** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

** **

**FORM 10-Q**

**(Mark One)**

**x**                              QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

** **

**For the quarterly periodended September 30, 2006**

** **

**OR**

** **

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

** **

**For the transition periodfrom                     to                     .**

** **

**Commission File Number:0-20625**

** **

**DUKE REALTY LIMITED PARTNERSHIP**

(Exact Name of Registrantas Specified in Its Charter)

| **Indiana**                                                      |   | **35-1898425**                           |
|------------------------------------------------------------------|--------|------------------------------------------|
| (State or Other  Jurisdiction  of Incorporation or Organization) |   | (I.R.S. 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) hasfiled all reports 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 x   Noo

Indicate by check mark whetherthe registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of theExchange Act.

Large accelerated filer o   Acceleratedfiler o   Non-accelerated filer x

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act):

YES o   NOx

Indicate the number of shares outstanding of each ofthe issuer’s classes of common stock, as of the latest practicable date:

| **Class**                              |   | **Outstanding  at November 1, 2006** |
|----------------------------------------|--------|--------------------------------------|
| Common Units,  $.01 par value per unit |   | 148,426,498  units                   |

 

 

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**DUKEREALTY LIMITED PARTNERSHIP**

**INDEX**
|                                                                                                               | ** ** | ** **                                                                                                                    | ** ** | ** **                                                   | ** ** | **Page** | ** ** |
|---------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------|------------|----------|------------|
| **Part I -  Financial Information**                                                                      |       |                                                                                                                          |       |
| ** **                                                                                                    | ** ** | ** **                                                                                                                    |       |                                                         |       |     |       |
| **Item 1.  Financial Statements**                                                                        |       |                                                                                                                          |       |
| ** **                                                                                                    | ** ** | ** **                                                                                                                    |       |                                                         |       |     |       |
|                                                                                                          |       | Condensed  Consolidated Balance Sheets as of September 30, 2006 (Unaudited) and December  31, 2005                            |       | 2                                                            |       |
|                                                                                                          |       |                                                                                                                          |       |                                                         |       |     |       |
|                                                                                                          |       | Condensed  Consolidated Statements of Operations (Unaudited) for the three and nine  months ended September 30, 2006 and 2005 |       | 3                                                            |       |
|                                                                                                          |       |                                                                                                                          |       |                                                         |       |     |       |
|                                                                                                          |       | Condensed  Consolidated Statements of Cash Flows (Unaudited) for the nine months ended  September 30, 2006 and 2005           |       | 4                                                            |       |
|                                                                                                          |       |                                                                                                                          |       |                                                         |       |     |       |
|                                                                                                          |       | Condensed  Consolidated Statement of Partners’ Equity (Unaudited) for the nine months  ended September 30, 2006          |       | 5                                                            |       |
|                                                                                                          |       |                                                                                                                          |       |                                                         |       |     |       |
|                                                                                                          |       | Notes to  Condensed Consolidated Financial Statements (Unaudited)                                                             |       | 6-19                                                         |       |
|                                                                                                          |       |                                                                                                                          |       |                                                         |       |     |       |
| **Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of  Operations** |       | 19-36                                                                                                                         |       |
| ** **                                                                                                    | ** ** | ** **                                                                                                                    | ** ** | ** **                                                   |       |     |       |
| **Item 3.  Quantitative and Qualitative Disclosures About Market Risk**                                  |       | 36                                                                                                                            |       |
| ** **                                                                                                    | ** ** | ** **                                                                                                                    |       |                                                         |       |     |       |
| **Item 4.  Controls and Procedures**                                                                     |       | 36-37                                                                                                                         |       |
| ** **                                                                                                    | ** ** | ** **                                                                                                                    | ** ** | ** **                                                   |       |     |       |
| **Part II - Other  Information**                                                                         |       |                                                                                                                          |       |
| ** **                                                                                                    | ** ** | ** **                                                                                                                    |       |                                                         |       |     |       |
|                                                                                                          |       | Item 1.                                                                                                                  |       | Legal Proceedings                                            |       | 37       |       |
|                                                                                                          |       | Item 1A.                                                                                                                 |       | Risk Factors                                                 |       | 37       |       |
|                                                                                                          |       | Item 2.                                                                                                                  |       | Unregistered  Sales of Equity Securities and Use of Proceeds |       | 37-38    |       |
|                                                                                                          |       | Item 3.                                                                                                                  |       | Defaults Upon  Senior Securities                             |       | 38       |       |
|                                                                                                          |       | Item 4.                                                                                                                  |       | Submission of  Matters to a Vote of Security Holders         |       | 38       |       |
|                                                                                                          |       | Item 5.                                                                                                                  |       | Other Information                                            |       | 38       |       |
|                                                                                                          |       | Item 6.                                                                                                                  |       | Exhibits                                                     |       | 38-40    |       |

 

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**PART I - FINANCIALINFORMATION**

**Item 1. FinancialStatements**

**DUKEREALTY LIMITED PARTNERSHIP AND SUBSIDIARIESCondensed Consolidated Balance Sheets(in thousands, except per unit data)**
| ** **                                                                                  | ** ** | **September 30,** | ** **    | **December 31,** | ** ** |
|---------------------------------------------------------------------------------------------|------------|------------------------|---------------|-----------------------|------------|
| ** **                                                                                  | ** ** | **2006**               | ** **    | **2005**              | ** ** |
| ** **                                                                                  | ** ** | **(Unaudited)**        | ** **    | ** **            | ** ** |
| **ASSETS**                                                                                  | ** ** | ** **             | ** **    | ** **            | ** ** |
| Real estate  investments:                                                                   |       |                   |          |                  |       |
| Land and  improvements                                                                      | ** ** | **$**                  | **751,529**   |                  | $          | 675,050 |   |
| Buildings and  tenant improvements                                                          | ** ** | **4,378,929**          |          | 4,156,456             |       |
| Construction in  progress                                                                   | ** ** | **332,857**            |          | 227,066               |       |
| Investments in  unconsolidated companies                                                    | ** ** | **453,484**            |          | 301,322               |       |
| Land held for  development                                                                  | ** ** | **696,551**            |          | 429,270               |       |
|                                                                                        | ** ** | **6,613,350**          |          | 5,789,164             |       |
| Accumulated  depreciation                                                                   | ** ** | **(860,504**           | **)**         | (754,742              | )          |
|                                                                                        | ** ** | ** **             |          |                  |       |
| Net real estate  investments                                                                | ** ** | **5,752,846**          |          | 5,034,422             |       |
|                                                                                        | ** ** | ** **             |          |                  |       |
| Real estate  investments and other assets held-for-sale (see Note 8)                        | ** ** | **838,556**            |          | —                |       |
|                                                                                        | ** ** | ** **             |          |                  |       |
| Cash and cash  equivalents                                                                  | ** ** | **24,994**             |          | 26,858                |       |
| Accounts receivable,  net of allowance of $1,078 and $1,093                                 | ** ** | **21,758**             |          | 31,342                |       |
| Straight-line rent  receivable, net of allowance of $1,693 and $1,538                       | ** ** | **10****5,245**        |          | 95,948                |       |
| Receivables on  construction contracts, including retentions                                | ** ** | **62,955**             |          | 50,035                |       |
| Deferred financing  costs, net of accumulated amortization of $18,194 and $14,113           | ** ** | **50,916**             |          | 27,118                |       |
| Deferred leasing and  other costs, net of accumulated amortization of $125,843 and $112,245 | ** ** | **251,538**            |          | 227,648               |       |
| Escrow deposits and  other assets                                                           | ** ** | **171,192**            |          | 153,316               |       |
|                                                                                        | ** ** | **$**                  | **7,280,000** |                  | $          | 5,646,687 |   |
|                                                                                        | ** ** | ** **             |          |                  |       |
| **LIABILITIES  AND PARTNERS’ EQUITY**                                                  | ** ** | ** **             | ** **    | ** **            | ** ** |
| ** **                                                                                  | ** ** | ** **             | ** **    | ** **            | ** ** |
| Indebtedness:                                                                               |       |                   |          |                  |       |
| Secured debt                                                                                | ** ** | **$**                  | **371,465**   |                  | $          | 167,255 |   |
| Unsecured notes                                                                             | ** ** | **2,800,218**          |          | 2,050,396             |       |
| Unsecured line  of credit                                                                   | ** ** | **904,000**            |          | 383,000               |       |
|                                                                                        | ** ** | **4,075,683**          |          | 2,600,651             |       |
|                                                                                        | ** ** | ** **             |          |                  |       |
| Construction payables  and amounts due subcontractors, including retentions                 | ** ** | **125,299**            |          | 93,137                |       |
| Accounts payable                                                                            | ** ** | **82**                 |          | 781                   |       |
| Accrued expenses:                                                                           |       |                   |          |                  |       |
| Real estate  taxes                                                                          | ** ** | **78,255**             |          | 60,883                |       |
| Interest                                                                                    | ** ** | **31,976**             |          | 33,022                |       |
| Other                                                                                       | ** ** | **46,609**             |          | 52,649                |       |
| Other liabilities                                                                           | ** ** | **119,162**            |          | 135,323               |       |
| Tenant security  deposits and prepaid rents                                                 | ** ** | **32,309**             |          | 34,924                |       |
| Total  liabilities                                                                          | ** ** | **4,509,375**          |          | 3,011,370             |       |
|                                                                                        | ** ** | ** **             |          |                  |       |
| Minority interest                                                                           | ** ** | **2,004**              |          | 73                    |       |
|                                                                                        | ** ** | ** **             |          |                  |       |
| Partners’ equity:                                                                      |       |                   |          |                  |       |
| General Partner                                                                             |       |                   |          |                  |       |
| Common equity                                                                               | ** ** | **1,766,623**          |          | 1,841,932             |       |
| Preferred equity  (liquidation preference of $876,250 and $657,250)                         | ** ** | **825,774**            |          | 616,780               |       |
|                                                                                        | ** ** | **2,592,397**          |          | 2,458,712             |       |
| Limited Partners’  common equity                                                       | ** ** | **171,384**            |          | 183,650               |       |
| Accumulated other  comprehensive income (loss)                                              | ** ** | **4,840**              |          | (7,118                | )          |
| Total Partners’  equity                                                                | ** ** | **2,768,621**          |          | 2,635,244             |       |
|                                                                                        | ** ** | ** **             |          |                  |       |
|                                                                                        | ** ** | **$**                  | **7,280,000** |                  | $          | 5,646,687 |   |

 

See accompanying Notes to Condensed ConsolidatedFinancial Statements.

2

----

**DUKEREALTY LIMITED PARTNERSHIP AND SUBSIDIARIESCondensed Consolidated Statements of OperationsFor the three and nine months ended September 30,(in thousands, except per unit data)(Unaudited)**
| ** **                                                              | ** ** | **Three Months Ended** | ** **  | **Nine months Ended** | ** ** |
|-------------------------------------------------------------------------|------------|----------------------------------|-------------|---------------------------------|------------|
| ** **                                                              | ** ** | **2006**                         | ** **  | **2005**                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| **RENTAL OPERATIONS:**                                                  | ** ** | ** **                       | ** **  | ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| Revenues:                                                               |       |                             |        |                            |       |   |   |   |   |
| Rental income  from continuing operations                               | ** ** | **$**                            | **208,248** |                            | $          | 170,022 | ** ** | **$** | **599,170** |   | $ | 486,534 |   |
| Equity in  earnings of unconsolidated companies                         | ** ** | **3,492**                        |        | 4,143                           | ** ** | **21,447** |   | 25,033 | ** ** |
|                                                                    | ** ** | **211,740**                      |        | 174,165                         | ** ** | **620,617** |   | 511,567 | ** ** |
| Operating  expenses:                                                    |       |                             |        |                            |       |   |   |   |   |
| Rental expenses                                                         | ** ** | **46,073**                       |        | 40,502                          | ** ** | **136,498** |   | 115,885 |   |
| Real estate  taxes                                                      | ** ** | **23,086**                       |        | 21,684                          | ** ** | **69,752** |   | 59,403 |   |
| Interest expense                                                        | ** ** | **50,173**                       |        | 30,523                          | ** ** | **133,288** |   | 86,123 |   |
| Depreciation and  amortization                                          | ** ** | **63,892**                       |        | 59,494                          | ** ** | **187,099** |   | 164,239 |   |
|                                                                    | ** ** | **183,224**                      |        | 152,203                         | ** ** | **526,637** |   | 425,650 |   |
| Earnings from  continuing rental operations                             | ** ** | **28,516**                       |        | 21,962                          | ** ** | **93,980** |   | 85,917 |   |
| ** **                                                              | ** ** | ** **                       | ** **  | ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| **SERVICE OPERATIONS**                                                  | ** ** | ** **                       | ** **  | ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| Revenues:                                                               |       |                             |        |                            |       |   |   |   |   |
| General  contractor gross revenue                                       | ** ** | **100,314**                      |        | 103,879                         | ** ** | **223,924** |   | 292,303 |   |
| General  contractor costs                                               | ** ** | **(93,555**                      | **)**       | (93,750                         | )          | **(206,561** | **)** | (267,906 | ) |
| Net general  contractor revenue                                         | ** ** | **6,759**                        |        | 10,129                          | ** ** | **17,363** |   | 24,397 |   |
| Property  management, maintenance and leasing fees                      | ** ** | **3,335**                        |        | 4,092                           | ** ** | **10,626** |   | 12,124 |   |
| Construction  management and development activity income                | ** ** | **11,665**                       |        | 8,092                           | ** ** | **12,948** |   | 28,124 |   |
| Other income                                                            | ** ** | **715**                          |        | 271                             | ** ** | **1,261** |   | 3,382 |   |
| Total revenue                                                           | ** ** | **22,474**                       |        | 22,584                          | ** ** | **42,198** |   | 68,027 |   |
| Operating  expenses                                                     | ** ** | **11,923**                       |        | 10,025                          | ** ** | **23,721** |   | 30,584 |   |
| Earnings from  service operations                                       | ** ** | **10,551**                       |        | 12,559                          | ** ** | **18,477** |   | 37,443 |   |
| General and  administrative expense                                     | ** ** | **(6,804**                       | **)**       | (5,792                          | )          | **(27,715** | **)** | (21,295 | ) |
| Operating income                                                        | ** ** | **32,263**                       |        | 28,729                          | ** ** | **84,742** |   | 102,065 |   |
| ** **                                                              | ** ** | ** **                       | ** **  | ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| **OTHER INCOME (EXPENSE)**                                              | ** ** | ** **                       | ** **  | ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| Interest and  other income, net                                         | ** ** | **4,381**                        |        | 1,517                           | ** ** | **8,313** |   | 3,676 |   |
| Earnings from  sale of land, net of impairment adjustments              | ** ** | **2,982**                        |        | 2,371                           | ** ** | **5,427** |   | 5,780 |   |
| Other minority  interest in earnings of subsidiaries                    | ** ** | **(126**                         | **)**       | (1,396                          | )          | **(301** | **)** | (1,462 | ) |
| Income from  continuing operations                                      | ** ** | **39,500**                       |        | 31,221                          | ** ** | **98,181** |   | 110,059 |   |
| Discontinued  operations:                                               |       |                             |        |                            |       |   |   |   |   |
| Net income  (loss) from discontinued operations                         | ** ** | **(39**                          | **)**       | 3,329                           | ** ** | **4,652** |   | 11,327 |   |
| Gain on sale of  discontinued operations, net of impairment adjustments | ** ** | **43,735**                       |        | 210,758                         | ** ** | **45,739** |   | 219,592 |   |
| Income from  discontinued operations                                    | ** ** | **43,696**                       |        | 214,087                         | ** ** | **50,391** |   | 230,919 |   |
| Net income                                                              | ** ** | **83,196**                       |        | 245,308                         | ** ** | **148,572** |   | 340,978 |   |
| Dividends on  preferred units                                           | ** ** | **(15,226**                      | **)**       | (11,619                         | )          | **(41,193** | **)** | (34,859 | ) |
| Adjustments for  redemption of preferred units                          |       | —                           |        | —                          | ** ** | **(2,633** | **)** | — |   |
| Net income  available for common unitholders                            | ** ** | **$**                            | **67,970**  |                            | $          | 233,689 | ** ** | **$** | **104,746** |   | $ | 306,119 |   |
|                                                                    |       |                             |        |                            |       |   |   |   |   |
| Basic net income  per common unit:                                      |       |                             |        |                            |       |   |   |   |   |
| Continuing  operations                                                  | ** ** | **$**                            | **.16**     |                            | $          | .13 | ** ** | **$** | **.37** |   | $ | .48 |   |
| Discontinued  operations                                                | ** ** | **.30**                          |        | 1.37                            | ** ** | **.34** |   | 1.47 |   |
| Total                                                                   | ** ** | **$**                            | **.46**     |                            | $          | 1.50 | ** ** | **$** | **.71** |   | $ | 1.95 |   |
| Diluted net  income per common unit:                                    |       |                             |        |                            |       |   |   |   |   |
| Continuing  operations                                                  | ** ** | **$**                            | **.16**     |                            | $          | .13 | ** ** | **$** | **.36** |   | $ | .48 |   |
| Discontinued  operations                                                | ** ** | **.29**                          |        | 1.35                            | ** ** | **.34** |   | 1.46 |   |
| Total                                                                   | ** ** | **$**                            | **.45**     |                            | $          | 1.48 | ** ** | **$** | **.70** |   | $ | 1.94 |   |
| Weighted average  number of common units outstanding                    | ** ** | **148,328**                      |        | 156,110                         | ** ** | **148,259** |   | 156,678 |   |
| Weighted average number  of common and dilutive potential common units  | ** ** | **150,947**                      |        | 158,468                         | ** ** | **149,472** |   | 157,453 |   |

 

See accompanyingNotes to Condensed Consolidated Financial Statements

3

----

**DUKEREALTY LIMITED PARTNERSHIP AND SUBSIDIARIESCondensed Consolidated Statements of Cash FlowsFor the nine months ended September 30,(in thousands)(Unaudited)**
| ** **                                                                                                   | ** ** | **2006**       | ** **  | **2005**  | ** ** |
|--------------------------------------------------------------------------------------------------------------|------------|----------------|-------------|-----------|------------|
| Cash flows from  operating activities:                                                                       |       |           |        |      |       |
| Net income                                                                                                   | ** ** | **$**          | **148,572** |      | $          | 340,978 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities:                           |       |           |        |      |       |
| Depreciation of  buildings and tenant improvements                                                           | ** ** | **155,156**    |        | 157,260   |       |
| Amortization of  deferred leasing and other costs                                                            | ** ** | **34,956**     |        | 37,713    |       |
| Amortization of  deferred financing costs                                                                    | ** ** | **6,093**      |        | 4,687     |       |
| Minority  interest in earnings                                                                               | ** ** | **301**        |        | 1,461     |       |
| Straight-line  rent adjustment                                                                               | ** ** | **(15,263**    | **)**       | (16,887   | )          |
| Earnings from  land and depreciated property sales                                                           | ** ** | **(46,734**    | **)**       | (225,371  | )          |
| Build-for-sale  operations, net                                                                              | ** ** | **(163,106**   | **)**       | 12,783    |       |
| Construction  contracts, net                                                                                 | ** ** | **(208**       | **)**       | 4,542     |       |
| Other accrued  revenues and expenses, net                                                                    | ** ** | **(10,235**    | **)**       | 7,755     |       |
| Operating  distributions received in excess of (less than) equity in earnings from  unconsolidated companies | ** ** | **(4,990**     | **)**       | (894      | )          |
| **Net  cash provided by operating activities**                                                               | ** ** | **104,542**    |        | 324,027   |       |
|                                                                                                         |       |           |        |      |       |
| Cash flows from  investing activities:                                                                       |       |           |        |      |       |
| Development of  real estate investments                                                                      | ** ** | **(274,672**   | **)**       | (130,825  | )          |
| Acquisition of  in-service real estate investments                                                           | ** ** | **(735,294**   | **)**       | (285,342  | )          |
| Acquisition of  land held for development and infrastructure costs                                           | ** ** | **(367,517**   | **)**       | (93,515   | )          |
| Recurring tenant  improvements                                                                               | ** ** | **(36,300**    | **)**       | (44,108   | )          |
| Recurring  leasing costs                                                                                     | ** ** | **(12,338**    | **)**       | (24,618   | )          |
| Recurring  building improvements                                                                             | ** ** | **(5,490**     | **)**       | (10,370   | )          |
| Other deferred  leasing costs                                                                                | ** ** | **(30,918**    | **)**       | (11,073   | )          |
| Other deferred  costs and other assets                                                                       | ** ** | **4,531**      |        | (20,393   | )          |
| Tax deferred  exchange escrow, net                                                                           |       | —         |        | (12,890   | )          |
| Proceeds from  land and depreciated property sales, net                                                      | ** ** | **140,273**    |        | 1,095,416 |       |
| Distributions  received from unconsolidated companies for land and depreciated property  sales               | ** ** | **21,238**     |        | —    |       |
| Repayments from  (advances to) unconsolidated companies                                                      | ** ** | **4,865**      |        | (9,206    | )          |
| **Net  cash provided by (used for) investing activities**                                                    | ** ** | **(1,291,622** | **)**       | 453,076   |       |
|                                                                                                         |       |           |        |      |       |
| Cash flows from  financing activities:                                                                       |       |           |        |      |       |
| Payments for  repurchases of common units                                                                    | ** ** | **(11,883**    | **)**       | (95,167   | )          |
| Proceeds from  exercise ofthe General Partner’s stock options                                           | ** ** | **6,335**      |        | 2,814     |       |
| Proceeds from  issuance of preferred units, net                                                              | ** ** | **283,994**    |        | —    |       |
| Payments for  redemption of preferred units                                                                  | ** ** | **(75,000**    | **)**       | —    |       |
| Redemption of  limited partner units                                                                         |       | —         |        | (2,129    | )          |
| Proceeds from  unsecured debt issuance                                                                       | ** ** | **850,000**    |        | 400,000   |       |
| Payments on  unsecured debt                                                                                  | ** ** | **(100,000**   | **)**       | (665,000  | )          |
| Proceeds from  issuance of secured debt                                                                      | ** ** | **710,450**    |        | —    |       |
| Payments on  secured indebtedness including principal amortization                                           | ** ** | **(722,777**   | **)**       | (45,281   | )          |
| Borrowings on  line of credit, net                                                                           | ** ** | **521,000**    |        | —    |       |
| Distributions to  common unitholders                                                                         | ** ** | **(210,142**   | **)**       | (219,768  | )          |
| Distributions to  preferred unitholders                                                                      | ** ** | **(41,193**    | **)**       | (34,859   | )          |
| Contributions  from minority interest                                                                        | ** ** | **1,630**      |        | 12        |       |
| Deferred financing  costs                                                                                    | ** ** | **(27,198**    | **)**       | (529      | )          |
| **Net  cash provided by (used for) financing activities**                                                    | ** ** | **1,185,216**  |        | (659,907  | )          |
| **Net  increase (decrease) in cash and cash equivalents**                                                    | ** ** | **(1,864**     | **)**       | 117,196   |       |
| Cash and cash  equivalents at beginning of period                                                            | ** ** | **26,858**     |        | 5,770     |       |
| Cash and cash  equivalents at end of period                                                                  | ** ** | **$**          | **24,994**  |      | $          | 122,966 |   |
| Other non-cash  items:                                                                                       |       |           |        |      |       |
| Conversion of  Limited Partner Units to common shares of the General Partner                                 |       | **$**          | **3,365**   |      | $          | 2,396 |   |
| Issuance of  Limited Partner Units for acquisition of minority interest                                      | ** ** | **$**          | **—**  |      | $          | 15,000 |   |
| Assumption of  debt for real estate acquisitions                                                             | ** ** | **$**          | **217,520** |      | $          | 11,743 |   |
| Contribution of  real estate investments to unconsolidated companies                                         | ** ** | **$**          | **77,412**  |      | $          | — |   |
| Transfer of  construction in process to investment in unconsolidated subsidiary                              | ** ** | **$**          | **96,634**  |      | $          | — |   |

 

See accompanyingNotes to Condensed Consolidated Financial Statements

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**DUKEREALTY LIMITED PARTNERSHIP AND SUBSIDIARIESCondensed Consolidated Statement of Partners’ EquityFor the nine months ended September 30, 2006(in thousands, 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, 2005**                                         | ** ** | **$**                    | **1,841,932** | ** **         | **$**      | **616,780** | ** ** | **$**                  | **183,650** | ** **  | **$**      | **(7,118** | **)** | **$** | **2,635,244** | ** ** |
| ** **                                                               | ** ** | ** **               | ** **    | ** **         | ** ** | ** **  | ** ** | ** **             | ** **  | ** **  | ** ** |
| Comprehensive income:                                                    |       |                     |          |               |       |        |       |                   |        |        |       |
|                                                                     |       |                     |          |               |       |        |       |                   |        |        |       |
| Net income                                                               |       | 97,527                   |          | 41,193             |       | 9,852       |       | —                 |        | 148,572     |       |
|                                                                     |       |                     |          |               |       |        |       |                   |        |        |       |
| Distributions to  preferred unitholders                                  |       | —                   |          | (41,193            | )          | —      |       | —                 |        | (41,193     | )          |
|                                                                     |       |                     |          |               |       |        |       |                   |        |        |       |
| Gains on  derivative instruments                                         |       | —                   |          | —             |       | —      |       | 11,958                 |        | 11,958      |       |
|                                                                     |       |                     |          |               |       |        |       |                   |        |        |       |
| Comprehensive  income available for common unitholders                   |       |                     |          |               |       |        |       |                   |        | 119,337     |       |
|                                                                     |       |                     |          |               |       |        |       |                   |        |        |       |
| Capital  contribution from General Partner                               |       | 6,007                    |          | 283,994            |       | —      |       | —                 |        | 290,001     |       |
|                                                                     |       |                     |          |               |       |        |       |                   |        |        |       |
| Acquisition of  Partnership interest for common stock of General Partner |       | 6,616                    |          | —             |       | (3,251      | )          | —                 |        | 3,365       |       |
|                                                                     |       |                     |          |               |       |        |       |                   |        |        |       |
| Redemption of  Series I Preferred Units                                  |       | —                   |          | (75,000            | )          | —      |       | —                 |        | (75,000     | )          |
|                                                                     |       |                     |          |               |       |        |       |                   |        |        |       |
| Tax benefits  from employee stock plans                                  |       | 419                      |          | —             |       | —      |       | —                 |        | 419         |       |
|                                                                     |       |                     |          |               |       |        |       |                   |        |        |       |
| Stock based  compensation expense                                        |       | 7,612                    |          | —             |       | —      |       | —                 |        | 7,612       |       |
|                                                                     |       |                     |          |               |       |        |       |                   |        |        |       |
| Retirement of  common units                                              |       | (2,526                   | )             | —             |       | —      |       | —                 |        | (2,526      | )          |
|                                                                     |       |                     |          |               |       |        |       |                   |        |        |       |
| Distribution to  General Partner                                         |       | (20                      | )             | —             |       | —      |       | —                 |        | (20         | )          |
|                                                                     |       |                     |          |               |       |        |       |                   |        |        |       |
| Distributions to  partners ($1.415 per Common Unit)                      |       | (190,944                 | )             | —             |       | (18,867     | )          | —                 |        | (209,811    | )          |
|                                                                     |       |                     |          |               |       |        |       |                   |        |        |       |
| **Balance  at September 30, 2006**                                       | ** ** | **$**                    | **1,766,623** | ** **         | **$**      | **825,774** | ** ** | **$**                  | **171,384** | ** **  | **$**      | **4,840** | ** ** | **$** | **2,768,621** | ** ** |
| ** **                                                               | ** ** | ** **               | ** **    | ** **         | ** ** | ** **  | ** ** | ** **             | ** **  | ** **  | ** ** |
| **Common Units outstanding at  September 30, 2006**                      | ** ** | **135,160**              | ** **    | ** **         | ** ** | **13,208**  | ** ** | ** **             | ** **  | **148,368** | ** ** |

 

See accompanyingNotes to Condensed Consolidated Financial Statements

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**DUKEREALTY LIMITED PARTNERSHIPNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)**

**1.****                                      GeneralBasis 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, 2005). The financial statements have been prepared inaccordance with United States generally accepted accounting principles (“GAAP”)for interim financial information and in accordance with Rule 10-01 ofRegulation S-X of the Securities Exchange Act of 1934. Accordingly, they do notinclude all of the information and footnotes required by GAAP for completefinancial statements. In the opinion of management, all adjustments (consistingof normal recurring adjustments) considered necessary for a fair presentationhave been included. These financial statements should be read in conjunctionwith Management’s Discussion and Analysis of Financial Condition and Results ofOperations included herein and the consolidated financial statements and notesthereto included in our Annual Report on Form 10-K for the year ended December31, 2005.

The Partnership was formed on October 4, 1993, whenDuke Realty Corporation (the “General Partner”) contributed all of itsproperties and related assets and liabilities, along with the net proceeds fromthe issuance of additional shares of the General Partner through an offering,to the Partnership. The General Partner qualifies as a real estate investmenttrust (“REIT”) under provisions of the Internal Revenue Code. The GeneralPartner is the sole general partner of the Partnership, owning 91.1% of thecommon partnership interests as of September 30, 2006 (“General Partner Units”).The remaining 8.9% of the Partnership’s common interest is owned by limitedpartners (“Limited Partner Units” and, together with the General Partner Units,the “Common Units”). The Limited Partner Units are exchangeable for shares ofthe General Partner’s common stock on a one-for-one basis subject generally toa one-year holding period or, under certain circumstances, the General Partnermay repurchase the Limited Partnership Units for cash. The General Partner alsoowns preferred partnership interests in the Partnership (“Preferred Units”).

We own and operatea diversified portfolio of industrial, office and other properties and providereal estate services to third-party owners. We conduct our service operationsthrough Duke Realty Services, LLC, Duke Realty Services Limited Partnership (“DRSLP”)and Duke Construction Limited Partnership. The condensed consolidated financialstatements include our accounts and our majority-owned or controlledsubsidiaries. In this Quarterly Report on Form 10-Q (this “Report”), the terms “we,”“us” and “our” refer to the Partnership and those entities owned or controlledby the Partnership.

**2.****                                      Reclassifications**

Certain 2005balances have been reclassified to conform to the 2006 presentation.

**3.****                                      Acquisitions**

In 2006, we completed the acquisition of a WashingtonD.C. metropolitan area portfolio of suburban office and light industrialproperties (the “Mark Winkler Portfolio”). The assets acquired for a purchaseprice of approximately $865.2 million are comprised of 32 properties withapproximately 2.9 million square feet for rental, 166 acres of undevelopedland, as well as certain related assets of the Mark Winkler Company, a realestate management company. The acquisition was financed primarily throughassumed mortgage loans and new borrowings (see Note 4). The assets of the MarkWinkler Portfolio related to the 32 in-service properties, consisting of $695.9million of real estate investments and acquired lease related intangible

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assets, are classified and accounted for asheld-for-sale based on meeting the applicable criteria of Statement ofFinancial Accounting Standards No. 144, *AccountingFor the Impairment or Disposal of Long-Lived Assets (“SFAS 144”).*Asrequired by SFAS 144, the results of operations of the acquired propertiessince the date of acquisition have been included in continuing operations,rather than discontinued operations, based on our present intention to sell themajority of our ownership interest in the properties to an entity in which wewill retain a minority equity ownership interest. The allocation of purchaseprice based on the fair value of assets acquired is preliminary.

In the thirdquarter of 2006, we completed the purchase of a portfolio of industrial realestate properties in Savannah, Georgia with the purpose of expanding ourindustrial real estate holdings near major port facilities. We completed amajority of the purchase in January 2006. The assets acquired for a purchaseprice of approximately $196.2 million are comprised of 18 buildings withapproximately 5.1 million square feet for rental as well as over 60 acres ofundeveloped land. The acquisition was financed in part through assumed mortgageloans (see Note 4). The results of operations for the acquired properties sincethe date of acquisition have been included in continuing rental operations inour consolidated financial statements.

**4.****                                      Indebtedness**

We had one unsecured line of credit available as ofSeptember 30, 2006, described as follows (dollars in thousands):

|                           | ** ** | **Borrowing** | ** ** | **Maturity** | ** **   | **Interest** | ** **   | **Outstanding Balance**             | ** ** |
|---------------------------|------------|---------------|------------|--------------|--------------|--------------|--------------|------------------------------------------|------------|
| **Description**           | ** ** | **Capacity**  | ** ** | **Date**     | ** **   | **Rate**     | ** **   | **at September 30, 2006** | ** ** |
| Unsecured Line  of Credit |       | $             | 1,000,000  |         | January 2010 |         | LIBOR + .525 | %                                        | $          | 904,000 |   |
|                           |            |               |            |              |              |              |              |                                          |            |  |  |

 

We use this line of credit to fund development activities,acquire additional rental properties and provide working capital.

The line of credit provides us with an option toobtain borrowings from financial institutions that participate in the line, atrates lower than the stated interest rate, subject to certain restrictions.Interest rates on the amounts outstanding on the unsecured line of credit as ofSeptember 30, 2006 ranged from LIBOR + .15% to LIBOR + .525% (equal to 5.48% to5.86% as of September 30, 2006).

The line of credit also contains financial covenantsthat require us to meet financial ratios and defined levels of performance,including those related to variable interest indebtedness, consolidated networth and debt-to-market capitalization. As of September 30, 2006, we were incompliance with all covenants under our line of credit.

We took the following actions during the nine-monthperiod ended September 30, 2006, relevant to our indebtedness:

·                  InJanuary 2006, we renewed our unsecured line of credit. The new facilityprovides borrowing capacity up to $1.0 billion and, subject to certainconditions, may be increased to $1.3 billion. Under the new facility, whichreplaced the previous unsecured line of credit agreement, the interest rate wasreduced, the borrowing capacity was increased by $500.0 million and thematurity date was extended to January 25, 2010.

·                  Tofinance the acquisition of the Mark Winkler Portfolio (see Note 3), we obtaineda $700.0 million term loan with an interest rate of LIBOR +.525%, secured bycertain of the acquired real estate properties. This term loan was paid in fullin August 2006 with proceeds from the issuance of senior unsecured debt asdescribed below.

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·                  In conjunctionwith our real estate acquisitions (see Note 3), we assumed $221.6 million ofmortgage loans, of which we received $10.5 million of proceeds directly. Theassumed mortgage loans bear interest at rates ranging between 5.55% and 8.50%and have maturities ranging between 2011 and 2026. An adjustment of $6.3million was recorded to increase the assumed loans to fair value.

·                  In March 2006,we issued $150.0 million of 5.50% senior unsecured notes due in 2016. A portionof the proceeds were used to retire our $100.0 million 6.72% unsecured notes.The remaining cash proceeds were used to fund costs associated with theissuance of the debt and to repay amounts outstanding under our line of credit.

·                  In August 2006,we issued $450.0 million of 5.95% senior unsecured notes due in 2017 and $250.0million of 5.625% senior unsecured notes due in 2011. The proceeds from theseissuances were used to pay off the $700.0 million secured term loan that wasobtained to finance the purchase of the Mark Winkler Portfolio (see Note 3).

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

We provideproperty management, leasing, construction and other tenant related services tounconsolidated companies in which we have equity interests. For the nine monthsended September 30, 2006 and 2005, we received management fees of $3.3 millionand $3.6 million, leasing fees of $2.2 million and $3.4 million andconstruction and development fees of $16.8 million and $1.6 million,respectively, from these companies. These fees approximate market rates and weeliminated our ownership percentage of these fees in the condensed consolidatedfinancial statements.

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

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

The following table reconciles the components of basicand diluted net income per common unit for the three and nine months endedSeptember 30, 2006 and 2005, respectively (in thousands):

|                                                                              | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|------------------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                                   | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                                                                   | ** ** | **2006**                         | ** ** | **2005**                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| Basic net income  available for common unitholders                           | ** ** | **$**                            | **67,970** |                            | $          | 233,689 | ** ** | **$** | **104,746** |   | $ | 306,199 |   |
| Joint venture  partner convertible ownership net income (1)                  | ** ** | **378**                          |       | 498                             |       | — | ** ** | **—** | ** ** |
|                                                                         | ** ** | ** **                       |       |                            |       |   | ** ** | ** ** | ** ** |
| Diluted net  income available for common unitholders                         | ** ** | **$**                            | **68,348** |                            | $          | 234,187 | ** ** | **$** | **104,746** |   | $ | 306,199 |   |
|                                                                         | ** ** | ** **                       |       |                            | ** ** | ** ** |   |   |   |
| Weighted average  number of common units outstanding                         | ** ** | **148,328**                      |       | 156,110                         | ** ** | **148,259** |   | 156,678 |   |
|                                                                         | ** ** | ** **                       |       |                            | ** ** | ** ** |   |   |   |
| Joint venture  partner convertible ownership common unit equivalents (1)     | ** ** | **1,357**                        |       | 1,525                           |       | — |   | — |   |
| Dilutive units  for stock-based compensation plans                           | ** ** | **1,262**                        |       | 833                             | ** ** | **1,213** |   | 775 |   |
| Weighted average number  of common units and dilutive potential common units | ** ** | **150,947**                      |       | 158,468                         | ** ** | **149,472** |   | 157,453 |   |

 

(1)             Oneof our joint venture partners in one of our unconsolidated companies has theoption to convert a portion of its ownership to common units. The effect ofthis option on earnings per unit is dilutive for the third quarters 2005 and2006; therefore, conversion to common units is included in weighted averagedilutive potential common units for both quarters.

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**7.****                                      SegmentReporting**

We are engaged in three reportable operating segments,the first two of which consist of the ownership and rental of office andindustrial real estate investments. The third segment consists of ourbuild-to-suit for sale operations and providing various real estate servicessuch as property management, maintenance, leasing, development and constructionmanagement to third party property owners and joint ventures (“ServiceOperations”). Our reportable segments offer different products and services andare managed separately because each segment requires different operatingstrategies and management expertise.

Non-segment revenue consists mainly of equity inearnings of unconsolidated companies. Segment FFO information (FFO is definedbelow) 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 operating results basedupon an industry performance measure referred to as Funds From Operations (“FFO”),which management believes is a useful indicator of our operating performance. FFO is used by industry analysts and investors asa supplemental operating performance measure of an equity real estateinvestment trust (“REIT”) like our General Partner. FFO is calculated inaccordance with the definition that was adopted by the Board of Governors ofthe National Association of Real Estate Investment Trusts (“NAREIT”). NAREITcreated FFO as a supplemental measure of REIT operating performance thatexcludes historical cost depreciation, among other items, from net income determinedin accordance with GAAP. FFO is a non-GAAP financial measure developed byNAREIT to compare the operating performance of REITs. The most comparable GAAPmeasure is net income (loss). FFO should not be considered as a substitute fornet income or any other measures derived in accordance with GAAP and may not becomparable to other similarly titled measures of other companies.

Historical cost accounting for real estate assets inaccordance with GAAP implicitly assumes that the value of real estate assetsdiminishes predictably over time. Since real estate values instead havehistorically risen or fallen with market conditions, many industry investorsand analysts have considered presentation of operating results for real estatecompanies that use historical cost accounting to be insufficient by themselves.FFO, as defined by NAREIT, represents GAAP net income (loss), excludingextraordinary items as defined under GAAP and gains or losses from sales ofpreviously depreciated operating real estate assets, plus certain non-cashitems such as real estate asset depreciation and amortization, and aftersimilar adjustments for unconsolidated partnerships and joint ventures.

Management believes that the use of FFO, combined withthe required primary GAAP presentations, improves the understanding ofoperating results of REITs among the investing public and makes comparisons ofREIT operating results more meaningful. Management considers FFO to be a usefulmeasure for reviewing comparative operating and financial performance (althoughFFO should be reviewed in conjunction with net income which remains the primarymeasure of performance) because by excluding gains or losses related to salesof previously depreciated operating real estate assets and excluding realestate asset depreciation and amortization, FFO provides a useful comparison ofthe operating performance of our real estate between periods or as compared todifferent companies.

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The following table shows (i) the revenues and FFO foreach of the reportable segments and (ii) a reconciliation of net incomeavailable for common unitholders to the calculation of FFO for the three andnine months ended September 30, 2006 and 2005, respectively (in thousands):
| ** **                                                          | ** ** | **Three Months Ended** | ** **  | **Nine months Ended** | ** ** |
|---------------------------------------------------------------------|------------|----------------------------------|-------------|---------------------------------|------------|
| ** **                                                          | ** ** | **September 30,**           | ** **  | **September 30,**          | ** ** |
| ** **                                                          | ** ** | **2006**                         | ** **  | **2005**                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| Revenues                                                            |       |                             |        |                            |       |   |   |   |   |
| Rental  Operations:                                                 |       |                             |        |                            |       |   |   |   |   |
| Office                                                              | ** ** | **$**                            | **158,036** |                            | $          | 125,278 | ** ** | **$** | **440,244** |   | $ | 356,520 |   |
| Industrial                                                          | ** ** | **47,664**                       |        | 42,240                          | ** ** | **149,976** |   | 122,879 |   |
| Service Operations                                                  | ** ** | **22,474**                       |        | 22,584                          | ** ** | **42,198** |   | 68,027 |   |
| Total Segment Revenues                                              | ** ** | **228,174**                      |        | 190,102                         | ** ** | **632,418** |   | 547,426 |   |
| Non-Segment Revenue                                                 | ** ** | **6,040**                        |        | 6,647                           | ** ** | **30,397** |   | 32,168 |   |
| Consolidated Revenue from continuing operations                     | ** ** | **$**                            | **234,214** |                            | $          | ­196,749 | ** ** | **$** | **662,815** |   | $ | 579,594 |   |
| Discontinued Operations                                             | ** ** | **1,797**                        |        | 31,536                          | ** ** | **13,795** |   | 99,352 |   |
| Consolidated Revenue                                                | ** ** | **$**                            | **236,011** |                            | $          | 228,285 | ** ** | **$** | **676,610** |   | $ | 678,946 |   |
|                                                                |       |                             |        |                            |       |   |   |   |   |
| Funds  From Operations                                              |       |                             |        |                            |       |   |   |   |   |
| Rental  Operations:                                                 |       |                             |        |                            |       |   |   |   |   |
| Office                                                              | ** ** | **$**                            | **100,567** |                            | $          | 75,152 | ** ** | **$** | **273,731** |   | $ | 217,404 |   |
| Industrial                                                          | ** ** | **38,127**                       |        | 32,001                          | ** ** | **115,436** |   | 91,625 |   |
| Services Operations                                                 | ** ** | **10,551**                       |        | 12,559                          | ** ** | **18,477** |   | 37,443 |   |
| Total Segment FFO                                                   | ** ** | **149,245**                      |        | 119,712                         | ** ** | **407,644** |   | 346,472 |   |
| Non-Segment FFO:                                                    |       |                             |        |                            |       |   |   |   |   |
| Interest expense                                                    | ** ** | **(50,173**                      | **)**       | (30,523                         | )          | **(133,288** | **)** | (86,123 | ) |
| Interest and other income, net                                      | ** ** | **4,381**                        |        | 1,517                           | ** ** | **8,313** |   | 3,676 |   |
| General and  administrative expense                                 | ** ** | **(6,804**                       | **)**       | (5,792                          | )          | **(27,715** | **)** | (21,295 | ) |
| Gain on land  sales, net of impairment                              | ** ** | **2,982**                        |        | 2,371                           | ** ** | **5,427** |   | 5,780 |   |
| Impairment  adjustments on depreciable property                     | ** ** | **(235**                         | **)**       | (79                             | )          | **(266** | **)** | (3,643 | ) |
| Other income on  non-segment FFO                                    | ** ** | **396**                          |        | 683                             | ** ** | **3,754** |   | 2,216 |   |
| Minority  interest in earnings of subsidiaries                      | ** ** | **(126**                         | **)**       | (1,396                          | )          | **(301** | **)** | (1,462 | ) |
|                                                                | ** ** | ** **                       |        |                            | ** ** | ** ** |   |   |   |
| Joint venture FFO                                                   | ** ** | **8,341**                        |        | 9,146                           | ** ** | **27,060** |   | 28,671 |   |
| Dividends on  preferred units                                       | ** ** | **(15,226**                      | **)**       | (11,619                         | )          | **(41,193** | **)** | (34,859 | ) |
| Adjustment for  redemption of preferred units                       |       | —                           |        | —                          | ** ** | **(2,633** | **)** | — |   |
| Discontinued  operations                                            | ** ** | **4,863**                        |        | 11,458                          | ** ** | **12,096** |   | 42,061 |   |
| Consolidated basic FFO                                              | ** ** | **$**                            | **97,644**  |                            | $          | 95,478 | ** ** | **$** | **258,898** |   | $ | 281,494 |   |
| Depreciation and  amortization on continuing operations             | ** ** | **(63,892**                      | **)**       | (59,494                         | )          | **(187,099** | **)** | (164,239 | ) |
| Depreciation and  amortization on discontinued operations           | ** ** | **(471**                         | **)**       | (8,129                          | )          | **(3,013** | **)** | (30,734 | ) |
| Company’s share  of joint venture adjustments                  | ** ** | **(4,568**                       | **)**       | (5,003                          | )          | **(13,695** | **)** | (14,811 | ) |
| Earnings from depreciated property sales on discontinued operations | ** ** | **39,537**                       |        | 210,837                         | ** ** | **41,573** |   | 223,235 |   |
| Earnings from depreciated property sales-share of joint venture     | ** ** | **(280**                         | **)**       | —                          | ** ** | **8,082** |   | 11,174 |   |
|                                                                | ** ** | ** **                       |        |                            | ** ** | ** ** |   |   |   |
| Net  income available for common unitholders                        | ** ** | **$**                            | **67,970**  |                            | $          | 233,689 | ** ** | **$** | **104,746** |   | $ | 306,119 |   |

 

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The assets for each of the reportable segments as ofSeptember 30, 2006 and December 31, 2005, respectively, are as follows (inthousands):

|                      | ** ** | **September 30,** | ** **    | **December 31,** | ** ** |
|----------------------|------------|------------------------|---------------|-----------------------|------------|
| ** **           | ** ** | **2006**               | ** **    | **2005**              | ** ** |
| Assets               |       |                   |          |                  |       |
| Rental  Operations:  |       |                   |          |                  |       |
| Office               | ** ** | **$**                  | **4,401,853** |                  | $          | 3,396,985 |   |
| Industrial           | ** ** | **1,939,724**          |          | 1,577,631             |       |
| Service Operations   | ** ** | **216,546**            |          | 177,463               |       |
| Total Segment Assets | ** ** | **6,558,123**          |          | 5,152,079             |       |
| Non-Segment Assets   | ** ** | **721,877**            |          | 494,608               |       |
| Consolidated  Assets | ** ** | **$**                  | **7,280,000** |                  | $          | 5,646,687 |   |

 

In addition to revenues and FFO, we also review ourrecurring capital expenditures in measuring the performance of our individualRental Operations segments. These recurring capital expenditures consist oftenant improvements, leasing commissions and building improvements. We reviewthese expenditures to determine the costs associated with re-leasing space andmaintaining the condition of our properties. Our recurring capital expendituresby segment are summarized as follows for the nine months ended September 30,2006 and 2005, respectively (in thousands):

|                                 | ** ** | **2006**  | ** ** | **2005** | ** ** |
|---------------------------------|------------|-----------|------------|----------|------------|
| Recurring Capital  Expenditures |       |      |       |     |       |
| Office                          | ** ** | **$**     | **42,035** |     | $          | 44,838 |   |
| Industrial                      | ** ** | **9,672** |       | 37,794   |       |
| Non-segment                     | ** ** | **347**   |       | 28       |       |
| Total                           | ** ** | **$**     | **52,054** |     | $          | 82,660 |   |

 

**8.****                                      DiscontinuedOperations**

We classified the operations of 257 buildings asdiscontinued operations in the condensed consolidated statements of operationsfor the three and nine months ended September 30, 2006 and 2005. These 257buildings consist of 239 industrial properties, 17 office properties and oneretail property. Of these properties, 18 were sold during the first nine monthsof 2006, 234 were sold during 2005 and five operating properties wereclassified as held-for-sale at September 30, 2006.

The following table illustrates the operations of the257 buildings reflected in discontinued operations for the three and ninemonths ended September 30, 2006 and 2005, respectively (in thousands):

|                                                          | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|----------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                               | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                                               | ** ** | **2006**                         | ** ** | **2005**                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| Statement of  Operations:                                |       |                             |       |                            |       |   |   |   |   |
| Revenues                                                 | ** ** | **$**                            | **1,797**  |                            | $          | 31,536 | ** ** | **$** | **13,795** |   | $ | 99,352 |   |
| Expenses:                                                |       |                             |       |                            |       |   |   |   |   |
| Operating                                                | ** ** | **935**                          |       | 10,162                          | ** ** | **3,779** |   | 31,019 |   |
| Interest                                                 | ** ** | **428**                          |       | 9,851                           | ** ** | **2,327** |   | 26,142 |   |
| Depreciation and  Amortization                           | ** ** | **471**                          |       | 8,129                           | ** ** | **3,013** |   | 30,734 |   |
| General and  Administrative                              | ** ** | **2**                            |       | 65                              | ** ** | **24** |   | 130 |   |
| Income from  discontinued operations before gain on sale | ** ** | **(39**                          | **)**      | 3,329                           | ** ** | **4,652** |   | 11,327 |   |
|                                                     | ** ** | ** **                       |       |                            | ** ** | ** ** |   |   |   |
| Gain on sale of  property, net of impairment adjustments | ** ** | **43,735**                       |       | 210,758                         | ** ** | **45,739** |   | 219,592 |   |
|                                                     | ** ** | ** **                       |       |                            | ** ** | ** ** |   |   |   |
| Income from  discontinued operations                     | ** ** | **$**                            | **43,696** |                            | $          | 214,087 | ** ** | **$** | **50,391** |   | $ | 230,919 |   |

 

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At September 30, 2006, we classified as held-for-sale,and included in discontinued operations, four industrial properties and oneoffice property comprising approximately 852,000 square feet. Additionally, wehave classified the 32 in-service properties from the Mark Winkler Portfolio(see Note 3), as well as six additional properties, as held-for-sale. However,the results of these 38 properties are included in continuing operations, asrequired by SFAS 144, either based on our present intention to sell themajority of our ownership interest in the properties to entities in which wewill retain a minority equity ownership interest or because the results ofoperations for the properties are immaterial. The following table illustratesthe aggregate balance sheet of the aforementioned five properties included indiscontinued operations, as well as the 38 held-for-sale properties whoseresults are included in continuing operations at September 30, 2006 (inthousands):

|                               | ** ** | **Held-for-Sale  and Included in  Discontinued  Operations** | ** ** | **Held-for-Sale  and Included in  Continuing  Operations** | ** ** | **Total** | ** ** |
|-------------------------------|------------|------------------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|-----------|------------|
| Real estate  investments, net |       | $                                                                      | 29,662     |                                                                 | $          | 698,734   |       | $ | 728,396 |   |
| Other assets                  |       | 1,112                                                                  |       | 109,048                                                              |       | 110,160   |       |
| Assets  held-for-sale         |       | 30,774                                                                 |       | 807,782                                                              |       | 838,556   |       |
|                          |       |                                                                   |       |                                                                 |       |      |       |
| Accrued expenses              |       | $                                                                      | 779        |                                                                 | $          | 3,856     |       | $ | 4,635 |   |
| Other liabilities             |       | 179                                                                    |       | 5,885                                                                |       | 6,064     |       |
| Secured debt                  |       | —                                                                 |       | 144,423                                                              |       | 144,423   |       |
| Liabilities  held-for-sale    |       | $                                                                      | 958        |                                                                 | $          | 154,164   |       | $ | 155,122 |   |

 

We allocate interest expense to discontinuedoperations as permitted under Emerging Issues Task Force (“EITF”) Issue No.87-24, A*llocation of Interest toDiscontinued Operations*, and have included such interest expense incomputing net income from discontinued operations. Interest expense allocableto discontinued operations includes interest on any debt on secured propertiesincluded in discontinued operations and an allocable share of our consolidatedunsecured interest expense for unencumbered properties. The allocation ofunsecured interest expense to discontinued operations was based upon the grossbook value of the discontinued operations unencumbered population as it relatedto our entire unencumbered population.

For the ninemonths ended September 30, 2006 and 2005, we recorded impairment adjustments of$576,000 and $3.8 million, respectively. The $576,000 impairment adjustmentrecorded in the nine months ended September 30, 2006 reflects the write-down ofthe carrying value of one industrial building, one office building and one landparcel sold in the nine months ended September 30, 2006, in addition to oneindustrial building that is held for sale as of September 30, 2006. The $3.8million impairment adjustment recorded in the nine months ended September 30,2005 reflects the write-down of the carrying value of three office buildings,three industrial buildings and four land parcels sold at various times in 2005and 2006.

**9.****                                      Partners’Equity**

The General Partner periodically accesses the publicequity markets to fund the development and acquisition of additional rentalproperties or to pay down debt. The proceeds of these offerings are contributedto us in exchange for additional interests in the Partnership. In January 2006,the General Partner issued $184.0 million of 6.95% Series M CumulativeRedeemable Preferred Shares, from which a portion of the net proceeds were usedto redeem its $75.0 million of outstanding 8.45% Series I Cumulative RedeemablePreferred Shares. Offering costs of $2.6 million were charged against netincome available to common unitholders in conjunction with the redemption ofthe Series I Cumulative Redeemable Preferred Shares. In June 2006, the GeneralPartner issued $110.0 million of 7.25% Series N Cumulative Redeemable PreferredShares.

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The following series of preferred units wereoutstanding as of September 30, 2006 (in thousands, except percentage data):

|                     | ** ** | **Units**       | ** ** | **Dividend** | ** ** | **Redemption**               | ** ** | **Liquidation** | ** ** |
|---------------------|------------|-----------------|------------|--------------|------------|------------------------------|------------|-----------------|------------|
| **Description**     | ** ** | **Outstanding** | ** ** | **Rate**     | ** ** | **Date**                     | ** ** | **Preference**  | ** ** |
|                |       |            |       |         |       |                         |       |            |       |
| Series B  Preferred |       | 265             |       | 7.990%       |       | September 30, 2007 |       | $               | 132,250    |   |
| Series J  Preferred |       | 400             |       | 6.625%       |       | August 29, 2008    |       | 100,000         |       |
| Series K  Preferred |       | 600             |       | 6.500%       |       | February 13, 2009  |       | 150,000         |       |
| Series L  Preferred |       | 800             |       | 6.600%       |       | November 30, 2009  |       | 200,000         |       |
| Series M  Preferred |       | 736             |       | 6.950%       |       | January 31, 2011   |       | 184,000         |       |
| Series N Preferred  |       | 440             |       | 7.250%       |       | June 30, 2011      |       | 110,000         |       |
|                     |            |                 |            |              |            |                              |            |                 |            |  |

 

The dividend rate on the Series B preferred unitsincreases to 9.99% after September 12, 2012.

All series ofpreferred units require cumulative distributions and have no stated maturitydate (although we may redeem all such preferred units on or following theiroptional redemption dates at our option, in whole or in part).

**10.****                               FinancialInstruments**

We are exposed to capital market risk, such as changesin interest rates. In order to manage the volatility relating to interest raterisk, we may enter into interest rate hedging arrangements from time to time.We do not utilize derivative financial instruments for trading or speculativepurposes.

In March 2005, we entered into $300.0 million of cashflow hedges through forward-starting interest rate swaps to hedge interestrates on $300.0 million of estimated debt offerings in 2006. The swapsqualified for hedge accounting under SFAS 133 with any changes in fair valuerecorded in Accumulated Other Comprehensive Income (“OCI”). The market value ofthese interest rate swaps is dependent upon existing market interest rates,which change over time. In March 2006, we issued $150.0 million of 5.5% seniorunsecured notes due 2016 (see Note 4) and terminated a corresponding amount ofthe cash flow hedges designated for this transaction. The settlement amountpaid of approximately $1.0 million will be recognized to earnings through interestexpense ratably over the life of the senior notes and the ineffective portionof the hedge was insignificant. In August 2006, we issued $450.0 million of5.95% senior unsecured notes due 2017 and $250.0 million of 5.69% seniorunsecured notes due 2011 (see Note 4) and terminated the remaining $150.0million of cash flow hedges. The settlement amount received of approximately$1.6 million will be recognized to earnings through interest expense ratablyover the lives of the senior unsecured notes. The ineffective portion of thehedge was insignificant.

In August 2005, we entered into $300.0 million of cashflow hedges through forward-starting interest rate swaps to hedge interestrates on $300.0 million of estimated debt offerings in 2007. The swaps qualifyfor hedge accounting under SFAS 133 with any changes in fair value recorded inOCI. At September 30, 2006, the fair value of these swaps was approximately$9.6 million in an asset position as the effective rates of the swaps werelower than current interest rates at September 30, 2006.

In June 2006, we entered into a $250.0 million cashflow hedge through an interest rate swap to fix the rate on $250.0 million ofpreviously floating rate debt which matures in December 2006. The swapqualifies for hedge accounting under SFAS 133 with any changes in fair valuerecorded in OCI. At September 30, 2006, the fair value of this swap wasapproximately $78,000 in a liability position and there was no ineffectiveness.

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The effectivenessof our hedges will be evaluated throughout their lives using the hypotheticalderivative method under which the change in fair value of the actual swapdesignated as the hedging instrument is compared to the change in fair value ofa hypothetical swap.

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

Under the limited partnership agreement of thePartnership, we are required to issue one Common Unit to the General Partnerfor each share of common stock issued by the General Partner. Accordingly, theissuance of common shares by the General Partner under its stock basedcompensation plans requires the issuance of a corresponding number of CommonUnits by the Partnership to the General Partner.

The General Partner’s stock based employee andnon-employee compensation plans are described more fully below. The GeneralPartner is authorized to issue up to 11,320,552 shares of its common stockunder these compensation plans. New shares of the General Partner’s commonstock are issued to employees upon exercise of share-based awards that aresettled in the General Partner’s stock.

For all stock-based awards issued by the GeneralPartner prior to 2002, we applied the recognition and measurement provisions ofAccounting Principles Board Opinion No. 25, *Accountingfor Stock Issued to Employees* (“APB 25”), and relatedinterpretations, in accounting for our stock-based compensation.

Accordingly, for stock options granted prior to 2002,no compensation expense is reflected in net income as all options granted hadan exercise price equal to the market value of the General Partner’s underlyingcommon shares on the date of the grant.

Effective January 1, 2002, we prospectively adoptedthe fair value recognition provisions of Statement of Financial AccountingStandards No. 123, *Accounting forStock-Based Compensation* (“SFAS 123”), and applied SFAS 123 to allawards granted after January 1, 2002.

Effective January 1, 2006, we adopted Statement ofFinancial Accounting Standards No. 123(R), *ShareBased Payment*, (“SFAS 123(R)”), using the modified prospectiveapplication method. Under this method, as of January 1, 2006, we applied theprovisions of SFAS 123(R) to new and modified awards, as well as to thenonvested portion of awards granted before the required effective date andoutstanding at such time.

Some of the General Partner’s stock-based compensationawards, including both stock options and restricted stock units, have aretirement eligible provision, whereby awards granted to an employee who hasreached certain age and service criteria, automatically vest upon such employee’sretirement. We have previously accounted for this type of arrangement byrecognizing compensation cost (for both pro forma and expense recognitionpurposes) over the full stated vesting period of the award and, if the employeeretired before the end of the vesting period, recognizing any remainingunrecognized compensation cost at the date of retirement. Upon adoption of SFAS123(R), new awards granted to retirement eligible employees are subject toaccelerated vesting over a period when the employee’s retention of the award isno longer contingent on providing additional service. Had we appliedaccelerated vesting to all existing unvested awards issued to retirementeligible employees prior to January 1, 2006, we would have recognized anadditional $969,000 in stock-based employee compensation expense for the ninemonths ended September 30, 2006.

An additional requirement of SFAS 123(R) is thatestimated forfeitures be considered in determining compensation expense. Aspreviously permitted, we recorded forfeitures when they occurred. The effect ofthis accounting change on existing nonvested stock compensation wasinsignificant.

As a result of adopting SFAS 123(R) on January 1,2006, our net income available for common unitholders for the nine-months endedSeptember 30, 2006, was $437,000 higher than if we had continued to account for

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share-based compensation under SFAS 123 and APB 25.There was no effect on basic and diluted earnings per unit from continuingoperations as a result of the adoption of SFAS 123(R).

Cash flows resulting from tax deductions in excess ofrecognized compensation cost from the exercise of stock options (excess taxbenefits) were not significant in either period presented.

The following table illustrates the effect on netincome and earnings per unit if we had applied the fair value recognitionprovisions of SFAS 123 to all stock-based employee compensation for the threeand nine-month periods ended September 30, 2005 (in thousands, except per unitdata):

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

 

**Fixed Stock Option Plans**

The General Partner had options outstanding under sixfixed option plans as of September 30, 2006. Additional grants may be madeunder one of those plans. Stock option awards granted under the General Partner’sstock based employee and non-employee compensation plans generally vest overfive years at 20% per year and have contractual lives of ten years. Theexercise price for stock option grants is set at the fair value of the GeneralPartner’s common stock on the day of grant.

The following table summarizes transactions under theGeneral Partner’s stock option plans for the nine months ended September 30,2006:

|                                           | ** ** | ** ** | ** ** | **Weighted** | ** ** | **Weighted**          | ** ** | **Aggregate**          | ** ** |
|-------------------------------------------|------------|------------|------------|--------------|------------|-----------------------|------------|------------------------|------------|
| ** **                                | ** ** | ** ** | ** ** | **Average**  | ** ** | **Average**           | ** ** | **Intrinsic**          | ** ** |
| ** **                                | ** ** | ** ** | ** ** | **Exercise** | ** ** | **Contractual**       | ** ** | **Value (1)**     | ** ** |
| ** **                                | ** ** | **Shares** | ** ** | **Price**    | ** ** | **Term (years)** | ** ** | **(in millions)** | ** ** |
| Outstanding, beginning  of year           |       | 3,828,157  |       | $            | 25.50      |                  |       |                   |       |   |
| Granted                                   |       | 857,667    |       | $            | 34.16      |                  |       |                   |       |   |
| Exercised                                 |       | (401,764   | )          | $            | 22.03      |                  |       |                   |       |   |
| Forfeited                                 |       | (80,259    | )          | $            | 29.66      |                  |       |                   |       |   |
| Outstanding at  September 30, 2006        |       | 4,203,801  |       | $            | 27.52      |                  | 6.36       |                   | $          | 41.3 |   |
| Options exercisable at September 30, 2006 |       | 2,297,473  |       | $            | 24.07      |                  | 4.68       |                   | $          | 30.5 |   |

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(1) The aggregate intrinsic value represents the totalpre-tax intrinsic value, based on the closing stock price of $37.35 atSeptember 30, 2006, which would have been received by the option holders hadall option holders exercised their options as of that date. This amount changescontinuously based on the fair value of the stock.

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Options granted in the nine-month periods endedSeptember 30, 2006 and 2005, respectively, had a weighted average fair value of$3.60 and $3.04. As of September 30, 2006, there was $4.1 million of totalunrecognized compensation expense related to stock options granted under theplans, which is expected to be recognized over a weighted average remainingperiod of 3.23 years. The total intrinsic value of options exercised during thenine-month periods ended September 30, 2006 and 2005, respectively, was $5.8million and $2.1 million. Compensation expense recognized for fixed stockoption plans was $1.4 million and $837,000 in the first nine months of 2006 and2005, respectively. The fair value of options vested during the nine monthperiods ending September 30, 2006 and 2005 was $1.3 million and $1.1 million.

The fair values of the options for the nine monthsended September 30, 2006 and 2005, were determined using the Black-Scholesoption-pricing model with the following assumptions:

|                         | ** ** | **2006**     | ** ** | **2005**     | ** ** |
|-------------------------|------------|--------------|------------|--------------|------------|
| Dividend yield          |       | 6.25         | %          | 6.25         | %          |
| Volatility              |       | 20.0         | %          | 20.0         | %          |
| Risk-free interest rate |       | 4.5          | %          | 3.8          | %          |
| Expected life           |       | 6 years |       | 6 years |       |

 

The risk free interest rate assumption is based uponobserved interest rates appropriate for the term of the General Partner’semployee stock options. The dividend yield assumption is based on the historyof and our present expectation of future dividend payouts. The computation ofexpected volatility for the valuation of stock options granted in the quartersended September 30, 2006 and 2005 is based on historic volatility over a periodof time equal to the expected term. The expected life of employee stock optionsrepresents the weighted average period the stock options are expected to remainoutstanding.

**Performance Share Plans**

Performance shares were granted under the 2000Performance Share Plan, with each performance share economically equivalent toone share of the General Partner’s common stock.

The performance shares vest over a five-year periodwith the vesting percentage for a year dependent upon our attainment of certainpredefined levels of earnings growth for such year. The performance shares havea contractual life of five years.

In April 2006, the 2000 Performance Share Plan wasamended to provide that awards would be settled in shares of the GeneralPartner’s common stock rather than cash. The fair value of existing awards wasfixed at the date of the amendment and the fair value of subsequent awards willbe fixed at the fair value of the General Partner’s common stock at the date ofgrant. Under the General Partner’s 2005 Long-Term Incentive Plan, additionalperformance shares may be granted on such terms and conditions as may beselected by the General Partner’s compensation committee, including whetherpayment will be made in cash, shares of the General Partner’s common stock, ourUnits or other property.

The following table summarizes transactions for theGeneral Partner’s performance shares for the first nine months of 2006:

| 2000 Performance Share Plan                           | ** ** | **Vested** | ** ** | **Unvested** | ** ** | **Total** | ** ** |
|----------------------------------------------------------------------|------------|------------|------------|--------------|------------|-----------|------------|
|                                                                 |       |       |       |         |       |      |       |
| Performance Share Plan  units at December 31, 2005                   |       | 84,466     |       | 99,001       |       | 183,467   |       |
| Granted                                                              |       | —     |       | —       |       | —    |       |
| Vested                                                               |       | 25,487     |       | (25,487      | )          | —    |       |
| Forfeited                                                            |       | —     |       | (3,746       | )          | (3,746    | )          |
| Dividend reinvestments                                               |       | 6,599      |       | —       |       | 6,599     |       |
| Disbursements                                                        |       | (13,744    | )          | —       |       | (13,744   | )          |
| Total Performance Share Plan units outstanding at September 30, 2006 |       | 102,808    |       | 69,768       |       | 172,576   |       |

 

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Compensation expense recognized for Performance SharePlan units was $787,000 and $860,000 for the nine-month periods ended September30, 2006 and 2005, respectively. As of September 30, 2006, there was $201,000of total unrecognized compensation expense related to nonvested performanceshares granted under the Plan, which will be recognized based on the GeneralPartner’s actual performance. The total vest date fair value of the GeneralPartner’s shares vesting during the nine-month period ended September 30, 2006was $918,000.

**Shareholder Value Plan Awards**

The General Partner’s 2005 Shareholder Value Plan (“2005SVP Plan”), a sub-plan of its 2005 Long-Term Incentive Plan, was approved byits shareholders in April 2005. Upon vesting, payout of the 2005 ShareholderValue Plan awards will be made in shares of the General Partner’s common stock.Under the 2005 SVP Plan, shareholder value awards fully vest three years afterthe date of grant. The number of common shares to be issued may range from0%-300% of the target shares awarded and will be based upon the General Partner’stotal shareholder return for such three-year period as compared to the S &P 500 Index and the NAREIT Real Estate 50 Index. Each index is weighted at 50%.

Awards made under the 2005 SVP Plan are measured atfair value, which is determined using a Monte Carlo simulation model that wasdeveloped to accommodate the unique features of the 2005 SVP Plan. Compensationcost recognized under the 2005 SVP Plan was $531,000 and $395,000 for thenine-month periods ended September 30, 2006 and 2005, respectively.

The following table summarizes transactions for theGeneral Partner’s awards under the 2005 SVP Plan for the first nine months of2006:

|                                                            | ** ** | ** **         | ** ** | **Weighted**        | ** ** |
|------------------------------------------------------------|------------|--------------------|------------|---------------------|------------|
| ** **                                                 | ** ** | **Number of** | ** ** | **Average**         | ** ** |
| ** **                                                 | ** ** | **SVP**            | ** ** | **Grant Date** | ** ** |
| **2005 Shareholder Value Plan Awards** | ** ** | **Units**          | ** ** | **Fair Value** | ** ** |
| SVP awards at December  31, 2005                           |       | 75,678             |       | $                   | 30.64      |   |
| Granted                                                    |       | 90,356             |       | $                   | 34.13      |   |
| Forfeited                                                  |       | (3,829             | )          | $                   | 31.23      |   |
| SVP awards at September 30, 2006                           |       | 162,205            |       | $                   | 32.57      |   |

 

As of September 30, 2006, there was $2.1 million oftotal unrecognized compensation expense related to nonvested SVP Plan awardsgranted under the 2005 SVP Plan, which will be recognized over a weightedaverage period of two years. All 2005 SVP Plan awards have a contractual lifeof three years.

**Restricted Stock Units**

Under the General Partner’s 2005 Long-Term IncentivePlan and the General Partner’s 2005 Non-Employee Directors Compensation Planapproved by its shareholders in April 2005, restricted stock units (“RSUs”) maybe granted to non-employee directors, executive officers and selectedmanagement employees. An RSU is economically equivalent to one share of theGeneral Partner’s common stock. RSUs granted prior to January 1, 2006 vest 20%per year over five years, have contractual lives of five years and are payablein shares of the General Parnter’s common stock. RSUs granted to existingnon-employee directors subsequent to January 1, 2006 vest 100% over one year,and have contractual lives of one year. We recognize the value of the grantedRSUs over this vesting period as expense.

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The following table summarizes transactions for theGeneral Partner’s RSUs, excluding dividend equivalents, for the first ninemonths of 2006:

|                                      | ** ** | ** **         | ** ** | **Weighted**        | ** ** |
|--------------------------------------|------------|--------------------|------------|---------------------|------------|
| ** **                           | ** ** | ** **         | ** ** | **Average**         | ** ** |
| ** **                           | ** ** | **Number of** | ** ** | **Grant Date** | ** ** |
| **Restricted Stock Units** | ** ** | **RSUs**           | ** ** | **Fair Value** | ** ** |
| RSUs at December 31,  2005           |       | 172,095            |       | $                   | 32.19      |   |
| Granted                              |       | 108,118            |       | $                   | 34.16      |   |
| Vested                               |       | (16,548            | )          | $                   | 30.76      |   |
| Forfeited                            |       | (7,563             | )          | $                   | 32.62      |   |
| RSUs at September 30, 2006           |       | 256,102            |       | $                   | 33.65      |   |

 

Compensation cost recognized for RSUs totaled $1.7million and $245,000 for the nine-month periods ended September 30, 2006 and2005, respectively.

As of September 30, 2006, there was $6.0 million oftotal unrecognized compensation expense related to nonvested RSUs granted underthe Plan, which is expected to be recognized over a weighted average period of4 years.

In addition, allRSUs earn dividend equivalents that are deemed to be reinvested in additionalRSUs. Dividend equivalents vest immediately and will be paid in shares of theGeneral Partner’s common stock when the corresponding portion of the originalRSU award vests or upon termination of the participant. Dividend equivalents of10,732 RSUs were earned in the first nine months of 2006, and 14,814 dividendequivalents were outstanding as of September 30, 2006. A charge to retained earningsof $706,000 was recorded for the value of these dividend equivalents during thefirst nine months of 2006.

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

In June 2006, the FASB issued Interpretation No. 48, *Accounting for Uncertainty in Income Taxes*,*an Interpretation of FASB Statement No. 109*(“FIN48”). FIN 48 clarifies the accounting for uncertainty in income taxesrecognized in a company’s financial statements and prescribes a recognitionthreshold and measurement attribute for the financial statement recognition andmeasurement of a tax position taken or expected to be taken in a tax return.The Interpretation also provides guidance on description, classification,interest and penalties, accounting in interim periods, disclosure andtransition. FIN 48 becomes effective on January 1, 2007. We are currentlyevaluating the effect that the adoption of FIN 48 will have on our financialstatements.

In September 2006, the Securities Exchange Commission(“SEC”) issued Staff Accounting Bulletin No. 108, *Considering the Effects of Prior Year Misstatements when QualifyingMisstatements in Current Year Financial Statements*(“SAB 108). SAB108 provides guidance regarding the process of qualifying financial statementmisstatements. We will adopt SAB 108 in the fourth quarter of 2006 and do notbelieve the adoption of SAB 108 will have a material effect on our financialstatements.

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**13.****                               SubsequentEvents**

*Declaration of Distributions*

The General Partner’s Board of Directors declared thefollowing distributions at its October 25, 2006, regularly scheduled Boardmeeting:

|                                   | ** ** | **Quarterly**   | ** ** | ** **           | ** **                  | ** **            | ** **                  |
|-----------------------------------|------------|-----------------|------------|----------------------|-----------------------------|-----------------------|-----------------------------|
| **Class**                         | ** ** | **Amount/Unit** | ** ** | **Record Date** | ** **                  | **Payment Date** | ** **                  |
| Common                            |       | $               | 0.4750     |                 | November 14, 2006 |                  | November 30, 2006 |   |
| Preferred (per  depositary unit): |       |            |       |                 |                        |                  |                        |
| Series B                          |       | $               | 0.998750   |                 | December 15, 2006 |                  | December 29, 2006 |   |
| Series J                          |       | $               | 0.414063   |                 | November 16, 2006 |                  | November 30, 2006 |   |
| Series K                          |       | $               | 0.406250   |                 | November 16, 2006 |                  | November 30, 2006 |   |
| Series L                          |       | $               | 0.412500   |                 | November 16, 2006 |                  | November 30, 2006 |   |
| Series M                          |       | $               | 0.434375   |                 | December 15, 2006 |                  | December 29, 2006 |   |
| Series N                          |       | $               | 0.453125   |                 | December 15, 2006 |                  | December 29, 2006 |   |

 

**Item 2. Management’sDiscussion and Analysis of Financial Condition and Results of Operations**

**CautionaryStatement Regarding Forward Looking Statements**

Certain statements in this quarterly report, includingthose related to our future operations, constitute “forward-looking statements”within the meaning of Section 27A of the Securities Act of 1933, as amended(the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934,as amended (the “Exchange Act”). The words “believe,” “estimate,” “expect,” “anticipate,”“intend,” “plan,” “seek,” “may,” and similar expressions or statementsregarding future periods are intended to identify forward-looking statements.These forward-looking statements involve known and unknown risks, uncertaintiesand other important factors that could cause our actual results, performance orachievements, or industry results, to differ materially from any predictions of future results, performance or achievementsthat we express or imply in this Report. Some of the risks, uncertainties andother important factors that may affect future results include, among others:

·                 Changes in general economic and businessconditions, including performance of financial markets;

·                 The General Partner’s continued qualification asa real estate investment trust, or “REIT”;

·                 Heightened competition for tenants and potentialdecreases in property occupancy;

·                 Potential increases in real estate constructioncosts;

·                 Potential changes in the financial markets andinterest rates;

·                 Our continuing ability to favorably raise fundsthrough the issuance of debt and equity in the capital markets;

·                 Our ability to successfully identify, acquire,develop and/or manage properties on terms that are favorable to us;

·                 Our ability to successfully dispose of propertieson terms that are favorable to us;

·                 Inherent risks in the real estate businessincluding tenant defaults, potential liability relating to environmentalmatters and liquidity of real estate investments; and

·                 Other risks and uncertainties described herein,including, without limitation, under the caption “Item 1A. Risk Factors”, andin our other reports and other filings with the Securities and ExchangeCommission (“SEC”).

This list of risks and uncertainties, however, is notintended to be exhaustive. Additional risk factor information is included inour Annual Report on Form 10-K for the fiscal year ended December 31, 2005,which we filed with the SEC on March 14, 2006, and is updated by us from timeto time in Quarterly Reports on Form 10-Q and other future filings.

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Although we presently believe that the plans,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**

Weare a limited partnership formed under the laws of the State of Indiana in1993. We own and operate a diversified portfolio of industrial, office andretail properties and provide real estate services to third-party owners. Weconduct our service operations through Duke Realty Services, LLC, Duke RealtyServices Limited Partnership (“DRSLP”) and Duke Construction LimitedPartnership. The condensed consolidated financial statements include ouraccounts and our majority-owned or controlled subsidiaries. In this QuarterlyReport on Form 10-Q (this “Report”), the terms “we,” “us” and “our” refer tothe Partnership and those entities owned or controlled by the Partnership. Asof September 30, 2006, we:

·                 Owned or controlled 733 industrial, office andretail properties (including properties under development), consisting ofapproximately 112.9 million square feet; and

·                 Owned or controlled more than 6,500 acres of landwith an estimated future development potential of more than 94 million squarefeet of industrial, office and retail properties.

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

·                 Property leasing;

·                 Property management;

·                 Construction;

·                 Development; and

·                 Other tenant-related services

**Acquisitions**

Inthe first quarter of 2006, we completed the majority of the acquisition of aWashington D.C. metropolitan area portfolio of suburban office and lightindustrial properties (the “Mark Winkler Portfolio”). The assets acquired for apurchase price of approximately $865.2 million are comprised of 32 propertieswith approximately 2.9 million square feet for rental, 166 acres of undevelopedland, as well as certain related assets of the Mark Winkler Company, a realestate management company. The acquisition was financed primarily through assumedmortgage loans and new borrowings.

Inthe third quarter of 2006, we completed the purchase of a portfolio ofindustrial real estate properties in Savannah, Georgia with the purpose ofexpanding our industrial real estate holdings near major port facilities. Wecompleted a majority of the purchase in January 2006. The assets acquired for apurchase price of approximately $196.2 million are comprised of 18 buildingswith approximately 5.1 million square feet for rental as well as over 60 acresof undeveloped land. The acquisition was financed in part through assumedmortgage loans.

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**Key Performance Indicators**

Ouroperating results depend primarily upon rental income from our office,industrial and retail properties (“Rental Operations”). The following highlightsthe areas of Rental Operations that we consider critical for future revenuegrowth. (All square footage totals and occupancy percentages reflect bothwholly owned properties and properties in joint ventures).

***Occupancy Analysis:*** Our ability to maintain favorable occupancyrates is a principal driver of our results of operations. The following tablesets forth occupancy information regarding our in-service portfolio of rentalproperties as of September 30, 2006 and 2005, respectively (in thousands, exceptpercentage data):

|                 | ** ** | **Total**            | ** ** | **Percent of**             | ** ** | ** **                | ** ** | ** ** | ** ** |
|-----------------|------------|----------------------|------------|---------------------------------|------------|---------------------------|------------|------------|------------|
| ** **      | ** ** | **Square Feet** | ** ** | **Total Square Feet** | ** ** | **Percent Occupied** | ** ** |
| **Type**        | ** ** | **2006**             | ** ** | **2005**                        | ** ** | **2006**                  | ** ** | **2005**   | ** ** | **2006** | ** ** | **2005** | ** ** |
| **Industrial**  | ** ** | ** **           | ** ** | ** **                      | ** ** | ** **                | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Service Centers | ** ** | **4,724**            |       | 4,724                           | ** ** | **4.4**                   | **%**      | 4.9        | %          | **91.9** | **%** | 90.2 | % |
| Bulk            | ** ** | **69,515**           |       | 61,723                          | ** ** | **64.9**                  | **%**      | 63.5       | %          | **93.2** | **%** | 92.5 | % |
| **Office**      | ** ** | **32,182**           |       | 30,074                          | ** ** | **30.1**                  | **%**      | 31.0       | %          | **90.9** | **%** | 88.7 | % |
| **Retail**      | ** ** | **611**              |       | 611                             | ** ** | **0.6**                   | **%**      | 0.6        | %          | **99.7** | **%** | 95.6 | % |
| Total           | ** ** | **107,032**          |       | 97,132                          | ** ** | **100.0**                 | **%**      | 100.0      | %          | **92.5** | **%** | 91.2 | % |

 

***Lease Expiration and Renewal:*** Our ability to maintain and increase occupancyrates primarily depends upon our continuing ability to re-lease expiring space.******The following tablereflects our in-service portfolio lease expiration schedule by property type asof September 30, 2006. The following table indicates square footage andannualized net effective rents (based on September 2006 rental revenue) underexpiring leases (in thousands, except percentage data):

|                              | ** ** | **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** | ** ** |
| 2006                         |       | 1,967         |       | $                  | 10,974     |                | 2          | %          | 1,582      |               | $          | 6,172      |       | 385                |       | $ | 4,802 |   | — |   | $ | — |   |
| 2007                         |       | 9,972         |       | 61,009             |       | 9                   | %          | 7,550      |       | 29,483             |       | 2,413      |       | 31,403             |       | 9 |   | 123 |   |
| 2008                         |       | 13,686        |       | 84,441             |       | 12                  | %          | 10,121     |       | 40,252             |       | 3,546      |       | 43,854             |       | 19 |   | 335 |   |
| 2009                         |       | 12,636        |       | 82,605             |       | 12                  | %          | 9,031      |       | 35,574             |       | 3,601      |       | 46,953             |       | 4 |   | 78 |   |
| 2010                         |       | 11,426        |       | 92,737             |       | 14                  | %          | 7,102      |       | 31,659             |       | 4,317      |       | 60,973             |       | 7 |   | 105 |   |
| 2011                         |       | 13,015        |       | 81,942             |       | 12                  | %          | 9,608      |       | 36,783             |       | 3,363      |       | 44,340             |       | 44 |   | 819 |   |
| 2012                         |       | 8,416         |       | 57,427             |       | 8                   | %          | 5,696      |       | 20,772             |       | 2,713      |       | 36,322             |       | 7 |   | 333 |   |
| 2013                         |       | 6,385         |       | 59,114             |       | 9                   | %          | 3,325      |       | 14,521             |       | 3,026      |       | 44,014             |       | 34 |   | 579 |   |
| 2014                         |       | 4,990         |       | 28,212             |       | 4                   | %          | 3,859      |       | 13,306             |       | 1,131      |       | 14,906             |       | — |   | — |   |
| 2015                         |       | 6,807         |       | 52,393             |       | 8                   | %          | 4,729      |       | 18,693             |       | 2,078      |       | 33,700             |       | — |   | — |   |
| 2016 and Thereafter          |       | 9,711         |       | 70,978             |       | 10                  | %          | 6,554      |       | 26,341             |       | 2,673      |       | 41,338             |       | 484 |   | 3,299 |   |
| Total  Leased                |       | 99,011        |       | $                  | 681,832    |                | 100        | %          | 69,157     |               | $          | 273,556    |       | 29,246             |       | $ | 402,605 |   | 608 |   | $ | 5,671 |   |
|                         |       |          |       |               |       |                |       |       |       |               |       |       |       |               |       |   |   |   |   |
| Total Portfolio Square  Feet |       | 107,032       |       |               |       |                |       | 74,239     |       |               |       | 32,182     |       |               |       | 611 |   |   |   |
|                         |       |          |       |               |       |                |       |       |       |               |       |       |       |               |       |   |   |   |   |
| Percent Occupied             |       | 92.5          | %          |               |       |                |       | 93.2       | %          |               |       | 90.9       | %          |               |       | 99.7 | % |   |   |

 

***Lease Renewals:***We renewed 79.6% and 78.9% of leases up forrenewal in the three and nine months ended September 30, 2006, totaling 1.9million and 5.7 million square feet, respectively. This compared to renewals of78.8% and 74.2% for the three and nine months ended September 30, 2005 totaling2.7 million and 7.6 million square feet, respectively.

The average term of renewals for the three and nine months endedSeptember 30, 2006, was 4.7 and 3.9 years, respectively, compared to an averageterm of 5.3 and 4.4 years for the three and nine months ended September 30,2005, respectively.

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***Future Development:***Another source ofgrowth in earnings is the development of additional properties. Theseproperties should provide future earnings through Service Operations incomeupon sale or from Rental Operations growth as they are placed in service. As ofSeptember 30, 2006, we had 11.4 million square feet of property underdevelopment with total estimated costs upon completion of $1.1 billion, whichwere 39% pre-leased as of September 30, 2006. This compares to 6.9 millionsquare feet with total estimated costs of $480.8 million, which were 34%pre-leased as of September 30, 2005.

A summary of propertiesunder development as of September 30, 2006, follows (in thousands, exceptpercentage data):

|                       | ** ** | ** ** | ** ** | ** **  | ** ** | **Total**     | ** ** | ** **      | ** ** |
|-----------------------|------------|------------|------------|-------------|------------|---------------|------------|-----------------|------------|
| **Anticipated**       | ** ** | ** ** | ** ** | ** **  | ** ** | **Estimated** | ** ** | **Anticipated** | ** ** |
| **In-Service**        | ** ** | **Square** | ** ** | **Percent** | ** ** | **Project**   | ** ** | **Stabilized**  | ** ** |
| **Date**              | ** ** | **Feet**   | ** ** | **Leased**  | ** ** | **Costs**     | ** ** | **Return**      | ** ** |
| Held for Rental:      |       |       |       |        |       |          |       |            |       |
| 4th Quarter 2006 |       | 3,811      |       | 32          | %          | $             | 189,574    |            | 9.02       | % |
| 1st Quarter 2007 |       | 891        |       | 23          | %          | 93,522        |       | 9.95            | %          |
| 2nd Quarter 2007 |       | 372        |       | 18          | %          | 49,812        |       | 9.50            | %          |
| Thereafter            |       | 752        |       | 8           | %          | 115,680       |       | 9.51            | %          |
|                  |       | 5,826      |       | 26          | %          | $             | 448,588    |            | 9.39       | % |
|                  |       |       |       |        |       |          |       |            |       |
| Service Segment:      |       |       |       |        |       |          |       |            |       |
| 4th Quarter 2006      |       | 410        |       | 80          | %          | $             | 79,647     |            | 8.70       | % |
| 1st Quarter 2007 |       | 2,110      |       | 33          | %          | 136,148       |       | 8.84            | %          |
| 2nd Quarter 2007 |       | 1,337      |       | 46          | %          | 71,737        |       | 9.06            | %          |
| Thereafter            |       | 1,708      |       | 73          | %          | 365,648       |       | 8.34            | %          |
|                  |       | 5,565      |       | 52          | %          | $             | 653,180    |            | 8.58       | % |
| Total                 |       | 11,391     |       | 39          | %          | $             | 1,101,768  |            | 8.92       | % |

 

***Acquisition and Disposition Activity:***Sales proceeds from dispositions of wholly ownedproperties for the nine months ended September 30, 2006 and 2005 were $165.6million and $1.1 billion, respectively. The sales in the first nine months of2006 and 2005 were comprised of both held-for-rental properties that no longermet our long-term growth objectives and held-for-sale properties that weredeveloped with the intent to sell upon completion.

On the acquisition front, our strategy is to pursueacquisitions with value added opportunities. During the first nine months of2006, we closed on over $1.2 billion of building and land acquisitions, aspreviously discussed, which compares to building and land acquisitions of$423.8 million for the same period in 2005. We will continue to identify andpursue both disposition and acquisition opportunities that arise and are inline with our business plan.

**Funds From Operations**

Funds From Operations (“FFO”) is used by industry analysts andinvestors as a supplemental operating performance measure of an equity REITlike our General Partner. FFO is calculated in accordance with the definitionthat was adopted by the Board of Governors of the National Association of RealEstate Investment Trusts (“NAREIT”). NAREIT created FFO as a supplementalmeasure of REIT operating performance that excludes historical costdepreciation, among other items, from net income determined in accordance withUnited States generally accepted accounting principles (“GAAP”). FFO is anon-GAAP financial measure developed by NAREIT to compare the operatingperformance of REITs. The most comparable GAAP measure is net income (loss).FFO should not be considered as a substitute for net income or any othermeasures derived in accordance with GAAP and may not be comparable to othersimilarly titled measures of other companies.

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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. FFO, as defined byNAREIT, represents GAAP net income (loss), excluding extraordinary items asdefined under GAAP and gains or losses from sales of previously depreciatedoperating real estate assets, plus certain non-cash items such as real estatedepreciation and amortization, and after similar adjustments for unconsolidatedpartnerships and joint ventures.

Management believes that the use of FFO, combined with the requiredprimary GAAP presentations, has improved the understanding of operating resultsof REITs among the investing public and made comparisons of REIT operatingresults more meaningful. Management considers FFO to be a useful measure forreviewing comparative operating and financial performance (although FFO shouldbe reviewed 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 provides a useful comparison of theoperating performance of our real estate between periods or as compared todifferent companies.

The following table shows a reconciliation of net income available forcommon unitholders to the calculation of FFO for the three and nine monthsended September 30, 2006 and 2005, respectively (in thousands):

|                                                                  | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                       | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                                                       | ** ** | **2006**                         | ** ** | **2005**                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| Net income available  for common unitholders                     | ** ** | **$**                            | **67,970** |                            | $          | 233,689 | ** ** | **$** | **104,746** |   | $ | 306,119 |   |
| Add back (deduct):                                               |       |                             |       |                            |       |   |   |   |   |
| Depreciation and  amortization                                   | ** ** | **64,363**                       |       | 67,623                          | ** ** | **190,112** |   | 194,973 |   |
| Share of joint  venture adjustments                              | ** ** | **4,568**                        |       | 5,003                           | ** ** | **13,695** |   | 14,811 |   |
| Earnings from  depreciable property sales-wholly owned           | ** ** | **(39,537**                      | **)**      | (210,837                        | )          | **(41,573** | **)** | (223,235 | ) |
| Earnings from  depreciable property sales-share of joint venture | ** ** | **280**                          |       | —                          | ** ** | **(8,082** | **)** | (11,174 | ) |
| ** **                                                       | ** ** | ** **                       |       |                            | ** ** | ** ** |   |   |   |
| **Funds From Operations**                                        | ** ** | **$**                            | **97,644** |                            | $          | 95,478 | ** ** | **$** | **258,898** |   | $ | 281,494 |   |

 

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**Results of Operations**

A summary of our operating results and property statistics for thethree and nine months ended September 30, 2006 and 2005, is as follows (inthousands, except number of properties and per unit data):

|                                                                   | ** ** | **Three Months Ended** | ** **  | **Nine Months Ended** | ** ** |
|-------------------------------------------------------------------|------------|----------------------------------|-------------|---------------------------------|------------|
| ** **                                                        | ** ** | **September 30,**           | ** **  | **September 30,**          | ** ** |
| ** **                                                        | ** ** | **2006**                         | ** **  | **2005**                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| Rental Operations  revenue from Continuing Operations             | ** ** | **$**                            | **208,248** |                            | $          | 170,022 | ** ** | **$** | **599,170** |   | $ | 486,534 |   |
| Service Operations  revenues from Continuing Operations           | ** ** | **22,474**                       |        | 22,584                          | ** ** | **42,198** |   | 68,027 |   |
| Earnings from  Continuing Rental Operations                       | ** ** | **28,516**                       |        | 21,962                          | ** ** | **93,980** |   | 85,917 |   |
| Earnings from  Continuing Service Operations                      | ** ** | **10,551**                       |        | 12,559                          | ** ** | **18,477** |   | 37,443 |   |
| Operating income                                                  | ** ** | **32,263**                       |        | 28,729                          | ** ** | **84,742** |   | 102,065 |   |
| Net income available for  common unitholders                      | ** ** | **67,970**                       |        | 233,689                         | ** ** | **104,746** |   | 306,119 |   |
| Weighted average common  units outstanding                        | ** ** | **148,328**                      |        | 156,110                         | ** ** | **148,259** |   | 156,678 |   |
| Weighted average common  and dilutive potential common units      | ** ** | **150,947**                      |        | 158,468                         | ** ** | **149,472** |   | 157,453 |   |
|                                                              |       |                             |        |                            |       |   |   |   |   |
| Basic income per common  unit:                                    |       |                             |        |                            |       |   |   |   |   |
| Continuing  operations                                            | ** ** | **$**                            | **.16**     |                            | $          | .13 | ** ** | **$** | **.37** |   | $ | .48 |   |
| Discontinued  operations                                          | ** ** | **.30**                          |        | 1.37                            | ** ** | **.34** |   | 1.47 |   |
| ** **                                                        | ** ** | **$**                            | **.46**     |                            | $          | 1.50 | ** ** | **$** | **.71** |   | $ | 1.95 |   |
|                                                              |       |                             |        |                            |       |   |   |   |   |
| Diluted income per  common unit:                                  |       |                             |        |                            |       |   |   |   |   |
| Continuing  operations                                            | ** ** | **$**                            | **.16**     |                            | $          | .13 | ** ** | **$** | **.36** |   | $ | .48 |   |
| Discontinued  operations                                          | ** ** | **.29**                          |        | 1.35                            | ** ** | **.34** |   | 1.46 |   |
| ** **                                                        | ** ** | **$**                            | **.45**     |                            | $          | 1.48 | ** ** | **$** | **.70** |   | $ | 1.94 |   |
| Number of in-service  properties at end of period                 | ** ** | **706**                          |        | 663                             | ** ** | **706** |   | 663 |   |
| In-service square  footage at end of period                       | ** ** | **107,032**                      |        | 97,132                          | ** ** | **107,032** |   | 97,132 |   |
| Under development held for rental square footage at end of period | ** ** | **5,826**                        |        | 3,717                           | ** ** | **5,826** |   | 3,717 |   |

 

**Comparison of Three Months Ended September 30, 2006 to Three MonthsEnded September 30, 2005**

Rental Income From Continuing Operations

Overall, rental incomefrom continuing operations increased from $170.0 million for the quarter endedSeptember 30, 2005 to $208.2 million for the same period in 2006. The followingtable reconciles rental income from continuing operations by reportable segmentto our total reported rental income from continuing operations for the quartersended September 30, 2006 and 2005 (in thousands):

|             | ** ** | **2006**   | ** **  | **2005** | ** ** |
|-------------|------------|------------|-------------|----------|------------|
| Office      | ** ** | **$**      | **158,036** |     | $          | 125,278 |   |
| Industrial  | ** ** | **47,664** |        | 42,240   |       |
| Non-segment | ** ** | **2,548**  |        | 2,504    |       |
| Total       | ** ** | **$**      | **208,248** |     | $          | 170,022 |   |

 

The following factors contributed to these results:

·                  Weacquired 50 properties and placed 25 developments in service from October 1,2005 to September 30, 2006. These acquisitions and developments are the primaryfactor in the overall $38.2 million increase in rental revenue for the thirdquarter of 2006, compared to the same period in 2005, as they provided revenuesof $27.0 million in the third quarter of 2006.

·                  Leasetermination fees totaled $5.2 million in the third quarter of 2006, compared to$373,000 for the same period in 2005.

·                  Theremaining increase in rental revenues was attributable to our in-serviceoccupancy increasing from 91% at September 30, 2005 to 92% at September 30,2006, as well as from increases in our rental rates for rollover and renewalleases.

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Rental Expensesand Real Estate Taxes

The followingtable reconciles rental expenses and real estate taxes by reportable segment toour total reported amounts in the statement of operations for the three monthsended September 30, 2006 and 2005, respectively (in thousands):

|                    | ** ** | **2006**  | ** ** | **2005** | ** ** |
|--------------------|------------|-----------|------------|----------|------------|
| Rental Expenses:   |       |      |       |     |       |
| Office             | ** ** | **$**     | **41,398** |     | $          | 34,717 |   |
| Industrial         | ** ** | **3,799** |       | 5,166    |       |
| Non-segment        | ** ** | **876**   |       | 619      |       |
| Total              | ** ** | **$**     | **46,073** |     | $          | 40,502 |   |
|               |       |      |       |     |       |
| Real Estate Taxes: |       |      |       |     |       |
| Office             | ** ** | **$**     | **16,072** |     | $          | 15,407 |   |
| Industrial         | ** ** | **5,739** |       | 5,074    |       |
| Non-segment        | ** ** | **1,275** |       | 1,203    |       |
| Total              | ** ** | **$**     | **23,086** |     | $          | 21,684 |   |

 

Of the overall$5.6 million increase in rental expenses, $4.0 million was attributable toproperties acquired and developments placed in service from October 1, 2005 toSeptember 30, 2006. The remaining increase in rental expense is the result ofincreased occupancy and inflationary factors. The increase in real estate taxeswas due to properties acquired and developments placed in service from October1, 2005 to September 30, 2006.

Interest Expense

Interest expense fromcontinuing operations increased from $30.5 million in the third quarter of 2005to $50.2 million in the third quarter of 2006 primarily due to an increase insecured debt, unsecured notes and an increase in borrowings and interest rateson our unsecured line of credit. The overall increase in debt was mainlyattributable to increased borrowings to fund the 2006 acquisitions and asubstantial increase in properties under development. Interest expense relatedto secured debt and the unsecured line of credit increased by $6.9 million and$9.5 million, respectively, from the third quarter of 2005, offset by anincrease in capitalized interest of $7.2 million. Additionally, $9.4 millionmore of interest expense was allocated to discontinued operations in the thirdquarter of 2005 than in the third quarter of 2006.

Depreciation and Amortization

Depreciation andamortization expense increased from $59.5 million for the third quarter of 2005to $63.9 million for the same period in 2006 due to increases in ourheld-for-rental asset base from acquisitions and developments during 2005 and2006.

Service Operations

Service Operationsprimarily consist of sales of properties developed or acquired with the intentto sell within a short period of time and the leasing, management, constructionand development services for joint venture properties and properties owned bythird parties. These operations are heavily influenced by the current state ofthe economy, as leasing and management fees are dependent upon occupancy whileconstruction and development services rely on the expansion of businessoperations. Service Operations earnings decreased from $12.6 million for thequarter ended September 30, 2005 to $10.6 million for the quarter endedSeptember 30, 2006, primarily as a result of shifting our resources from thirdparty construction services to wholly owned construction activities. Also, ourService Operations building development and sales program, whereby a buildingis developed and then sold, is generally a significant component ofconstruction and development income. During the third quarter of 2006, weincluded one such

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building sale incontinuing operations for a gain of $4.4 million. We sold five properties inthe third quarter of 2005 for a gain of $5.2 million.

General and Administrative Expense

General andadministrative expenses increased from $5.8 million in the quarter endedSeptember 30, 2005 to $6.8 million for the quarter ended September 30, 2006.General and administrative expenses are comprised of two components. The firstis direct expenses that are not attributable to specific assets such as legalfees, external audit fees, marketing costs, investor relations expenses andother corporate overhead. The second component is the unallocated indirectoverhead costs associated with the operation of our owned properties andService Operations, including construction, leasing and maintenance operations.Those overhead costs not allocated to these operations are charged to generaland administrative expenses. The increase from the quarter ended September 30,2005 was largely attributable to the $7.1 million increase in our overall poolof overhead costs which exceeded the allocation of those costs to leasing andconstruction activities by $468,000 and an increase in direct corporate generaland administrative costs of $470,000. Our overall pool of overhead costs hasincreased in order to support our actual and anticipated increase in overallrental and service operations.

Other Income and Expenses

Interest and otherincome in the third quarter of 2006 was $4.4 million compared to $1.5 millionduring the same period of 2005. The increase in interest and other income ismainly due to an increase in interest-bearing advances to unconsolidatedcompanies and miscellaneous other income from a variety of sources, includingseller-financed property sales.

We pursueopportunities to dispose of undeveloped land in markets with a highconcentration of undeveloped land and those markets where the land no longermeets our strategic development plans. Earnings from the sale of land, net ofimpairment adjustments, are comprised of the following amounts for the threemonths ended September 30, 2006 and 2005, respectively (in thousands):

|                                 | ** ** | **2006** | ** ** | **2005** | ** ** |
|---------------------------------|------------|----------|------------|----------|------------|
| Gain on land sales              | ** ** | **$**    | **2,982**  |     | $          | 2,427 |   |
| Impairment adjustment  for land |       | —   |       | (56      | )          |
| Total                           | ** ** | **$**    | **2,982**  |     | $          | 2,371 |   |

 

We sold eightparcels of undeveloped land in the third quarter of 2006, compared to 11 such parcelsin the third quarter of 2005. We recorded impairment charges of $56,000 in thethird quarter of 2005 associated with three land parcel sales. No impairmentcharges on land were recorded in the third quarter of 2006.

Discontinued Operations

Theresults of operations for properties sold during the year or designated asheld-for-sale to unrelated parties at the end of the period are required to beclassified as discontinued operations. The property specific components of netearnings that are classified as discontinued operations include rentalrevenues, rental expenses, real estate taxes, allocated interest expense anddepreciation expense, as well as the net gain or loss on the disposition ofproperties.

Weclassified the operations of 257 buildings as discontinued operations as ofSeptember 30, 2006. These 257 buildings consist of 239 industrial properties,17 office properties and one retail property. As a result, we classified netincome (loss) from operations of ($39,000) and $3.3 million as net income(loss) from

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discontinuedoperations for each of the quarters ended September 30, 2006 and 2005,respectively. Of these properties, 13 were sold during the third quarter of2006 and 218 properties were sold during the third quarter of 2005. The gains ondisposal of these properties, net of impairment adjustment, of $43.7 millionand $210.8 million for the quarters ended September 30, 2006 and 2005,respectively, are also reported in discontinued operations. The remaining 26properties consist of 16 properties sold in 2005, five properties sold in thefirst six months of 2006 and five operating properties classified asheld-for-sale at September 30, 2006. We also classified 38 buildings asheld-for-sale, but have not included these buildings in discontinuedoperations, based on our present intention to sell the majority of ourownership interest in these properties to an entity in which we will retain aminority equity ownership interest or because the results of operations forthose buildings were not material.

**Comparison of Nine Months Ended September 30, 2006 to Nine Months EndedSeptember 30, 2005**

Rental Income From Continuing Operations

Overall, rental incomefrom continuing operations increased from $486.5 million for the nine monthsended September 30, 2005 to $599.2 million for the same period in 2006. Thefollowing table reconciles rental income from continuing operations byreportable segment to our total reported rental income from continuingoperations for the nine months ended September 30, 2006 and 2005, respectively(in thousands):

|             | ** ** | **2006**    | ** **  | **2005** | ** ** |
|-------------|------------|-------------|-------------|----------|------------|
| Office      | ** ** | **$**       | **440,244** |     | $          | 356,520 |   |
| Industrial  | ** ** | **149,976** |        | 122,879  |       |
| Non-segment | ** ** | **8,950**   |        | 7,135    |       |
| Total       | ** ** | **$**       | **599,170** |     | $          | 486,534 |   |

 

The followingfactors contributed to these results:

·                  Weacquired 50 properties and placed 25 developments in service from October 1,2005 to September 30, 2006. These acquisitions and developments are the primaryfactor in the overall $112.6 million increase in rental revenue for the firstnine months in 2006, compared to the same period in 2005, as these transactionsprovided revenues of $61.6 million in the first nine months of 2006.

·                  Revenuesfrom acquisitions and developments placed in service in the first nine monthsof 2005 increased by $20.8 million in the first nine months of 2006.

·                  Leasetermination fees totaled $15.3 million for the first nine months of 2006,compared to $3.3 million for the same period in 2005.

·                  Theremaining increase in rental revenues was attributable to our in-serviceoccupancy increasing from 91% at September 30, 2005 to 92% at September 30,2006 as well as from increases in our rental rates for rollover and renewalleases.

Equity in Earningsof Unconsolidated Companies

Equity in earningsdecreased from $25.0 million for the first nine months of 2005 to $21.4 millionfor the same period in 2006. Our share of the gains on joint venture buildingsales was $8.1 million in the first nine months of 2006 compared to $11.2million for the same period in 2005, which is the main reason for the decrease.

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Rental Expensesand Real Estate Taxes

The followingtable reconciles rental expenses and real estate taxes by reportable segment toour total reported amounts in the statement of operations for the nine monthsended September 30, 2006 and 2005, respectively (in thousands):

|                    | ** ** | **2006**   | ** **  | **2005** | ** ** |
|--------------------|------------|------------|-------------|----------|------------|
| Rental Expenses:   |       |       |        |     |       |
| Office             | ** ** | **$**      | **118,260** |     | $          | 98,199 |   |
| Industrial         | ** ** | **17,059** |        | 16,380   |       |
| Non-segment        | ** ** | **1,179**  |        | 1,306    |       |
| Total              | ** ** | **$**      | **136,498** |     | $          | 115,885 |   |
|               |       |       |        |     |       |
| Real Estate Taxes: |       |       |        |     |       |
| Office             | ** ** | **$**      | **48,253**  |     | $          | 40,916 |   |
| Industrial         | ** ** | **17,481** |        | 14,874   |       |
| Non-segment        | ** ** | **4,018**  |        | 3,613    |       |
| Total              | ** ** | **$**      | **69,752**  |     | $          | 59,403 |   |

 

Of the overallincrease in rental expenses and real estate taxes of $20.6 million and $10.3million, respectively, $8.0 million and $4.4 million, respectively, were attributableto properties acquired and developments placed in service from October 1, 2005to September 30, 2006, as noted above. In addition, rental expenses and realestate taxes for acquisitions and developments placed in service in the firstnine months of 2005 increased by $5.0 million and $2.4 million, respectively,in the same period of 2006, as a result of having a full nine months ofoperating activity on these properties. The remaining increase in rentalexpenses is the result of increased occupancy and inflationary factors and theremaining increase to real estate taxes was driven by normal increases inassessments by municipal authorities.

Interest Expense

Interest expense fromcontinuing operations increased from $86.1 million for the nine months endedSeptember 30, 2005 to $133.3 million for the same period in 2006 due to anincrease in secured debt, unsecured notes and an increase in borrowings andinterest rates on our unsecured line of credit. The overall increase in debtwas mainly attributable to increased borrowings to fund the 2006 acquisitionsand a substantial increase in properties under development. Interest expenserelated to secured debt and the unsecured line of credit increased by $22.3million and $21.2 million, respectively, from the third quarter of 2005, andwas offset by a decrease in interest expense on unsecured notes of $3.2 millionand an increase in capitalized interest of $18.7 million. Additionally, $23.8million more of interest expense was allocated to discontinued operations inthe first nine months of 2005 than in the first nine months of 2006.

Depreciation andAmortization

Depreciation andamortization expense increased from $164.2 million for the first nine months of2005 to $187.1 million for the same period in 2006 due to increases in ourheld-for-rental asset base from acquisitions and developments during 2005 and2006.

Service Operations

Service Operationsprimarily consist of sales of properties developed or acquired with the intentto sell within a short period and the leasing, management, construction anddevelopment services for joint venture properties and properties owned by thirdparties. These operations are heavily influenced by the current state of theeconomy, as leasing and management fees are dependent upon occupancy whileconstruction and development services rely on the expansion of businessoperations. Service Operations earnings decreased

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from $37.4 millionfor the nine months ended September 30, 2005 to $18.5 million for the sameperiod in 2006, primarily as a result of shifting our resources from thirdparty construction services to wholly owned construction activities. Also, ourService Operations building development and sales program, whereby a buildingis developed and then sold, is generally a significant component ofconstruction and development income. During the nine months ended September 30,2006, we included one such building sale in continuing operations for a gain of$4.4 million while we sold eight properties in the first nine months of 2005for a gain of $17.8 million.

General andAdministrative Expense

General andadministrative expenses increased from $21.3 million for the nine months endedSeptember 30, 2005 to $27.7 million for the same period in 2006. General andadministrative expenses are comprised of two components. The first is directexpenses that are not attributable to specific assets such as legal fees,external audit fees, marketing costs, investor relations expenses and othercorporate overhead. The second component is the unallocated overhead costsassociated with the operation of our owned properties and Service Operations,including construction, leasing and maintenance operations. Those overheadcosts not allocated to these operations are charged to general and administrativeexpenses. The increase from the nine months ended September 30, 2005 waslargely attributable to the $16.9 million increase in our overall pool ofoverhead costs exceeding the allocation of those costs to leasing andconstruction activities by $6.0 million. The increase in the overall pool ofoverhead costs was made in order to meet actual and anticipated increases inleasing, development and construction activities in 2006 and beyond.

Other Income and Expenses

Interest and other incomein the first nine months of 2006 was $8.3 million compared to $3.7 millionduring the same period of 2005. The increase in interest and other income ismainly due to an increase in interest-bearing advances to unconsolidatedcompanies and miscellaneous other income from a variety of sources, includingseller-financed property sales.

We pursue opportunitiesto dispose of land in markets with a high concentration of undeveloped land andthose markets where the land no longer meets our strategic development plans.Earnings from the sale of land, net of impairment adjustments, are comprised ofthe following amounts for the nine months ended September 30, 2006 and 2005,respectively (in thousands):

|                                 | ** ** | **2006** | ** ** | **2005** | ** ** |
|---------------------------------|------------|----------|------------|----------|------------|
| Gain on land sales              | ** ** | **$**    | **5,737**  |     | $          | 5,913 |   |
| Impairment adjustment  for land | ** ** | **(310** | **)**      | (133     | )          |
| Total                           | ** ** | **$**    | **5,427**  |     | $          | 5,780 |   |

 

We recorded $310,000 and$133,000 of impairment charges on land parcels for the nine months endedSeptember 30, 2006 and 2005, respectively. The land parcel associated with the $310,000impairment charge recorded in the second quarter of 2006 was sold in the thirdquarter of 2006. One of the four land parcels related to the $133,000impairment charge was sold in the second quarter of 2005 and the other threeparcels were sold in the third quarter of 2005.

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Discontinued Operations

Weclassified the operations of 257 buildings as discontinued operations as ofSeptember 30, 2006. These 257 buildings consist of 239 industrial properties,17 office properties and one retail property. As a result, we classified netincome from operations of $4.7 million and $11.3 million as net income fromdiscontinued operations for the nine months ended September 30, 2006 and 2005,respectively. Of these properties, 18 were sold during the first nine months of2006 and 230 properties were sold during the first nine months of 2005. Thegains on disposal of these properties, net of impairment adjustment, of $45.7million and $219.6 million for the nine months ended September 30, 2006 and2005, respectively, are also reported in discontinued operations. The remainingnine properties consist of four properties sold during the last three months of2005 and five operating properties classified as held-for-sale at September 30,2006. We also classified 38 buildings as held-for-sale, but have not includedthese buildings in discontinued operations, based on our present intention tosell the majority of our ownership interest in these properties to an entity inwhich we will retain a minority equity ownership interest or because theresults of operations of those buildings were not material.

**Liquidity and Capital Resources**

Sources of Liquidity

We expect to meetour short-term liquidity requirements over the next twelve months, includingpayments of dividends and distributions,as well as recurring capital expenditures relating to maintaining our currentreal estate assets, primarily through the following:

·                 working capital;

·                 net cash providedby operating activities; and

·                 proceeds receivedfrom real estate dispositions.

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 needed to fundsuch expenditures during periods of high leasing volume.

We expect to meet long-term liquidity requirements,such as scheduled mortgage debt maturities, refinancing of long-term debt,preferred unit redemptions, the retirement of unsecured notes and amounts outstandingunder the unsecured credit facility, property acquisitions, financing ofdevelopment activities and other non-recurring capital improvements, primarilythrough the following sources:

·                 issuance ofadditional General Partner equity, including common and preferred stock;

·                 issuance ofadditional debt securities;

·                 undistributedcash provided by operating activities, if any; and

·                 proceedsreceived from real estate dispositions.

### *Rental Operations*

We believe that ourprincipal source of liquidity, cash flows from Rental Operations, provides astable 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 in a short time followingthe actual revenue recognition.

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We are subject to risksof decreased occupancy through market conditions, as well as tenant defaultsand bankruptcies, and potential reduction in rental rates upon renewal orre-letting of properties, which would result in reduced cash flow fromoperations. However, we believe that these risks are mitigated by our relativelystrong market presence in most of our locations and the fact that we performin-house credit review and analysis on major tenants and all significant leasesbefore they are executed.

*Credit Facilities*

We had one unsecured lineof credit available as of September 30, 2006, summarized as follows (dollars inthousands):
|                          | ** ** | **Borrowing** | ** ** | **Maturity** | ** **        | **Interest** | ** **             | **Outstanding Balance**             | ** ** |
|--------------------------|------------|---------------|------------|--------------|-------------------|--------------|------------------------|------------------------------------------|------------|
| **Description**          | ** ** | **Capacity**  | ** ** | **Date**     | ** **        | **Rate**     | ** **             | **at September 30, 2006** | ** ** |
| Unsecured Line of Credit |       | $             | 1,000,000  |         | January 2010 |         | LIBOR + .525 | %                                        | $          | 904,000 |   |
|                          |            |               |            |              |                   |              |                        |                                          |            |  |  |

 

We use this line ofcredit to fund development activities, acquire additional rental properties andprovide 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. Interest rates on the amounts outstanding onthe unsecured line of credit as of September 30, 2006, ranged from LIBOR + .15%to LIBOR + .525% (equal to 5.48% to 5.86% as of September 30, 2006).

The line of credit alsocontains financial covenants that require us to meet financial ratios anddefined levels of performance, including those related to variable interestindebtedness, consolidated net worth and debt-to-market capitalization. As ofSeptember 30, 2006, we were in compliance with all covenants under our line ofcredit.

*Debtand Equity Securities*

On July 31, 2006, wefiled with the SEC an automatic shelf registration statement on Form S-3,relating to the offer and sale, from time to time of an indeterminate amount ofdebt securities. From time to time, we and the General Partner expect to issueadditional securities under this new automatic shelf registration statement tofund the development and acquisition of additional rental properties and tofund the repayment of the credit facilities and other long-term debt uponmaturity.

The indenture governingour unsecured notes also requires us to comply with financial ratios and othercovenants regarding our operations. We were in compliance with all suchcovenants as of September 30, 2006.

On July 21, 2006, theGeneral Partner announced that we had received the requisite consent of theholders of certain outstanding notes to amend the terms of the following seriesof our outstanding notes:
|                    | ** ** | **Principal Amount** | ** **  | ** **                    | ** **                                | **Consent Payment** | ** ** |
|--------------------|------------|---------------------------|-------------|-------------------------------|-------------------------------------------|--------------------------|------------|
| **CUSIP No.** | ** ** | **Outstanding**           | ** **  | **Security Description** | ** **                                | **per $1,000**      | ** ** |
|               |       |                      |        |                          |                                      |                     |       |
| 264414AS2          |       | $                         | 100,000,000 |                          | 6.75% Notes due 5/30/2008  |                     | $          | 1.00 |   |
| 264414AT0          |       | $                         | 125,000,000 |                          | 6.80% Notes due 2/12/2009  |                     | $          | 2.50 |   |
| 26441YAC1          |       | $                         | 150,000,000 |                          | 7.75% Notes due 11/15/2009 |                     | $          | 2.50 |   |
| 26441YAE7          |       | $                         | 175,000,000 |                          | 5.25% Notes due 1/15/2010  |                     | $          | 2.50 |   |
| 26441YAD9          |       | $                         | 175,000,000 |                          | 6.95% Notes due 3/15/2011  |                     | $          | 3.75 |   |
| 264411AB5          |       | $                         | 150,000,000 |                          | 5.875% Notes due 8/15/2012 |                     | $          | 3.75 |   |
| 26441QAD6          |       | $                         | 50,000,000  |                          | 5.45% Notes due 10/1/2012  |                     | $          | 3.75 |   |
| 26441QAC8          |       | $                         | 50,000,000  |                          | 7.25% Notes due 6/15/2028  |                     | $          | 5.00 |   |

 

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The purpose of theconsent solicitation was to obtain the consent of the holders of the securitiesto amend certain financial covenants governing the securities to make themconsistent with the financial covenants in each series of our notes issued onor after May 22, 2003.

*Sale ofReal Estate Assets*

We utilize sales of realestate assets as an additional source of liquidity. We pursue opportunities tosell real estate assets at favorable prices to capture value created by us aswell as to improve the overall quality of our portfolio by recycling salesproceeds into new properties with greater value creation opportunities.

Uses of Liquidity

Our principal uses ofliquidity include the following:

·                 Property investments;

·                 Recurring leasing/capital costs;

·                 Distributions to unitholders;

·                 Long-term debt maturities; and

·                 Other contractual obligations.

*PropertyInvestment*

We evaluate developmentand acquisition opportunities based upon market outlook, supply and long-termgrowth potential.

*RecurringExpenditures*

One of ourprincipal uses of our liquidity is to fund the development, acquisition andrecurring leasing/capital expenditures of our real estate investments. Thefollowing is a summary of our recurring capital expenditures for the ninemonths ended September 30, 2006 and 2005, respectively, (in thousands):

|                       | ** ** | **2006** | ** ** | **2005** | ** ** |
|-----------------------|------------|----------|------------|----------|------------|
| Tenant improvements   |       | $        | 34,226     |     | $          | 47,672 |   |
| Leasing costs         |       | 12,338   |       | 24,618   |       |
| Building improvements |       | 5,490    |       | 10,370   |       |
| Totals                |       | $        | 52,054     |     | $          | 82,660 |   |

 

*DebtMaturities*

Debt outstandingat September 30, 2006 totaled $4.1 billion with a weighted average interestrate of 5.95% maturing at various dates through 2028. We had $2.8 billion ofunsecured debt, $904.0 million outstanding on our unsecured line of credit, and$371.5 million of secured debt outstanding at September 30, 2006. Scheduledprincipal amortization of such debt totaled $7.2 million for the nine monthsended September 30, 2006.

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The following is asummary of the scheduled future amortization and maturities of our indebtednessat September 30, 2006 (in thousands, except percentage data):

|            | ** ** | **Future Repayments** | ** ** | **Weighted Average** | ** ** |
|------------|------------|----------------------------|------------|---------------------------|------------|
| ** ** | ** ** | **Scheduled**              | ** ** | ** **                | ** ** | ** ** | ** ** | **Interest Rate of** | ** ** |
| **Year**   | ** ** | **Amortization**           | ** ** | **Maturities**            | ** ** | **Total** | ** ** | **Future Repayments** | ** ** |
| 2006       |       | $                          | 3,002      |                      | $          | 275,000 |   | $ | 278,002 |   | 5.80 | % |
| 2007       |       | 13,045                     |       | 214,615                   |       | 227,660 |   | 5.55 | % |
| 2008       |       | 12,478                     |       | 268,968                   |       | 281,446 |   | 5.05 | % |
| 2009       |       | 12,185                     |       | 275,000                   |       | 287,185 |   | 7.36 | % |
| 2010       |       | 11,952                     |       | 1,079,000                 |       | 1,090,952 |   | 5.68 | % |
| 2011       |       | 11,985                     |       | 437,139                   |       | 449,124 |   | 6.26 | % |
| 2012       |       | 9,914                      |       | 201,216                   |       | 211,130 |   | 5.90 | % |
| 2013       |       | 9,905                      |       | 150,000                   |       | 159,905 |   | 4.74 | % |
| 2014       |       | 9,826                      |       | 294,534                   |       | 304,360 |   | 6.44 | % |
| 2015       |       | 7,593                      |       | 5,807                     |       | 13,400 |   | 7.13 | % |
| 2016       |       | 6,671                      |       | 187,473                   |       | 194,144 |   | 6.59 | % |
| Thereafter |       | 36,652                     |       | 541,723                   |       | 578,375 |   | 6.06 | % |
| ** ** |       | $                          | 145,208    |                      | $          | 3,930,475 |   | $ | 4,075,683 |   | 5.95 | % |

 

Historical Cash Flows

Cash and cashequivalents were $25.0 million and $123.0 million at September 30, 2006 and2005, respectively. The following highlights significant changes in net cashassociated with our operating, investing and financing activities (inmillions):

|                                                       | ** ** | **Nine months Ended September 30,** | ** ** |
|-------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                            | ** ** | **2006**                                                | ** ** | **2005** | ** ** |
| Net Cash Provided by  Operating Activities            |       | $                                                       | 104.5      |   | $ | 324.0 |   |
|                                                  |       |                                                    |       |   |   |
| Net Cash Provided by  (used for) Investing Activities |       | $                                                       | (1,291.6   | ) | $ | 453.1 |   |
|                                                  |       |                                                    |       |   |   |
| Net Cash Provided by (used for) Financing Activities  |       | $                                                       | 1,185.2    |   | $ | (659.9 | ) |

 

*OperatingActivities*

Cash flows fromoperating activities provide the cash necessary for us to meet normaloperational requirements of our rental operations and Service Operationsactivities. The receipt of rental income from rental operations continues toprovide the primary source of our revenues and operating cash flows. Inaddition, we also develop buildings with the intent to sell them at or soonafter completion, which provides another significant source of operating cashflow activity.

·                  During the nine-month period ended September 30,2006, we incurred Service Operations building development costs of$188.7 million, compared to $58.9 million for the nine-month period endedSeptember 30, 2005. The difference is reflective of the increased activity inour held-for-sale pipeline. The pipeline of held-for-sale projects underconstruction as of September 30, 2006 has anticipated future costs of $271.4million.

·                  We sold three Service Operations buildings in thefirst nine months of 2006 compared to sales of nine Service Operationsbuildings for the same period in 2005, recognizing after tax gains of $8.8 millionand $17.5 million, respectively.

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*Investing Activities*

Investing activities are one of the primary uses of our liquidity.Development and acquisition activities typically generate additional rentalrevenues and provide cash flows for operational requirements. Highlights ofsignificant cash uses are as follows:

·                  Developmentcosts totaled $274.7 million for the nine-month period ended September 30,2006, compared to $130.8 million for the same period in 2005. The increaseddevelopment costs from 2005 is the result of our increased focus on whollyowned development activity in 2006.

·                  During the firstnine months of 2006, we paid cash of $735.3 million for real estateacquisitions and $367.5 million for undeveloped land acquisitions, compared to$285.3 million for real estate acquisitions and $93.5 million for undevelopedland acquisitions in the same period of 2005. The most significant activity inthe first nine months of 2006 consisted of the purchase of the Mark WinklerPortfolio of suburban office and light industrial properties and undevelopedland in the Washington, D.C. area for $865.2 million ($713.5 million paid incash), a portfolio of industrial properties in Savannah, Georgia for $196.2million ($125.9 million paid in cash), and the purchase of land held fordevelopment of $367.5 million. The most significant activity in the first ninemonths of 2005 was the acquisition of a five building office complex in ourChicago market for $257.0 million.

·                  Sales of landand depreciated property provided $140.3 million in net proceeds for thenine-month period ended September 30, 2006, compared to $1.1 billion for thesame period in 2005. In addition, during the first nine months of 2006 wereceived distributions of $21.2 million for our share of proceeds on the salesof land and depreciable property within three of our joint ventures. Anindustrial portfolio sale of 212 properties consisting of approximately 14.1million square feet of primarily light distribution and service centerproperties and approximately 50 acres of undeveloped land, which was completedon September 29, 2005, provided $955.0 million of the $1.1 billion of proceedsreceived in the nine months ended September 30, 2005. We continue to dispose ofnon-strategic and older properties as part of our capital recycling program tofund acquisitions and new development while improving the overall quality ofour investment portfolio.

*Financing Activities*

The following significant items highlight fluctuations in net cashprovided by financing activities:

·                  In January 2006,we received approximately $177.7 million in net proceeds from the GeneralPartner’s issuance of its Series M Cumulative Redeemable preferred stock. Thispreferred stock was issued at a dividend yield of 6.95%. We applied a portionof the net proceeds from the Series M preferred equity issuance to redeem theGeneral Partner’s $75.0 million of Series I preferred shares in February, whichhad an 8.45% dividend rate.

·                  In February2006, we obtained a $700.0 million secured term loan, which was priced at LIBOR+.525%. The proceeds were used to finance the acquisition of the Mark WinklerPortfolio in the Washington, D.C. metropolitan area, and the loan is secured bythese properties. This term loan was paid in full in August 2006 with proceedsfrom the issuance of senior unsecured debt as described below.

·                  In March 2006,we issued $150.0 million of 5.50% senior unsecured notes due in 2016. A portionof the proceeds were used to retire our $100.0 million 6.72% puttable optionreset securities. The remaining cash proceeds were used to fund costsassociated with the issuance of debt and to repay amounts outstanding under ourline of credit.

·                  During the firstnine months of 2006, we increased net borrowings on our $1.0 billion line ofcredit by $521.0 million. These borrowings were used to fund our developmentand acquisition activity in the first nine months of 2006.

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·                  In June 2006, wereceived approximately $106.3 million in net proceeds from the General Partner’sissuance of its Series N Cumulative Redeemable Preferred Shares. This preferredstock bears a dividend yield of 7.25%.

·                  In August 2006,we issued $450.0 million of 5.95% senior unsecured notes due in 2017 and $250.0million of 5.625% senior unsecured notes due in 2011. The proceeds from theseissuances were used to pay off the $700.0 million secured term loan.

Financial Instruments

We are exposed to capital market risk, such as changesin interest rates. In order to manage the volatility relating to interest raterisk, we may enter into interest rate hedging arrangements from time to time.We do not utilize derivative financial instruments for trading or speculativepurposes.

In March 2005, we entered into $300.0 million of cashflow hedges through forward-starting interest rate swaps to hedge interestrates on $300.0 million of estimated debt offerings in 2006. The swapsqualified for hedge accounting with any changes in fair value recorded inAccumulated Other Comprehensive Income (“OCI”). The market value of theseinterest rate swaps is dependent upon existing market interest rates, whichchange over time. In March 2006, we issued $150.0 million of 5.5% seniorunsecured notes due 2016 and terminated a corresponding amount of the cash flowhedges designated for this transaction. The settlement amount paid ofapproximately $1.0 million will be recognized to earnings through interestexpense ratably over the life of the senior notes and the ineffective portionof the hedge was insignificant. In August 2006, we issued $450.0 million of5.95% senior unsecured notes due 2017 and $250.0 million of 5.69% seniorunsecured notes due 2011 and terminated the remaining $150.0 million of cashflow hedges. The settlement amount received of approximately $1.6 million willbe recognized to earnings through interest expense ratably over the lives ofthe senior unsecured notes. The ineffective portion of the hedge wasinsignificant.

In August 2005, we entered into $300.0 million of cashflow hedges through forward-starting interest rate swaps to hedge interestrates on $300.0 million of estimated debt offerings in 2007. The swaps qualifyfor hedge accounting with any changes in fair value recorded in OCI. AtSeptember 30, 2006, the fair value of these swaps was approximately $9.6million in an asset position as the effective rates of the swaps were lowerthan current interest rates at September 30, 2006.

In June 2006, we entered into a $250.0 million cashflow hedge through an interest rate swap to fix the rate on $250.0 million ofpreviously floating rate debt, which matures in December 2006. The swapqualifies for hedge accounting with any changes in fair value recorded in OCI.At September 30, 2006, the fair value of this swap was approximately $78,000 ina liability position and there was no ineffectiveness.

**Recent Accounting Pronouncements**

In June 2006, the FASBissued Interpretation No. 48, *Accounting forUncertainty in Income Taxes*, *anInterpretation of FASB Statement No. 109*(“FIN 48”). FIN 48clarifies the accounting for uncertainty in income taxes recognized in acompany’s financial statements and prescribes a recognition threshold andmeasurement attribute for the financial statement recognition and measurementof a tax position taken or expected to be taken in a tax return. TheInterpretation also provides guidance on description, classification, interestand penalties, accounting in interim periods, disclosure and transition. FIN 48becomes effective on January 1, 2007. We are currently evaluating the effectthat the adoption of FIN 48 will have on our financial statements.

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In September 2006, theSEC issued Staff Accounting Bulletin No. 108, *Consideringthe Effects of Prior Year Misstatements when Qualifying Misstatements inCurrent Year Financial Statements*(“SAB 108”). SAB 108 providesguidance regarding the process of qualifying financial statement misstatements.We will adopt SAB 108 in the fourth quarter of 2006 and do not believe theadoption of SAB 108 will have a material effect on our financial statements.

**Investments in Unconsolidated Companies**

We analyze ourinvestments in joint ventures under FASB Interpretation No. 46(R), *Consolidation of Variable Interest Entities (*“FIN46(R)”),**to determine if thejoint venture is a VIE and would require consolidation. To the extent that ourjoint ventures do not qualify as VIEs, we further assess under the guidelinesof EITF No. 04-5, *Determining Whether aGeneral Partner, or the General Partners as a Group, Controls a LimitedPartnership or Similar Entity when the Limited Partners Have Certain Rights*(“EITF 04-5”); 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.

We have equity interestsin unconsolidated partnerships and joint ventures that own and operate rentalproperties, develop properties and hold land for development. The equity methodof accounting 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 approximately 6% of our total assets as of September 30, 2006.

**Item 3.Quantitative and Qualitative Disclosures About Market Risk**

Weare exposed to interest rate changes primarily as a result of our line ofcredit, preferred stock and long-term debt used to maintain liquidity and fundcapital expenditures and expansion of our real estate investment portfolio andoperations. Our interest rate risk management objective is to limit the impactof interest rate changes on earnings and cash flows and to lower our overallborrowing costs. To achieve our objectives, we borrow primarily at fixed ratesand may enter into derivative financial instruments such as interest rateswaps, caps and treasury locks in order to mitigate our interest rate risk on arelated financial instrument. We do not enter into derivative or interest ratetransactions for speculative purposes. For a discussion of the market risk withrespect to our outstanding cash flow hedges, see “Management’s Discussion andAnalysis of Financial Condition and Results of Operations — Liquidity andCapital Resources — Financial Instruments.”

**Item 4. Controlsand Procedures**

(a)                                  Evaluationof Disclosure Controls and Procedures

We maintain disclosurecontrols and procedures that are designed to ensure that information requiredto be disclosed by us in the reports that we file or submit under theSecurities and Exchange Act of 1934, as amended, is recorded, processed,summarized and reported within the time periods specified in the SEC’s rulesand forms. These disclosure controls and procedures are further designed toensure that such information is accumulated and communicated to management,including the General Partner’s Chief Executive Officer and the General Partner’sChief Financial Officer to allow timely decisions regarding requireddisclosure.

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We carried out anevaluation, under the supervision and with the participation of management,including the General Partner’s Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of the design and operation of our disclosurecontrols and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. Basedupon the foregoing, the General Partner’s Chief Executive Officer and theGeneral Partner’s Chief Financial Officer concluded that, as of the end of theperiod covered by this Report, our disclosure controls and procedures areeffective in all material respects.

(b)                                 Changesin Internal Control over Financial Reporting

During the nine monthsended September 30, 2006, there have been no changes in our internal controlover financial reporting during the period covered by this report that havematerially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting.

**Part II - OtherInformation**

**Item 1. LegalProceedings**

From time to time, we areparties to a variety of legal proceedings and claims arising in the ordinarycourse of our businesses. While these matters generally are covered byinsurance, there is no assurance that our insurance will cover any particularproceeding or claim. We presently believe that all of these proceedings towhich we were subject as of September 30, 2006, taken as a whole, will not havea material adverse effect on our liquidity, business, financial condition orresults of operations.

**Item 1A. RiskFactors**

Inaddition to the information set forth in this Report, you also should carefullyreview and consider the information contained in our other reports and periodicfilings that we make with the SEC, including, without limitation, theinformation contained under the caption “Item 1A. Risk Factors” in our AnnualReport on Form 10-K for the year ended December 31, 2005, and in our QuarterlyReports on Form 10-Q filed after the date of such Annual Report. Those riskfactors could materially affect our business, financial condition and resultsof operations.

Therisks that we describe in our public filings are not the only risks that weface. Additional risks and uncertainties not currently known to us, or that wepresently deem to be immaterial, also may materially adversely affect ourbusiness, financial condition and results of operations.

**Item 2.Unregistered Sales of Equity Securities and Use of Proceeds**

**(a)Unregistered Sales of Equity Securities**

None

**(b) Useof Proceeds**

None

**(c)Issuer Purchases of Equity Securities**

From time to time, theGeneral Partner may repurchase its common shares under a $750 millionrepurchase program that initially was approved by the General Partner’s Boardof Directors and publicly announced in October 2001 (the “Repurchase Program”).In July 2005, the General Partner’s Board of Directors authorized management topurchase up to $750 million of the General Partner’s common shares pursuant tothis plan. Under the Repurchase Program, the General Partner also executesshare repurchases on an ongoing basis associated with certain employeeelections under the General Partner’s compensation and benefit programs.

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The following table showsthe General Partner’s share repurchase activity for each of the three months inthe quarter ended September 30, 2006:
| Month     | ** ** | **Total Number of  Shares  Purchased (1)** | ** ** | **Average Price  Paid per Share** | ** ** | **Total Number of  Shares Purchased as  Part of Publicly  Announced Plans or  Programs** | ** ** | **Maximum Number  (or Approximate  Dollar Value) of  Shares that May  Yet be Purchased  Under the Plans or  Programs (2)** | ** ** |
|-----------|------------|-----------------------------------------------------------|------------|--------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| July      |       | 6,995                                                     |       | $                                                | 36.28      |                                                                                                                             | 6,995      |                                                                                                                                                                                   |       |   |
| August    |       | 56,031                                                    |       | $                                                | 37.09      |                                                                                                                             | 56,031     |                                                                                                                                                                                   |       |   |
| September |       | 4,620                                                     |       | $                                                | 37.01      |                                                                                                                             | 4,620      |                                                                                                                                                                                   |       |   |
| Total     |       | 67,646                                                    |       | $                                                | 37.00      |                                                                                                                             | 67,646     |                                                                                                                                                                                   |       |   |

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(1) Includes 17,275common shares of the General Partner repurchased under its Employee StockPurchase Plan, 42,922 common shares swapped to pay the exercise price of stockoptions and 7,449 common shares repurchased through a Rabbi Trust under itsExecutives’ Deferred Compensation Plan.

(2) The number of commonshares of the General Partner that may yet be repurchased in the open market tofund shares purchased under the General Partner’s Employee Stock Purchase Plan,as amended, was 159,206 as of September 30, 2006. The approximate dollar valueof common shares that may yet be purchased under the General Partner’s ShareRepurchase Program was $450.4 million as of September 30, 2006.

**Item 3. Defaultsupon Senior Securities**

During the period coveredby this Report, we did not default under the terms of any of our material indebtedness,nor has there been any material arrearage of dividends or other materialuncured delinquency with respect to any class of our preferred equity.

**Item 4. Submissionof Matters to a Vote of Security Holders**

None.

**Item 5. OtherInformation**

During the period coveredby this Report, there was no information required to be disclosed by us in aCurrent Report on Form 8-K that was not so reported, nor were there anymaterial changes to the procedures by which our security holders may recommendnominees to the General Partner’s Board of Directors.

**Item 6. Exhibits**

(a)                                  Exhibits

1.1                                 TermsAgreement, dated as of August 17, 2006, by and among the General Partner, thePartnership, and the several underwriters named in the Terms Agreement (includingthe terms of the related Underwriting Agreement attached as Annex A to theTerms Agreement and made a part thereof) (filed as Exhibit 1.1 to DRLP’sCurrent Report on Form 8-K, as filed with the SEC on August 23, 2006, File No.001-09044, and incorporated herein by this reference).

3.1                                 SecondAmended and Restated Agreement of Limited Partnership of the Partnership (filedas Exhibit 4.1 to the Partnership’s Current Report on Form 8-K, as filed withthe SEC on July 16, 1999, File No. 000-20625, and incorporated herein by thisreference).

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3.2                                 FirstAmendment to the Second Amended and Restated Agreement of Limited Partnershipof the Partnership (filed as Exhibit 10.2 to the General Partner’s AnnualReport on Form 10-K for the fiscal year ended December 31, 2000, as filed withthe SEC on March 28, 2001, File No. 001-09044, and incorporated herein by thisreference).

3.3                                 SecondAmendment to the Second Amended and Restated Agreement of Limited Partnershipof the Partnership (filed as Exhibit 10.3 to the General Partner’s AnnualReport on Form 10-K for the fiscal year ended December 31, 2001, as filed withthe SEC on March 15, 2002, File No. 001-09044, and incorporated herein by thisreference).

3.4                                 ThirdAmendment to the Second Amended and Restated Agreement of Limited Partnershipof the Partnership (filed as Exhibit 10.4 to the General Partner’s AnnualReport on Form 10-K for the fiscal year ended December 31, 2001, as filed withthe SEC on March 15, 2002, File No. 001-09044, and incorporated herein by thisreference).

3.5                                 FourthAmendment to the Second Amended and Restated Agreement of Limited Partnershipof the Partnership (filed as Exhibit 10.5 to the General Partner’s AnnualReport on Form 10-K for the fiscal year ended December 31, 2001, as filed withthe SEC on March 15, 2002, File No. 001-09044, and incorporated herein by thisreference).

3.6                                 FifthAmendment to the Second Amended and Restated Agreement of Limited Partnershipof the Partnership (filed as Exhibit 10.6 to the General Partner’s AnnualReport on Form 10-K for the fiscal year ended December 31, 2005, as filed withthe SEC on March 7, 2006, File No. 001-09044, and incorporated herein by thisreference).

3.7                                 SixthAmendment to the Second Amended and Restated Agreement of Limited Partnershipof the Partnership (filed as Exhibit 10.7 to the General Partner’s AnnualReport on Form 10-K for the fiscal year ended December 31, 2005, as filed withthe SEC on March 7, 2006, File No. 001-09044, and incorporated herein by thisreference).

3.8                                 SeventhAmendment to the Second Amended and Restated Agreement of Limited Partnershipof the Partnership (filed as Exhibit 10.8 to the General Partner’s AnnualReport on Form 10-K for the fiscal year ended December 31, 2005, as filed withthe SEC on March 7, 2006, File No. 001-09044, and incorporated herein by thisreference).

3.9                                 EighthAmendment to the Second Amended and Restated Agreement of Limited Partnershipof the Partnership (filed as Exhibit 3.1 to the Partnership’s Current Report onForm 8-K, as filed with the SEC on February 6, 2006, File No. 000-20625, andincorporated herein by this reference).

3.10                           NinthAmendment to the Second Amended and Restated Agreement of Limited Partnershipof the Partnership, to add a new *Exhibit T*establishing the amount, terms and rights of the Partnership’s 7.25% Series NCumulative Redeemable Preferred Units, liquidation preference (filed as Exhibit3.1 to the Partnership’s Current Report on Form 8-K, as filed with the SEC onJuly 5, 2006, and incorporated herein by this reference)

3.11                           Certificateof Amendment to the Second Amended and Restated Agreement of LimitedPartnership of the Partnership, to amend and restate *Exhibit S* thereto (filed as Exhibit 3.2 to the Partnership’sCurrent Report on Form 8-K, as filed with the SEC on July 5, 2006, andincorporated herein by this reference).

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4.1                                 TwentiethSupplemental Indenture, dated as of July 24, 2006, by and between thePartnership and J.P. Morgan Trust Company, National Association (successor ininterest to The First National Bank of Chicago) (filed as Exhibit 4.1 to thePartnership’s Current Report on Form 8-K, filed with the SEC on July 28, 2006,and incorporated herein by this reference).

4.2                                 FirstSupplemental Indenture, dated as of August 24, 2006, by and between thePartnership and J.P. Morgan Trust Company, National Association, including theform of global note evidencing the 5.625% Senior Notes Due 2011 (filed asExhibit 4.1 to the Partnership’s Current Report on Form 8-K, as filed with theSEC on August 30, 2006, and incorporated herein by this reference).

4.3                                 SecondSupplemental Indenture, dated as of August 24, 2006, by and between thePartnership and J.P. Morgan Trust Company, National Association, including theform of global note evidencing the 5.95% Senior Notes Due 2017 (filed asExhibit 4.2 to the Partnership’s Current Report on Form 8-K, as filed with theSEC on August 30, 2006, and incorporated herein by this reference).

10.1                           AmendmentTen to the 1995 Key Employees’ Stock Option Plan of Duke Realty Investments,Inc., dated as of July 26, 2006.*

10.2                           AmendmentThree to the Directors’ Deferred Compensation Plan of Duke-Weeks RealtyCorporation, dated as of July 26, 2006.*

11.1                           StatementRegarding Computation of Earnings. **

12.1                           Ratioof Earning to Combined Fixed Charges and Preferred Stock Distributions.*

12.2                           Ratioof Earnings to Debt Service.*

31.1                           Rule13a-14(a) Certification of the General Partner’s Chief Executive Officer.*

31.2                           Rule13a-14(a) Certification of the General Partner’s Chief Financial Officer.*

32.1                           Section1350 Certification of the General Partner’s Chief Executive Officer.*

32.2                           Section1350 Certification of the General Partner’s Chief Financial Officer.*

 

* Filed herewith.

** Data required by Statement of Financial AccountingStandards No. 128, *Earnings per Share*,is provided in Note 6 to the condensed consolidated financial statementsincluded in this report.

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**SIGNATURES**

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.
|                         | DUKE REALTY LIMITED PARTNERSHIP                                              |
|-------------------------|------------------------------------------------------------------------------|
|                    |                                                                         |
| Date: November 13, 2006 | /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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