**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, 2005** |
|           |   |   |
| **OR**         |
|           |   |   |
| **o**          | ** ** | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |
| ** **     | ** ** | ** ** |
| ** **     | ** ** | **For the transition period from                    to                   .** |

** **

**CommissionFile Number: 0-20625**

 

**DUKE REALTY LIMITED PARTNERSHIP**

(Exact Name of Registrant asSpecified in Its Charter)

 
| **Indiana**                                                      | ** ** | **35-1898425**                         |
|------------------------------------------------------------------|------------|----------------------------------------|
| (State or  Other Jurisdiction  of Incorporation or Organization) |       | (IRS  Employer  Identification Number) |
|                                                             |       |                                   |
| **600 East 96th Street, Suite 100  Indianapolis, Indiana**  | ** ** | **46240**                              |
| (Address of  Principal Executive Offices)                        |       | (Zip Code)                             |

 

**Registrant’s telephonenumber, including area code:  (317)808-6000**

 

Indicate by check mark whether the registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.

 

Yes  ý  No  o

 

Indicate by check mark whether the registrant is an accelerated filer(as defined in Exchange Act Rule 12b-2.

 

Yes  o  No  ý

 

Indicate by check mark whether the registrant is a shell company (asdefined in Rule 126-2 of the Exchange Act).

 

Yes  o  No  ý

 

The number of Common Unitsoutstanding as of November 1, 2005 was 150,852,379 ($.01 par value pershare).

 

 

----

 

**DUKE REALTY LIMITED PARTNERSHIPINDEX**

 
| **Part I - Financial Information**                                                                                             |                                                         |
|-------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------|
|                                                                                                                                | ** **                                                   |
| **Item 1. Financial Statements**                                                                                               | ** **                                                   |
| ** **                                                                                                                          | ** **                                                   |
| Condensed Consolidated Balance Sheets as of  September 30, 2005 (Unaudited) and December 31, 2004                         |                                                         |
|                                                                                                                                |                                                         |
| Condensed Consolidated Statements of  Operations (Unaudited)   for the three and nine months ended September 30, 2005 and 2004 |                                                         |
|                                                                                                                                |                                                         |
| Condensed Consolidated Statements of Cash  Flows (Unaudited)  for the nine months ended September 30, 2005 and 2004            |                                                         |
|                                                                                                                                |                                                         |
| Condensed Consolidated Statement of  Partners’ Equity  (Unaudited) for the nine months ended September 30, 2005           |                                                         |
|                                                                                                                                |                                                         |
| Notes to Condensed Consolidated Financial  Statements  (Unaudited)                                                                  |                                                         |
|                                                                                                                                |                                                         |
| Report of Independent Registered Public  Accounting Firm                                                                            |                                                         |
|                                                                                                                                |                                                         |
| **Item 2. Management’s Discussion and Analysis of Financial  Condition 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                                                     |   |

 

----

 

**PART I - FINANCIAL INFORMATION**

**Item 1.  Financial Statements**

**DUKEREALTY LIMITED PARTNERSHIP AND SUBSIDIARIES**

**Condensed Consolidated Balance Sheets**

**(inthousands)**

 
| ** **                                                                                 | ** ** | **September 30,** | ** **    | **December 31,** | ** ** |
|--------------------------------------------------------------------------------------------|------------|------------------------|---------------|-----------------------|------------|
| ** **                                                                                 | ** ** | **2005**               | ** **    | **2004**              | ** ** |
| ** **                                                                                 | ** ** | **(Unaudited)**        | ** **    | ** **            | ** ** |
| **ASSETS**                                                                                 | ** ** | ** **             | ** **    | ** **            | ** ** |
| Real estate investments:                                                                   |       |                   |          |                  |       |
| Land and improvements                                                                      |       | **$**                  | **651,164**   | ** **            | $          | 710,379 |   |
| Buildings and tenant improvements                                                          |       | **4,087,883**          | ** **    | 4,666,715             |       |
| Construction in progress                                                                   |       | **191,058**            | ** **    | 109,788               |       |
| Investments in unconsolidated companies                                                    |       | **298,808**            | ** **    | 287,554               |       |
| Land held for development                                                                  |       | **417,122**            | ** **    | 393,100               |       |
|                                                                                       |       | **5,646,035**          | ** **    | 6,167,536             |       |
| Accumulated depreciation                                                                   |       | **(726,567**           | **)**         | (788,900              | )          |
|                                                                                       |       | ** **             | ** **    |                  |       |
| Net real estate investments                                                                |       | **4,919,468**          | ** **    | 5,378,636             |       |
|                                                                                       |       | ** **             | ** **    |                  |       |
| Cash and cash equivalents                                                                  |       | **122,966**            | ** **    | 5,770                 |       |
| Accounts receivable, net of allowance of  $2,382 and $1,238                                |       | **19,736**             | ** **    | 17,127                |       |
| Straight-line rent receivable, net of  allowance of $2,021 and $1,646                      |       | **90,654**             | ** **    | 89,497                |       |
| Receivables on construction contracts,  including retentions                               |       | **73,689**             | ** **    | 59,342                |       |
| Deferred financing costs, net of  accumulated amortization of $12,816 and $9,006           |       | **28,312**             | ** **    | 31,924                |       |
| Deferred leasing and other costs, net of  accumulated amortization of $105,379 and $88,888 |       | **239,733**            | ** **    | 203,882               |       |
| Escrow deposits and other assets                                                           |       | **160,840**            | ** **    | 108,466               |       |
|                                                                                       |       | **$**                  | **5,655,398** | ** **            | $          | 5,894,644 |   |
| **LIABILITIES AND PARTNERS’ EQUITY**                                                  |       | ** **             | ** **    |                  |       |
| Indebtedness:                                                                              |       | ** **             | ** **    |                  |       |
| Secured debt                                                                               |       | **$**                  | **168,851**   | ** **            | $          | 203,081 |   |
| Unsecured notes                                                                            |       | **2,050,453**          | ** **    | 2,315,623             |       |
| Unsecured line of credit                                                                   |       | **—**             | ** **    | —                |       |
|                                                                                       |       | **2,219,304**          | ** **    | 2,518,704             |       |
|                                                                                       |       | ** **             | ** **    |                  |       |
| Construction payables and amounts due  subcontractors, including retentions                |       | **99,861**             | ** **    | 67,740                |       |
| Accounts payable                                                                           |       | **651**                | ** **    | 526                   |       |
| Accrued expenses:                                                                          |       | ** **             | ** **    |                  |       |
| Real estate taxes                                                                          |       | **78,738**             | ** **    | 55,745                |       |
| Interest                                                                                   |       | **23,239**             | ** **    | 36,531                |       |
| Other                                                                                      |       | **38,939**             | ** **    | 48,605                |       |
| Other liabilities                                                                          |       | **131,249**            | ** **    | 105,838               |       |
| Tenant security deposits and prepaid rents                                                 |       | **35,083**             | ** **    | 39,827                |       |
| Total liabilities                                                                          |       | **2,627,064**          | ** **    | 2,873,516             |       |
|                                                                                       |       | ** **             | ** **    |                  |       |
| Minority interest                                                                          |       | **1,320**              | ** **    | —                |       |
|                                                                                       |       | ** **             | ** **    |                  |       |
| Partners’ equity:                                                                     |       | ** **             | ** **    |                  |       |
| General Partner                                                                            |       | ** **             | ** **    |                  |       |
| Common equity                                                                              |       | **2,240,762**          | ** **    | 2,214,473             |       |
| Preferred equity (liquidation preferences  of $657,250)                                    |       | **616,780**            | ** **    | 616,780               |       |
|                                                                                       |       | **2,857,542**          | ** **    | 2,831,253             |       |
| Limited Partners’ common equity                                                       |       | **181,225**            | ** **    | 196,422               |       |
| Accumulated other comprehensive income  (loss)                                             |       | **(11,753**            | **)**         | (6,547                | )          |
| Total Partners’ equity                                                                |       | **3,027,014**          | ** **    | 3,021,128             |       |
|                                                                                       |       | ** **             | ** **    |                  |       |
|                                                                                       |       | **$**                  | **5,655,398** | ** **            | $          | 5,894,644 |   |

 

See accompanying Notes toCondensed Consolidated Financial Statements.

 

2

----

 

**DUKEREALTY LIMITED PARTNERSHIP AND SUBSIDIARIES**

**Condensed Consolidated Statements of Operations**

**For thethree and nine months ended September 30,**

**(inthousands, except per unit data)**

**(Unaudited)**

 
| ** **                                                                                                     | ** ** | **Three Months Ended** | ** **  | **Nine Months Ended** | ** ** |
|----------------------------------------------------------------------------------------------------------------|------------|------------------------|-------------|-----------------------|------------|
| ** **                                                                                                     | ** ** | **2005**               | ** **  | **2004**              | ** ** | **2005** | ** ** | **2004** | ** ** |
| **RENTAL OPERATIONS**                                                                                          | ** ** | ** **             | ** **  |                  |       | ** ** | ** ** |   |   |
| Revenues:                                                                                                      |       | ** **             | ** **  |                  |       | ** ** | ** ** |   |   |
| Rental income from continuing operations                                                                       | ** ** | **$**                  | **173,159** | ** **            | $          | 157,485 |   | **$** | **496,324** | ** ** | $ | 459,358 |   |
| Equity in earnings of unconsolidated  companies                                                                | ** ** | **4,143**              | ** **  | 6,220                 |       | **25,033** | ** ** | 16,515 |   |
|                                                                                                           | ** ** | **177,302**            | ** **  | 163,705               |       | **521,357** | ** ** | 475,873 |   |
|                                                                                                           |       | ** **             | ** **  |                  |       | ** ** | ** ** |   |   |
| Operating expenses:                                                                                            |       | ** **             | ** **  |                  |       | ** ** | ** ** |   |   |
| Rental expenses                                                                                                | ** ** | **41,251**             | ** **  | 35,726                |       | **117,998** | ** ** | 101,152 |   |
| Real estate taxes                                                                                              | ** ** | **22,199**             | ** **  | 18,429                |       | **60,884** | ** ** | 53,369 |   |
| Interest expense                                                                                               | ** ** | **31,522**             | ** **  | 27,979                |       | **88,946** | ** ** | 80,979 |   |
| Depreciation and amortization                                                                                  | ** ** | **61,245**             | ** **  | 48,127                |       | **169,672** | ** ** | 130,887 |   |
|                                                                                                           |       | **156,217**            | ** **  | 130,261               |       | **437,500** | ** ** | 366,387 |   |
| Earnings from continuing rental operations                                                                     | ** ** | **21,085**             | ** **  | 33,444                |       | **83,857** | ** ** | 109,486 |   |
| **SERVICE OPERATIONS**                                                                                         | ** ** | ** **             | ** **  |                  |       | ** ** | ** ** |   |   |
| Revenues:                                                                                                      |       | ** **             | ** **  |                  |       | ** ** | ** ** |   |   |
| General contractor gross revenue                                                                               | ** ** | **103,879**            | ** **  | 90,932                |       | **292,303** | ** ** | 263,388 |   |
| General contractor costs                                                                                       | ** ** | **(93,750**            | **)**       | (84,368               | )          | **(267,906** | **)** | (243,646 | ) |
| Net general contractor revenue                                                                                 | ** ** | **10,129**             | ** **  | 6,564                 |       | **24,397** | ** ** | 19,742 |   |
| Property management, maintenance and  leasing fees                                                             | ** ** | **4,092**              | ** **  | 3,742                 |       | **12,124** | ** ** | 11,532 |   |
| Construction management and development  activity income                                                       | ** ** | **8,092**              | ** **  | 4,794                 |       | **28,124** | ** ** | 9,424 |   |
| Other income                                                                                                   | ** ** | **271**                | ** **  | 2,334                 |       | **3,382** | ** ** | 2,910 |   |
| Total revenue                                                                                                  | ** ** | **22,584**             | ** **  | 17,434                |       | **68,027** | ** ** | 43,608 |   |
| Operating expenses                                                                                             | ** ** | **10,588**             | ** **  | 11,093                |       | **32,848** | ** ** | 30,502 |   |
| Earnings from service operations                                                                               | ** ** | **11,996**             | ** **  | 6,341                 |       | **35,179** | ** ** | 13,106 |   |
| General and administrative expense                                                                             | ** ** | **(5,239**             | **)**       | (6,856                | )          | **(19,048** | **)** | (20,751 | ) |
| Operating income                                                                                               | ** ** | **27,842**             | ** **  | 32,929                |       | **99,988** | ** ** | 101,841 |   |
| **OTHER INCOME (EXPENSE)**                                                                                     |       | ** **             | ** **  |                  |       | ** ** | ** ** |   |   |
| Interest income                                                                                                | ** ** | **1,683**              | ** **  | 1,222                 |       | **4,086** | ** ** | 4,322 |   |
| Earnings from sale of land and ownership  interests in unconsolidated companies, net of impairment adjustments | ** ** | **2,371**              | ** **  | 3,387                 |       | **5,780** | ** ** | 9,120 |   |
| Other expenses                                                                                                 | ** ** | **(166**               | **)**       | (260                  | )          | **(410** | **)** | (334 | ) |
| Other minority interest in earnings of  subsidiaries                                                           | ** ** | **(1,396**             | **)**       | (275                  | )          | **(1,462** | **)** | (1,007 | ) |
| Income from continuing operations                                                                              | ** ** | **30,334**             | ** **  | 37,003                |       | **107,982** | ** ** | 113,942 |   |
| Discontinued operations:                                                                                       |       | ** **             | ** **  |                  |       | ** ** | ** ** |   |   |
| Net income from discontinued operations                                                                        | ** ** | **4,216**              | ** **  | 3,311                 |       | **13,404** | ** ** | 16,544 |   |
| Gain on sale of discontinued operations,  net of impairment adjustment                                         | ** ** | **210,758**            | ** **  | 14,873                |       | **219,592** | ** ** | 19,577 |   |
| Income from discontinued operations                                                                            | ** ** | **214,974**            | ** **  | 18,184                |       | **232,996** | ** ** | 36,121 |   |
| Net income                                                                                                     | ** ** | **245,308**            | ** **  | 55,187                |       | **340,978** | ** ** | 150,063 |   |
| Dividends on preferred units                                                                                   | ** ** | **(11,619**            | **)**       | (8,320                | )          | **(34,859** | **)** | (24,321 | ) |
| Adjustments for redemption of preferred  units                                                                 | ** ** | **—**             | ** **  | —                |       | **—** | ** ** | (3,645 | ) |
| Net income available for common unitholders                                                                    | ** ** | **$**                  | **233,689** | ** **            | $          | 46,867 |   | **$** | **306,119** | ** ** | $ | 122,097 |   |
|                                                                                                           | ** ** | ** **             | ** **  |                  |       | ** ** | ** ** |   |   |
| Basic net income per common unit:                                                                              |       | ** **             | ** **  |                  |       | ** ** | ** ** |   |   |
| Continuing operations                                                                                          | ** ** | **$**                  | **.12**     | ** **            | $          | .18 |   | **$** | **.46** | ** ** | $ | .56 |   |
| Discontinued operations                                                                                        | ** ** | **1.38**               | ** **  | .12                   |       | **1.49** | ** ** | .23 |   |
| Total                                                                                                          | ** ** | **$**                  | **1.50**    | ** **            | $          | .30 |   | **$** | **1.95** | ** ** | $ | .79 |   |
| Diluted net income per common unit:                                                                            |       | ** **             | ** **  |                  |       | ** ** | ** ** |   |   |
| Continuing operations                                                                                          | ** ** | **$**                  | **.12**     | ** **            | $          | .18 |   | **$** | **.46** | ** ** | $ | .55 |   |
| Discontinued operations                                                                                        | ** ** | **1.36**               | ** **  | .12                   |       | **1.48** | ** ** | .23 |   |
| Total                                                                                                          | ** ** | **$**                  | **1.48**    | ** **            | $          | .30 |   | **$** | **1.94** | ** ** | $ | .78 |   |
|                                                                                                           | ** ** | ** **             | ** **  |                  |       | ** ** | ** ** |   |   |
| Weighted average number of common units  outstanding                                                           | ** ** | **156,110**            | ** **  | 156,211               |       | **156,678** | ** ** | 154,905 |   |
| Weighted average number of common and dilutive  potential common units                                         | ** ** | **158,468**            | ** **  | 157,105               |       | **157,453** | ** ** | 156,956 |   |

 

See accompanying Notes toCondensed Consolidated Financial Statements

 

3

----

 

**DUKEREALTY LIMITED PARTNERSHIP AND SUBSIDIARIES**

**Condensed Consolidated Statements of Cash Flows**

**For thenine months ended September 30,**

**(inthousands)**

**(Unaudited)**

 
| ** **                                                                                                  | ** ** | **2005**      | ** **  | **2004**   | ** ** |
|-------------------------------------------------------------------------------------------------------------|------------|---------------|-------------|------------|------------|
| Cash flows  from operating activities:                                                                      |       | ** **    | ** **  |       |       |
| Net income                                                                                                  | ** ** | **$**         | **340,978** | ** ** | $          | 150,063 |   |
| Adjustments to reconcile net income to net cash  provided by operating activities:                          |       | ** **    | ** **  |       |       |
| Depreciation of buildings and tenant  improvements                                                          | ** ** | **157,260**   | ** **  | 138,873    |       |
| Amortization of deferred leasing and other  costs                                                           | ** ** | **37,713**    | ** **  | 28,286     |       |
| Amortization of deferred financing costs                                                                    | ** ** | **4,687**     | ** **  | 3,366      |       |
| Minority interest in earnings                                                                               | ** ** | **1,461**     | ** **  | 1,007      |       |
| Straight-line rent adjustment                                                                               | ** ** | **(16,887**   | **)**       | (15,334    | )          |
| Earnings from land and depreciated property  sales                                                          | ** ** | **(225,371**  | **)**       | (28,697    | )          |
| Build-for-sale operations, net                                                                              | ** ** | **12,783**    | ** **  | (3,713     | )          |
| Construction contracts, net                                                                                 | ** ** | **4,542**     | ** **  | (944       | )          |
| Other accrued revenues and expenses, net                                                                    | ** ** | **7,755**     | ** **  | (11,564    | )          |
| Operating distributions received in excess  of (less than) equity in earnings from unconsolidated companies | ** ** | **(894**      | **)**       | 9,947      |       |
| **Net cash provided by operating activities**                                                               | ** ** | **324,027**   | ** **  | 271,290    |       |
| ** **                                                                                                  | ** ** | ** **    | ** **  |       |       |
| Cash flows  from investing activities:                                                                      |       | ** **    | ** **  |       |       |
| Development of real estate investments                                                                      | ** ** | **(130,825**  | **)**       | (97,817    | )          |
| Acquisition of real estate investments                                                                      | ** ** | **(285,342**  | **)**       | (204,361   | )          |
| Acquisition of land held for development  and infrastructure costs                                          | ** ** | **(93,515**   | **)**       | (96,048    | )          |
| Recurring tenant improvements                                                                               | ** ** | **(44,108**   | **)**       | (41,968    | )          |
| Recurring leasing costs                                                                                     | ** ** | **(24,618**   | **)**       | (20,313    | )          |
| Recurring building improvements                                                                             | ** ** | **(10,370**   | **)**       | (14,679    | )          |
| Other deferred leasing costs                                                                                | ** ** | **(11,073**   | **)**       | (11,464    | )          |
| Other deferred costs and other assets                                                                       | ** ** | **(20,393**   | **)**       | (14,430    | )          |
| Tax deferred exchange escrow, net                                                                           | ** ** | **(12,890**   | **)**       | —     |       |
| Proceeds from land and depreciated property  sales, net                                                     | ** ** | **1,095,416** | ** **  | 147,353    |       |
| Advances to unconsolidated companies                                                                        | ** ** | **(9,206**    | **)**       | (2,328     | )          |
| **Net cash provided by (used for) investing  activities**                                                   | ** ** | **453,076**   | ** **  | (356,055   | )          |
| ** **                                                                                                  | ** ** | ** **    | ** **  |       |       |
| Cash flows  from financing activities:                                                                      |       | ** **    | ** **  |       |       |
| Payments for repurchase of common units                                                                     | ** ** | **(95,167**   | **)**       | —     |       |
| Proceeds from issuance of common units, net                                                                 | ** ** | **2,814**     | ** **  | 10,343     |       |
| Proceeds from issuance of preferred units,  net                                                             | ** ** | **—**    | ** **  | 144,940    |       |
| Payments for redemption of preferred units                                                                  | ** ** | **—**    | ** **  | (102,651   | )          |
| Redemption of warrants                                                                                      | ** ** | **—**    | ** **  | (2,881     | )          |
| Redemption of limited partner units                                                                         | ** ** | **(2,129**    | **)**       | —     |       |
| Proceeds from unsecured debt issuance                                                                       | ** ** | **400,000**   | ** **  | 440,000    |       |
| Payments on unsecured debt                                                                                  | ** ** | **(665,000**  | **)**       | (100,000   | )          |
| Payments on secured indebtedness including  principal amortization                                          | ** ** | **(45,281**   | **)**       | (37,764    | )          |
| Borrowings (payments) on line of credit,  net                                                               | ** ** | **—**    | ** **  | (12,000    | )          |
| Distributions to common unitholders                                                                         | ** ** | **(219,768**  | **)**       | (213,930   | )          |
| Distributions to preferred unitholders                                                                      | ** ** | **(34,859**   | **)**       | (23,508    | )          |
| Contributions from (distributions to)  minority interest                                                    | ** ** | **12**        | ** **  | (820       | )          |
| Deferred financing costs                                                                                    | ** ** | **(529**      | **)**       | (29,659    | )          |
| **Net cash provided by (used for) financing  activities**                                                   | ** ** | **(659,907**  | **)**       | 72,070     |       |
| **Net increase (decrease) in cash and cash  equivalents**                                                   | ** ** | **117,196**   | ** **  | (12,695    | )          |
|                                                                                                        |       | ** **    | ** **  |       |       |
| Cash and cash equivalents at beginning of  period                                                           | ** ** | **5,770**     | ** **  | 12,695     |       |
| Cash and cash equivalents at end of period                                                                  | ** ** | **$**         | **122,966** | ** ** | —     |   |
| Other non-cash items:                                                                                       |       | ** **    | ** **  |       |       |
| Conversion of Limited Partner Units to  common shares of General Partner                                    | ** ** | **$**         | **2,396**   | ** ** | $          | 7,617 |   |
| Conversion of Series D preferred units  to common shares of General Partner                            | ** ** | **$**         | **—**  | ** ** | $          | 130,665 |   |
| Issuance of Limited Partner Units for real  estate acquisitions                                             | ** ** | **$**         | **—**  | ** ** | $          | 5,575 |   |
| Issuance of Limited Partner Units for  acquisition of minority interest                                     | ** ** | **$**         | **15,000**  | ** ** | $          | — |   |
| Assumption of secured debt on acquisition  of real estate                                                   | ** ** | **$**         | **11,743**  | ** ** | $          | 29,854 |   |

 

See accompanying Notes toCondensed Consolidated Financial Statements

 

4

----

 

**DUKEREALTY LIMITED PARTNERSHIP AND SUBSIDIARIES**

**Condensed Consolidated Statement of Partners’ Equity**

**For thenine months ended September 30, 2005**

**(inthousands, except per unit data)**

**(Unaudited)**

 
| ** **                                                                | ** ** | ** **          | ** **    | ** **         | ** ** | **Limited** | ** ** | **Accumulated**   | ** **  | ** **  | ** ** |
|---------------------------------------------------------------------------|------------|---------------------|---------------|--------------------|------------|-------------|------------|-------------------|-------------|-------------|------------|
| ** **                                                                | ** ** | **General Partner** | ** **    | **Partners’** | ** ** | **Other**   | ** ** | ** **        | ** **  |
| ** **                                                                | ** ** | **Common**          | ** **    | **Preferred**      | ** ** | **Common**  | ** ** | **Comprehensive** | ** **  | ** **  | ** ** |
| ** **                                                                | ** ** | **Equity**          | ** **    | **Equity**         | ** ** | **Equity**  | ** ** | **Income (Loss)** | ** **  | **Total**   | ** ** |
| **Balance at December 31, 2004**                                     | ** ** | **$**               | **2,214,473** | ** **         | **$**      | **616,780** | ** ** | **$**             | **196,422** | ** **  | **$**      | **(6,547** | **)** | **$** | **3,021,128** | ** ** |
| Comprehensive  income:                                                    |       |                |          |               |       |        |       |              |        |        |       |
| Net income                                                                |       | 299,472             |          | 34,859             |       | 6,647       |       | —            |        | 340,978     |       |
| Distributions to preferred unitholders                                    |       | —              |          | (34,859            | )          | —      |       | —            |        | (34,859     | )          |
| Gains (losses) on derivative instruments                                  |       | —              |          | —             |       | —      |       | (5,206            | )           | (5,206      | )          |
| Comprehensive income available for common  unitholders                    |       |                |          |               |       |        |       |              |        | 300,913     |       |
| Capital contribution from General Partner                                 |       | 2,938               |          | —             |       | —      |       | —            |        | 2,938       |       |
| Acquisition of partnership interest for  common shares of General Partner |       | 18,049              |          | —             |       | (15,653     | )          | —            |        | 2,396       |       |
| Acquisition of property in exchange for  Limited Partner Units            |       | —              |          | —             |       | 15,000      |       | —            |        | 15,000      |       |
| Redemption of Limited Partner Units                                       |       | —              |          | —             |       | (2,039      | )          | —            |        | (2,039      | )          |
| Tax benefits from Employee Stock Plans                                    |       | 136                 |          | —             |       | —      |       | —            |        | 136         |       |
| FASB 123 Compensation Expense                                             |       | 1,477               |          | —             |       | —      |       | —            |        | 1,477       |       |
| Retirement of common units                                                |       | (95,167             | )             | —             |       | —      |       | —            |        | (95,167     | )          |
| Distribution to General Partner                                           |       | (21                 | )             | —             |       | —      |       | —            |        | (21         | )          |
| Distributions to partners ($1.40 per Common  Unit)                        |       | (200,595            | )             | —             |       | (19,152     | )          | —            |        | (219,747    | )          |
| **Balance at September 30, 2005**                                    | ** ** | **$**               | **2,240,762** | ** **         | **$**      | **616,780** | ** ** | **$**             | **181,225** | ** **  | **$**      | **(11,753** | **)** | **$** | **3,027,014** | ** ** |
| **Common Units outstanding at  September 30, 2005**                  | ** ** | **140,684**         | ** **    | ** **         | ** ** | **13,399**  | ** ** | ** **        | ** **  | **154,083** | ** ** |

** **

See accompanying Notes toCondensed Consolidated Financial Statements

 

5

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**DUKEREALTY LIMITED PARTNERSHIP AND SUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

 

**1.**     **General Basis of Presentation**

 

The interim condensed consolidated financialstatements included herein have been prepared by Duke Realty LimitedPartnership (the “Partnership”) without audit (except for the Balance Sheet asof December 31, 2004). The financial statements have been prepared inaccordance with accounting principles generally accepted in the United Statesof America for interim financial information and in accordance with Rule 10-01of Regulation S-X of the Securities Exchange Act of 1934, as amended.Accordingly, they do not include all of the information and footnotes requiredby accounting principles generally accepted in the United States of America forcomplete financial statements. In the opinion of management, all adjustments(consisting of normal recurring adjustments) considered necessary for a fairpresentation have been included. These financial statements should be read inconjunction with Management’s Discussion and Analysis of Financial Conditionand Results of Operations included herein and the condensed consolidatedfinancial statements and notes thereto included in our Annual Report on Form 10-Kfor the year ended December 31, 2004.

 

The Partnership was formed on October 4,1993, when Duke Realty Corporation (the “General Partner”) contributed all ofits properties and related assets and liabilities, along with the net proceedsfrom the issuance of additional shares of the General Partner through anoffering, to the Partnership. Simultaneously, the Partnership completed the acquisition of DukeAssociates, a full-service commercial real estate firm operating in theMidwest.  The General Partner was formedin 1985 and qualifies as a Real Estate Investment Trust (“REIT”) underprovisions of the Internal Revenue Code. The General Partner is the sole general partner of the Partnership,owning 91.3% of the common partnership interests as of September 30, 2005(“General Partner Units”).  The remaining8.7% of the Partnership’s common interest is owned by limited partners (“LimitedPartner Units” and, together with the General Partner Units, the “Common Units”).  The Limited Partner Units are exchangeablefor shares of the General Partner’s common stock on a one-for-one basis subjectgenerally to a one-year holding period or, under certain circumstances, theGeneral Partner may repurchase the Limited Partnership Units for cash.  The General Partner also owns preferredpartnership interests in the Partnership (“Preferred Units”).

 

We own and operate a portfolio of industrial,office and retail properties in the midwestern and southeastern United Satesand provide real estate services to third-party owners.  We conduct our service operations throughDuke Realty Services LLC (“DRS”), Duke Realty Services Limited Partnership (“DRSLP”)and Duke Construction Limited Partnership (“DCLP”).

 

**2.****     IndustrialPortfolio Sale**

 

On September 29,2005, we completed the sale of a portfolio of 212 real estate properties,consisting of approximately 14.1 million square feet of primarily lightdistribution and service center properties and approximately 50 acres ofundeveloped land (“the Industrial Portfolio Sale”). The purchase price totaled$983 million, of which we received net proceeds of $955 million after thesettlement of certain liabilities and transaction costs.  Portions of the proceeds were used to paydown $423 million of outstanding debt on our $500 million unsecured line ofcredit and the entire outstanding balance on our $400 million term loan.  The operations and gain for 2004 and 2005associated with the properties in the Industrial Portfolio Sale have beenreclassified to discontinued operations. For further discussion, see Note 8.  The General Partner declared a one-timespecial cash distribution of $1.05 per unit to be paid to holders of theGeneral Partner’s common shares in the fourth quarter of 2005.

 

6

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**3.****     Reclassifications**

 

Certainprior period amounts have been reclassified to conform to current periodpresentation.

 

**4.****     Indebtedness**

 

We had one unsecured line of credit availableat September 30, 2005, summarized as follows (in thousands):

 
| ** **               | ** ** | **Borrowing** | ** ** | **Maturity** | ** **        | **Interest** | ** **   | **Outstanding**                | ** ** |
|--------------------------|------------|---------------|------------|--------------|-------------------|--------------|--------------|--------------------------------|------------|
| **Description**          | ** ** | **Capacity**  | ** ** | **Date**     | ** **        | **Rate**     | ** **   | **at September 30, 2005** | ** ** |
| Unsecured Line of Credit |       | $             | 500,000    |         | January 2007 |         | LIBOR + .60% |                           | $          | — |   |
|                          |            |               |            |              |                   |              |              |                                |            |  |  |

 

We use this line of credit to funddevelopment activities, acquire additional rental properties and provideworking capital.

 

The line of credit provides us with an optionto obtain borrowings from financial institutions that participate in the line,at rates lower than the stated interest rate, subject to certainrestrictions.  At September 30,2005, there was no outstanding balance on this line of credit.

 

The line of credit contains various financialcovenants that require us to meet defined levels of performance, includingvariable interest indebtedness, consolidated net worth, and debt-to-marketcapitalization As of September 30, 2005, we were in compliance with allfinancial covenants under our line of credit.

 

We took the following actions during thenine-month period ended September 30, 2005 relevant to our indebtedness:

•      In January 2005,we retired our $65.0 million variable-rate term loan.

•      In March 2005,we retired $100.0 million of 6.94% senior unsecured debt that matured.

•      In May 2005,we obtained a $400.0 million unsecured term loan, which was priced at LIBOR +..30%.  This unsecured term loan was paidoff in full on September 29, 2005 with proceeds from the IndustrialPortfolio Sale.

•      In September 2005,we paid down the outstanding balance of $423.0 million on our $500.0 millionunsecured line of credit with proceeds from the Industrial Portfolio Sale.

 

**5.****     RelatedParty Transactions**

 

We provide property management, leasing,construction and other tenant-related services to unconsolidated companies inwhich we have equity interests. For the nine months ended September 30,2005 and 2004, we received management fees of $3.6 million and $3.8 million,leasing fees of $3.4 million and $1.9 million and construction and developmentfees of $1.6 million and $1.0 million, respectively, from these unconsolidatedcompanies. We recorded these fees at market rates and eliminated our ownershippercentages of these fees in the condensed consolidated financial statements.

 

**6.****     NetIncome Per Common Unit**

 

Basic net income per common unit is computedby dividing net income available for common units by the weighted averagenumber of common units outstanding for the period. Diluted net income percommon unit is computed by dividing the sum of 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.

 

7

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The following table reconciles the componentsof basic and diluted net income per common unit for the three and nine monthsended September 30, 2005 and 2004, respectively (in thousands):

 
| ** **                                                                   | ** ** | **Three Months Ended,** | ** **  | **Nine Months Ended**  | ** ** |
|------------------------------------------------------------------------------|------------|-------------------------|-------------|------------------------|------------|
| ** **                                                                   | ** ** | **September 30,**  | ** **  | **September 30,** | ** ** |
| ** **                                                                   | ** ** | **2005**                | ** **  | **2004**               | ** ** | **2005** | ** ** | **2004** | ** ** |
| Basic net income available for common  unitholders                           |       | **$**                   | **233,689** | ** **             | $          | 46,867 |   | **$** | **306,119** | ** ** | $ | 122,097 |   |
| Joint venture partner convertible ownership  net income (1)                  |       | **498**                 | ** **  | —                 |       | **—** | ** ** | — |   |
| Diluted net income available for common  unitholders                         |       | **$**                   | **234,187** | ** **             | $          | 46,867 |   | **$** | **306,119** | ** ** | $ | 122,097 |   |
|                                                                         |       | ** **              | ** **  |                   |       | ** ** | ** ** |   |   |
| **Weighted Average Units:**                                                  |       | ** **              | ** **  |                   |       | ** ** | ** ** |   |   |
| Weighted average number of common units  outstanding                         |       | **156,110**             | ** **  | 156,211                |       | **156,678** | ** ** | 154,905 |   |
| Weighted average conversion of  Series D preferred units (2)            |       | **—**              | ** **  | —                 |       | **—** | ** ** | 1,170 |   |
| Joint venture partner convertible ownership  common unit equivalents (1)     |       | **1,525**               | ** **  | —                 |       | **—** | ** ** | — |   |
| Dilutive units for stock-based compensation  plans                           |       | **833**                 | ** **  | 894                    |       | **775** | ** ** | 881 |   |
| Weighted average number of common units and  dilutive potential common units |       | **158,468**             | ** **  | 157,105                |       | **157,453** | ** ** | 156,956 |   |

 

----

(1)   Oneof our joint venture partner’s in one of our unconsolidated companies has theoption to convert a portion of its ownership to the General Partner’s commonshares.  The effect of this option onearnings per unit is dilutive for the third quarter 2005; therefore, conversionto common units is included in weighted dilutive potential common units for thequarter.

 

(2)   TheGeneral Partner called for the redemption of the Series D preferred unitsas of March 16, 2004.  Prior to theredemption date, nearly 5.3 million Series D preferred units wereconverted into 4.9 million common units. These units represent the weighted effect, assuming the Series Dpreferred units had been converted on January 1, 2004.

 

**7.****     SegmentReporting**

 

We are engaged in four operating segments,the first three of which consist of the ownership and rental of office,industrial and retail real estate investments (collectively, “Rental Operations”).The fourth segment consists of our build-to-suit for sale operations andvarious real estate services that we provide such as property management,maintenance, leasing, development and construction management to third-partyproperty owners and joint ventures (“Service Operations”). Our reportablesegments offer different products or services and are managed separatelybecause each segment requires different operating strategies and managementexpertise. During the period covered by this Report, there were no materialintersegment sales or transfers.

 

Non-segment revenue consists mainly of equityin earnings of unconsolidated companies. Segment FFO (defined below)information is calculated by subtracting operating expenses attributable to theapplicable segment from segment revenues. Non-segment assets consist ofcorporate assets including cash, deferred financing costs and investments inunconsolidated companies. Interest expense and other non-property specificrevenues and expenses are not allocated to individual segments in determiningour performance measure.

 

We assess and measure segment operatingresults based upon an industry performance measure referred to as Funds FromOperations (“FFO”), which management believes is a useful indicator of ouroperating performance. Funds From Operations is used by industry analysts andinvestors as a supplemental operating performance measure of an equity realestate investment trust (“REIT”).

 

8

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FFO is calculated in accordance with thedefinition 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 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 thereportable segments for the three and nine months ended September 30, 2005and 2004, respectively, and the assets for each of the reportable segments asof September 30, 2005 and December 31, 2004, respectively, aresummarized as follows (in thousands):

 
| ** **                                       | ** ** | **Three Months Ended** | ** **  | **Nine Months Ended**  | ** ** |
|--------------------------------------------------|------------|------------------------|-------------|------------------------|------------|
| ** **                                       | ** ** | **September 30,** | ** **  | **September 30,** | ** ** |
| ** **                                       | ** ** | **2005**               | ** **  | **2004**               | ** ** | **2005** | ** ** | **2004** | ** ** |
| Revenues                                         |       |                   |        |                   |       |   |   |   |   |
| Rental Operations:                               |       |                   |        |                   |       |   |   |   |   |
| Office                                           |       | **$**                  | **126,282** | ** **             | $          | 112,250 |   | **$** | **359,366** | ** ** | $ | 331,348 |   |
| Industrial                                       |       | **44,372**             | ** **  | 42,447                 |       | **129,823** | ** ** | 120,680 |   |
| Retail                                           |       | **1,151**              | ** **  | 1,393                  |       | **3,147** | ** ** | 3,584 |   |
| Service Operations                               |       | **22,584**             | ** **  | 17,434                 |       | **68,027** | ** ** | 43,608 |   |
| Total Segment Revenues                           |       | **194,389**            | ** **  | 173,524                |       | **560,363** | ** ** | 499,220 |   |
| Non-Segment Revenue                              |       | **5,497**              | ** **  | 7,615                  |       | **29,021** | ** ** | 20,261 |   |
| Consolidated Revenue from continuing  operations |       | **199,886**            | ** **  | 181,139                |       | **589,384** | ** ** | 519,481 |   |
| Discontinued Operations                          |       | **28,399**             | ** **  | 33,603                 |       | **89,562** | ** ** | 104,424 |   |
| Consolidated Revenue                             |       | **$**                  | **228,285** | ** **             | $          | 214,742 |   | **$** | **678,946** | ** ** | $ | 623,905 |   |
| Funds From Operations                            |       | ** **             | ** **  |                   |       | ** ** | ** ** |   |   |
| Rental Operations:                               |       | ** **             | ** **  |                   |       | ** ** | ** ** |   |   |
| Office                                           |       | **$**                  | **75,763**  | ** **             | $          | 70,363 |   | **$** | **219,073** | ** ** | $ | 210,774 |   |
| Industrial                                       |       | **33,263**             | ** **  | 32,203                 |       | **96,153** | ** ** | 91,051 |   |
| Retail                                           |       | **841**                | ** **  | 1,189                  |       | **2,378** | ** ** | 2,910 |   |
| Services Operations                              |       | **11,996**             | ** **  | 6,341                  |       | **35,179** | ** ** | 13,106 |   |
| Total Segment FFO                                |       | **121,863**            | ** **  | 110,096                |       | **352,783** | ** ** | 317,841 |   |
|                                             |       | ** **             | ** **  |                   |       | ** ** | ** ** |   |   |
| Non-Segment FFO:                                 |       | ** **             | ** **  |                   |       | ** ** | ** ** |   |   |
| Interest expense                                 |       | **(31,522**            | **)**       | (27,979                | )          | **(88,946** | **)** | (80,979 | ) |
| Interest income                                  |       | **1,683**              | ** **  | 1,222                  |       | **4,086** | ** ** | 4,322 |   |
| General and administrative expense               |       | **(5,239**             | **)**       | (6,856                 | )          | **(19,048** | **)** | (20,751 | ) |
| Gain on land sales                               |       | **2,371**              | ** **  | 3,387                  |       | **5,779** | ** ** | 9,070 |   |
| Impairment adjustments on depreciable property   |       | **(79**                | **)**       | —                 |       | **(3,643** | **)** | — |   |
| Other expense                                    |       | **(324**               | **)**       | (686                   | )          | **(572** | **)** | (232 | ) |
| Minority interest in earnings of subsidiaries    |       | **(1,396**             | **)**       | (275                   | )          | **(1,462** | **)** | (1,007 | ) |
| Joint Venture FFO                                |       | **9,146**              | ** **  | 10,907                 |       | **28,671** | ** ** | 30,398 |   |
| Dividend on preferred units                      |       | **(11,619**            | **)**       | (8,320                 | )          | **(34,859** | **)** | (24,321 | ) |
| Adjustment for redemption of preferred  units    |       | **—**             | ** **  | —                 |       | **—** | ** ** | (3,645 | ) |
| Discontinued operations                          |       | **10,594**             | ** **  | 16,695                 |       | **38,705** | ** ** | 52,816 |   |
| Consolidated FFO                                 |       | **$**                  | **95,478**  | ** **             | $          | 98,191 |   | **$** | **281,494** | ** ** | $ | 283,512 |   |

 

9

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| ** **                                                                                      | ** ** | **Three Months Ended** | ** **  | **Nine Months Ended**  | ** ** |
|-------------------------------------------------------------------------------------------------|------------|------------------------|-------------|------------------------|------------|
| ** **                                                                                      | ** ** | **September 30,** | ** **  | **September 30,** | ** ** |
| ** **                                                                                      | ** ** | **2005**               | ** **  | **2004**               | ** ** | **2005** | ** ** | **2004** | ** ** |
|                                                                                            |       | ** **             | ** **  |                   |       | ** ** | ** ** |   |   |
| Depreciation and amortization on continuing  operations                                         |       | **(61,245**            | **)**       | (48,127                | )          | **(169,672** | **)** | (130,887 | ) |
| Depreciation and amortization on  discontinued operations                                       |       | **(6,378**             | **)**       | (13,384                | )          | **(25,301** | **)** | (36,272 | ) |
| Share of joint venture adjustments                                                              |       | **(5,003**             | **)**       | (4,686                 | )          | **(14,811** | **)** | (13,883 | ) |
| Earnings from sale of ownership  interests in unconsolidated companies on continuing operations |       | **—**             | ** **  | —                 |       | **—** | ** ** | (130 | ) |
| Earnings from depreciated  property sales on discontinued operations                            |       | **210,837**            | ** **  | 14,873                 |       | **223,235** | ** ** | 19,757 |   |
| Earnings from sale of joint  venture property                                                   |       | **—**             | ** **  | —                 |       | **11,174** | ** ** | — |   |
| Net income available for common  unitholders                                                    |       | **$**                  | **233,689** | ** **             | $          | 46,867 |   | **$** | **306,119** | ** ** | $ | 122,097 |   |
|                                                                                                 |            |                        |             |                        |            |  |  |  |  |  |  |  |  |

 
|                 | ** ** | **September 30,** | ** **    | **December 31,** | ** ** |
|----------------------|------------|------------------------|---------------|-----------------------|------------|
| ** **           | ** ** | **2005**               | ** **    | **2004**              | ** ** |
| Assets               |       |                   |          |                  |       |
| Rental Operations:   |       |                   |          |                  |       |
| Office               | ** ** | **$**                  | **3,387,009** |                  | $          | 3,128,387 |   |
| Industrial           | ** ** | **1,510,591**          |          | 2,211,509             |       |
| Retail               | ** ** | **88,448**             |          | 84,625                |       |
| Service Operations   | ** ** | **191,759**            |          | 131,218               |       |
| Total Segment Assets | ** ** | **5,177,807**          |          | 5,555,739             |       |
| Non-Segment Assets   | ** ** | **477,591**            |          | 338,905               |       |
| Consolidated Assets  | ** ** | **$**                  | **5,655,398** |                  | $          | 5,894,644 |   |

 

In addition to revenues and FFO, we alsoreview our recurring capital expenditures in measuring the performance of ourindividual Rental Operations segments. These recurring capital expendituresconsist of tenant improvements, leasing commissions and building improvements.We review these expenditures to determine the costs associated with re-leasingvacant space and maintaining the condition of our properties. Our recurringcapital expenditures by segment are summarized as follows for the nine monthsended September 30, 2005 and 2004, respectively  (in thousands):

 
|                            | ** ** | **2005**   | ** ** | **2004** | ** ** |
|---------------------------------|------------|------------|------------|----------|------------|
| Recurring  Capital Expenditures |       |       |       |     |       |
| Office                          |       | **$**      | **44,838** |     | $          | 52,328 |   |
| Industrial                      |       | **37,794** |       | 24,610   |       |
| Retail                          | ** ** | **28**     |       | 22       |       |
|                            | ** ** | **$**      | **82,660** |     | $          | 76,960 |   |

 

**8.****    ****Real Estate Investments**

 

We have classified the operations of 275buildings as discontinued operations as of September 30, 2005. These 275buildings consisted of 256 industrial, 16 office and three retail properties.As a result, we classified net income from operations, of $4.2 million and $3.3million as net income from discontinued operations for the three months ended September 30,2005 and 2004, respectively; and $13.4 million and $16.5 million as net incomefrom discontinued operations for the nine months ended September 30, 2005and 2004, respectively. We sold 230 of the properties classified asdiscontinued operations during the first nine months of 2005 and 34 propertiesclassified as discontinued operations during the first nine months of 2004.

 

10

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The gains net of impairment adjustments ondisposal of these properties of (i) $210.8 million and $14.9 million forthe three months ended September 30, 2005 and 2004, respectively, and (ii) $219.6million and $19.6 million for the nine months ended September 30, 2005 and2004, respectively, are also reported in discontinued operations. The remaining11 properties consist of seven properties sold during the last three months of2004 and four depreciable properties classified as held-for-sale at September 30,2005.

 

At September 30, 2005, we had classifiedas held-for-sale three industrial properties and one office property,consisting of approximately 443,000 square feet. While we have entered intoagreements for the sale of these properties there can be no assurance that suchproperties actually will be sold.

 

The following table illustrates theoperations of the 275 buildings reflected in discontinued operations for thethree and nine months ended September 30, 2005 and 2004, respectively (inthousands):

 

| ** **                                                | ** ** | **Three Months Ended** | ** **  | **Nine Months Ended**  | ** ** |
|-----------------------------------------------------------|------------|------------------------|-------------|------------------------|------------|
| ** **                                                | ** ** | **September 30,** | ** **  | **September 30,** | ** ** |
| ** **                                                | ** ** | **2005**               | ** **  | **2004**               | ** ** | **2005** | ** ** | **2004** | ** ** |
| Income Statement:                                         |       |                   |        |                   |       |   |   |   |   |
| Revenues                                                  |       | **$**                  | **28,399**  | ** **             | $          | 33,603 |   | **$** | **89,562** | ** ** | $ | 104,424 |   |
| Expenses:                                                 |       | ** **             | ** **  |                   |       | ** ** | ** ** |   |   |
| Operating                                                 |       | **8,898**              | ** **  | 9,853                  |       | **27,425** | ** ** | 30,699 |   |
| Interest                                                  |       | **8,852**              | ** **  | 7,013                  |       | **23,319** | ** ** | 20,809 |   |
| Depreciation and Amortization                             |       | **6,378**              | ** **  | 13,384                 |       | **25,301** | ** ** | 36,272 |   |
| General and Administrative                                |       | **55**                 | ** **  | 43                     |       | **113** | ** ** | 103 |   |
| Operating Income                                          |       | **4,216**              | ** **  | 3,310                  |       | **13,404** | ** ** | 16,541 |   |
| Other Income                                              |       | **—**             | ** **  | 1                      |       | **—** | ** ** | 3 |   |
| Income from discontinued operations, before  gain on sale |       | **4,216**              | ** **  | 3,311                  |       | **13,404** | ** ** | 16,544 |   |
| Gain on sale of property, net of impairment  adjustment   |       | **210,758**            | ** **  | 14,873                 |       | **219,592** | ** ** | 19,577 |   |
| Income from discontinued operations                       |       | **$**                  | **214,974** | ** **             | $          | 18,184 |   | **$** | **232,996** | ** ** | $ | 36,121 |   |

 

The following table illustrates the aggregate balance sheet of our fourproperties identified as held-for-sale at September 30, 2005 (inthousands):

 
| Balance Sheet:               |   |   |   |
|------------------------------|--------|--------|--------|
| Real estate investments, net |   | $      | 19,671 |   |
| Other Assets                 |   | 508    |   |
| Total Assets                 |   | $      | 20,179 |   |
| Accrued Expenses             |   | $      | 244    |   |
| Other Liabilities            |   | 189    |   |
| Equity                       |   | 19,746 |   |
| Total Liabilities and Equity |   | $      | 20,179 |   |

 

We allocate interest expense to discontinuedoperations as permitted under Emerging Issues Task Force (“EITF”) Issue No. 87-24,*Allocation of Interest to DiscontinuedOperations,*and have 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 our consolidated unsecuredinterest expense for unencumbered properties. The allocation of unsecuredinterest expense to discontinued operations was based upon the gross book valueof the discontinued operations unencumbered population as it related to ourentire unencumbered population.

 

11

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The amount of allocated unsecured interestexpense included in discontinued operations was (i) $6.6 million and $6.3million for the three months ended September 30, 2005 and 2004,respectively and (ii) $19.7 million and $18.9 million for the nine monthsended September 30, 2005 and 2004, respectively.

 

For the nine months ended September 30,2005 and 2004, we recorded impairment adjustments of $3.8 million and $425,000,respectively. The $3.8 million of impairment reflects the write-down of thecarrying value of one industrial held-for-sale building, three office and twoindustrial buildings sold in the second quarter of 2005,  one land parcel sold in the second quarter of2005 and three land parcels sold in the third quarter of 2005.  The $425,000 impairment reflects thewrite-down of the carrying value of three land parcels that were later sold in2004.

 

**9.****    ****Partners’ Equity**

 

The General Partner periodically accesses thepublic equity markets to fund the development and acquisition of additionalrental properties or to pay down debt. The proceeds of these offerings are contributed to us in exchange for anadditional interest in the Partnership.

 

The following series of preferred units wereoutstanding as of September 30, 2005 (in thousands, except percentagedata):

 

| ** **               | ** ** | **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 29, 2008    |       | 100,000         |       | No              |       |
| Series K  Preferred |       | 600             |       | 6.500        | %          | February 13, 2009  |       | 150,000         |       | No              |       |
| Series L  Preferred |       | 800             |       | 6.600        | %          | November 30, 2009  |       | 200,000         |       | No              |       |
|                          |            |                 |            |              |            |                         |            |                 |            |                 |            |  |

 

The dividend rate on the Series Bpreferred units increases to 9.99% after September 12, 2012.

 

All series of preferred units requirecumulative distributions and have no stated maturity date (although we mayredeem all such preferred units on or following their respective optionalredemption dates).

 

At our option, we may redeem, in whole orpart, the Series B, Series I, Series J, Series K and Series Lpreferred units described in this section.

 

Pursuant to the General Partner’s $750million share repurchase plan that was approved by the General Partner’s boardof directors, we paid approximately $95.2 million for 2,933,300 of the GeneralPartner’s common shares at an average price of $32.44 per share during thethree months ended September 30, 2005. From time to time, the General Partner’s management may repurchaseadditional common shares of the General Partner pursuant to the General Partner’sshare repurchase plan.  The timing andamount of future General Partner share repurchases will depend on business andmarket conditions, as well as legal and regulatory considerations.

 

**10.****  FinancialInstruments**

 

We are exposed to capital market risk, suchas changes in interest rates. In order to manage the volatility relating tointerest rate risk, we may enter into interest rate hedging arrangements fromtime to time. We do not utilize derivative financial instruments for trading orspeculative purposes. We account for derivative instruments under Statement ofFinancial Accounting Standards (“SFAS”) No. 133, *Accounting for Derivative Instruments and HedgingActivities* (“SFAS 133”), as amended by SFAS No. 138, *Accounting for Certain Derivative Instruments andCertain Hedging Activities* (“SFAS 138”).

 

12

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In March 2005, we entered into $300.0million of cash flow hedges through forward-starting interest rate swaps tohedge interest rates on $300.0 million of estimated debt offerings in 2006. Theswaps qualify for hedge accounting under SFAS 133, as amended by SFAS 138, withany changes in fair value recorded in Accumulated Other Comprehensive Income (“OCI”).  The market value of these interest rate swapsis dependant upon existing market interest rates, which change over time.  At September 30, 2005, the estimatedliability of these swaps was approximately $9.1 million.  The effective rates of the swaps were higherthan interest rates at September 30, 2005.

 

In August 2005, we entered into $300.0million of cash flow hedges through forward-starting interest rate swaps tohedge interest rates on $300.0 million of estimated debt offerings in2007.  The swaps qualify for hedgeaccounting under SFAS 133, as amended by SFAS 138, with any changes in fairvalue recorded in OCI.  At September 30,2005, the fair value of these swaps was $3.5 million. The effective rates ofthe swaps were lower than interest rates at September 30, 2005.

 

In May 2003, the Financial AccountingStandards Board (“FASB”) issued SFAS No. 150, *Accounting for Certain Financial Instruments with Characteristics ofBoth Liabilities and Equity* (“SFAS 150”). SFAS 150 establishesstandards for classifying and measuring as liabilities certain financialinstruments that embody obligations of the issuer and have characteristics ofboth liabilities and equity. SFAS 150 was effective for all financialinstruments created or modified after May 31, 2003, and otherwise waseffective July 1, 2003. We consolidated the operations of one jointventure in our condensed consolidated financial statements at September 30,2005. This joint 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 30,2005, the estimated settlement value of the noncontrolling interest in thisconsolidated joint venture was approximately $1.1 million, as compared to the$99,000 receivable reported in our financial statements for this joint venture.

 

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

 

Under thelimited partnership agreement of the Partnership, the Partnership is requiredto issue one Common Unit to the General Partner for each share of common sharesissued by the General Partner. Accordingly, the issuance of common shares by the General Partner underits stock based compensation plans requires that issuance of a correspondingnumber of Common Units by the Partnership to the General Partner.

 

For allissuances of stock-based awards prior to 2002, we apply the recognition andmeasurement provisions of Accounting Principles Board Opinion No. 25, *Accounting for Stock Issued to Employees*,and related interpretations in accounting for our stock-basedcompensation.  Effective January 1,2002, we prospectively adopted the fair value recognition provisions of FASBStatement No. 123, *Accounting forStock-Based Compensation* (“SFAS 123”), and applied SFAS 123 to allawards granted after January 1, 2002.

 

13

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The following table illustrates the effect onnet income and earnings per unit if the fair value method had been applied toall outstanding and unvested awards in each period (in thousands, except perunit data).

 
| ** **                                                                                                | ** ** | **Three Months Ended** | ** **  | **Nine Months Ended**  | ** ** |
|-----------------------------------------------------------------------------------------------------------|------------|------------------------|-------------|------------------------|------------|
| ** **                                                                                                | ** ** | **September 30,** | ** **  | **September 30,** | ** ** |
| ** **                                                                                                | ** ** | **2005**               | ** **  | **2004**               | ** ** | **2005** | ** ** | **2004** | ** ** |
| Net income available for common  unitholders, as reported                                                 |       | **$**                  | **233,689** | ** **             | $          | 46,867 |   | **$** | **306,119** | ** ** | $ | 122,097 |   |
| Add: Stock-based employee compensation  expense included in net income determined under fair value method |       | **547**                | ** **  | 101                    |       | **1,477** | ** ** | 302 |   |
| Deduct: Total stock-based compensation  expense determined under fair value method for all awards         |       | **(603**               | **)**       | (220                   | )          | **(1,642** | **)** | (660 | ) |
| Pro forma net income available for common  unitholders                                                    |       | **$**                  | **233,633** | ** **             | $          | 46,748 |   | **$** | **305,954** | ** ** | $ | 121,739 |   |
|                                                                                                      |       | ** **             | ** **  |                   |       | ** ** | ** ** |   |   |
| Basic net income per common unit                                                                          |       | ** **             | ** **  |                   |       | ** ** | ** ** |   |   |
| As reported                                                                                               |       | **$**                  | **1.50**    | ** **             | $          | .30 |   | **$** | **1.95** | ** ** | $ | .79 |   |
| Pro forma                                                                                                 |       | **$**                  | **1.50**    | ** **             | $          | .30 |   | **$** | **1.95** | ** ** | $ | .79 |   |
| Diluted net income per common unit                                                                        |       | ** **             | ** **  |                   |       | ** ** | ** ** |   |   |
| As reported                                                                                               |       | **$**                  | **1.48**    | ** **             | $          | .30 |   | **$** | **1.94** | ** ** | $ | .78 |   |
| Pro forma                                                                                                 |       | **$**                  | **1.48**    | ** **             | $          | .30 |   | **$** | **1.94** | ** ** | $ | .78 |   |

 

**12.****  RecentAccounting Pronouncements**

** **

In December 2004, FASB issued SFAS No. 123(R), *Share-Based Payment,*whichis a revision of SFAS No. 123, *Accountingfor Stock Based Compensation.*In April 2005, the SEC delayedthe effective date on SFAS No. 123 (R) from July 2005 to January 2006.We are currently evaluating the impact of SFAS No. 123 (R) on our financialposition and results of operations.

 

In June 2005, the FASB ratified theconsensus reached in EITF Issue No. 04-5, *DeterminingWhether a General Partner, or the General Partners as a Group, Controls aLimited Partnership or Similar Entity When the Limited Partners Have CertainRights* “EITF 04-5”.EITF 04-5 is effective for all newly formedlimited partnerships after the consensus was ratified and January 2006 forall preexisting limited partnership agreements. This consensus applies to limited partnerships or similar entities, suchas limited liability companies that have governing provisions that are thefunctional equivalent of a limited partnership. We have evaluated the ownershipstructure of our existing investments in unconsolidated companies anddetermined that we do not demonstrate control over any unconsolidated venturesas defined by EITF 04-5.

 

**13.****  SubsequentEvents**

 

*Declaration ofDistributions*

On October 26, 2005, the General Partner’sboard of directors declared the following distributions:

 
| ** **                         | ** ** | **Quarterly**   | ** ** | ** **      | ** **             | ** **       | ** **             |
|------------------------------------|------------|-----------------|------------|-----------------|------------------------|------------------|------------------------|
| **Class**                          | ** ** | **Amount/Unit** | ** ** | **Record Date** | ** **             | **Payment Date** | ** **             |
| Common –  Regular             |       | $               | 0.47       |            | November 14, 2005 |             | November 30, 2005 |   |
| Common –  Special             |       | $               | 1.05       |            | November 14, 2005 |             | December 15, 2005 |   |
| Preferred  (per depositary share): |       |            |       |            |                   |             |                   |
| Series B                      |       | $               | 0.99875    |            | December 16, 2005 |             | December 30, 2005 |   |
| Series I                      |       | $               | 0.52813    |            | December 16, 2005 |             | December 30, 2005 |   |
| Series J                      |       | $               | 0.41406    |            | November 16, 2005 |             | November 30, 2005 |   |
| Series K                      |       | $               | 0.40625    |            | November 16, 2005 |             | November 30, 2005 |   |
| Series L                      |       | $               | 0.41250    |            | November 16, 2005 |             | November 30, 2005 |   |

 

14

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The special distribution represents aone-time distribution that was declared in order to maintain the GeneralPartner’s compliance with the minimum distribution requirements for aREIT.  The one-time special distributionwas declared as a result of the significant gain realized as a result of theIndustrial Portfolio Sale discussed in Note 2.

 

Partner’s Equity

 

Pursuant to the General Partner’s $750 millionshare repurchase plan discussed in Note 9, we have paid approximately $106.6million for an additional 3,243,500 of the General Partner’s common shares atan average price of $32.88 per share from October 1, 2005 through November 1,2005.

 

15

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REPORT OF INDEPENDENT REGISTERED 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, 2005, therelated condensed consolidated statements of operations for the three and ninemonths ended September 30, 2005 and 2004, the related condensedconsolidated statement of cash flows for the nine months ended September 30,2005 and 2004, and the related condensed consolidated statement of partners’equity for the nine months ended September 30, 2005. These condensedconsolidated financial statements are the responsibility of the Partnership’smanagement.

 

We conducted our review in accordance with standards of the PublicCompany Accounting Oversight Board (United States). A review of interimfinancial information consists principally of applying analytical procedures tofinancial data and making inquiries of persons responsible for financial andaccounting matters. It is substantially less in scope than an audit conductedin accordance with the standards of the Public Company Accounting OversightBoard (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 of December 31,2004, and the related consolidated statements of operations, partners’ equityand cash flows for the year then ended (not presented herein); and in ourreport dated February 28, 2005, we expressed an unqualified opinion onthose consolidated financial statements. In our opinion, the information setforth in the accompanying condensed consolidated balance sheet as of December 31,2004, is fairly presented, in all material respects, in relation to theconsolidated balance sheet from which it has been derived.

 

 

KPMG LLP

Indianapolis, Indiana

November 14, 2005

 

16

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**Item 2. Management’s Discussion and Analysis of Financial Condition and Resultsof Operations**

 

**Cautionary Statement RegardingForward-Looking Statements**

 

Certain statements in this quarterly report, including those related toour future operations, constitute “forward-looking statements” within themeaning of Section 27A of the Securities Act of 1933, as amended, and Section 21Eof the Securities Exchange Act of 1934, as amended. These forward-lookingstatements involve known and unknown risks, uncertainties and other importantfactors that could cause our actual results, performance or achievements, orindustry results, to differ materially from any 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:

 

•      Changes ingeneral economic and business conditions, including performance of financialmarkets;

•      The GeneralPartner’s continued qualification as a real estate investment trust;

•      Heightenedcompetition for tenants and potential decreases in property occupancy;

•      Potentialincreases in real estate construction costs;

•      Potentialchanges in the financial markets and interest rates;

•      Continuingability to favorably raise debt and equity in the capital markets;

•      Inherent risksin the real estate business including tenant defaults, potential liabilityrelating to environmental matters and liquidity of real estate investments; and

•      Other risks anduncertainties described from time to time in our filings with the Securitiesand Exchange Commission (“SEC”).

 

This list of risks and uncertainties, however, is not intended to beexhaustive. We have on file with the SEC a Current Report on Form 8-Kdated July 24, 2003, with additional risk factor information.

 

The words “believe,” “estimate,” “expect,” “anticipate,” “intend,” “plan,”“seek” and similar expressions or statements regarding future periods areintended to identify forward-looking statements. Although we believe that theplans, expectations and results expressed in or suggested by the forward-lookingstatements are reasonable, all forward-looking statements are inherentlyuncertain as they involve substantial risks and uncertainties beyond ourcontrol. New factors emerge from time to time, and it is not possible for us topredict the nature or assess the potential impact of each new factor on ourbusiness. Given these uncertainties, we caution you not to place undue relianceon these forward-looking statements. We undertake no obligation to update orrevise any of our forward-looking statements for events or circumstances thatarise after the statement is made.

 

**Business Overview**

 

As of September 30, 2005, we:

 

•      Owned orcontrolled 683 industrial, office and retail properties (including propertiesunder development), consisting of approximately 102.6 million square feetlocated in 13 operating platforms; and

•      Owned orcontrolled approximately 4,500 acres of land with an estimated futuredevelopment potential of approximately 64 million square feet of industrial,office and retail properties.

 

17

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We provide the following services for our properties and for certainproperties owned by third parties and joint ventures:

 

•      Propertyleasing;

•      Propertymanagement;

•      Construction;

•      Development; and

•      Othertenant-related services.

 

**Industrial Portfolio Sale**

 

On September 29, 2005, we completed the sale of a portfolio of 212real estate properties, consisting of approximately 14.1 million square feet ofprimarily light distribution and service center properties and approximately 50acres of undeveloped land (the “Industrial Portfolio Sale”). The purchase pricetotaled $983 million, of which we received net proceeds of $955 million afterthe settlement of certain liabilities and transaction costs. Portions of theproceeds were used to pay down $423 million of outstanding debt on our $500million unsecured line of credit and the entire outstanding balance on our $400million term loan.  The operations andgain for 2004 and 2005 associated with the properties in the IndustrialPortfolio Sale have been reclassified to discontinued operations. The GeneralPartner declared a one-time special cash distribution of $1.05 per unit to bepaid to holders of the General Partner’s common shares in the fourth quarter of2005.

 

**Key Performance Indicators**

 

Our operating results depend primarily upon rental income from ouroffice, industrial and retail properties (“Rental Operations”). The followinginformation highlights the areas of Rental Operations that we consider criticalfor future revenue growth. All square footage totals and occupancy percentagesreflect both wholly-owned properties and properties in joint ventures.

 

***Occupancy Analysis:***Our ability to maintain occupancy rates is a principal driver of our results ofoperations. The following table sets forth occupancy information regarding ourin-service portfolio of rental properties as of September 30, 2005 and2004, respectively (in thousands, except percentage data):

 
| ** **      | ** ** | **Total**       | ** ** | **Percent of**        |       | ** **           | ** ** | ** ** | ** ** |
|-----------------|------------|-----------------|------------|-----------------------|------------|----------------------|------------|------------|------------|
| ** **      | ** ** | **Square Feet** | ** ** | **Total Square Feet** |       | **Percent Occupied** | ** ** |
| **Type**        | ** ** | **2005**        | ** ** | **2004**              | ** ** | **2005**             | ** ** | **2004**   |       | **2005** | ** ** | **2004** | ** ** |
| **Industrial**  |       |            |       |                  |       |                 | ** ** |       |       |   | ** ** |   |   |
| Service Centers | ** ** | **5,457**       |       | 13,010                | ** ** | **5.6**              | **%**      | 11.9       | %          | **91.1** | **%** | 84.5 | % |
| Bulk            | ** ** | **62,006**      |       | 67,341                | ** ** | **63.7**             | **%**      | 61.7       | %          | **92.1** | **%** | 92.0 | % |
| **Office**      | ** ** | **29,341**      |       | 28,239                | ** ** | **30.1**             | **%**      | 25.9       | %          | **88.5** | **%** | 86.8 | % |
| **Retail**      | ** ** | **611**         |       | 596                   | ** ** | **0.6**              | **%**      | 0.5        | %          | **95.6** | **%** | 99.2 | % |
| Total           | ** ** | **97,415**      |       | 109,186               | ** ** | **100.0**            | **%**      | 100.0      | %          | **91.0** | **%** | 89.8 | % |

 

***Lease Expiration andRenewal:*** Our ability to maintain and improveoccupancy rates primarily depends upon our continuing ability to re-leaseexpiring space.******Thefollowing table reflects our in-service portfolio lease expiration schedule byproperty type as of September 30, 2005. The table indicates square footageand annualized net effective rents (based on September 2005 rental revenue)under expiring leases (in thousands, except percentage data):

 

18

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| ** **                   | ** ** | **Total**     | ** ** | ** **     | ** ** | ** **      | ** ** | ** ** | ** ** | ** **     | ** ** | ** ** | ** ** | ** **     | ** ** |
|------------------------------|------------|---------------|------------|----------------|------------|-----------------|------------|------------|------------|----------------|------------|------------|------------|----------------|------------|
| ** **                   | ** ** | **Portfolio** | ** ** | **Industrial** | ** ** | **Office**      | ** ** | **Retail** | ** ** |
| **Year of**                  | ** ** | **Square**    | ** ** | **Ann.  Rent** | ** ** | **Percent  of** | ** ** | **Square** | ** ** | **Ann.  Rent** | ** ** | **Square** | ** ** | **Ann.  Rent** | ** ** | **Square** | ** ** | **Ann.  Rent** | ** ** |
| **Expiration**               | ** ** | **Feet**      | ** ** | **Revenue**    | ** ** | **Revenue**     | ** ** | **Feet**   | ** ** | **Revenue**    | ** ** | **Feet**   | ** ** | **Revenue**    | ** ** | **Feet** | ** ** | **Revenue** | ** ** |
| 2005                         |       | 2,269         |       | $              | 14,522     |            | 4          | %          | 1,681      |           | $          | 7,153      |       | 587            |       | $ | 7,350 |   | 1 |   | $ | 19 |   |
| 2006                         |       | 8,793         |       | 60,928         |       | 10              | %          | 6,287      |       | 28,091         |       | 2,504      |       | 32,812         |       | 2 |   | 25 |   |
| 2007                         |       | 10,665        |       | 68,806         |       | 11              | %          | 7,843      |       | 31,471         |       | 2,813      |       | 37,212         |       | 9 |   | 123 |   |
| 2008                         |       | 12,921        |       | 82,042         |       | 13              | %          | 9,444      |       | 38,702         |       | 3,458      |       | 43,005         |       | 19 |   | 335 |   |
| 2009                         |       | 10,849        |       | 74,094         |       | 12              | %          | 7,353      |       | 29,133         |       | 3,492      |       | 44,883         |       | 4 |   | 78 |   |
| 2010                         |       | 10,661        |       | 85,869         |       | 14              | %          | 6,746      |       | 30,718         |       | 3,909      |       | 55,065         |       | 6 |   | 86 |   |
| 2011                         |       | 6,875         |       | 49,845         |       | 8               | %          | 4,647      |       | 19,092         |       | 2,195      |       | 30,108         |       | 33 |   | 645 |   |
| 2012                         |       | 5,943         |       | 34,374         |       | 6               | %          | 4,541      |       | 15,718         |       | 1,395      |       | 18,323         |       | 7 |   | 333 |   |
| 2013                         |       | 4,433         |       | 44,395         |       | 7               | %          | 2,050      |       | 8,949          |       | 2,349      |       | 34,867         |       | 34 |   | 579 |   |
| 2014                         |       | 4,164         |       | 21,128         |       | 3               | %          | 3,447      |       | 11,644         |       | 717        |       | 9,484          |       | — |   | — |   |
| 2015 and  Thereafter         |       | 11,063        |       | 73,374         |       | 12              | %          | 8,041      |       | 32,150         |       | 2,554      |       | 38,383         |       | 468 |   | 2,841 |   |
| Total Leased                 |       | 88,636        |       | $              | 609,377    |            | 100        | %          | 62,080     |           | $          | 252,821    |       | 25,973         |       | $ | 351,492 |   | 583 |   | $ | 5,064 |   |
|                         |       |          |       |           |       |            |       |       |       |           |       |       |       |           |       |   |   |   |   |
| Total Portfolio Square  Feet |       | 97,415        |       |           |       |            |       | 67,463     |       |           |       | 29,341     |       |           |       | 611 |   |   |   |
|                         |       |          |       |           |       |            |       |       |       |           |       |       |       |           |       |   |   |   |   |
| Percent Occupied             |       | 91.0          | %          |           |       |            |       | 92.0       | %          |           |       | 88.5       | %          |           |       | 95.6 | % |   |   |
|                              |            |               |            |                |            |                 |            |            |            |                |            |            |            |                |            |  |  |  |  |  |  |  |  |  |

 

***Lease Renewals:***Werenewed 78.8% and 74.2% of leases up for renewal in the three and nine monthsended September 30, 2005, totaling 2.7 million and 7.6 million squarefeet, respectively. This compares to renewals of 71.3% and 72.1% for the threeand nine months ended September 30, 2004, totaling 1.9 million and 6.9million square feet, respectively. Our lease renewal percentages over the pastthree years have remained relatively consistent at a 70-75% success ratedespite the relatively weak market conditions.

 

The average term of renewals for the three and nine months ended September 30,2005, was 5.3 and 4.4 years, respectively, compared to an average term of 3.1and 3.8 years for the three and nine months ended September 30, 2004,respectively.

 

***FutureDevelopment: ***Another source of growth in our earnings is thedevelopment of additional properties. These properties should provide futureearnings growth through Service Operations income upon sale or from RentalOperations growth, as they are placed in service. As of September 30,2005, we had 6.9 million square feet of property under development with totalcosts of $480.8 million, which was 34% pre-leased. This compares to 4.3 millionsquare feet with a total cost of $150.1 million, which was 54% pre-leased, at September 30,2004. The $163.2 million increase in held-for-rental developments is the resultof improved market conditions and increased speculative developments. The$167.6 million increase in held-for-sale developments is due to medicalbuilding development through our new joint venture with a healthcare facilitydeveloper and manager. As of September 30, 2005, we have four medicaloffice projects under development with total costs of $60.7 million. We alsobegan construction on a building in Buffalo, New York with total estimatedcosts of $85.4 million and a scheduled completion date of August 2007.

 

19

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The following table summarizes ourproperties under development as of September 30, 2005, follows (inthousands, except percentage data):

 

| **Anticipated**     | ** ** | ** ** | ** ** | ** **  | ** ** | ** **  | ** ** | **Anticipated** | ** ** |
|---------------------|------------|------------|------------|-------------|------------|-------------|------------|-----------------|------------|
| **In-Service**      | ** ** | **Square** | ** ** | **Percent** | ** ** | **Project** | ** ** | **Stabilized**  | ** ** |
| **Date**            | ** ** | **Feet**   | ** ** | **Leased**  | ** ** | **Costs**   | ** ** | **Return**      | ** ** |
| Held for Rental:    |       |       |       |        |       |        |       |            |       |
| 4th Quarter 2005    |       | 1,564      |       | 32          | %          | $           | 85,009     |            | 10.0       | % |
| 1st Quarter 2005    |       | 1,196      |       | 19          | %          | 84,477      |       | 9.6             | %          |
| 2nd Quarter 2006    |       | 2,085      |       | 23          | %          | 89,794      |       | 9.5             | %          |
| Thereafter          |       | 318        |       | 61          | %          | 18,861      |       | 10.4            | %          |
|                |       | 5,163      |       | 27          | %          | $           | 278,141    |            | 9.7        | % |
| Merchant Buildings: |       |       |       |        |       |        |       |            |       |
| 4th Quarter 2005    |       | 84         |       | 100         | %          | $           | 10,072     |            | 9.5        | % |
| 1st Quarter 2005    |       | 904        |       | 19          | %          | 46,765      |       | 9.6             | %          |
| 2nd Quarter 2006    |       | 72         |       | 43          | %          | 13,847      |       | 9.6             | %          |
| Thereafter          |       | 667        |       | 93          | %          | 131,974     |       | 8.3             | %          |
|                |       | 1,727      |       | 52          | %          | $           | 202,658    |            | 8.8        | % |
| Total               |       | 6,890      |       | 34          | %          | $           | 480,799    |            | 9.4        | % |

 

***Acquisition andDisposition Activity:***  Sales proceeds from dispositions ofheld-for-rental properties for the first nine months of 2005 and 2004 wereapproximately $1.1 billion and $121.7 million, respectively.  The disposition proceeds during the firstnine months of 2004 were used to partially fund acquisitions of $263.5million.  The increase in dispositionproceeds is mainly the result of our third quarter Industrial Portfolio Sale.These proceeds were primarily used to reduce short-term floating rate debt andfund acquisitions of $328.7 million.

 

**Funds From Operations**

 

Funds From Operations (“FFO”) is used by industry analysts andinvestors as a supplemental operating performance measure of an equity REIT.FFO is calculated in accordance with the definition that was adopted by theBoard of Governors of the National Association of Real Estate Investment Trusts(“NAREIT”). FFO, as defined by NAREIT, represents net income (loss) determinedin accordance with accounting principles generally accepted in the United Statesof America (“GAAP”), excluding extraordinary items as defined under GAAP andgains or losses from sales of previously depreciated operating real estateassets, plus certain non-cash items such as real estate asset depreciation andamortization, and after similar adjustments for unconsolidated partnerships andjoint ventures.

 

Historical cost accounting for real estate assets in accordance withGAAP implicitly assumes that the value of real estate assets diminishespredictably over time. Since real estate values instead have historically risenor fallen with market conditions, many industry investors and analysts haveconsidered presentation of operating results for real estate companies that usehistorical cost accounting to be insufficient by themselves. Thus, NAREITcreated FFO as a supplemental measure of REIT operating performance thatexcludes historical cost depreciation, among other items, from GAAP net income.Management believes that the use of FFO, combined with the required primaryGAAP presentations, has improved the understanding of operating results ofREITs among the investing public and made comparisons of REIT operating resultsmore meaningful. Management considers FFO to be a useful measure for reviewingcomparative operating and financial performance (although FFO should bereviewed in conjunction with net income which remains the primary measure ofperformance) because, by excluding gains or losses related to sales ofpreviously depreciated operating real estate assets and excluding real estateasset depreciation and amortization, FFO assists in comparing the operatingperformance of a company’s real estate between periods or as compared todifferent companies.

 

20

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The following table summarizes the calculation of FFO for the three andnine months ended September 30, 2005 and 2004, respectively (inthousands):

 

| ** **                                                       | ** ** | **Three Months Ended** | ** **  | **Nine Months Ended**  | ** ** |
|------------------------------------------------------------------|------------|------------------------|-------------|------------------------|------------|
| ** **                                                       | ** ** | **September 30,** | ** **  | **September 30,** | ** ** |
| ** **                                                       | ** ** | **2005**               | ** **  | **2004**               | ** ** | **2005** | ** ** | **2004** | ** ** |
| Net income available for common unitholders                      |       | **$**                  | **233,689** | ** **             | $          | 46,867 |   | **$** | **306,119** | ** ** | $ | 122,097 |   |
| Add back (deduct):                                               |       | ** **             | ** **  |                   |       | ** ** | ** ** |   |   |
| Depreciation and amortization                                    |       | **67,623**             | ** **  | 61,511                 |       | **194,973** | ** ** | 167,159 |   |
| Share of joint venture adjustments                               |       | **5,003**              | ** **  | 4,686                  |       | **14,811** | ** ** | 13,883 |   |
| Earnings from depreciable property sales                         |       | **(210,837**           | **)**       | (14,873                | )          | **(223,235** | **)** | (19,627 | ) |
| Share of earnings from joint venture depreciable  property sales |       | **—**             | ** **  | —                 |       | **(11,174** | **)** | — |   |
| **Funds From Operations**                                        |       | **$**                  | **95,478**  | ** **             | $          | 98,191 |   | **$** | **281,494** | ** ** | $ | 283,512 |   |

 

**Results of Operations**

 

The following table summarizes our operating results and propertystatistics for the three and nine months ended September 30, 2005 and2004, respectively, (in thousands, except number of properties and per unitdata):

 

| ** **                                                   | ** ** | **Three Months Ended** | ** **  | **Nine Months Ended**  | ** ** |
|--------------------------------------------------------------|------------|------------------------|-------------|------------------------|------------|
| ** **                                                   | ** ** | **September 30,** | ** **  | **September 30,** | ** ** |
| ** **                                                   | ** ** | **2005**               | ** **  | **2004**               | ** ** | **2005** | ** ** | **2004** | ** ** |
| Rental Operations revenue from Continuing  Operations        |       | **$**                  | **177,302** | ** **             | $          | 163,705 |   | **$** | **521,357** | ** ** | $ | 475,873 |   |
|                                                         |       | ** **             | ** **  |                   |       | ** ** | ** ** |   |   |
| Service Operations revenues from Continuing  Operations      |       | **22,584**             | ** **  | 17,434                 |       | **68,027** | ** ** | 43,608 |   |
|                                                         |       | ** **             | ** **  |                   |       | ** ** | ** ** |   |   |
| Earnings from Continuing Rental Operations                   |       | **21,085**             | ** **  | 33,444                 |       | **83,857** | ** ** | 109,486 |   |
|                                                         |       | ** **             | ** **  |                   |       | ** ** | ** ** |   |   |
| Earnings from Continuing Service Operations                  |       | **11,996**             | ** **  | 6,341                  |       | **35,179** | ** ** | 13,106 |   |
|                                                         |       | ** **             | ** **  |                   |       | ** ** | ** ** |   |   |
| Operating income                                             |       | **27,842**             | ** **  | 32,929                 |       | **99,988** | ** ** | 101,841 |   |
|                                                         |       | ** **             | ** **  |                   |       | ** ** | ** ** |   |   |
| Net income available for common unitholders                  |       | **$**                  | **233,689** | ** **             | $          | 46,867 |   | **$** | **306,119** | ** ** | $ | 122,097 |   |
|                                                         |       | ** **             | ** **  |                   |       | ** ** | ** ** |   |   |
| Weighted average common units outstanding                    |       | **156,110**            | ** **  | 156,211                |       | **156,678** | ** ** | 154,905 |   |
|                                                         |       | ** **             | ** **  |                   |       | ** ** | ** ** |   |   |
| Weighted average common and dilutive  potential common units |       | **158,468**            | ** **  | 157,105                |       | **157,453** | ** ** | 156,956 |   |
| Basic income per common unit:                                |       | ** **             | ** **  |                   |       | ** ** | ** ** |   |   |
| Continuing operations                                        |       | **$**                  | **.12**     | ** **             | $          | .18 |   | **$** | **.46** | ** ** | $ | .56 |   |
| Discontinued operations                                      |       | **$**                  | **1.38**    | ** **             | $          | .12 |   | **$** | **1.49** | ** ** | $ | .23 |   |
| Diluted income per common unit:                              |       | ** **             | ** **  |                   |       | ** ** | ** ** |   |   |
| Continuing operations                                        |       | **$**                  | **.12**     | ** **             | $          | .18 |   | **$** | **.46** | ** ** | $ | .55 |   |
| Discontinued operations                                      |       | **$**                  | **1.36**    | ** **             | $          | .12 |   | **$** | **1.48** | ** ** | $ | .23 |   |
| Number of in-service properties at end of  period            |       | **664**                | ** **  | 876                    |       | **664** | ** ** | 876 |   |
| In-service square footage at end of period                   |       | **97,415**             | ** **  | 109,186                |       | **97,415** | ** ** | 109,186 |   |
|                                                         |       | ** **             | ** **  |                   |       | ** ** | ** ** |   |   |
| Under development square footage at end of  period           |       | **5,163**              | ** **  | 3,330                  |       | **5,163** | ** ** | 3,330 |   |

 

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**Comparison of Three Months Ended September 30,2005 to Three Months Ended September 30, 2004**

 

Rental Income From Continuing Operations

 

Overall, rental income from continuing operationsincreased from $157.5 million for the quarter ended September 30, 2004 to$173.2 million for the same period in 2005. The following table reconcilesrental income from continuing operations by reportable segment to our totalreported rental income from continuing operations for the quarter ended September 30,2005 and 2004, respectively (in thousands):

 
| ** **  | ** ** | **2005**   | ** **  | **2004** | ** ** |
|-------------|------------|------------|-------------|----------|------------|
| Office      | ** ** | **$**      | **126,282** |     | 112,250    |   |
| Industrial  | ** ** | **44,372** |        | 42,447   |       |
| Retail      | ** ** | **1,151**  |        | 1,393    |       |
| Non-segment | ** ** | **1,354**  |        | 1,395    |       |
| Total       | ** ** | **$**      | **173,159** |     | $          | 157,485 |   |
|             |            |            |             |          |            |  |  |  |

 

Each of our three reportablesegments that comprise Rental Operations (office, industrial and retail) are withinthe real estate industry; however, the same economic and industry conditions donot affect each segment in the same manner. The primary causes of the increasein rental income from continuing operations, with specific references to aparticular segment when applicable, are summarized below:

•                  Weacquired nine properties and placed 15 developments in service from October 1,2004 to September 30, 2005. These acquisitions and developments are theprimary factor in the overall $15.7 million increase in rental revenue for thethird quarter of 2005 compared to the same period in 2004. Acquisitions anddevelopments placed in service in the last three months of 2004 and the firstnine months of 2005 provided revenues of $11.3 million in the third quarter of2005.  Office acquisitions in our Chicagomarket accounted for $8.6 million of this increase.

•                  Samestore revenues for acquisitions and developments placed in service in the thirdquarter of 2004 increased by $3.1 million in the third quarter of 2005.

•                  Leasetermination fees totaled $373,000 for the third quarter of 2005 compared to$4.5 million for the same period in 2004. The decrease in termination feescontinues a downward trend due to improved economic conditions.

•                  Ourin-service occupancy rate increased from 89.8% at September 30, 2004 to91.0% at September 30, 2005.

 

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Rental Expenses and Real Estate Taxes

 

The following table reconciles rental expenses and real estate taxes byreportable segment to our total reported amounts in the statement of operationsfor the three months ended September 30, 2005 and 2004, respectively (inthousands):

 

| ** **          | ** ** | **2005**  | ** ** | **2004** | ** ** |
|---------------------|------------|-----------|------------|----------|------------|
| Rental  Expenses:   |       |      |       |     |       |
| Office              | ** ** | **$**     | **34,974** |     | $          | 30,038 |   |
| Industrial          | ** ** | **5,658** |       | 5,510    |       |
| Retail              | ** ** | **221**   |       | 87       |       |
| Non-segment         | ** ** | **398**   |       | 91       |       |
| Total               | ** ** | **$**     | **41,251** |     | $          | 35,726 |   |
|                |       |      |       |     |       |
| Real Estate  Taxes: |       |      |       |     |       |
| Office              | ** ** | **$**     | **15,545** |     | $          | 12,300 |   |
| Industrial          | ** ** | **5,451** |       | 4,886    |       |
| Retail              | ** ** | **89**    |       | 111      |       |
| Non-segment         | ** ** | **1,114** |       | 1,132    |       |
| Total               | ** ** | **$**     | **22,199** |     | $          | 18,429 |   |

 

The overall increase in rental expenses and real estate taxes is theresult of our increased real estate assets associated with the acquisitions anddevelopments as noted above.

 

Interest Expense

 

Interest expense increased from $28.0 million in the third quarter of2004 to $31.5 million in the same period of 2005 due to our utilization ofa  $400.0 million term loan used totemporarily finance the acquisition of office properties in our Chicagomarket.  This loan was repaid withproceeds from the Industrial Portfolio Sale.

 

Depreciation and Amortization

 

Depreciation and amortization expense increased from $48.1 million forthe third quarter of 2004 to $61.2 million for the same period in 2005. Thefollowing information highlights the significant changes in depreciation and amortizationexpense:

•                  Depreciationexpense on building and tenant improvements increased by $9.0 million as aresult of increases in our held-for-rental asset base from acquisition anddevelopment activity.

•                  Leasecommission amortization increased by $4.1 million due to increased leasingactivity and the effect of SFAS 141, *BusinessCombinations* (“SFAS 141”) on acquisitions.  SFAS 141 requires the allocation of a portionof a property’s purchase price to intangible assets for leases acquired andin-place at the time of acquisition.  Weamortize these assets over the remaining life of the leases.

 

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Service Operations

 

Service Operations primarily consist of our merchant building sales andthe leasing, management, construction and development services for jointventure properties and properties owned by third parties. These operations areheavily influenced by the current state of the economy as leasing andmanagement fees are dependent upon occupancy while construction and developmentservices rely on the expansion of business operations. Service Operationsearnings increased from $6.3 million for the quarter ended September 30,2004 to $12.0 million for the quarter ended September 30, 2005, primarilyas a result of the following:

•                  Ourmerchant building development and sales program, whereby a building isdeveloped and then sold, is a significant component of Construction andDevelopment income. During the third quarter of 2005, we sold five suchproperties for a gain of $5.2 million. During the third quarter of 2004, wesold one such property and recognized a deferred gain on a previous sale for atotal gain of $4.3 million.

•                  Excludingthe gains above, earnings from Service Operations increased from $2.0 millionin the third quarter of 2004 to $6.8 million in the same period of 2005. Wehave experienced increased construction fees on more profitable jobs as ageneral contractor for third parties during 2005.

 

General and Administrative Expense

 

General and administrativeexpenses decreased from $6.9 million for the quarter ended September 30,2004 to $5.2 million for the same period in 2005. General and administrativeexpenses are comprised of two components. The first is direct expenses that arenot attributable to specific assets such as legal fees, external audit fees,marketing costs, investor relations expenses and executive compensation andother corporate overhead. The second component is the unallocated overheadcosts associated with the operation of our owned properties and ServiceOperations, including construction, leasing and maintenance operations.Overhead costs not allocated to these operations are charged to general andadministrative expenses. The decrease in general and administrative expenses isprimarily the result of increased construction and leasing activity thatresulted in lower unallocated overhead costs. A portion of this decrease has been partially offset by an increase inpayroll expenses associated with long-term compensation plans and an increasein the number of employees to support our National Development and Constructionpractice.

 

Other Income and Expenses

 

Earnings from the sale of land and ownership interests in consolidatedcompanies, net of impairment adjustments, are comprised of the followingamounts for the three months ended September 30, 2005 and 2004,respectively (in thousands):

 

| ** **                      | ** ** | **2005** | ** ** | **2004** | ** ** |
|---------------------------------|------------|----------|------------|----------|------------|
| Gain on land  sales             | ** ** | **$**    | **2,427**  |     | $          | 3,712 |   |
| Impairment  adjustment for land | ** ** | **(56**  | **)**      | (325     | )          |
| Total                           | ** ** | **$**    | **2,371**  |     | $          | 3,387 |   |

 

Gain on land sales is derived from sales of undeveloped land that weowned. In the third quarter of 2005, we sold 11 parcels of land, for totalproceeds of $10.9 million as compared to the sale of nine parcels of land fortotal proceeds of $11.5 million in the third quarter of 2004.

 

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We pursue opportunities to dispose of land in those markets with a highconcentration of undeveloped land and in those markets where the land no longermeets our strategic development plans.

 

We recorded impairment charges of $56,000 in the third quarter of 2005associated with three land parcel sales. For the three months ended September 30,2004, we recorded $325,000 of impairment charges associated with contracts tosell three other land parcels, which were later sold in 2004.

 

Discontinued Operations

 

We classified the operations of 275 buildings as discontinuedoperations as of September 30, 2005. These 275 buildings consisted of 256industrial, 16 office and three retail properties. As a result, we classifiednet income from operations of $4.2 million and $3.3 million as net income fromdiscontinued operations for the three months ended September 30, 2005 and2004, respectively.  We sold 218 of theproperties classified as discontinued operations during the third quarter of2005 and 28 properties classified as discontinued operations during the thirdquarter of 2004. The gains on disposal of these properties, net of impairmentadjustment, of $210.8 million and $14.9 million for the three months ended September 30,2005 and 2004, respectively, are also reported in discontinued operations. Theremaining 29 properties consist of 13 properties sold in 2004, 12 propertiessold in the first and second quarters of 2005 and four depreciable propertiesclassified as held-for-sale at September 30, 2005.

 

**Comparison of Nine Months Ended September 30,2005 to Nine Months Ended September 30, 2004**

 

Rental Income From Continuing Operations

 

Overall, rental income from continuing operationsincreased from $459.4 million for the nine months ended September 30, 2004to $496.3 million for the same period in 2005. The following table reconciles rental income from continuing operationsby reportable segment to our total reported rental income from continuingoperations for the nine months ended September 30, 2005 and 2004,respectively (in thousands):

 
| ** **  | ** ** | **2005**    | ** **  | **2004** | ** ** |
|-------------|------------|-------------|-------------|----------|------------|
| Office      | ** ** | **$**       | **359,366** |     | $          | 331,348 |   |
| Industrial  | ** ** | **129,823** |        | 120,680  |       |
| Retail      | ** ** | **3,147**   |        | 3,584    |       |
| Non-segment | ** ** | **3,988**   |        | 3,746    |       |
| Total       | ** ** | **$**       | **496,324** |     | $          | 459,358 |   |
|             |            |             |             |          |            |  |  |  |

 

Each of our three reportablesegments that comprise Rental Operations (office, industrial and retail) arewithin the real estate industry; however, the same economic and industryconditions do not affect each segment in the same manner. The primary causes ofthe increase in rental income from continuing operations, with specificreferences to a particular segment when applicable, are summarized below:

•                  Weacquired nine properties and placed 15 developments in service from October 1,2004 to September 30, 2005. These acquisitions and developments are theprimary factor in the overall $36.9 million increase in rental revenue for thenine months ended September 30, 2005 compared to the same period in 2004.Acquisitions and developments placed in service in the last three months of2004 and the first nine months of 2005 provided revenues of $17.1 million inthe first nine months of 2005.  Officeacquisitions in our Chicago market accounted for $11.4 million of thisincrease.

•                  Samestore revenues for acquisitions and developments placed in service in the firstnine months of 2004 increased by $23.1 million in the first nine months of2005.

•                  Leasetermination fees totaled $3.3 million for the first nine months of 2005compared to $10.9 million for the same period in 2004. The decrease intermination fees continues a downward trend due to improved economicconditions.

 

25

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•                  Ourin-service occupancy rates increased from 89.8% at September 30, 2004 to91.0% at September 30, 2005.

 

Equity in Earnings of UnconsolidatedCompanies

 

Equity in earnings increased from $16.5 million for the first ninemonths of 2004 to $25.0 million for the same period in 2005.  During the second quarter of 2005, one of ourjoint ventures sold three buildings and our share of the gain was $11.2million.

 

Rental Expenses and Real Estate Taxes

 

The following table reconciles rental expenses and real estate taxes byreportable segment to our total reported amounts in the statement of operationsfor the nine months ended September 30, 2005 and 2004, respectively (inthousands):

 

| ** **          | ** ** | **2005**   | ** **  | **2004** | ** ** |
|---------------------|------------|------------|-------------|----------|------------|
| Rental  Expenses:   |       |       |        |     |       |
| Office              | ** ** | **$**      | **98,925**  |     | $          | 84,669 |   |
| Industrial          | ** ** | **17,767** |        | 15,723   |       |
| Retail              | ** ** | **521**    |        | 343      |       |
| Non-segment         | ** ** | **785**    |        | 417      |       |
| Total               | ** ** | **$**      | **117,998** |     | $          | 101,152 |   |
|                |       |       |        |     |       |
| Real Estate  Taxes: |       |       |        |     |       |
| Office              | ** ** | **$**      | **41,368**  |     | $          | 35,908 |   |
| Industrial          | ** ** | **15,903** |        | 14,420   |       |
| Retail              | ** ** | **248**    |        | 406      |       |
| Non-segment         | ** ** | **3,365**  |        | 2,635    |       |
| Total               | ** ** | **$**      | **60,884**  |     | $          | 53,369 |   |

 

The overall increase in rental expenses and real estate taxes is theresult of our increased real estate assets associated with the acquisitions anddevelopments as noted above.

 

Interest Expense

 

Interest expense increased from $81.0 million for the nine months endedSeptember 30, 2004 to $88.9 million for the nine months ended September 30,2005 due to increased debt levels and higher interest rates.  Our long-term unsecured debt increased by anet $85.0 million from August 2004 to September 2005. Our short-termfloating rate debt increased as a result of higher credit line usage and a$400.0 million term loan that we used to temporarily finance the acquisition ofoffice properties in the Chicago market in the second quarter of 2005.  The $400.0 million term loan and the $423.0million outstanding balance under our $500.0 million line of credit were repaidat the end of the third quarter with proceeds from the Industrial PortfolioSale.  We also assumed approximately$40.7 million of secured debt in conjunction with two acquisitions in August 2004and June 2005.

 

26

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Depreciation and Amortization

 

Depreciation and amortization expense increased from $130.9 million forthe first nine months of 2004 to $169.7 million for the same period in2005.  The following informationhighlights the significant changes in depreciation and amortization expense.

•                  Buildingand tenant improvement depreciation expense increased $28.8 million as a resultof increases in our held-for-rental asset base from acquisitions, developmentsand increased leasing activity.

•                  Leasingcommission amortization increased by $10.0 million due to our increased leasingactivity and the impact of SFAS 141, *BusinessCombinations* (“SFAS 141”) on the amortization of certain assets thatwe acquired.  SFAS 141 requires theallocation of a portion of a property’s purchase price to intangible assets forleases acquired and in-place at the time of acquisition.  We amortize these assets over the remaininglife of the leases.

 

Service Operations

 

Service Operations primarily consist of our merchant building sales andthe leasing, management, construction and development services for jointventure properties and properties owned by third parties. These operations areheavily influenced by the current state of the economy as leasing andmanagement fees are dependent upon occupancy, while construction anddevelopment services rely on the expansion of business operations. ServiceOperations earnings increased from $13.1 million for the nine months ended September 30,2004 to $35.2 million for the nine months ended September 30, 2005,primarily as a result of the following:

•                  Ourmerchant building development and sales program, whereby a building isdeveloped and then sold, is a significant component of Construction and Developmentincome. During the first nine months of 2005, we sold eight such properties fora gain of $17.8 million compared to four properties in the first nine months of2004 for a gain of $7.5 million.

•                  Excludingthe gains above, earnings from Service Operations increased from $5.6 millionin the first nine months of 2004 to $17.3 million in the same period of 2005.We have experienced increased construction fees on more profitable jobs as ageneral contractor for third parties during 2005.

 

Other Income and Expenses

 

Earnings from thesale of land and ownership interests in consolidated companies, net ofimpairment adjustments, are comprised of the following amounts for the ninemonths ended September 30, 2005 and 2004, respectively (in thousands):

 

| ** **                                                       | ** ** | **2005** | ** ** | **2004**   | ** ** |
|------------------------------------------------------------------|------------|----------|------------|------------|------------|
| Gain on land  sales                                              | ** ** | **$**    | **5,913**  | ** ** | $          | 9,495 | ** ** |
| Gain on sale of ownership interests in  unconsolidated companies |       | —   |       | 50         |       |
| Impairment  adjustment for land                                  | ** ** | **(133** | **)**      | (425       | )          |
| Total                                                            | ** ** | **$**    | **5,780**  |       | $          | 9,120 |   |

 

Gain on land salesis derived from sales of undeveloped land that we owned. We pursueopportunities to dispose of land in those markets with a high concentration ofundeveloped land and in those markets where the land no longer meets ourstrategic development plans.

 

27

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We recorded$133,000 and $425,000 of impairment charges on land parcels for the nine monthsended September 30, 2005 and 2004, respectively. One of the four landparcels related to the $133,000 impairment was sold in the second quarter of2005 and the other three parcels were sold in the third quarter of 2005. Thethree parcels associated with the $425,000 impairment charge were later sold in2004.

 

DiscontinuedOperations

 

We have classifiedthe operations of 275 buildings as discontinued operations as of September 30,2005. These 275 buildings consisted of 256 industrial, 16 office and threeretail properties. As a result, we classified net income from operations of$13.4 million and $16.5 million as net income from discontinued operations forthe nine months ended September 30, 2005 and 2004, respectively. We sold230 of the properties classified as discontinued operations during the firstnine months of 2005 and 34 properties classified as discontinued operationsduring the first nine months of 2004. The gains on disposal of these properties, net of impairment adjustmentsof $219.6 million and $19.6 million for the nine months ended September 30,2005 and 2004, respectively, are also reported in discontinued operations. Theremaining 11 properties consist of seven properties sold during the last threemonths of 2004 and four depreciable properties classified as held-for-sale at September 30,2005.

 

**Liquidity and Capital Resources**

 

Sources of Liquidity

 

We expect to beable to continue meeting our short-term liquidity requirements over the next 12months, such as the payment of quarterly or special dividends and distributionsand recurring capital expenditures on our current real estate assets, primarilythrough the following:

 

•                  working capital; and

•                  net cash provided by operatingactivities.

 

Although wehistorically have not used any other sources of funds to pay for recurringcapital expenditures on our current real estate investments, we may rely on thetemporary use of borrowings or property disposition proceeds to fund suchexpenditures during periods of high leasing volume.  We expect to meet long-term liquidityrequirements, such as scheduled mortgage debt maturities, refinancing oflong-term debt, preferred share redemptions, the retirement of unsecured notesand amounts outstanding under the unsecured credit facility, propertyacquisitions, financing of development activities and other non-recurringcapital improvements, primarily through the following sources:

•                 issuanceof additional unsecured notes;

•                 issuanceof additional General Partner preferred equity;

•                 undistributedcash provided by operating activities, if any; and

•                 proceedsreceived from real estate dispositions.

 

### ***Rental Operations***

 

We believe thatour principal source of liquidity, cash flows from Rental Operations, providesa stable source of cash to fund operational expenses. We believe that thiscash-based revenue stream is substantially aligned with revenue recognition(except for periodic straight-line rental income accruals and amortization ofabove or below market rents) as cash receipts from the leasing of rentalproperties are generally received in advance of or shortly following the actualrevenue recognition.

 

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We are subject torisks of decreased occupancy through market conditions as well as tenantdefaults and bankruptcies, and potential reduction in rental rates upon renewalor re-letting of properties, which would result in reduced cash flow fromoperations. However, we believe that these risks are mitigated by our strongmarket presence in most of our locations and the fact that we perform in-housecredit review and analysis on major tenants and all significant leases beforethey are executed.

 

*CreditFacilities*

 

We had oneunsecured line of credit available at September 30, 2005, summarized asfollows (in thousands):

 
| ** **               | ** ** | **Borrowing** | ** ** | **Maturity** | ** **        | **Interest** | ** **   | **Outstanding**                | ** ** |
|--------------------------|------------|---------------|------------|--------------|-------------------|--------------|--------------|--------------------------------|------------|
| **Description**          | ** ** | **Capacity**  | ** ** | **Date**     | ** **        | **Rate**     | ** **   | **at September 30, 2005** | ** ** |
| Unsecured Line of Credit |       | $             | 500,000    |         | January 2007 |         | LIBOR + .60% |                           | $          | — |   |
|                          |            |               |            |              |                   |              |              |                                |            |  |  |

 

We use this lineof credit to fund development activities, acquire additional rental propertiesand provide working capital.

 

The line of creditprovides us with an option to obtain borrowings from financial institutionsthat participate in the line, at rates lower than the stated interest rate,subject to certain restrictions.  At September 30,2005, there was no outstanding balance on this line of credit.

 

The line of creditcontains various financial covenants that require us to meet defined levels ofperformance, including variable interest indebtedness, consolidated net worth,and debt-to-market capitalization.  As ofSeptember 30, 2005, we were in compliance with all financial covenantsunder our line of credit.

 

*Debt and EquitySecurities*

 

At September 30,2005, we had on file with the SEC an effective shelf registration statementthat permits us to sell up to an additional $795 million of unsecured debtsecurities.  In addition the GeneralPartner has on file with the SEC an effective shelf registration statement thatpermits the General Partner to sell up to an additional $350.7 million ofcommon and preferred stock as of September 30, 2005. From time to time, weexpect to issue additional securities under these registration statements tofund the development and acquisition of additional rental properties and tofund the repayment of the credit facilities and other long-term debt uponmaturity.

 

The indenturegoverning our unsecured notes also requires us to comply with financial ratiosand other covenants regarding our operations. As of September 30, 2005, wewere in compliance with all such covenants.

 

*Saleof Real Estate Assets*

 

We utilize salesof real estate assets as an additional source of liquidity. We pursue opportunitiesto sell real estate assets at favorable prices to capture value created by usas well as to improve the overall quality of our portfolio by recycling saleproceeds into new properties with greater value creation opportunities.

 

29

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Uses of Liquidity

 

Our principal uses of liquidity include the following:

 

•                 Property investments;

•                 Recurring leasing/capital costs;

•                 Distributions to unitholders;

•                 Long-term debt maturities; and

•                 Other contractual obligations.

 

*Property Investment*

 

We evaluatedevelopment and acquisition opportunities based upon market outlook, supply andlong-term growth potential.

 

*RecurringExpenditures*

 

One of ourprincipal uses of our liquidity is to fund the development, acquisition andrecurring leasing/capital expenditures of our real estate investments.

 

The following is asummary of our recurring capital expenditures for the nine months ended September 30,2005 and 2004, respectively (in thousands):

 
| ** **             | ** ** | **2005**   | ** ** | **2004** | ** ** |
|------------------------|------------|------------|------------|----------|------------|
|                   |       |       |       |     |       |
| Tenant  improvements   | ** ** | **$**      | **47,672** |     | $          | 41,968 |   |
| Leasing  costs         | ** ** | **24,618** |       | 20,313   |       |
| Building  improvements | ** ** | **10,370** |       | 14,679   |       |
| Totals                 | ** ** | **$**      | **82,660** |     | $          | 76,960 |   |

 

*DebtMaturities*

 

Debt outstandingat September 30, 2005, totaled $2.2 billion with a weighted average interestrate of 5.80% maturing at various dates through 2028. We had $2.1 billion ofunsecured debt and  $168.9 million ofsecured debt outstanding at September 30, 2005. Scheduled principalamortization of such debt totaled $5.6 million for the nine months ended September 30,2005.

 

The following is asummary of the scheduled future amortization and maturities of our indebtednessat September 30, 2005 (in thousands, except percentage data):

 

| ** ** | ** ** | **Future Repayments** | ** ** | **Weighted****Average** | ** ** |
|------------|------------|-----------------------|------------|-------------------------|------------|
| ** ** | ** ** | **Scheduled**         | ** ** | ** **              | ** ** | ** ** | ** ** | **Interest Rate of** | ** ** |
| **Year**   | ** ** | **Amortization**      | ** ** | **Maturities**          | ** ** | **Total** | ** ** | **Future Repayments** | ** ** |
|       |       |                  |       |                    |       |   |   |   |   |
| 2005       |       | $                     | 1,648      |                    | $          | — |   | $ | 1,648 |   | 6.76 | % |
| 2006       |       | 7,082                 |       | 390,249                 |       | 397,331 |   | 5.05 | % |
| 2007       |       | 6,625                 |       | 214,615                 |       | 221,240 |   | 5.50 | % |
| 2008       |       | 5,651                 |       | 268,968                 |       | 274,619 |   | 4.90 | % |
| 2009       |       | 4,926                 |       | 275,000                 |       | 279,926 |   | 7.37 | % |
| 2010       |       | 4,316                 |       | 175,000                 |       | 179,316 |   | 5.38 | % |
| 2011       |       | 4,497                 |       | 175,000                 |       | 179,497 |   | 6.94 | % |
| 2012       |       | 3,172                 |       | 200,000                 |       | 203,172 |   | 5.86 | % |
| 2013       |       | 2,879                 |       | 150,000                 |       | 152,879 |   | 4.65 | % |
| 2014       |       | 2,800                 |       | 272,112                 |       | 274,912 |   | 6.26 | % |
| Thereafter |       | 4,765                 |       | 50,000                  |       | 54,765 |   | 7.01 | % |
| Total      |       | $                     | 48,361     |                    | $          | 2,170,944 |   | $ | 2,219,305 |   | 5.80 | % |

 

30

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Historical Cash Flows

 

Cash and cashequivalents were $123.0 million and zero at September 30, 2005 and 2004,respectively. The following highlights significant changes in net cashassociated with our operating, investing and financing activities (inmillions):

 

| ** **                                            | ** ** | **Nine Months Ended September 30,** | ** ** |
|-------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                            | ** ** | **2005**                                 | ** ** | **2004** | ** ** |
| Net Cash  Provided by Operating Activities            |       | $                                        | 324.0      |   | $ | 271.3 |   |
|                                                  |       |                                     |       |   |   |
| Net Cash Provided by (used for) Investing  Activities |       | $                                        | 453.1      |   | $ | (356.1 | ) |
|                                                  |       |                                     |       |   |   |
| Net Cash Provided by (used for) Financing  Activities |       | $                                        | (659.9     | ) | $ | 72.1 |   |

 

*Operating Activities*

 

Cash flows fromoperating activities represents the cash necessary to meet normal operationalrequirements of our rental operations and merchant building activities. Thereceipt of rental income from rental operations continues to provide theprimary source of our revenues and operating cash flows. In addition, wedevelop buildings with the intent to sell them, which provides anothersignificant source of operating cash flow activity.

 

•                  During the period ended September 30,2005, we incurred merchant building development costs of $58.9 million,compared to $27.3 million for the period ended September 30, 2004. Thedifference is reflective of the increased activity in our held-for-salepipeline. The pipeline of held-for-sale projects under construction as of September 30,2005, has anticipated costs of $202.7 million. In addition to the developmentcosts noted above, we also acquired a building for $6.0 million during thefirst quarter of 2005 on which we made improvements of approximately $7.5million and sold in June 2005 for $20.0 million.

•                  We sold nine merchant buildings inthe first nine months of 2005 compared to four sales of merchant buildings forthe same period in 2004, recognizing after tax gains of $17.5 million and $3.9million, respectively.

 

*Investing Activities*

 

Investingactivities represents one of the primary uses of our funds. Development andacquisition activities typically generate additional rental revenues andprovide cash flows for operational requirements. Highlights of significant cashuses are as follows:

•                  Sales of land and depreciated propertyprovided $1.1 billion in net proceeds for the period ended September 30,2005, compared to $147.4 million for the same period in 2004.  The Industrial Portfolio Sale provided $955million of proceeds during the quarter. We continue to dispose of non-strategic and older properties as part ofour capital recycling program to fund acquisitions and new developments whileimproving the overall quality of our investment portfolio.

•                  Development costs totaled $130.8million for the period September 30, 2005, compared to $97.8 million forthe same period in 2004.

•                  During the first nine months of 2005,we acquired $285.3 million of real estate, compared to $204.4 million for thesame period in 2004. The largest of the 2005 acquisitions was a five-building officecomplex in our Chicago market for $257.0 million.

 

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*FinancingActivities*

 

The followingsignificant items highlight fluctuations in net cash provided by financingactivities:

•                  In January 2005, we retired a$65.0 million variable-rate term loan.

•                  In March 2005, we retired $100.0million of 6.94% senior unsecured debt that matured in March 2005.

•                  In May 2005, we obtained a$400.0 million term loan. The proceeds from this term loan were used to financethe property acquisitions noted above and to pay down our unsecured debtobligations.  The loan was paid off in September 2005with proceeds from the Industrial Portfolio Sale.

•                  In September 2005, we usedproceeds from the Industrial Portfolio Sale to pay off the outstanding balanceof $423.0 million on our $500.0 million unsecured line of credit, which had nooutstanding balance at September 30, 2005.

•                  In September 2005, we retired$100.0 million of 7.48% corporate unsecured debt that matured in September 2005.

•                  Throughout the third quarter of 2005,the General Partner repurchased and retired $95.2 million of the GeneralPartner’s common shares.

 

*FinancialInstruments*

 

We are exposed tocapital market risk, such as changes in interest rates. In order to manage thevolatility relating to interest rate risk, we may enter into interest ratehedging arrangements from time to time. We do not utilize derivative financialinstruments for trading or speculative purposes. We account for derivativeinstruments under Statement of Financial Accounting Standard No. 133, *Accounting for Derivative Instruments and HedgingActivities* (“SFAS 133”), as amended by SFAS No. 138, *Accounting for Certain Derivative Instruments andCertain Hedging Activities* (“SFAS 138”).

 

In March 2005,we entered into $300.0 million of cash flow hedges through forward-startinginterest rate swaps to hedge interest rates on $300.0 million of estimated debtofferings in 2006. The swaps qualify for hedge accounting under SFAS 133, asamended by SFAS 138, with any changes in fair value recorded in AccumulatedOther Comprehensive Income (“OCI”).  Themarket value of these interest rate swaps is dependent upon existing marketinterest rates, which change over time. At September 30, 2005, the estimated liability value of these swapswas approximately $9.1 million.  Theeffective rates of the swaps were higher than interest rates at September 30,2005.

 

In August 2005,we entered into $300.0 million of cash flow hedges through forward-startinginterest rate swaps to hedge interest rates on $300.0 million of estimated debtofferings in 2007.  The swaps qualify forhedge accounting under SFAS 133, as amended by SFAS 138, with any changes infair value recorded in OCI.  At September 30,2005, the fair value of these swaps was an asset of $3.5 million. The effectiverates of the swaps were lower than interest rates at September 30, 2005.

 

In May 2003,the Financial Accounting Standards Board (“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 was effective for allfinancial instruments created or modified after May 31, 2003, andotherwise was effective July 1, 2003. We consolidated the operations ofone joint venture in our condensed consolidated financial statements at September 30,2005. This joint 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 30,2005, the estimated settlement value of the noncontrolling interest in thisconsolidated joint venture was approximately $1.1 million as compared to the$99,000 receivable reported in our financial statements for this joint venture.

 

32

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**Recent Accounting Pronouncements**

 

In December 2004,FASB issued SFAS No. 123 (R), *Share-BasedPayment,*which is a revision of SFAS No. 123, *Accounting for Stock Based Compensation*.In April 2005, the SEC delayed the effective date on SFAS No. 123 (R)from July 2005 to January 2006. We are currently evaluating theimpact of SFAS No. 123 (R) on our financial position and results ofoperations.

 

In June 2005,the FASB ratified the consensus reached in Emerging Issues Task Force (“EITF”) No. 04-5,*Determining Whether a General Partner, orthe General Partners as a Group, Controls a Limited Partnership or SimilarEntity When the Limited Partners Have Certain Rights* (“EITF 04-5”).EITF 04-5 is effective for all newly formed limited partnerships after theconsensus was ratified and January 2006 for all existing limitedpartnership agreements.  This consensusapplies to limited partnerships or similar entities, such as limited liabilitycompanies that have governing provisions that are the functional equivalent ofa limited partnership. We have evaluated the ownership structure of ourexisting investments in unconsolidated companies and determined that we do notdemonstrate control over any unconsolidated ventures as defined by EITF 04-5.

 

**Investmentsin Unconsolidated Companies**

 

We analyze ourinvestments in joint ventures under FASB Interpretation No. 46(R), *Consolidation of Variable Interest Entities*(“FIN 46(R)”), to determine if the joint venture is a variable interest entityand would require consolidation. To the extent that our joint ventures do notqualify as variable interest entities, we further assess under the guidelinesof Statement of Position 78-9, *Accountingfor Investments in Real Estate Ventures;* Accounting ResearchBulletin No. 51, *Consolidated FinancialStatements* and FASB No. 94, *Consolidationof All Majority-Owned Subsidiaries*, to determine if the ventureshould be consolidated.

 

In 2004, weannounced a 50/50 joint venture agreement with a medical office developer todevelop healthcare facilities. Under the terms of the agreement, we willprovide the project financing and construction services while our partner willprovide the business development, leasing and property management of theco-developed properties. We evaluated this partnership under the guidelines ofFIN 46(R).   The joint venture qualifiesas a variable interest entity subject to consolidation. We are the primarybeneficiary as determined under FIN 46(R) and fully consolidate the jointventure.

 

At September 30,2005, there were three properties under development with the joint venture.These properties total 258,601 square feet and have an aggregate constructionin-process balance of over $7.5 million that is consolidated into our balancesheet. The joint venture expects to sell the properties upon completion.

 

We have equityinterests in unconsolidated partnerships and joint ventures that own andoperate rental properties and hold land for development. The equity method ofaccounting is used for these investments in which we have the ability toexercise significant influence, but not control, over operating and financialpolicies. As a result, the assets and liabilities of these joint ventures arenot included on our balance sheet. Our investment in unconsolidated companiesrepresents less than 5% of our total assets as of September 30, 2005.

 

33

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**Item 3.  Quantitativeand Qualitative Disclosure About Market Risk**

 

We are exposed tointerest rate changes primarily as a result of our line of credit and long-termdebt used to maintain liquidity and fund capital expenditures and expansion ofour real estate investment portfolio and operations. Our interest rate riskmanagement objective is to limit the impact of interest rate changes onearnings and cash flows and to lower our overall borrowing costs. To achieveour objectives, we borrow primarily at fixed rates and may enter intoderivative financial instruments such as interest rate swaps, caps and treasurylocks in order to mitigate our interest rate risk on a related financialinstrument. We do not enter into derivative or interest rate transactions forspeculative purposes. For a discussion of the market risk with respect to ouroutstanding cash flow hedges, see “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations – Liquidity and Capital Resources– Financial Instruments.”

 

**Item4.  Controls and Procedures**

 

(a)           Evaluationof Disclosure Controls and Procedures

 

We maintaindisclosure controls and procedures that are designed to ensure that informationrequired to be disclosed by us in the reports that we file or submit under theSecurities and Exchange Act of 1934 is recorded, processed, summarized andreported within the time periods specified in the SEC’s rules and forms.These disclosure controls and procedures are further designed to ensure thatsuch information is accumulated and communicated to management, including theChief Executive Officer and the Chief Financial Officer to allow timelydecisions regarding required disclosure.

 

We carried out anevaluation, under the supervision and with the participation of management,including our Chief Executive Officer and Chief Financial Officer, of theeffectiveness of the design and operation of our disclosure controls andprocedures pursuant to Exchange Act Rule 13a-15. Based upon the foregoing,the Chief Executive Officer and the Chief Financial Officer concluded that, asof the end of the period covered by this Report, our disclosure controls andprocedures are effective in all material respects.

 

(b)           Changes in Internal Control over Financial Reporting

 

During the threemonths ended September 30, 2005, there have been no changes in ourinternal control over financial reporting during the period covered by thisreport that have materially affected, or are reasonably likely to materiallyaffect, our internal control over financial reporting.

 

34

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**Part II - Other Information**

 

Item 1.  Legal Proceedings

 

From time to time, we are parties to a variety of legal proceedings andclaims arising in the ordinary course of our businesses. While these mattersgenerally are covered by insurance, there is no assurance that our insurancewill cover any particular proceeding or claim. We presently believe that all ofthese proceedings to which we were subject as of September 30, 2005, takenas a whole, will not have a material adverse effect on our liquidity, businessfinancial condition or results of operations.

 

Item 2.  Unregistered Sales ofEquity Securities and Use of Proceeds

 

(c) Issuer Purchases of Equity Securities

 

From time to time, the General Partner may repurchase common sharesunder a $750 share repurchase program that initially was approved by the GeneralPartner’s Board of Directors and publicly announced in October 2001 (the “RepurchaseProgram”).  In July 2005, theGeneral Partner’s Board of Directors authorized management to purchase up to$750.0 million of the General Partner’s common shares pursuant to thisplan.  Under the Repurchase Program, theGeneral Partner also executes share repurchases on an ongoing basis associatedwith certain employee elections under the General Partner’s compensation andbenefit programs.

 

The following table shows the share repurchaseactivity for each of the three months in the quarter ended September 30,2005:

 
| ** **                        | ** ** | ** **          | ** ** | ** **         | ** ** | ** **                | ** ** | **Maximum Number**     | ** ** |
|-----------------------------------|------------|---------------------|------------|--------------------|------------|---------------------------|------------|------------------------|------------|
| ** **                        | ** ** | ** **          | ** ** | ** **         | ** ** | ** **                | ** ** | **(or Approximate**    | ** ** |
| ** **                        | ** ** | ** **          | ** ** | ** **         | ** ** | **Total Number of**       | ** ** | **Dollar Value) of**   | ** ** |
| ** **                        | ** ** | ** **          | ** ** | ** **         | ** ** | **Shares Purchased as**   | ** ** | **Shares that May**    | ** ** |
| ** **                        | ** ** | **Total Number of** | ** ** | ** **         | ** ** | **Part of Publicly** | ** ** | **Yet be Purchased**   | ** ** |
| ** **                        | ** ** | **Shares**          | ** ** | **Average Price**  | ** ** | **Announced Plans or**    | ** ** | **Under the Plans or** | ** ** |
| **Month**                         | ** ** | **Purchased (1)**   | ** ** | **Paid per Share** | ** ** | **Programs**              | ** ** | **Programs (2)**       | ** ** |
|                              |       |                |       |               |       |                      |       |                   |       |
| July 1 through 31, 2005      |       | 142,466             |       | $                  | 32.04      |                      | 142,466    |                   |       |   |
| August 1 through 31, 2005    |       | 1,427,417           |       | $                  | 31.71      |                      | 1,427,417  |                   |       |   |
| September 1 through 30, 2005 |       | 1,395,608           |       | $                  | 33.23      |                      | 1,395,608  |                   |       |   |
|                              |       |                |       |               |       |                      |       |                   |       |
| Total                             |       | 2,965,491           |       | $                  | 32.44      |                      | 2,965,491  |                   |       |   |

 

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(1) Includes 20,151 common shares of the General Partnerrepurchased under the General Partner’s Employee Stock Purchase Plan, 3,136shares of the General Partner swapped to pay the exercise price of stockoptions, 8,904 common shares of the General Partner repurchased through a RabbiTrust under the General Partner’s Executives’ Deferred Compensation Plan and2,933,300 common shares of the General Partner repurchased under the GeneralPartner’s Share Repurchase Plan.

 

(2) Thenumber of common shares that may yet be repurchased in the open market to fundshares purchased under the General Partner’s Employee Stock Purchase Plan was250,065 as of September 30, 2005, and approximately $654.8 million underthe General Partner’s Share Repurchase Plan.

 

Item 3.  Defaults upon SeniorSecurities

 

During the period covered by this Report, we did not default under theterms of any of our material indebtedness, nor has there been any materialarrearage of dividends or other material uncured delinquency with respect toany class of our preferred equity.

 

Item 4.  Submission of Matters toa Vote of Security Holders

 

None.

 

35

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Item 5.  Other Information

 

During the period covered by this Report, there was no informationrequired to be disclosed by us in a Current Report on Form 8-K that wasnot so reported, nor were there any material changes to the procedures by whichour security holders may recommend nominees to the General Partner’s board ofdirectors.

 

Item 6. Exhibits

 

(a)           Exhibits

 

Exhibit 10.1Agreement for Purchase and Sale, dated September 12, 2005, regarding thesale of approximately 14.1 million square feet of primarily light distributionand service center properties and approximately 50 acres of undeveloped land. *

 

Exhibit 10.2Amendment Number Five to the 1995 Shareholder Value Plan of Duke RealtyServices Limited Partnership, dated as of October 26, 2005. +

 

Exhibit 10.3Amendment Nine to the 1995 Key Employees’ Stock Option Plan of Duke RealtyInvestments, Inc., dated as of October 26, 2005.  +

 

Exhibit 10.4Amendment Two to the Directors’ Deferred Compensation Plan of Duke-Weeks RealtyCorporation, dated as of October 26, 2005. +

 

Exhibit 10.5Amendment One to the Duke Realty Corporation 2005 Non-Employee DirectorsCompensation Plan, dated as of October 26, 2005.  +

 

Exhibit 11.1Ratio of Earnings to Combined Fixed Charges and Preferred Equity Distributions.

 

Exhibit 11.2Ratio of Earnings to Debt Service.

 

Exhibit 15.1Letter from KPMG LLP regarding unaudited interim financial information.

 

Exhibit 31.1Rule 13a-14(a) Certification of the General Partner’s Chief ExecutiveOfficer.

 

Exhibit 31.2Rule 13a-14(a) Certification of the General Partner’s Chief FinancialOfficer.

 

Exhibit 32.1Section 1350 Certification of the General Partner’s Chief ExecutiveOfficer.

 

Exhibit 32.2Section 1350 Certification of the General Partner’s Chief FinancialOfficer.

 

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*Certain information contained in the originally executed copy of theAgreement for Purchase and Sale has been omitted from Exhibit 10.1, asfiled with this Form 10-Q, pursuant to a request for confidentialtreatment delivered by the Registrant to the Office of the Secretary of theSecurities and Exchange Commission simultaneously with the filing of this Form 10-Q.  The omitted information has been replacedwith the symbol “***” to notify readers that such information has beenomitted.  The omission of thisinformation appears on many pages of the Agreement for Purchase and Sale,as well as the exhibits to the Agreement for Purchase and Sale.

 

+  Denotes management contract orcompensatory plan or arrangement.

 

36

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**SIGNATURES**

 

Pursuant to the requirements of theSecurities Exchange Act of 1934, the registrant has duly caused this report tobe signed on its behalf by the undersigned thereunto duly authorized.

 
|                               | DUKE REALTY LIMITED PARTNERSHIP |
|------------------------------------|---------------------------------|
|                               | By:                             | DUKE REALTY CORPORATION |
|                               |                            | Its General Partner |
|                               |                            |   |   |
|                               |                            |   |   |
| Date:  November 14, 2005 |                            | /s/ | Dennis D. Oklak |   |
|                               |                            | Dennis D. Oklak |
|                               |                            | Chairman 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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