Arden Realtys 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 our 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 assume 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 our 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 our best interests. Arden Realtys Board of Directors has waived our 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 45




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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 has been extended to March 2006 subject to the
continuation of the Terrorism Risk Insurance Act of 2002 (TRIA), 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 3.6% of our 2004 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. 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 35 properties in
our portfolio, representing approximately 35% 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 house an underground storage tank, two contain friable asbestos, twenty-three
contain non-friable asbestos, and eight 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 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 46




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cannot release encapsulated asbestos fibers. Friable asbestos is more likely to be released
into the air than non-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. There are no known UST-related violations or outstanding compliance issues with
regulatory agencies. We have also implemented a program to ensure appropriate double-wall
construction, testing protocols, placement of tanks within bermed areas, and the installation of
leak and spill detection equipment at relevant sites. Environmental site assessments and investigations completed to date 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 enacted and proposed changes in laws and
regulations. 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 has resulted in significant increased compliance costs to us as we evaluate the
implications of any new rules and comply 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 committees or as executive officers. The compliance with and the
provisions of the Sarbanes-Oxley Act in future years will result in significant continuing costs to
us. 
 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. The Partners of Arden Realty Limited Partnership We have audited managements assessment, included in the accompanying Managements Report on
Internal Control over Financial Reporting, that Arden Realty Limited Partnership maintained
effective internal control over financial reporting as of December 31, 2004, based on criteria
established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). Arden Realty Limited Partnerships
management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting. Our
responsibility is to express an opinion on managements assessment and an opinion on the
effectiveness of the companys internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating managements assessment, testing and evaluating the
design and operating effectiveness of internal control, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinion. A companys internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting
principles. A companys internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the companys assets that could have
a material effect on the financial statements. 47




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Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate. In our opinion, managements assessment that Arden Realty Limited Partnership maintained
effective internal control over financial reporting as of December 31, 2004, is fairly stated, in
all material respects, based on the COSO criteria. Also, in our opinion, Arden Realty Limited
Partnership maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2004, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets as of December 31, 2004 and 2003
and the related consolidated statements of income, partners capital and cash flows for each of the
three years in the period ended December 31, 2004 of Arden Realty Limited Partnership and our
report dated March 12, 2005 expressed an unqualified opinion thereon. Ernst & Young LLP Los Angeles, California
March 12, 2005 
 ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 
 ITEM 9A.CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures We have established disclosure controls and procedures that are designed to ensure that
information required to be disclosed by Arden Realty, Inc., including its consolidated entities, in
its reports under the Securities and Exchange Act of 1934, as amended (the Act) is recorded,
processed, summarized and reported, within the time periods specified in the U.S. Securities and
Exchange Commission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, management recognized that any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures. As of and for the year ended December 31, 2004, we carried out an evaluation, under the
supervision and with the participation of management, including Arden Realtys Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures. Based on the foregoing, Arden Realtys Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and procedures were effective. Managements Report on Internal Control Over Financial Reporting Internal control over financial reporting is a process designed by, or under the supervision
of, Arden Realtys Chief Executive Officer and Chief Financial Officer and effected by its board of
directors, management and other personnel to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. Internal control over financial reporting
includes those policies and procedures that: (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of
the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition of assets that could
have a material effect on the financial statements. Management is responsible for establishing and maintaining adequate internal control over
financial reporting. Arden Realty Limited Partnerships internal control over financial reporting
is supported by written policies and procedures and by an appropriate segregation of
responsibilities and duties. Arden Realty Limited Partnership has used the criteria set forth in
the Internal Control-Integrated Frameworkissued by the Committee of Sponsoring Organizations of
the Treadway Commission to assess its internal control over financial reporting. Based upon this
assessment, management concluded that internal control over financial reporting is operating
effectively as of December 31, 2004. Ernst & Young LLP has audited Arden Realty Limited
Partnerships financial statements and has issued an attestation report on managements assessment
of internal control over financial reporting. Submitted
on March 12, 2005 48




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ITEM 9B.OTHER INFORMATION None. 
 PART III The information required by Part III is incorporated by reference from our definitive proxy
statement for Arden Realtys 2005 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, 2004 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): Number of shares of commonNumber of shares of common
    
    
    Weighted-average
    
    
    stock remaining available forstock to be issued upon
    
    
    exercise price of
    
    
    future issuance under equityexercise of outstanding
    
    
    outstanding options,
    
    
    compensation plans (excludingPlan Category
    
    options, warrants and rights
    
    
    warrants and rights
    
    
    shares reflected in column (a))(1)(a)
    
    
    (b)
    
    
    (c)Equity
Compensation plans
approved by
shareholders
    
    
    1,556
    
    
    $
    25.11
    
    
    
    542Equity
Compensation plans
not approved by
shareholders
    
    
    80
    (2)
    
    
    24.13
    
    
    
    Total
    
    
    1,636
    
    
    $
    25.06
    
    
    
    542
   (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 our 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. Mr. Covitz, Mr.
Flax and Mr. Good exercised 50,000, 40,000 and 20,000 options, respectively, during 2004. 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 Proposal 2: Ratification of Appointment of
Independent Auditors of the definitive proxy statement is incorporated herein by reference. 49




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##### Table of Contents



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-1Consolidated Balance Sheets as of December 31, 2004 and 2003
    
    F-2Consolidated Statements of Income for the years ended December 31, 2004, 2003 and 2002
    
    F-3Consolidated Statements of Partners Capital for the years ended December 31, 2004, 2003 and 2002
    
    F-4Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002
    
    F-5Notes 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
    
    Description3.1*
    
    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).
 50




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##### Table of Contents



ExhibitNumber
    
    Description4.3*
    
    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).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).
 51




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##### Table of Contents



ExhibitNumber
    
    Description10.8*
    
    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.
 52




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##### Table of Contents



ExhibitNumber
    
    Description10.20*
    
    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).
 53




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##### Table of Contents



ExhibitNumber
    
    Description10.31*
    
    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, 1999.10.32*
    
    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).
 54




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##### Table of Contents



ExhibitNumber
    
    Description10.44*^
    
    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
Richard Ziman, Victor Coleman, 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, Inc.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, 2002.10.53*
    
    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,
2003.10.55*
    
    Confidential Resignation Agreement and General Release dated as
of March 4, 2005 by and between Arden Realty, Inc. and Arden
Realty Limited Partnership and Andrew J. Sobel.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. 55




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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 10, 2005. ARDEN REALTY LIMITED PARTNERSHIPBy: ARDEN REALTY, INC.Its: General PartnerBy: /s/ RICHARD S. ZIMANRichard S. ZimanChairman of the BoardAnd 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
    
    Chairman of the Board, Chief
    
    March 10, 2005Executive Officer and DirectorRichard S. Ziman/s/ VICTOR J. COLEMAN
    
    President, Chief Operating
    
    March 10, 2005Officer and DirectorVictor J. Coleman/s/ RICHARD S. DAVIS
    
    Executive Vice President and
    
    March 10, 2005Chief Financial OfficerRichard S. Davis/s/ ROBERT C. PEDDICORD
    
    Executive Vice President -
    
    March 10, 2005Leasing and Property OperationsRobert C. Peddicord/s/ LESLIE E. BIDERDirector
    
    March 10, 2005Leslie E. Bider/s/ CARL D. COVITZDirector
    
    March 10, 2005Carl D. Covitz/s/ LARRY S. FLAXDirector
    
    March 10, 2005Larry S. Flax/s/ STEVEN C. GOODDirector
    
    March 10, 2005Steven C. Good/s/ ALAN I. ROTHENBERGDirector
    
    March 10, 2005Alan I. Rothenberg
 56




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Partners
Arden Realty Limited Partnership We have audited the accompanying consolidated balance sheets of Arden Realty Limited
Partnership as of December 31, 2004 and 2003 and the related consolidated statements of income,
partners capital, and cash flows for each of the three years in the period ended December 31,
2004. 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 the standards of the Public
Company Accounting Oversight Board (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,
2004 and 2003 and the consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 2004, in conformity with U.S. generally accepted
accounting principles. We have also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the effectiveness of Arden Realty Limited Partnerships internal
control over financial reporting as of December 31, 2004, based on the criteria established in
Internal Control  Integrated Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated March 12, 2005
expressed an unqualified opinion thereon. Los Angeles, California
    
    /s/ ERNST & YOUNG LLPMarch 12, 2005
 F-1




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ARDEN REALTY LIMITED PARTNERSHIP


CONSOLIDATED BALANCE
SHEETS
(in thousands, except
share data) December 31,2004
    
    
    2003AssetsInvestment in real estate:Land
    
    $
    450,439
    
    
    $
    438,342Buildings and improvements
    
    
    2,175,571
    
    
    
    2,029,276Tenant improvements and leasing commissions
    
    
    360,401
    
    
    
    329,2852,986,411
    
    
    
    2,796,903Less: accumulated depreciation and amortization
    
    
    (488,808
    )
    
    
    (432,814
    )2,497,603
    
    
    
    2,364,089Properties under development or renovation
    
    
    16,295
    
    
    
    75,627Land available for development
    
    
    23,795
    
    
    
    23,723Properties held for disposition, net
    
    
    14,288
    
    
    
    183,260Net investment in real estate
    
    
    2,551,981
    
    
    
    2,646,699Cash and cash equivalents
    
    
    13,040
    
    
    
    4,707Restricted cash
    
    
    14,788
    
    
    
    19,694Rent and other receivables, net of allowance of
$3,748 and $4,041 at December 31, 2004 and 2003,
respectively
    
    
    5,953
    
    
    
    3,688Due from general partner
    
    
    
    
    
    
    4,972Deferred rent, net of allowance of $1,933 and $2,216
at December 31, 2004 and 2003, respectively
    
    
    42,886
    
    
    
    44,203Prepaid financing costs, expenses and other assets,
net of accumulated amortization of $13,244 and
$13,781 at December 31, 2004 and 2003, respectively
    
    
    31,349
    
    
    
    22,442Total assets
    
    $
    2,659,997
    
    
    $
    2,746,405LiabilitiesMortgage loans payable
    
    $
    375,417
    
    
    $
    557,435Mortgage loan payable  property held for disposition
    
    
    7,222
    
    
    
    7,394Unsecured lines of credit
    
    
    121,500
    
    
    
    161,000Unsecured term loan
    
    
    125,000
    
    
    
    125,000Unsecured senior notes, net of discount
    
    
    696,945
    
    
    
    498,952Accounts payable and accrued expenses
    
    
    58,441
    
    
    
    54,317Security deposits
    
    
    25,498
    
    
    
    22,321Total liabilities
    
    
    1,410,023
    
    
    
    1,426,419Minority interest
    
    
    2,677
    
    
    
    2,717Partners CapitalPreferred
partner, None and 2,000,000 Series B
Cumulative Redeemable Preferred Units outstanding at
December 31, 2004 and 2003
    
    
    
    
    
    
    50,000General and limited partners, 67,997,458 and
66,113,199 common OP Units outstanding at December
31, 2004 and 2003, respectively
    
    
    1,264,177
    
    
    
    1,282,822Deferred compensation
    
    
    (12,830
    )
    
    
    (14,952
    )Accumulated other comprehensive loss
    
    
    (4,050
    )
    
    
    (601
    )Total partners capital
    
    
    1,247,297
    
    
    
    1,317,269Total liabilities and partners capital
    
    $
    2,659,997
    
    
    $
    2,746,405
 See accompanying notes to financial statements. F-2




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##### Table of Contents



ARDEN REALTY LIMITED
PARTNERSHIP 
 CONSOLIDATED
STATEMENTS OF INCOME
 (in thousands, except
per share amounts)
 Year Ended December 31,2004
    
    
    2003
    
    
    2002Property revenues
    
    $
    409,193
    
    
    $
    393,765
    
    
    $
    374,135Property operating expenses
    
    
    (133,635
    )
    
    
    (125,979
    )
    
    
    (117,019
    )275,558
    
    
    
    267,786
    
    
    
    257,116General and administrative expenses
    
    
    19,503
    
    
    
    15,217
    
    
    
    11,219Interest expense
    
    
    88,856
    
    
    
    93,093
    
    
    
    87,827Depreciation and amortization
    
    
    121,687
    
    
    
    111,952
    
    
    
    100,317Interest income and other loss (income)
    
    
    508
    
    
    
    401
    
    
    
    (2,063
    )Income from continuing operations before gain on sale of properties
and impairment on investment in securities and minority interest
    
    
    45,004
    
    
    
    47,123
    
    
    
    59,816Gain on sale of operating properties
    
    
    
    
    
    
    
    
    
    
    1,967Income from continuing operations before impairment on investment in
securities and minority interest
    
    
    45,004
    
    
    
    47,123
    
    
    
    61,783Impairment on investment in securities
    
    
    (2,700
    )
    
    
    
    
    
    
    Minority interest
    
    
    (186
    )
    
    
    (103
    )
    
    
    (110
    )Income from continuing operations
    
    
    42,118
    
    
    
    47,020
    
    
    
    61,673Discontinued operations
    
    
    7,200
    
    
    
    13,037
    
    
    
    15,990Gain on sale of discontinued properties
    
    
    30,473
    
    
    
    5,937
    
    
    
    Net income
    
    $
    79,791
    
    
    $
    65,994
    
    
    $
    77,663Net Income allocated to:Preferred partner
    
    $
    4,309
    
    
    $
    4,312
    
    
    $
    4,312General and limited partners
    
    $
    75,482
    
    
    $
    61,682
    
    
    $
    73,351Basic net income per common operating partnership unit:Income from continuing operations
    
    $
    0.57
    
    
    $
    0.66
    
    
    $
    0.87Income from discontinued operations
    
    
    0.56
    
    
    
    0.29
    
    
    
    0.24Net income per common operating partnership unit  basic
    
    $
    1.13
    
    
    $
    0.95
    
    
    $
    1.11Weighted average number of common operating partnership units  basic
    
    
    67,047
    
    
    
    65,251
    
    
    
    65,898Diluted net income per common operating partnership unit:Income from continuing operations
    
    $
    0.56
    
    
    $
    0.65
    
    
    $
    0.87Income from discontinued operations
    
    
    0.56
    
    
    
    0.29
    
    
    
    0.24Net income per common operating partnership unit  diluted
    
    $
    1.12
    
    
    $
    0.94
    
    
    $
    1.11Weighted average number of common operating partnership units  diluted
    
    
    67,415
    
    
    
    65,513
    
    
    
    66,098
 See accompanying notes to financial statements. F-3




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##### Table of Contents



ARDEN REALTY LIMITED
PARTNERSHIP 
 CONSOLIDATED STATEMENTS
OF PARTNERS CAPITAL
 (in
thousands)
 AccumulatedOtherPreferred
    
    
    Limited
    
    
    General
    
    
    Deferred
    
    
    ComprehensivePartner
    
    
    Partner
    
    
    Partner
    
    
    Compensation
    
    
    Loss
    
    
    TotalBalance at January 1, 2002
    
    
    50,000
    
    
    
    48,726
    
    
    
    1,357,074
    
    
    
    (9,133
    )
    
    
    
    
    
    
    1,446,667Common OP Units converted
    
    
    
    
    
    
    (2,270
    )
    
    
    2,270
    
    
    
    
    
    
    
    
    
    
    
    Distributions
    
    
    (4,312
    )
    
    
    (3,527
    )
    
    
    (129,153
    )
    
    
    
    
    
    
    
    
    
    
    (136,992
    )Stock compensation
    
    
    
    
    
    
    
    
    
    
    4,815
    
    
    
    (4,815
    )
    
    
    
    
    
    
    Amortization of stock compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,444
    
    
    
    
    
    
    
    1,444Forfeitures
    
    
    
    
    
    
    
    
    
    
    (1,245
    )
    
    
    1,245
    
    
    
    
    
    
    
    Stock options exercised
    
    
    
    
    
    
    
    
    
    
    9,078
    
    
    
    
    
    
    
    
    
    
    
    9,078Stock repurchases
    
    
    
    
    
    
    
    
    
    
    (40,693
    )
    
    
    
    
    
    
    
    
    
    
    (40,693
    )Unrealized loss on interest rate hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,995
    )
    
    
    (2,995
    )Reclassification adjustment for losses
included in earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    227
    
    
    
    227Net income
    
    
    4,312
    
    
    
    1,944
    
    
    
    71,407
    
    
    
    
    
    
    
    
    
    
    
    77,663Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74,895Redemption adjustment
    
    
    
    
    
    
    (6,845
    )
    
    
    6,845
    
    
    
    
    
    
    
    
    
    
    
    Balance at December 31,2002
    
    
    50,000
    
    
    
    38,028
    
    
    
    1,280,398
    
    
    
    (11,259
    )
    
    
    (2,768
    )
    
    
    1,354,399Common OP Units converted
    
    
    
    
    
    
    (495
    )
    
    
    495
    
    
    
    
    
    
    
    
    
    
    
    Distributions
    
    
    (4,312
    )
    
    
    (3,443
    )
    
    
    (128,068
    )
    
    
    
    
    
    
    
    
    
    
    (135,823
    )Stock compensation
    
    
    
    
    
    
    
    
    
    
    6,279
    
    
    
    (6,279
    )
    
    
    
    
    
    
    Amortization of stock compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,545
    
    
    
    
    
    
    
    2,545Stock option expense
    
    
    
    
    
    
    
    
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    41Forfeitures
    
    
    
    
    
    
    
    
    
    
    (41
    )
    
    
    41
    
    
    
    
    
    
    
    Stock options exercised
    
    
    
    
    
    
    
    
    
    
    27,946
    
    
    
    
    
    
    
    
    
    
    
    27,946Unrealized loss on interest rate hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (155
    )
    
    
    (155
    )Reclassification adjustment for losses
included in earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,322
    
    
    
    2,322Net income
    
    
    4,312
    
    
    
    1,604
    
    
    
    60,078
    
    
    
    
    
    
    
    
    
    
    
    65,994Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68,161Redemption adjustment
    
    
    
    
    
    
    15,512
    
    
    
    (15,512
    )
    
    
    
    
    
    
    
    
    
    
    Balance at December 31, 2003
    
    
    50,000
    
    
    
    51,206
    
    
    
    1,231,616
    
    
    
    (14,952
    )
    
    
    (601
    )
    
    
    1,317,269Common OP Units converted
    
    
    
    
    
    
    (285
    )
    
    
    285
    
    
    
    
    
    
    
    
    
    
    
    Distributions
    
    
    (4,309
    )
    
    
    (3,353
    )
    
    
    (135,747
    )
    
    
    
    
    
    
    
    
    
    
    (143,409
    )Redemption of Preferred OP Units
    
    
    (50,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,000
    )Stock compensation
    
    
    
    
    
    
    
    
    
    
    1,596
    
    
    
    (1,596
    )
    
    
    
    
    
    
    Amortization of stock compensation
    
    
    
    
    
    
    
    
    
    
    665
    
    
    
    3,641
    
    
    
    
    
    
    
    4,306Stock option expense
    
    
    
    
    
    
    
    
    
    
    44
    
    
    
    
    
    
    
    
    
    
    
    44Forfeitures
    
    
    
    
    
    
    
    
    
    
    (77
    )
    
    
    77
    
    
    
    
    
    
    
    Stock options exercised
    
    
    
    
    
    
    
    
    
    
    42,745
    
    
    
    
    
    
    
    
    
    
    
    42,745Unrealized loss on interest rate hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,315
    )
    
    
    (4,315
    )Reclassification adjustment for losses
included in earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    866
    
    
    
    866Net income
    
    
    4,309
    
    
    
    1,887
    
    
    
    73,595
    
    
    
    
    
    
    
    
    
    
    
    79,791Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76,342Redemption adjustment
    
    
    
    
    
    
    13,603
    
    
    
    (13,603
    )
    
    
    
    
    
    
    
    
    
    
    Balance at December 31, 2004
    
    $
    
    
    
    $
    63,058
    
    
    $
    1,201,119
    
    
    $
    (12,830
    )
    
    $
    (4,050
    )
    
    $
    1,247,297
 See accompanying notes to financial statements. F-4




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##### Table of Contents



ARDEN REALTY LIMITED
PARTNERSHIP 
 CONSOLIDATED STATEMENTS
OF CASH FLOWS
 (in
thousands)
 Year
Ended December 31,2004
    
    

2003
    
    

2002Operating Activities:Net income
    
    $
    79,791
    
    
    $
    65,994
    
    
    $
    77,663Adjustments to reconcile net income to net cash provided by
operating activities:Minority interest
    
    
    186
    
    
    
    103
    
    
    
    110Depreciation and amortization, including discontinued operations
    
    
    126,582
    
    
    
    120,316
    
    
    
    111,418Amortization of loan costs and fees
    
    
    3,801
    
    
    
    3,972
    
    
    
    3,807Gain on sale of property
    
    
    (30,473
    )
    
    
    (5,937
    )
    
    
    (1,967
    )Gain on repayment of mortgage loan receivable
    
    
    
    
    
    
    
    
    
    
    (750
    )Impairment on investment in securities
    
    
    2,700
    
    
    
    
    
    
    
    Amortization of deferred compensation
    
    
    3,760
    
    
    
    2,251
    
    
    
    1,199Changes in operating assets and liabilities:Rent and other receivables
    
    
    (2,265
    )
    
    
    (771
    )
    
    
    6,768Due from general partner
    
    
    
    
    
    
    (1,544
    )
    
    
    (1,170
    )Deferred rent
    
    
    (1,015
    )
    
    
    (557
    )
    
    
    (4,657
    )Prepaid financing costs, expenses and other assets
    
    
    (4,783
    )
    
    
    (1,494
    )
    
    
    (2,997
    )Accounts payable and accrued expenses
    
    
    3,564
    
    
    
    (2,356
    )
    
    
    9,728Security deposits
    
    
    3,285
    
    
    
    1,676
    
    
    
    962Net cash provided by operating activities
    
    
    185,133
    
    
    
    181,653
    
    
    
    200,114Investing Activities:Acquisitions and improvements to commercial properties
    
    
    (198,309
    )
    
    
    (111,365
    )
    
    
    (251,534
    )Proceeds from sales of properties
    
    
    187,072
    
    
    
    91,010
    
    
    
    24,287Proceeds from repayment of mortgage note receivable
    
    
    
    
    
    
    
    
    
    
    14,245Net cash used in investing activities
    
    
    (11,237
    )
    
    
    (20,355
    )
    
    
    (213,002
    )Financing Activities:Proceeds from term loan
    
    
    
    
    
    
    
    
    
    
    125,000Repayments of mortgage loans
    
    
    (182,190
    )
    
    
    (5,825
    )
    
    
    (2,798
    )Proceeds from unsecured lines of credit
    
    
    465,500
    
    
    
    102,500
    
    
    
    255,937Repayments of unsecured lines of credit
    
    
    (505,000
    )
    
    
    (150,086
    )
    
    
    (227,700
    )Proceeds from issuances of unsecured senior notes, net of discount
    
    
    197,033
    
    
    
    
    
    
    
    Decrease (increase) in restricted cash
    
    
    5,012
    
    
    
    804
    
    
    
    (1,730
    )Proceeds from issuance of common operating partnership units
    
    
    42,745
    
    
    
    27,946
    
    
    
    9,078Repurchase of common operating partnership units
    
    
    
    
    
    
    
    
    
    
    (40,693
    )Distributions to minority interests
    
    
    (226
    )
    
    
    (170
    )
    
    
    (192
    )Distributions to preferred operating partnership unit holders
    
    
    (3,234
    )
    
    
    (4,312
    )
    
    
    (4,312
    )Redemption of preferred operating partnership units
    
    
    (50,000
    )
    
    
    
    
    
    
    Distributions and redemptions paid to common operating partnership
unit holders
    
    
    (135,203
    )
    
    
    (131,511
    )
    
    
    (132,680
    )Net cash used in financing activities
    
    
    (165,563
    )
    
    
    (160,654
    )
    
    
    (20,090
    )Net increase (decrease) in cash and cash equivalents
    
    
    8,333
    
    
    
    644
    
    
    
    (32,978
    )Cash and cash equivalents at beginning of period
    
    
    4,707
    
    
    
    4,063
    
    
    
    37,041Cash and cash equivalents at end of period
    
    $
    13,040
    
    
    $
    4,707
    
    
    $
    4,063Supplemental Disclosure of Cash Flow Information:Cash paid during the period for interest, net of amount
capitalized
    
    $
    87,572
    
    
    $
    96,547
    
    
    $
    94,007
 See accompanying notes to financial statements. F-5




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##### Table of Contents



ARDEN REALTY LIMITED
PARTNERSHIP 
 NOTES 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, 2004, owned 97.5% 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, 2004, our portfolio was comprised of 120 primarily suburban office
properties, consisting of 197 buildings with approximately 18.2 million net rentable square feet.
As of December 31, 2004, our operating portfolio was 91.2% 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.,
the Operating Partnership, and our 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
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. 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. 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. F-6




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##### Table of Contents



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, 2004 and 2003. Property acquisitions are accounted for in accordance with Statement of Financial Accounting
Standards (SFAS) No. 141, Business Combinations. 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. 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. F-7




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##### Table of Contents



Restricted Cash Restricted cash at December 31, 2004 and 2003 consisted of $9.7 million and $13.7 million,
respectively, in cash deposits as required by certain of our mortgage loans payable and $5.1
million and $6.0 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 Company 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 Company 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, 2004 and 2003
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. The estimated fair value of our mortgage loans payable and unsecured senior notes is as
follows (in thousands): December 31, 2004
    
    
    December 31, 2003Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueMortgage loans payable
    
    $
    382,639
    
    
    $
    389,755
    
    
    $
    564,829
    
    
    $
    581,945Unsecured senior notes
    
    $
    696,945
    
    
    $
    712,137
    
    
    $
    498,952
    
    
    $
    540,904
 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. F-8




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##### Table of Contents



Interest Rate Hedge Agreements We have periodically entered into interest rate hedge agreements to effectively convert
floating rate debt into fixed rate debt or to remove the variability associated with forecasted
issuances of 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 manage 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. In August 2004, we settled $150 million of forward-starting swaps we entered
into in 2003 in conjunction with a forecasted $200 million issuance of unsecured senior notes. We
expensed approximately $130,000 of ineffectiveness relating to this settlement during 2004. In 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. In 2004, we entered into $300 million of forward-starting swaps that effectively fixed the
10-year Treasury rate at an average rate of approximately 4.37% for borrowings that are expected to
occur in 2005 to primarily refinance some of our scheduled debt maturities. The forward-starting
interest rate swaps were entered into at current market rates and, therefore, had no initial cost. 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 $300 million in
forward-starting hedges outstanding as of December 31, 2004 are classified as cash flow hedges.
The fair value of these instruments of ($3.7) million at December 31, 2004 has been deferred in
accumulated other comprehensive loss on our balance sheet. Of the amount deferred in other
comprehensive loss at December 31, 2004, we estimate that approximately $4.8 million will be
reclassified out of other comprehensive loss as an increase to interest expense during 2005. 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 $162,000 reported in both the unsecured senior notes
and accounts payable and accrued expenses 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. During the years ended
December 31, 2004 and 2003, we recognized approximately $1.6 million and $400,000, respectively, as
a reduction of interest expense related to our fair value 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 2004, the FASB issued SFAS No. 123R, which is a revision of SFAS No. 123. SFAS
No. 123R supersedes APB Opinion No. 25, and its related implementation guidance. SFAS No. 123R
requires companies to record compensation expense for share-based payments to employees, including
grants of employee stock options, at fair value. SFAS No. 123R is effective for most public
companies at the beginning of the first interim or annual period beginning after June 15, 2005. We
believe that the implementation of the provisions of SFAS No. 123R will not have a material impact
on our financial position or results of operations. Reclassifications Certain prior year amounts on our consolidated balance sheets and consolidated statements of
income have been reclassified to confirm with the current year presentation for properties sold and
classified as held for disposition pursuant to SFAS 144. 3. Commercial Properties Property Dispositions SalesDate of
    
    Property
    
    Square
    
    PriceProperty
    
    Major Area
    
    Submarket
    
    Sale
    
    Type
    
    Feet
    

($000s)Tower Plaza Retail
    
    Riverside
    
    Temecula
    
    February 4, 2004
    
    Retail
    
    133,481
    
    $17,050Univision
- 5999 Center Drive
    
    Los Angeles
    
    Culver City/Fox Hills
    
    March 16, 2004
    
    Office
    
    161,650
    
    52,50010251 Vista Sorrento
    
    San Diego
    
    Sorrento Mesa
    
    August 24, 2004
    
    Office
    
    69,386
    
    9,250Waples Center
    
    San Diego
    
    Sorrento Mesa
    
    December 29, 2004
    
    Office
    
    28,119
    
    (A)Morehouse Center
    
    San Diego
    
    Sorrento Mesa
    
    December 29, 2004
    
    Office
    
    181,207
    
    (A)91 Freeway Center
    
    Los Angeles
    
    Artesia
    
    December 29, 2004
    
    Office
    
    93,277
    
    (A)Norwalk
    
    Los Angeles
    
    Norwalk
    
    December 29, 2004
    
    Office
    
    122,175
    
    (A)1501 Hughes Way
    
    Los Angeles
    
    Suburban Long Beach
    
    December 29, 2004
    
    Office
    
    77,060
    
    (A)3901 Via Oro
    
    Los Angeles
    
    Suburban Long Beach
    
    December 29, 2004
    
    Office
    
    53,195
    
    (A)Glendale
Corporate Center
    
    Los Angeles
    
    Glendale
    
    December 29, 2004
    
    Office
    
    108,209
    
    (A)Whittier
    
    Los Angeles
    
    Whittier
    
    December 29, 2004
    
    Office
    
    135,415
    
    (A)South Bay Tech
    
    Los Angeles
    

190th Corridor
    
    December 29, 2004
    
    Office
    
    104,815
    
    (A)Sub-total
    
    
    
    
    
    
    
    
    
    1,267,989
    
    78,800(A) Portfolio sale
    
    
    
    
    
    
    
    
    
    
    
    126,000 (B)1,267,989
    
    $204,800
 (B) Includes approximately $12.5 million in proceeds held in escrow at the end of 2004 as part
of a 1031 exchange transaction to be completed in 2005. Property Acquisitions PurchaseDate of
    
    Property
    
    Square
    
    PriceProperty
    
    County
    
    Submarket
    
    Purchase
    
    Type
    
    Feet
    

($000s)Homestore
    
    Los Angeles
    
    Westlake Village
    
    October 4, 2004
    
    Office
    
    137,762
    
    $32,300Warner Corporate Center
    
    Los Angeles
    
    Woodland Hills
    
    October 11, 2004
    
    Office
    
    253,000
    
    64,500390,762
    
    $96,800
 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 year ended December 31, 2002. In
order to increase the comparability of our consolidated statements of income for the years ended
December 31, 2004, 2003 and 2002, the tables below summarize the operating results of one property
classified as held for disposition at December 31, 2004, twelve properties sold during 2004 and
eight properties sold during 2003. As of December 31, 2004, properties held for disposition consisted of one property with
approximately 167,000 square feet. See footnote 13. The results of operations for the properties classified as discontinued operations for the
years ended December 31, 2004, 2003 and 2002 are as follows (in thousands): For the Years Ended December 31,2004
    
    

2003
    
    

2002Revenues
    
    $
    20,533
    
    
    $
    33,794
    
    
    $
    41,978Property operating expenses
    
    
    (7,781
    )
    
    
    (11,711
    )
    
    
    (14,199
    )Depreciation and amortization
    
    
    (4,895
    )
    
    
    (8,372
    )
    
    
    (11,100
    )Interest expense
    
    
    (659
    )
    
    
    (674
    )
    
    
    (689
    )Interest and other income
    
    
    2
    
    
    
    
    
    
    
    Discontinued operations
    
    $
    7,200
    
    
    $
    13,037
    
    
    $
    15,990Gain on sale of discontinued properties
    
    $
    30,473
    
    
    $
    5,937
    
    
    $
    
 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 31,2004
    
    
    2003
    
    
    2002Total
interest incurred(1)
    
    $
    90,451
    
    
    $
    96,263
    
    
    $
    94,162Amount capitalized
    
    
    (936
    )
    
    
    (2,496
    )
    
    
    (5,646
    )Amount expensed(1)
    
    $
    89,515
    
    
    $
    93,767
    
    
    $
    88,516
   (1)
    
    Includes interest expense related to a property currently classified as held
for disposition. F-11




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##### Table of Contents



Future Minimum Lease Payments Future minimum lease payments to be received under noncancelable operating leases existing as
of December 31, 2004, are as follows (in thousands): 2005
    
    $
    349,9672006
    
    
    305,0342007
    
    
    254,4902008
    
    
    196,7352009
    
    
    144,404Thereafter
    
    
    274,098Total
    
    $
    1,524,728
 The above future minimum lease payments do not include payments received for tenant
reimbursements of specified operating expenses. 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 $1.8 million, $2.0 million and $1.9 million for the years ended December 31, 2004,
2003 and 2002, respectively. Future minimum ground lease payments due under existing ground leases
are as follows (in thousands): 2005
    
    $
    1,8152006
    
    
    1,8402007
    
    
    1,8652008
    
    
    1,8652009
    
    
    1,865Thereafter
    
    
    109,056Total
    
    $
    118,306
 4. Non-Real Estate Investments During the year ended December 31, 2004, an impairment of $2.7 million was recognized in
connection with Arden Realtys investment in the securities of a non-publicly traded company that
provides distributed energy generation to commercial property owners. This impairment represents
our entire investment in this company. We recorded this impairment after analyzing information received from this company regarding
their current business and financial strategies which indicated to us that the recoverability of
our investment was unlikely. F-12




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##### Table of Contents



5. Mortgage Loans and Unsecured Indebtedness A summary of mortgage loans payable, unsecured lines of credit and unsecured senior notes is
as follows: Stated Annual
    
    
    
    
    
    
    Number ofDecember 31,
    
    
    December 31,
    
    
    Interest Rate at
    
    
    Fixed/Floating
    
    
    Properties
    
    
    MaturityType of Debt
    
    2004
    
    
    2003
    
    
    December 31, 2004
    
    
    Rate
    
    
    Securing Loan
    
    
    Date(in thousands)Mortgage Loans Payable:Fixed RateMortgage Financing I(1)
    
    $
    
    
    
    $
    175,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mortgage Financing III(2)
    
    
    132,323
    
    
    
    134,544
    
    
    
    6.74
    %
    
    Fixed
    
    
    22
    
    
    
    4/08Mortgage Financing IV(2)
    
    
    108,194
    
    
    
    109,960
    
    
    
    6.61
    %
    
    Fixed
    
    
    12
    
    
    
    4/08Mortgage Financing V(2)
    
    
    103,504
    
    
    
    105,899
    
    
    
    6.94
    %
    
    Fixed
    
    
    12
    
    
    
    4/09Mortgage Financing VI(2)
    
    
    21,325
    
    
    
    21,578
    
    
    
    7.54
    %
    
    Fixed
    
    
    3
    
    
    
    4/09Activity Business Center(2), (3)
    
    
    7,222
    
    
    
    7,394
    
    
    
    8.85
    %
    
    Fixed
    
    
    1
    
    
    
    5/06145 South Fairfax(2)
    
    
    3,869
    
    
    
    3,912
    
    
    
    8.93
    %
    
    Fixed
    
    
    1
    
    
    
    1/27Marin Corporate Center(2)
    
    
    2,585
    
    
    
    2,724
    
    
    
    9.00
    %
    
    Fixed
    
    
    1
    
    
    
    7/15Conejo Business Center(2)
    
    
    2,531
    
    
    
    2,669
    
    
    
    8.75
    %
    
    Fixed
    
    (Note 4)
    
    
    7/15Conejo Business Center(2)
    
    
    1,086
    
    
    
    1,149
    
    
    
    7.88
    %
    
    Fixed
    
    (Note 4)
    
    
    7/15382,639
    
    
    
    564,829Unsecured Lines of Credit:Floating RateWells Fargo  $310 mm(5)
    
    
    111,500
    
    
    
    158,000
    
    
    
    3.57
    %
    
    LIBOR +0.90% (Notes 6, 7)
    
    
    
    
    
    
    4/06City National Bank  $20 mm(5)
    
    
    10,000
    
    
    
    3,000
    
    
    
    3.21
    %
    
    LIBOR + 0.90% (Note 8)
    
    
    
    
    
    
    8/05121,500
    
    
    
    161,000Unsecured Term Loan:Fixed RateWells Fargo  $125 mm(5)
    
    
    125,000
    
    
    
    125,000
    
    
    
    4.55
    %
    
    Fixed (Note 9)
    
    
    
    
    
    
    2/12
    (10)Unsecured Senior Notes:Fixed Rate2005 Notes(11), (12)
    
    
    199,974
    
    
    
    199,872
    
    
    
    8.88
    %
    
    Fixed
    
    
    
    
    
    
    3/052007 Notes(11)
    
    
    149,395
    
    
    
    149,907
    
    
    
    7.00
    %
    
    (Note 13)
    
    
    
    
    
    
    11/072010 Notes(11)
    
    
    49,785
    
    
    
    49,744
    
    
    
    9.15
    %
    
    Fixed
    
    
    
    
    
    
    3/102010 Notes(11)
    
    
    99,513
    
    
    
    99,429
    
    
    
    8.50
    %
    
    Fixed
    
    
    
    
    
    
    11/102011 Notes(11), (14)
    
    
    198,278
    
    
    
    
    
    
    
    5.20
    %
    
    Fixed
    
    
    
    
    
    
    9/11696,945
    
    
    
    498,952Total Debt
    
    $
    1,326,084
    
    
    $
    1,349,781
   (1)
    
    This mortgage financing was repaid in full on April 9, 2004.(2)
    
    Requires monthly payments of principal and interest.(3)
    
    This loan is secured by a property currently classified as held for disposition.
This loan was repaid in January of 2005. See footnote 13.(4)
    
    Both mortgage loans are secured by the Conejo Business Center property.(5)
    
    Requires monthly payments of interest only, with outstanding principal balance due
upon maturity.(6)
    
    This line of credit also has an annual 20 basis point facility fee on the entire
$310 million commitment amount. In June 2004, we amended this line of credit to reduce
the interest rate from LIBOR + 1.00% to LIBOR + 0.90%.(7)
    
    We have entered into interest rate swap agreements to fix the interest rate on $50
million of the outstanding balance on this line of credit at 3.95% through April of 2006.(8)
    
    On October 4, 2004, we amended this line of credit to reduce the interest rate
from LIBOR + 1.00% or Prime Rate  1.875% to LIBOR + 0.90% or Prime Rate  1.975%.(9)
    
    In 2002, we entered into interest rate swap agreements that fixed the interest
rate on the entire balance of this loan. In June 2004, we amended this loan to reduce it
effective interest rate by 20 basis points. After this amendment and after taking into
effect the interest rate swap agreements for this loan, it will have an effective
interest rate of 4.55% in 2005 and 4.70% in 2006.(10)
    
    On February 18, 2005, we extended the maturity of this loan to February of 2012.
See footnote 13.(11)
    
    Requires semi-annual interest payments only, with the principal balance due upon
maturity.(12)
    
    These notes were redeemed in March of 2005. See footnote 13.(13)
    
    In 2003, we entered into interest rate swap 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 of 2007. Including these swap agreements, the effective interest rate
on these notes was approximately 6.53% as of December 31, 2004.(14)
    
    On August 18, 2004, we issued $200 million of unsecured senior notes. F-13




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##### Table of Contents



Our Operating Partnership has an unsecured line of credit with a total commitment of $20
million from City National Bank. This line of credit accrues interest at LIBOR + 0.90% or the City
National Bank Prime Rate less 1.975% and is scheduled to mature on August 1, 2005. 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, 2004 and 2003, there was $10.0 million and $3.0 million outstanding on this line of credit,
respectively, and $10.0 and $17.0 million was available for additional borrowings, respectively. Our Operating Partnership also has 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 + 0.65% and
LIBOR + 1.15% (including an annual facility fee ranging from 0.15% to 0.40% based on the aggregate
amount of the line of credit) depending on the Operating Partnerships unsecured debt rating. This
line of credit matures in April 2006. In addition, as long as the Operating Partnership maintains
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. The Operating Partnership also has 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, 2004 and 2003, $111.5 million and $158.0 million was outstanding on
this line of credit, respectively, and $198.5 million and $152.0 million was available for
additional borrowings, respectively. Following is a summary of scheduled principal payments for our total debt outstanding as of
December 31, 2004 (in thousands): Year
    
    Amount2005
    
    $
    216,871
    (1)2006
    
    
    251,101
    (2),(3)2007
    
    
    158,0352008
    
    
    230,7262009
    
    
    112,291Thereafter
    
    
    357,060Total
    
    $
    1,326,084
   (1)
    
    Includes $200 million of unsecured senior notes redeemed in March of 2005. See footnote 13.(2)
    
    Includes $111.5 million outstanding on our Wells Fargo unsecured line of credit.(3)
    
    Includes $125 million outstanding on our Wells Fargo unsecured term loan. The maturity date
of this loan was extended to February of 2012 subsequent to year- end. See footnote 13. 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 the 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
2004, we made a distribution of approximately $5.0 million to
Arden Realty, our general partner, pursuant to the terms of our
partnership agreement. During the years ended December 31, 2004 and 2003, Arden Realty redeemed an aggregate of
16,000 and 29,076 common OP Units, respectively, for shares of its common stock. During the years ended December 31, 2004 and 2003, Arden Realty issued a total of 1,750,592
and 1,162,523 common shares, respectively, relating to exercises of stock options. In September 2004, we redeemed the $50 million of 5.625% Series B Cumulative Redeemable
Preferred Operating Partnership Units at par plus accrued unpaid distributions. These Preferred OP
Units were originally issued in September of 1999. In conjunction with this redemption, we
expensed approximately $1.1 million of original issuance costs. During 2004, Arden Realty issued a total of 136,500 restricted stock awards to several key
executive officers, directors 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 $29.30 to $32.66.
These restricted shares vest equally on the anniversary date of the awards over 3 years. We recorded compensation expense of approximately $600,000 during 2004 for the grants
described above based upon the market value of these shares on the dates of the awards. In
2004 and 2003, we made distributions totaling $2.02 per common OP unit. F-14




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##### Table of Contents



7. Commitments and Contingencies Capital Commitments As of December 31, 2004, we had approximately $44.8 million outstanding in capital commitments
related to tenant improvements, renovation costs, operating leases 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, 2004. 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. As of December 31, 2004 and 2003, we had a total of approximately
$39.3 million and $33.5 million, respectively, of total lease security available, including
security deposits and existing letters of credit. 8. Related Party Transactions At December 31, 2004 and 2003, we have four promissory notes totaling approximately $486,000
relating to two of our officers. These notes originated during 2001 and 2002 and mature between
July of 2006 and September of 2011. Two of these notes bear interest at fixed rates ranging from
5.75% to 6.00%. The remaining note bears interest at LIBOR + 1.10%. These notes are personally
guaranteed by the respective officers and are included as part of other receivables in our balance
sheets at December 31, 2004 and 2003. We lease approximately 7,300 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
$175,000. We also lease approximately 34,000 square feet to a company related to one of our
independent directors. The total annual rents from this lease is approximately $497,000. The
terms under these leases are comparable to those that would have been negotiated at inception with
unaffiliated third parties. F-15




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##### Table of Contents



9. Earnings Per Share The following table sets forth the computation of basic and diluted net income per share for
the years ended December 31, 2004, 2003 and 2002 (in thousands, except per share amounts): 2004
    
    
    2003
    
    
    2002Income from continuing operations
    
    $
    42,118
    
    
    $
    47,020
    
    
    $
    61,673Discontinued operations
    
    
    7,200
    
    
    
    13,037
    
    
    
    15,990Gain on sale of discontinued properties
    
    
    30,473
    
    
    
    5,937
    
    
    
    Net income
    
    $
    79,791
    
    
    $
    65,994
    
    
    $
    77,663Net Income allocated to:Preferred partner
    
    $
    4,309
    
    
    $
    4,312
    
    
    $
    4,312General and limited partners
    
    $
    75,482
    
    
    $
    61,682
    
    
    $
    73,351Weighted average number of common operating partnership
units  basic
    
    
    67,047
    
    
    
    65,251
    
    
    
    65,898Weighted average diluted stock options
    
    
    368
    
    
    
    262
    
    
    
    200Weighted average number of common operating partnership
units  diluted
    
    
    67,415
    
    
    
    65,513
    
    
    
    66,098Basic net income per common operating partnership unit:Income from continuing operations
    
    $
    0.57
    
    
    $
    0.66
    
    
    $
    0.87Income from discontinued operations
    
    
    0.56
    
    
    
    0.29
    
    
    
    0.24Net income per common operating partnership unit  basic
    
    $
    1.13
    
    
    $
    0.95
    
    
    $
    1.11Diluted net income per common operating partnership unit:Income from continuing operations
    
    $
    0.56
    
    
    $
    0.65
    
    
    $
    0.87Income from discontinued operations
    
    
    0.56
    
    
    
    0.29
    
    
    
    0.24Net income per common operating partnership unit  diluted
    
    $
    1.12
    
    
    $
    0.94
    
    
    $
    1.11
 See discussion of discontinued operations in footnote 3 above. 10. Income (Loss) from Taxable REIT Subsidiary Beginning in 2004, we have reclassified in all periods presented for financial presentation
purposes the operating results of Next>edge, our taxable REIT subsidiary, or TRS, from general
and administrative expenses to interest income and other loss in our consolidated statements of
income. Next>edge provides energy consulting services to commercial real estate owners. The
following is a breakdown of the components of interest and other income (loss) for the years ended
December 31, 2004, 2003 and 2002
(in thousands): 2004
    
    
    2003
    
    
    2002Net loss from Next>edge
    
    $
    (960
    )
    
    $
    (1,135
    )
    
    $
    (478
    )Interest and other income
    
    
    452
    
    
    
    734
    
    
    
    2,541Interest income and other (loss)
    
    $
    (508
    )
    
    $
    (401
    )
    
    $
    2,063
 11. Stock Option Plan 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, 2004, 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. F-16




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##### Table of Contents



A summary of stock option activity and related information for the years ended December 31,
2004, 2003 and 2002 follows: 2004
    
    
    2003
    
    
    2002Options
    
    
    Weighted-Average
    
    
    Options
    
    
    Weighted-Average
    
    
    Options
    
    
    Weighted-Average(000's)
    
    
    Exercise Price
    
    
    (000's)
    
    
    Exercise Price
    
    
    (000's)
    
    
    Exercise PriceOutstanding, beginning of period
    
    
    3,426
    
    
    $
    24.77
    
    
    
    4,479
    
    
    $
    24.91
    
    
    
    5,014
    
    
    $
    24.63Granted
    
    
    
    
    
    
    
    
    
    
    268
    
    
    
    20.81
    
    
    
    164
    
    
    
    25.60Exercised
    
    
    (1,750
    )
    
    
    24.42
    
    
    
    (1,162
    )
    
    
    24.04
    
    
    
    (424
    )
    
    
    21.40Forfeited
    
    
    (40
    )
    
    
    28.12
    
    
    
    (159
    )
    
    
    27.37
    
    
    
    (275
    )
    
    
    25.68Outstanding at end of year
    
    
    1,636
    
    
    $
    25.06
    
    
    
    3,426
    
    
    $
    24.77
    
    
    
    4,479
    
    
    $
    24.91Exercisable at end of the period
    
    
    1,366
    
    
    $
    25.71
    
    
    
    2,952
    
    
    $
    25.03
    
    
    
    3,691
    
    
    $
    24.75Weighted-average fair value of
options granted
    
    $
    
    
    
    
    
    
    
    $
    0.49
    
    
    
    
    
    
    $
    1.66
 Exercise prices for options outstanding as of December 31, 2004 ranged from $19.13 to
$32.25. The weighted average remaining contractual life of those options is approximately 5 years. 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
our 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
(SFAS 123) requires use of option valuation models that were not developed for use in valuing
employee stock options and that do not necessarily provide a reliable single measure of the fair
value of our employee and director 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. Beginning on January 1, 2003, we adopted prospectively 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. There were no grants of stock
options in 2004. 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 2004 and 2003, we recognized
approximately $44,000 and $41,000, respectively, of stock option based employee compensation costs
for the stock options granted in 2003. Below we also present pro forma information regarding net income and earnings per share as if
we had expensed all of Arden Realtys stock options granted prior to 2003. 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: risk-free interest rate of 4.28%, dividend yield
of 7.80% and a volatility factor of the expected market price of our common stock of 0.190. The
weighted average expected life of the options is approximately 7 to 10 years. 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, 2004, 2003 and 2002 follows (in thousands, except earnings per share information): 2004
    
    
    2003
    
    
    2002Net income available to general and limited partners, as reported
    
    $
    75,482
    
    
    $
    61,682
    
    
    $
    73,351Stock based employee compensation costs for options granted
prior to 2003 assuming fair value method
    
    
    (201
    )
    
    
    (843
    )
    
    
    (1,477
    )Net income allocated to general and limited partners, as adjusted
    
    $
    75,281
    
    
    $
    60,839
    
    
    $
    71,874Earnings per share:Basic as reported
    
    $
    1.13
    
    
    $
    0.95
    
    
    $
    1.11Basic as adjusted
    
    $
    1.12
    
    
    $
    0.93
    
    
    $
    1.09Diluted as reported
    
    $
    1.12
    
    
    $
    0.94
    
    
    $
    1.11Diluted as adjusted
    
    $
    1.12
    
    
    $
    0.93
    
    
    $
    1.09
 12. Employee Retirement Savings Plan 401(k)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 $1.0 million in 2004, $0.9 million in 2003 and $0.8 million in 2002. Plan
participants are immediately vested in their contributions and are vested equally over four years
in matching contributions by us. F-17




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##### Table of Contents



Deferred Compensation Plan We also have a Deferred Compensation Plan, or the Plan. This plan provides certain key
employees, with supplemental deferred benefits in the form of retirement payments. During 2004 and 2003, we made contributions to the Plan totaling approximately $0.6 million
and $0.4 million, respectively. The contributions made by us on behalf of the Plan participants
vest 100% to the benefit of the Plan participants after seven years of service to us. A life
insurance policy has been purchased on the life of each Plan participant naming us as sole
beneficiary to provide a reimbursement to us for all or a portion of the contributions made under
the Plan including the cost of the use of our money. 13. Subsequent Events On January 5, 2005, we sold an approximate 167,000 square foot property located in San Diego
County for approximately $16.7 million. In conjunction with this sale we repaid a $7.2 million
mortgage loan outstanding on this property. This property was classified as held for disposition
in our balance sheet at December 31, 2004 and 2003. Also on this date, we acquired 707 Broadway, an
approximate 170,000 square foot, 96.6% leased office property located in San Diego County for
approximately $48.0 million. Approximately $2 million of the purchase price for 707 Broadway was
funded with the issuance of OP Units. On January 5, 2005, Andrew Sobel, Executive Vice President  Strategic Planning, announced his
resignation to pursue other business interests effective February 28, 2005. As part of his
separation, Mr. Sobel entered into a Confidential Resignation Agreement and General Release and a
Consulting Agreement with a term of 3 years. These agreements provide for the following:  
    Severance pay in an amount equal to 24 months base salary, plus an amount
equal to Mr. Sobels 2003 bonus and an amount equal to the value of 16,080 unvested
stock options for a total amount of $1,503,487;
    The payment of premiums for Mr. Sobel and his dependents health and
dental benefits coverage for no longer the duration of his Consulting Agreement;
    Monthly consulting fee of $25,000;
    The continued vesting over the term of the Consulting Agreement of 91,417
unvested restricted stock awards, which are held by Mr. Sobel pursuant to restricted
stock agreements with Arden Realty;
    An agreement by Mr. Sobel not to engage in any business activity, during
the term of the Consulting Agreement, that is the same or similar to Mr. Sobels work
for Arden Realty and that is within the same geographic territory and which is
directly competitive with the business conducted by Arden Realty at the time of Mr.
Sobels resignation; and
    Customary confidentiality, release of claims, non-disparagement,
non-solicitation, and indemnification provisions. Upon the termination of his employment, Mr. Sobel forfeited 13,329 unvested restricted stock
awards and 24,120 stock options (including the 16,080 for which he received payments as described
above). On February 18, 2005, we extended the maturity of our $125 million unsecured term loan with a
group of banks led by Wells Fargo Bank from June of 2006 to February of 2012. In
conjunction with this extension, we also entered into a series of interest rate swap
agreements to fix the interest rate through the extension period. Under these interest rate swap
agreements, the interest rate on this loan is fixed at 5.29% from June of 2006 through May of 2007,
5.55% from June of 2007 through November of 2008, 5.76% from December of 2008 through May of 2010
and 5.99% from June of 2010 through February of 2012. On February 28, 2005, we issued $300 million of senior unsecured notes due in March of 2015.
Including offering expenses and the settlement of forward-starting swaps discussed in footnote 2,
the all-in effective rate of these unsecured notes is approximately 5.5%. The proceeds from this
issuance were used to redeem the notes discussed below and to reduce the outstanding balance on our
Wells Fargo unsecured line of credit. On March 1, 2005, we redeemed all of its $200 million, 8.875% senior unsecured notes, maturing
March 1, 2005. The total paid for the redemption was 100% of the principal amount of $200 million,
plus interest accrued through March 1, 2005. F-18




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##### Table of Contents



14. Quarterly Results  unaudited Following is a quarterly summary of our revenue and expenses for the years ended December 31,
2004 and 2003. Revenue and expenses may fluctuate significantly from quarter to quarter due to our
development, renovation, acquisition and sales activity. For the Quarter Ended (in thousands, except per share amounts)March 31, 2004
    
    
    June 30, 2004
    
    
    September 30, 2004
    
    
    December 31, 2004Revenue
    
    $
    99,829
    
    
    $
    100,518
    
    
    $
    103,277
    
    
    $
    105,569Property operating expenses
    
    
    (32,465
    )
    
    
    (32,528
    )
    
    
    (34,657
    )
    
    
    (33,985
    )General and administrative
    
    
    (4,484
    )
    
    
    (4,665
    )
    
    
    (4,823
    )
    
    
    (5,531
    )Interest expense
    
    
    (23,147
    )
    
    
    (21,019
    )
    
    
    (21,352
    )
    
    
    (23,338
    )Depreciation and amortization
    
    
    (28,882
    )
    
    
    (30,481
    )
    
    
    (30,595
    )
    
    
    (31,729
    )Interest and other income
    
    
    766
    
    
    
    (436
    )
    
    
    (178
    )
    
    
    (660
    )Impairment on investment in securities
    
    
    
    
    
    
    (2,700
    )
    
    
    
    
    
    
    Minority interest
    
    
    (14
    )
    
    
    (47
    )
    
    
    (53
    )
    
    
    (72
    )Discontinued operations
    
    
    2,383
    
    
    
    1,347
    
    
    
    1,036
    
    
    
    2,434Gain on sale of discontinued properties
    
    
    6,429
    
    
    
    400
    
    
    
    937
    
    
    
    22,707Net Income
    
    $
    20,415
    
    
    $
    10,389
    
    
    $
    13,592
    
    
    $
    35,395Net income per common OP unit:Basic
    
    $
    0.29
    
    
    $
    0.14
    
    
    $
    0.17
    
    
    $
    0.53Diluted
    
    $
    0.29
    
    
    $
    0.14
    
    
    $
    0.17
    
    
    $
    0.52
 For the Quarter Ended (in thousands, except per share amounts)March 31, 2003
    
    
    June 30, 2003
    
    
    September 30, 2003
    
    
    December 31, 2003Revenue
    
    $
    96,022
    
    
    $
    97,361
    
    
    $
    100,136
    
    
    $
    100,246Property operating expenses
    
    
    (29,786
    )
    
    
    (31,077
    )
    
    
    (33,463
    )
    
    
    (31,653
    )General and administrative
    
    
    (3,204
    )
    
    
    (3,391
    )
    
    
    (4,012
    )
    
    
    (4,610
    )Interest expense
    
    
    (22,866
    )
    
    
    (23,085
    )
    
    
    (23,785
    )
    
    
    (23,357
    )Depreciation and amortization
    
    
    (26,973
    )
    
    
    (27,979
    )
    
    
    (28,998
    )
    
    
    (28,002
    )Interest and other income
    
    
    104
    
    
    
    149
    
    
    
    (171
    )
    
    
    (483
    )Minority interest
    
    
    (23
    )
    
    
    (33
    )
    
    
    (22
    )
    
    
    (25
    )Discontinued operations
    
    
    4,664
    
    
    
    3,083
    
    
    
    2,568
    
    
    
    2,722(Loss) Gain on sale of discontinued properties
    
    
    (639
    )
    
    
    6,021
    
    
    
    
    
    
    
    555Net Income
    
    $
    17,299
    
    
    $
    21,049
    
    
    $
    12,253
    
    
    $
    15,393Net income per common OP unit:Basic
    
    $
    0.25
    
    
    $
    0.31
    
    
    $
    0.17
    
    
    $
    0.22Diluted
    
    $
    0.25
    
    
    $
    0.31
    
    
    $
    0.17
    
    
    $
    0.22
 Note: Net income per common OP unit on a quarter by quarter basis may not sum to the year to date
net income per common OP unit due to rounding. F-19




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##### Table of Contents



15. Schedule of Commercial Properties and Accumulated Depreciation
December 31, 2004
(in thousands, except square foot data) Initial Costs
    
    
    
    
    
    
    Basis Step Up
    
    
    
    
    
    
    Total CostsCosts CapitalizedSquare
    
    
    
    
    
    
    Buildings and
    
    
    
    
    
    
    Buildings and
    
    
    Subsequent to
    
    
    
    
    
    
    Buildings and
    
    
    
    
    
    
    Accumulated
    
    
    
    
    
    
    Year Built/Footage
    
    
    Land
    
    
    Improvements
    
    
    Land
    
    
    Improvements
    
    
    Acquisition(2)
    
    
    Land
    
    
    Improvements
    
    
    Total
    
    
    Depreciation(1)
    
    
    Encumbrances
    
    
    RenovatedCentury Park Center
    
    
    235,178
    
    
    $
    7,190
    
    
    $
    17,262
    
    
    $
    
    
    
    $
    
    
    
    $
    12,292
    
    
    $
    7,190
    
    
    $
    29,554
    
    
    $
    36,744
    
    
    $
    8,549
    
    
    $
    
    
    
    1972/94Beverly Atrium
    
    
    59,582
    
    
    
    4,127
    
    
    
    11,524
    
    
    
    118
    
    
    
    326
    
    
    
    2,951
    
    
    
    4,245
    
    
    
    14,801
    
    
    
    19,046
    
    
    
    4,290
    
    
    
    
    
    
    1989Woodland Hills
    
    
    229,616
    
    
    
    6,566
    
    
    
    14,765
    
    
    
    365
    
    
    
    880
    
    
    
    7,992
    
    
    
    6,931
    
    
    
    23,637
    
    
    
    30,568
    
    
    
    7,853
    
    
    
    
    
    
    1972/95Anaheim City Centre
    
    
    177,266
    
    
    
    515
    
    
    
    11,208
    
    
    
    94
    
    
    
    2,075
    
    
    
    4,480
    
    
    
    609
    
    
    
    17,763
    
    
    
    18,372
    
    
    
    5,112
    
    
    
    
    
    
    1986/91425 West Broadway
    
    
    72,317
    
    
    
    1,500
    
    
    
    4,462
    
    
    
    305
    
    
    
    918
    
    
    
    2,201
    
    
    
    1,805
    
    
    
    7,581
    
    
    
    9,386
    
    
    
    2,164
    
    
    
    
    
    
    19841950 Sawtelle
    
    
    104,171
    
    
    
    1,988
    
    
    
    7,268
    
    
    
    
    
    
    
    
    
    
    
    2,761
    
    
    
    1,988
    
    
    
    10,029
    
    
    
    12,017
    
    
    
    2,655
    
    
    
    6,671
    (3)
    
    1988/95Bristol Plaza
    
    
    84,033
    
    
    
    1,820
    
    
    
    3,381
    
    
    
    257
    
    
    
    485
    
    
    
    1,957
    
    
    
    2,077
    
    
    
    5,823
    
    
    
    7,900
    
    
    
    1,763
    
    
    
    
    
    
    198216000 Ventura
    
    
    175,275
    
    
    
    1,700
    
    
    
    17,145
    
    
    
    185
    
    
    
    1,929
    
    
    
    4,974
    
    
    
    1,885
    
    
    
    24,048
    
    
    
    25,933
    
    
    
    6,573
    
    
    
    11,319
    (3)
    
    1980/965000 East Spring
    
    
    168,967
    
    
    
    
    
    
    
    10,903
    
    
    
    
    
    
    
    424
    
    
    
    6,151
    
    
    
    
    
    
    
    17,478
    
    
    
    17,478
    
    
    
    5,133
    
    
    
    
    
    
    1989/9570 South Lake
    
    
    101,236
    
    
    
    1,360
    
    
    
    9,086
    
    
    
    
    
    
    
    
    
    
    
    3,066
    
    
    
    1,360
    
    
    
    12,152
    
    
    
    13,512
    
    
    
    3,623
    
    
    
    
    
    
    1982/94Westwood Terrace
    

    
    136,707
    
    
    
    2,103
    
    
    
    16,888
    
    
    
    
    
    
    
    
    
    
    
    4,073
    
    
    
    2,103
    
    
    
    20,961
    
    
    
    23,064
    
    
    
    5,485
    
    
    
    
    
    
    1988Westlake  5601 Lindero
    
    
    106,144
    
    
    
    2,576
    
    
    
    7,747
    
    
    
    
    
    
    
    
    
    
    
    4,148
    
    
    
    2,576
    
    
    
    11,895
    
    
    
    14,471
    
    
    
    3,714
    
    
    
    
    
    
    19896100 Wilshire
    
    
    202,675
    
    
    
    1,200
    
    
    
    19,886
    
    
    
    
    
    
    
    
    
    
    
    6,702
    
    
    
    1,200
    
    
    
    26,588
    
    
    
    27,788
    
    
    
    7,471
    
    
    
    
    
    
    1986Calabasas Commerce Center
    
    
    126,771
    
    
    
    1,262
    
    
    
    9,721
    
    
    
    
    
    
    
    
    
    
    
    3,000
    
    
    
    1,262
    
    
    
    12,721
    
    
    
    13,983
    
    
    
    3,297
    
    
    
    7,878
    (3)
    
    1990Long Beach AirportDF&G
    
    
    272,013
    
    
    
    
    
    
    
    14,457
    
    
    
    
    
    
    
    
    
    
    
    1,549
    
    
    
    
    
    
    
    16,006
    
    
    
    16,006
    
    
    
    3,487
    
    
    
    
    
    
    1987/95Skyview Center
    
    
    398,261
    
    
    
    6,514
    
    
    
    33,696
    
    
    
    
    
    
    
    
    
    
    
    9,232
    
    
    
    6,514
    
    
    
    42,928
    
    
    
    49,442
    
    
    
    10,830
    
    
    
    
    
    
    1981/87/95400 Corporate Pointe
    
    
    165,487
    
    
    
    3,383
    
    
    
    17,779
    
    
    
    74
    
    
    
    391
    
    
    
    6,494
    
    
    
    3,457
    
    
    
    24,664
    
    
    
    28,121
    
    
    
    6,041
    
    
    
    
    
    
    19875832 Bolsa
    
    
    49,355
    
    
    
    690
    
    
    
    3,611
    
    
    
    15
    
    
    
    80
    
    
    
    1,541
    
    
    
    705
    
    
    
    5,232
    
    
    
    5,937
    
    
    
    1,936
    
    
    
    
    
    
    19859665 Wilshire
    
    
    159,645
    
    
    
    6,697
    
    
    
    22,574
    
    
    
    139
    
    
    
    473
    
    
    
    10,396
    
    
    
    6,836
    
    
    
    33,443
    
    
    
    40,279
    
    
    
    8,666
    
    
    
    
    
    
    1972/92/93701 B Street
    
    
    548,310
    
    
    
    3,722
    
    
    
    35,662
    
    
    
    64
    
    
    
    626
    
    
    
    16,123
    
    
    
    3,786
    
    
    
    52,411
    
    
    
    56,197
    
    
    
    13,553
    
    
    
    
    
    
    1982/96100 West Broadway
    
    
    191,371
    
    
    
    4,570
    
    
    
    15,276
    
    
    
    
    
    
    
    
    
    
    
    4,393
    
    
    
    4,570
    
    
    
    19,669
    
    
    
    24,239
    
    
    
    4,507
    
    
    
    
    
    
    1987/96303 Glenoaks
    
    
    177,898
    
    
    
    6,500
    
    
    
    18,132
    
    
    
    
    
    
    
    
    
    
    
    6,617
    
    
    
    6,500
    
    
    
    24,749
    
    
    
    31,249
    
    
    
    5,706
    
    
    
    
    
    
    1983/9610351 Santa Monica
    
    
    96,899
    
    
    
    3,080
    
    
    
    8,014
    
    
    
    
    
    
    
    
    
    
    
    1,961
    
    
    
    3,080
    
    
    
    9,975
    
    
    
    13,055
    
    
    
    2,330
    
    
    
    5,388
    (3)
    
    19842730 Wilshire
    
    
    55,531
    
    
    
    3,515
    
    
    
    4,413
    
    
    
    
    
    
    
    
    
    
    
    1,651
    
    
    
    3,515
    
    
    
    6,064
    
    
    
    9,579
    
    
    
    1,636
    
    
    
    4,478
    (3)
    
    1985Grand Avenue Plaza
    
    
    82,872
    
    
    
    620
    
    
    
    2,909
    
    
    
    
    
    
    
    
    
    
    
    4,132
    
    
    
    620
    
    
    
    7,041
    
    
    
    7,661
    
    
    
    1,428
    
    
    
    5,675
    (3)
    
    1980/98Burbank Executive Plaza
    
    
    63,320
    
    
    
    1,100
    
    
    
    4,418
    
    
    
    
    
    
    
    
    
    
    
    2,511
    
    
    
    1,100
    
    
    
    6,929
    
    
    
    8,029
    
    
    
    2,026
    
    
    
    
    
    
    1987/83333 N. Glenoaks
    
    
    82,939
    
    
    
    1,500
    
    
    
    5,976
    
    
    
    
    
    
    
    
    
    
    
    3,309
    
    
    
    1,500
    
    
    
    9,285
    
    
    
    10,785
    
    
    
    2,413
    
    
    
    
    
    
    1978/83Center Promenade
    
    
    177,072
    
    
    
    2,310
    
    
    
    9,296
    
    
    
    
    
    
    
    
    
    
    
    3,433
    
    
    
    2,310
    
    
    
    12,729
    
    
    
    15,039
    
    
    
    2,992
    
    
    
    
    
    
    1982Los Angeles Corporate
Center
    
    
    389,615
    
    
    
    26,781
    
    
    
    15,165
    
    
    
    
    
    
    
    
    
    
    
    9,677
    
    
    
    26,781
    
    
    
    24,842
    
    
    
    51,623
    
    
    
    6,990
    
    
    
    
    
    
    19865200 West Century
    
    
    312,700
    
    
    
    2,080
    
    
    
    9,510
    
    
    
    
    
    
    
    
    
    
    
    15,728
    
    
    
    2,080
    
    
    
    25,238
    
    
    
    27,318
    
    
    
    4,907
    
    
    
    
    
    
    1982/98/9915250 Ventura
    
    
    112,142
    
    
    
    2,560
    
    
    
    10,313
    
    
    
    
    
    
    
    
    
    
    
    3,800
    
    
    
    2,560
    
    
    
    14,113
    
    
    
    16,673
    
    
    
    3,430
    
    
    
    
    
    
    1970/90-9110350 Santa Monica
    
    
    42,696
    
    
    
    860
    
    
    
    3,458
    
    
    
    
    
    
    
    
    
    
    
    855
    
    
    
    860
    
    
    
    4,313
    
    
    
    5,173
    
    
    
    971
    
    
    
    
    
    
    1979535 N. Brand Blvd.
    
    
    109,104
    
    
    
    1,600
    
    
    
    8,427
    
    
    
    
    
    
    
    
    
    
    
    11,739
    
    
    
    1,600
    
    
    
    20,166
    
    
    
    21,766
    
    
    
    2,951
    
    
    
    
    
    
    1973/92/9910780 Santa Monica
    
    
    93,211
    
    
    
    2,625
    
    
    
    7,531
    
    
    
    
    
    
    
    
    
    
    
    2,880
    
    
    
    2,625
    
    
    
    10,411
    
    
    
    13,036
    
    
    
    2,668
    
    
    
    
    
    
    19844900 California
    
    
    155,791
    
    
    
    4,680
    
    
    
    14,133
    
    
    
    
    
    
    
    
    
    
    
    3,756
    
    
    
    4,680
    
    
    
    17,889
    
    
    
    22,569
    
    
    
    4,122
    
    
    
    
    
    
    1983
 F-20




---



##### Table of Contents



Initial Costs
    
    
    Basis Step Up
    
    
    
    
    
    
    Total CostsCosts CapitalizedSquare
    
    
    
    
    
    
    Buildings and
    
    
    
    
    
    
    Buildings and
    
    
    Subsequent to
    
    
    
    
    
    
    Buildings and
    
    
    
    
    
    
    Accumulated
    
    
    
    
    
    
    Year Built/Footage
    
    
    Land
    
    
    Improvements
    
    
    Land
    
    
    Improvements
    
    
    Acquisition(2)
    
    
    Land
    
    
    Improvements
    
    
    Total
    
    
    Depreciation(1)
    
    
    Encumbrances
    
    
    RenovatedClarendon Crest
    
    
    43,222
    
    
    
    1,300
    
    
    
    3,741
    
    
    
    
    
    
    
    
    
    
    
    1,529
    
    
    
    1,300
    
    
    
    5,270
    
    
    
    6,570
    
    
    
    1,279
    
    
    
    3,106
    (3)
    
    1990Noble Professional Center
    
    
    52,599
    
    
    
    1,657
    
    
    
    4,817
    
    
    
    
    
    
    
    
    
    
    
    1,344
    
    
    
    1,657
    
    
    
    6,161
    
    
    
    7,818
    
    
    
    1,479
    
    
    
    3,481
    (3)
    
    1985/93South Bay Centre
    
    
    204,197
    
    
    
    4,775
    
    
    
    13,646
    
    
    
    
    
    
    
    
    
    
    
    5,716
    
    
    
    4,775
    
    
    
    19,362
    
    
    
    24,137
    
    
    
    4,654
    
    
    
    12,420
    (3)
    
    19848383 Wilshire
    
    
    424,588
    
    
    
    13,570
    
    
    
    43,213
    
    
    
    
    
    
    
    
    
    
    
    14,756
    
    
    
    13,570
    
    
    
    57,969
    
    
    
    71,539
    
    
    
    13,573
    
    
    
    
    
    
    1971/93Parkway Center I
    
    
    61,289
    
    
    
    1,480
    
    
    
    5,651
    
    
    
    
    
    
    
    
    
    
    
    1,053
    
    
    
    1,480
    
    
    
    6,704
    
    
    
    8,184
    
    
    
    1,563
    
    
    
    
    
    
    1992/95Centerpointe La Palma
    
    
    603,582
    
    
    
    16,011
    
    
    
    60,874
    
    
    
    
    
    
    
    
    
    
    
    13,223
    
    
    
    16,011
    
    
    
    74,097
    
    
    
    90,108
    
    
    
    16,782
    
    
    
    32,918
    (3)
    
    1986/88/90299 N. Euclid
    
    
    74,573
    
    
    
    1,050
    
    
    
    5,738
    
    
    
    
    
    
    
    
    
    
    
    5,700
    
    
    
    1,050
    
    
    
    11,438
    
    
    
    12,488
    
    
    
    2,790
    
    
    
    
    
    
    1983/992800 28th Street
    
    
    106,481
    
    
    
    2,938
    
    
    
    8,425
    
    
    
    
    
    
    
    
    
    
    
    4,054
    
    
    
    2,938
    
    
    
    12,479
    
    
    
    15,417
    
    
    
    2,919
    
    
    
    
    
    
    19791000 Town Center
    
    
    108,508
    
    
    
    2,800
    
    
    
    10,638
    
    
    
    
    
    
    
    
    
    
    
    2,029
    
    
    
    2,800
    
    
    
    12,667
    
    
    
    15,467
    
    
    
    2,793
    
    
    
    
    
    
    1989Mariner Court
    
    
    105,436
    
    
    
    2,350
    
    
    
    9,176
    
    
    
    
    
    
    
    
    
    
    
    1,781
    
    
    
    2,350
    
    
    
    10,957
    
    
    
    13,307
    
    
    
    2,571
    
    
    
    6,660
    (3)
    
    1989Pacific Gateway
    
    
    225,805
    
    
    
    6,288
    
    
    
    18,417
    
    
    
    
    
    
    
    
    
    
    
    6,818
    
    
    
    6,288
    
    
    
    25,235
    
    
    
    31,523
    
    
    
    6,832
    
    
    
    
    
    
    1982/90Irvine Corporate Center
    
    
    126,781
    
    
    
    1,808
    
    
    
    5,295
    
    
    
    
    
    
    
    
    
    
    
    4,559
    
    
    
    1,808
    
    
    
    9,854
    
    
    
    11,662
    
    
    
    1,849
    
    
    
    
    
    
    1980/88/99Crown Cabot Financial
    
    
    174,222
    
    
    
    7,056
    
    
    
    20,667
    
    
    
    
    
    
    
    
    
    
    
    9,352
    
    
    
    7,056
    
    
    
    30,019
    
    
    
    37,075
    
    
    
    7,064
    
    
    
    
    
    
    1989120 S. Spalding
    
    
    64,877
    
    
    
    2,775
    
    
    
    8,287
    
    
    
    
    
    
    
    
    
    
    
    4,863
    
    
    
    2,775
    
    
    
    13,150
    
    
    
    15,925
    
    
    
    3,189
    
    
    
    7,943
    (3)
    
    19841370 Valley Vista
    
    
    81,962
    
    
    
    2,698
    
    
    
    7,900
    
    
    
    
    
    
    
    
    
    
    
    1,643
    
    
    
    2,698
    
    
    
    9,543
    
    
    
    12,241
    
    
    
    2,179
    
    
    
    5,378
    (3)
    
    1988Foremost Professional
Plaza
    
    
    60,311
    
    
    
    2,049
    
    
    
    6,001
    
    
    
    
    
    
    
    
    
    
    
    1,090
    
    
    
    2,049
    
    
    
    7,091
    
    
    
    9,140
    
    
    
    1,579
    
    
    
    8,664
    
    
    1992Northpoint
    
    
    105,145
    
    
    
    1,800
    
    
    
    19,022
    
    
    
    
    
    
    
    
    
    
    
    3,790
    
    
    
    1,800
    
    
    
    22,812
    
    
    
    24,612
    
    
    
    4,498
    
    
    
    
    
    
    1991Conejo Business Center
    
    
    69,425
    
    
    
    2,489
    
    
    
    6,960
    
    
    
    
    
    
    
    
    
    
    
    1,740
    
    
    
    2,489
    
    
    
    8,700
    
    
    
    11,189
    
    
    
    1,677
    
    
    
    3,617
    
    
    1991Marin Corporate Center
    
    
    51,776
    
    
    
    1,956
    
    
    
    5,589
    
    
    
    
    
    
    
    
    
    
    
    1,108
    
    
    
    1,956
    
    
    
    6,697
    
    
    
    8,653
    
    
    
    1,089
    
    
    
    2,585
    
    
    1986145 South Fairfax
    
    
    54,398
    
    
    
    1,825
    
    
    
    5,325
    
    
    
    
    
    
    
    
    
    
    
    2,473
    
    
    
    1,825
    
    
    
    7,798
    
    
    
    9,623
    
    
    
    1,513
    
    
    
    3,869
    
    
    1984Bernardo Regency
    
    
    48,052
    
    
    
    1,625
    
    
    
    4,764
    
    
    
    
    
    
    
    
    
    
    
    1,722
    
    
    
    1,625
    
    
    
    6,486
    
    
    
    8,111
    
    
    
    1,465
    
    
    
    
    
    
    1986Fountain Valley City
Centre
    
    
    303,267
    
    
    
    8,250
    
    
    
    23,513
    
    
    
    
    
    
    
    
    
    
    
    5,941
    
    
    
    8,250
    
    
    
    29,454
    
    
    
    37,704
    
    
    
    6,305
    
    
    
    
    
    
    1982Wilshire Pacific Plaza
    
    
    101,229
    
    
    
    3,750
    
    
    
    10,996
    
    
    
    
    
    
    
    
    
    
    
    4,052
    
    
    
    3,750
    
    
    
    15,048
    
    
    
    18,798
    
    
    
    3,520
    
    
    
    
    
    
    1976/87World Savings Center
    
    
    473,581
    
    
    
    
    
    
    
    106,259
    
    
    
    
    
    
    
    
    
    
    
    27,569
    
    
    
    
    
    
    
    133,828
    
    
    
    133,828
    
    
    
    26,957
    
    
    
    
    
    
    1983Sunset Point Plaza
    
    
    59,186
    
    
    
    2,075
    
    
    
    6,077
    
    
    
    
    
    
    
    
    
    
    
    1,360
    
    
    
    2,075
    
    
    
    7,437
    
    
    
    9,512
    
    
    
    1,525
    
    
    
    3,359
    (3)
    
    1988Activity Business Center
    
    
    167,170
    
    
    
    3,650
    
    
    
    10,690
    
    
    
    
    
    
    
    
    
    
    
    2,581
    
    
    
    3,650
    
    
    
    13,271
    
    
    
    16,921
    
    
    
    2,634
    
    
    
    7,222
    
    
    1987Westlake Gardens
    
    
    50,267
    
    
    
    1,831
    
    
    
    5,405
    
    
    
    
    
    
    
    
    
    
    
    2,311
    
    
    
    1,831
    
    
    
    7,716
    
    
    
    9,547
    
    
    
    2,226
    
    
    
    
    
    
    19989100 Wilshire
    
    
    328,697
    
    
    
    16,250
    
    
    
    47,593
    
    
    
    
    
    
    
    
    
    
    
    10,957
    
    
    
    16,250
    
    
    
    58,550
    
    
    
    74,800
    
    
    
    13,075
    
    
    
    
    
    
    1971/90Westwood Center
    
    
    314,366
    
    
    
    3,159
    
    
    
    24,374
    
    
    
    
    
    
    
    
    
    
    
    85,669
    
    
    
    3,159
    
    
    
    110,043
    
    
    
    113,202
    
    
    
    13,432
    
    
    
    
    
    
    1965/20001919 Santa Monica
    
    
    43,766
    
    
    
    2,580
    
    
    
    7,623
    
    
    
    
    
    
    
    
    
    
    
    1,296
    
    
    
    2,580
    
    
    
    8,919
    
    
    
    11,499
    
    
    
    1,697
    
    
    
    3,620
    (3)
    
    1991600 Corporate Pointe
    
    
    275,113
    
    
    
    8,575
    
    
    
    34,632
    
    
    
    
    
    
    
    
    
    
    
    8,273
    
    
    
    8,575
    
    
    
    42,905
    
    
    
    51,480
    
    
    
    8,556
    
    
    
    17,214
    (3)
    
    1989150 East Colorado
Boulevard
    
    
    61,657
    
    
    
    1,988
    
    
    
    5,880
    
    
    
    
    
    
    
    
    
    
    
    2,588
    
    
    
    1,988
    
    
    
    8,468
    
    
    
    10,456
    
    
    
    1,860
    
    
    
    4,635
    (3)
    
    1979/975161 Lankershim
    
    
    180,940
    
    
    
    5,016
    
    
    
    24,908
    
    
    
    
    
    
    
    
    
    
    
    4,723
    
    
    
    5,016
    
    
    
    29,631
    
    
    
    34,647
    
    
    
    6,136
    
    
    
    13,196
    (3)
    
    1985/97
 F-21




---



##### Table of Contents



Initial Costs
    
    
    Basis Step Up
    
    
    
    
    
    
    Total CostsCosts CapitalizedSquare
    
    
    
    
    
    
    Buildings and
    
    
    
    
    
    
    Buildings and
    
    
    Subsequent to
    
    
    
    
    
    
    Buildings and
    
    
    
    
    
    
    Accumulated
    
    
    
    
    
    
    Year Built/Footage
    
    
    Land
    
    
    Improvements
    
    
    Land
    
    
    Improvements
    
    
    Acquisition(2)
    
    
    Land
    
    
    Improvements
    
    
    Total
    
    
    Depreciation(1)
    
    
    Encumbrances
    
    
    RenovatedHuntington Beach Plaza
    
    
    53,459
    
    
    
    1,109
    
    
    
    3,284
    
    
    
    
    
    
    
    
    
    
    
    1,335
    
    
    
    1,109
    
    
    
    4,619
    
    
    
    5,728
    
    
    
    1,068
    
    
    
    1,468
    (3)
    
    1984/96Fountain Valley Plaza
    
    
    107,313
    
    
    
    2,949
    
    
    
    8,728
    
    
    
    
    
    
    
    
    
    
    
    3,282
    
    
    
    2,949
    
    
    
    12,010
    
    
    
    14,959
    
    
    
    2,302
    
    
    
    4,699
    (3)
    
    1982Newport Irvine Center
    
    
    75,184
    
    
    
    2,215
    
    
    
    6,554
    
    
    
    
    
    
    
    
    
    
    
    1,784
    
    
    
    2,215
    
    
    
    8,338
    
    
    
    10,553
    
    
    
    1,895
    
    
    
    3,154
    (3)
    
    1981/97Von Karman Corporate Center
    
    
    452,378
    
    
    
    11,513
    
    
    
    34,077
    
    
    
    
    
    
    
    
    
    
    
    11,792
    
    
    
    11,513
    
    
    
    45,869
    
    
    
    57,382
    
    
    
    10,219
    
    
    
    18,592
    (3)
    
    1981/84South Coast Executive
Center
    
    
    61,292
    
    
    
    1,563
    
    
    
    4,526
    
    
    
    
    
    
    
    
    
    
    
    1,369
    
    
    
    1,563
    
    
    
    5,895
    
    
    
    7,458
    
    
    
    1,281
    
    
    
    2,199
    (3)
    
    1979/97City Centre I
    
    
    141,903
    
    
    
    4,792
    
    
    
    14,172
    
    
    
    
    
    
    
    
    
    
    
    3,724
    
    
    
    4,792
    
    
    
    17,896
    
    
    
    22,688
    
    
    
    3,491
    
    
    
    6,859
    (3)
    
    1985/97Orange Financial Center
    
    
    307,920
    
    
    
    10,379
    
    
    
    34,714
    
    
    
    
    
    
    
    
    
    
    
    9,792
    
    
    
    10,379
    
    
    
    44,506
    
    
    
    54,885
    
    
    
    9,325
    
    
    
    17,679
    (3)
    
    1985/95Carlsbad Corporate Center
    
    
    129,000
    
    
    
    3,722
    
    
    
    12,104
    
    
    
    
    
    
    
    
    
    
    
    8,882
    
    
    
    3,722
    
    
    
    20,986
    
    
    
    24,708
    
    
    
    3,836
    
    
    
    9,068
    (3)
    
    1996Balboa Corporate Center
    
    
    70,987
    
    
    
    2,759
    
    
    
    7,884
    
    
    
    
    
    
    
    
    
    
    
    1,209
    
    
    
    2,759
    
    
    
    9,093
    
    
    
    11,852
    
    
    
    1,501
    
    
    
    5,580
    (3)
    
    1990Panorama Corporate Center
    
    
    130,396
    
    
    
    6,512
    
    
    
    19,249
    
    
    
    
    
    
    
    
    
    
    
    4,408
    
    
    
    6,512
    
    
    
    23,657
    
    
    
    30,169
    
    
    
    4,312
    
    
    
    12,544
    (3)
    
    1991Ruffin Corporate Center
    
    
    45,059
    
    
    
    1,766
    
    
    
    5,222
    
    
    
    
    
    
    
    
    
    
    
    71
    
    
    
    1,766
    
    
    
    5,293
    
    
    
    7,059
    
    
    
    939
    
    
    
    3,330
    (3)
    
    1990Skypark Office Plaza
    
    
    203,946
    
    
    
    5,733
    
    
    
    21,047
    
    
    
    
    
    
    
    
    
    
    
    7,322
    
    
    
    5,733
    
    
    
    28,369
    
    
    
    34,102
    
    
    
    5,719
    
    
    
    
    
    
    1986Governor Park Plaza
    
    
    104,441
    
    
    
    3,382
    
    
    
    10,005
    
    
    
    
    
    
    
    
    
    
    
    3,299
    
    
    
    3,382
    
    
    
    13,304
    
    
    
    16,686
    
    
    
    3,265
    
    
    
    4,890
    (3)
    
    19865120 Shoreham
    
    
    37,813
    
    
    
    1,224
    
    
    
    3,621
    
    
    
    
    
    
    
    
    
    
    
    1,283
    
    
    
    1,224
    
    
    
    4,904
    
    
    
    6,128
    
    
    
    1,430
    
    
    
    2,903
    (3)
    
    1984Torreyana Science Park
    
    
    81,204
    
    
    
    5,035
    
    
    
    14,878
    
    
    
    
    
    
    
    
    
    
    
    648
    
    
    
    5,035
    
    
    
    15,526
    
    
    
    20,561
    
    
    
    2,845
    
    
    
    9,236
    (3)
    
    1980/97Camarillo Business Park
    
    
    154,298
    
    
    
    3,522
    
    
    
    10,427
    
    
    
    
    
    
    
    
    
    
    
    3,680
    
    
    
    3,522
    
    
    
    14,107
    
    
    
    17,629
    
    
    
    3,305
    
    
    
    8,100
    (3)
    
    1984/975702 Bolsa
    
    
    27,731
    
    
    
    589
    
    
    
    1,745
    
    
    
    
    
    
    
    
    
    
    
    178
    
    
    
    589
    
    
    
    1,923
    
    
    
    2,512
    
    
    
    382
    
    
    
    915
    (3)
    
    1987/975672 Bolsa
    
    
    12,110
    
    
    
    254
    
    
    
    753
    
    
    
    
    
    
    
    
    
    
    
    65
    
    
    
    254
    
    
    
    818
    
    
    
    1,072
    
    
    
    159
    
    
    
    321
    (3)
    
    19875632 Bolsa
    
    
    21,568
    
    
    
    458
    
    
    
    1,358
    
    
    
    
    
    
    
    
    
    
    
    92
    
    
    
    458
    
    
    
    1,450
    
    
    
    1,908
    
    
    
    275
    
    
    
    822
    (3)
    
    1987Huntington Commerce Center
    
    
    69,749
    
    
    
    992
    
    
    
    2,941
    
    
    
    
    
    
    
    
    
    
    
    578
    
    
    
    992
    
    
    
    3,519
    
    
    
    4,511
    
    
    
    777
    
    
    
    1,513
    (3)
    
    1987Savi Tech Center
    
    
    242,327
    
    
    
    5,876
    
    
    
    17,396
    
    
    
    
    
    
    
    
    
    
    
    3,390
    
    
    
    5,876
    
    
    
    20,786
    
    
    
    26,662
    
    
    
    4,630
    
    
    
    14,320
    (3)
    
    1989Yorba Linda Business Park
    
    
    165,710
    
    
    
    2,629
    
    
    
    7,796
    
    
    
    
    
    
    
    
    
    
    
    1,230
    
    
    
    2,629
    
    
    
    9,026
    
    
    
    11,655
    
    
    
    1,904
    
    
    
    4,057
    (3)
    
    1988Cymer Technology Center
    
    
    155,612
    
    
    
    5,446
    
    
    
    16,109
    
    
    
    
    
    
    
    
    
    
    
    2,819
    
    
    
    5,446
    
    
    
    18,928
    
    
    
    24,374
    
    
    
    3,324
    
    
    
    10,615
    (3)
    
    1986Poway Industrial
    
    
    112,000
    
    
    
    1,876
    
    
    
    5,561
    
    
    
    
    
    
    
    
    
    
    
    305
    
    
    
    1,876
    
    
    
    5,866
    
    
    
    7,742
    
    
    
    1,091
    
    
    
    3,397
    (3)
    
    1991/9610180 Scripps Ranch
    
    
    43,560
    
    
    
    1,165
    
    
    
    3,448
    
    
    
    
    
    
    
    
    
    
    
    298
    
    
    
    1,165
    
    
    
    3,746
    
    
    
    4,911
    
    
    
    688
    
    
    
    1,941
    (3)
    
    1978/96Via Frontera
    
    
    77,920
    
    
    
    1,792
    
    
    
    5,306
    
    
    
    
    
    
    
    
    
    
    
    1,024
    
    
    
    1,792
    
    
    
    6,330
    
    
    
    8,122
    
    
    
    1,495
    
    
    
    2,797
    (3)
    
    1982/97Westridge
    
    
    48,955
    
    
    
    1,807
    
    
    
    5,345
    
    
    
    
    
    
    
    
    
    
    
    616
    
    
    
    1,807
    
    
    
    5,961
    
    
    
    7,768
    
    
    
    1,204
    
    
    
    2,890
    (3)
    
    1984/96
 F-22




---



##### Table of Contents



Initial Costs
    
    
    Basis Step Up
    
    
    
    
    
    
    Total CostCosts CapitalizedSquare
    
    
    
    
    
    
    Buildings and
    
    
    
    
    
    
    Buildings and
    
    
    Subsequent to
    
    
    
    
    
    
    Buildings and
    
    
    
    
    
    
    Accumulated
    
    
    
    
    
    
    Year Built/Footage
    
    
    Land
    
    
    Improvements
    
    
    Land
    
    
    Improvements
    
    
    Acquisition(2)
    
    
    Land
    
    
    Improvements
    
    
    Total
    
    
    Depreciation(1)
    
    
    Encumbrances
    
    
    Renovated6060 Center Drive
    
    
    256,665
    
    
    
    4,299
    
    
    
    48,701
    
    
    
    
    
    
    
    
    
    
    
    12,046
    
    
    
    4,299
    
    
    
    60,747
    
    
    
    65,046
    
    
    
    7,118
    
    
    
    
    
    
    2000Howard Hughes  Spectrum
Club
    
    
    36,959
    
    
    
    2,500
    
    
    
    7,500
    
    
    
    
    
    
    
    
    
    
    
    37
    
    
    
    2,500
    
    
    
    7,537
    
    
    
    10,037
    
    
    
    1,271
    
    
    
    
    
    
    19936080 Center Drive
    
    
    286,568
    
    
    
    5,082
    
    
    
    49,853
    
    
    
    
    
    
    
    
    
    
    
    23,702
    
    
    
    5,082
    
    
    
    73,555
    
    
    
    78,637
    
    
    
    7,209
    
    
    
    
    
    
    20016100 Center Drive
    
    
    284,798
    
    
    
    2,513
    
    
    
    57,079
    
    
    
    
    
    
    
    
    
    
    
    24,174
    
    
    
    2,513
    
    
    
    81,253
    
    
    
    83,766
    
    
    
    3,390
    
    
    
    
    
    
    200211075 Santa Monica
    
    
    35,996
    
    
    
    1,225
    
    
    
    3,588
    
    
    
    
    
    
    
    
    
    
    
    1,407
    
    
    
    1,225
    
    
    
    4,995
    
    
    
    6,220
    
    
    
    1,196
    
    
    
    
    
    
    1983Continental Grand Plaza
    
    
    237,494
    
    
    
    7,125
    
    
    
    39,416
    
    
    
    
    
    
    
    
    
    
    
    9,252
    
    
    
    7,125
    
    
    
    48,668
    
    
    
    55,793
    
    
    
    9,634
    
    
    
    26,011
    (3)
    
    1986Calabasas Tech
    
    
    283,692
    
    
    
    11,513
    
    
    
    32,696
    
    
    
    
    
    
    
    
    
    
    
    8,501
    
    
    
    11,513
    
    
    
    41,197
    
    
    
    52,710
    
    
    
    8,745
    
    
    
    
    
    
    1990/2001Oceangate Tower
    
    
    218,554
    
    
    
    3,080
    
    
    
    19,838
    
    
    
    
    
    
    
    
    
    
    
    4,290
    
    
    
    3,080
    
    
    
    24,128
    
    
    
    27,208
    
    
    
    4,603
    
    
    
    
    
    
    1971/93/94Genesee Executive Plaza
    
    
    155,014
    
    
    
    6,750
    
    
    
    19,691
    
    
    
    
    
    
    
    
    
    
    
    5,651
    
    
    
    6,750
    
    
    
    25,342
    
    
    
    32,092
    
    
    
    5,295
    
    
    
    15,908
    (3)
    
    1984Solar Drive Business Center
    
    
    138,341
    
    
    
    4,250
    
    
    
    12,447
    
    
    
    
    
    
    
    
    
    
    
    2,093
    
    
    
    4,250
    
    
    
    14,540
    
    
    
    18,790
    
    
    
    2,680
    
    
    
    
    
    
    1982601 S. Glenoaks
    
    
    74,745
    
    
    
    2,450
    
    
    
    7,132
    
    
    
    
    
    
    
    
    
    
    
    1,712
    
    
    
    2,450
    
    
    
    8,844
    
    
    
    11,294
    
    
    
    1,574
    
    
    
    5,535
    (3)
    
    1990Tourney Pointe
    
    
    219,673
    
    
    
    6,047
    
    
    
    20,312
    
    
    
    
    
    
    
    
    
    
    
    12,880
    
    
    
    6,047
    
    
    
    33,192
    
    
    
    39,239
    
    
    
    6,592
    
    
    
    
    
    
    1985/98/2000Hillside Corporate Center
    
    
    61,000
    
    
    
    2,213
    
    
    
    7,336
    
    
    
    
    
    
    
    
    
    
    
    2,285
    
    
    
    2,213
    
    
    
    9,621
    
    
    
    11,834
    
    
    
    1,792
    
    
    
    
    
    
    1998Westlake Gardens II
    
    
    48,874
    
    
    
    1,831
    
    
    
    5,493
    
    
    
    
    
    
    
    
    
    
    
    1,448
    
    
    
    1,831
    
    
    
    6,941
    
    
    
    8,772
    
    
    
    1,280
    
    
    
    
    
    
    1999Howard Hughes Tower
    
    
    316,014
    
    
    
    5,830
    
    
    
    44,839
    
    
    
    
    
    
    
    
    
    
    
    14,405
    
    
    
    5,830
    
    
    
    59,244
    
    
    
    65,074
    
    
    
    11,543
    
    
    
    
    
    
    19872001 Wilshire Blvd
    
    
    99,565
    
    
    
    5,006
    
    
    
    14,540
    
    
    
    
    
    
    
    
    
    
    
    1,861
    
    
    
    5,006
    
    
    
    16,401
    
    
    
    21,407
    
    
    
    2,593
    
    
    
    
    
    
    1980Carmel Valley Centre
    
    
    109,518
    
    
    
    4,900
    
    
    
    23,336
    
    
    
    
    
    
    
    
    
    
    
    1,794
    
    
    
    4,900
    
    
    
    25,130
    
    
    
    30,030
    
    
    
    1,440
    
    
    
    
    
    
    1987/89Carmel View Office Plaza
    
    
    77,672
    
    
    
    3,100
    
    
    
    9,342
    
    
    
    
    
    
    
    
    
    
    
    972
    
    
    
    3,100
    
    
    
    10,314
    
    
    
    13,414
    
    
    
    675
    
    
    
    
    
    
    1985Crossroads
    
    
    134,477
    
    
    
    3,950
    
    
    
    12,810
    
    
    
    
    
    
    
    
    
    
    
    1,723
    
    
    
    3,950
    
    
    
    14,533
    
    
    
    18,483
    
    
    
    969
    
    
    
    
    
    
    1979Governor Executive Center
    
    
    52,828
    
    
    
    1,500
    
    
    
    9,670
    
    
    
    
    
    
    
    
    
    
    
    368
    
    
    
    1,500
    
    
    
    10,038
    
    
    
    11,538
    
    
    
    521
    
    
    
    
    
    
    1988Gateway Towers
    
    
    433,545
    
    
    
    5,585
    

    
    
    56,892
    
    
    
    
    
    
    
    
    
    
    
    4,093
    
    
    
    5,585
    
    
    
    60,985
    
    
    
    66,570
    
    
    
    3,594
    
    
    
    
    
    
    1984/86Governor Executive Center
II
    
    
    101,433
    
    
    
    1,959
    
    
    
    17,958
    
    
    
    
    
    
    
    
    
    
    
    2,895
    
    
    
    1,959
    
    
    
    20,853
    
    
    
    22,812
    
    
    
    1,545
    
    
    
    
    
    
    1989Homestore
    
    
    137,762
    
    
    
    9,128
    
    
    
    19,253
    
    
    
    
    
    
    
    
    
    
    
    3,790
    
    
    
    9,128
    
    
    
    23,043
    
    
    
    32,171
    
    
    
    386
    
    
    
    
    
    
    2000Warner Corporate Center
    
    
    253,000
    
    
    
    2,860
    
    
    
    53,725
    
    
    
    
    
    
    
    
    
    
    
    8,806
    
    
    
    2,860
    
    
    
    62,531
    
    
    
    65,391
    
    
    
    603
    
    
    
    
    
    
    198818,110,660
    
    
    $
    452,473
    
    
    $
    1,879,789
    
    
    $
    1,616
    
    
    $
    8,607
    
    
    $
    660,848
    
    
    $
    454,089
    
    
    $
    2,549,244
    
    
    $
    3,003,333
    
    
    $
    491,442
    
    
    $
    382,639
   (1)
    
    The depreciable lives 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 $54.6 million.(3)
    
    All of these properties are collateral for our $365.3 million mortgage financings. The
encumbrance allocated to an individual property is based on the related individual release
price. F-23




---



##### 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, 2004, 2003 and 2002 are as follows
(in thousands): Arden Realty Limited PartnershipFor the Years Ended December 31,2004
    
    
    2003
    
    
    2002Commercial Properties:Balance at beginning of period
    
    $
    3,008,081
    
    
    $
    3,045,208
    
    
    $
    2,797,052Improvements
    
    
    93,811
    
    
    
    77,532
    
    
    
    95,073Disposition of property
    
    
    (196,999
    )
    
    
    (97,632
    )
    
    
    (24,094
    )Write offs of fully depreciated assets
    
    
    (65,591
    )
    
    
    (37,913
    )
    
    
    (24,129
    )Acquisition of properties
    
    
    97,503
    
    
    
    22,054
    
    
    
    134,938Transfers from (to) properties under
development and land available for
development
    
    
    66,528
    
    
    
    
    
    
    
    66,368Reclassification to other assets
    
    
    
    
    
    
    (1,168
    )
    
    
    Balance at end of period
    
    $
    3,003,333
    
    
    $
    3,008,081
    
    
    $
    3,045,208Accumulated Depreciation:Balance at beginning of period
    
    $
    (460,732
    )
    
    $
    (392,611
    )
    
    $
    (307,082
    )Depreciation for period
    
    
    (125,315
    )
    
    
    (118,416
    )
    
    
    (111,022
    )Disposition of property
    
    
    29,817
    
    
    
    12,325
    
    
    
    1,982Write offs of fully depreciated assets
    
    
    65,591
    
    
    
    37,913
    
    
    
    24,129Transfers to (from) properties under
development and land available for
development
    
    
    (803
    )
    
    
    
    
    
    
    (618
    )Reclassification to other assets
    
    
    
    
    
    
    57
    
    
    
    Balance at end of period
    
    $
    (491,442
    )
    
    $
    (460,732
    )
    
    $
    (392,611
    )
 F-24