##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended September 30, 2005
 OR
  ̈ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number 1-14516
 PRENTISS PROPERTIES TRUST
 (Exact Name of Registrant as Specified in its Charter)
 Maryland
    
    75-2661588(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)
 3890 West Northwest Highway, Suite 400, Dallas, Texas 75220
(Address of Principal Executive Offices)
 (214) 654-0886
(Registrants Telephone Number, Including Area Code)
 þ  ̈
 þ  ̈
 o þ




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TABLE OF CONTENTS  Third Amended and Restated Credit AgreementSecond Amended and Restated Credit AgreementCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906    Table of Contents  PRENTISS PROPERTIES TRUST
 INDEX
 Page NumberPart I:
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsConsolidated Balance Sheets as of September 30, 2005 (unaudited) and December 31, 2004 (unaudited)
    
    
    5Consolidated Statements of Income for the three and nine months ended September 30, 2005 and 2004 (unaudited)
    
    
    6Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2005 and 2004 (unaudited)
    
    
    7Consolidated Statements of Cash Flows for the nine months ended September 30, 2005 and 2004 (unaudited)
    
    
    8Notes to Consolidated Financial Statements
    
    
    9-23Item 2.
    
    Management's Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24-45Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    46Item 4.
    
    Controls and Procedures
    
    
    46Part II:
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    47Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    47Item 3.
    
    Defaults Upon Senior Securities
    
    
    47Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    47Item 5.
    
    Other Information
    
    
    47Item 6.
    
    Exhibits
    
    
    48-50SIGNATURE
    
    
    
    
    51
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##### Table of Contents



FORWARD-LOOKING STATEMENTS
  
    
    Our failure to qualify as a REIT under the Internal Revenue Code of 1986, as amended;
    
    Possible adverse changes in tax and environmental laws, as well as the impact of newly adopted
accounting principles on our accounting policies and on period-to-period comparison of financial
results;
    
    Potential liability for uninsured losses and environmental contamination;
    
    Our properties are illiquid assets;
    
    Factors that could result in the poor operating performance of our properties including tenant
defaults and increased costs such as taxes, insurance, utilities and casualty losses that exceed
insurance limits;
    
    Changes in market conditions including market interest rates and employment rates;
    
    Our incurrence of debt and use of variable rate and derivative financial instruments;
    
    Our real estate acquisition, redevelopment, development and construction activities;
    
    The geographic concentration of our properties;
    
    Changes in market conditions including capitalization rates applied in real estate
acquisitions;
    
    Competition in markets where we have properties;
    
    Our dependence on key personnel whose continued service is not guaranteed;
    
    Changes in our investment, financing and borrowing policies without shareholder approval;
    
    The effect of shares available for future sale on the price of common shares;
    
    Limited ability of shareholders to effect change of control;
    
    Conflicts of interest with management, our board of trustees and joint venture partners could impact
business decisions;
    
    Our third-party property management, leasing, development and construction business and related services;
    
    Risks associated with an increase in the frequency and scope of changes in state and local tax laws and
increases in the number of state and local tax audits; and
    
    Cost of compliance with the Americans with Disabilities Act and other similar laws related to our
properties.
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PART I
FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 (this page intentionally left blank)
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PRENTISS PROPERTIES TRUST
 
 CONSOLIDATED BALANCE SHEETS
 (Unaudited)
 September 30,
    
    
    December 31,2005
    
    
    2004ASSETSOperating real estate:Land
    
    $
    324,878
    
    
    $
    341,321Buildings and improvements
    
    
    1,636,723
    
    
    
    1,789,043Less: accumulated depreciation
    
    
    (211,686
    )
    
    
    (234,007
    )1,749,915
    
    
    
    1,896,357Properties and related assets held for sale, net
    
    
    321,365
    
    
    
    Construction in progress
    
    
    38,871
    
    
    
    23,417Land held for development
    
    
    63,786
    
    
    
    59,014Deferred charges and other assets, net
    
    
    253,137
    
    
    
    260,283Notes receivable
    
    
    
    
    
    
    1,500Accounts receivable, net
    
    
    45,141
    
    
    
    55,772Cash and cash equivalents
    
    
    8,813
    
    
    
    8,586Escrowed cash
    
    
    44,949
    
    
    
    9,584Investments in securities and insurance contracts
    
    
    5,208
    
    
    
    3,279Investments in unconsolidated joint ventures and subsidiaries
    
    
    7,139
    
    
    
    12,943Interest rate hedges
    
    
    7,462
    
    
    
    2,804Total assets
    
    $
    2,545,786
    
    
    $
    2,333,539LIABILITIES AND SHAREHOLDERS EQUITYMortgages and notes payable
    
    $
    1,234,829
    
    
    $
    1,191,911Mortgages and notes payable related to properties held for sale
    
    
    121,801
    
    
    
    Interest rate hedges
    
    
    385
    
    
    
    3,850Accounts payable and other liabilities
    
    
    85,487
    
    
    
    105,304Accounts payable and other liabilities related to properties held for sale
    
    
    14,480
    
    
    
    Distributions payable
    
    
    28,476
    
    
    
    28,103Total liabilities
    
    
    1,485,458
    
    
    
    1,329,168Minority interest in operating partnership
    
    
    34,856
    
    
    
    24,990Minority interest in real estate partnerships
    
    
    52,262
    
    
    
    35,792Commitments and contingenciesPreferred shares $.01 par value, 20,000,000 shares authorized, 2,823,585
and 3,773,585 shares issued and outstanding at September 30, 2005 and
December 31, 2004, respectively
    
    
    74,825
    
    
    
    100,000Common shares $.01 par value, 100,000,000 shares authorized, 49,562,335
and 48,268,845 (includes 3,294,951 and 3,286,957 in treasury) shares
issued and outstanding at September 30, 2005 and December 31, 2004,
respectively
    
    
    496
    
    
    
    483Additional paid-in capital
    
    
    1,066,042
    
    
    
    1,020,917Common shares in treasury at cost 3,294,951 and 3,286,957 shares at
September 30, 2005 and December 31, 2004, respectively
    
    
    (83,468
    )
    
    
    (82,694
    )Unearned compensation
    
    
    (4,910
    )
    
    
    (3,386
    )Accumulated other comprehensive income
    
    
    7,710
    
    
    
    (302
    )Distributions in excess of earnings
    
    
    (87,485
    )
    
    
    (91,429
    )Total shareholders equity
    
    
    973,210
    
    
    
    943,589Total liabilities and shareholders equity
    
    $
    2,545,786
    
    
    $
    2,333,539
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PRENTISS PROPERTIES TRUST
 
 CONSOLIDATED STATEMENTS OF INCOME
 (Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Revenues:Rental income
    
    $
    86,490
    
    
    $
    76,032
    
    
    $
    244,605
    
    
    $
    219,244Service business and other income
    
    
    3,530
    
    
    
    3,215
    
    
    
    10,054
    
    
    
    9,59090,020
    
    
    
    79,247
    
    
    
    254,659
    
    
    
    228,834Operating expenses:Property operating and maintenance
    
    
    24,008
    
    
    
    19,881
    
    
    
    66,745
    
    
    
    55,341Real estate taxes
    
    
    8,320
    
    
    
    6,441
    
    
    
    23,784
    
    
    
    20,064General and administrative and personnel costs
    
    
    4,997
    
    
    
    3,423
    
    
    
    11,569
    
    
    
    8,793Expenses of service business
    
    
    3,099
    
    
    
    2,670
    
    
    
    8,646
    
    
    
    6,785Depreciation and amortization
    
    
    23,242
    
    
    
    20,014
    
    
    
    64,354
    
    
    
    56,08563,666
    
    
    
    52,429
    
    
    
    175,098
    
    
    
    147,068Other expenses:Interest expense
    
    
    19,294
    
    
    
    15,795
    
    
    
    52,772
    
    
    
    45,454Amortization of deferred financing costs
    
    
    657
    
    
    
    646
    
    
    
    1,916
    
    
    
    1,77919,951
    
    
    
    16,441
    
    
    
    54,688
    
    
    
    47,233Income from continuing operations before equity in income/(loss) of
unconsolidated joint ventures and subsidiaries, loss on investment in
securities, loss from impairment of mortgage loan and minority interests
    
    
    6,403
    
    
    
    10,377
    
    
    
    24,873
    
    
    
    34,533Equity in income/(loss) of unconsolidated joint ventures and subsidiaries
    
    
    697
    
    
    
    616
    
    
    
    (148
    )
    
    
    1,790Loss on investment in securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (420
    )Loss from impairment of mortgage loan
    
    
    
    
    
    
    
    
    
    
    (500
    )
    
    
    Minority interests
    
    
    (18
    )
    
    
    (141
    )
    
    
    (487
    )
    
    
    (1,948
    )Income from continuing operations
    
    
    7,082
    
    
    
    10,852
    
    
    
    23,738
    
    
    
    33,955Discontinued operations:(Loss)/income from discontinued operations
    
    
    (5,794
    )
    
    
    3,661
    
    
    
    (738
    )
    
    
    10,860Gain/(loss) from disposition of discontinued operations
    
    
    65,756
    
    
    
    (1,821
    )
    
    
    65,773
    
    
    
    8,364Loss from debt defeasance related to sale of real estate
    
    
    (68
    )
    
    
    
    
    
    
    (68
    )
    
    
    (5,316
    )Minority interests related to discontinued operations
    
    
    (2,163
    )
    
    
    (138
    )
    
    
    (2,371
    )
    
    
    (740
    )57,731
    
    
    
    1,702
    
    
    
    62,596
    
    
    
    13,168Income before gain on sale of land and an interest in a real estate partnership
    
    
    64,813
    
    
    
    12,554
    
    
    
    86,334
    
    
    
    47,123Gain on sale of land and an interest in a real estate partnership
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,222Net income
    
    $
    64,813
    
    
    $
    12,554
    
    
    $
    86,334
    
    
    $
    48,345Preferred dividends
    
    
    (1,581
    )
    
    
    (2,113
    )
    
    
    (5,807
    )
    
    
    (7,939
    )Net income applicable to common shareholders
    
    $
    63,232
    
    
    $
    10,441
    
    
    $
    80,527
    
    
    $
    40,406Basic earnings per common share:Income from continuing operations applicable to common shareholders
    
    $
    0.15
    
    
    $
    0.19
    
    
    $
    0.48
    
    
    $
    0.61Discontinued operations
    
    
    1.18
    
    
    
    0.04
    
    
    
    1.29
    
    
    
    0.30Net income applicable to common shareholders  basic
    
    $
    1.33
    
    
    $
    0.23
    
    
    $
    1.77
    
    
    $
    0.91Weighted average number of common shares outstanding  basic
    
    
    45,795
    
    
    
    44,691
    
    
    
    45,197
    
    
    
    44,170Diluted earnings per common share:Income from continuing operations applicable to common shareholders
    
    $
    0.14
    
    
    $
    0.19
    
    
    $
    0.48
    
    
    $
    0.61Discontinued operations
    
    
    1.18
    
    
    
    0.04
    
    
    
    1.28
    
    
    
    0.30Net income applicable to common shareholders  diluted
    
    $
    1.32
    
    
    $
    0.23
    
    
    $
    1.76
    
    
    $
    0.91Weighted average number of common shares and common share equivalents
outstanding  diluted
    
    
    46,129
    
    
    
    44,882
    
    
    
    45,459
    
    
    
    44,358
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PRENTISS PROPERTIES TRUST
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 (Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income
    
    $
    64,813
    
    
    $
    12,554
    
    
    $
    86,334
    
    
    $
    48,345Unrealized gains and losses on securities:Unrealized gains/(losses) arising during the period
    
    
    147
    
    
    
    (55
    )
    
    
    128
    
    
    
    (27
    )Unrealized gains and losses on interest rate hedges:Unrealized gains/(losses) arising during the period
    
    
    4,622
    
    
    
    (7,516
    )
    
    
    5,235
    
    
    
    (5,179
    )Reclassification of losses on qualifying cash flow hedges into earnings
    
    
    342
    
    
    
    2,946
    
    
    
    2,649
    
    
    
    8,343Other comprehensive income
    
    
    5,111
    
    
    
    (4,625
    )
    
    
    8,012
    
    
    
    3,137Comprehensive income
    
    $
    69,924
    
    
    $
    7,929
    
    
    $
    94,346
    
    
    $
    51,482
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##### Table of Contents



PRENTISS PROPERTIES TRUST
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Nine Months EndedSeptember 30,2005
    
    
    2004Cash Flows from Operating Activities:Net income
    
    $
    86,334
    
    
    $
    48,345Adjustments to reconcile net income to net cash provided by operating activities:Minority interests
    
    
    2,858
    
    
    
    2,688Gain from disposition
    
    
    (65,773
    )
    
    
    (8,364
    )Gain on sale of land and an interest in a real estate partnership
    
    
    
    
    
    
    (1,222
    )Loss on impairment of discontinued operations
    
    
    10,196
    
    
    
    Loss on debt extinguishment/defeasance
    
    
    68
    
    
    
    5,316Loss on investment in securities
    
    
    
    
    
    
    420Loss on impairment of mortgage loan
    
    
    500
    
    
    
    Provision for doubtful accounts
    
    
    328
    
    
    
    (3,698
    )Depreciation and amortization
    
    
    77,114
    
    
    
    71,531Amortization of deferred financing costs
    
    
    1,957
    
    
    
    1,784Non-cash compensation
    
    
    3,631
    
    
    
    2,229Gain on derivative financial instruments
    
    
    (240
    )
    
    
    (242
    )Changes in assets and liabilities:Deferred charges and other assets
    
    
    (8,364
    )
    
    
    (9,933
    )Accounts receivable
    
    
    (9,884
    )
    
    
    (6,754
    )Escrowed cash
    
    
    1,376
    
    
    
    2,334Accounts payable and other liabilities
    
    
    (7,997
    )
    
    
    1,233Net cash provided by operating activities
    
    
    92,104
    
    
    
    105,667Cash Flows from Investing Activities:Development/redevelopment of real estate
    
    
    (21,665
    )
    
    
    (9,394
    )Purchase of real estate
    
    
    (174,826
    )
    
    
    (189,932
    )Capital expenditures for in-service properties
    
    
    (40,207
    )
    
    
    (34,643
    )Distributions in excess of earnings of unconsolidated joint ventures
    
    
    1,461
    
    
    
    13Proceeds from the sale of a joint venture interest in a real estate partnership
    
    
    
    
    
    
    69,338Proceeds received from sale/repayment of notes receivable
    
    
    1,000
    
    
    
    10,464Proceeds from the sale of investment
    
    
    
    
    
    
    1,107Proceeds from the sale of real estate
    
    
    129,469
    
    
    
    132,489Investments in securities and insurance contracts
    
    
    (918
    )
    
    
    (729
    )Investments in unconsolidated subsidiaries
    
    
    (17,050
    )
    
    
    Net cash used in investing activities
    
    
    (122,736
    )
    
    
    (21,287
    )Cash Flows from Financing Activities:Net proceeds from sale of common shares
    
    
    3,173
    
    
    
    64,990Net proceeds from sale of treasury shares
    
    
    964
    
    
    
    Redemption of series E preferred units
    
    
    
    
    
    
    (10,000
    )Redemption of series B preferred units
    
    
    
    
    
    
    (95,000
    )Repurchase of treasury shares
    
    
    (275
    )
    
    
    Capital contribution from minority interest partners in consolidated joint ventures
    
    
    32,606
    
    
    
    11,034Repurchase of operating partnership common units
    
    
    
    
    
    
    (891
    )Distributions paid to limited partners
    
    
    (19,620
    )
    
    
    (51,361
    )Distributions paid to common shareholders
    
    
    (75,872
    )
    
    
    (73,809
    )Distributions paid to preferred shareholders
    
    
    (6,339
    )
    
    
    (6,339
    )Distributions paid to preferred unitholders
    
    
    
    
    
    
    (3,176
    )Proceeds from mortgages and notes payable
    
    
    704,943
    
    
    
    656,828Payment of debt prepayment cost
    
    
    
    
    
    
    Repayments of mortgages and notes payable
    
    
    (608,653
    )
    
    
    (570,329
    )Payment of debt defeasance cost on debt extinguishment
    
    
    (68
    )
    
    
    (5,316
    )Net cash provided by/used in financing activities
    
    
    30,859
    
    
    
    (83,369
    )Net change in cash and cash equivalents
    
    
    227
    
    
    
    1,011Cash and cash equivalents, beginning of period
    
    
    8,586
    
    
    
    5,945Cash and cash equivalents, end of period
    
    $
    8,813
    
    
    $
    6,956Supplemental Cash Flow Information:Cash paid for interest
    
    $
    59,943
    
    
    $
    51,807
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1. The Organization
 Organization
  Series DConvertibleCommon
    
    
    
    
    
    
    Preferred(units in thousands)
    
    Units
    
    
    %
    
    
    Units
    
    
    %Prentiss Properties Trust
    
    
    46,329
    (1)
    
    
    96.27
    %
    
    
    2,824
    
    
    
    100.00
    %Third parties
    
    
    1,797
    
    
    
    3.73
    %
    
    
    
    
    
    
    0.00
    %Total
    
    
    48,126
    
    
    
    100.00
    %
    
    
    2,824
    
    
    
    100.00
    %
 
 (1)
    
    Includes 61,398 common shares held by the company pursuant to a deferred
compensation plan. The shares are accounted for as common shares in treasury on our
consolidated balance sheet.  Number of
    
    
    Net RentableBuildings
    
    
    Square Feet(in thousands)Office properties
    
    
    103
    
    
    
    16,665Industrial properties
    
    
    27
    
    
    
    2,203Total
    
    
    130
    
    
    
    18,868
    Reportable Segment
    
    MarketMid-Atlantic
    
    Metropolitan Washington D.C.Midwest
    
    Chicago, Suburban DetroitSouthwest
    
    Dallas/Fort Worth, Austin, DenverNorthern California
    
    Oakland, East Bay, Silicon ValleySouthern California
    
    San Diego, Los Angeles
 Real Estate Transactions
  9




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##### Table of Contents



(1)
    
    Pursuant to Statement of Financial Accounting Standards, No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets we classified the properties located within
our Midwest Region as properties held for sale. As a result, we recognized an impairment
charge of $10.2 million representing the excess of the carrying amount of five of our
Chicago properties, containing approximately 322,000 net rentable square feet, over the
estimated fair value of the properties, less the cost to sell.(2)
    
    On September 28, 2005, we completed the sale of one office property containing
approximately 541,000 net rentable square feet, (our 123 North Wacker property) located in
downtown Chicago to an unrelated third party. The property was sold for gross proceeds of
approximately $170.2 million and resulted in a gain on sale of approximately $65.8 million.
Proceeds from the sale were placed in escrow pending the completion of Sec. 1031
like-kind asset exchanges. An amount of $133.0 million was immediately released due to an
already identified and completed acquisition and was used to repay a portion of the
outstanding borrowings under our revolving credit facility. At September 30, 2005, $37.2
million remained in escrow.
    September 30, 2005(in thousands)Land
    
    $
    49,541Buildings and improvements
    
    $
    263,583Less: accumulated depreciation
    
    $
    (47,390
    )Deferred charges and other assets, net
    
    $
    39,544Accounts receivable, net
    
    $
    15,293Escrowed cash
    
    $
    794Properties and related assets held for sale, net
    
    $
    321,365
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Three Months EndedSeptember 30, 2005(in thousands)Land
    
    $
    18,422Buildings and improvements
    
    $
    74,489Tenant improvements and leasing commissions
    
    $
    7,710Above/(below) market lease value
    
    $
    (1,523
    )Other intangible assets
    
    $
    10,386
  Three Months Ended
    
    
    Nine Months EndedDiscontinued Operations :
    
    September 30,
    
    
    September 30,(in thousands)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Property revenues:Rental income
    
    $
    16,916
    
    
    $
    16,663
    
    
    $
    50,547
    
    
    $
    57,208Other income
    
    
    10
    
    
    
    16
    
    
    
    42
    
    
    
    57Property revenues
    
    
    16,926
    
    
    
    16,679
    
    
    
    50,589
    
    
    
    57,265Property expenses:Property operating and maintenance
    
    
    4,072
    
    
    
    3,437
    
    
    
    12,610
    
    
    
    14,570Real estate taxes
    
    
    3,269
    
    
    
    3,293
    
    
    
    9,520
    
    
    
    10,252Depreciation and amortization
    
    
    3,090
    
    
    
    4,498
    
    
    
    12,760
    
    
    
    15,446Property expenses
    
    
    10,431
    
    
    
    11,228
    
    
    
    34,890
    
    
    
    40,268Interest expense
    
    
    (2,083
    )
    
    
    (1,785
    )
    
    
    (6,200
    )
    
    
    (6,132
    )Amortization of deferred financing costs
    
    
    (10
    )
    
    
    (5
    )
    
    
    (41
    )
    
    
    (5
    )Loss on impairment of real estate
    
    
    (10,196
    )
    
    
    
    
    
    
    (10,196
    )
    
    
    (Loss)/income from discontinued operations
    
    $
    (5,794
    )
    
    $
    3,661
    
    
    $
    (738
    )
    
    $
    10,860
 Other Transactions
     11




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##### Table of Contents



2. Basis of Presentation
  3. Share-Based Compensation
    Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(amounts in thousands, except per share data)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Net income applicable to common shareholders as reported
    
    $
    63,232
    
    
    $
    10,441
    
    
    $
    80,527
    
    
    $
    40,406Add: Share-based employee compensation expense included therein
    
    
    1,322
    
    
    
    870
    
    
    
    3,378
    
    
    
    1,982Deduct: Total share-based employee compensation expense
determined under fair value method for all awards
    
    
    (1,322
    )
    
    
    (890
    )
    
    
    (3,381
    )
    
    
    (2,044
    )Pro Forma net income applicable to common shareholders
    
    $
    63,232
    
    
    $
    10,421
    
    
    $
    80,524
    
    
    $
    40,344Earnings per share:Basic  as reported
    
    $
    1.33
    
    
    $
    0.23
    
    
    $
    1.77
    
    
    $
    0.91Basic  pro forma
    
    $
    1.33
    
    
    $
    0.23
    
    
    $
    1.77
    
    
    $
    0.91Diluted  as reported
    
    $
    1.32
    
    
    $
    0.23
    
    
    $
    1.76
    
    
    $
    0.91Diluted  pro forma
    
    $
    1.32
    
    
    $
    0.23
    
    
    $
    1.76
    
    
    $
    0.91
 12




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##### Table of Contents



4. Earnings per Share
  Three Months Ended
    
    
    Nine Months Ended(in thousands, except per share data)
    
    September 30,
    
    
    September 30,Reconciliation of the numerator used for basic earnings per share
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Income from continuing operations
    
    $
    7,082
    
    
    $
    10,852
    
    
    $
    23,738
    
    
    $
    33,955Gain on sale of land and an interest in a real estate partnership
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,222Income from continuing operations allocated to preferred shareholders
    
    
    (438
    )
    
    
    (2,113
    )
    
    
    (1,715
    )
    
    
    (7,939
    )Income from continuing operations applicable to common shareholders
    
    $
    6,644
    
    
    $
    8,739
    
    
    $
    22,023
    
    
    $
    27,238Discontinued operations
    
    
    57,731
    
    
    
    1,702
    
    
    
    62,596
    
    
    
    13,168Discontinued operations allocated to preferred shareholders
    
    
    (3,572
    )
    
    
    
    
    
    
    (4,522
    )
    
    
    Discontinued operations applicable to common shareholders
    
    $
    54,159
    
    
    $
    1,702
    
    
    $
    58,074
    
    
    $
    13,168Net income applicable to common shareholders
    
    $
    60,803
    
    
    $
    10,441
    
    
    $
    80,097
    
    
    $
    40,406Reconciliation of the denominator used for basic earnings per shareWeighted average common shares outstanding
    
    
    45,795
    
    
    
    44,691
    
    
    
    45,197
    
    
    
    44,170Basic earnings per share
    
    $
    1.33
    
    
    $
    0.23
    
    
    $
    1.77
    
    
    $
    0.91Reconciliation of the numerator used for dilutive earnings per shareIncome from continuing operations
    
    $
    7,082
    
    
    $
    10,852
    
    
    $
    23,738
    
    
    $
    33,955Gain on sale of land and an interest in a real estate partnership
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,222Income from continuing operations allocated to preferred shareholder
    
    
    (438
    )
    
    
    (2,113
    )
    
    
    (1,715
    )
    
    
    (7,939
    )Income from continuing operations applicable to common shareholders
    
    $
    6,644
    
    
    $
    8,739
    
    
    $
    22,023
    
    
    $
    27,238Discontinued operations
    
    
    57,731
    
    
    
    1,702
    
    
    
    62,596
    
    
    
    13,168Discontinued operations allocated to preferred shareholders
    
    
    (3,572
    )
    
    
    
    
    
    
    (4,522
    )
    
    
    Discontinued
operations applicable to common shareholders
    
    $
    54,159
    
    
    $
    1,702
    
    
    $
    58,074
    
    
    $
    13,168Net income applicable to common shareholders
    
    $
    60,803
    
    
    $
    10,441
    
    
    $
    80,097
    
    
    $
    40,406Reconciliation of the denominator used for dilutive earnings per share(1)Weighted average common shares outstanding
    
    
    45,795
    
    
    
    44,691
    
    
    
    45,197
    
    
    
    44,170Dilutive options
    
    
    162
    
    
    
    111
    
    
    
    121
    
    
    
    124Dilutive share grants
    
    
    172
    
    
    
    80
    
    
    
    141
    
    
    
    64Weighted average common shares and common share equivalents outstanding
(1)
    
    
    46,129
    
    
    
    44,882
    
    
    
    45,459
    
    
    
    44,358Diluted earnings per share
    
    $
    1.32
    
    
    $
    0.23
    
    
    $
    1.76
    
    
    $
    0.91
 
 (1)
    
    For the three and nine months ending September 30, 2004, the if-converted method was
used to determine the dilutive effect of our Series D Convertible Preferred Shares. The conversion
of the Series D Convertible Preferred Shares were anti-dilutive to earnings per share during these
periods and thus were excluded from the computation. 13




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,Antidilutive Securities (in thousands)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Series D Convertible Preferred Shares
    
    
    2,824
    
    
    
    3,774
    
    
    
    2,824
    
    
    
    3,774
 5. Deferred Charges and Other Assets, Net
  (in thousands)September 30,
    
    
    December 31,2005
    
    
    2004Deferred leasing costs and tenant improvements
    
    $
    283,740
    
    
    $
    311,320In-place lease values
    
    
    45,836
    
    
    
    27,910Above market lease values
    
    
    5,368
    
    
    
    5,666Deferred financing costs
    
    
    15,526
    
    
    
    14,568Prepaids and other assets
    
    
    16,201
    
    
    
    11,610366,671
    
    
    
    371,074Less: accumulated amortization
    
    
    (113,534
    )
    
    
    (110,791
    )$
    253,137
    
    
    $
    260,283
  6. Notes Receivable
  7. Accounts Receivable, Net
  (in thousands)September 30,
    
    
    December 31,2005
    
    
    2004Rents and services
    
    $
    10,875
    
    
    $
    10,449Accruable rental income
    
    
    38,300
    
    
    
    50,721Other
    
    
    442
    
    
    
    80949,617
    
    
    
    61,979Less: allowance for doubtful accounts
    
    
    (4,476
    )
    
    
    (6,207
    )$
    45,141
    
    
    $
    55,772
 14




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##### Table of Contents



8. Investments in Unconsolidated Joint Ventures and Subsidiaries
  Summary of Financial Position:
    
    Total Assets
    
    
    Total Debt(4)
    
    
    Total Equity
    
    

Companys InvestmentSept. 30,
    
    
    Dec. 31,
    
    
    Sept. 30,
    
    
    Dec. 31,
    
    
    Sept. 30,
    
    
    Dec. 31,
    
    
    Sept. 30,
    
    
    Dec. 31,(in thousands)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Broadmoor Austin Associates (1)
    
    $
    96,153
    
    
    $
    97,962
    
    
    $
    126,719
    
    
    $
    131,979
    
    
    $
    (33,308
    )
    
    $
    (34,814
    )
    
    $
    4,779
    
    
    $
    4,217Tysons International Partners (2)
    
    
    
    
    
    
    89,268
    
    
    
    
    
    
    
    59,113
    
    
    
    
    
    
    
    28,914
    
    
    
    
    
    
    
    8,726Other Investments (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,360
    
    
    
    $
    7,139
    
    
    $
    12,943
 Summary of Operations for the Three
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Companys Share ofMonths Ended September 30, 2005 and 2004:
    
    Total Revenue
    
    
    Net Income
    
    
    Net Income/(Loss)(in thousands)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Broadmoor Austin Associates
    
    $
    5,646
    
    
    $
    4,999
    
    
    $
    1,394
    
    
    $
    1,288
    
    
    $
    697
    
    
    $
    644Tysons International Partners (2)
    
    
    
    
    
    
    2,995
    
    
    
    
    
    
    
    (112
    )
    
    
    
    
    
    
    (28
    )Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    697
    
    
    $
    616
 Summary of Operations for the Nine
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Companys Share ofMonths Ended September 30, 2005 and 2004:
    
    Total Revenue
    
    
    Net Income
    
    
    Net Income/(Loss)(in thousands)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Broadmoor Austin Associates
    
    $
    16,938
    
    
    $
    15,033
    
    
    $
    4,135
    
    
    $
    3,761
    
    
    $
    2,068
    
    
    $
    1,880Tysons International Partners (2)
    
    
    4,228
    
    
    
    8,815
    
    
    
    (8,864
    )
    
    
    (361
    )
    
    
    (2,216
    )
    
    
    (90
    )Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (148
    )
    
    $
    1,790
 
 (1)
    
    We own a 50% non-controlling interest in Broadmoor Austin Associates, an entity,
which owns a seven-building, 1.1 million net rentable square foot office complex in Austin,
Texas.(2)
    
    At December 31, 2004, we owned a 25% non-controlling interest in Tysons
International Partners, an entity, which owns two office properties containing 456,000 net
rentable square feet in the Northern Virginia area. On May 2, 2005, we acquired the remaining
75% interest in the properties owned by the joint venture. Prior to our acquisition of the
remaining 75% for $103.2 million, we contributed to the joint venture $14.7 million
representing our pro rata share of the outstanding indebtedness on the properties. As a
condition of closing, out of proceeds from the sale and our capital contribution, the joint
venture prepaid the outstanding indebtedness collateralized by the properties. The prepayment
amount totaled $67.6 million of which $8.8 million represented a prepayment penalty. Net
income for Tysons International Partners for the nine months ended September 30, 2005 includes
the $8.8 million loss from debt prepayment but excludes the gain on sale resulting from our
acquisition of the remaining 75% interest in the joint venture.(3)
    
    Represents an interest in Prentiss Properties Capital Trust I and Prentiss
Properties Capital Trust II that we account for using the cost method of accounting.(4)
    
    The mortgage debt, all of which is non-recourse, is collateralized by the individual
real estate property or properties within each venture. 15




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##### Table of Contents



9. Mortgages and Notes Payable
   (in thousands)September 30,
    
    
    December 31,Description
    
    2005
    
    
    2004
    
    
    Amortization
    
    Interest Rate(1)
    
    MaturityRevolving credit facility
    
    $
    91,500
    
    
    $
    217,500
    
    
    None
    
    LIBOR+.950%
    
    July 26, 2008PPREFI portfolio loan (2)
    
    
    180,100
    
    
    
    180,100
    
    
    None
    
    7.58%
    
    February 26, 2007High Bluffs construction loan
    
    
    24,661
    
    
    
    8,929
    
    
    None
    
    LIBOR+1.400%
    
    September 1, 2007Collateralized term loan  Union Bank of Calif(3)
    
    
    30,000
    
    
    
    30,000
    
    
    None
    
    LIBOR+1.150%
    
    September 30, 2007Unsecured
term loan  EuroHypo I
    
    
    100,000
    
    
    
    100,000
    
    
    None
    
    LIBOR+ .950%
    
    May 22, 2008Unsecured term loan  Commerzbank
    
    
    75,000
    
    
    
    75,000
    
    
    None
    
    LIBOR+ .950%
    
    March 15, 2009Unsecured
term loan  EuroHypo II
    
    
    13,550
    
    
    
    13,760
    
    
    30 yr
    
    7.46%
    
    July 15, 2009Collateralized term loan  Mass Mutual (4)
    
    
    85,000
    (5)
    
    
    85,000
    
    
    None
    
    LIBOR+0.850%
    
    August 1, 2009Prentiss Properties Capital Trust I Debenture
    
    
    52,836
    
    
    
    
    
    
    None
    
    LIBOR+1.250%
    
    March 30, 2035Prentiss Properties Capital Trust II Debenture
    
    
    25,774
    
    
    
    
    
    
    None
    
    LIBOR+1.250%
    
    June 30, 2035Variable rate mortgage notes payable (6)
    
    
    61,600
    (7)
    
    
    96,700
    
    
    None
    
    (8)
    
    (8)Fixed rate mortgage notes payable (9) (10)
    
    
    616,609
    (11)(12)
    
    
    384,922
    
    
    (13)
    
    (13)
    
    (13)$
    1,356,630
    
    
    $
    1,191,911
 (1)
    
    All of our variable rate loans are based on 30-day LIBOR with the exception of
our Prentiss Properties Capital Trust I & II Debentures which are based on 90-day LIBOR. 30-day
and 90-day LIBOR were 3.86% and 4.07% at September 30, 2005, respectively.(2)
    
    The PPREFI portfolio loan is collateralized by 36 properties with an
aggregate net book value of real estate of $232.6 million.(3)
    
    The term loan is collateralized by two properties with an aggregate
net book value of real estate of $18.1 million.(4)
    
    The term loan is collateralized by 9 properties with an aggregate net
book value of real estate of $106.2 million.(5)
    
    Includes $13.5 million related to properties held for sale.(6)
    
    The variable rate mortgage loans are collateralized by 5 buildings
with an aggregate net book value of $84.5 million.(7)
    
    Includes $20.0 million with an interest rate equal to LIBOR plus 110
basis points relating to properties held for sale.(8)
    
    Interest rates on our variable rate mortgages range from 30-day LIBOR
plus 110 basis points to 30-day LIBOR plus 130 basis points. Maturity dates range from July
2009 through May 2010.(9)
    
    The fixed rate mortgage loans are collateralized by 27 buildings with
an aggregate net book value of $702.2 million(10)
    
    In connection with our fixed rate mortgages, we have three letters
of credit outstanding for $6.0 million, $2.5 million and $590,000. The letters of credit were
issued in accordance with loan documents in lieu of establishing escrow accounts with lenders.(11)
    
    Includes an additional $3.9 million of debt representing the adjustment to record
an acquired mortgage loan at fair value on the date of acquisition.(12)
    
    Includes $88.3 million with interest rates between 6.80% and 8.05%
related to properties held for sale.(13)
    
    The payments on our fixed rate mortgages are based on amortization
periods ranging between 18 and 30 years. The effective interest rates for our fixed rate
mortgages range from 4.84% to 8.05% with a weighted average effective interest rate of 6.35%
at September 30, 2005. Maturity dates range from April 2006 through August 2015 with a
weighted average maturity of 6.8 years from September 30, 2005.
   (in thousands)2005
    
    $
    1,7922006
    
    
    11,5102007
    
    
    248,7482008
    
    
    200,9562009
    
    
    255,346Thereafter
    
    
    638,278$
    1,356,630
 16




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##### Table of Contents



10. Interest Rate Hedges
         17




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##### Table of Contents



Swap Rate ReceivedNotional
    
    Swap Rate Paid
    
    
    (Variable) atAmount
    
    (Fixed)
    
    
    September 30, 2005
    
    
    Swap Maturity
    
    
    Fair Value(in thousands)$20 million
    
    
    5.985
    %
    
    
    3.86
    %
    
    March 2006
    
    $
    (154
    )$30 million
    
    
    5.990
    %
    
    
    3.86
    %
    
    March 2006
    
    
    (231
    )$50 million
    
    
    2.270
    %
    
    
    3.86
    %
    
    August 2007
    
    
    1,936$25 million
    
    
    2.277
    %
    
    
    3.86
    %
    
    August 2007
    
    
    965$70 million (1)
    
    
    4.139
    %
    
    
    3.86
    %
    
    August 2008
    
    
    618$30 million
    
    
    3.857
    %
    
    
    3.86
    %
    
    September 2008
    
    
    523$30 million
    
    
    3.819
    %
    
    
    3.86
    %
    
    October 2008
    
    
    555$20 million
    
    
    3.819
    %
    
    
    3.86
    %
    
    October 2008
    
    
    370$50 million
    
    
    3.935
    %
    
    
    3.86
    %
    
    May 2009
    
    
    922$30 million
    
    
    3.443
    %
    
    
    3.86
    %
    
    October 2009
    
    
    1,170$20 million (1)
    
    
    4.000
    %
    
    
    3.86
    %
    
    February 2010
    
    
    403Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    7,077
 
 (1)
    
    The interest rate swap agreement was executed by Prentiss Office Investors,
L.P., a partnership which is 51% owned by our operating partnership.
  11. Accounts Payable and Other Liabilities
  (in thousands)September 30,
    
    
    December 31,2005
    
    
    2004Accrued interest expense
    
    $
    6,148
    
    
    $
    5,685Accrued real estate taxes
    
    
    17,273
    
    
    
    28,178Advance rents and deposits
    
    
    16,974
    
    
    
    20,010Deferred compensation liability
    
    
    7,824
    
    
    
    6,516Below market lease values, net of amortization(1)
    
    
    11,439
    
    
    
    8,319Other liabilities
    
    
    25,829
    
    
    
    36,596$
    85,487
    
    
    $
    105,304
 
 (1)
    
    Accumulated amortization for below market lease values as of September 30,
2005 and December 31, 2004 was $3.4 million and $2.0 million, respectively. We record
below market lease value amortization in the line item rental income.
 12. Distributions
  18




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##### Table of Contents



13. Supplemental Disclosure of Non-Cash Activities
         14. Segment Information
  For the Three Months Ended September 30, 2005  (in thousands)
 CorporateNotMid-
    
    
    
    
    
    
    
    
    
    
    Northern
    
    
    Southern
    
    
    Total
    
    
    Allocable To
    
    
    ConsolidatedAtlantic
    
    
    Midwest(1)
    
    
    Southwest(1)
    
    
    California
    
    
    California
    
    
    Segments
    
    
    Segments(2)
    
    
    TotalRevenues
    
    $
    29,354
    
    
    $
    251
    
    
    $
    34,013
    
    
    $
    15,555
    
    
    $
    10,466
    
    
    $
    89,639
    
    
    $
    381
    
    
    $
    90,020Income from continuing
operations
    
    $
    12,111
    
    
    $
    (145
    )
    
    $
    11,090
    
    
    $
    4,872
    
    
    $
    4,183
    
    
    $
    32,111
    
    
    $
    (25,029
    )
    
    $
    7,082Additions to long-lived assets:Development/redevelopment
    
    $
    268
    
    
    $
    171
    
    
    $
    656
    
    
    $
    1,462
    
    
    $
    4,625
    
    
    $
    7,182
    
    
    $
    
    
    
    $
    7,182Purchase of real estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    109,484
    
    
    
    
    
    
    
    109,484
    
    
    
    
    
    
    
    109,484Capital expenditures for
in-service properties
    
    
    1,877
    
    
    
    938
    
    
    
    4,709
    
    
    
    1,888
    
    
    
    1,231
    
    
    
    10,643
    
    
    
    
    
    
    
    10,643Total additions
    
    $
    2,145
    
    
    $
    1,109
    
    
    $
    5,365
    
    
    $
    112,834
    
    
    $
    5,856
    
    
    $
    127,309
    
    
    $
    
    
    
    $
    127,309Investment balance in equity
method investees
    
    $
    
    
    
    $
    
    
    
    $
    4,779
    
    
    $
    
    
    
    $
    
    
    
    $
    4,779
    
    
    $
    
    
    
    $
    4,779Assets
    
    $
    774,633
    
    
    $
    314,166
    
    
    $
    697,445
    
    
    $
    391,827
    
    
    $
    290,658
    
    
    $
    2,468,729
    
    
    $
    77,057
    
    
    $
    2,545,786
 19




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##### Table of Contents



For the Three Months Ended September 30, 2004  (in thousands)
 CorporateNotMid-
    
    
    
    
    
    
    
    
    
    
    Northern
    
    
    Southern
    
    
    Total
    
    
    Allocable To
    
    
    ConsolidatedAtlantic
    
    
    Midwest(1)
    
    
    Southwest(1)
    
    
    California
    
    
    California
    
    
    Segments
    
    
    Segments(2)
    
    
    TotalRevenues
    
    $
    24,563
    
    
    $
    180
    
    
    $
    34,210
    
    
    $
    9,626
    
    
    $
    10,257
    
    
    $
    78,836
    
    
    $
    411
    
    
    $
    79,247Income from continuing
operations
    
    $
    11,280
    
    
    $
    (160
    )
    
    $
    11,391
    
    
    $
    4,568
    
    
    $
    3,904
    
    
    $
    30,983
    
    
    $
    (20,131
    )
    
    $
    10,852Additions to long-lived assets:Development/redevelopment
    
    $
    78
    
    
    $
    664
    
    
    $
    19
    
    
    $
    370
    
    
    $
    5,361
    
    
    $
    6,492
    
    
    $
    
    
    
    $
    6,492Purchase of Real Estate
    
    
    15
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    14,960
    
    
    
    14,988
    
    
    $
    
    
    
    
    14,988Capital expenditures for
in- service properties
    
    
    1,840
    
    
    
    3,017
    
    
    
    4,973
    
    
    
    2,069
    
    
    
    1,569
    
    
    
    13,468
    
    
    
    
    
    
    
    13,468Total additions
    
    $
    1,933
    
    
    $
    3,681
    
    
    $
    5,005
    
    
    $
    2,439
    
    
    $
    21,890
    
    
    $
    34,948
    
    
    $
    
    
    
    $
    34,948Investment balance in equity
method investees
    
    $
    8,736
    
    
    $
    
    
    
    $
    4,170
    
    
    $
    
    
    
    $
    
    
    
    $
    12,906
    
    
    $
    
    
    
    $
    12,906Assets
    
    $
    611,496
    
    
    $
    416,518
    
    
    $
    708,074
    
    
    $
    215,954
    
    
    $
    273,485
    
    
    $
    2,225,527
    
    
    $
    25,421
    
    
    $
    2,250,948
 For the Nine Months Ended September 30, 2005  (in thousands)
 CorporateNotMid-
    
    
    
    
    
    
    
    
    
    
    Northern
    
    
    Southern
    
    
    Total
    
    
    Allocable To
    
    
    ConsolidatedAtlantic
    
    
    Midwest(1)
    
    
    Southwest(1)
    
    
    California
    
    
    California
    
    
    Segments
    
    
    Segments(2)
    
    
    TotalRevenues
    
    $
    83,988
    
    
    $
    880
    
    
    $
    97,302
    
    
    $
    40,060
    
    
    $
    30,731
    
    
    $
    252,961
    
    
    $
    1,698
    
    
    $
    254,659Income from continuing
operations
    
    $
    33,294
    
    
    $
    (583
    )
    
    $
    31,392
    
    
    $
    13,085
    
    
    $
    11,796
    
    
    $
    88,984
    
    
    $
    (65,246
    )
    
    $
    23,738Additions to long-lived assets:Development/redevelopment
    
    $
    326
    
    
    $
    968
    
    
    $
    1,394
    
    
    $
    2,699
    
    
    $
    16,278
    
    
    $
    21,665
    
    
    $
    
    
    
    $
    21,665Purchase of real estate
    
    
    155,040
    
    
    
    
    
    
    
    
    
    
    
    111,369
    
    
    
    
    
    
    
    266,409
    
    
    
    
    
    
    
    266,409Capital expenditures for
in- service properties
    
    
    15,031
    
    
    
    2,270
    
    
    
    15,918
    
    
    
    2,610
    
    
    
    4,378
    
    
    
    40,207
    
    
    
    
    
    
    
    40,207Total additions
    
    $
    170,397
    
    
    $
    3,238
    
    
    $
    17,312
    
    
    $
    116,678
    
    
    $
    20,656
    
    
    $
    328,281
    
    
    $
    
    
    
    $
    328,281
 For the Nine Months Ended September 30, 2004  (in thousands)
 CorporateNotMid-
    
    
    
    
    
    
    
    
    
    
    Northern
    
    
    Southern
    
    
    Total
    
    
    Allocable To
    
    
    ConsolidatedAtlantic
    
    
    Midwest(1)
    
    
    Southwest(1)
    
    
    California
    
    
    California
    
    
    Segments
    
    
    Segments(2)
    
    
    TotalRevenues
    
    $
    72,998
    
    
    $
    800
    
    
    $
    96,572
    
    
    $
    26,412
    
    
    $
    30,351
    
    
    $
    227,133
    
    
    $
    1,701
    
    
    $
    228,834Income from continuing
operations
    
    $
    32,869
    
    
    $
    604
    
    
    $
    34,282
    
    
    $
    11,829
    
    
    $
    10,663
    
    
    $
    90,247
    
    
    $
    (56,292
    )
    
    $
    33,955Additions to long-lived assets:Development/redevelopment
    
    $
    93
    
    
    $
    2,392
    
    
    $
    198
    
    
    $
    371
    
    
    $
    6,340
    
    
    $
    9,394
    
    
    $
    
    
    
    $
    9,394Purchase of real estate
    
    
    15
    
    
    
    
    
    
    
    123,336
    
    
    
    34,780
    
    
    
    32,684
    
    
    
    190,815
    
    
    
    
    
    
    
    190,815Capital expenditures for
in- service properties
    
    
    5,730
    
    
    
    7,534
    
    
    
    12,279
    
    
    
    5,031
    
    
    
    4,069
    
    
    
    34,643
    
    
    
    
    
    
    
    34,643Total additions
    
    $
    5,838
    
    
    $
    9,926
    
    
    $
    135,813
    
    
    $
    40,182
    
    
    $
    43,093
    
    
    $
    234,852
    
    
    $
    
    
    
    $
    234,852
 
 (1)
    
    Segment information, other than revenues and income from continuing operations, is
inclusive of those properties classified as held
for sale in the Midwest and Southwest Regions at September 30, 2005.(2)
    
    Income from continuing operations included in Corporate Not Allocable to Segments
consists of interest expense, general and
administrative and service business expense, and amortization of deferred finance expense not
allocated to segments. The assets not allocated to segments
consist of escrowed funds, marketable securities, deferred financing charges and cash.
 20




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15. Recently Issued Accounting Pronouncements
        21




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16. Pro Forma
   Nine Months EndedPro Forma
    
    September 30,(in thousands)
    
    2005(1)
    
    
    2004Total revenue
    
    $
    268,120
    
    
    $
    253,076Income applicable to common shareholders before discontinued operations
    
    
    23,215
    
    
    
    24,558Net income applicable to common shareholders
    
    
    81,289
    
    
    
    37,726Basic earnings per share:Income applicable to common shareholders before discontinued operations
    
    $
    0.51
    
    
    $
    0.56Net income applicable to common shareholders
    
    $
    1.80
    
    
    $
    0.86Weighted average number of common shares outstanding
    
    
    45,197
    
    
    
    44,170Diluted earnings per share:Income applicable to common shareholders before discontinued operations
    
    $
    0.51
    
    
    $
    0.55Net income applicable to common shareholders
    
    $
    1.79
    
    
    $
    0.85Weighted average number of common shares and common share equivalents outstanding
    
    
    45,459
    
    
    
    44,358
 
 (1) The pro forma results of operations for the nine months ended September 30, 2005
excludes a $2.2 million prepayment penalty due to its non-recurring nature. The $2.2
million loss is included in the line item equity in (loss)/income of unconsolidated joint
ventures and subsidiaries on our consolidated statement of income during the three and
nine months ended September 30, 2005.
 17. Subsequent Events
     22




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23




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
   Number of
    
    
    Net RentableBuildings
    
    
    Square Feet(in thousands)Office properties
    
    
    103
    
    
    
    16,665Industrial properties
    
    
    27
    
    
    
    2,203Total
    
    
    130
    
    
    
    18,868
     Region
    
    Revenues
    
    
    Market(in thousands)Mid-Atlantic
    
    $
    29,354
    
    
    Metropolitan Washington D.C.Midwest
    
    
    251
    
    
    Chicago, Suburban DetroitSouthwest
    
    
    34,013
    
    
    Dallas/Fort Worth, Austin, DenverNorthern California
    
    
    15,555
    
    
    Oakland, East Bay, Silicon ValleySouthern California
    
    
    10,466
    
    
    San Diego, Los AngelesTotal
    
    $
    89,639
 24




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##### Table of Contents



Square Feet(in thousands)
    
    Mid-Atlantic
    
    
    Midwest
    
    
    Southwest
    
    
    Northern California
    
    
    Southern California
    
    
    Total2005
    
    
    79
    
    
    
    30
    
    
    
    71
    
    
    
    57
    
    
    
    145
    
    
    
    382
    
    
    
    2.3
    %2006
    
    
    674
    
    
    
    427
    
    
    
    322
    
    
    
    96
    
    
    
    253
    
    
    
    1,772
    
    
    
    10.5
    %2007
    
    
    488
    
    
    
    112
    
    
    
    861
    
    
    
    343
    
    
    
    682
    
    
    
    2,486
    
    
    
    14.7
    %2008
    
    
    348
    
    
    
    551
    
    
    
    493
    
    
    
    237
    
    
    
    367
    
    
    
    1,996
    
    
    
    11.8
    %2009
    
    
    584
    
    
    
    210
    
    
    
    976
    
    
    
    205
    
    
    
    446
    
    
    
    2,421
    
    
    
    14.4
    %Thereafter
    
    
    1,983
    
    
    
    1,100
    
    
    
    2,956
    
    
    
    1,317
    
    
    
    444
    
    
    
    7,800
    
    
    
    46.3
    %4,156
    
    
    
    2,430
    
    
    
    5,679
    
    
    
    2,255
    
    
    
    2,337
    
    
    
    16,857
    
    
    
    100.0
    %
  Recent Developments
 Merger
     25




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Cityplace Center
   Third Quarter 2005 Transactions
 Real Estate Transactions
    (1)
    
    Pursuant to Statement of Financial Accounting Standards, No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets we classified the properties located within
our Midwest Region as properties held for sale. As a result, we recognized an impairment
charge of $10.2 million representing the excess of the carrying amount of five of our
Chicago properties, containing approximately 322,000 net rentable square feet, over the
estimated fair value of the properties, less the cost to sell.(2)
    
    On September 28, 2005, we completed the sale of one office property containing
approximately 541,000 net rentable square feet, (our 123 North Wacker property) located in
downtown Chicago to an unrelated third party. The property was sold for gross proceeds of
approximately $170.2 million and resulted in a gain on sale of approximately $65.8 million.
Proceeds from the sale were placed in escrow pending the completion of Sec. 1031
like-kind asset exchanges. An amount of $133.0 million was immediately released due to an
already identified and completed acquisition and was used to repay a portion of the
outstanding borrowings under our revolving credit facility. At September 30, 2005, $37.2
million remained in escrow.
 26




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##### Table of Contents



(3)
    
    On October 14, 2005, we completed the sale of four industrial properties containing
approximately 682,000 net rentable square feet, (our Chicago Industrial properties) to an
unrelated third party. The properties were sold for gross proceeds of approximately $30.0
million and resulted in a gain on sale of approximately $14.8 million. The proceeds were
placed in escrow pending a Sec. 1031 like-kind asset exchange.(4)
    
    On October 31, 2005, we completed the sale of our Detroit office property containing
approximately 241,000 net rentable square feet to an unrelated third party. The property
was sold for gross proceeds of approximately $31.9 million and resulted in a gain on sale
of approximately $3.8 million. The proceeds were used to repay a portion of the
outstanding borrowings under our revolving credit facility.
   Three Months Ended
    
    
    Nine Months EndedDiscontinued Operations:
    
    September 30,
    
    
    September 30,(in thousands)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Property revenues:Rental income
    
    $
    16,916
    
    
    $
    16,663
    
    
    $
    50,547
    
    
    $
    57,208Other income
    
    
    10
    
    
    
    16
    
    
    
    42
    
    
    
    57Property revenues
    
    
    16,926
    
    
    
    16,679
    
    
    
    50,589
    
    
    
    57,265Property expenses:Property operating and maintenance
    
    
    4,072
    
    
    
    3,437
    
    
    
    12,610
    
    
    
    14,570Real estate taxes
    
    
    3,269
    
    
    
    3,293
    
    
    
    9,520
    
    
    
    10,252Depreciation and amortization
    
    
    3,090
    
    
    
    4,498
    
    
    
    12,760
    
    
    
    15,446Property expenses
    
    
    10,431
    
    
    
    11,228
    
    
    
    34,890
    
    
    
    40,268Interest expense
    
    
    (2,083
    )
    
    
    (1,785
    )
    
    
    (6,200
    )
    
    
    (6,132
    )Amortization of deferred financing costs
    
    
    (10
    )
    
    
    (5
    )
    
    
    (41
    )
    
    
    (5
    )Loss on impairment of real estate
    
    
    (10,196
    )
    
    
    
    
    
    
    (10,196
    )
    
    
    Income from discontinued operations
    
    $
    (5,794
    )
    
    $
    3,661
    
    
    $
    (738
    )
    
    $
    10,860
   27




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##### Table of Contents



Three Months Ended(in thousands)
    
    September 30, 2005Land
    
    $
    18,422Buildings and improvements
    
    $
    74,489Tenant improvements and leasing commissions
    
    $
    7,710Above/(below) market lease value
    
    $
    (1,523
    )Other intangible assets
    
    $
    10,386
 Other Transactions
       Critical Accounting Policies and Estimates
   28




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##### Table of Contents



(1)
    
    Impairment of long-lived assets and the long-lived assets to be disposed of;(2)
    
    Allowance for doubtful accounts;(3)
    
    Depreciable lives applied to real estate assets and improvements to real estate
assets;(4)
    
    Initial recognition, measurement and allocation of the cost of real estate acquired;
and(5)
    
    Fair value of derivative instruments.
 Impairment of long-lived assets and long-lived assets to be disposed of
  Allowance for doubtful accounts
  Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,(in thousands)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Decrease in allowance for doubtful accounts
    
    $
    (151
    )
    
    $
    (551
    )
    
    $
    (1,708
    )
    
    $
    (3,698
    )Amounts written off during the period
    
    $
    (707
    )
    
    $
    (390
    )
    
    $
    (2,536
    )(1)
    
    $
    (4,469
    )Allowance for doubtful accounts at period end
    
    $
    4,498
    
    
    $
    6,288
    
    
    $
    4,498
    
    
    $
    6,288
 
 (1) Includes a $500,000 loss from impairment of mortgage loan recognized
effective June 30, 2005.
 29




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##### Table of Contents



Depreciable lives applied to real estate assets and improvements to real estate assets
  Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,(in thousands)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Real estate depreciation and amortization from continuing operations
    
    $
    23,070
    
    
    $
    19,870
    
    
    $
    63,852
    
    
    $
    55,689Real estate depreciation and amortization from discontinued operations
    
    $
    3,090
    
    
    $
    4,498
    
    
    $
    12,760
    
    
    $
    15,446
 Initial recognition, measurement and allocation of the cost of real estate acquired
      30




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Nine Months Ended(in thousands)
    
    September 30, 2005Land
    
    $
    41,421Buildings and improvements
    
    $
    181,500Tenant improvements and leasing commissions
    
    $
    23,632Above/(below) market lease value
    
    $
    (5,406
    )Other intangible assets
    
    $
    23,377
 Fair value of derivative instruments
      Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,(in thousands)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Net cash paid under our interest rate swap agreements
    
    $
    551
    
    
    $
    3,364
    
    
    $
    3,125
    
    
    $
    8,685Fair value of interest rate swaps at period end
    
    $
    7,077
    
    
    $
    (4,668
    )
    
    $
    7,077
    
    
    $
    (4,668
    )
 31




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##### Table of Contents



Results of Operations
 Comparison of the three months ended September 30, 2005 to the three months ended September 30, 2004.
  Three Months EndedConsolidated Statements of Income
    
    September 30,(in thousands)
    
    2005
    
    
    2004Revenues:Rental income
    
    $
    86,490
    
    
    $
    76,032Service business and other income
    
    
    3,530
    
    
    
    3,21590,020
    
    
    
    79,247Operating expenses:Property operating and maintenance
    
    
    24,008
    
    
    
    19,881Real estate taxes
    
    
    8,320
    
    
    
    6,441General and administrative and personnel costs
    
    
    4,997
    
    
    
    3,423Expenses of service business
    
    
    3,099
    
    
    
    2,670Depreciation and amortization
    
    
    23,242
    
    
    
    20,01463,666
    
    
    
    52,429Other expenses:Interest expense
    
    
    19,294
    
    
    
    15,795Amortization of deferred financing costs
    
    
    657
    
    
    
    64619,951
    
    
    
    16,441Income from continuing operations before equity in income of
unconsolidated joint ventures and subsidiaries and minority
interests
    
    
    6,403
    
    
    
    10,377Equity in income of unconsolidated joint ventures and subsidiaries
    
    
    697
    
    
    
    616Minority interests
    
    
    (18
    )
    
    
    (141
    )Income from continuing operations
    
    
    7,082
    
    
    
    10,852Discontinued operations:(Loss)/income from discontinued operations
    
    
    (5,794
    )
    
    
    3,661Gain/(loss) from disposition of discontinued operations
    
    
    65,756
    
    
    
    (1,821
    )Loss from debt defeasance related to sale of real estate
    
    
    (68
    )
    
    
    Minority interests related to discontinued operations
    
    
    (2,163
    )
    
    
    (138
    )57,731
    
    
    
    1,702Net income
    
    $
    64,813
    
    
    $
    12,554Preferred dividends
    
    
    (1,581
    )
    
    
    (2,113
    )Net income applicable to common shareholders
    
    $
    63,232
    
    
    $
    10,441
  Acquisition of Real Estate.
 32




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Net Rentable
    
    
    AcquisitionMonth of
    
    
    Number of
    
    
    Square Feet(1)
    
    
    PriceAcquired Properties
    
    Segment
    
    Market
    
    Acquisition
    
    
    Buildings
    
    
    (in thousands)
    
    
    (in millions)Lakeside Point I & II (2)
    
    Midwest
    
    Chicago
    
    Oct. 2004
    
    
    2
    
    
    
    198
    
    
    
    32.62101 Webster
    
    Northern Calif.
    
    Oakland
    
    Oct. 2004
    
    
    1
    
    
    
    459
    
    
    
    65.7Presidents Plaza (2)
    
    Mid-Atlantic
    
    Metro Wash., DC
    
    Feb. 2005
    
    
    2
    
    
    
    197
    
    
    
    51.81676 International Drive (3)
    
    Mid-Atlantic
    
    Metro Wash., DC
    
    May 2005
    
    
    1
    
    
    
    295
    
    
    
    83.88260 Greensboro Drive (3)
    
    Mid-Atlantic
    
    Metro Wash., DC
    
    May 2005
    
    
    1
    
    
    
    161
    
    
    
    19.41333 Broadway (2)
    
    Northern Calif.
    
    Oakland
    
    July 2005
    
    
    1
    
    
    
    238
    
    
    
    40.0Concord Airport Plaza
    
    Northern Calif.
    
    Concord
    
    August 2005
    
    
    2
    
    
    
    350
    
    
    
    69.510
    
    
    
    1,898
    
    
    $
    362.8
 (1)
    
    Net rentable square feet defines the area of a property for which a tenant is
required to pay rent, which includes the actual rentable area plus a portion of the common
areas of the property allocated to a tenant.(2)
    
    Acquisitions were acquired by Prentiss Office Investors, L.P. which is owned 51%
by our operating partnership and its affiliates and 49% by Stichting Pensioenfond ABP. The
net rentable square feet and acquisition price is presented at 100%. Each partner
contributed their pro rata share of the purchase price of each property to Prentiss Office
Investors, L.P. prior to acquisition.(3)
    
    Our operating partnership held a 25% interest in the 1676 International Drive and
8260 Greensboro Drive properties prior to our acquisition of the remaining interest in May
2005. Purchase price represents amount paid for the 75% interest not previously owned.
 Real Estate Dispositions.
  Rental Income.
 Service Business and Other Income.
 Property Operating and Maintenance.
 Real Estate Taxes.
 General and Administrative and Personnel Costs.
 Expense of Service Business.
 Depreciation and Amortization.
 33




---



##### Table of Contents



Interest Expense.
 Equity in income of unconsolidated joint ventures and subsidiaries
 Minority Interests.
 Discontinued Operations.
 34




---



##### Table of Contents



Results of Operations  Comparison of the nine months ended September 30, 2005 to the nine months ended September 30,
2004.
  Nine Months EndedConsolidated Statements of Income
    
    September 30,(in thousands)
    
    2005
    
    
    2004Revenues:Rental income
    
    $
    244,605
    
    
    $
    219,244Service business and other income
    
    
    10,054
    
    
    
    9,590254,659
    
    
    
    228,834Operating expenses:Property operating and maintenance
    
    
    66,745
    
    
    
    55,341Real estate taxes
    
    
    23,784
    
    
    
    20,064General and administrative and personnel costs
    
    
    11,569
    
    
    
    8,793Expenses of service business
    
    
    8,646
    
    
    
    6,785Depreciation and amortization
    
    
    64,354
    
    
    
    56,085175,098
    
    
    
    147,068Other expenses:Interest expense
    
    
    52,772
    
    
    
    45,454Amortization of deferred financing costs
    
    
    1,916
    
    
    
    1,77954,688
    
    
    
    47,233Income from continuing operations before equity in (loss)/income of
unconsolidated joint ventures and subsidiaries, loss on investment in
securities, loss from impairment of mortgage loan and minority interests
    
    
    24,873
    
    
    
    34,533Equity in (loss)/income of unconsolidated joint ventures and subsidiaries
    
    
    (148
    )
    
    
    1,790Loss on investment in securities
    
    
    
    
    
    
    (420
    )Loss from impairment of mortgage loan
    
    
    (500
    )
    
    
    Minority interests
    
    
    (487
    )
    
    
    (1,948
    )Income from continuing operations
    
    
    23,738
    
    
    
    33,955Discontinued operations:(Loss)/income from discontinued operations
    
    
    (738
    )
    
    
    10,860Gain from disposition of discontinued operations
    
    
    65,773
    
    
    
    8,364Loss from debt defeasance related to sale of real estate
    
    
    (68
    )
    
    
    (5,316
    )Minority interests related to discontinued operations
    
    
    (2,371
    )
    
    
    (740
    )62,596
    
    
    
    13,168Income before gain on sale of land and an interest in a real estate
partnership
    
    
    86,334
    
    
    
    47,123Gain on sale of land and an interest in a real estate partnership
    
    
    
    
    
    
    1,222Net income
    
    $
    86,334
    
    
    $
    48,345Preferred dividends
    
    
    (5,807
    )
    
    
    (7,939
    )Net income applicable to common shareholders
    
    $
    80,527
    
    
    $
    40,406
  Acquisition of Real Estate.
 35




---



##### Table of Contents



Net Rentable
    
    
    AcquisitionMonth of
    
    
    Number of
    
    
    Square Feet(1)
    
    
    PriceAcquired Properties
    
    Segment
    
    
    Market
    
    
    Acquisition
    
    
    Buildings
    
    
    (in thousands)
    
    
    (in millions)Cityplace Center
    
    Southwest
    
    Dallas/Ft. Worth
    
    April 2004
    
    
    1
    
    
    
    1,296
    
    
    $
    123.3The Bluffs (2)
    
    Southern Calif.
    
    San Diego
    
    May 2004
    
    
    1
    
    
    
    69
    
    
    
    17.75500 Great America Parkway
    
    Northern Calif.
    
    Silicon Valley
    
    May 2004
    
    
    3
    
    
    
    306
    
    
    
    34.8Lakeside Point I & II (2)
    
    Midwest
    
    Chicago
    
    Oct. 2004
    
    
    2
    
    
    
    198
    
    
    
    32.62101 Webster
    
    Northern Calif.
    
    Oakland
    
    Oct. 2004
    
    
    1
    
    
    
    459
    
    
    
    65.7Presidents Plaza (2)
    
    Mid-Atlantic
    
    Metro Wash., DC
    
    Feb. 2005
    
    
    2
    
    
    
    197
    
    
    
    51.81676 International Drive (3)
    
    Mid-Atlantic
    
    Metro Wash., DC
    
    May 2005
    
    
    1
    
    
    
    295
    
    
    
    83.88260 Greensboro Drive (3)
    
    Mid-Atlantic
    
    Metro Wash., DC
    
    May 2005
    
    
    1
    
    
    
    161
    
    
    
    19.41333 Broadway (2)
    
    Northern Calif.
    
    Oakland
    
    July 2005
    
    
    1
    
    
    
    238
    
    
    
    40.0Concord Airport Plaza
    
    Northern Calif.
    
    Concord
    
    August 2005
    
    
    2
    
    
    
    350
    
    
    
    69.515
    
    
    
    3,569
    
    
    $
    538.6
  (1)
    
    Net rentable square feet defines the area of a property for which a tenant is
required to pay rent, which includes the actual rentable area plus a portion of the common
areas of the property allocated to a tenant.(2)
    
    Acquisitions were acquired by Prentiss Office Investors, L.P. which is owned 51%
by our operating partnership and its affiliates and 49% by Stichting Pensioenfond ABP. The
net rentable square feet and acquisition price is presented at 100%. Each partner
contributed their pro rata share of the purchase price of each property to Prentiss Office
Investors, L.P. prior to acquisition.(3)
    
    Our operating partnership held a 25% interest in the 1676 International Drive and
8260 Greensboro Drive properties prior to our acquisition of the remaining interest in May
2005. Purchase price represents amount paid for the 75% interest not previously owned. Real Estate Dispositions.
 Other Significant Real Estate Transactions.
   Rental Income.
 Service Business and Other Income.
 Property Operating and Maintenance.
 36




---



##### Table of Contents



Real Estate Taxes.
 General and Administrative and Personnel Costs.
 Expense of Service Business.
 Depreciation and Amortization.
 Interest Expense.
 Equity in (loss)/income of unconsolidated joint ventures and subsidiaries
 Loss on Investment in Securities.
 Loss from impairment of mortgage loan.
 Minority Interests.
 Discontinued Operations.
 Gain on sale of a Partnership Interest.
 Liquidity and Capital Resources
   37




---



##### Table of Contents



Debt Financing
   38




---



##### Table of Contents



CurrentBalanceBorrower/Description
    
    (000s)
    
    
    Amortization
    
    
    Interest Rate
    
    
    MaturityConsolidated EntitiesBurnett Plaza AssociatesBurnett Plaza
    
    $
    114,200
    
    
    30 yr
    
    
    5.02
    %
    
    April 1, 2015PL Properties Associates, L.P.Park West C2
    
    
    32,493
    
    
    30 yr
    
    
    6.63
    %
    
    November 10, 2010Prentiss Properties Acquisition Partners, L.P.Highland Court
    
    
    4,247
    
    
    25 yr
    
    
    7.27
    %
    
    April 1, 2006Plaza I & II
    
    
    6,708
    
    
    18 yr
    
    
    7.75
    %
    
    January 1, 2007Revolving Credit Facility
    
    
    91,500
    
    
    None
    
    LIBOR + .950%
    
    July 26, 2008Collateralized Term Loan (1)
    
    
    30,000
    
    
    None
    
    LIBOR + 1.150%
    
    September 30, 2007Unsecured Term Loan  EuroHypo I
    
    
    100,000
    
    
    None
    
    LIBOR + .950%
    
    May 22, 2008Unsecured Term Loan  Commerzbank
    
    
    75,000
    
    
    None
    
    LIBOR + .950%
    
    March 15, 20097101 Wisconsin Avenue
    
    
    19,862
    
    
    30 yr
    
    
    7.25
    %
    
    April 1, 2009Unsecured Term Loan  EuroHypo II
    
    
    13,550
    
    
    30 yr
    
    
    7.46
    %
    
    July 15, 2009The Ordway
    
    
    46,988
    
    
    30 yr
    
    
    7.95
    %
    
    August 1, 2010World Savings Center
    
    
    27,962
    
    
    30 yr
    
    
    7.91
    %
    
    November 1, 2010One OHare Centre
    
    
    38,617
    
    
    30 yr
    
    
    6.80
    %
    
    January 10, 20113130 Fairview Park Drive
    
    
    21,664
    
    
    30 yr
    
    
    7.00
    %
    
    April 1, 2011Research Office Center I-III
    
    
    42,985
    
    
    28 yr
    
    
    7.64
    %
    
    October 1, 2011Concord Airport Plaza
    
    
    43,315
    
    
    25 yr
    
    
    5.25
    %
    
    January 1, 2012Bannockburn Centre
    
    
    25,600
    
    
    30 yr
    
    
    8.05
    %
    
    June 1, 2012Del Mar Loan
    
    
    42,969
    
    
    30 yr
    
    
    7.41
    %
    
    June 1, 20138260 Greensboro & 1676 International Drive
    
    
    100,000
    
    
    30 yr
    
    
    4.84
    %
    
    August 10, 2015Prentiss Properties Capital Trust I Debenture
    
    
    52,836
    
    
    None
    
    LIBOR + 1.250%
    
    March 30, 2035Prentiss Properties Capital Trust II Debenture
    
    
    25,774
    
    
    None
    
    LIBOR + 1.250%
    
    June 30, 2035Prentiss Properties Corporetum, L.P.Corporetum Office Campus (2)
    
    
    24,084
    
    
    30 yr
    
    
    7.02
    %
    
    February 1, 2009Prentiss Properties Real Estate Fund I, L.P.PPREFI Portfolio Loan (2)(3)
    
    
    180,100
    
    
    None
    
    
    7.58
    %
    
    February 26, 2007Prentiss Office Investors, L.P.(4)The Bluffs
    
    
    10,700
    
    
    None
    
    LIBOR + 1.300%
    
    July 23, 2009Collateralized Term Loan  Mass Mutual (5)
    
    
    85,000
    
    
    None
    
    LIBOR + 0.850%
    
    August 1, 2009Lakeside Point I & II
    
    
    20,000
    
    
    None
    
    LIBOR + 1.100%
    
    December 1, 2009Presidents Plaza I & II
    
    
    30,900
    
    
    None
    
    LIBOR + 1.150%
    
    May 4, 20101333 Broadway
    
    
    24,915
    
    
    30 yr
    
    
    5.175
    %
    
    June 1, 2010Prentiss/Collins Del Mar Heights, LLC(6)High Bluff Ridge Construction Loan
    
    
    24,661
    
    
    None
    
    LIBOR + 1.400%
    
    September 1, 2007Total Consolidated Outstanding Debt
    
    $
    1,356,630Unconsolidated EntitiesBroadmoor Austin AssociatesBroadmoor Austin (7)
    
    $
    126,719
    
    
    16 yr
    
    
    7.04
    %
    
    April 10, 2011Total Unconsolidated Outstanding Debt
    
    $
    126,719
  (1)
    
    The Term Loan is collateralized by the following two properties: 8521 Leesburg
Pike and the IBM Call Center. 39




---



##### Table of Contents



(2)
    
    On October 7, 2005, we exercised our right to complete a voluntary defeasance of our
$180.1 million PPREFI portfolio loan and a $24.1 million mortgage loan collateralized by our
Corporetum Office Campus properties. Pursuant to each defeasance, we transferred the mortgage
loan to an unrelated successor entity along with proceeds necessary to acquire U.S. Treasury
Securities sufficient to cover debt service including both interest and principal payments
from the defeasance date through maturity of the loans. Proceeds used to defease the loans
which totaled $216.4 million were funded with borrowings under our revolving credit facility.(3)
    
    The PPREFI Portfolio Loan is collateralized by the following 36 properties: the Los
Angeles industrial properties (18 properties), the Chicago industrial properties (4
properties), the Cottonwood Office Center (3 properties), Park West E1 and E2 (2 properties),
One Northwestern Plaza, 3141 Fairview Park Drive, 13825 Sunrise Valley Drive, OHare Plaza II,
1717 Deerfield Road, 2411 Dulles Corner Road, 4401 Fair Lakes Court, the WestPoint Office
Building and the PacifiCare Building.(4)
    
    Our operating partnership owns a 51% interest in Prentiss Office Investors, L.P.
The accounts of Prentiss Office Investors, L.P. are consolidated with and into the accounts of
the operating partnership. The amounts shown reflect 100% of the debt balance.(5)
    
    The Term Loan is collateralized by the following 9 properties: Camino West Corporate
Park, Carlsbad Airport Plaza, La Place Court (2 properties), Pacific Ridge Corporate Centre (2
properties), Pacific View Plaza, Corporate Lakes III, and 2291 Wood Oak Drive.(6)
    
    Our operating partnership and its affiliates own a 70% interest in Prentiss/Collins
Del Mar Heights, LLC. The accounts of Prentiss/Collins Del Mar Heights, LLC are consolidated
with and into the accounts of the operating partnership. The amount shown reflects 100% of
the debt balance.(7)
    
    We own a 50% non-controlling interest in the entity that owns the Broadmoor Austin
properties, which interest is accounted for using the equity method of accounting. The amount
shown reflects 100% of the non-recourse mortgage indebtedness collateralized by the
properties.   Hedging Activities
   40




---



##### Table of Contents



Swap Rate ReceivedNotional
    
    Swap Rate Paid
    
    
    (Variable) atAmount
    
    (Fixed)
    
    
    September 30, 2005
    
    
    Swap Maturity
    
    
    Fair Value(in thousands)$20 million
    
    
    5.985
    %
    
    
    3.86
    %
    
    March 2006
    
    $
    (154
    )$30 million
    
    
    5.990
    %
    
    
    3.86
    %
    
    March 2006
    
    
    (231
    )$50 million
    
    
    2.270
    %
    
    
    3.86
    %
    
    August 2007
    
    
    1,936$25 million
    
    
    2.277
    %
    
    
    3.86
    %
    
    August 2007
    
    
    965$70 million(1)
    
    
    4.139
    %
    
    
    3.86
    %
    
    August 2008
    
    
    618$30 million
    
    
    3.857
    %
    
    
    3.86
    %
    
    September 2008
    
    
    523$30 million
    
    
    3.819
    %
    
    
    3.86
    %
    
    October 2008
    
    
    555$20 million
    
    
    3.819
    %
    
    
    3.86
    %
    
    October 2008
    
    
    370$50 million
    
    
    3.935
    %
    
    
    3.86
    %
    
    May 2009
    
    
    922$30 million
    
    
    3.443
    %
    
    
    3.86
    %
    
    October 2009
    
    
    1,170$20 million (1)
    
    
    4.000
    %
    
    
    3.86
    %
    
    February 2010
    
    
    403Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    7,077
  (1)
    
    The interest rate swap agreement was executed by Prentiss Office Investors,
L.P., a partnership which is 51% owned by our operating partnership.  Capital Improvements
  Equity Financing
  Common shares outstanding at June 30, 2005
    
    
    45,174,605Common shares issued:Conversion of operating partnership units
    
    
    46,981Conversion of preferred shares
    
    
    950,000Dividend Reinvestment and Share Purchase Plan
    
    
    995Trustees Share Incentive Plan
    
    
    855Share options exercised
    
    
    119,4551,118,286Common shares placed in treasury/issued from treasury:Common shares surrendered in connection with share options exercised
    
    
    (27,548
    )Common shares placed in treasury in connection with our Key
Employee Share Option Plan
    
    
    (902
    )Common shares issued from treasury in connection with our Key
Employee Share Option Plan
    
    
    2,943Common shares outstanding at September 30, 2005
    
    
    46,267,384
 41




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##### Table of Contents



Off-Balance Sheet Arrangements
     Summary of Financial Position:
    
    
    
    
    
    
    
    
    
    
    
    
    
    Companys(in thousands)
    
    Total Assets
    
    
    Total Debt(1)
    
    
    Total Equity
    
    
    InvestmentBroadmoor Austin Associates
    
    $
    96,153
    
    
    $
    126,719
    
    
    $
    (33,308
    )
    
    $
    4,779Other Investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,360$
    7,139
  CompanysSummary of Operations for the Three Months Ended September 30, 2005:
    
    Total
    
    
    Net
    
    
    Share of Net(in thousands)
    
    Revenue
    
    
    Income
    
    
    IncomeBroadmoor Austin Associates
    
    $
    5,646
    
    
    $
    1,394
    
    
    $
    697$
    697
 CompanysSummary of Operations for the Nine Months Ended September 30, 2005:
    
    Total
    
    
    Net
    
    
    Share of Net(in thousands)
    
    Revenue
    
    
    Income
    
    
    IncomeBroadmoor Austin Associates
    
    $
    16,938
    
    
    $
    4,135
    
    
    $
    2,068Tysons International Partners(2)
    
    
    4,228
    
    
    
    (8,864
    )
    
    
    (2,216
    )$
    (148
    )
  (1)
    
    The mortgage debt, which is non-recourse, is collateralized by the individual
real estate properties within the venture. Our proportionate share of the non-recourse
mortgage debt totaled $63.4 million at September 30, 2005.(2)
    
    At December 31, 2004, we owned a 25% non-controlling interest in Tysons
International Partners, an entity, which owns two office properties containing 456,000 net
rentable square feet in the Northern Virginia area. On May 2, 2005, we acquired the remaining
75% interest in the properties owned by the joint venture. Prior to our acquisition of the
remaining 75% for $103.2 million, we contributed to the joint venture $14.7 million
representing our pro rata share of the outstanding indebtedness on the properties. As a
condition of closing, out of proceeds from the sale and our capital contribution, the joint
venture prepaid the outstanding indebtedness collateralized by the properties. The prepayment
amount totaled $67.6 million of which $8.8 million represented a prepayment penalty. Net
income for Tysons International Partners for the nine months ended September 30, 2005 includes
the $8.8 million loss from debt prepayment but excludes the gain on sale resulting from our
acquisition of the remaining 75% interest in the joint venture.  42




---



##### Table of Contents



Contractual Obligations and Commercial Commitments
  Contractual Obligations
    
    Payments Due by Period(in thousands)
    
    Total
    
    
    2005
    
    
    2006/2007
    
    
    2008/2009
    
    
    ThereafterMortgages and notes payable
    
    $
    1,356,630
    
    
    $
    1,792
    
    
    $
    260,258
    
    
    $
    456,302
    
    
    $
    638,278Capital lease obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ground leases
    
    
    30,137
    
    
    
    105
    
    
    
    841
    
    
    
    848
    
    
    
    28,343Unconditional purchase obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other long-term obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    1,386,767
    
    
    $
    1,897
    
    
    $
    261,099
    
    
    $
    457,150
    
    
    $
    666,621
  Payments Due by Period(in thousands)
    
    Total
    
    
    2005
    
    
    2006/2007
    
    
    2008/2009
    
    
    ThereafterInterest payable(1)
    
    
    460,401
    
    
    
    20,404
    
    
    
    147,207
    
    
    
    101,693
    
    
    
    191,097
  (1)
    
    Interest payable under our variable rate loans is calculated using a
variable interest rate at September 30, 2005 which is equal to 30-day LIBOR of 3.86%
plus our spread over LIBOR which ranges between 85 basis points and 140 basis
points.     Commitment Expiration by PeriodOther Commercial Commitments
    
    Total Amounts(in thousands)
    
    Committed
    
    
    2005
    
    
    2006/2007
    
    
    2008/2009
    
    
    ThereafterStandby letters of credit
    
    $
    9,279
    
    
    $
    63
    
    
    $
    2,626
    
    
    $
    
    
    
    $
    6,590
  43




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##### Table of Contents



Funds from Operations
   Three Months Ended
    
    
    Nine Months EndedFunds from operations
    
    September 30,
    
    
    September 30,( in thousands)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Net income
    
    $
    64,813
    
    
    $
    12,554
    
    
    $
    86,334
    
    
    $
    48,345Adjustments:Real estate depreciation and amortization(1)
    
    
    26,160
    
    
    
    24,368
    
    
    
    76,612
    
    
    
    71,135Minority interests(2)
    
    
    2,132
    
    
    
    333
    
    
    
    2,639
    
    
    
    1,367Minority interests share of depreciation and
amortization
    
    
    (1,664
    )
    
    
    (1,181
    )
    
    
    (4,673
    )
    
    
    (3,305
    )Pro rata share of joint venture depreciation and
amortization
    
    
    531
    
    
    
    749
    
    
    
    1,881
    
    
    
    2,229Gain on sale of real estate and interests in real
estate partnerships
    
    
    (65,756
    )
    
    
    1,821
    
    
    
    (65,773
    )
    
    
    (9,586
    )Funds from operations(3)
    
    $
    26,216
    
    
    $
    38,644
    
    
    $
    97,020
    
    
    $
    110,185
  (1)
    
    Includes real estate depreciation and amortization included in continuing
operations and real estate depreciation and amortization included in discontinued operations.(2)
    
    Represents the minority interests applicable to the common unit holders of the
operating partnership.(3)
    
    Impairment losses and debt defeasance related to real estate are not
added back in our reconciliation of net income to funds from operations; therefore, for
periods in which impairment losses or debt defeasance are recognized, funds from operations is
negatively impacted. We recognized an impairment loss on our Corporetum assets of $10.2
million and a $68,000 loss on debt prepayment for the three and nine months ended September
30, 2005. In addition, we recognized an impairment loss on a mortgage loan of $500,000 and a
loss on debt prepayment of $2.2 million during the nine months ended September 30, 2005. We
recognized debt defeasance of $5.3 million during the nine months ended September 30, 2004.  44




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##### Table of Contents



Recently Issued Accounting Pronouncements
        45




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
   (dollars in thousands)
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    Thereafter
    
    
    Total
    
    
    Fair ValueLiabilitiesLong-Term Debt:Fixed Rate
    
    $
    1,792
    
    
    $
    11,510
    
    
    $
    194,086
    
    
    $
    9,456
    
    
    $
    64,646
    
    
    $
    528,768
    
    
    $
    810,258
    
    
    $
    843,977Average Interest
Rate
    
    
    6.67
    %
    
    
    6.66
    %
    
    
    6.40
    %
    
    
    6.34
    %
    
    
    6.27
    %
    
    
    5.64
    %
    
    
    
    
    
    
    Variable Rate
    
    $
    
    
    
    $
    
    
    
    $
    54,662
    
    
    $
    191,500
    
    
    $
    190,700
    
    
    $
    109,510
    
    
    $
    546,372
    
    
    $
    546,372Average Interest
Rate
    
    
    4.96
    %
    
    
    4.96
    %
    
    
    4.95
    %
    
    
    4.95
    %
    
    
    5.03
    %
    
    
    5.18
    %
    
    
    
    
    
    
    Interest Rate DerivativesInterest Rate Swaps:Variable to Fixed
    
    $
    
    
    
    $
    50,000
    
    
    $
    75,000
    
    
    $
    150,000
    
    
    $
    80,000
    
    
    $
    20,000
    
    
    $
    375,000
    
    
    $
    7,077Average Pay Rate
    
    
    3.86
    %
    
    
    3.59
    %
    
    
    3.66
    %
    
    
    3.88
    %
    
    
    3.77
    %
    
    
    4.00
    %
    
    
    
    
    
    
    Average Receive Rate
    
    
    3.86
    %
    
    
    3.86
    %
    
    
    3.86
    %
    
    
    3.86
    %
    
    
    3.86
    %
    
    
    3.86
    %
    
    
    
    
    
    
    
 
 Item 4. Controls and Procedures
   46




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##### Table of Contents



PART II
OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Total Number ofShares Purchased as
    
    
    Maximum Number of Shares thatPart of Publicly
    
    
    May Yet Be PurchasedTotal Number of
    
    
    Average Price Paid
    
    
    Announced
    
    
    Under thePeriod
    
    Shares Purchased(1)
    
    
    per Share
    
    
    Plans or Programs
    
    
    Plans or Programs(2)July 1, 2005 
July 31, 2005
    
    
    902
    
    
    $
    39.40
    
    
    
    
    
    
    
    997,200August 1, 2005 
August 31, 2005
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    September 1,
2005 
September 30, 2005
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    Total
    
    
    902
    
    
    $
    39.40
    
    
    
    
    
    
    
    997,200
  (1)
    
    During July 2005, we purchased 902 of our common shares pursuant to our Key Employee
Share Option Plan.(2)
    
    During 1998, our board of trustees authorized the repurchase of up to 2.0 million
common shares in the open market or negotiated private transactions. On January 4, 2000, the
board of trustees authorized a 1.5 million-share increase in the share repurchase program
bringing the total authorization to 3.5 million common shares. On May 9, 2001, the board of
trustees authorized an additional 1.0 million-share increase in the share repurchase program
bringing the total authorization to 4.5 million shares. Since inception of the repurchase
program, through September 30, 2005, we have purchased 3,502,800 common shares and pursuant to
current authorization, we have the ability to repurchase an additional 997,200 in the future. 
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  47




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##### Table of Contents



Item 6. Exhibits
 2.1
    
    Agreement and Plan of Merger, dated as of October 3, 2005, by and among Prentiss, Prentiss
OP, Brandywine, Brandywine OP, Brandywine Cognac I, LLC and Brandywine Cognac II, LLC
(incorporated by reference to Exhibit 2.1 of Brandywines Current Report on Form 8-K filed on
October 4, 2005).3.1
    
    Amended and Restated Declaration of Trust of the Registrant (filed as Exhibit 3.1 to our Form
10-K, filed on March 15, 2004, File No. 001-14516).3.2
    
    Second Amended and Restated Bylaws of the Registrant. (filed as Exhibit 3.2 to our Quarterly
Report on Form 10-Q, filed on September 30, 2004, File No. 001-14516 and incorporated by
reference herein).3.3
    
    Articles Supplementary, dated February 17, 1998, Classifying and Designating a Series of
Preferred Shares of Beneficial Interest as Junior Participating Cumulative Convertible
Redeemable Preferred Shares of Beneficial Interest, Series B, and Fixing Distribution and
Other Preferences and Rights of Such Shares (filed as an Exhibit to our Registration Statement
on Form 8-A, filed on February 17, 1998, File No. 000-23813 and incorporated by reference
herein).3.4
    
    Articles Supplementary, dated June 25, 1998, Classifying and Designating a Series of
Preferred Shares of Beneficial Interest as Series B Cumulative Redeemable Perpetual Preferred
Shares of Beneficial Interest and Fixing Distribution and Other Preferences and Rights of Such
Shares (filed as Exhibit 3.5 to our Form 10-Q, filed on August 12, 1998, File No. 001-14516).3.5
    
    Articles Supplementary, dated March 20, 2001 (filed as Exhibit 3.6 to our Form 10-K, filed
March 27, 2001, File No. 001-14516, and incorporated by reference herein).3.6
    
    Articles Supplementary Classifying and Designating a Series of Preferred Shares of Beneficial
Interest as Series D Cumulative Convertible Redeemable Preferred Shares of Beneficial Interest
and Fixing Distribution and Other Preferences and Rights of such Shares, dated March 20, 2001
(filed as Exhibit 3.7 to our Form 10-K, filed March 27, 2001, File No. 001-14516, and
incorporated by reference herein).3.7
    
    Articles Supplementary, dated January 4, 2002 (filed as Exhibit 3.7 to our Form 10-K, filed
March 27, 2002, File No. 001-14516, and incorporated by reference herein).3.8
    
    Articles Supplementary, dated February 24, 2004, declassifying the Series B Cumulative
Redeemable Perpetual Preferred Shares (filed as Exhibit 3.10 to our Form 10-K, filed on March
15, 2004, File No. 001-14516).4.1
    
    Form of Common Share Certificate (filed as Exhibit 4.1 to our Registration Statement on
Amendment No. 1 of Form S-11, File No. 333-09863, and incorporated by reference herein).4.2
    
    Amended and Restated Rights Agreement, dated January 22, 2002, between Prentiss Properties
Trust and EquiServe Trust Company, N.A., as Rights Agent (filed as Exhibit 1 to Amendment No.
2 to our Registration Statement on Form 8-A, filed on February 6, 2002, File No. 000-014516).4.3
    
    First Amendment dated June 26, 2002 to the Amended and Restated Rights Agreement between
Prentiss Properties Trust and Equiserve Trust Company, N.A. as Rights Agent (filed as Exhibit 2 to
Amendment No. 3 our Registration Statement on Form 8-A, filed on June 27, 2002. File No.
001-014516).4.4
    
    Second Amendment, dated October 21, 2003, to the Amended and Restated Rights Agreement
between Prentiss Properties Trust and Equiserve Trust Company, N.A. as Rights Agent (filed as
Exhibit 3 to Amendment No. 4 to our Registration Statement on Form 8-A, filed on January 26, 2004
File No. 001- 014516).4.5
    
    Third Amendment, dated February 14, 2005, to the Amended and Restated Rights Agreement
between Prentiss Properties Trust and Equiserve Trust Company, N.A. as Rights Agent (filed as
Exhibit 4 to Amendment No. 5 to our Registration Statement on Form 8-A, filed on February 16, 2005,
File No. 001-014516 and incorporated by reference herein).
 48




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##### Table of Contents



4.6
    
    Fourth Amendment to the Amended and Restated Rights Agreement, dated October 3, 2005,
between Prentiss and Computershare Shareholder Services, Inc. (incorporated by reference to Exhibit
4.1 of the Companys Current Report on Form 8-K filed on October 4, 2005).4.7
    
    Form of Rights Certificate (included as Exhibit A to the Rights Agreement (Exhibit 4.2)).4.8
    
    Form of Series D Preferred Share Certificate (filed as Exhibit 4.4 to our Form 10-K, filed
March 27, 2001, File No. 001-14516, and incorporated by reference herein).10.1*
    
    Third Amended and Restated Credit Agreement, dated as of July 26, 2005, by and among
Prentiss Properties Acquisition Partners, L.P., JP Morgan Chase Bank, NA, Bank of America, NA,
and the lenders named therein.10.2*
    
    Second Amended and Restated Credit Agreement, dated August, 3, 2005, by and among Prentiss
Properties Acquisition Partners, L.P., EuroHypo AG, New York Branch, JP Morgan Chase Bank,
N.A. and the lenders named therein.10.3
    
    Master Agreement, dated as of October 3, 2005, by and between Brandywine OP and Prudential
(incorporated by reference to Exhibit 10.4 of Brandywines Current Report on Form 8-K filed on
October 4, 2005).10.4
    
    Asset Purchase Agreement, dated as of October 3, 2005, between Prentiss and Prudential
(incorporated by reference to Exhibit 10.5 of Brandywines Current Report on Form 8-K filed on
October 4, 2005).10.5
    
    Registration Rights Agreement,
dated October 3, by and between Brandywine, Brandywine OP and
Michael V. Prentiss (incorporated by reference to Exhibit 10.6 of Brandywines Current Report
on Form 8-K filed on October 4, 2005).10.6
    
    Voting Agreement, dated as of October 3, 2005, by and among Brandywine, Brandywine OP and
Michael V. Prentiss (incorporated by reference to Exhibit 10.2 of Brandywines Current Report
on Form 8-K filed on October 4, 2005).10.7
    
    Voting Agreement, dated as of October 3, 2005, by and among Brandywine, Brandywine OP and
Thomas F. August (incorporated by reference to Exhibit 10.3 of Brandywines Current Report on
Form 8-K filed on October 4, 2005).10.8+
    
    First Amendment to Third Amended and Restated Employment Agreement of Michael V. Prentiss,
dated October 3, 2005 (incorporated by reference to Exhibit 4.1 of the Companys Current
Report on Form 8-K filed on October 4, 2005).10.9+
    
    First Amendment to Amended and Restated Employment Agreement of Thomas F. August, dated
October 3, 2005 (incorporated by reference to Exhibit 4.1 of the Companys Current Report on
Form 8-K filed on October 4, 2005).10.10+
    
    Prentiss Change in Control Severance Protection Plan for Key Employees (incorporated by
reference to Exhibit 4.1 of the Companys Current Report on Form 8-K filed on October 4,
2005).10.11+
    
    Prentiss Change in Control Severance Protection Plan for Hourly and Salaried Non-Officer
Employees (incorporated by reference to Exhibit 4.1 of the Companys Current Report on Form
8-K filed on October 4, 2005).10.12
    
    Option Agreement, dated October 3, 2005, by and between Michael V. Prentiss and Prentiss
Properties Continental, L.L.C. (incorporated by reference to Exhibit 4.1 of the Companys
Current Report on Form 8-K filed on October 4, 2005).31.1*
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2*
    
    Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 49




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##### Table of Contents



*
    
    Filed herewith.+
    
    Management contract or compensation plan, contract or arrangement. 50




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##### Table of Contents



SIGNATURE
  PRENTISS PROPERTIES TRUSTDate: November 7, 2005
    
    By:
    
    /s/ Scott W. FordhamScott W. Fordham
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer and Duly Authorized
Officer of the Company)
 51