**UNITED STATESSECURITIES AND EXCHANGE COMMISSION****Washington, D.C.  20549**

** **

**FORM 10-Q**

 

**(Mark One)**

** **

| **ý**                                                                                                                                                              | ** ** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------|
| ** **                                                                                                                                                              |
| **For the quarterly period ended September 30,  2004**                                                                                                                  |
|                                                                                                                                                                    |
| **OR**                                                                                                                                                                  |
| ** **                                                                                                                                                              |
| **o**                                                                                                                                                                   | ** ** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** **                                                                                                                                                              |
| **For the transition period from             to            .** |

 

**Commission File Number: 0-20625**

 

**DUKEREALTY LIMITED PARTNERSHIP**

 

| State  of Incorporation: |       | IRS  Employer Identification Number: |
|--------------------------|------------|--------------------------------------|
| **Indiana**              | ** ** | **35-1898425**                       |

 

**600 East 96th Street, Suite 100**

**Indianapolis, Indiana 46240**

 

**Telephone: (317) 808-6000**

(Address, including zip code and telephone number, including area code,of principal executive offices)

 

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.

 

Yes ý  No o

 

Indicate by check mark whether the registrant is anaccelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act).

 

Yes o  No ý

 

The number of Common Units outstanding as of November 1, 2004 was156,355,511.

 

 

----

 

**DUKE REALTY LIMITED PARTNERSHIP**

 

**INDEX**

 
| **Part I — Financial  Information** | ** **                                                                                                                    |
|------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------|
|                                     |                                                                                                                          |
| **Item 1.**                              | **Financial Statements**                                                                                                      |   |
|                                     |                                                                                                                          |   |
|                                     | Condensed  Consolidated Balance Sheets as of  September 30, 2004 (Unaudited) and December 31, 2003                            |   |
|                                     |                                                                                                                          |   |
|                                     | Condensed  Consolidated Statements of Operations (Unaudited)  for the three and nine months ended September 30, 2004 and 2003 |   |
|                                     |                                                                                                                          |   |
|                                     | Condensed  Consolidated Statements of Cash Flows (Unaudited)  for the nine months ended September 30, 2004 and 2003           |   |
|                                     |                                                                                                                          |   |
|                                     | Condensed  Consolidated Statement of Partners’ Equity  (Unaudited) for the nine months ended September 30, 2004          |   |
|                                     |                                                                                                                          |   |
|                                     | Notes  to Condensed Consolidated Financial Statements  (Unaudited)                                                            |   |
|                                     |                                                                                                                          |   |
|                                     | Report  of Independent Registered Public Accounting Firm                                                                      |   |
|                                     |                                                                                                                          |   |
| **Item  2.**                             | **Management’s  Discussion and Analysis of FinancialCondition and Results of Operations**                                |   |
|                                     |                                                                                                                          |   |
| **Item  3.**                             | **Quantitative  and Qualitative Disclosures About Market Risk**                                                               |   |
|                                     |                                                                                                                          |   |
| **Item 4.**                              | **Controls and  Procedures**                                                                                                  |   |
|                                     |                                                                                                                          |   |
| **Part II - Other Information**          |                                                                                                                          |
|                                     |                                                                                                                          |   |   |
|                                     | Item 1.                                                                                                                       | Legal Proceedings |   |
|                                     | Item  2.                                                                                                                      | Unregistered  Sales of Equity Securities and Use of Proceeds |   |
|                                     | Item 3.                                                                                                                       | Defaults Upon  Senior Securities |   |
|                                     | Item  4.                                                                                                                      | Submission  of Matters to a Vote of Security Holders |   |
|                                     | Item 5.                                                                                                                       | Other Information |   |
|                                     | Item 6.                                                                                                                       | Exhibits and  Reports on Form 8-K |   |

 

----

 

**PART I - FINANCIALINFORMATION**

**Item 1.  Financial Statements**

**DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES**

**Condensed ConsolidatedBalance Sheets**

**(in thousands)**

 
| ** **                                                                                | ** ** | **September 30,** | ** **    | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------|------------|-------------------|---------------|------------------|------------|
| ** **                                                                                | ** ** | **2004**          | ** **    | **2003**         | ** ** |
| ** **                                                                                | ** ** | **(Unaudited)**   | ** **    | ** **       | ** ** |
| **ASSETS**                                                                                |       |              |          |             |       |
| Real estate investments:                                                                  |       |              |          |             |       |
| Land and improvements                                                                     | ** ** | **$**             | **708,142**   |             | $          | 641,544 |   |
| Buildings and tenant improvements                                                         | ** ** | **4,665,019**     |          | 4,452,624        |       |
| Construction in progress                                                                  | ** ** | **98****,690**    |          | 119,441          |       |
| Investments in unconsolidated companies                                                   | ** ** | **287,827**       |          | 295,837          |       |
| Land held for development                                                                 | ** ** | **381,358**       |          | 314,446          |       |
| ** **                                                                                |       | **6****,141,036** |          | 5,823,892        |       |
| Accumulated depreciation                                                                  | ** ** | **(764,745**      | )             | (677,357         | )          |
|                                                                                      |       |              |          |             |       |
| Net real estate investments                                                               | ** ** | **5,376,291**     |          | 5,146,535        |       |
|                                                                                      |       |              |          |             |       |
| Cash and cash equivalents                                                                 |       | **—**        |          | 12,695           |       |
| Accounts receivable, net of allowance of $1,971 and $2,430                                | ** ** | **15,374**        |          | 16,215           |       |
| Straight-line rent receivable, net of allowance of $1,240 and $1,240                      | ** ** | **83,987**        |          | 71,049           |       |
| Receivables on construction contracts                                                     | ** ** | **53,748**        |          | 44,905           |       |
| Deferred financing costs, net of accumulated amortization of $8,369  and $10,703          | ** ** | **39****,647**    |          | 13,358           |       |
| Deferred leasing and other costs, net of accumulated amortization of  $83,326 and $67,317 | ** ** | **202****,346**   |          | 158,562          |       |
| Escrow deposits and other assets                                                          | ** ** | **108,517**       |          | 95,392           |       |
| ** **                                                                                |       | **$**             | **5,879,910** |             | $          | 5,558,711 |   |
| **LIABILITIES AND PARTNERS’ EQUITY**                                                 |       |              |          |             |       |
|                                                                                      |       |              |          |             |       |
| Indebtedness:                                                                             |       |              |          |             |       |
| Secured debt                                                                              | ** ** | **$**             | **204,942**   |             | $          | 208,649 |   |
| Unsecured notes                                                                           | ** ** | **2****,115,687** |          | 1,775,887        |       |
| Unsecured lines of credit                                                                 | ** ** | **339,000**       |          | 351,000          |       |
| ** **                                                                                |       | **2,659,629**     |          | 2,335,536        |       |
|                                                                                      |       |              |          |             |       |
| Construction payables and amounts due subcontractors                                      | ** ** | **76****,126**    |          | 60,789           |       |
| Accounts payable                                                                          | ** ** | **6****,904**     |          | 2,268            |       |
| Accrued expenses:                                                                         |       |              |          |             |       |
| Real estate taxes                                                                         | ** ** | **78****,182**    |          | 52,955           |       |
| Interest                                                                                  | ** ** | **25****,904**    |          | 33,259           |       |
| Other                                                                                     | ** ** | **38****,703**    |          | 49,029           |       |
| Other liabilities                                                                         | ** ** | **107,206**       |          | 107,321          |       |
| Tenant security deposits and prepaid rents                                                | ** ** | **32,765**        |          | 37,975           |       |
| Total liabilities                                                                         | ** ** | **3****,025,419** |          | 2,679,132        |       |
|                                                                                      |       |              |          |             |       |
| Minority interest                                                                         | ** ** | **72**            |          | 1,259            |       |
|                                                                                      |       |              |          |             |       |
| Partners’ equity:                                                                    |       |              |          |             |       |
| General Partner                                                                           |       |              |          |             |       |
| Common equity                                                                             | ** ** | **2,229,613**     |          | 2,153,844        |       |
| Preferred equity (liquidation preference of $457,250)                                     | ** ** | **423,409**       |          | 511,785          |       |
| ** **                                                                                |       | **2,653,022**     |          | 2,665,629        |       |
| Limited Partners’ common equity                                                      | ** ** | **201,265**       |          | 212,691          |       |
| Accumulated other comprehensive income                                                    | ** ** | **132**           |          | —           |       |
| ** **                                                                                |       | **2,854,419**     |          | 2,878,320        |       |
| ** **                                                                                |       | **$**             | **5,879,910** |             | $          | 5,558,711 |   |
|                                                                                           |            |                   |               |                  |            |  |  |  |  |  |  |

 

See accompanying Notes to Condensed Consolidated Financial Statements

 

2

----

 

**DUKE REALTY LIMITED PARTNERSHIPAND SUBSIDIARIES**

**Condensed ConsolidatedStatements of Operations**

**For the three and nine months ended September 30,**

** (in thousands, except per unitamounts)**

**(Unaudited)**

 
| ** **                                                               | ** ** | **Three Months Ended** |        | **Nine Months Ended** | ** ** |
|--------------------------------------------------------------------------|------------|------------------------|-------------|-----------------------|------------|
| ** **                                                               | ** ** | **2004**               | ** **  | **2003**              |       | **2004** | ** ** | **2003** | ** ** |
| **RENTAL OPERATIONS:**                                                   |       |                   | ** **  |                  |       |   | ** ** |   |   |
| Revenues:                                                                |       |                   | ** **  |                  |       |   | ** ** |   |   |
| Rental income                                                            | ** ** | **$**                  | **188,739** | ** **            | $          | 171,297 |   | **$** | **554,514** | ** ** | $ | 513,332 |   |
| Equity in earnings of unconsolidated companies                           | ** ** | **6,220**              | ** **  | 7,368                 |       | **16,515** | ** ** | 18,330 |   |
| ** **                                                               |       | **194,959**            | ** **  | 178,665               |       | **571****,029** | ** ** | 531,662 |   |
| Operating expenses:                                                      |       |                   | ** **  |                  |       |   | ** ** |   |   |
| Rental expenses                                                          | ** ** | **40****,971**         | ** **  | 35,101                |       | **1****17,418** | ** ** | 106,600 |   |
| Real estate taxes                                                        | ** ** | **22,403**             | ** **  | 17,834                |       | **65****,158** | ** ** | 58,189 |   |
| Interest expense                                                         | ** ** | **34,423**             | ** **  | 30,273                |       | **99****,755** | ** ** | 95,116 |   |
| Depreciation and amortization                                            | ** ** | **61,447**             | ** **  | 46,163                |       | **164,109** | ** ** | 136,526 |   |
| ** **                                                               |       | **159,244**            | ** **  | 129,371               |       | **446****,440** | ** ** | 396,431 |   |
| Earnings from rental operations                                          | ** ** | **35,715**             | ** **  | 49,294                |       | **124,589** | ** ** | 135,231 |   |
|                                                                     |       |                   | ** **  |                  |       |   | ** ** |   |   |
| **SERVICE OPERATIONS**                                                   |       |                   | ** **  |                  |       |   | ** ** |   |   |
| Revenues:                                                                |       |                   | ** **  |                  |       |   | ** ** |   |   |
| General contractor gross revenue                                         | ** ** | **90****,932**         | ** **  | 79,018                |       | **263,388** | ** ** | 196,679 |   |
| General contractor costs                                                 | ** ** | **(84,368**            | **)**       | (71,420               | )          | **(243,646** | **)** | (176,854 | ) |
| Net general contractor revenue                                           | ** ** | **6,564**              | ** **  | 7,598                 |       | **19,742** | ** ** | 19,825 |   |
| Property management, maintenance and leasing fees                        | ** ** | **3,742**              | ** **  | 3,409                 |       | **11****,532** | ** ** | 10,951 |   |
| Construction management and development activity income                  | ** ** | **4,794**              | ** **  | 122                   |       | **9****,424** | ** ** | 839 |   |
| Other income                                                             | ** ** | **2,334**              | ** **  | 1,324                 |       | **2,910** | ** ** | 1,441 |   |
| Total revenue                                                            | ** ** | **17,434**             | ** **  | 12,453                |       | **43****,608** | ** ** | 33,056 |   |
|                                                                     |       |                   | ** **  |                  |       |   | ** ** |   |   |
| Operating expenses                                                       | ** ** | **11,093**             | ** **  | 8,137                 |       | **30,502** | ** ** | 22,168 |   |
| Total earnings from service operations                                   | ** ** | **6,341**              | ** **  | 4,316                 |       | **13,106** | ** ** | 10,888 |   |
|                                                                     |       |                   | ** **  |                  |       |   | ** ** |   |   |
| General and administrative expense                                       | ** ** | **(6,890**             | **)**       | (4,612                | )          | **(20,839** | **)** | (15,455 | ) |
| Operating income                                                         | ** ** | **35****,166**         | ** **  | 48,998                |       | **116****,856** | ** ** | 130,664 |   |
|                                                                     |       |                   | ** **  |                  |       |   | ** ** |   |   |
| **OTHER INCOME (EXPENSE)**                                               |       |                   | ** **  |                  |       |   | ** ** |   |   |
| Interest income                                                          | ** ** | **1,223**              | ** **  | 808                   |       | **4****,325** | ** ** | 2,681 |   |
| Earnings from sale of land and ownership interest in                     |       |                   | ** **  |                  |       |   | ** ** |   |   |
| unconsolidated companies, net of impairment adjustment                   | ** ** | **3****,387**          | ** **  | 1,394                 |       | **8****,940** | ** ** | 12,539 |   |
| Other revenue (expense)                                                  | ** ** | **(260**               | **)**       | 421                   |       | **(334** | **)** | (138 | ) |
| Other minority interest in earnings of subsidiaries                      | ** ** | **(275**               | **)**       | (296                  | )          | **(1,007** | **)** | (768 | ) |
| Income from continuing operations                                        | ** ** | **39,241**             | ** **  | 51,325                |       | **128,780** | ** ** | 144,978 |   |
|                                                                     |       |                   | ** **  |                  |       |   | ** ** |   |   |
| Discontinued operations:                                                 |       |                   | ** **  |                  |       |   | ** ** |   |   |
| Net income from discontinued operations                                  | ** ** | **1,073**              | ** **  | 819                   |       | **1,526** | ** ** | 5,042 |   |
| Gain on sale of discontinued operations and net of impairment adjustment |       | **14,873**             | ** **  | 3,338                 |       | **19,757** | ** ** | 5,821 |   |
| Income from discontinued operations                                      | ** ** | **15,946**             | ** **  | 4,157                 |       | **21,283** | ** ** | 10,863 |   |
| Net income                                                               | ** ** | **55****,187**         | ** **  | 55,482                |       | **150****,063** | ** ** | 155,841 |   |
| Preferred unit distributions                                             | ** ** | **(8,320**             | **)**       | (10,816               | )          | **(24,321** | **)** | (31,124 | ) |
| Adjustment for redemption of preferred units                             | ** ** | **—**             | ** **  | —                |       | **(3,645** | **)** | — |   |
| Net income available for common unitholders                              | ** ** | **$**                  | **46,867**  | ** **            | $          | 44,666 |   | **$** | **122,097** | ** ** | $ | 124,717 |   |
| Basic net income per common unit:                                        |       |                   | ** **  |                  |       |   | ** ** |   |   |
| Continuing operations                                                    | ** ** | **$**                  | **.20**     | ** **            | $          | .27 |   | **$** | **.65** | ** ** | $ | .76 |   |
| Discontinued operations                                                  | ** ** | **.10**                | ** **  | .03                   |       | **.14** | ** ** | .07 |   |
| Total                                                                    | ** ** | **$**                  | **.30**     | ** **            | $          | .30 |   | **$** | **.79** | ** ** | $ | .83 |   |
| Diluted net income per common unit:                                      |       |                   | ** **  |                  |       |   | ** ** |   |   |
| Continuing operations                                                    | ** ** | **$**                  | **.20**     | ** **            | $          | .27 |   | **$** | **.64** | ** ** | $ | .76 |   |
| Discontinued operations                                                  | ** ** | **.10**                | ** **  | .03                   |       | **.14** | ** ** | .07 |   |
| Total                                                                    | ** ** | **$**                  | **.30**     | ** **            | $          | .30 |   | **$** | **.78** | ** ** | $ | .83 |   |
| Weighted average number of common units outstanding                      | ** ** | **156,211**            | ** **  | 150,373               |       | **154,905** | ** ** | 150,163 |   |
| Weighted average number of common and dilutive potential common units    |       | **157,105**            | ** **  | 151,244               |       | **156,956** | ** ** | 150,965 |   |

 

See accompanying Notes to Condensed ConsolidatedFinancial Statements.

 

3

----

 

**DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES**

**Condensed ConsolidatedStatements of Cash Flows**

**For the nine months ended September 30,**

**(in thousands)**

**(Unaudited)**

 
| ** **                                                                                       | ** ** | **2004**        | ** **  | **2003**   | ** ** |
|--------------------------------------------------------------------------------------------------|------------|-----------------|-------------|------------|------------|
| Cash flows from operating activities:                                                            |       |            | ** **  |       |       |
| Net income                                                                                       | ** ** | **$**           | **150,063** | ** ** | $          | 155,841 |   |
| Adjustments to reconcile net income to net cash provided by operating  activities:               |       |            | ** **  |       |       |
| Depreciation of buildings and tenant improvements                                                | ** ** | **13****8,873** | ** **  | 125,191    |       |
| Amortization of deferred leasing and other costs                                                 | ** ** | **28****,286**  | ** **  | 17,348     |       |
| Amortization of deferred financing costs                                                         | ** ** | **3,366**       | ** **  | 2,756      |       |
| Minority interest in earnings                                                                    | ** ** | **1,007**       | ** **  | 768        |       |
| Straight-line rent adjustment                                                                    | ** ** | **(15,334**     | **)**       | (16,971    | )          |
| Earnings from land and depreciated property sales                                                | ** ** | **(28,697**     | **)**       | (18,360    | )          |
| Build-for-sale operations, net                                                                   | ** ** | **(3,713**      | **)**       | (37,196    | )          |
| Construction contracts, net                                                                      | ** ** | **(944**        | **)**       | (6,924     | )          |
| Other accrued revenues and expenses, net                                                         | ** ** | **(8,328**      | **)**       | 5,596      |       |
| Operating distributions received in excess of equity and earnings from  unconsolidated companies |       | **9,947**       | ** **  | 6,974      |       |
| **Net cash provided by operating activities**                                                    | ** ** | **274,526**     | ** **  | 235,023    |       |
|                                                                                             |       |            | ** **  |       |       |
| Cash flows from investing activities:                                                            |       |            | ** **  |       |       |
| Development of real estate investments                                                           | ** ** | **(97,817**     | **)**       | (100,810   | )          |
| Acquisition of real estate investments                                                           | ** ** | **(204,361**    | **)**       | (108,074   | )          |
| Acquisition of land held for development and infrastructure costs                                | ** ** | **(99,284**     | **)**       | (28,067    | )          |
| Recurring tenant improvements                                                                    | ** ** | **(41,968**     | **)**       | (28,078    | )          |
| Recurring leasing costs                                                                          | ** ** | **(20,313**     | **)**       | (15,993    | )          |
| Recurring building improvements                                                                  | ** ** | **(14,679**     | **)**       | (12,736    | )          |
| Other deferred leasing costs                                                                     | ** ** | **(11,464**     | **)**       | (14,848    | )          |
| Other deferred costs and other assets                                                            | ** ** | **(14,430**     | **)**       | (18,437    | )          |
| Tax deferred exchange escrow, net                                                                | ** ** | **—**      | ** **  | (8,248     | )          |
| Proceeds from land and depreciated property sales, net                                           | ** ** | **147,353**     | ** **  | 85,709     |       |
| Advances to unconsolidated companies                                                             | ** ** | **(2,328**      | **)**       | (13,294    | )          |
| **Net cash used by investing activities**                                                        | ** ** | **(359,291**    | **)**       | (262,876   | )          |
|                                                                                             |       |            | ** **  |       |       |
| Cash flows from financing activities:                                                            |       |            | ** **  |       |       |
| Contribution from General Partner, common units                                                  | ** ** | **10,343**      | ** **  | 9,691      |       |
| Contribution from General Partner, preferred units                                               | ** ** | **144,940**     | ** **  | 96,700     |       |
| Payments for redemption of General Partner’s preferred equity                               | ** ** | **(102,651**    | **)**       | (20        | )          |
| Payments for exercise of warrants                                                                | ** ** | **(2,881**      | **)**       | (4,692     | )          |
| Proceeds from indebtedness                                                                       | ** ** | **440,000**     | ** **  | 325,000    |       |
| Payments on unsecured debt                                                                       | ** ** | **(100,000**    | **)**       | (175,000   | )          |
| Proceeds from debt refinancing                                                                   |       | **—**      | ** **  | 38,340     |       |
| Payments on indebtedness including principal amortization                                        | ** ** | **(37,764**     | **)**       | (131,686   | )          |
| Borrowings (payments) on line of credit, net                                                     | ** ** | **(12,000**     | **)**       | 95,109     |       |
| Distributions to common unitholders                                                              | ** ** | **(213,930**    | **)**       | (205,964   | )          |
| Distributions to preferred unitholders                                                           | ** ** | **(23,508**     | **)**       | (30,460    | )          |
| Distributions to minority interest                                                               | ** ** | **(820**        | **)**       | (1,284     | )          |
| Deferred financing costs                                                                         | ** ** | **(29,659**     | **)**       | (4,304     | )          |
| **Net cash provided by financing activities**                                                    | ** ** | **72,070**      | ** **  | 11,430     |       |
| **Net decrease in cash and cash equivalents**                                                    | ** ** | **(12,695**     | **)**       | (16,423    | )          |
|                                                                                             |       |            | ** **  |       |       |
| Cash and cash equivalents at beginning of period                                                 | ** ** | **12,695**      | ** **  | 17,129     |       |
| Cash and cash equivalents at end of period                                                       | ** ** | **$**           | **—**  | ** ** | $          | 706 |   |
| Other non-cash items:                                                                            |       |            | ** **  |       |       |
| Assumption of debt for real estate acquisitions                                                  | ** ** | **$**           | **—**  | ** ** | $          | — |   |
| Conversion of Limited Partner Units to common shares of General  Partner                         | ** ** | **$**           | **7,617**   | ** ** | $          | 4,299 |   |
| Issuance of Limited Partner Units for real estate acquisitions                                   | ** ** | **$**           | **5,575**   | ** ** | $          | 3,187 |   |
| Assumption of debt for real estate acquisitions                                                  | ** ** | **$**           | **29,854**  | ** ** | $          | — |   |
| Adjustments for redemption of preferred units                                                    | ** ** | **$**           | **130,665** | ** ** | $          | — |   |

 

See accompanying Notes to Condensed Consolidated Financial Statements

 

4

----

 

**DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES**

**Condensed ConsolidatedStatement of Partners’ Equity**

**For the nine  months endedSeptember 30, 2004**

**(in thousands,  except per unitdata)**

**(Unaudited)**

 
| ** **                                                               | ** ** | ** **          | ** **    | ** **         | ** ** | **Limited** | ** ** | **Accumulated**   | ** **  | ** ** | ** ** |
|--------------------------------------------------------------------------|------------|---------------------|---------------|--------------------|------------|-------------|------------|-------------------|-------------|------------|------------|
| ** **                                                               | ** ** | **General Partner** | ** **    | **Partners’** | ** ** | **Other**   | ** ** | ** **        | ** **  |
| ** **                                                               | ** ** | **Common**          | ** **    | **Preferred**      | ** ** | **Common**  | ** ** | **Comprehensive** | ** **  | ** ** | ** ** |
| ** **                                                               | ** ** | **Equity**          | ** **    | **Equity**         | ** ** | **Equity**  | ** ** | **Income**        | ** **  | **Total**  | ** ** |
| **Balance at December 31, 2003**                                         | ** ** | **$**               | **2,153,844** | ** **         | **$**      | **511,785** | ** ** | **$**             | **212,691** | ** ** | **$**      | **—** | ** ** | **$** | **2,878,320** | ** ** |
|                                                                     |       |                |          |               |       |        |       |              |        |       |       |
| Comprehensive income:                                                    |       |                |          |               |       |        |       |              |        |       |       |
| Net income                                                               |       | 113,852             |          | 24,321             |       | 11,890      |       | —            |        | 150,063    |       |
| Distributions to preferred unitholders                                   |       | —              |          | (24,321            | )          | —      |       | —            |        | (24,321    | )          |
| Gains (losses) on derivative instruments                                 |       | —              |          | —             |       | —      |       | 132               |        | 132        |       |
|                                                                     |       |                |          |               |       |        |       |              |        |       |       |
| Comprehensive income available for common unitholders                    |       |                |          |               |       |        |       |              |        | 125,874    |       |
|                                                                     |       |                |          |               |       |        |       |              |        |       |       |
| Capital contribution from General Partner                                |       | 10,470              |          | 144,940            |       | —      |       | —            |        | 155,410    |       |
|                                                                     |       |                |          |               |       |        |       |              |        |       |       |
| Acquisition of Partnership interest for common stock of General  Partner |       | 17,357              |          | —             |       | (9,740      | )          | —            |        | 7,617      |       |
|                                                                     |       |                |          |               |       |        |       |              |        |       |       |
| Acquisition of property in exchange for Limited Partner Units            |       | —              |          | —             |       | 5,575       |       | —            |        | 5,575      |       |
|                                                                     |       |                |          |               |       |        |       |              |        |       |       |
| Redemption of Series E Preferred Units                              |       | —              |          | (100,028           | )          | —      |       | —            |        | (100,028   | )          |
|                                                                     |       |                |          |               |       |        |       |              |        |       |       |
| General Partner’s redemption of Series D Preferred Units       |       | —              |          | (2,623             | )          | —      |       | —            |        | (2,623     | )          |
|                                                                     |       |                |          |               |       |        |       |              |        |       |       |
| General Partner’s conversion of Series D Preferred Units       |       | 130,665             |          | (130,665           | )          | —      |       | —            |        | —     |       |
|                                                                     |       |                |          |               |       |        |       |              |        |       |       |
| Exercise of General Partner warrants                                     |       | (2,881              | )             | —             |       | —      |       | —            |        | (2,881     | )          |
|                                                                     |       |                |          |               |       |        |       |              |        |       |       |
| Tax benefits from employee stock plans                                   |       | 783                 |          | —             |       | —      |       | —            |        | 783        |       |
|                                                                     |       |                |          |               |       |        |       |              |        |       |       |
| FASB 123 compensation expense                                            |       | 302                 |          | —             |       | —      |       | —            |        | 302        |       |
|                                                                     |       |                |          |               |       |        |       |              |        |       |       |
| Distribution to General Partner                                          |       | (31                 | )             | —             |       | —      |       | —            |        | (31        | )          |
|                                                                     |       |                |          |               |       |        |       |              |        |       |       |
| Distributions to partners ($1.39 per Common Unit)                        |       | (194,748            | )             | —             |       | (19,151     | )          | —            |        | (213,899   | )          |
|                                                                     |       |                |          |               |       |        |       |              |        |       |       |
| **Balance at September 30, 2004**                                   | ** ** | **$**               | **2,229,613** | ** **         | **$**      | **423,409** | ** ** | **$**             | **201,265** | ** ** | **$**      | **132** | ** ** | **$** | **2,854,419** | ** ** |

 

See accompanying Notes to Condensed Consolidated Financial Statements

 

5

----

 

**DUKEREALTY LIMITED PARTNERSHIP**

**NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

**1.**              **Financial Statements**

 

The interim condensed consolidated financial statements included hereinhave been prepared by Duke Realty Limited Partnership (the “Partnership”)without audit (except for the Balance Sheet as of December 31, 2003). Thefinancial statements have been prepared in accordance with accountingprinciples generally accepted in the United States of America for interimfinancial information and in accordance with Rule 10-01 of Regulation S-X ofthe Securities Exchange Act of 1934. Accordingly, they do not include all ofthe information and footnotes required by accounting principles generallyaccepted in the United States of America for complete financial statements. Inthe opinion of management, all adjustments (consisting of normal recurringadjustments) considered necessary for a fair presentation have been included.These financial statements should be read in conjunction with Management’s Discussionand Analysis of Financial Condition and Results of Operations included hereinand the consolidated financial statements and notes thereto included in thePartnership’s Annual Report on Form 10-K for the year ended December 31, 2003.

 

**The Partnership**

 

Duke Realty Limited Partnership (the “Partnership”)was formed on October 4, 1993, when Duke Realty Corporation (the “GeneralPartner”) contributed all of its properties and related assets and liabilities,along with the net proceeds from the issuance of additional shares of theGeneral Partner through an offering, to the Partnership. Simultaneously, thePartnership completed the acquisition of Duke Associates, a full-servicecommercial real estate firm operating in the Midwest. The General Partner was formedin 1985 and qualifies as a Real Estate Investment Trust (“REIT”) underprovisions of the Internal Revenue Code. TheGeneral Partner is the sole general partner of the Partnership, owning 91.2% ofthe common partnership interests as of September 30, 2004 (“General PartnerUnits”). The remaining 8.8% of the Partnership’s common interest is owned bylimited partners (“Limited Partner Units” and, together with the GeneralPartner Units, the “Common Units”). TheLimited Partner Units are exchangeable for shares of the General Partner’scommon stock on a one-for-one basis subject generally to a one-year holdingperiod. The General Partner also owns preferred partnership interests in thePartnership (“Preferred Units”).

 

The Partnership owns and operates a portfolio ofindustrial, office and retail properties in the midwestern and southeasternUnited States and provides real estate services to third-party owners. ThePartnership conducts Service Operations through Duke Realty Services LimitedPartnership (“DRSLP”) and Duke Construction Limited Partnership (“DCLP”).

 

**2.****             ****Linesof Credit**

 

The Partnership has one unsecured line of credit available at September30, 2004, described as follows (in thousands):

 
| **Description**          | ** ** | **Borrowing Capacity** | ** ** | **Maturity Date** | ** **    | **Interest Rate** | ** **    | **Outstanding at September 30, 2004** | ** ** |
|--------------------------|------------|------------------------|------------|-------------------|---------------|-------------------|---------------|--------------------------------------------|------------|
| Unsecured Line of Credit |       | $                      | 500,000    |              | January  2007 |              | LIBOR  + .60% |                                       | $          | 339,000 |   |
|                          |            |                        |            |                   |               |                   |               |                                            |            |  |  |

 

Theline of credit is used to fund development activities, acquire additionalrental properties and provide working capital.

 

The line of creditprovides the Partnership with an option to obtain borrowings from financialinstitutions that participate in the line, at rates lower than the statedinterest rate, subject to certain restrictions. Amounts outstanding on theunsecured line of credit at September 30, 2004, range from LIBOR + .24% to .60%(1.88% to 2.44% at September 30, 2004).

 

6

----

 

The line of credit alsocontains financial covenants that require the Partnership to meet defined levelsof performance.  As of September 30,2004, the Partnership is in compliance with all covenants and expects to remainin compliance for the foreseeable future.

 

**3.****           ****RelatedParty Transactions**

 

The Partnership providesproperty management, leasing, construction, and other tenant related servicesto properties in which former executive officers and current Board Members ofthe General Partner have ownership interests. The Partnership received feestotaling approximately $546,000 and $997,000 for services provided to theseproperties for the nine months ended September 30, 2004 and 2003, respectively.The fees charged by the Partnership for such services are equivalent to thosecharged to unrelated third-party owners for similar services.

 

The Partnership provides property management, leasing, construction andother tenant related services to unconsolidated companies in which thePartnership has an equity interest. For the nine months ended September 30,2004 and 2003, respectively, the Partnership received management fees of $3.8million and $3.7 million, leasing fees of $1.9 million and $1.7 million andconstruction and development fees of $1.0 million and $1.1 million from theseunconsolidated companies. These fees were recorded at market rates and the Partnershipeliminates its ownership percentage of these fees in the consolidated financialstatements.

 

**4. ****       ****Net IncomePer Common Unit**

 

Basic net income per common unit is computed bydividing net income available for common unitholders by the weighted averagenumber of common units outstanding for the period. Diluted net income percommon unit is computed by dividing the net income available for commonunitholders by the sum of the weighted average number of common unitsoutstanding, including any dilutive potential common units for the period.

 

The following table reconciles the components ofbasic and diluted net income per common unit for the three and nine monthsended September 30 (in thousands):

 
| ** **                                                                   | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
|------------------------------------------------------------------------------|------------|-------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                                   | ** ** | **2004**                                  | ** ** | **2003**                                 | ** ** | **2004** | ** ** | **2003** | ** ** |
| Basic and diluted net income available for common unitholders                |       | **$**                                     | **46,867** |                                     | $          | 44,666 | ** ** | **$** | **122,097** |   | $ | 124,717 |   |
|                                                                         |       | ** **                                |       |                                     | ** ** | ** ** |   |   |   |
| Weighted average number of common units outstanding                          | ** ** | **156,211**                               |       | 150,373                                  | ** ** | **154,905** |   | 150,163 |   |
|                                                                         |       |                                      |       |                                     |       |   |   |   |   |
| Weighted average conversion of Series D preferred units (1)             |       | —                                    |       | —                                   | ** ** | **1,170** |   | — |   |
| Dilutive units for stock based compensation plan                             | ** ** | **894**                                   |       | 871                                      | ** ** | **881** |   | 802 |   |
|                                                                         | ** ** | ** **                                |       |                                     | ** ** | ** ** |   |   |   |
| Weighted average number of common units and dilutive potential common  units |       | **157,105**                               |       | 151,244                                  | ** ** | **156,956** |   | 150,965 |   |
|                                                                              |            |                                           |            |                                          |            |  |  |  |  |  |  |  |  |

----

(1)          TheGeneral Partner called for the redemption of the Series D preferred units as ofMarch 16, 2004. Prior to the redemption date, nearly 5.3 million Series Dpreferred units were converted into 4.9 million common units. These unitsrepresent the weighted effect, assuming the Series D preferred units had beenconverted on January 1, 2004.

 

**5.     Segment Reporting**

 

The Partnership is engaged in four operating segments, the first threeof which consist of the ownership and rental of office, industrial and retailreal estate investments (collectively, “Rental Operations”). The fourth segmentconsists of the Partnership’s build-to-suit for sale operations and theproviding of various real estate services such as property management,maintenance, leasing, development and construction management to third-partyproperty owners and joint ventures (“Service Operations”). The Partnership’sreportable segments offer different products or services and are managedseparately because each requires

 

7

----

 

different operating strategies and management expertise. There are nomaterial intersegment sales or transfers.

 

Non-segment revenue consists mainly of equity in earnings of unconsolidatedcompanies. Segment FFO information is calculated by subtracting operatingexpenses attributable to the applicable segment from segment revenues.Non-segment assets consist of corporate assets including cash, deferredfinancing costs and investments in unconsolidated companies. Interest expenseand other non-property specific revenues and expenses are not allocated toindividual segments in determining the Partnership’s performance measure.

 

The Partnership assesses and measures segment operating results basedupon an industry performance measure referred to as Funds From Operations (“FFO”),which management believes is a useful indicator of the Partnership’s operatingperformance. Funds From Operations is usedby industry analysts and investors as a supplemental operating performancemeasure of an equity real estate investment trust (“REIT”). FFO is calculatedin accordance with the definition that was adopted by the Board of Governors ofthe National Association of Real Estate Investment Trusts (“NAREIT”). FFO, asdefined by NAREIT, represents net income (loss) determined in accordance withaccounting principles generally accepted in the United States of America (“GAAP”),excluding extraordinary items as defined under GAAP and gains or losses fromsales of previously depreciated operating real estate assets, plus certainnon-cash items such as real estate asset depreciation and amortization, andafter similar adjustments for unconsolidated partnerships and joint ventures.

 

The revenues and FFO for each of the reportable segments for the threeand nine months ended September 30, 2004, and 2003, and the assets for each ofthe reportable segments as of September 30, 2004, and December 31, 2003, aresummarized as follows (in thousands):

 
| ** **                                      | ** ** | **Three Months Ended  September 30,** |        | **Nine Months Ended  September 30,** | ** ** |
|-------------------------------------------------|------------|--------------------------------------------|-------------|-------------------------------------------|------------|
| ** **                                      | ** ** | **2004**                                   | ** **  | **2003**                                  |       | **2004** | ** ** | **2003** | ** ** |
| Revenues                                        |       |                                       | ** **  |                                      |       |   | ** ** |   |   |
| Rental  Operations:                             |       |                                       | ** **  |                                      |       |   | ** ** |   |   |
| Office                                          | ** ** | **$**                                      | **115,108** | ** **                                | $          | 104,894 |   | **$** | **340,099** | ** ** | $ | 313,334 |   |
| Industrial                                      | ** ** | **70****,827**                             | ** **  | 64,267                                    |       | **207****,037** | ** ** | 193,794 |   |
| Retail                                          | ** ** | **1,409**                                  | ** **  | 1,447                                     |       | **3****,632** | ** ** | 4,367 |   |
| Service Operations                              | ** ** | **17,434**                                 | ** **  | 12,453                                    |       | **43,608** | ** ** | 33,056 |   |
| Total Segment Revenues                          | ** ** | **204****,778**                            | ** **  | 183,061                                   |       | **594****,376** | ** ** | 544,551 |   |
| Non-Segment Revenue                             | ** ** | **7,615**                                  | ** **  | 8,057                                     |       | **20,261** | ** ** | 20,167 |   |
| Consolidated Revenue from continuing operations |       | **212,393**                                | ** **  | 191,118                                   |       | **614****,637** | ** ** | 564,718 |   |
| Discontinued Operations                         | ** ** | **2,349**                                  | ** **  | 5,999                                     |       | **9,268** | ** ** | 21,463 |   |
| Consolidated Revenue                            | ** ** | **$**                                      | **214,742** | ** **                                | $          | 197,117 |   | **$** | **623,905** | ** ** | $ | 586,181 |   |
| Funds From Operations                           |       |                                       | ** **  |                                      |       |   | ** ** |   |   |
| Rental  Operations:                             |       |                                       | ** **  |                                      |       |   | ** ** |   |   |
| Office                                          | ** ** | **$**                                      | **71,993**  | ** **                                | $          | 69,023 |   | **$** | **215,724** | ** ** | $ | 202,956 |   |
| Industrial                                      | ** ** | **52,601**                                 | ** **  | 49,076                                    |       | **153,170** | ** ** | 143,765 |   |
| Retail                                          | ** ** | **1,196**                                  | ** **  | 1,221                                     |       | **2,942** | ** ** | 3,564 |   |
| Services Operations                             | ** ** | **6,341**                                  | ** **  | 4,316                                     |       | **13,106** | ** ** | 10,888 |   |
| Total Segment FFO                               | ** ** | **132,131**                                | ** **  | 123,636                                   |       | **384,942** | ** ** | 361,173 |   |
| Non-Segment FFO:                                |       |                                       | ** **  |                                      |       |   | ** ** |   |   |
| Interest expense                                | ** ** | **(34,423**                                | **)**       | (30,273                                   | )          | **(99,755** | **)** | (95,116 | ) |
| Interest income                                 | ** ** | **1,223**                                  | ** **  | 808                                       |       | **4****,325** | ** ** | 2,681 |   |
| General and  administrative expense             | ** ** | **(6,890**                                 | **)**       | (4,612                                    | )          | **(20,839** | **)** | (15,455 | ) |
| Gain on land  sales                             | ** ** | **3,387**                                  | ** **  | 1,383                                     |       | **9,****070** | ** ** | 6,293 |   |
| Impairment  charges on depreciable property     |       | **—**                                 | ** **  | —                                    |       | **—** | ** ** | (500 | ) |
| Other expenses                                  | ** ** | **(686**                                   | **)**       | (537                                      | )          | **(232** | **)** | (1,880 | ) |
| Minority  interest in earnings of subsidiaries  |       | **(275**                                   | **)**       | (296                                      | )          | **(1,007** | **)** | (768 | ) |
| Joint venture FFO                               | ** ** | **10,907**                                 | ** **  | 11,827                                    |       | **30****,398** | ** ** | 32,566 |   |
| Preferred unit  distributions                   | ** ** | **(8,320**                                 | **)**       | (10,816                                   | )          | **(24,321** | **)** | (31,124 | ) |
| Adjustment for  redemption of preferred units   |       | **—**                                 | ** **  | —                                    |       | **(3,645** | **)** | — |   |
| Discontinued  operations                        | ** ** | **1,137**                                  | ** **  | 2,906                                     |       | **4,576** | ** ** | 11,055 |   |
| Consolidated FFO                                | ** ** | **98,191**                                 | ** **  | 94,026                                    |       | **283,512** | ** ** | 268,925 |   |

 

8

----

 
| ** **                                                                                  | ** ** | **Three Months Ended  September 30,** |       | **Nine Months Ended  September 30,** | ** ** |
|---------------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                                                  | ** ** | **2004**                                   | ** ** | **2003**                                  |       | **2004** | ** ** | **2003** | ** ** |
|                                                                                        |       |                                       | ** ** |                                      |       |   | ** ** |   |   |
| Depreciation and amortization on continuing operations                                      |       | **(61,447**                                | **)**      | (46,163                                   | )          | **(164,109** | **)** | (136,526 | ) |
| Depreciation and amortization on discontinued operations                                    |       | **(64**                                    | **)**      | (2,087                                    | )          | **(3,050** | **)** | (6,013 | ) |
| Share of joint venture adjustments                                                          | ** ** | **(4,686**                                 | **)**      | (4,459                                    | )          | **(13,883** | **)** | (14,236 | ) |
| Earnings (loss) from joint venture and depreciable  property sales on continuing operations |       | **—**                                 | ** ** | 11                                        |       | **(130** | **)** | 6,746 |   |
| Earnings from depreciated property sales on  discontinued operations                        |       | **14,873**                                 | ** ** | 3,338                                     |       | **19,****757** | ** ** | 5,821 |   |
| Net income available for common unitholders                                                 |       | **$**                                      | **46,867** | ** **                                | $          | 44,666 |   | **$** | **122,097** | ** ** | $ | 124,717 |   |
|                                                                                             |            |                                            |            |                                           |            |  |  |  |  |  |  |  |  |

 

 
| ** **           | ** ** | **September 30,** | ** **    | **December 31,** | ** ** |
|----------------------|------------|-------------------|---------------|------------------|------------|
| ** **           | ** ** | **2004**          | ** **    | **2003**         | ** ** |
| Assets               |       |              |          |             |       |
| Rental Operations:   |       |              |          |             |       |
| Office               | ** ** | **$**             | **3,127,021** |             | $          | 2,884,834 |   |
| Industrial           | ** ** | **2,184,700**     |          | 2,177,483        |       |
| Retail               | ** ** | **95****,666**    |          | 47,293           |       |
| Service Operations   | ** ** | **125,739**       |          | 111,318          |       |
| Total Segment Assets | ** ** | **5,533,126**     |          | 5,220,928        |       |
| Non-Segment Assets   | ** ** | **346,784**       |          | 337,783          |       |
| Consolidated Assets  | ** ** | **$**             | **5,879,910** |             | $          | 5,558,711 |   |

 

In addition to revenues and FFO, the Partnershipalso reviews its recurring capital expenditures in measuring the performance ofits individual Rental Operations segments. These recurring capital expendituresconsist of tenant improvements, leasing commissions and building improvements.These expenditures are reviewed by the Partnership to determine the costsassociated with re-leasing vacant space and maintaining the condition of itsproperties. The Partnership’s recurring capital expenditures by segment aresummarized as follows for the nine months ended September 30, 2004 and 2003,respectively  (in thousands):

 
| ** **                     | ** ** | **2004**   | ** ** | **2003** | ** ** |
|--------------------------------|------------|------------|------------|----------|------------|
| Recurring Capital Expenditures |       |       |       |     |       |
| Office                         | ** ** | **$**      | **52,328** |     | $          | 34,354 |   |
| Industrial                     | ** ** | **24,610** |       | 22,342   |       |
| Retail                         | ** ** | **22**     |       | 111      |       |
| Total                          | ** ** | **$**      | **76,960** |     | $          | 56,807 |   |

 

**6.     RealEstate Investments**

 

The Partnership adopted SFAS No. 144, *Accounting for the Impairment or Disposal of LongLived Assets*(“SFAS 144”), on January 1, 2002. SFAS 144 requires thePartnership to report in discontinued operations the results of operations of aproperty which has either been disposed or is classified as held-for-sale,unless certain conditions are met.

 

As of September 30, 2004, the Partnership has classifiedoperations of seventy-nine buildings as discontinued operations in accordancewith SFAS 144. These seventy-nine buildings consist of sixty-six industrial,eight office and five retail properties. As a result, the Partnership classifiednet income of $1.1 million and $819,000 as discontinued operations for thethree months ended September 30, 2004 and 2003, respectively, and $1.5 millionand $5.0 million as discontinued operations for the nine months ended September30, 2004 and 2003, respectively. Thirty-four of the properties classified indiscontinued operations were sold during the first nine months of 2004 andeleven properties were sold during the first nine months of 2003; therefore,the gains on disposal of these properties of $14.9 million and $3.3 million forthe three months ended September 30, 2004 and 2003, respectively, and $19.8million and $5.8 million for the nine months ended September 30, 2004 and 2003,respectively, are also reported in discontinued operations. The remainingthirty-four properties consist of thirty-one properties sold during the lastthree months of 2003 and three depreciable properties classified asheld-for-sale at September 30, 2004.

 

9

----

 

Thefollowing table illustrates the major classes of assets and operations affectedby the seventy-nine buildings identified as discontinuedoperations at September 30, 2004 (in thousands):

 
| ** **                                               | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
|----------------------------------------------------------|------------|-------------------------------------------|------------|------------------------------------------|------------|
| ** **                                               | ** ** | **2004**                                  | ** ** | **2003**                                 | ** ** | **2004** | ** ** | **2003** | ** ** |
| Statement of Operations:                                 |       |                                      |       |                                     |       |   |   |   |   |
| Revenues                                                 | ** ** | **$**                                     | **2,349**  |                                     | $          | 5,999 | ** ** | **$** | **9,268** |   | $ | 21,463 |   |
| Expenses:                                                |       |                                      |       |                                     |       |   |   |   |   |
| Operating                                                | ** ** | **634**                                   |       | 1,770                                    | ** ** | **2,644** |   | 6,189 |   |
| Interest                                                 | ** ** | **569**                                   |       | 1,309                                    | ** ** | **2,033** |   | 4,196 |   |
| Depreciation and Amortization                            | ** ** | **64**                                    |       | 2,087                                    | ** ** | **3,050** |   | 6,013 |   |
| General and Administrative                               | ** ** | **9**                                     |       | 15                                       | ** ** | **15** |   | 25 |   |
| Operating Income                                         | ** ** | **1,073**                                 |       | 818                                      | ** ** | **1,526** |   | 5,040 |   |
| Other Income                                             |       | **—**                                |       | 1                                        |       | **—** |   | 2 |   |
| Income from discontinued operations, before gain on sale |       | **1,073**                                 |       | 819                                      | ** ** | **1,526** |   | 5,042 |   |
| Gain on sale of property, net of impairment adjustment   |       | **14,873**                                |       | 3,338                                    | ** ** | **19,757** |   | 5,821 |   |
| Income from discontinued operations                      | ** ** | **$**                                     | **15,946** |                                     | $          | 4,157 | ** ** | **$** | **21,283** |   | $ | 10,863 |   |
|                                                          |            |                                           |            |                                          |            |  |  |  |  |  |  |  |  |  |

 
| ** **                   | ** ** | **September 30, 2004** | ** ** |
|------------------------------|------------|------------------------|------------|
| Balance Sheet:               |       |                   |       |
| Real estate investments, net | ** ** | **$**                  | **12,446** | ** ** |
| Other Assets                 | ** ** | **1,343**              | ** ** |
| Total Assets                 | ** ** | **$**                  | **13,789** | ** ** |
| Accrued Expenses             | ** ** | **$**                  | **25**     | ** ** |
| Other Liabilities            | ** ** | **3**                  | ** ** |
| Equity                       | ** ** | **13,761**             | ** ** |
| Total Liabilities and Equity | ** ** | **$**                  | **13,789** | ** ** |

 

The Partnership allocates interest expense todiscontinued operations as permitted under EITF 87-24, *“Allocation of Interest to Discontinued Operations,”*andhas included such interest expense in computing

netincome from discontinued operations. Interest expense allocable to discontinuedoperations includes interest on any debt on secured properties included indiscontinued operations and an allocable share of the Partnership’sconsolidated unsecured interest expense for unencumbered properties. Theallocation of unsecured interest expense to discontinued operations was basedupon the gross book value of the discontinued operations unencumberedpopulation relative to the gross book value of the Partnership’s entire unencumbered population.

 

At September 30, 2004, the Partnership had fouroffice properties, five industrial properties and one retail property, whichcomprised approximately 1.7 million square feet classified as held-for-sale.These ten properties consist of three depreciable properties and seven merchantbuilding developments. The net book value of the properties held-for-sale atSeptember 30, 2004, was approximately $77.8 million. There can be no assurancethat such properties held for sale will be sold.

 

For the nine months ended September 30, 2004 and 2003, the Partnershiprecorded $425,000 and $1.1 million, respectively, of impairment adjustments.The $425,000 of impairment reflects the write-down of the carrying value ofthree held-for-sale land parcels contracted to sell in the fourth quarter of2004. In 2003, the Partnership recorded $1.1 million of impairment adjustmentsfor one industrial building and three land parcels that were held-for-sale.These adjustments reflected the write-down of the carrying value of theproperties to their projected sales price, less selling expenses. Each propertywas later sold in 2003.

 

**7.****             ****Partners’ Equity**

 

The General Partner periodically accesses the public equity markets tofund the development and acquisition of additional rental properties or to paydown debt. The proceeds of these offerings are contributed to the Partnershipin exchange for an additional interest in the Partnership.

 

10

----

 

The following series of preferred units are outstanding as of September30, 2004 (in thousands, except percentages):

 
| ** **         | ** ** | ** **      | ** ** | ** **   | ** ** | **Initial Optional** | ** ** | ** **      | ** ** | ** **      | ** ** |
|--------------------|------------|-----------------|------------|--------------|------------|----------------------|------------|-----------------|------------|-----------------|------------|
| ** **         | ** ** | **Units**       | ** ** | **Dividend** | ** ** | **Redemption**       | ** ** | **Liquidation** | ** ** | ** **      | ** ** |
| **Description**    | ** ** | **Outstanding** | ** ** | **Rate**     | ** ** | **Date**             | ** ** | **Preference**  | ** ** | **Convertible** | ** ** |
| Series B Preferred |       | 265             |       | 7.990        | %          | September  30, 2007  |       | $               | 132,250    |            | No         |   |
| Series I Preferred |       | 300             |       | 8.450        | %          | February  6, 2006    |       | $               | 75,000     |            | No         |   |
| Series J Preferred |       | 400             |       | 6.625        | %          | August  25, 2008     |       | $               | 100,000    |            | No         |   |
| Series K Preferred |       | 600             |       | 6.500        | %          | February  13, 2009   |       | $               | 150,000    |            | No         |   |

 

All series require cumulative distributions, have no stated maturitydate (although the General Partner may redeem them on or following theirinitial optional redemption dates) and may be redeemed only at the GeneralPartner’s option, in whole or in part.

 

The dividend rate on the Series B Preferred Units increases to 9.99%after September 12, 2012.

 

The General Partner and the Partnership redeemed the $100.0 millionSeries E Preferred Units on January 20, 2004 at par value.

 

The General Partner and the Partnership called for the redemption of theSeries D Convertible Preferred Units as of March 16, 2004.  Prior to the redemption date, 5,242,635Series D Convertible Preferred Units were converted into 4,911,143 CommonUnits. The remaining 103,695 Series D Convertible Preferred Units outstandingon March 16, 2004 were redeemed.

 

The General Partner issued $150 million of Series K Preferred Units onFebruary 13, 2004 at a dividend rate of 6.50%.

 

**8.****             ****OtherMatters**

 

**Reclassifications**

 

Certain2003 balances have been reclassified to conform to the 2004 presentation.

 

**9.****             ****FinancialInstruments**

 

The Partnership is exposedto capital market risk, such as changes in interest rates. In order to managethe volatility relating to interest rate risk, the Partnership may enter intointerest rate hedging arrangements from time to time. The Partnership does notutilize derivative financial instruments for trading or speculative purposes.The Partnership accounts for derivative instruments under Statement ofFinancial Accounting Standard No. 133, “Accounting for Derivative Instrumentsand Hedging Activities” as amended (“SFAS 133”).

 

During the first quarter of2004, the Partnership funded a $65 million note receivable secured by a firstmortgage on a portfolio of office properties owned by a third-party located inAtlanta, Georgia. The note receivable had a maximum two-year term with aninterest rate of 5.5% for the first six months and 6.5% thereafter. In order tofund the note receivable, the Partnership borrowed $65 million under a variableinterest rate term loan. The loan bears interest at the rate of LIBOR + 75basis points, has a maturity date of January 2005, and contains two six-monthrenewal options. To hedge its variable interest rate risk on the loan, thePartnership entered into two interest rate swaps totaling $65 million thateffectively fixed the rate at 2.184% through maturity. The hedge accountingrules are being used for the swaps, which allow for changes in market value ofthe swaps to be recorded through Other Comprehensive Income (“OCI”) in equityversus the Statement of Operations. In the third quarter of 2004, the $65million note receivable was repaid in connection with the Partnership’sacquisition of the properties that secured the note. However, the Partnership’s$65 million note payable and related interest swaps were not retired. As ofSeptember 30, 2004, the fair value of the hedge was $132,000, which wasreflected through an increase in other assets and OCI on the Partnership’sbalance sheet.

 

In June 2004, thePartnership simultaneously entered into three forward-starting interest rateswaps aggregating $144.3 million, which effectively fixed the rate on financingexpected in 2004 at 5.346%, plus

 

11

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the Partnership’s creditspread over the swap rate. The swaps qualified for hedge accounting under SFAS133; therefore, changes in the fair value were recorded in OCI.  In August of 2004, the Partnership settledthese three swaps when it issued $250.0 million of unsecured notes with aneffective interest rate of 6.33%, due in 2014. The Partnership recorded $6.85million of deferred financing costs associated with the unwinding of the swap,which will be amortized into interest expense over the life of the new 6.33%notes.

 

In May 2003, the FASB issued SFAS No. 150, *Accounting for Certain Financial Instruments withCharacteristics of both Liabilities and Equity* (“SFAS 150”). SFAS150 establishes standards for classifying and measuring as liabilities certainfinancial instruments that embody obligations of the issuer and havecharacteristics of both liabilities and equity. SFAS 150 is effective for allfinancial instruments created or modified after May 31, 2003, and otherwise iseffective July 1, 2003. The Partnership includes the operations of one jointventure in its consolidated financial statements at September 30, 2004. Thisjoint venture is partially owned by unaffiliated parties that havenoncontrolling interests. SFAS 150 requires the disclosure of the estimatedsettlement value of these noncontrolling interests. As of September 30, 2004,the estimated settlement value of the noncontrolling interest in thisconsolidated joint venture was approximately $1.0 million as compared to theminority interest asset recorded on the Partnership’s books for this jointventure of $157,000.

 

**10.****      ****Debt**

 

In August 2004, the Partnership issued $250million of 5.40% unsecured notes due in 2014. The notes were issued as part ofan exchange of securities for $100 million principal amount of the Partnership’s6.95% unsecured debt due August 2004. The remaining cash proceeds were used tofinance costs associated with the offering, exchange of debt and to reduceamounts outstanding under the Partnership’s unsecured line of credit.

 

**11.****      ****StockBased Compensation**

 

Under the limitedpartnership agreement of the Partnership, the Partnership is required to issueone Common Unit to the General Partner for each share of common stock issued bythe General Partner. Accordingly, the issuance of common shares by the GeneralPartner under its stock based compensation plans requires the issuance of acorresponding number of Common Units by the Partnership to the General Partner.

 

For all issuances priorto 2002, the Partnership applies the recognition and measurement provisions ofAPB Opinion No. 25, *Accounting for StockIssued to Employees*, and related Interpretations in accounting forits stock based compensation. Effective January 1, 2002, the Partnershipprospectively adopted the fair value recognition provisions of FASB StatementNo. 123, *Accounting for Stock-BasedCompensation*, to all awards granted after January 1, 2002.

 

The following table illustrates the effect on net income and earningsper common unit if the fair value method had been applied to all outstandingand unvested awards in each period (in thousands, except per unit amounts).

 

12

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| ** **                                                                                                | ** ** | **Three Months Ended September 30,** |       | **Nine Months Ended September 30,** | ** ** |
|-----------------------------------------------------------------------------------------------------------|------------|-------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                                                                | ** ** | **2004**                                  | ** ** | **2003**                                 |       | **2004** | ** ** | **2003** | ** ** |
| Net income, as reported                                                                                   | ** ** | **$**                                     | **46,867** | ** **                               | $          | 44,666 |   | **$** | **122,097** | ** ** | $ | 124,717 |   |
| Add: Stock-based employee compensation expense included in net income  determined under fair value method |       | **101**                                   | ** ** | 64                                       |       | **302** | ** ** | 96 |   |
| Deduct: Total stock based compensation expense determined under fair  value method for all awards         |       | **(220**                                  | **)**      | (239                                     | )          | **(660** | **)** | (621 | ) |
| Proforma net income                                                                                       | ** ** | **$**                                     | **46,748** | ** **                               | $          | 44,491 |   | **$** | **121,739** | ** ** | $ | 124,192 |   |
|                                                                                                      |       |                                      | ** ** |                                     |       |   | ** ** |   |   |
| Basic net income per common unit                                                                          |       |                                      | ** ** |                                     |       |   | ** ** |   |   |
| As reported                                                                                               | ** ** | **$**                                     | **.30**    | ** **                               | $          | .30 |   | **$** | **.79** | ** ** | $ | .83 |   |
| Pro forma                                                                                                 | ** ** | **$**                                     | **.30**    | ** **                               | $          | .30 |   | **$** | **.79** | ** ** | $ | .83 |   |
|                                                                                                      |       |                                      | ** ** |                                     |       |   | ** ** |   |   |
| Diluted net income common unit                                                                            |       |                                      | ** ** |                                     |       |   | ** ** |   |   |
| As reported                                                                                               | ** ** | **$**                                     | **.30**    | ** **                               | $          | .30 |   | **$** | **.78** | ** ** | $ | .83 |   |
| Pro forma                                                                                                 | ** ** | **$**                                     | **.30**    | ** **                               | $          | .29 |   | **$** | **.78** | ** ** | $ | .82 |   |
|                                                                                                           |            |                                           |            |                                          |            |  |  |  |  |  |  |  |  |  |  |

 

**12.****      ****SubsequentEvents**

 

*Declaration of Distributionss*

The Board of Directors of the General Partner declared the followingdistributions at its October 27, 2004, regularly scheduled Board meeting:

 
| ** **                       | ** ** | **Quarterly**   | ** ** | ** **      | ** **         | ** **       | ** **         |
|----------------------------------|------------|-----------------|------------|-----------------|--------------------|------------------|--------------------|
| **Class**                        | ** ** | **Amount/Unit** | ** ** | **Record Date** | ** **         | **Payment Date** | ** **         |
| Common                           |       | $               | 0.465      |            | November  12, 2004 |             | November  30, 2004 |   |
| Preferred (per depositary unit): |       |            |       |            |               |             |               |
| Series B                         |       | $               | 0.99875    |            | December  17, 2004 |             | December  31, 2004 |   |
| Series I                         |       | $               | 0.52813    |            | December  17, 2004 |             | December  31, 2004 |   |
| Series J                         |       | $               | 0.41406    |            | November  16, 2004 |             | November  30, 2004 |   |
| Series K                         |       | $               | 0.40625    |            | November  16, 2004 |             | November  30, 2004 |   |
|                                  |            |                 |            |                 |                    |                  |                    |  |  |

 

*Agreement to Sell Series L Preferred Units*

On November 2, 2004, the General Partner and the Partnership agreed tosell $200 million of Series L Preferred Units, at a dividend rate of6.60%.  The sale is expected to close onNovember 30, 2004.

 

13

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REPORT OF INDEPENDENTREGISTERED PUBLIC ACCOUNTING FIRM

 

 

The Partners

**Duke Realty Limited Partnership:**

 

We have reviewed the condensed consolidated balance sheet of DukeRealty Limited Partnership and subsidiaries as of September 30, 2004, therelated condensed consolidated statements of operations for the three and ninemonths ended September 30, 2004 and 2003, the related condensed consolidatedstatements of cash flows for the nine months ended September 30, 2004 and 2003,and the related condensed consolidated statement of shareholders’ equity forthe nine months ended September 30, 2004. These condensed consolidatedfinancial statements are the responsibility of the Partnership’s management.

 

We conducted our review in accordance with standards of the PublicCompany Accounting Oversight Board (United States). A review of interim financialinformation consists principally of applying analytical procedures to financialdata and making inquiries of persons responsible for financial and accountingmatters. It is substantially less in scope than an audit conducted inaccordance with the standards of the Public Company Accounting Oversight Board(United States), the objective of which is the expression of an opinionregarding the financial statements taken as a whole. Accordingly, we do notexpress such an opinion.

 

Based on our review, we are not aware of any material modificationsthat should be made to the condensed consolidated financial statements referredto above for them to be in conformity with U.S. generally accepted accountingprinciples.

 

We have previously audited, in accordance with standards established bythe Public Company Accounting Oversight Board (United States), the consolidatedbalance sheet of Duke Realty Limited Partnership and subsidiaries as ofDecember 31, 2003, and the related consolidated statements of operations,partners’ equity and cash flows for the year then ended (not presented herein);and in our report dated January 28, 2004, we expressed an unqualified opinionon those consolidated financial statements. In our opinion, the information setforth in the accompanying condensed consolidated balance sheet as of December31, 2003, is fairly presented, in all material respects, in relation to theconsolidated balance sheet from which it has been derived.

 

 

 

KPMG LLP

Indianapolis, Indiana

November 9, 2004

 

14

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**Item 2.  Management’s Discussion and Analysis ofFinancial Condition and Results of Operations**

 

**Cautionary Statement RegardingForward - Looking Statements**

 

Certain statements in this quarterly report,including those related to the Partnership’s future operations, constitute “forward-lookingstatements” within the meaning of Section 27A of the Securities Act of 1933, asamended, and Section 21E of the Securities Exchange Act of 1934, as amended.These forward-looking statements involve known and unknown risks, uncertaintiesand other important factors that could cause the actual results, performance orachievements of the Partnership, or industry results, to differ materially fromany predictions of future results,performance or achievements that we express or imply in this report. Some ofthe risks, uncertainties and other important factors that may affect futureresults include, among others:

 

•     General economic and business conditions;

•     The General Partner’s continued qualification as a real estate investmenttrust;

•     Competition for tenants and decrease in property occupancy;

•     Potential decreases in market rental rates;

•     Potential increases in real estate construction costs;

•     Potential changes in interest rates;

•     Continuing ability to favorably raise debt and equity in the capitalmarkets; and

•     Other risks inherent in the real estate business, including tenantdefaults, potential liability relating to environmental matters and liquidityof real estate investments.

 

This list of risks and uncertainties, however, isnot intended to be exhaustive. The Partnership has on file with the Securitiesand Exchange Commission (“SEC”) a Current Report on Form 8-K dated September 5,2003, which contains additional risk factor information.

 

The words “believe,” “estimate,” “expect” and similar expressions orstatements regarding future periods are intended to identify forward-looking statements. Although we believe that theplans, expectations and results expressed in or suggested by theforward-looking statements are reasonable, all forward-looking statements areinherently uncertain as they involve substantial risks and uncertainties beyondthe Partnership’s control. New factors emerge from time to time, and it is notpossible for us to predict the nature or assess the potential impact of eachnew factor on the Partnership’s business. Given these uncertainties, we cautionyou not to place undue reliance on these forward-looking statements. ThePartnership undertakes no obligation to update or revise any of its forward-lookingstatements for events or circumstances that arise after the statement is made.

 

**Business Overview**

 

As of September 30, 2004, the Partnership:

 

•                 Owned or controlled 896 industrial, office and retail properties(including properties under development), consisting of approximately 114.1million square feet located in 13 operating platforms; and

•                 Owned or controlled approximately 4,600 acres of land with an estimatedfuture development potential of approximately 69 million square feet ofindustrial, office and retail properties.

 

The Partnership provides the following servicesfor its properties and for certain properties owned by third parties and jointventures:

•                 leasing;

•                 management;

•                 construction;

•                 development; and

•                 other tenant-related services.

 

15

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The Partnership’s operating results dependprimarily upon income from the Rental Operations of its properties. This rentalincome is substantially influenced by the supply and demand for the Partnership’srental space. The Partnership’s continued growth is dependent upon its abilityto maintain occupancy rates and increase rental rates of its in-serviceportfolio. The Partnership’s strategy for growth also includes developing andacquiring additional rental properties.

 

The following highlights the areas of RentalOperations that the Partnership considers critical for future revenue growth(all square footage totals and occupancy percentages reflect 100% of bothwholly-owned properties and properties in joint ventures):

 

***OccupancyAnalysis:*** As discussed above, theability to maintain occupancy rates is a principal driver of the Partnership’sresults of operations. The following table sets forth occupancy informationregarding the Partnership’s in-service portfolio of rental properties as ofSeptember 30, 2004 and 2003 (in thousands, except percent occupied):

 
| ** **      | ** ** | **Total  Square Feet** | ** ** | **Percent of  Total Square Feet** |       | **Percent Occupied** | ** ** |
|-----------------|------------|------------------------|------------|-----------------------------------|------------|----------------------|------------|
| **Type**        | ** ** | **2004**               | ** ** | **2003**                          | ** ** | **2004**             | ** ** | **2003** |   | **2004** | ** ** | **2003** | ** ** |
| **Industrial**  |       |                   |       |                              |       |                 | ** ** |   |   |   | ** ** |   |   |
| Service Centers | ** ** | **13,011**             |       | 13,636                            | ** ** | **11.9**             | **%**      | 12.9 | % | **84.5** | **%** | 88.2 | % |
| Bulk            | ** ** | **67,469**             |       | 65,700                            | ** ** | **61.5**             | **%**      | 62.0 | % | **92.0** | **%** | 89.6 | % |
| **Office**      | ** ** | **28,569**             |       | 25,644                            | ** ** | **26.0**             | **%**      | 24.2 | % | **86.9** | **%** | 85.7 | % |
| **Retail**      | ** ** | **708**                |       | 933                               | ** ** | **0.6**              | **%**      | 0.9 | % | **99.3** | **%** | 98.0 | % |
| Total           | ** ** | **109,757**            |       | 105,913                           | ** ** | **100.0**            | **%**      | 100.0 | % |   | ** ** |   |   |

 

***LeaseExpiration:***The following table reflectsthe Partnership’s in-service portfolio lease expiration schedule as ofSeptember 30, 2004, by property type indicating square footage and annualizednet effective rents under expiring leases (in thousands, except per square footamounts):

 
| ** **                  | ** ** | **Total Portfolio** | ** ** | **Industrial**        | ** ** | **Office**             | ** ** | **Retail**           | ** ** |
|-----------------------------|------------|---------------------|------------|-----------------------|------------|------------------------|------------|----------------------|------------|
| **Year of Expiration**      | ** ** | **Square Feet**     | ** ** | **Ann. Rent Revenue** | ** ** | **Percent of Revenue** | ** ** | **Square**

**Feet** | ** ** | **Ann. Rent**

**Revenue** | ** ** | **Square**

**Feet** | ** ** | **Ann. Rent**

**Revenue** | ** ** | **Square**

**Feet** | ** ** | **Ann. Rent Revenue** | ** ** |
| 2004                        |       | 3,225               |       | $                     | 20,284     |                   | 3          | %                    | 2,471      |   | $ | 11,088 |   | 754 |   | $ | 9,196 |   | — |   | $ | — |   |
| 2005                        |       | 11,975              |       | 82,801                |       | 13                     | %          | 9,405                |       | 46,371 |   | 2,559 |   | 36,279 |   | 11 |   | 151 |   |
| 2006                        |       | 11,403              |       | 77,652                |       | 11                     | %          | 8,994                |       | 44,590 |   | 2,409 |   | 33,062 |   | — |   | — |   |
| 2007                        |       | 12,969              |       | 84,414                |       | 12                     | %          | 10,023               |       | 46,315 |   | 2,927 |   | 37,913 |   | 19 |   | 186 |   |
| 2008                        |       | 13,287              |       | 81,339                |       | 12                     | %          | 10,530               |       | 45,818 |   | 2,738 |   | 35,183 |   | 19 |   | 338 |   |
| 2009                        |       | 12,125              |       | 83,900                |       | 12                     | %          | 8,700                |       | 39,390 |   | 3,417 |   | 44,380 |   | 8 |   | 130 |   |
| 2010                        |       | 8,183               |       | 62,108                |       | 9                      | %          | 5,905                |       | 29,293 |   | 2,270 |   | 32,652 |   | 8 |   | 163 |   |
| 2011                        |       | 4,861               |       | 38,429                |       | 6                      | %          | 3,398                |       | 16,331 |   | 1,444 |   | 21,759 |   | 19 |   | 339 |   |
| 2012                        |       | 5,188               |       | 32,958                |       | 5                      | %          | 3,807                |       | 14,813 |   | 1,374 |   | 17,812 |   | 7 |   | 333 |   |
| 2013                        |       | 3,911               |       | 41,218                |       | 6                      | %          | 1,651                |       | 7,635 |   | 2,203 |   | 32,752 |   | 57 |   | 831 |   |
| 2014 and Thereafter         |       | 11,493              |       | 74,746                |       | 11                     | %          | 8,205                |       | 31,527 |   | 2,734 |   | 39,162 |   | 554 |   | 4,057 |   |
| Total Leased                |       | 98,620              |       | $                     | 679,849    |                   | 100        | %                    | 73,089     |   | $ | 333,171 |   | 24,829 |   | $ | 340,150 |   | 702 |   | $ | 6,528 |   |
|                        |       |                |       |                  |       |                   |       |                 |       |   |   |   |   |   |   |   |   |   |   |
| Total Portfolio Square Feet |       | 109,757             |       |                  |       |                   |       | 80,480               |       |   |   | 28,569 |   |   |   | 708 |   |   |   |
|                        |       |                |       |                  |       |                   |       |                 |       |   |   |   |   |   |   |   |   |   |   |
| Percent Occupied            |       | 89.9                | %          |                  |       |                   |       | 90.8                 | %          |   |   | 86.9 | % |   |   | 99.3 | % |   |   |
|                             |            |                     |            |                       |            |                        |            |                      |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

*** ***

***Future Development:***The Partnership expects to realize growth in earningsfrom Rental Operations through the development and acquisition of additionalrental properties in its primary markets. Specifically, the Partnership has 4.3million square feet of properties under development at September 30, 2004.These properties should provide future earnings through Service Operationsincome upon sale or from Rental Operations growth as they are placed inservice.  A summary of the propertiesunder development as of September 30, 2004 follows (in thousands, exceptpercent leased and anticipated stabilized returns):

 

16

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| **Anticipated In-Service Date** | ** ** | **Square  Feet** | ** ** | **Percent  Leased** | ** ** | **Project  Costs** | ** ** | **Anticipated  Stabilized  Return** | ** ** |
|---------------------------------|------------|------------------|------------|---------------------|------------|--------------------|------------|-------------------------------------|------------|
| Held For Rental:                |       |             |       |                |       |               |       |                                |       |
| 4th Quarter 2004                |       | 893              |       | 48                  | %          | 34,202             |       | 10.3                                | %          |
| 1st Quarter 2005                |       | 2,234            |       | 36                  | %          | 65,163             |       | 9.8                                 | %          |
| 2nd Quarter 2005                |       | 123              |       | 100                 | %          | 6,408              |       | 9.5                                 | %          |
| Thereafter                      |       | 80               |       | —              |       | 9,182              |       | 10.5                                | %          |
|                            |       | 3,330            |       | 41                  | %          | $                  | 114,955    |                                | 10.0       | % |
| Build-to-Suit for Sale:         |       |             |       |                |       |               |       |                                |       |
| 4th Quarter 2004                |       | 31               |       | 100                 | %          | 3,011              |       | 11.3                                | %          |
| 1st Quarter 2005                |       | 888              |       | 100                 | %          | 25,731             |       | 8.0                                 | %          |
| 2nd Quarter 2005                |       | 47               |       | 100                 | %          | 6,377              |       | 9.6                                 | %          |
| Thereafter                      |       | —           |       | —              |       | —             |       | —                              |       |
|                            |       | 966              |       | 100                 | %          | $                  | 35,119     |                                | 8.6        | % |
| Total                           |       | 4,296            |       | 54                  | %          | $                  | 150,074    |                                | 9.6        | % |
|                                 |            |                  |            |                     |            |                    |            |                                     |            |  |  |

 

***LeaseRenewals:***The Partnership renewed 71.3%and 72.1% of leases up for renewal in the three and nine months ended September30, 2004, totaling 1.9 million and 6.9 million square feet, respectively. Thiscompares to renewals of 76.5% and 70.9% for the three and nine months endedSeptember 30, 2003, totaling 2.4 million and 5.0 million square feet. Theaverage term of renewals for the three and nine months ended September 30,2004, remained generally consistent at 3.1 years and 3.8 years compared to anaverage term of 3.6 years and 3.2 years for first three and nine months endedSeptember 30, 2003.

 

**Funds From Operations**

 

Funds From Operations (“FFO”) is used by industryanalysts and investors as a supplemental operating performance measure of anequity real estate investment trust (“REIT”). FFO is calculated in accordancewith the definition that was adopted by the Board of Governors of the NationalAssociation of Real Estate Investment Trusts (“NAREIT”). FFO, as defined byNAREIT, represents net income (loss) determined in accordance with accountingprinciples generally accepted in the United States of America (“GAAP”),excluding extraordinary items as defined under GAAP and gains or losses fromsales of previously depreciated operating real estate assets, plus certainnon-cash items such as real estate asset depreciation and amortization, andafter similar adjustments for unconsolidated partnerships and joint ventures.

 

Historical cost accounting for real estate assetsin accordance with GAAP implicitly assumes that the value of real estate assetsdiminishes predictably over time. Since real estate values instead havehistorically risen or fallen with market conditions, many industry investorsand analysts have considered presentation of operating results for real estatecompanies that use historical cost accounting to be insufficient by themselves.Thus, NAREIT created FFO as a supplemental measure of REIT operatingperformance that excludes historical cost depreciation, among other items, fromGAAP net income. Management believes that the use of FFO, combined with therequired primary GAAP presentations, has improved the understanding of operatingresults of REITs among the investing public and made comparisons of REIToperating results more meaningful. Management considers FFO to be a usefulmeasure for reviewing comparative operating and financial performance (althoughFFO should be reviewed in conjunction with net income which remains the primarymeasure of performance) because by excluding gains or losses related to salesof previously depreciated operating real estate assets and excluding realestate asset depreciation and amortization, FFO assists in comparing theoperating performance of a Partnership’s real estate between periods or ascompared to different companies.

 

The following table summarizes the calculation ofFFO for the three and nine months ended September 30, 2004 and 2003 (inthousands):

 

17

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| ** **                                      | ** ** | **Three Months Ended September 30,** |       | **Nine Months Ended September 30,** | ** ** |
|-------------------------------------------------|------------|-------------------------------------------|------------|------------------------------------------|------------|
| ** **                                      | ** ** | **2004**                                  | ** ** | **2003**                                 |       | **2004** | ** ** | **2003** | ** ** |
| Net income available for common unitholders     | ** ** | **$**                                     | **46,867** | ** **                               | $          | 44,666 |   | **$** | **122,097** | ** ** | $ | 124,717 |   |
| Add back (deduct):                              |       |                                      | ** ** |                                     |       |   | ** ** |   |   |
| Depreciation and amortization                   | ** ** | **61,511**                                | ** ** | 48,250                                   |       | **167,159** | ** ** | 142,539 |   |
| Share of joint venture adjustments              | ** ** | **4,686**                                 | ** ** | 4,459                                    |       | **13,883** | ** ** | 14,236 |   |
| Earnings from depreciable property dispositions | ** ** | **(14,873**                               | **)**      | (3,349                                   | )          | **(19,627** | **)** | (12,567 | ) |
| **Funds From Operations**                       | ** ** | **$**                                     | **98,191** | ** **                               | $          | 94,026 |   | **$** | **283,512** | ** ** | $ | 268,925 |   |
|                                                 |            |                                           |            |                                          |            |  |  |  |  |  |  |  |  |  |

 

**Results of Operations**

 

A summary of the Partnership’s operating resultsand property statistics for the three and nine months ended September 30, 2004and 2003, is as follows (in thousands, except number of properties and per unitamounts):

 
| ** **                                                  | ** ** | **Three Months Ended September 30,** | ** **  | **Nine Months Ended September 30,** | ** ** |
|-------------------------------------------------------------|------------|-------------------------------------------|-------------|------------------------------------------|------------|
| ** **                                                  | ** ** | **2004**                                  | ** **  | **2003**                                 | ** ** | **2004** | ** ** | **2003** | ** ** |
| Rental Operations revenue from continuing operations        |       | **$**                                     | **194,959** |                                     | $          | 178,665 | ** ** | **$** | **571,029** |   | $ | 531,662 |   |
| Service Operations revenues                                 | ** ** | **17,434**                                |        | 12,453                                   | ** ** | **43,608** |   | 33,056 |   |
| Earnings from Rental Operations                             | ** ** | **35,715**                                |        | 49,294                                   | ** ** | **124,589** |   | 135,231 |   |
| Earnings from Service Operations                            | ** ** | **6,341**                                 |        | 4,316                                    | ** ** | **13,106** |   | 10,888 |   |
| Operating income                                            | ** ** | **35,166**                                |        | 48,998                                   | ** ** | **116,856** |   | 130,664 |   |
| Net income available for common unitholders                 | ** ** | **$**                                     | **46,867**  |                                     | $          | 44,666 | ** ** | **$** | **122,097** |   | $ | 124,717 |   |
| Weighted average common units outstanding                   | ** ** | **156,211**                               |        | 150,373                                  | ** ** | **154,905** |   | 150,163 |   |
| Weighted average common and dilutive potential common units |       | **157,105**                               |        | 151,244                                  | ** ** | **156,956** |   | 150,965 |   |
| Basic income per common unit:                               |       |                                      |        |                                     |       |   |   |   |   |
| Continuing operations                                       | ** ** | **$**                                     | **.20**     |                                     | $          | .27 | ** ** | **$** | **.65** |   | $ | .76 |   |
| Discontinued operations                                     | ** ** | **$**                                     | **.10**     |                                     | $          | .03 | ** ** | **$** | **.14** |   | $ | .07 |   |
| Diluted income per common unit:                             |       |                                      |        |                                     |       |   |   |   |   |
| Continuing operations                                       | ** ** | **$**                                     | **.20**     |                                     | $          | .27 | ** ** | **$** | **.64** |   | $ | .76 |   |
| Discontinued operations                                     | ** ** | **$**                                     | **.10**     |                                     | $          | .03 | ** ** | **$** | **.14** |   | $ | .07 |   |
| Number of in-service properties at end of period            | ** ** | **880**                                   |        | 908                                      | ** ** | **880** |   | 908 |   |
| In-service square footage at end of period                  | ** ** | **109,757**                               |        | 105,914                                  | ** ** | **109,757** |   | 105,914 |   |
|                                                        | ** ** | ** **                                |        |                                     | ** ** | ** ** |   |   |   |
| Under development square footage at end of period           | ** ** | **4,296**                                 |        | 3,941                                    | ** ** | **4,296** |   | 3,941 |   |
|                                                             |            |                                           |             |                                          |            |  |  |  |  |  |  |  |  |  |

** **

**Comparison of Three Months EndedSeptember 30, 2004 to Three Months Ended September 30, 2003**

 

Rental Income From Continuing Operations

 

Overall, rental incomefrom continuing operations for the three months ended September 30, 2004,increased from $171.3 million in 2003 to $188.7 million in 2004. The followingtable reconciles rental income from continuing operations by reportable segmentto the Partnership’s total reported rental income from continuing operationsfor the three months ended September 30, 2004 and 2003 (in thousands):

 
| ** **  | ** ** | **Three Months Ended September 30,** | ** **  |
|-------------|------------|--------------------------------------|-------------|
| ** **  | ** ** | **2004**                             | ** **  | **2003** | ** ** |
| Office      | ** ** | **$**                                | **115,108** |   | 104,894 |   |
| Industrial  | ** ** | **70,827**                           |        | 64,267 |   |
| Retail      | ** ** | **1,409**                            |        | 1,447 |   |
| Non-segment | ** ** | **1,395**                            |        | 689 |   |
| Total       | ** ** | **$**                                | **188,739** |   | $ | 171,297 |   |
|             |            |                                      |             |  |  |  |  |

 

Although the Partnership’sthree reportable segments comprising Rental Operations (office, industrial andretail) are all within the real estate industry, they are not necessarily affectedby the same economic and industry conditions. The primary causes of theincrease in rental income from continuing operations, with specific referencesto a particular segment when applicable, are summarized below:

**•****                 **The Partnership’s in-service occupancyincreased to 89.9% at September 30, 2004, from 88.6% at September 30,2003.  Increases in the bulk industrialand office portfolio occupancies were the main reasons for the Partnership’soverall occupancy increase.

•                  During the last quarter of2003 and the first three quarters of 2004, the Partnership acquiredtwenty-seven new properties and placed sixteen development projects in-service.These acquisitions and

 

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developments are theprimary factors in the overall $17.5 million increase in rental revenue for thethree months ended September 30, 2004, compared to the same period in 2003.Twenty-one of the twenty-seven property acquisitions and five developmentprojects were office properties. These office acquisitions and developmentswere the primary reasons for the $10.2 million increase in office rentalincome. During the last quarter of 2003 and in the first three quarters of2004, the Partnership acquired four and developed ten industrial buildings.

•                  Straight-line rental income for the thirdquarter of 2004 decreased slightly to $4.5 million compared to $5.5 million in2003. Even though straight-line rental income decreased, the Partnership hascontinued the use of free rent concessions as an incentive to attract qualitytenants in competitive markets. The effect of these concessions is reflected instraight-line rental income over the life of the leases.

•                  Lease termination fees totaled $4.7 millionfor the third quarter 2004, compared to $1.2 million for the same period in2003.  Most of these termination feeswere realized in the industrial portfolio, which had termination fees of $3.2million during the third quarter of 2004 compared to $554,000 for the third quarterof 2003. Of the $3.2 million of industrial terminations, $2.7 million wasassociated with a single tenant.

 

Rental Expenses and Real Estate Taxes

 

The following table reconciles rental expenses and real estate taxes byreportable segment to the Partnership’s total reported amounts in the statementof operations for the three months ended September 30, 2004 and 2003 (inthousands):

 
| ** **         | ** ** | **Three Months Ended September 30,** | ** ** |
|--------------------|------------|--------------------------------------|------------|
| ** **         | ** ** | **2004**                             | ** ** | **2003** | ** ** |
| Rental Expenses:   |       |                                 |       |   |   |
| Office             | ** ** | **$**                                | **30,986** |   | $ | 26,723 |   |
| Industrial         | ** ** | **9,****799**                        |       | 8,183 |   |
| Retail             | ** ** | **95**                               |       | 126 |   |
| Non-segment        | ** ** | **91**                               |       | 69 |   |
| Total              | ** ** | **$**                                | **40,971** |   | $ | 35,101 |   |
|               |       |                                 |       |   |   |
| Real Estate Taxes: |       |                                 |       |   |   |
| Office             | ** ** | **$**                                | **12,580** |   | $ | 9,800 |   |
| Industrial         | ** ** | **8,577**                            |       | 6,997 |   |
| Retail             | ** ** | **114**                              |       | 99 |   |
| Non-segment        | ** ** | **1,132**                            |       | 938 |   |
| Total              | ** ** | **$**                                | **22,403** |   | $ | 17,834 |   |
|                    |            |                                      |            |  |  |  |  |  |  |  |

 

The overall increase in rental expenses and real estate taxes is theresult of the Partnership’s increased real estate assets associated with theacquisitions and developments as noted above.

 

Interest Expense

 

The increase in interest expense from $30.3 million for the thirdquarter of 2003 to $34.4 million for the same period in 2004 is primarilyattributable to the additional $540.0 million of unsecured debt which was issuedby the Partnership since September 2003, compared to unsecured debt retirementsof only $100.0 million during that same time period. The increase in unsecureddebt is the result of the Partnership issuing unsecured debt to take advantageof the favorable interest environment and to fund new developments andacquisitions.

 

Depreciation and Amortization

 

Depreciation and amortization expense increased from $46.2 millionduring the three months ended September 30, 2003 to $61.4 million for the sameperiod in 2004.

 

The following highlights the significant changes in depreciationexpense for these time periods:

•                  Depreciation expense ontenant improvements increased by $7.5 million, which is reflective of increasedleasing activity over the past year.

 

19

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•                  Amortization expense of inplace lease intangible assets associated with acquisitions increased by $4.0million, which reflects the acquisition activity in the last three months of2003 and the first nine months of 2004.

•                  Depreciation expense onbuilding assets has increased by $1.0 million as a result of the Partnershipincreasing its held for investment portfolio by $167.5 million over the pastyear.

 

Service Operations

 

Service Operations primarily consist of the Partnership’s build-to-suitfor sale operations and the leasing, management, construction and developmentservices for joint venture properties and properties owned by third parties.Service Operations revenues increased from $12.5 million for the three monthsended September 30, 2003 to $17.4 million for the three months ended September30, 2004, primarily as a result  of thefollowing:

•                  Net revenue from workperformed as general contractor for third-party construction jobs decreasedfrom $7.6 million for the three months ended September 30, 2003, to $6.6million for the three months ended September 30, 2004, respectively. Thedecrease is reflective of the realization of lower profit margins onthird-party construction contracts in 2004, despite volume increases in 2004over 2003. The Partnership has been successful in increasing the volume of itsthird-party construction contracts in late 2003 and 2004, but at lower marginsin order to generate additional volume. During the second and third quarters of2004, the Partnership has been more selective on new third-party contractsresulting in an increase in the margin of new deals signed, which will have apositive effect on Service Operations profitability in 2005.

•                  The Partnership’s merchantbuilding development and sales program, whereby a building is developed by thePartnership and then sold, is a significant component of Construction andDevelopment income. During the third quarter of 2004, the Partnership sold twosuch properties for a gain of nearly $4.6 million as compared to no merchantbuilding sales in the third quarter of 2003. Profit margins on these types ofbuilding sales fluctuate by sale depending on the type of property being sold,the strength of the underlying tenant and nature of the sale, such as apre-contracted purchase price for a primary tenant versus a sale on the openmarket.

 

Service Operations expenses increased from$8.1 million for the three months ended September 30, 2003, to $11.1 millionfor the three months ended September 30, 2004, respectively. This increasereflects greater costs associated with the increased third-party constructionvolume and income tax expense on the merchant building sales noted above.

 

General and AdministrativeExpense

 

General and administrative expenses increased from $4.6 million to $6.9million for the three months ended September 30, 2003, compared to the sameperiod in 2004. The Partnership experienced an increase in overall expenses asa result of increased staffing and employee compensation to support businessexpansion for the quarter ended September 30, 2004, compared to the same periodin 2003.

 

OtherIncome and Expenses

 

Earnings from sale of land and ownership interests in unconsolidatedcompanies is comprised of the following amounts for the three months endedSeptember 30, 2004 and 2003 (in thousands):

 
| ** **                                    | ** ** | **Three Months Ended September 30,** | ** ** |
|-----------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                    | ** ** | **2004**                                  | ** ** | **2003** | ** ** |
| Gain on land sales                            | ** ** | **$**                                     | **3,712**  |   | $ | 1,383 |   |
| Gain (loss) on sale of joint venture interest |       | **—**                                |       | 11 |   |
| Impairment adjustment for land                | ** ** | **(325**                                  | )          | — |   |
| Total                                         | ** ** | **$**                                     | **3,387**  |   | $ | 1,394 |   |
|                                               |            |                                           |            |  |  |  |  |  |

 

20

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Gain on land sales are derived from sales of undeveloped land owned bythe Partnership. The Partnership pursues opportunities to dispose of land inmarkets with a high concentration of undeveloped land and those markets wherethe land no longer meets strategic development plans of the Partnership.

 

For the three months ended September 30, 2004, the Partnership recorded$325,000 of impairment charges associated with contracts to sell three landparcels.

 

Discontinued Operations

 

ThePartnership has classified the operations of seventy-nine buildings asdiscontinued operations at September 30, 2004. These seventy-nine buildingsconsist of sixty-six industrial, eight office and five retail properties. As aresult, the Partnership classified net income from operations of $1.1 millionand $819,000 as net income from discontinued operations for the three monthsended September 30, 2004 and 2003, respectively. In addition, twenty-eight ofthe properties classified in discontinued operations were sold during the thirdquarter of 2004 and two properties were sold during the third quarter of 2003;therefore, the gains on disposal of these properties of $14.9 million and $3.3million, respectively, are also reported in discontinued operations. Theremaining forty-nine properties consist of forty properties sold in 2003, sixproperties sold during the first and second quarter of 2004 and threeproperties classified as held-for-sale at September 30, 2004.

 

**Comparison of Nine Months EndedSeptember 30, 2004 to Nine Months Ended September 30, 2003**

 

Rental Income From Continuing Operations

 

Overall, rental income from continuing operations increased from $513.3million in 2003 to $554.5 million in 2004. The following table reconcilesrental income from continuing operations by reportable segment to thePartnership’s total reported rental income from continuing operations for thenine months ended September 30, 2004 and 2003 (in thousands):

 
| ** **  | ** ** | **Nine Months Ended September 30,** | ** **  |
|-------------|------------|------------------------------------------|-------------|
| ** **  | ** ** | **2004**                                 | ** **  | **2003** | ** ** |
| Office      | ** ** | **$**                                    | **340,099** |   | $ | 313,334 |   |
| Industrial  | ** ** | **207,037**                              |        | 193,794 |   |
| Retail      | ** ** | **3,632**                                |        | 4,367 |   |
| Non-segment | ** ** | **3,746**                                |        | 1,837 |   |
| Total       | ** ** | **$**                                    | **554,514** |   | $ | 513,332 |   |
|             |            |                                          |             |  |  |  |  |  |  |

 

The primary causes of theincrease in rental income from continuing operations, with specific referencesto a particular segment when applicable, are summarized below:

•                  During the last quarter of2003 and the first nine months of 2004, the Partnership acquired twenty-sevennew properties and placed sixteen development projects in-service. Theseacquisitions and developments are the primary factor in the overall $41.2million increase in rental revenue for the nine months ended September 30,2004, compared to the same period in 2003. Twenty-one of the twenty-sevenproperty acquisitions and five development projects were within the officesegment. These office acquisitions and developments were the primary reason forthe $26.8 million increase in office rental income. During the same period in2003 and 2004, the Partnership acquired four and developed ten industrialbuildings, which are the main factors causing the $13.2 million increase inindustrial rental income.

•                  The increase in the Partnership’s rentalincome was also the result of the Partnership’s in-service occupancy increasingto 89.9% at September 30, 2004, from 88.6% at September 30, 2003.

•                  Straight-line rental income for the ninemonths ended September 30, 2004, totaled approximately $15.3 million comparedto $17.0 million in 2003, which reflects the Partnership’s continued use offree rent concessions as an incentive to attract quality tenants in competitivemarkets primarily on office leases. The effect of these concessions isreflected in straight-line rental income over the life of the leases.

 

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•                  The rental income shown above includes leasetermination fees. The termination fee component of rental income totaled $11.2million for the nine months ended September 30, 2004, compared to $12.1 millionfor the same period in 2003. The office portfolio had termination fees of $6.8million during the nine months ended September 30, 2004, compared to $10.3million for the same period in 2003. In 2003, $5.9 million of the $10.3 millionof office termination fees was associated with a single tenant. Industrialtermination fees have increased from $1.7 million for the nine months endedSeptember 30, 2003 to $4.4 million for the same period in 2004. Of the $4.4million of industrial terminations, $2.7 million was associated with a singletenant.

 

Rental Expenses and Real Estate Taxes

 

The following table reconciles rental expenses and real estate taxes byreportable segment to the Partnership’s total reported amounts in the statementof operations for the nine months ended September 30, 2004 and 2003 (inthousands):
| ** **         | ** ** | **Nine Months Ended September 30,** | ** **  |
|--------------------|------------|------------------------------------------|-------------|
| ** **         | ** ** | **2004**                                 | ** **  | **2003** | ** ** |
| Rental Expenses:   |       |                                     |        |   |   |
| Office             | ** ** | **$**                                    | **87,635**  |   | $ | 78,404 |   |
| Industrial         | ** ** | **29,013**                               |        | 27,061 |   |
| Retail             | ** ** | **353**                                  |        | 476 |   |
| Non-segment        | ** ** | **417**                                  |        | 659 |   |
| Total              | ** ** | **$**                                    | **117,418** |   | $ | 106,600 |   |
|               |       |                                     |        |   |   |
| Real Estate Taxes: |       |                                     |        |   |   |
| Office             | ** ** | **36,743**                               |        | 31,717 |   |
| Industrial         | ** ** | **25,368**                               |        | 21,869 |   |
| Retail             | ** ** | **412**                                  |        | 103 |   |
| Non-segment        | ** ** | **2,635**                                |        | 4,500 |   |
| Total              | ** ** | **$**                                    | **65,158**  |   | $ | 58,189 |   |
|                    |            |                                          |             |  |  |  |  |  |  |

 

The overall rental expense increase is the result of the Partnership’sincreased real estate assets associated with acquisitions and developments asnoted above.

 

Interest Expense

 

The increase in interest expense from $95.1 million for the nine monthsended September 30, 2003, to $99.8 million for the same period in 2004 isprimarily attributable to the additional $540.0 million of unsecured debt whichwas issued by the Partnership since September 3003, compared to unsecured debtretirements of only $100.0 million during that same time period. In the lastyear, the Partnership has continued to issue unsecured debt, to take advantageof the favorable interest environment and to fund new developments andacquisitions.

 

Depreciation and Amortization

 

Depreciation and amortization expense increased from $136.5 millionduring the nine months ended September 30, 2003 to $164.1 million for the sameperiod in 2004.

 

The following highlights the significant changes in expense during thisperiod:

•                  Depreciation expense ontenant improvements increased by $11.6 million, which is reflective ofincreased leasing activity over the past twelve-month period.

•                  Amortization expense of inplace lease intangible assets associated with acquisitions increased by $9.4million, which reflects the increased acquisition activity since the last threemonths of 2003 and first nine months of 2004.

•                  Depreciation expense onbuildings increased by $2.1 million, which is reflective of the net increase inthe held for investment portfolio over the past twelve months resulting fromacquisition and development activity outpacing dispositions.

 

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Service Operations

 

Service Operations primarily consist of the Partnership’s build-to-suitfor sale operations and the leasing, management, construction and developmentservices for joint venture properties and properties owned by third parties.Service Operations revenues increased from $33.1 million for the nine monthsended September 30, 2003, to $43.6 million for the nine months ended September30, 2004, primarily as a result of the following:

•                  Net revenue from workperformed as general contractor for third-party construction jobs decreasedfrom $19.8 million to $19.7 million for the nine months ended September 30,2003 and 2004, respectively. During the nine months ended September 30, 2004,the Partnership has experienced an increase in the volume of third-party work,but the margins associated with this work have been lower. The Partnershipaccepted these lower margin jobs in order to increase its overall third-partyvolume. While margins associated with this work have been lower in the firstnine months, the Partnership has noted an increase in margins of new dealssigned during the second and third quarters of 2004. The Partnership has beenmore selective on new third-party contracts, which will have a positive effecton Service Operations profitability in 2005.

•                  The Partnership’s merchantbuilding development and sales program whereby a building is developed by thePartnership and then sold is a significant component of Construction andDevelopment income. During 2004, the Partnership sold four such properties fora gain of nearly $9.2 million as compared to one such sale in 2003 for a gainof $743,000. Profit margins on these types of building sales fluctuate by saledepending on the type of property being sold, the strength of the underlyingtenant and nature of the sale, such as a pre-contracted purchase price for aprimary tenant versus a sale on the open market.

 

Service Operations expenses increased from $22.2 million to $30.5million for the nine months ended September 30, 2003 and 2004, respectively.This increase reflects greater costs being incurred by Service Operations as aresult of the increase in the Partnership’s third-party construction volume andmerchant building sales activity for the nine months ended September 30, 2004,compared to the same period in 2003.

 

General and AdministrativeExpense

 

General and administrative expenses increased from $15.5 million forthe nine months ended September 30, 2003, to $20.8 million for the same periodin 2004. The Partnership experienced an increase in overall expenses as aresult of increased staffing and employee compensation to support businessexpansion for the nine months ended September 30, 2004, compared to the sameperiod in 2003.

 

Other Income and Expenses

 

Earnings from sale of land and ownership interests in unconsolidatedcompanies is comprised of the following amounts for the nine months endedSeptember 30, 2004 and 2003 (in thousands):

 
| ** **                             | ** ** | **Nine Months Ended September 30,** | ** ** |
|----------------------------------------|------------|------------------------------------------|------------|
| ** **                             | ** ** | **2004**                                 | ** ** | **2003** | ** ** |
| Gain on land sales                     | ** ** | **$**                                    | **9,495**  | ** ** | $ | 6,853 |   |
| Gain on sale of joint venture interest | ** ** | **50**                                   | ** ** | 6,266 |   |
| Loss on sale of depreciable property   | ** ** | **(180**                                 | **)**      | (20 | ) |
| Impairment adjustment for land         | ** ** | **(425**                                 | **)**      | (560 | ) |
| Total                                  | ** ** | **$**                                    | **8,940**  | ** ** | $ | 12,539 |   |

 

Gain on land sales are derived from sales of undeveloped land owned bythe Partnership. The Partnership pursues opportunities to dispose of land inmarkets with a high concentration of undeveloped land and those markets wherethe land no longer meets strategic development plans of the Partnership.

 

In the first quarter of 2003, the Partnership sold its interest in ajoint venture that owned and operated depreciable investment property. ThePartnership was a 50% partner in this joint venture. The joint venturedeveloped and operated real estate assets; thus, the gain was not included inoperating income.

 

23

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Loss on sale of depreciable property represents post sale expensesincurred that are associated with properties not in the discontinuedpopulation.

 

The Partnership recorded $425,000 and $560,000 of impairment chargesassociated with contracts to sell land parcels for the nine months endedSeptember 30, 2004 and 2003, respectively.

 

Discontinued Operations

 

ThePartnership has classified operations of seventy-nine buildings as discontinuedoperations as of September 30, 2004. These seventy-nine buildings consist ofsixty-six industrial, eight office and five retail properties. As a result, thePartnership classified net income from operations of $1.5 million and $5.0million as net income from discontinued operations for the nine months endedSeptember 30, 2004 and 2003, respectively. In addition, thirty-four of theproperties classified in discontinued operations were sold during the firstnine months of 2004 and eleven properties were sold during the first ninemonths of 2003; therefore, the gains on disposal of these properties of $19.8million and $5.8 million, respectively, are also reported in discontinuedoperations. The remaining thirty-four properties consist of thirty-one propertiessold throughout the last three months of 2003 and three properties classifiedas held-for-sale at September 30, 2004.

 

**Liquidity and Capital Resources**

 

Sources of Liquidity

 

The Partnership expects to meet its short-term liquidity requirementsover the next twelve months, including payments of dividends and distributions as well as recurringcapital expenditures relating to maintaining the Partnership’s current realestate assets, primarily through the following:

 

•            working capital; and

•            net cash provided byoperating activities.

 

The Partnership historically has not used any other sources of funds topay for recurring capital expenditures on its current real estate investments.However, as a result of the recent significant increases in occupancy and theamount of funds required to pay for tenant improvements and leasing commissionsassociated with the high leasing volume, the Partnership has temporarilysupplemented these sources with a relatively small amount of propertydisposition proceeds and may continue to do so for in the foreseeable future.

 

The Partnership expects to meetlong-term liquidity requirements, such as scheduled mortgage debt maturities,refinancing of long-term debt, preferred stock redemptions, the retirement ofunsecured notes and amounts outstanding under the unsecured credit facility,property acquisitions, financing of development activities and othernon-recurring capital improvements, primarily through the following sources:

•            issuance of additionalunsecured notes;

•            issuance of additionalpreferred equity;

•            undistributed cash providedby operating activities, if any; and

•            proceedsreceived from real estate dispositions.  

 

### ***RentalOperations***

The Partnership believesthat its principal source of liquidity, cash flows from Rental Operations,provides a stable source of cash to fund operational expenses. The Partnershipbelieves that this cash-based revenue stream is substantially aligned withrevenue recognition (except for periodic straight-line rental income accruals) ascash receipts from the leasing of rental properties are generally received inadvance of or in a short time following the actual revenue recognition. ThePartnership is subject to risks of decreased occupancy as a result of marketconditions as well as tenant defaults and bankruptcies, and potential reductionin rental rates upon renewal or re-letting of properties, which would result inreduced cash flow from operations. However, management believes that theserisks are mitigated by the Partnership’s strong

 

24

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market presence in mostof its locations and the fact that the Partnership performs in-house creditreview and analysis on major tenants and all significant leases before they areexecuted.

*Credit Facilities*

The Partnership has one unsecured line of credit available at September30, 2004, described as follows (in thousands):

 
| **Description**          | ** ** | **Borrowing  Capacity** | ** ** | **Maturity Date** | ** **    | **Interest Rate** | ** **    | **Outstanding at September 30, 2004** | ** ** |
|--------------------------|------------|-------------------------|------------|-------------------|---------------|-------------------|---------------|--------------------------------------------|------------|
| Unsecured Line of Credit |       | $                       | 500,000    |              | January  2007 |              | LIBOR  + .60% |                                       | $          | 339,000 |   |
|                          |            |                         |            |                   |               |                   |               |                                            |            |  |  |

 

The line of credit is used to fund development activities, acquireadditional rental properties and provide working capital.

 

The line of creditprovides the Partnership with an option to obtain borrowings from financialinstitutions that participate in the line, at rates lower than the statedinterest rate, subject to certain restrictions. Amounts outstanding on theunsecured line of credit at September 30, 2004, range from LIBOR + .24% to .60%(1.88% to 2.44% at September 30, 2004).

 

The line of creditalso contains financial covenants that require the Partnership to meet definedlevels of performance.  As of September30, 2004, the Partnership is in compliance with all covenants and expects to remainin compliance for the foreseeable future.

 

*Debtand Equity Securities*

 

At September 30, 2004, the Partnership currently has on file with theSEC an effective shelf registration statement that permits the Partnership tosell up to an additional $295 million of unsecured debt securities. Inaddition, the General Partner has on file with the SEC an effective shelfregistration statement that permits the General Partner to sell up to anadditional $250.7 million of common and preferred stock. From time-to-time, the  Partnership and the General Partner expect toissue additional securities under these registration statements to funddevelopment and acquisition of additional rental properties and to fund therepayment of the credit facilities and other long-term debt upon maturity.

 

The indenturegoverning the Partnership’s unsecured notes also requires the Partnership tocomply with financial ratios and other covenants regarding the operations ofthe Partnership. The Partnership is currently in compliance with all suchcovenants as of September 30, 2004 and expects to remain in compliance for theforeseeable future.

 

In January 2004, the Partnership completed a $125 million unsecureddebt offering at an effective interest rate of 3.4%, due January 2008.

 

In February 2004, the General Partner and the Partnership issued SeriesK Preferred Units totaling $150 million at a dividend rate of 6.50%.

 

In August 2004, the Partnership issued $250 million of 5.40% unsecurednotes due in 2014. The notes were issued as part of an exchange of securitiesfor $100 million principal amount of the Partnership’s 6.95% unsecured debt dueAugust 2004. The remaining cash proceeds were used to finance the cancellationof the related call option with respect to the exchange of the debt, to financeexpenses associated with the offering and to reduce amounts outstanding underthe Partnership’s unsecured line of credit.

 

On November 2, 2004, the General Partner and thePartnership agreed to sell $200 million of Series L Preferred Units, at a dividendrate of 6.60%. The sale is expected to close on November 30, 2004.

 

*Sale of Real Estate Assets*

The Partnership utilizes sales of real estate assets as an additionalsource of liquidity. The Partnership continues to pursue opportunities to sellreal estate assets and prune its older portfolio properties when beneficial andin-line with the Partnership’s long-term strategy.

 

 

25

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Uses of Liquidity

 

The Partnership’sprincipal uses of liquidity include the following:

 

•                 Property investments;

•                 Recurring leasing/capital costs;

•                 Dividends and distributions to shareholders and unitholders;

•                 Long-term debt maturities; and

•                 Other contractual obligations.

 

*PropertyInvestments and Other Capital Expenditures*

 

One of the Partnership’s principal uses of its liquidity is to fund thedevelopment, acquisition and recurring leasing/capital expenditures of its realestate investments.

 

A summary of the Partnership’s recurring capital expenditures for thenine months ended September 30, 2004 and 2003, is as follows (in thousands,except weighted average interest rate of future repayments):

 
| ** **            | ** ** | **2004**   | ** ** | **2003** | ** ** |
|-----------------------|------------|------------|------------|----------|------------|
| Tenant improvements   | ** ** | **$**      | **41,968** |     | $          | 28,078 |   |
| Leasing costs         | ** ** | **20,313** |       | 15,993   |       |
| Building improvements | ** ** | **14,679** |       | 12,736   |       |
| Totals                | ** ** | **$**      | **76,960** |     | $          | 56,807 |   |
|                       |            |            |            |          |            |  |  |  |  |

 

The large increase in these expenditures in 2004 coincides with thePartnership’s increase in occupancy and the related increased leasing volume.

 

*DebtMaturities*

 

Debt outstanding at September 30, 2004, totaled $2.7 billion with aweighted average interest rate of 5.52% maturing at various dates through 2028.The Partnership had $2.5 billion of unsecured debt and approximately $204.9million of secured debt outstanding at September 30, 2004. Scheduled principalamortization of such debt totaled $5.7 million for the nine months endedSeptember 30, 2004.

 

Following is a summary of the scheduled future amortization andmaturities of the Partnership’s indebtedness at September 30, 2004 (inthousands):
| ** ** | ** ** | **Future Repayments** | ** ** | **Weighted****Average** | ** ** |
|------------|------------|-----------------------|------------|-------------------------|------------|
| ** ** | ** ** | **Scheduled**         | ** ** | ** **              | ** ** | ** ** | ** ** | **Interest Rate of** | ** ** |
| **Year**   | ** ** | **Amortization**      | ** ** | **Maturities**          | ** ** | **Total** | ** ** | **Future Repayments** | ** ** |
| 2004       |       | $                     | 1,924      |                    | $          | 50,000 |   | $ | 51,924 |   | 7.21 | % |
| 2005       |       | 8,687                 |       | 270,980                 |       | 279,667 |   | 6.04 | % |
| 2006       |       | 8,317                 |       | 165,186                 |       | 173,503 |   | 6.34 | % |
| 2007       |       | 6,891                 |       | 553,615                 |       | 560,506 |   | 3.46 | % |
| 2008       |       | 6,031                 |       | 259,028                 |       | 265,059 |   | 4.92 | % |
| 2009       |       | 5,867                 |       | 275,000                 |       | 280,867 |   | 7.37 | % |
| 2010       |       | 5,313                 |       | 175,000                 |       | 180,313 |   | 5.39 | % |
| 2011       |       | 4,647                 |       | 175,000                 |       | 179,647 |   | 6.93 | % |
| 2012       |       | 3,332                 |       | 200,000                 |       | 203,332 |   | 5.85 | % |
| 2013       |       | 3,049                 |       | 150,000                 |       | 153,049 |   | 4.64 | % |
| Thereafter |       | 9,650                 |       | 322,112                 |       | 331,762 |   | 6.34 | % |
|       |       | $                     | 63,708     |                    | $          | 2,595,921 |   | $ | 2,659,629 |   | 5.52 | % |
|            |            |                       |            |                         |            |  |  |  |  |  |  |  |  |  |

 

Historical Cash Flows

 

Cash and cash equivalents were zero and $931,000 at September 30, 2004and 2003, respectively. The following highlights significant changes in netcash, associated with the Partnership’s operating, investing and financingactivities (in millions):

 

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| ** **                                 | ** ** | **Nine Months Ended September 30,** | ** ** |
|--------------------------------------------|------------|-------------------------------------|------------|
| ** **                                 | ** ** | **2004**                            | ** ** | **2003** | ** ** |
| Net Cash Provided by  Operating Activities |       | $                                   | 274.5      |   | $ | 235.0 |   |
|                                       |       |                                |       |   |   |
| Net Cash Used by  Investing Activities     |       | $                                   | (359.3     | ) | $ | (262.9 | ) |
|                                       |       |                                |       |   |   |
| Net Cash Provided by  Financing Activities |       | $                                   | 72.1       |   | $ | 11.4 |   |

 

*Operating Activities*

 

Cash flows from operating activities provide the cash necessary to meetnormal operational requirements of the Partnership’s rental operations and itsbuild-for-sale activities. The receipt of rental income from rental operationscontinues to provide the primary source of revenues and operating cash flowsfor the Partnership. In addition, the Partnership also develops buildings withthe intent to sell, which provides another significant source of operating cashflow activity.

•                  During the nine months endedSeptember 30, 2004, the Partnership incurred build-for-sale development costsof $27.3 million as compared to $41.9 million for the nine months endedSeptember 30, 2003. The difference is reflective of the timing of activity inthe held for sale pipeline as the Partnership had significant sales of held forsale properties during the fourth quarter of 2003; thus, the development costswere much higher for the first nine months of 2003.  The 2004 pipeline is presently beingreplenished as evidenced by the September 30, 2004 backlog of projects withanticipated costs of $86.4 million.

•                  The Partnership sold fourbuild-for-sale properties in the first nine months of 2004, for a gain of $9.2million as compared to one sale in the first nine months of 2003 for a gain of$743,000.

 

*Investing Activities*

Investing activities are oneof the primary uses of the Partnership’s liquidity. Development and acquisitionactivity typically generates additional rental revenues and provides cash flowsfor operational requirements. Highlights of significant cash uses are as follows:

•                  Development costs decreasedto $97.8 million for the nine months ended September 30, 2004 from $100.8million for the same period in 2003. The decrease reflects the lowerdevelopment volume carried over from 2003, as a result of fewer developmentopportunities in 2003.

•                  The Partnership acquired$204.4 million of real estate in the first nine months of 2004 as compared to$108.1 million for the same period in 2003. This increase was mainly the resultof the Northwinds office portfolio acquisition in Atlanta, Georgia. Total costsassociated with this acquisition were $138.4 million in September 2004.

•                  In the nine months endedSeptember 30, 2004, the Partnership has significantly increased its costsassociated with the acquisition of land held for development. The Partnershipacquired $99.3 million of land in the first nine months of 2004 as compared to$28.1 million for the same period in 2003. These increased acquisitions are aresult of future developments the Partnership is planning.

•                  Recurring costs for tenantimprovements, lease commissions and building improvements have continued toincrease. Management anticipates that these costs will remain high as overallportfolio occupancy continues to increase.

•                  Sales of land anddepreciated property provided $147.4 million in net proceeds for the ninemonths ended September 30, 2004, compared to $85.7 million in 2003. ThePartnership continues to pursue opportunities to sell real estate assets, inparticular its older properties, when beneficial and consistent with thePartnership’s long-term strategy. Sales of property will continue to beutilized as part of the Partnership’s capital recycling program to fundacquisitions and new development.

 

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*Financing Activities*

 

In the first nine months of 2004, the Partnership raised capital byborrowing from the public debt markets and receiving proceeds from preferredstock offerings by the General Partner. The following significant itemshighlight fluctuations in net cash provided by financing activities:

 

•                  During the nine months endedSeptember 30, 2004, the Partnership received approximately $145.0 million innet proceeds from the General Partner’s issuance of Series K preferred stock.This preferred equity was issued at a favorable dividend yield of 6.5%. TheSeries K preferred issuance corresponded with the redemption of $102.6 millionof the General Partner’s Series E preferred shares in January 2004, whichcarried an 8.25% dividend rate.

•                  In February 2004, theGeneral Partner called for the redemption of all its Series D convertiblepreferred shares as of March 16, 2004. The redemption price of each depositoryshare of the Series D stock was $25, whereas each depository share wasconvertible into .93677 shares of the General Partner’s common stock.  Since the value of the General Partner’scommon stock was well in excess of the $26.68 strike price per share during theredemption period, the vast majority of the Series D shareholders elected toconvert their shares into the General Partner’s common stock. Prior to theredemption date, 5,242,635 Series D convertible preferred depositary shareswere converted into 4,911,143 common shares of the General Partner, with theremaining 103,695 Series D convertible preferred depositary shares redeemed forcash on March 16, 2004. The General Partner’s equity issuances are directlyrelated with corresponding equity issuances by the Partnership to the GeneralPartner. The Partnership issued one Common Unit for each common share issued bythe General Partner, and cancelled one Series D Preferred Unit for each SeriesD preferred share converted or redeemed by the General Partner.

•                  The Partnership tookadvantage of the low interest rate environment in January when it issued $125.0million of four year unsecured debt at 3.35%. The net proceeds from thisunsecured offering were used to decrease the amounts outstanding under thePartnership’s line of credit.

•                  The Partnership paid $2.9million in cash to a group of warrant holders in exchange for the cancellationof their warrants in March 2004. The price paid represented the “in-the money”value of the warrants based upon the difference between the exercise price ofthe warrants and the price of the General Partner’s common stock at theexercise date.

•                  In August 2004, thePartnership issued $250 million of 5.40% unsecured notes due in 2014. The noteswere issued as part of an exchange of securities for $100 million principalamount of the Partnership’s 6.95% unsecured debt due August 2004. The remainingcash proceeds were used to finance costs associated with the offering, exchangeof debt and to reduce amounts outstanding under the Partnership’s unsecuredline of credit.

 

*Financial Instruments*

The Partnership is exposed to capital marketrisk, such as changes in interest rates. In order to manage the volatilityrelating to interest rate risk, the Partnership may enter into interest ratehedging arrangements from time to time. The Partnership does not utilizederivative financial instruments for trading or speculative purposes. ThePartnership accounts for derivative instruments under Statement of FinancialAccounting Standard No. 133, “Accounting for Derivative Instruments and HedgingActivities” as amended (“SFAS 133”).

 

During the first quarter of 2004, thePartnership funded a $65 million note receivable secured by a first mortgage ona portfolio of office properties owned by a third-party located in Atlanta,Georgia. The note receivable had a maximum two-year term with an interest rateof 5.5% for the first six months and 6.5% thereafter. In order to fund the notereceivable, the Partnership borrowed $65 million under a variable interest rateterm loan. The loan bears interest at the rate of LIBOR + 75 basis points, hasa maturity date

 

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of January 2005, and contains two six-monthrenewal options. To hedge its variable interest rate risk on the loan, thePartnership entered into two interest rate swaps totaling $65 million that effectivelyfixed the rate at 2.184% through maturity. The hedge accounting rules are beingused for the swaps, which allow for changes in market value of the swaps to berecorded through Other Comprehensive Income (“OCI”) in equity versus theStatement of Operations. In the third quarter of 2004, the $65 million notereceivable was repaid in connection with the Partnership’s acquisition of theproperties that secured the note. However, the Partnership’s $65 million notepayable and related interest swaps were not retired. As of September 30, 2004,the fair value of the hedge was $132,000, which was reflected through anincrease in other assets and OCI on the Partnership’s balance sheet.

 

In June 2004, the Partnership simultaneouslyentered into three forward-starting interest rate swaps aggregating $144.3million, which effectively fixed the rate on financing expected in 2004 at5.346%, plus the Partnership’s credit spread over the swap rate. The swapsqualified for hedge accounting under SFAS 133; therefore, changes in the fairvalue were recorded in OCI.  In August of2004, the Partnership settled these three swaps when it issued $250.0 millionof unsecured notes with an effective interest rate of 6.33%, due in 2014. ThePartnership recorded $6.85 million of deferred financing costs associated withthe unwinding of the swap, which will be amortized into interest expense overthe life of the new 6.33% notes.

 

In May 2003, the FASB issued SFAS No. 150, *Accounting for Certain Financial Instruments withCharacteristics of both Liabilities and Equity* (“SFAS 150”). SFAS150 establishes standards for classifying and measuring as liabilities certainfinancial instruments that embody obligations of the issuer and havecharacteristics of both liabilities and equity. SFAS 150 is effective for allfinancial instruments created or modified after May 31, 2003, and otherwise iseffective July 1, 2003. The Partnership includes the operations of one jointventure in its consolidated financial statements at September 30, 2004. Thisjoint venture is partially owned by unaffiliated parties that havenoncontrolling interests. SFAS 150 requires the disclosure of the estimatedsettlement value of these noncontrolling interests. As of September 30, 2004,the estimated settlement value of the noncontrolling interest in thisconsolidated joint venture was approximately $1.0 million as compared to theminority interest asset recorded on the Partnership’s books for this jointventure of $157,000.

 

**Investments in UnconsolidatedCompanies**

 

The Partnership has equity interests in unconsolidated partnerships andjoint ventures that own and operate rental properties and hold land fordevelopment. The equity method of accounting is used for these investments inwhich the Partnership has the ability to exercise significant influence, butnot control, over operating and financial policies. As a result, the assets andliabilities of these joint ventures are not included on the Partnership’sbalance sheet. The Partnership’s investment in unconsolidated companiesrepresents less than 5% of the Partnership’s total assets as of September 30,2004. These investments provide several benefits to the Partnership, includingincreased market share and an additional source of capital to fund real estateprojects. The Partnership has determined that these entities are either notvariable interest entities under FIN 46R or the Partnership is not a primarybeneficiary under FIN 46R. As a result, consolidation of the operations ofthese entities is not required.

 

**Item 3.  Quantitative and Qualitative DisclosuresAbout Market Risk**

 

The Partnership is exposed to interest rate changesprimarily as a result of its line of credit and long-term debt used to maintainliquidity and fund capital expenditures and expansion of the Partnership’s realestate investment portfolio and operations. The Partnership’s interest raterisk management objective is to limit the impact of interest rate changes onearnings and cash flows and to lower its overall borrowing costs. To achieveits objectives the Partnership borrows primarily at fixed rates and may enterinto derivative financial instruments such as interest rate swaps, caps andtreasury locks in order to mitigate its interest rate risk on a relatedfinancial instrument. The Partnership does not enter into derivative orinterest rate

 

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transactions for speculative purposes.  For a discussion of the market risk withrespect to certain financial instruments, see “Management’s Discussion andAnalysis of Financial Condition and Results of Operations — Liquidity andCapital Resources — Financial Instruments.”

 

**Item 4.  Controls and Procedures**

 

The Partnershipmaintains disclosure controls and procedures that are designed to ensure thatinformation required to be disclosed in annual and periodic reports filed withthe SEC is recorded, processed, summarized and reported within the time periodsspecified in the SEC’s rules and forms. These disclosure controls andprocedures are further designed to ensure that such information is accumulatedand communicated to Partnership’s management, including the chief executiveofficer of the General Partner and the chief financial officer of the GeneralPartner to allow timely decisions regarding required disclosure.

 

Based on the mostrecent evaluation, which was completed as of September 30, 2004, the ChiefExecutive Officer of the General Partner and Chief Financial Officer of theGeneral Partner believe that the Partnership’s disclosure controls and proceduresare effective. There have been no changes during the period covered by thisreport in the Partnership’s internal controls over financial reporting thathave materially affected, or are reasonably likely to materially affectinternal controls over financial reporting.

 

**Part II - OtherInformation**

Item 1.  Legal Proceedings

 

Broadband Office, Inc. and Official Committee of Unsecured Creditors ofBroadband Office, Inc. filed a complaint against a group of real estateinvestment trusts and real estate operating companies and certain affiliatedentities and individuals in connection with the formation and operation ofBroadband Office. The General Partner, the Partnership and Mr. Dennis D. Oklak,the General Partner’s Chief Executive Officer, were among the defendants in thecomplaint. During the third quarter of 2004, the General Partner and thePartnership settled with the plaintiffs whereby it paid $175,014 in fullsettlement of the lawsuit and the General Partner and the Partnership, itssubsidiaries and Mr. Oklak were released from further liability.

 

Item 2.  Unregistered Sales ofEquity Securities and Use of Proceeds

 

None

 

Item 3.  Defaults upon SeniorSecurities

 

None

 

Item 4.  Submission of Matters toa Vote of Security Holders

 

None

 

Item 5.  Other Information

 

None

 

Item 6.  Exhibits and Reports on Form 8-K

 

(a)             Exhibits

 

                                                Exhibit 11.1          Ratio of Earnings to Combined FixedCharges and Preferred Stock Distributions.

 

                                                Exhibit 11.2          Ratio of Earnings to Debt Service.

 

                                                Exhibit 15             Letter regarding unaudited interimfinancial information.

 

                                                Exhibit 31.1          Rule 13a-14(a) Certification of theChief Executive Officer of the General Partner.

 

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                                                Exhibit 31.2          Rule 13a-14(a) Certification of theChief Financial Officer of the General Partner.

             

                                                Exhibit 32.1          Section 1350 Certification of theChief Executive Officer of the General Partner.

 

                                                Exhibit 32.2          Section 1350 Certification of the ChiefFinancial Officer of the General Partner.

 

 (b)                                    Reports on Form 8-K

Acurrent report was filed on Form 8-K, dated August 16, 2004, setting forthunder item 5 the issuance of $250,000,000 aggregate principal amount of 5.40%Notes due 2014.

 

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**SIGNATURES**

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.

 
|                    |   | By:    | Duke Realty Corporation                                                       |
|-------------------------|--------|--------|-------------------------------------------------------------------------------|
|                    |   |   | Its General Partner                                                           |
|                    |   |   |                                                                          |
| Date: November 12, 2004 |   |   | /s/ Dennis D. Oklak                                                           |
|                    |   |   | Dennis D. Oklak                                                               |
|                    |   |   | President and Chief Executive Officer  of the General Partner                 |
|                    |   |   |                                                                          |
|                    |   |   | /s/ Matthew A. Cohoat                                                         |
|                    |   |   | Matthew A. Cohoat                                                             |
|                    |   |   | Executive Vice President  and Chief Financial Officer of  the General Partner |

 

 

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