**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 

**(MarkOne)**
| **ý** | ** ** | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                    |
|------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                 |
| ** ** | ** ** | **For the  quarterly period ended June 30, 2005**                                                                                                                                                                                                                     |
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                 |
| **OR**     |
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                 |
| **o**      | ** ** | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                   |
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                 |
| ** ** | ** ** | **For the  transition period from                   to                   .** |

 

**Commission File Number: 0-20625**

 

**DUKE REALTY LIMITED PARTNERSHIP**

(Exact Name of Registrant as Specified in Its Charter)

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

** **

**Registrant’s telephone number, including areacode: **(317) 808-6000

** **

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.

 

Yes  ý    No    o

 

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 12b-2of the Securities Exchange Act).

 

Yes  o   No    ý

 

The number of CommonUnits outstanding as of August 1, 2005 was 156,896,618.

 

 

----

 

**DUKE REALTY LIMITED PARTNERSHIP**

 

**INDEX**

 
| **Part I - Financial Information**                                                                 | ** **                                                                                                                    |
|---------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------|
| ** **                                                                                              | ** **                                                                                                                    |
| **Item 1. Financial Statements**                                                                        |                                                                                                                          |
|                                                                                                    |                                                                                                                          |   |
|                                                                                                    | Condensed Consolidated  Balance Sheets as of June 30, 2005 (Unaudited) and December 31,  2004                       |   |
|                                                                                                    |                                                                                                                          |   |
|                                                                                                    | Condensed  Consolidated Statements of Operations (Unaudited) for the three and six  months ended June 30, 2005  and 2004 |   |
|                                                                                                    |                                                                                                                          |   |
|                                                                                                    | Condensed Consolidated  Statements of Cash Flows (Unaudited) for the six months ended June 30,  2005 and 2004            |   |
|                                                                                                    |                                                                                                                          |   |
|                                                                                                    | Condensed Consolidated  Statement of Partners’ Equity (Unaudited) for the six months ended  June 30, 2005           |   |
|                                                                                                    |                                                                                                                          |   |
|                                                                                                    | Notes to Condensed  Consolidated Financial Statements (Unaudited)                                                             |   |
|                                                                                                    |                                                                                                                          |   |
|                                                                                                    | Report of Independent  Registered Public Accounting Firm                                                                      |   |
|                                                                                                    |                                                                                                                          |   |
| **Item 2. Management’s  Discussion and Analysis of Financial Condition and Results of Operations** |                                                                                                                          |
|                                                                                                    |                                                                                                                          |   |
| **Item 3.  Quantitative and Qualitative Disclosures About Market Risk**                                 |                                                                                                                          |
|                                                                                                    |                                                                                                                          |   |
| **Item 4. Controls  and Procedures**                                                                    |                                                                                                                          |
|                                                                                                    |                                                                                                                          |   |
| **Part II - Other  Information**                                                                   |                                                                                                                          |
|                                                                                                    |                                                                                                                          |   |
|                                                                                                    | Item 1.                                                                                                                       | Legal Proceedings |   |
|                                                                                                    | Item 2.                                                                                                                       | Unregistered  Sales of Equity Securities and Use of Proceeds |   |
|                                                                                                    | Item 3.                                                                                                                       | Defaults  Upon Senior Securities |   |
|                                                                                                    | Item 4.                                                                                                                       | Submission  of Matters to a Vote of Security Holders |   |
|                                                                                                    | Item 5.                                                                                                                       | Other Information |   |
|                                                                                                    | Item 6.                                                                                                                       | Exhibits |   |

 

----

 

**PART I - FINANCIALINFORMATION**

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

**DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES**

**Condensed Consolidated BalanceSheets**

**(in thousands)**

 
| ** **                                                                                 | ** ** | **June 30,** | ** **    | **December 31,** | ** ** |
|--------------------------------------------------------------------------------------------|------------|-------------------|---------------|-----------------------|------------|
| ** **                                                                                 | ** ** | **2005**          | ** **    | **2004**              | ** ** |
| ** **                                                                                 | ** ** | **(Unaudited)**   | ** **    | ** **            | ** ** |
| **ASSETS**                                                                                 |       |              |          |                  |       |
| Real estate  investments:                                                                  |       |              |          |                  |       |
| Land and  improvements                                                                     | ** ** | **$**             | **764,069**   |                  | $          | 710,379 |   |
| Buildings and  tenant improvements                                                         | ** ** | **4,873,739**     |          | 4,666,715             |       |
| Construction in  progress                                                                  | ** ** | **119,667**       |          | 109,788               |       |
| Investments in  unconsolidated companies                                                   | ** ** | **301,955**       |          | 287,554               |       |
| Land held for  development                                                                 | ** ** | **391,481**       |          | 393,100               |       |
| ** **                                                                                 |       | **6,450,911**     |          | 6,167,536             |       |
| Accumulated  depreciation                                                                  | ** ** | **(856,038**      | **)**         | (788,900              | )          |
|                                                                                       | ** ** | ** **        |          |                  |       |
| Net real estate  investments                                                               | ** ** | **5,594,873**     |          | 5,378,636             |       |
|                                                                                       | ** ** | ** **        |          |                  |       |
| Cash and cash  equivalents                                                                 | ** ** | **6,489**         |          | 5,770                 |       |
| Accounts  receivable, net of allowance of $2,011 and $1,238                                | ** ** | **14,129**        |          | 17,127                |       |
| Straight-line  rent receivable, net of allowance of $1,565 and $1,646                      | ** ** | **97,091**        |          | 89,497                |       |
| Receivables on  construction contracts, including retentions                               | ** ** | **75,026**        |          | 59,342                |       |
| Deferred  financing costs, net of accumulated amortization of $11,749 and $9,006           | ** ** | **29,681**        |          | 31,924                |       |
| Deferred leasing  and other costs, net of accumulated amortization of $106,817 and $88,888 | ** ** | **259,782**       |          | 203,882               |       |
| Escrow deposits  and other assets                                                          | ** ** | **126,228**       |          | 108,466               |       |
| ** **                                                                                 |       | **$**             | **6,203,299** |                  | $          | 5,894,644 |   |
|                                                                                       |       |              |          |                  |       |
| **LIABILITIES  AND PARTNERS’ EQUITY**                                                 |       |              |          |                  |       |
|                                                                                       |       |              |          |                  |       |
| Indebtedness:                                                                              |       |              |          |                  |       |
| Secured debt                                                                               | ** ** | **$**             | **204,999**   |                  | $          | 203,081 |   |
| Unsecured notes                                                                            | ** ** | **2,550,509**     |          | 2,315,623             |       |
| Unsecured line  of credit                                                                  | ** ** | **120,000**       |          | —                |       |
| ** **                                                                                 |       | **2,875,508**     |          | 2,518,704             |       |
|                                                                                       | ** ** | ** **        |          |                  |       |
| Construction  payables and amounts due subcontractors, including retentions                | ** ** | **75,762**        |          | 67,740                |       |
| Accounts payable                                                                           | ** ** | **1,272**         |          | 526                   |       |
| Accrued  expenses:                                                                         |       |              |          |                  |       |
| Real estate  taxes                                                                         | ** ** | **67,365**        |          | 55,745                |       |
| Interest                                                                                   | ** ** | **35,944**        |          | 36,531                |       |
| Other                                                                                      | ** ** | **37,463**        |          | 48,605                |       |
| Other  liabilities                                                                         | ** ** | **125,206**       |          | 105,838               |       |
| Tenant security  deposits and prepaid rents                                                | ** ** | **37,059**        |          | 39,827                |       |
| Total  liabilities                                                                         | ** ** | **3,255,579**     |          | 2,873,516             |       |
|                                                                                       |       |              |          |                  |       |
| Partners’  equity:                                                                    |       |              |          |                  |       |
| General Partner                                                                            |       |              |          |                  |       |
| Common equity                                                                              | ** ** | **2,166,560**     |          | 2,214,473             |       |
| Preferred equity  (liquidation preference of $657,250)                                     | ** ** | **616****,780**   |          | 616,780               |       |
| ** **                                                                                 |       | **2,783,340**     |          | 2,831,253             |       |
| Limited  Partners’ common equity                                                      | ** ** | **189,612**       |          | 196,422               |       |
| Accumulated  other comprehensive income                                                    | ** ** | **(25,232**       | **)**         | (6,547                | )          |
| Total Partners’  equity                                                               | ** ** | **2,947,720**     |          | 3,021,128             |       |
|                                                                                       | ** ** | **$**             | **6,203,299** |                  | $          | 5,894,644 |   |

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

2

----

 

**DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES**

**Condensed Consolidated Statementsof Operations**

**For the three and six months ended June 30,**

**(in thousands, except perunit data)**

**(Unaudited)**

 
| ** **                                                             | ** ** | **Three Months Ended** | ** **  | **Six Months Ended** | ** ** |
|------------------------------------------------------------------------|------------|------------------------|-------------|----------------------|------------|
| ** **                                                             | ** ** | **2005**               | ** **  | **2004**             | ** ** | **2005** | ** ** | **2004** | ** ** |
| **RENTAL  OPERATIONS:**                                                |       |                   |        |                 |       |   |   |   |   |
| Revenues:                                                              |       |                   |        |                 |       |   |   |   |   |
| Rental income  from continuing operations                              | ** ** | **$**                  | **189,482** |                 | $          | 178,503 | ** ** | **$** | **378,698** |   | $ | 358,341 |   |
| Equity in  earnings of unconsolidated companies                        | ** ** | **15,684**             |        | 5,770                | ** ** | **20,890** |   | 10,295 | ** ** |
|                                                                   | ** ** | **205,166**            |        | 184,273              | ** ** | **399,588** |   | 368,636 | ** ** |
| Operating  expenses:                                                   |       |                   |        |                 |       |   |   |   |   |
| Rental expenses                                                        | ** ** | **42,277**             |        | 35,913               | ** ** | **86,112** |   | 74,529 |   |
| Real estate  taxes                                                     | ** ** | **23,121**             |        | 21,055               | ** ** | **45,705** |   | 41,811 |   |
| Interest expense                                                       | ** ** | **35,921**             |        | 32,119               | ** ** | **70,835** |   | 64,049 |   |
| Depreciation and  amortization                                         | ** ** | **63,789**             |        | 50,296               | ** ** | **126,103** |   | 100,571 |   |
| ** **                                                             |       | **165,108**            |        | 139,383              | ** ** | **328,755** |   | 280,960 |   |
| Earnings from  continuing rental operations                            | ** ** | **40,058**             |        | 44,890               | ** ** | **70,833** |   | 87,676 |   |
| **SERVICE  OPERATIONS**                                                |       |                   |        |                 |       |   |   |   |   |
| Revenues:                                                              |       |                   |        |                 |       |   |   |   |   |
| General  contractor gross revenue                                      | ** ** | **101,808**            |        | 89,733               | ** ** | **188,424** |   | 172,456 |   |
| General  contractor costs                                              | ** ** | **(94,597**            | **)**       | (83,242              | )          | **(174,156** | **)** | (159,278 | ) |
| Net general  contractor revenue                                        | ** ** | **7,211**              |        | 6,491                | ** ** | **14,268** |   | 13,178 |   |
| Property  management, maintenance and leasing fees                     | ** ** | **4,153**              |        | 3,855                | ** ** | **8,032** |   | 7,790 |   |
| Construction  management and development activity income               | ** ** | **12,038**             |        | 4,051                | ** ** | **20,032** |   | 4,630 |   |
| Other income                                                           | ** ** | **346**                |        | 342                  | ** ** | **3,111** |   | 576 |   |
| Total revenue                                                          | ** ** | **23,748**             |        | 14,739               | ** ** | **45,443** |   | 26,174 |   |
| Operating  expenses                                                    | ** ** | **11,485**             |        | 10,016               | ** ** | **22,260** |   | 19,409 |   |
| Earnings from  service operations                                      | ** ** | **12,263**             |        | 4,723                | ** ** | **23,183** |   | 6,765 |   |
| General and  administrative expense                                    | ** ** | **(6,279**             | **)**       | (5,625               | )          | **(13,858** | **)** | (13,942 | ) |
| Operating income                                                       | ** ** | **46,042**             |        | 43,988               | ** ** | **80,158** |   | 80,499 |   |
| **OTHER  INCOME (EXPENSE)**                                            |       |                   |        |                 |       |   |   |   |   |
| Interest income                                                        | ** ** | **1,083**              |        | 1,594                | ** ** | **2,403** |   | 3,102 |   |
| Earnings from  sale of land, net of impairment adjustments             | ** ** | **3,266**              |        | 1,104                | ** ** | **3,409** |   | 5,733 |   |
| Other expenses                                                         | ** ** | **(166**               | )           | (71                  | )          | **(244** | **)** | (74 | ) |
| Other minority  interest in earnings of subsidiaries                   | ** ** | **(29**                | **)**       | (425                 | )          | **(66** | **)** | (732 | ) |
| Income from  continuing operations                                     | ** ** | **50****,196**         |        | 46,190               | ** ** | **85****,660** |   | 88,528 |   |
| Discontinued  operations:                                              |       |                   |        |                 |       |   |   |   |   |
| Net income from  discontinued operations                               | ** ** | **560**                |        | 555                  | ** ** | **1,176** |   | 1,644 |   |
| Gain on sale of  discontinued operations, net of impairment adjustment | ** ** | **5,133**              |        | 695                  | ** ** | **8,834** |   | 4,704 |   |
| Income from  discontinued operations                                   | ** ** | **5,693**              |        | 1,250                | ** ** | **10****,010** |   | 6,348 |   |
| Net income                                                             | ** ** | **55,889**             |        | 47,440               | ** ** | **95****,670** |   | 94,876 |   |
| Dividends on  preferred units                                          | ** ** | **(11,620**            | **)**       | (8,401               | )          | **(23,240** | **)** | (16,001 | ) |
| Adjustments for  redemption of preferred units                         | ** ** | **—**             |        | (31                  | )          | **—** |   | (3,645 | ) |
| Net income  available for common unitholders                           | ** ** | **$**                  | **44,269**  |                 | $          | 39,008 | ** ** | **$** | **72,430** |   | $ | 75,230 |   |
|                                                                   |       |                   |        |                 |       |   |   |   |   |
| Basic net income  per common unit:                                     |       |                   |        |                 |       |   |   |   |   |
| Continuing  operations                                                 | ** ** | **$**                  | **.24**     |                 | $          | .24 | ** ** | **$** | **.40** |   | $ | .45 |   |
| Discontinued  operations                                               | ** ** | **.04**                |        | .01                  | ** ** | **.06** |   | .04 |   |
| Total                                                                  | ** ** | **$**                  | **.28**     |                 | $          | .25 | ** ** | **$** | **.46** |   | $ | .49 |   |
| Diluted net  income per common unit:                                   |       |                   |        |                 |       |   |   |   |   |
| Continuing  operations                                                 | ** ** | **$**                  | **.24**     |                 | $          | .24 | ** ** | **$** | **.40** |   | $ | .44 |   |
| Discontinued  operations                                               | ** ** | **.04**                |        | .01                  | ** ** | **.06** |   | .04 |   |
| Total                                                                  | ** ** | **$**                  | **.28**     |                 | $          | .25 | ** ** | **$** | **.46** |   | $ | .48 |   |
| Weighted average  number of common units outstanding                   | ** ** | **156,986**            |        | 156,045              | ** ** | **156,967** |   | 154,244 |   |
| Weighted average  number of common and dilutive potential common units | ** ** | **157,696**            |        | 156,828              | ** ** | **157,711** |   | 156,871 |   |

 

See accompanying Notes to Condensed Consolidated Financial Statements

 

3

----

 

**DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES**

**Condensed Consolidated Statementsof Cash Flows**

**For the six months ended June 30,**

**(in thousands)**

**(Unaudited)**

 
| ** **                                                                                                   | ** ** | **2005**     | ** ** | **2004**   | ** ** |
|--------------------------------------------------------------------------------------------------------------|------------|--------------|------------|------------|------------|
| Cash flows from  operating activities:                                                                       |       |         | ** ** |       |       |
| Net income                                                                                                   | ** ** | **$**        | **95,670** | ** ** | $          | 94,876 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities:                           |       |         | ** ** |       |       |
| Depreciation of  buildings and tenant improvements                                                           | ** ** | **104,013**  | ** ** | 87,634     |       |
| Amortization of  deferred leasing and other costs                                                            | ** ** | **23,337**   | ** ** | 18,014     |       |
| Amortization of  deferred financing costs                                                                    | ** ** | **3,087**    | ** ** | 2,068      |       |
| Minority  interest in earnings                                                                               | ** ** | **66**       | ** ** | 732        |       |
| Straight-line  rent adjustment                                                                               | ** ** | **(11,221**  | **)**      | (10,856    | )          |
| Earnings from  land and depreciated property sales                                                           | ** ** | **(12,242**  | **)**      | (10,437    | )          |
| Build-for-sale  operations, net                                                                              | ** ** | **14,470**   | ** ** | (3,436     | )          |
| Construction  contracts, net                                                                                 | ** ** | **(13,696**  | **)**      | (7,742     | )          |
| Other accrued  revenues and expenses, net                                                                    | ** ** | **(2,850**   | **)**      | (12,418    | )          |
| Operating  distributions received in excess of (less than) equity in earnings from  unconsolidated companies | ** ** | **(5,149**   | **)**      | 6,770      |       |
| **Net  cash provided by operating activities**                                                               | ** ** | **195,485**  | ** ** | 165,205    |       |
|                                                                                                         |       |         | ** ** |       |       |
| Cash flows from  investing activities:                                                                       |       |         | ** ** |       |       |
| Development of  real estate investments                                                                      | ** ** | **(68,230**  | **)**      | (63,544    | )          |
| Acquisition of  real estate investments                                                                      | ** ** | **(262,720** | **)**      | (45,616    | )          |
| Acquisition of  land held for development and infrastructure costs                                           | ** ** | **(40,163**  | **)**      | (39,186    | )          |
| Recurring tenant  improvements                                                                               | ** ** | **(29,948**  | **)**      | (28,485    | )          |
| Recurring  leasing costs                                                                                     | ** ** | **(16,346**  | **)**      | (13,202    | )          |
| Recurring  building improvements                                                                             | ** ** | **(6,086**   | **)**      | (8,305     | )          |
| Other deferred  leasing costs                                                                                | ** ** | **(7,473**   | **)**      | (8,782     | )          |
| Other deferred  costs and other assets                                                                       | ** ** | **(3,556**   | **)**      | (9,648     | )          |
| Tax deferred  exchange escrow, net                                                                           |       | **—**   | ** ** | (2,448     | )          |
| Proceeds from  land and depreciated property sales, net                                                      | ** ** | **70,616**   | ** ** | 37,155     |       |
| Investment in  secured mortgage loan                                                                         |       | **—**   | ** ** | (65,000    | )          |
| Advances to  unconsolidated companies                                                                        | ** ** | **(8,102**   | **)**      | (1,918     | )          |
| **Net  cash used for investing activities**                                                                  | ** ** | **(372,008** | **)**      | (248,979   | )          |
|                                                                                                         |       |         | ** ** |       |       |
| Cash flows from  financing activities:                                                                       |       |         | ** ** |       |       |
| Proceeds from  issuance of common units, net                                                                 | ** ** | **1,342**    | ** ** | 9,262      |       |
| Proceeds from  issuance of preferred units, net                                                              |       | **—**   | ** ** | 144,975    |       |
| Payments for  redemption of preferred units                                                                  |       | **—**   | ** ** | (102,651   | )          |
| Redemption of  warrants                                                                                      |       | **—**   | ** ** | (2,881     | )          |
| Proceeds from  unsecured debt issuance                                                                       | ** ** | **400,000**  | ** ** | 125,000    |       |
| Payments on  unsecured debt                                                                                  | ** ** | **(100,000** | **)**      | —     |       |
| Proceeds  (payments) from (on) term loan                                                                     | ** ** | **(65,000**  | **)**      | 65,000     |       |
| Payments on  secured indebtedness including principal amortization                                           | ** ** | **(9,408**   | **)**      | (20,543    | )          |
| Borrowings  (payments) on line of credit, net                                                                | ** ** | **120,000**  | ** ** | 25,000     |       |
| Distributions to  common unitholders                                                                         | ** ** | **(145,995** | **)**      | (141,504   | )          |
| Distributions to  preferred unitholders                                                                      | ** ** | **(23,240**  | **)**      | (15,188    | )          |
| Contributions  (distributions) from (to) minority interest                                                   | ** ** | **12**       | ** ** | (449       | )          |
| Deferred  financing costs                                                                                    | ** ** | **(469**     | **)**      | (4,151     | )          |
| **Net  cash provided from financing activities**                                                             | ** ** | **177,242**  | ** ** | 81,870     |       |
| **Net  increase (decrease) in cash and cash equivalents**                                                    | ** ** | **719**      | ** ** | (1,904     | )          |
|                                                                                                         |       |         | ** ** |       |       |
| Cash and cash  equivalents at beginning of period                                                            | ** ** | **5,770**    | ** ** | 12,695     |       |
| Cash and cash  equivalents at end of period                                                                  | ** ** | **$**        | **6,489**  | ** ** | $          | 10,791 |   |
| Other non-cash  items:                                                                                       |       |         | ** ** |       |       |
| Conversion of  Limited Partner Units to common shares of General Partner                                     | ** ** | **$**        | **1,440**  | ** ** | $          | 3,047 |   |
| Conversion of  Series D preferred units to common shares of General Partner                             | ** ** | **$**        | **—** | ** ** | $          | 130,665 |   |
| Issuance of  Limited Partner Units for acquisition of minority interest                                      | ** ** | **$**        | **15,000** | ** ** | $          | — |   |
| Assumption of  secured debt on acquisition of real estate                                                    | ** ** | **$**        | **11,743** | ** ** | $          | — |   |

 

See accompanying Notes to Condensed Consolidated Financial Statements

 

4

----

 

**DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES**

**Condensed Consolidated Statementof Partners’ Equity**

**For the six months ended June 30, 2005**

**(in thousands, except perunit data)**

**(Unaudited)**

 
| ** **                                                                      | ** ** | ** **          | ** **    | ** **         | ** ** | **Limited** | ** ** | **Accumulated**   | ** **  | ** **  | ** ** |
|---------------------------------------------------------------------------------|------------|---------------------|---------------|--------------------|------------|-------------|------------|-------------------|-------------|-------------|------------|
| ** **                                                                      | ** ** | **General Partner** | ** **    | **Partners’** | ** ** | **Other**   | ** ** | ** **        | ** **  |
| ** **                                                                      | ** ** | **Common**          | ** **    | **Preferred**      | ** ** | **Common**  | ** ** | **Comprehensive** | ** **  | ** **  | ** ** |
| ** **                                                                      | ** ** | **Equity**          | ** **    | **Equity**         | ** ** | **Equity**  | ** ** | **Income (Loss)** | ** **  | **Total**   | ** ** |
| **Balance  at December 31, 2004**                                          | ** ** | **$**               | **2,214,473** | ** **         | **$**      | **616,780** | ** ** | **$**             | **196,422** | ** **  | **$**      | **(6,547** | **)** | **$** | **3,021,128** | ** ** |
|                                                                            |       |                |          |               |       |        |       |              |        |        |       |
| Comprehensive income:                                                           |       |                |          |               |       |        |       |              |        |        |       |
|                                                                            |       |                |          |               |       |        |       |              |        |        |       |
| Net income                                                                      |       | 65,783              |          | 23,240             |       | 6,647       |       | —            |        | 95,670      |       |
|                                                                            |       |                |          |               |       |        |       |              |        |        |       |
| Distributions to  preferred unitholders                                         |       | —              |          | (23,240            | )          | —      |       | —            |        | (23,240     | )          |
|                                                                            |       |                |          |               |       |        |       |              |        |        |       |
| Gains (losses)  on derivative instruments                                       |       | —              |          | —             |       | —      |       | (18,685           | )           | (18,685     | )          |
|                                                                            |       |                |          |               |       |        |       |              |        |        |       |
| Comprehensive  income available for common unitholders                          |       |                |          |               |       |        |       |              |        | 53,745      |       |
|                                                                            |       |                |          |               |       |        |       |              |        |        |       |
| Capital  contribution from General Partner                                      |       | 1,417               |          | —             |       | —      |       | —            |        | 1,417       |       |
|                                                                            |       |                |          |               |       |        |       |              |        |        |       |
| Acquisition of  partnership interest for common stock of   General Partner |       | 17,091              |          | —             |       | (15,651     | )          | —            |        | 1,440       |       |
|                                                                            |       |                |          |               |       |        |       |              |        |        |       |
| Acquisition of  minority interest in exchange for Limited Partner Units         |       | —              |          | —             |       | 15,000      |       | —            |        | 15,000      |       |
|                                                                            |       |                |          |               |       |        |       |              |        |        |       |
| Tax benefits  from Employee Stock Plans                                         |       | 55                  |          | —             |       | —      |       | —            |        | 55          |       |
|                                                                            |       |                |          |               |       |        |       |              |        |        |       |
| FASB 123  Compensation Expense                                                  |       | 930                 |          | —             |       | —      |       | —            |        | 930         |       |
|                                                                            |       |                |          |               |       |        |       |              |        |        |       |
| Distribution to  General Partner                                                |       | (14                 | )             | —             |       | —      |       | —            |        | (14         | )          |
|                                                                            |       |                |          |               |       |        |       |              |        |        |       |
| Distributions to  partners ($0.93 per Common Unit)                              |       | (133,175            | )             | —             |       | (12,806     | )          | —            |        | (145,981    | )          |
|                                                                            |       |                |          |               |       |        |       |              |        |        |       |
| **Balance  at June 30, 2005**                                              | ** ** | **$**               | **2,166,560** | ** **         | **$**      | **616,780** | ** ** | **$**             | **189,612** | ** **  | **$**      | **(25,232** | **)** | **$** | **2,947,720** | ** ** |
|                                                                            |       |                |          |               |       |        |       |              |        |        |       |
| **Common  Units outstanding at June 30, 2005**                             | ** ** | **143,509**         | ** **    | ** **         | ** ** | **13,494**  |       |              |        | **157,003** |       |

 

See accompanying Notes to Condensed Consolidated Financial Statements

 

5

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**DUKE REALTY LIMITED PARTNERSHIP**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**(Unaudited)**

 

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

 

Theinterim condensed consolidated financial statements included herein have beenprepared by Duke Realty Limited Partnership (the “Partnership”) without audit(except for the Balance Sheet as of December 31, 2004). The financialstatements have been prepared in accordance with accounting principlesgenerally accepted in the United States of America for interim financialinformation and in accordance with Rule 10-01 of Regulation S-X of theSecurities Exchange Act of 1934, as amended. Accordingly, they do not includeall of the information and footnotes required by accounting principlesgenerally accepted in the United States of America for complete financialstatements. In the opinion of management, all adjustments (consisting of normalrecurring adjustments) considered necessary for a fair presentation have beenincluded. These financial statements should be read in conjunction withManagement’s Discussion and Analysis of Financial Condition and Results ofOperations included herein and the condensed consolidated financial statementsand notes thereto included in our Annual Report on Form 10-K for the yearended December 31, 2004.

 

ThePartnership was formed on October 4, 1993, when Duke Realty Corporation(the “General Partner”) contributed all of its properties and related assetsand liabilities, along with the net proceeds from the issuance of additionalshares of the General Partner through an offering, to the Partnership.Simultaneously, the Partnership completed the acquisition of Duke Associates, afull-service commercial real estate firm operating in the Midwest. The GeneralPartner was formed in 1985 and qualifies as a Real Estate Investment Trust (“REIT”)under provisions of the Internal Revenue Code. The General Partner is the solegeneral partner of the Partnership, owning 91.4% of the common partnershipinterests as of June 30, 2005 (“General Partner Units”). The remaining8.6% of the Partnership’s common interest is owned by limited partners (“LimitedPartner Units” and, together with the General Partner Units, the “Common Units”).The Limited Partner Units are exchangeable for shares of the General Partner’scommon stock on a one-for-one basis subject generally to a one-year holdingperiod or, under certain circumstances, the General Partner may repurchase theLimited Partnership Units for cash. The General Partner also owns preferredpartnership interests in the Partnership (“Preferred Units”).

 

We ownand operate a portfolio of industrial, office and retail properties in themidwestern and southeastern United States and provide real estate services tothird-party owners. We conduct our service operations through Duke RealtyServices LLC (“DRS”), Duke Realty Services Limited Partnership (“DRSLP”) andDuke Construction Limited Partnership (“DCLP”).

 

**2.****     Indebtedness**

 

Wehave one unsecured line of credit available at June 30, 2005, described asfollows (in thousands):

 
| ** **                | ** ** | **Borrowing** | ** ** | **Maturity** | ** **        | **Interest** | ** **   | **Outstanding**           | ** ** |
|---------------------------|------------|---------------|------------|--------------|-------------------|--------------|--------------|---------------------------|------------|
| **Description**           | ** ** | **Capacity**  | ** ** | **Date**     | ** **        | **Rate**     | ** **   | **at June 30, 2005** | ** ** |
| Unsecured Line  of Credit |       | $             | 500,000    |         | January 2007 |         | LIBOR + .60% |                      | $          | 120,000 |   |
|                           |            |               |            |              |                   |              |              |                           |            |  |  |

 

The line of credit is used to funddevelopment activities, acquire additional rental properties and provideworking capital.

 

The line of credit provides us withan option to obtain borrowings from financial institutions that participate inthe line, at rates lower than the stated interest rate, subject to certainrestrictions. Amounts outstanding on the unsecured line ofcredit at June 30, 2005, range from LIBOR + .17 to .60 (3.31% to 3.82% at June 30,2005).

 

6

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The line of credit also containsfinancial covenants that require us to meet defined levels of performance.  As of June 30, 2005, we are incompliance with all covenants and expect to remain in compliance for the foreseeablefuture.

 

We took the following actionsduring the six-month period ended June 30, 2005 relevant to ourindebtedness:

•      InJanuary 2005, we retired our $65.0 million variable rate term loan.

•      InMarch 2005, we retired $100.0 million of 6.94% senior unsecured debt thatmatured.

•      InMay 2005, we entered into a $400 million term loan priced at LIBOR + .30%and scheduled to mature in October 2005. Subject to lender’s approval, theloan’s maturity date may be extended by one month to November 2005.

 

**3.****     Related PartyTransactions**

 

Weprovide property management, leasing, construction and other tenant relatedservices to unconsolidated companies in which we have equity interests. For thesix months ended June 30, 2005 and 2004, respectively, we receivedmanagement fees of $2.4 million and $2.4 million, leasing fees of $2.2 millionand $1.4 million and construction and development fees of $1.1 million and$673,000 from these unconsolidated companies. These fees were recorded atmarket rates and we eliminated our ownership percentage of these fees in thecondensed consolidated financial statements.

 

**4.****     Net Income Per Common Unit**

 

Basicnet income per common unit is computed by dividing net income available forcommon units by the weighted average number of common units outstanding for theperiod. Diluted net income per common unit is computed by dividing the sum ofnet income available for common unitholders by the sum of the weighted averagenumber of common units outstanding, including any dilutive potential commonunits for the period.

 

Thefollowing table reconciles the components of basic and diluted net income percommon unit for the three and six months ended June 30, 2005 and 2004,respectively (in thousands):

 
| ** **                                                                   | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|------------------------------------------------------------------------------|------------|--------------------------------------|------------|------------------------------------|------------|
| ** **                                                                   | ** ** | **2005**                             | ** ** | **2004**                           | ** ** | **2005** | ** ** | **2004** | ** ** |
| Basic and  diluted net income available for common units                     | ** ** | **$**                                | **44,269** |                               | $          | 39,008 | ** ** | **$** | **72,430** |   | $ | 75,230 |   |
|                                                                         |       |                                 |       |                               |       |   |   |   |   |
| Weighted average  number of common units outstanding                         | ** ** | **156,986**                          |       | 156,045                            | ** ** | **156,967** |   | 154,244 |   |
|                                                                         |       |                                 |       |                               |       |   |   |   |   |
| Weighted average  conversion of Series D preferred units (1)            |       | **—**                           |       | —                             |       | **—** |   | 1,755 |   |
| Dilutive shares  for stock-based compensation plans                          | ** ** | **710**                              |       | 783                                | ** ** | **744** |   | 872 |   |
| Weighted average  number of common units and dilutive potential common units | ** ** | **157,696**                          |       | 156,828                            | ** ** | **157,711** |   | 156,871 |   |
|                                                                              |            |                                      |            |                                    |            |  |  |  |  |  |  |  |  |

 

----

(1)   The GeneralPartner called for the redemption of the Series D preferred units as of March 16,2004. Prior to the redemption date, nearly 5.3 million Series D preferredunits were converted into 4.9 million common units.  These units represent the weighted effect,assuming the Series D preferred units had been converted on January 1,2004.

 

7

----

 

**5.****     SegmentReporting**

 

We areengaged in four operating segments, the first three of which consist of theownership and rental of office, industrial and retail real estate investments(collectively, “Rental Operations”). The fourth segment consists of ourbuild-to-suit for sale operations and the providing of various real estate servicessuch as property management, maintenance, leasing, developmentand construction management to third-party property owners and joint ventures (“ServiceOperations”). Our reportable segments offer different products or services andare managed separately because each requires different operating strategies andmanagement expertise. There are no material intersegment sales or transfers.

 

Non-segmentrevenue consists mainly of equity in earnings of unconsolidated companies.Segment FFO information is calculated by subtracting operating expensesattributable to the applicable segment from segment revenues. Non-segmentassets consist of corporate assets including cash, deferred financing costs andinvestments in unconsolidated companies. Interest expense and othernon-property specific revenues and expenses are not allocated to individualsegments in determining our performance measure.

 

Weassess and measure segment operating results based upon an industry performancemeasure referred to as Funds From Operations (“FFO”),which management believes is a useful indicator of our operating performance.Funds From Operations is used by industry analysts andinvestors as a supplemental operating performance measure of an equity realestate investment trust (“REIT”). FFO is calculated in accordance with thedefinition that was adopted by the Board of Governors of the NationalAssociation of Real Estate Investment Trusts (“NAREIT”). FFO, as defined byNAREIT, represents net income (loss) determined in accordance with accountingprinciples generally accepted in the United States of America (“GAAP”),excluding extraordinary items as defined under GAAP and gains or losses fromsales of previously depreciated operating real estate assets, plus certainnon-cash items such as real estate asset depreciation and amortization, andafter similar adjustments for unconsolidated partnerships and joint ventures.

 

Therevenues and FFO for each of the reportable segments for the three and sixmonths ended June 30, 2005, and 2004, and the assets for each of thereportable segments as of June 30, 2005 and December 31, 2004, aresummarized as follows (in thousands):

 
| ** **                                      | ** ** | **Three Months Ended  June 30,** | ** **  | **Six Months Ended June 30,** | ** ** |
|-------------------------------------------------|------------|---------------------------------------|-------------|------------------------------------|------------|
| ** **                                      | ** ** | **2005**                              | ** **  | **2004**                           | ** ** | **2005** | ** ** | **2004** | ** ** |
| Revenues                                        |       |                                  |        |                               |       |   |   |   |   |
| Rental Operations:                              |       |                                  |        |                               |       |   |   |   |   |
| Office                                          | ** ** | **$**                                 | **116,933** |                               | $          | 110,816 | ** ** | **$** | **235,058** |   | $ | 221,487 |   |
| Industrial                                      | ** ** | **70,077**                            |        | 65,463                             | ** ** | **139,010** |   | 132,312 |   |
| Retail                                          | ** ** | **954**                               |        | 1,031                              | ** ** | **1,996** |   | 2,191 |   |
| Service Operations                              | ** ** | **23,748**                            |        | 14,739                             | ** ** | **45,443** |   | 26,174 |   |
| Total Segment Revenues                          | ** ** | **211,712**                           |        | 192,049                            | ** ** | **421,507** |   | 382,164 |   |
| Non-Segment Revenue                             | ** ** | **17,202**                            |        | 6,963                              | ** ** | **23,524** |   | 12,646 |   |
| Consolidated Revenue from continuing operations | ** ** | **228,914**                           |        | 199,012                            | ** ** | **445,031** |   | 394,810 |   |
| Discontinued Operations                         | ** ** | **2,281**                             |        | 7,090                              | ** ** | **5,630** |   | 14,353 |   |
| Consolidated Revenue                            | ** ** | **$**                                 | **231,195** |                               | $          | 206,102 | ** ** | **$** | **450,661** |   | $ | 409,163 |   |
| Funds From Operations                           |       |                                  |        |                               |       |   |   |   |   |
| Rental  Operations:                             |       |                                  |        |                               |       |   |   |   |   |
| Office                                          | ** ** | **$**                                 | **71,553**  |                               | $          | 71,502 | ** ** | **$** | **144,411** |   | $ | 141,927 |   |
| Industrial                                      | ** ** | **51,746**                            |        | 48,898                             | ** ** | **100,938** |   | 97,830 |   |
| Retail                                          | ** ** | **734**                               |        | 803                                | ** ** | **1,536** |   | 1,717 |   |
| Services Operations                             | ** ** | **12,263**                            |        | 4,723                              | ** ** | **23,183** |   | 6,765 |   |
| Total Segment FFO                               | ** ** | **136,296**                           |        | 125,926                            | ** ** | **270,068** |   | 248,239 |   |
|                                                 |            |                                       |             |                                    |            |  |  |  |  |  |  |  |  |  |  |

 

8

----

 
| ** **                                                                                      | ** ** | **Three Months Ended  June 30,** |       | **Six Months Ended June 30,** | ** ** |
|-------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|------------------------------------|------------|
| ** **                                                                                      | ** ** | **2005**                              | ** ** | **2004**                           |       | **2005** | ** ** | **2004** | ** ** |
| Non-Segment FFO:                                                                                |       |                                  | ** ** |                               |       |   | ** ** |   |   |
| Interest expense                                                                                | ** ** | **(35,921**                           | **)**      | (32,119                            | )          | **(70,835** | **)** | (64,049 | ) |
| Interest income                                                                                 | ** ** | **1,083**                             | ** ** | 1,594                              |       | **2,403** | ** ** | 3,102 |   |
| General and  administrative expense                                                             | ** ** | **(6,279**                            | **)**      | (5,625                             | )          | **(13,858** | **)** | (13,942 | ) |
| Gain on land  sales                                                                             | ** ** | **3,266**                             | ** ** | 1,054                              |       | **3,409** | ** ** | 5,683 |   |
| Impairment  adjustments on depreciable property                                                 | ** ** | **(755**                              | **)**      | —                             |       | **(3,564** | **)** | — |   |
| Other income  (expenses)                                                                        | ** ** | **(115**                              | **)**      | 261                                |       | **(249** | **)** | 454 |   |
| Minority  interest in earnings of subsidiaries                                                  | ** ** | **(29**                               | **)**      | (425                               | )          | **(66** | **)** | (732 | ) |
| Joint venture FFO                                                                               | ** ** | **9,453**                             | ** ** | 10,379                             |       | **19,525** | ** ** | 19,491 |   |
| Dividends on  preferred units                                                                   | ** ** | **(11,620**                           | **)**      | (8,401                             | )          | **(23,240** | **)** | (16,001 | ) |
| Adjustment for  redemption of preferred unit                                                    |       | **—**                            | ** ** | (31                                | )          | **—** | ** ** | (3,645 | ) |
| Discontinued  operations                                                                        | ** ** | **895**                               | ** ** | 3,510                              |       | **2,423** | ** ** | 6,721 |   |
| Consolidated FFO                                                                                | ** ** | **$**                                 | **96,274** | ** **                         | $          | 96,123 |   | **$** | **186,016** | ** ** | $ | 185,321 |   |
| Depreciation and  amortization on continuing operations                                         | ** ** | **(63,789**                           | **)**      | (50,296                            | )          | **(126,103** | **)** | (100,571 | ) |
| Depreciation and  amortization on discontinued operations                                       | ** ** | **(335**                              | **)**      | (2,955                             | )          | **(1,247** | **)** | (5,077 | ) |
| Share of joint  venture adjustments                                                             | ** ** | **(4,943**                            | **)**      | (4,609                             | )          | **(9,808** | **)** | (9,197 | ) |
| Earnings from sale of ownership interests in unconsolidated companies on  continuing operations |       | **—**                            | ** ** | 50                                 |       | **—** | ** ** | 50 |   |
| Earnings from depreciated property sales on discontinued operations                             | ** ** | **5,888**                             | ** ** | 695                                |       | **12,398** | ** ** | 4,704 |   |
| Earnings from sale of joint venture property                                                    | ** ** | **11,174**                            | ** ** | —                             |       | **11,174** | ** ** | — |   |
| Net income available for common unitholders                                                     | ** ** | **$**                                 | **44,269** | ** **                         | $          | 39,008 |   | **$** | **72,430** | ** ** | $ | 75,230 |   |

 
| ** **           | ** ** | **June 30,** | ** **    | **December 31,** | ** ** |
|----------------------|------------|-------------------|---------------|-----------------------|------------|
| ** **           | ** ** | **2005**          | ** **    | **2004**              | ** ** |
| Assets               |       |              |          |                  |       |
| Rental  Operations:  |       |              |          |                  |       |
| Office               | ** ** | **$**             | **3,355,885** |                  | $          | 3,128,387 |   |
| Industrial           | ** ** | **2,185,876**     |          | 2,211,509             |       |
| Retail               | ** ** | **113,655**       |          | 84,625                |       |
| Service Operations   | ** ** | **190,798**       |          | 131,218               |       |
| Total Segment Assets | ** ** | **5,846,214**     |          | 5,555,739             |       |
| Non-Segment Assets   | ** ** | **357,085**       |          | 338,905               |       |
| Consolidated Assets  | ** ** | **$**             | **6,203,299** |                  | $          | 5,894,644 |   |

 

Inaddition to revenues and FFO, we also review our recurring capital expendituresin measuring the performance of our individual Rental Operations segments.These recurring capital expenditures consist of tenant improvements, leasingcommissions and building improvements. We review these expenditures todetermine the costs associated with re-leasing vacant space and maintaining thecondition of our properties. Our recurring capital expenditures by segment aresummarized as follows for the six months ended June 30, 2005 and 2004, respectively  (inthousands):

 
| ** **                      | ** ** | **2005**   | ** ** | **2004**   | ** ** |
|---------------------------------|------------|------------|------------|------------|------------|
| Recurring  Capital Expenditures | ** ** | ** ** | ** ** | ** ** | ** ** |
| Office                          | ** ** | **$**      | **29,179** |       | $          | 31,070 |   |
| Industrial                      | ** ** | **23,179** |       | 18,903     |       |
| Retail                          | ** ** | **22**     |       | 19         |       |
| ** **                      |       | **$**      | **52,380** |       | $          | 49,992 |   |

 

9

----

 

**6.****    ****Real Estate Investments**

 

Wehave classified the operations of 58 buildings as discontinued operations as ofJune 30, 2005. These 58 buildings consist of 45 industrial, ten office andthree retail properties. As a result, we classified net income from operationsof $560,000 and $555,000 as net income from discontinued operations for thethree months ended June 30, 2005 and 2004, respectively; and $1.2 millionand $1.6 million as net income from discontinued operations for the six monthsended June 30, 2005 and 2004, respectively. Twelve of the propertiesclassified in discontinued operations were sold during the first six months of2005 and six properties were sold during the first six months of 2004. Thegains net of impairment adjustments on the disposal of these properties, were$5.1 million and $695,000 for the three months ended June 30, 2005 and2004, respectively; and $8.8 million and $4.7 million for the six months ended June 30,2005 and 2004, respectively, are also reported in discontinued operations. Theremaining 40 properties consist of 35 properties sold during the last sixmonths of 2004 and five classified as held-for-sale at June 30, 2005.

 

At June 30,2005, we had two industrial properties and three office properties whichcomprised approximately 595,000 square feet classified as held-for-sale. Theseproperties have signed contracts, but there can be no assurance that suchproperties will be sold.

 

Thefollowing table illustrates the operations of the 58 buildings reflected indiscontinued operations for the three and six months ended June 30, 2005and 2004, respectively (in thousands):

 
| ** **                                                | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|-----------------------------------------------------------|------------|--------------------------------------|------------|------------------------------------|------------|
| ** **                                                | ** ** | **2005**                             | ** ** | **2004**                           | ** ** | **2005** | ** ** | **2004** | ** ** |
| Statement of  Operations:                                 |       |                                 |       |                               |       |   |   |   |   |
| Revenues                                                  | ** ** | **$**                                | **2,281**  |                               | $          | 7,090 | ** ** | **$** | **5,630** |   | $ | 14,353 |   |
| Expenses:                                                 |       |                                 |       |                               |       |   |   |   |   |
| Operating                                                 | ** ** | **896**                              |       | 2,243                              | ** ** | **2,142** |   | 4,872 |   |
| Interest                                                  | ** ** | **483**                              |       | 1,330                              | ** ** | **1,056** |   | 2,747 |   |
| Depreciation and  Amortization                            | ** ** | **335**                              |       | 2,955                              | ** ** | **1,247** |   | 5,077 |   |
| General and  Administrative                               | ** ** | **7**                                |       | 7                                  | ** ** | **9** |   | 13 |   |
| Income from  discontinued operations, before gain on sale | ** ** | **560**                              |       | 555                                | ** ** | **1,176** |   | 1,644 |   |
| Gain on sale of  property, net of impairment adjustment   | ** ** | **5,133**                            |       | 695                                | ** ** | **8,834** |   | 4,704 |   |
| Income from  discontinued operations                      | ** ** | **$**                                | **5,693**  |                               | $          | 1,250 | ** ** | **$** | **10,010** |   | $ | 6,348 |   |

 

Thefollowing table illustrates the aggregate balance sheet of our five propertiesidentified as held-for-sale at June 30, 2005 (in thousands):

 
| ** **                    | ** ** | **June 30, 2005** | ** ** |
|-------------------------------|------------|------------------------|------------|
| Balance Sheet:                |       |                   |       |
| Real estate  investments, net |       | $                      | 26,732     |   |
| Other Assets                  |       | 2,047                  |       |
| Total Assets                  |       | $                      | 28,779     |   |
| Accrued Expenses              |       | $                      | 279        |   |
| Other  Liabilities            |       | 161                    |       |
| Equity                        |       | 28,339                 |       |
| Total  Liabilities and Equity |       | $                      | 28,779     |   |

 

10

----

 

Weallocate interest expense to discontinued operations as permitted underEmerging Issues Task Force (“EITF”) Issue No. 87-24, *“Allocation of Interest to Discontinued Operations,”*andhave included such interest expense in computing net income from discontinuedoperations. Interest expense allocable to discontinued operations includesinterest on any debt on secured properties included in discontinued operationsand an allocable share of our consolidated unsecured interest expense forunencumbered properties. The allocation of unsecured interest expense todiscontinued operations was based upon the gross book value of the discontinuedoperations unencumbered population as it related to our entire unencumberedpopulation.

 

Forthe six months ended June 30, 2005 and 2004, we recorded impairmentadjustments of $3.6 million and $100,000, respectively. The $3.6 million ofimpairment reflects the write-down of the carrying value of one held-for-saleindustrial building, three office and two industrial buildings sold in thesecond quarter of 2005, one land parcel sold in the second quarter of 2005 andone land parcel contracted to sell in 2005. The $100,000  impairment reflects the write-down ofthe carrying value of a land parcel that was later sold in 2004.

 

**7.****    ****Partners’ Equity**

 

TheGeneral Partner periodically accesses the public equity markets to fund the developmentand acquisition of additional rental properties or to pay down debt. Theproceeds of these offerings are contributed to us in exchange for an additionalinterest in the Partnership.

 

Thefollowing series of preferred units are outstanding as of June 30, 2005(in thousands, except percentage data):

 
| ** **               | ** ** | **Units**       | ** ** | **Dividend** | ** ** | **Redemption**          | ** ** | **Liquidation** | ** ** | ** **      | ** ** |
|--------------------------|------------|-----------------|------------|--------------|------------|-------------------------|------------|-----------------|------------|-----------------|------------|
| **Description**          | ** ** | **Outstanding** | ** ** | **Rate**     | ** ** | **Date**                | ** ** | **Preference**  | ** ** | **Convertible** | ** ** |
|                     |       |            |       |         |       |                    |       |            |       |            |       |   |
| Series B  Preferred |       | 265             |       | 7.990        | %          | September 30, 2007 |       | $               | 132,250    |            | No         |   |
| Series I  Preferred |       | 300             |       | 8.450        | %          | February 6, 2006   |       | 75,000          |       | No              |       |
| Series J  Preferred |       | 400             |       | 6.625        | %          | August 29, 2008    |       | 100,000         |       | No              |       |
| Series K  Preferred |       | 600             |       | 6.500        | %          | February 13, 2009  |       | 150,000         |       | No              |       |
| Series L  Preferred |       | 800             |       | 6.600        | %          | November 30, 2009  |       | 200,000         |       | No              |       |

 

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

 

All series of preferred units require cumulativedistributions and have no stated maturity date (although we may redeem them onor following their optional redemption dates).

 

The Series B, Series I, Series J, Series Kand Series L preferred units may be redeemed on or after the dates notedabove only at our option, in whole or in part.

 

**8.****     Reclassifications**

 

Certain2004 balances have been reclassified to conform to the 2005 presentation.

 

**9.****     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. We account for derivative instruments under Statement of FinancialAccounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instrumentsand Hedging Activities” as amended (“SFAS 133”).

 

11

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In March 2005,we entered into $300.0 million of cash flow hedges through forward-startinginterest rate swaps to hedge interest rates on $300.0 million of estimated debtofferings in 2006. The swaps qualify for hedge accounting under SFAS 133 withany changes in fair value recorded in Accumulated Other Comprehensive Income (“OCI”).Due to the decline in interest rates, the fair value at June 30, 2005, isa liability of $19.0 million.

 

In May 2003,the Financial Accounting Standards Board (“FASB”) issued SFAS No. 150, *Accounting for Certain Financial Instruments withCharacteristics of both Liabilities and Equity* (“SFAS 150”). SFAS150 establishes standards for classifying and measuring as liabilities certainfinancial instruments that embody obligations of the issuer and havecharacteristics of both liabilities and equity. SFAS 150 is effective for allfinancial instruments created or modified after May 31, 2003, andotherwise is effective July 1, 2003. We consolidate the operations of onejoint venture in our condensed consolidated financial statements at June 30,2005. This joint venture is partially owned by unaffiliated parties that havenoncontrolling interests. SFAS 150 requires the disclosure of the estimatedsettlement value of these noncontrolling interests. As of June 30, 2005,the estimated settlement value of the noncontrolling interest in thisconsolidated joint venture was approximately $1.1 million as compared to thereceivable asset recorded on our books for this joint venture of $75,000.

 

**10.****  Stock BasedCompensation**

 

Under the limited partnership agreement of thePartnership, the Partnership is required to issue one Common Unit to the GeneralPartner for each share of common stock issued by the General Partner.  Accordingly, the issuance of common shares bythe General Partner under its stock based compensation plans require theissuance of a corresponding number of Common Units by the Partnership to theGeneral Partner.

 

For all issuances prior to 2002, we apply therecognition and measurement provisions of APB Opinion No. 25, *Accounting for Stock Issued to Employees*,and related Interpretations in accounting for our stock-based compensation.Effective January 1, 2002, we prospectively adopted the fair valuerecognition provisions of FASB Statement No. 123, *Accounting for Stock-Based Compensation* (“SFAS123”), to all awards granted after January 1, 2002.

 

Thefollowing table illustrates the effect on net income and earnings per unit ifthe fair value method had been applied to all outstanding and unvested awardsin each period (in thousands, except per unit data).

 
| ** **                                                                                                 | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|------------------------------------------------------------------------------------------------------------|------------|--------------------------------------|------------|------------------------------------|------------|
| ** **                                                                                                 | ** ** | **2005**                             | ** ** | **2004**                           | ** ** | **2005** | ** ** | **2004** | ** ** |
| Net income  available for common unitholders, as reported                                                  | ** ** | **$**                                | **44,269** |                               | $          | 39,008 | ** ** | **$** | **72,430** |   | $ | 75,230 |   |
| Add: Stock-based  employee compensation expense included in net income determined under fair  value method | ** ** | **648**                              |       | 100                                | ** ** | **929** |   | 201 |   |
| Deduct: Total  stock-based compensation expense determined under fair value method for all  awards         | ** ** | **(703**                             | **)**      | (220                               | )          | **(1,040** | **)** | (440 | ) |
| Proforma net  income available for common untiholders                                                      | ** ** | **$**                                | **44,214** |                               | $          | 38,888 | ** ** | **$** | **72,319** |   | $ | 74,991 |   |
|                                                                                                       | ** ** | ** **                           | ** ** |                               |       |   | ** ** | ** ** | ** ** |   |   |   |   |
| Basic net income  per common unit                                                                          |       |                                 |       |                               |       |   |   |   |   |
| As reported                                                                                                | ** ** | **$**                                | **.28**    |                               | $          | .25 | ** ** | **$** | **.46** |   | $ | .49 |   |
| Pro forma                                                                                                  | ** ** | **$**                                | **.28**    |                               | $          | .25 | ** ** | **$** | **.46** |   | $ | .49 |   |
|                                                                                                       | ** ** | ** **                           | ** ** |                               |       |   | ** ** | ** ** | ** ** |   |   |   |   |
| Diluted net  income per common unit                                                                        |       |                                 |       |                               |       |   |   |   |   |
| As reported                                                                                                | ** ** | **$**                                | **.28**    |                               | $          | .25 | ** ** | **$** | **.46** |   | $ | .48 |   |
| Pro forma                                                                                                  | ** ** | **$**                                | **.28**    |                               | $          | .25 | ** ** | **$** | **.46** |   | $ | .48 |   |

 

12

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In April 2005, the General Partner’sshareholders approved the Duke Realty Corporation 2005 Long-Term IncentivePlan, the Duke Realty Corporation Shareholder Value Plan and the Duke RealtyCorporation Non-Employee Directors Co mpensation Plan. Under these plans, theGeneral Partner granted the following awards to directors, executive officersand selected management employees:

 

•      Stock Options.  Stock Options vest 20% per year over fiveyears.  The exercise price of the stockoptions may not be less than the fair market value of the General Partner’scommon stock on the date of grant.

•      Restricted Stock Units(“RSUs”).  RSUs vest 20% per year overfive years and are payable in the General Partner stock.  All RSUs earn dividend equivalents that aredeemed to be reinvested in additional RSUs. Dividend equivalents will be paidin General Partner stock when the corresponding portion of the original RSUawards vests or is paid.

•      Shareholder Value PlanAwards.  Shareholder Value Plan awardsvest entirely three years after the date of grant. The number of GeneralPartner shares issued is based upon the General Partners’ total shareholderreturn for such three-year period compared to the S&P 500 Index and theNAREIT Real Estate 50 Index.  Each indexis weighted at 50%.  Upon vesting, payoutof the shareholder value plan award will be made in General Partner stock.

 

We adopted SFAS 123 in January 2002.The value of each award was calculated on the date of grant with compensationexpense recognized over the applicable vesting period.

 

Also in April 2005, the General Partner’sshareholders approved amendments to the following plans:

 

•      1995 Key Employees’Stock Option, the 1999 Salary Replacement Stock Option and Dividend IncreaseUnit and the 1999 Directors’ Stock Option and Dividend Increase Unit Plans topermit adjustment to existing stock options in the event of an extraordinarycash dividend.

•      1995 Dividend IncreaseUnit Plan to clarify the form and method of income tax withholdings.

 

**11.****  Recent AccountingPronouncements**

 

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

 

In June 2005,the FASB ratified the consensus reached in EITF Issue No. 04-5, “DeterminingWhether a General Partner, or the General Partners as a Group, Controls aLimited Partnership or Similar Entity When the Limited Partners Have CertainRights” (EITF 04-5). EITF 04-5 is effective for all newly formed limitedpartnerships after the consensus was ratified and January 2006 for allexisting limited partnership agreements. We have evaluated the ownershipstructure of our existing investments in unconsolidated companies anddetermined that we do not demonstrate control over those ventures as defined byEITF 04-5.

 

13

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**12.****  Subsequent Events**

 

*Declaration of Distributions*

 

TheGeneral Partner’s board of directors declared the following distributions atits July 27, 2005, regularly scheduled board meeting:

 
| ** **                        | ** ** | **Quarterly**   | ** ** | ** **      | ** **              | ** **       | ** **              |
|-----------------------------------|------------|-----------------|------------|-----------------|-------------------------|------------------|-------------------------|
| **Class**                         | ** ** | **Amount/Unit** | ** ** | **Record Date** | ** **              | **Payment Date** | ** **              |
| Common                            |       | $               | 0.47       |            | August 12, 2005    |             | August 31, 2005    |   |
| Preferred (per  depositary unit): |       |            |       |            |                    |             |                    |
| Series B                     |       | $               | 0.99875    |            | September 16, 2005 |             | September 30, 2005 |   |
| Series I                     |       | $               | 0.52813    |            | September 16, 2005 |             | September 30, 2005 |   |
| Series J                     |       | $               | 0.41406    |            | August 17, 2005    |             | August 31, 2005    |   |
| Series K                     |       | $               | 0.40625    |            | August 17, 2005    |             | August 31, 2005    |   |
| Series L                     |       | $               | 0.41250    |            | August 17, 2005    |             | August 31, 2005    |   |

* *

*Other Events*

 

In January 2000,the General Partner adopted a share repurchase plan (the “Repurchase Program”)authorizing the repurchase of up to $100 million shares of the General Partner’scommon stock. In October 2001, the General Partner increased the maximumexpenditure authority under the repurchase program from $100 million to $250million. On July 27, 2005, the General Partner increased the maximumexpenditure authority under the repurchase program from $250 million to $750million.

 

Underthe repurchase program, we may effect share repurchases from time to time inthe open market or in privately negotiated transactions at management’sdiscretion. The timing and amount of share repurchases, if any, will depend onbusiness and market conditions, as well as legal and regulatory considerations.We can give no assurances as to when and whether the General Partner willrepurchase any shares.

 

14

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REPORT OF INDEPENDENTREGISTERED PUBLIC ACCOUNTING FIRM

 

The Partners

**DukeRealty Limited Partnership:**

 

We have reviewed thecondensed consolidated balance sheet of Duke Realty Limited Partnership andsubsidiaries as of June 30, 2005, the related condensed consolidatedstatements of operations for the three and six months ended June 30, 2005and 2004, the related condensed consolidated statement of cash flows for thesix months ended June 30, 2005 and 2004, and the related condensedconsolidated statement of partners’ equity for the six months ended June 30,2005. These condensed consolidated financial statements are the responsibilityof the Partnership’s management.

 

We conducted our reviewin accordance with standards of the Public Company Accounting Oversight Board(United States). A review of interim financial information consists principallyof applying analytical procedures to financial data and making inquiries ofpersons responsible for financial and accounting matters. It is substantiallyless in scope than an audit conducted in accordance with the standards of thePublic Company Accounting Oversight Board (United States), the objective ofwhich is the expression of an opinion regarding the financial statements takenas a whole. Accordingly, we do not express such an opinion.

 

Based on our review, weare not aware of any material modifications that should be made to thecondensed consolidated financial statements referred to above for them to be inconformity with U.S. generally accepted accounting principles.

 

We have previouslyaudited, in accordance with standards established by the Public CompanyAccounting Oversight Board (United States), the consolidated balance sheet ofDuke Realty Limited Partnership and subsidiaries as of December 31, 2004,and the related consolidated statements of operations, partners’ equity andcash flows for the year then ended (not presented herein); and in our reportdated February 28, 2005, we expressed an unqualified opinion on thoseconsolidated financial statements. In our opinion, the information set forth inthe accompanying condensed consolidated balance sheet as of December 31, 2004,is fairly presented, in all material respects, in relation to the consolidatedbalance sheet from which it has been derived.

 

 

KPMG LLP

Indianapolis, Indiana

August 12, 2005

 

15

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**Item 2.****  Management’s Discussion andAnalysis of Financial Condition and Results of Operations**

 

**CautionaryStatement Regarding Forward Looking Statements**

 

Certain statements inthis quarterly report, including those related to our future operations,constitute “forward-looking statements” within the meaning of Section 27Aof the Securities Act of 1933, as amended, and Section 21E of theSecurities Exchange Act of 1934, as amended. These forward-looking statementsinvolve known and unknown risks, uncertainties and other important factors thatcould cause our actual results, performance or achievements, or industryresults, to differ materially from any predictions of future results,performance or achievements that we express or imply in this report. Some ofthe risks, uncertainties and other important factors that may affect futureresults include, among others:

 

•      Changesin general economic and business conditions, including performance of financialmarkets;

•      Ourcontinued qualification as a real estate investment trust;

•      Heightenedcompetition for tenants and potential decreases in property occupancy;

•      Potentialincreases in real estate construction costs;

•      Potentialchanges in the financial markets and interest rates;

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

•      Inherentrisks in the real estate business including tenant defaults, potentialliability relating to environmental matters and liquidity of real estateinvestments; and

•      Otherrisks and uncertainties described from time-to-time in our filings with theSEC.

 

This list of risks anduncertainties, however, is not intended to be exhaustive. We have on file withthe Securities and Exchange Commission (“SEC”) a Current Report on Form 8-Kdated July 24, 2003, with additional risk factor information.

 

The words “believe,” “estimate,”“expect,” “anticipate,” “intend,” “plan,” “seek” and similar expressions orstatements regarding future periods are intended to identify forward-lookingstatements. Although we believe that the plans, expectations and resultsexpressed in or suggested by the forward-looking statements are reasonable, allforward-looking statements are inherently uncertain as they involve substantialrisks and uncertainties beyond our control. New factors emerge from time to time,and it is not possible for us to predict the nature or assess the potentialimpact of each new factor on our business. Given these uncertainties, wecaution you not to place undue reliance on these forward-looking statements. Weundertake no obligation to update or revise any of our forward-lookingstatements for events or circumstances that arise after the statement is made.

 

**BusinessOverview**

 

As of June 30, 2005,we:

 

•      Ownedor controlled 891 industrial, office and retail properties (including propertiesunder development), consisting of approximately 113.8 million square feetlocated in 13 operating platforms; and

•      Ownedor controlled approximately 4,400 acres of land with an estimated futuredevelopment potential of approximately 65 million square feet of industrial,office and retail properties.

 

16

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We provide the followingservices for our properties and for certain properties owned by third partiesand joint ventures:

•      Propertyleasing;

•      Propertymanagement;

•      Construction;

•      Development;and

•      Othertenant-related services.

 

**KeyPerformance Indicators**

 

Our operating resultsdepend primarily upon rental income from our office, industrial and retailproperties (“Rental Operations”). The following highlights the areas of RentalOperations that we consider critical for future revenue growth (all squarefootage totals and occupancy percentages reflect both wholly-owned propertiesand properties in joint ventures):

 

***Occupancy Analysis:*** Our ability to maintainoccupancy rates is a principal driver of our results of operations. Thefollowing table sets forth occupancy information regarding our in-serviceportfolio of rental properties as of June 30, 2005 and 2004 (in thousands,except percentage data):

 
| ** **      | ** ** | **Total**       | ** ** | **Percent of**        | ** ** | ** **           | ** ** | ** ** | ** ** |
|-----------------|------------|-----------------|------------|-----------------------|------------|----------------------|------------|------------|------------|
| ** **      | ** ** | **Square Feet** | ** ** | **Total Square Feet** | ** ** | **Percent Occupied** | ** ** |
| **Type**        | ** ** | **2005**        | ** ** | **2004**              | ** ** | **2005**             | ** ** | **2004**   | ** ** | **2005** | ** ** | **2004** | ** ** |
| **Industrial**  |       |            |       |                  |       |                 |       |       |       |   |   |   |   |
| Service Centers | ** ** | **12,811**      |       | 13,200                | ** ** | **11.5**             | **%**      | 12.2       | %          | **86.5** | **%** | 85.7 | % |
| Bulk            | ** ** | **68****,031**  |       | 67,574                | ** ** | **61.3**             | **%**      | 62.4       | %          | **92.6** | **%** | 91.4 | % |
| **Office**      | ** ** | **29,578**      |       | 26,883                | ** ** | **26.6**             | **%**      | 24.8       | %          | **88.2** | **%** | 87.3 | % |
| **Retail**      | ** ** | **611**         |       | 688                   | ** ** | **0.6**              | **%**      | 0.6        | %          | **96.0** | **%** | 97.6 | % |
| Total           | ** ** | **111,031**     |       | 108,345               | ** ** | **100.0**            | **%**      | 100.0      | %          | **90.7** | **%** | 89.7 | % |

 

***Lease Expiration and Renewal:*** Ourability to maintain and grow occupancy rates primarily depends upon ourcontinuing ability to re-lease expiring space.******The following table reflects ourin-service portfolio lease expiration schedule as of June 30, 2005,by property type. The table indicates square footage and annualized neteffective rents (based on June 2005 rental revenue) under expiring 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** | ** ** |
| 2005                         |       | 5,814         |       | $              | 38,086     |           | 6          | %          | 4,477      |          | $          | 20,532     |       | 1,334         |       | $ | 17,485 |   | 3 |   | $ | 69 |   |
| 2006                         |       | 10,855        |       | 76,967         |       | 11             | %          | 8,306      |       | 41,803        |       | 2,547      |       | 35,139        |       | 2 |   | 25 |   |
| 2007                         |       | 13,012        |       | 91,460         |       | 13             | %          | 9,795      |       | 45,491        |       | 3,208      |       | 45,846        |       | 9 |   | 123 |   |
| 2008                         |       | 14,070        |       | 88,289         |       | 13             | %          | 10,830     |       | 48,467        |       | 3,221      |       | 39,487        |       | 19 |   | 335 |   |
| 2009                         |       | 12,855        |       | 86,609         |       | 12             | %          | 9,338      |       | 41,223        |       | 3,513      |       | 45,308        |       | 4 |   | 78 |   |
| 2010                         |       | 11,799        |       | 88,582         |       | 13             | %          | 8,386      |       | 41,378        |       | 3,407      |       | 47,118        |       | 6 |   | 86 |   |
| 2011                         |       | 6,621         |       | 49,086         |       | 7              | %          | 4,708      |       | 21,655        |       | 1,880      |       | 26,800        |       | 33 |   | 631 |   |
| 2012                         |       | 6,489         |       | 38,058         |       | 5              | %          | 4,970      |       | 18,354        |       | 1,512      |       | 19,371        |       | 7 |   | 333 |   |
| 2013                         |       | 4,671         |       | 45,615         |       | 7              | %          | 2,300      |       | 10,566        |       | 2,337      |       | 34,470        |       | 34 |   | 579 |   |
| 2014                         |       | 4,400         |       | 22,126         |       | 3              | %          | 3,689      |       | 12,708        |       | 711        |       | 9,418         |       | — |   | — |   |
| 2015 and  Thereafter         |       | 10,131        |       | 70,996         |       | 10             | %          | 7,245      |       | 31,634        |       | 2,418      |       | 36,521        |       | 468 |   | 2,841 |   |
| Total Leased                 |       | 100,717       |       | $              | 695,874    |           | 100        | %          | 74,044     |          | $          | 333,811    |       | 26,088        |       | $ | 356,963 |   | 585 |   | $ | 5,100 |   |
| Total Portfolio Square  Feet |       | 111,031       |       |           |       |           |       | 80,842     |       |          |       | 29,578     |       |          |       | 611 |   |   |   |
|                         |       |          |       |           |       |           |       |       |       |          |       |       |       |          |       |   |   |   |   |
| Percent Occupied             |       | 90.7          | %          |           |       |           |       | 91.4       | %          |          |       | 88.2       | %          |          |       | 96.0 | % |   |   |

 

17

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***Lease Renewals:***We renewed 70.0% and71.9% of leases up for renewal in the three and six months ended June 30,2005, totaling 3.1 million and 4.9 million square feet, respectively. Thiscompares to renewals of 71.5% and 72.5% for the three and six months ended June 30,2004, totaling 2.1 million and 5.1 million square feet. Our lease renewalpercentages over the past three years have remained relatively consistent at a70-75% success rate despite the relatively weak market conditions.

 

The average term of renewalsfor the three and six months ended June 30, 2005, was 4.3 and 4.0 yearscompared to an average term of 3.4 and 4.0 years for the three and six monthsended June 30, 2004.

 

***FutureDevelopment: ***Another source ofgrowth in earnings is the development of additional merchant buildings andrental properties.  These propertiesshould provide future earnings growth through Service Operations income uponsale or from Rental Operations growth as they are placed in service. As of June 30,2005, we had 3.6 million square feet of property under development with totalcosts of $351.0 million, which were 47% pre-leased. This compares to 3.8million square feet with total estimated costs of $143.0 million, which were59% pre-leased at June 30, 2004. Of the $208.0 million increase in projectcosts over 2004, $101.0 million is attributable to increased held-for-rentaldevelopments. The remaining $107.0 million of the increase is in merchantbuilding developments and is due to medical building development. Specifically,we have four medical office projects under development through our jointventure with a healthcare facility developer and manager with total costs of$55.8 million, and we began construction on a single office building with totalcosts of $85.4 million.

 

A summary of properties underdevelopment as of June 30, 2005, follows (in thousands, except percentagedata):

 
| **Anticipated**      | ** ** | ** ** | ** ** | ** **  | ** ** | ** **  | ** ** | **Anticipated** | ** ** |
|----------------------|------------|------------|------------|-------------|------------|-------------|------------|-----------------|------------|
| **In-Service**       | ** ** | **Square** | ** ** | **Percent** | ** ** | **Project** | ** ** | **Stabilized**  | ** ** |
| **Date**             | ** ** | **Feet**   | ** ** | **Leased**  | ** ** | **Costs**   | ** ** | **Return**      | ** ** |
| Held for Rental:     |       |       |       |        |       |        |       |            |       |
| 3rd  Quarter 2005    |       | 353        |       | 44          | %          | $           | 14,297     |            | 10.5       | % |
| 4th Quarter  2005    |       | 1,671      |       | 21          | %          | 97,131      |       | 10.1            | %          |
| 1st  Quarter 2006    |       | 375        |       | 60          | %          | 43,720      |       | 10.0            | %          |
| Thereafter           |       | 322        |       | 58          | %          | 34,729      |       | 10.7            | %          |
|                 |       | 2,721      |       | 34          | %          | $           | 189,877    |            | 10.2       | % |
| Merchant  Buildings: |       |       |       |        |       |        |       |            |       |
| 3rd  Quarter 2005    |       | 83         |       | 78          | %          | $           | 13,169     |            | 9.5        | % |
| 4th Quarter  2005    |       | 102        |       | 100         | %          | 13,111      |       | 9.4             | %          |
| 1st  Quarter 2006    |       | 71         |       | 64          | %          | 13,856      |       | 9.1             | %          |
| Thereafter           |       | 609        |       | 92          | %          | 121,021     |       | 8.5             | %          |
|                 |       | 865        |       | 89          | %          | $           | 161,157    |            | 8.7        | % |
| Total                |       | 3,586      |       | 47          | %          | $           | 351,034    |            | 9.6        | % |

*** ***

***Acquisition and Disposition Activity:***We continue to actively pursue dispositionand acquisition opportunities in an effort to create long-term value in ourreal estate portfolio. During the six months ended June 30, 2005, wereceived proceeds of over $136 million on the disposition of over 2 millionsquare feet of properties. The sales were comprised of held-for-rental assetsthat we believe no longer meet our long-term growth objectives andheld-for-sale properties that were developed with the intent to sell uponcompletion. This disposition activity for 2005 compares to dispositions ofapproximately $40 million during the first six months of 2004. The favorablemarket pricing of real estate continues to allow us to market and pursuedisposition opportunities.

 

Onthe acquisition front, our strategy is to pursue acquisitions with value addedopportunities. During the first six months of 2005, we closed on over $280million of acquisitions, including a $257 million, five building officeportfolio in Chicago. This compares to acquisitions of over $48 million for thesame period in 2004.

 

18

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**FundsFrom Operations**

 

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

 

Historical costaccounting for real estate assets in accordance with GAAP implicitly assumesthat the value of real estate assets diminishes predictably over time. Sincereal estate values instead have historically risen or fallen with marketconditions, many industry investors and analysts have considered presentationof operating results for real estate companies that use historical costaccounting to be insufficient by themselves. Thus, NAREIT created FFO as asupplemental measure of REIT operating performance that excludes historicalcost depreciation, among other items, from GAAP net income. Management believesthat the use of FFO, combined with the required primary GAAP presentations, hasimproved the understanding of operating results of REITs among the investingpublic and made comparisons of REIT operating results more meaningful.Management considers FFO to be a useful measure for reviewing comparativeoperating and financial performance (although FFO should be reviewed inconjunction with net income which remains the primary measure of performance) because,by excluding gains or losses related to sales of previously depreciatedoperating real estate assets and excluding real estate asset depreciation andamortization, FFO assists in comparing the operating performance of a company’sreal estate between periods or as compared to different companies.

 

The following tablesummarizes the calculation of FFO for the three and six months ended June 30,2005 and 2004, respectively (in thousands):

 
| ** **                                                       | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|------------------------------------------------------------------|------------|--------------------------------------|------------|------------------------------------|------------|
| ** **                                                       | ** ** | **2005**                             | ** ** | **2004**                           | ** ** | **2005** | ** ** | **2004** | ** ** |
| Net income  available for common unitholders                     | ** ** | **$**                                | **44,269** |                               | $          | 39,008 | ** ** | **$** | **72,430** |   | $ | 75,230 |   |
| Add back  (deduct):                                              |       |                                 |       |                               |       |   |   |   |   |
| Depreciation and  amortization                                   | ** ** | **64****,124**                       |       | 53,251                             | ** ** | **127,350** |   | 105,648 |   |
| Share of joint  venture adjustments                              | ** ** | **4,943**                            |       | 4,609                              | ** ** | **9,808** | ** ** | 9,197 |   |
| Earnings from  depreciable property sales                        | ** ** | **(5,888**                           | **)**      | (745                               | )          | **(12,398** | **)** | (4,754 | ) |
| Share of  earnings from joint venture depreciable property sales | ** ** | **(11,174**                          | **)**      | —                             | ** ** | **(11,174** | **)** | — |   |
|                                                             |       |                                 |       |                               |       |   | ** ** |   |   |
| **Funds  From Operations**                                       | ** ** | **$**                                | **96,274** |                               | $          | 96,123 | ** ** | **$** | **186,016** |   | $ | 185,321 |   |

 

**Resultsof Operations**

 

A summary of ouroperating results and property statistics for the three and six months ended June 30,2005 and 2004, is as follows (in thousands, except number of properties and perunit data):

 

19

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| ** **                                                   | ** ** | **Three Months Ended June 30,** | ** **   | **Six Months Ended June 30,** | ** ** |
|--------------------------------------------------------------|------------|--------------------------------------|--------------|------------------------------------|------------|
| ** **                                                   | ** ** | **2005**                             | ** **   | **2004**                           | ** ** | **2005** | ** ** | **2004** | ** ** |
| Rental  Operations revenue from Continuing Operations        | ** ** | **$**                                | **205,166**  |                               | $          | 184,273 | ** ** | **$** | **399,588** |   | $ | 368,636 |   |
| Service  Operations revenues from Continuing Operations      | ** ** | **23,748**                           |         | 14,739                             | ** ** | **45,443** |   | 26,174 |   |
| Earnings from  Continuing Rental Operations                  | ** ** | **40,058**                           |         | 44,890                             | ** ** | **70,833** |   | 87,676 |   |
| Earnings from  Continuing Service Operations                 | ** ** | **12,263**                           |         | 4,723                              | ** ** | **23,183** |   | 6,765 |   |
| Operating income                                             | ** ** | **46,042**                           |         | 43,988                             | ** ** | **80,158** |   | 80,499 |   |
| Net income  available for common unitholders                 | ** ** | **$**                                | **44,269**   |                               | $          | 39,008 | ** ** | **$** | **72,430** |   | $ | 75,230 |   |
| Weighted average  common units outstanding                   | ** ** | **156,986**                          |         | 156,045                            | ** ** | **156,967** |   | 154,244 |   |
| Weighted average  common and dilutive potential common units | ** ** | **157,696**                          |         | 156,828                            | ** ** | **157,711** |   | 156,871 |   |
| Basic income per  common unit:                               |       |                                 |         |                               |       |   |   |   |   |
| Continuing  operations                                       | ** ** | **$**                                | **.24**      |                               | $          | .24 | ** ** | **$** | **.40** |   | $ | .45 |   |
| Discontinued  operations                                     | ** ** | **$**                                | ** 04** |                               | $          | .01 | ** ** | **$** | **.06** |   | $ | .04 |   |
| Diluted income  per common unit:                             |       |                                 |         |                               |       |   |   |   |   |
| Continuing  operations                                       | ** ** | **$**                                | **.24**      |                               | $          | .24 | ** ** | **$** | **.40** |   | $ | .44 |   |
| Discontinued  operations                                     | ** ** | **$**                                | **.04**      |                               | $          | .01 | ** ** | **$** | **.06** |   | $ | .04 |   |
| Number of  in-service properties at end of period            | ** ** | **891**                              |         | 897                                | ** ** | **891** |   | 897 |   |
| In-service  square footage at end of period                  | ** ** | **113,753**                          |         | 111,170                            | ** ** | **113,753** |   | 111,170 |   |
| Under  development square footage at end of period           | ** ** | **2,722**                            |         | 2,826                              | ** ** | **2,722** |   | 2,826 |   |

 

**Comparisonof Three Months Ended June 30, 2005 to Three Months Ended June 30,2004**

 

Rental Income FromContinuing Operations

 

Overall, rental income fromcontinuing operations increased from $178.5 million for the quarter ended June 30,2004 to $189.5 million for the same period in 2005. The following tablereconciles rental income from continuing operations by reportable segment toour total reported rental income from continuing operations for the quartersended June 30, 2005 and 2004 (in thousands):

 
| ** **  | ** ** | **2005**   | ** **  | **2004** | ** ** |
|-------------|------------|------------|-------------|----------|------------|
| Office      | ** ** | **$**      | **116,933** |     | 110,816    |   |
| Industrial  | ** ** | **70,077** |        | 65,463   |       |
| Retail      | ** ** | **954**    |        | 1,031    |       |
| Non-segment | ** ** | **1,518**  |        | 1,193    |       |
| Total       | ** ** | **$**      | **189,482** |     | $          | 178,503 |   |
|             |            |            |             |          |            |  |  |

 

Our three reportable segmentscomprising Rental Operations (office, industrial and retail) are within thereal estate industry; however, the same economic and industry conditions do notnecessarily affect each segment. The primary causes of the increase in rentalincome from continuing operations, with specific references to a particularsegment when applicable, are summarized below:

 

•      Weacquired 21 properties and placed 19 developments in service from July 1,2004 to June 30, 2005. These acquisitions and developments are the primaryfactor in the overall $11.0 million increase in rental revenue for the secondquarter of 2005 compared to the same period in 2004. These acquisitions anddevelopments provided revenues of $11.5 million in the second quarter of 2005,including $8.3 million from office acquisitions primarily in our Chicago,Atlanta and Cincinnati markets.

•      Leasetermination fees totaled $1.1 million for the second quarter of 2005 comparedto $2.3 million for the same period in 2004.

•      Ourin-service occupancy increased from 89.7% at June 30, 2004 to 90.7% at June 30,2005.

 

20

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Equity in Earningsof Unconsolidated Companies

 

Equity in earningsincreased from $5.8 million for the second quarter of 2004 to $15.7 million forthe same period in 2005. During the second quarter of 2005, one of our 50%owned joint ventures sold three buildings with our share of the gain totaling$11.2 million.

 

Rental Expensesand Real Estate Taxes

 

The following tablereconciles rental expenses and real estate taxes by reportable segment to ourtotal reported amounts in the statement of operations for the three monthsended June 30, 2005 and 2004, respectively (in thousands):

 
| ** **          | ** ** | **2005**  | ** ** | **2004** | ** ** |
|---------------------|------------|-----------|------------|----------|------------|
| Rental Expenses:    |       |      |       |     |       |
| Office              | ** ** | **$**     | **32,183** |     | $          | 27,089 |   |
| Industrial          | ** ** | **9,662** |       | 8,574    |       |
| Retail              | ** ** | **146**   |       | 105      |       |
| Non-segment         | ** ** | **286**   |       | 145      |       |
| Total               | ** ** | **$**     | **42,277** |     | $          | 35,913 |   |
| Real Estate  Taxes: |       |      |       |     |       |
| Office              | ** ** | **$**     | **13,197** |     | $          | 12,076 |   |
| Industrial          | ** ** | **8,668** |       | 7,841    |       |
| Retail              | ** ** | **75**    |       | 126      |       |
| Non-segment         | ** ** | **1,181** |       | 1,012    |       |
| Total               | ** ** | **$**     | **23,121** |     | $          | 21,055 |   |

 

The overall increase inrental expenses and real estate taxes is the result of our increased realestate assets associated with the acquisitions and developments as noted above.

 

Interest Expense

 

Interest expenseincreased from $32.1 million in the second quarter of 2004 to $35.9 million inthe second the quarter of 2005 due to a net increase in unsecured long-termdebt and higher interest rates on our line of credit. Our unsecured long-termdebt increased by a net $585 million since June 30, 2004, which includedthe $400 million term loan obtained on May 31, 2005. This increaseresulted in $2.5 million of interest expense. The average borrowings on ourline of credit decreased slightly compared to the same period last year;however, the near 100% increase in the LIBOR rate added nearly $800,000 ofinterest expense during the second quarter of 2005 compared to 2004.

 

Depreciation andAmortization

 

Depreciation andamortization expense increased from $50.3 million for the second quarter of2004 to $63.8 million for the same period in 2005. The following highlights thesignificant changes in depreciation and amortization expense.

•      Buildingdepreciation expense increased $5.3 million due to increases in our held-for-rentalasset base from acquisitions and developments during 2004 and 2005.

•      Depreciationon tenant improvements increased by $2.6 million and lease commissionamortization increased by $3.6 million due to increased leasing activity andthe effect of Statement of Financial Accounting Standards (“SFAS”) No. 141,*Business Combinations* (“SFAS 141”)on acquisitions. SFAS 141 requires the allocation of a portion of a property’spurchase price to existing tenant improvements and intangible assets for leasesacquired and in-place at the time of acquisition. We amortize these assets overthe remaining life of the leases.

 

21

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Service Operations

 

Service Operationsprimarily consist of our merchant building sales and the leasing, management,construction and development services for joint venture properties andproperties owned by third parties. These operations are heavily influenced bythe current state of the economy as leasing and management fees are dependent uponoccupancy while construction and development services rely on businessesexpanding operations. Service Operations earnings increased from $4.7 millionfor the quarter ended June 30, 2004 to $12.3 million for the quarter endedJune 30, 2005, primarily as a result of the following:

•      Ourmerchant building development and sales program, whereby a building isdeveloped and then sold, is a significant component of Construction andDevelopment income. During the second quarter of 2005, we sold two such propertiesfor a gain of $7.9 million compared to one property in the second quarter of2004 for a gain of $2.7 million.

•      Excludingthe gains above, earnings from Service Operations increased from $2.0 millionin the second quarter of 2004 to $4.4 million in the same period of 2005. Wehave experienced construction volume and fee increases through work performedas a general contractor for third parties as economic conditions improve andfinancing of construction remains attractive.

 

General andAdministrative Expense

 

General andadministrative expenses increased from $5.6 million for the quarter ended June 30,2004 to $6.3 million, compared to the same period in 2005. 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 operations are charged to general and administrativeexpenses. The increase in general and administrative expenses for the period isthe result of an overall increase in our overhead costs. As our constructionvolume increases, the need for additional employees creates more overhead forthe Service Operations group. Additionally, our National Development andConstruction group has continued to expand as opportunities arise throughoutour core markets and new markets. While a portion of the increased overhead hasbeen offset by increased construction and leasing activity, the overall effecthas been an increase to general and administrative expenses.

 

Other Income andExpenses

 

Earnings from sale ofland and ownership interests in consolidated companies, net of impairmentadjustments, are comprised of the following amounts for the three months ended June 30,2005 and 2004, respectively (in thousands):

 
| ** **                                                       | ** ** | **2005**   | ** ** | **2004** | ** ** |
|------------------------------------------------------------------|------------|------------|------------|----------|------------|
| Gain on land  sales                                              | ** ** | **$**      | **3,309**  |     | $          | 1,054 |   |
| Gain on sale of  ownership interests in unconsolidated companies |       | **—** |       | 50       |       |
| Impairment  adjustment for land                                  | ** ** | **(43**    | **)**      | —   |       |
| Total                                                            | ** ** | **$**      | **3,266**  |     | $          | 1,104 |   |

 

Gain on land sales isderived from sales of undeveloped land owned by us. In the second quarter of2005, we sold ten parcels of land versus eight parcels in the second quarter of2004.

 

22

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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.

 

We recorded a $43,000impairment charge in the second quarter of 2005 associated with the contractedsale of land parcels. One of the two land parcels making up the $43,000impairment was sold in the second quarter of 2005 and the other is scheduled tobe sold later in 2005.

 

DiscontinuedOperations

 

We have classified theoperations of 58 buildings as discontinued operations as of June 30, 2005.These 58 buildings consist of 45 industrial, ten office and three retailproperties. As a result, we classified net income from operations of $560,000and $555,000 as net income from discontinued operations for the three months endedJune 30, 2005 and 2004, respectively. Ten of the properties classified indiscontinued operations were sold during the second quarter of 2005 and twoproperties were sold during the second quarter of 2004. The gains on disposalof these properties, net of impairment adjustment of $5.1 million and $695,000for the three months ended June 30, 2005 and 2004, respectively, are alsoreported in discontinued operations. The remaining 46 properties consist of 39properties sold in 2004, two properties sold in the first quarter of 2005 andfive depreciable properties classified as held-for-sale at June 30, 2005.

 

**Comparisonof Six Months Ended June 30, 2005 to Six Months Ended June 30, 2004**

 

Rental Income FromContinuing Operations

 

Overall, rental income from continuing operationsincreased from $358.3 million for the six months ended June 30, 2004 to$378.7 million for the same period in 2005. The following table reconcilesrental income from continuing operations by reportable segment to our totalreported rental income from continuing operations for the six months ended June 30,2005 and 2004, respectively (in thousands):

 
| ** **  | ** ** | **2005**    | ** **  | **2004** | ** ** |
|-------------|------------|-------------|-------------|----------|------------|
| Office      | ** ** | **$**       | **235,058** |     | $          | 221,487 |   |
| Industrial  | ** ** | **139,010** |        | 132,312  |       |
| Retail      | ** ** | **1,996**   |        | 2,191    |       |
| Non-segment | ** ** | **2,634**   |        | 2,351    |       |
| Total       | ** ** | **$**       | **378,698** |     | $          | 358,341 |   |

 

Our three reportable segmentscomprising Rental Operations (office, industrial and retail) are within thereal estate industry; however, the same economic and industry conditions do notnecessarily affect each segment. The primary causes of the increase in rentalincome from continuing operations, with specific references to a particularsegment when applicable, are summarized below:

•      Weacquired 21 properties and placed 19 developments in service from July 1,2004 to June 30, 2005. These acquisitions and developments are the primaryfactor in the overall $20.4 million increase in rental revenue for the firstsix months in 2005 compared to the same period in 2004, as they providedrevenues of $19.3 million in the first six months of 2005, including $13.7million from office acquisitions primarily in our Chicago, Atlanta andCincinnati markets.

 

23

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•      Leasetermination fees totaled $2.9 million for the first six months of 2005 comparedto $6.4 million for the same period in 2004.

•      Ourin-service occupancy increased from 89.7% at June 30, 2004 to 90.7% at June 30,2005.

 

Equity in Earningsof Unconsolidated Companies

 

Equity in earningsincreased from $10.3 million for the first half of 2004 to $20.9 million forthe same period in 2005. During the second quarter of 2005, one of our 50%owned joint ventures sold three buildings with our share of the gain totaling$11.2 million.

 

Rental Expensesand Real Estate Taxes

 

The following tablereconciles rental expenses and real estate taxes by reportable segment to ourtotal reported amounts in the statement of operations for the six months ended June 30,2005 and 2004, respectively (in thousands):

 
| ** **          | ** ** | **2005**   | ** ** | **2004** |   |
|---------------------|------------|------------|------------|----------|--------|
| Rental Expenses:    |       |       |       |     |   |
| Office              | ** ** | **$**      | **64,573** |     | $      | 55,284 |   |
| Industrial          | ** ** | **20,851** |       | 18,663   |   |
| Retail              | ** ** | **301**    |       | 257      |   |
| Non-segment         | ** ** | **387**    |       | 325      |   |
| Total               | ** ** | **$**      | **86,112** |     | $      | 74,529 |   |
|                |       |       |       |     |   |
| Real Estate  Taxes: |       |       |       |     |   |
| Office              | ** ** | **$**      | **26,074** |     | $      | 23,827 |   |
| Industrial          | ** ** | **17,221** |       | 15,670   |   |
| Retail              | ** ** | **159**    |       | 218      |   |
| Non-segment         | ** ** | **2,251**  |       | 2,096    |   |
| Total               | ** ** | **$**      | **45,705** |     | $      | 41,811 |   |

 

The overall increase inrental expenses and real estate taxes is the result of our increased realestate assets associated with the acquisitions and developments as noted above.

 

Interest Expense

 

Interest expenseincreased from $64.0 million for the six months ended June 30, 2004 to$70.8 million for the six months ended June 30, 2005 due to a net increasein unsecured long-term debt and higher interest rates on our line of credit.Our unsecured long-term debt increased by a net $585 million since June 30,2004, which included the $400 million term loan obtained on May 31,2005.  This increase resulted in $5.2million of interest expense. The average borrowings on our line of creditdecreased compared to same period last year; however, the increase in the LIBORrate added nearly $500,000 of interest expense in 2005 over 2004.

 

Depreciation andAmortization

 

Depreciation andamortization expense increased from $100.6 million for the first half of 2004 to$126.1 million for the same period in 2005. The following highlights thesignificant changes in depreciation and amortization expense.

•      Buildingdepreciation expense increased $9.4 million due to increases in ourheld-for-rental asset base from 2005 and 2004 acquisitions and developments.

 

24

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•      Depreciationon tenant improvements increased by $7.0 million and lease commissionamortization increased by $5.9 million due to increased leasing activity andthe effect of SFAS 141, *BusinessCombinations* (“SFAS 141”) on acquisitions. SFAS 141 requires theallocation of a portion of a property’s purchase price to existing tenantimprovements and intangible assets for leases acquired and in-place at the timeof acquisition. We amortize these assets over the remaining life of theleases.  

 

Service Operations

 

Service Operationsprimarily consist of our merchant building sales and the leasing, management,construction and development services for joint venture properties andproperties owned by third parties. These operations are heavily influenced bythe current state of the economy as leasing and management fees are dependentupon occupancy while construction and development services rely on businessesexpanding operations. Service Operations earnings increased from $6.8 millionfor the six months ended June 30, 2004 to $23.2 million for the six monthsended June 30, 2005, primarily as a result of the following:

•      Ourmerchant building development and sales program, whereby a building isdeveloped and then sold, is a significant component of Construction andDevelopment income. During the first half of 2005, we sold four such propertiesfor a gain of $12.4 million compared to two properties in the first half of2004 for a gain of $3.1 million.

•      Excludingthe gains above, earnings from Service Operations increased from $3.7 millionin first half of 2004 to $10.8 million in the same period of 2005. We haveexperienced construction volume and fee increases through work performed as ageneral contractor for third parties as economic conditions improve andfinancing of construction remains attractive.

•      Duringthe first quarter of 2005, we recognized $2.7 million of deferred gainassociated with the sale of our landscaping operations in 2001. The gain wasdeferred as a result of future performance provisions contained in the originalsale agreement. As a result of contract renegotiations effective in the firstquarter of 2005, all future performance provisions were removed and the gainwas recognized.

 

Other Income andExpenses

 

Earnings from sale ofland and ownership interests in consolidated companies, net of impairmentadjustments, are comprised of the following amounts for the six months ended June 30,2005 and 2004, respectively (in thousands):

 
| ** **                                                       | ** ** | **2005** | ** ** | **2004** | ** ** |
|------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Gain on land  sales                                              |       | $        | 3,486      |     | $          | 5,783 |   |
| Gain on sale of  ownership interests in unconsolidated companies |       | —   |       | 50       |       |
| Impairment  adjustment land                                      | ** ** | **(77**  | **)**      | (100     | )          |
| Total                                                            | ** ** | **$**    | **3,409**  |     | $          | 5,733 |   |

 

Gain on land sales isderived from sales of undeveloped land owned by us. We pursue opportunities todispose of land in markets with a high concentration of undeveloped land andthose markets where the land no longer meets our strategic development plans.

 

We recorded  $77,000 and $100,000 of impairment charges onland parcels for the six months ended June 20, 2005 and 2004,respectively. One of the two land parcels making up the $77,000 impairment wassold in the second quarter of 2005 and the other parcel is contracted to selllater in 2005. The 2004 parcel with the $100,000 impairment was later sold in2004.

 

25

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DiscontinuedOperations

 

We have classified theoperations of 58 buildings as discontinued operations as of June 30, 2005.These 58 buildings consist of 45 industrial, ten office and three retailproperties. As a result, we classified net income from operations of $1.2million and $1.6 million as net income from discontinued operations for the sixmonths ended June 30, 2005 and 2004, respectively. Twelve of theproperties classified in discontinued operations were sold during the first sixmonths of 2005 and six properties were sold during the first six months of2004. The gains on disposal of these properties, net of impairment adjustmentof $8.8 million and $4.7 million for the six months ended June 30, 2005and 2004, respectively, are also reported in discontinued operations. Theremaining 40 properties consist of 35 properties sold during the last sixmonths of 2004 and five depreciable properties classified as held-for-sale at June 30,2005.

 

**Liquidityand Capital Resources**

 

Sources ofLiquidity

 

We expect to meet ourshort-term liquidity requirements over the next twelve months, includingpayments of dividends and distributions as well as recurring capitalexpenditures relating to maintaining our current real estate assets, primarilythrough the following:

 

•      workingcapital; and

•      netcash provided by operating activities.

 

Although we historicallyhave not used any other sources of funds to pay for recurring capitalexpenditures on our current real estate investments, the use of borrowings orproperty disposition proceeds may be temporarily needed to fund suchexpenditures during periods of high leasing volume.

 

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

•      issuanceof additional unsecured notes;

•      issuanceof additional General Partner preferred equity;

•      undistributedcash provided by operating activities, if any; and

•      proceeds received from realestate dispositions.  

 

### ***Rental Operations***

### ** **

We believe that our principal source of liquidity,cash flows from Rental Operations, provides a stable source of cash to fundoperational expenses. We believe that this cash-based revenue stream issubstantially aligned with revenue recognition (except for periodicstraight-line rental income accruals and amortization of above or below marketrents) as cash receipts from the leasing of rental properties are generallyreceived in advance of or in a short time following the actual revenuerecognition. We are subject to risks of decreased occupancy through marketconditions as well as tenant defaults and bankruptcies, and potential reductionin rental rates upon renewal or re-letting of properties, which would result inreduced cash flow from operations. However, we believe that these risks aremitigated by our strong market presence in most of our locations and the factthat we perform in-house credit review and analysis on major tenants and allsignificant leases before they are executed.

 

26

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*CreditFacilities*

 

We have one unsecuredline of credit available at June 30, 2005, described as follows (in thousands):

 
| ** **                | ** ** | **Borrowing** | ** ** | **Maturity** | ** **        | **Interest** | ** **   | **Outstanding Balance**   | ** ** |
|---------------------------|------------|---------------|------------|--------------|-------------------|--------------|--------------|---------------------------|------------|
| **Description**           | ** ** | **Capacity**  | ** ** | **Date**     | ** **        | **Rate**     | ** **   | **at June 30, 2005** | ** ** |
| Unsecured Line  of Credit |       | $             | 500,000    |         | January 2007 |         | LIBOR + .60% |                      | $          | 120,000 |   |
|                           |            |               |            |              |                   |              |              |                           |            |  |  |

 

The line of credit is used to funddevelopment activities, acquire additional rental properties and provideworking capital.

 

The line of credit provides us withan option to obtain borrowings from financial institutions that participate inthe line, at rates lower than the stated interest rate, subject to certainrestrictions. Amounts outstanding on the unsecured line of credit at June 30,2005, range from LIBOR + .17% to .60% (3.31% to 3.82% at June 30, 2005).

 

The line of credit also containsfinancial covenants that require us to meet defined levels of performance.  As of June 30, 2005, we are incompliance with all covenants and expect to remain in compliance for theforeseeable future.

 

*Debt and EquitySecurities*

 

At June 30, 2005, we have onfile with the SEC an effective shelf registration statement that permits us tosell up to an additional $795 million of unsecured debt securities.  In addition, the General Partner has on filewith the SEC an effective shelf registration statement that permits the GeneralPartner to sell up to an additional $350.7 million of common and preferredstock as of June 30, 2005. From time-to-time, we expect to issueadditional securities under these registration statements to fund developmentand acquisition of additional rental properties and to fund the repayment ofthe credit facilities and other long-term debt upon maturity.

 

The indenture governing ourunsecured notes also requires us to comply with financial ratios and othercovenants regarding our operations. We are currently in compliance with allsuch covenants as of June 30, 2005 and expect to remain in compliance forthe foreseeable future.

 

*Saleof Real Estate Assets*

 

We utilize sales of realestate assets as an additional source of liquidity. We pursue opportunities tosell real estate assets and prune our older portfolio properties whenbeneficial to our long-term strategy.

 

Uses of Liquidity

 

Our principal uses ofliquidity include the following:

 

•      Property investments;

•      Recurringleasing/capital costs;

•      Distributions tounitholders;

•      Long-term debtmaturities; and

•      Other contractualobligations.

 

*PropertyInvestment*

 

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

 

27

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*RecurringExpenditures*

 

One of our principal usesof our liquidity is to fund the development, acquisition and recurringleasing/capital expenditures of our real estate investments.

 

A summary of ourrecurring capital expenditures for the six months ended June 30, 2005 and2004, respectively, is as follows (in thousands):

 
| ** **             | ** ** | **2005**   | ** ** | **2004** | ** ** |
|------------------------|------------|------------|------------|----------|------------|
|                   | ** ** | ** ** | ** ** |     |       |   |   |
| Tenant  improvements   | ** ** | **$**      | **29,948** |     | $          | 28,485 |   |
| Leasing costs          | ** ** | **16,346** |       | 13,202   |       |
| Building  improvements | ** ** | **6,086**  |       | 8,305    |       |
| Totals                 | ** ** | **$**      | **52,380** |     | $          | 49,992 |   |

 

*DebtMaturities*

 

Debt outstanding at June 30,2005, totaled $2.9 billion with a weighted average interest rate of 5.39%maturing at various dates through 2028. We had $2.7 billion of unsecured debtand  $205.0 million of secured debtoutstanding at June 30, 2005. Scheduled principal amortization of suchdebt totaled $3.9 million for the six months ended June 30, 2005.

 

Following is a summary ofthe scheduled future amortization and maturities of our indebtedness at June 30,2005 (in thousands, except percentage data):

 
| ** ** | ** ** | **Future Repayments** | ** ** | **Weighted****Average** | ** ** |
|------------|------------|-----------------------|------------|-------------------------|------------|
| ** ** | ** ** | **Scheduled**         | ** ** | ** **              | ** ** | ** ** | ** ** | **Interest Rate of** | ** ** |
| **Year**   | ** ** | **Amortization**      | ** ** | **Maturities**          | ** ** | **Total** | ** ** | **Future Repayments** | ** ** |
|       |       |                  |       |                    |       |   |   |   |   |   |   |   |
| 2005       |       | $                     | 4,976      |                    | $          | 500,000 |   | $ | 504,976 |   | 4.24 | % |
| 2006       |       | 8,835                 |       | 415,186                 |       | 424,021 |   | 4.88 | % |
| 2007       |       | 7,433                 |       | 334,615                 |       | 342,048 |   | 4.80 | % |
| 2008       |       | 6,525                 |       | 268,968                 |       | 275,493 |   | 4.91 | % |
| 2009       |       | 5,867                 |       | 275,000                 |       | 280,867 |   | 7.37 | % |
| 2010       |       | 5,313                 |       | 175,000                 |       | 180,313 |   | 5.39 | % |
| 2011       |       | 4,647                 |       | 175,000                 |       | 179,647 |   | 6.94 | % |
| 2012       |       | 3,332                 |       | 200,000                 |       | 203,332 |   | 5.86 | % |
| 2013       |       | 3,050                 |       | 150,000                 |       | 153,050 |   | 4.64 | % |
| 2014       |       | 3,800                 |       | 273,196                 |       | 276,996 |   | 6.23 | % |
| Thereafter |       | 4,765                 |       | 50,000                  |       | 54,765 |   | 7.00 | % |
|       |       | $                     | 58,543     |                    | $          | 2,816,965 |   | $ | 2,875,508 |   | 5.39 | % |

 

Historical CashFlows

 

Cash and cash equivalentswere $6.5 million and $10.8 million at June 30, 2005 and 2004, respectively.The following highlights significant changes in net cash, associated with ouroperating, investing and financing activities (in millions):

 
| ** **                                 | ** ** | **Six Months Ended June 30,** | ** ** |
|--------------------------------------------|------------|------------------------------------|------------|
| ** **                                 | ** ** | **2005**                           | ** ** | **2004** | ** ** |
| Net Cash  Provided by Operating Activities |       | $                                  | 195.5      |   | $ | 165.2 |   |
| Net Cash Used  for Investing Activities    |       | $                                  | (372.0     | ) | $ | (249.0 | ) |
| Net Cash  Provided by Financing Activities |       | $                                  | 177.2      |   | $ | 81.9 |   |

 

28

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*OperatingActivities*

 

Cash flows from operatingactivities provide the cash necessary to meet normal operational requirementsof our rental operations and merchant building activities. The receipt ofrental income from rental operations continues to provide the primary source ofour revenues and operating cash flows. In addition, we also develop buildingswith the intent to sell, which provides another significant source of operatingcash flow activity.

•      Duringthe period ended June 30, 2005, we incurred merchant building developmentcosts of $37.9 million compared to $17.8 million for the period ended June 30,2004. The difference is reflective of the increased activity in ourheld-for-sale pipeline. The pipeline of held-for-sale projects underconstruction as of June 30, 2005, has anticipated costs of $161.2 million.In addition to the development costs noted above, we also acquired a buildingfor $6.0 million during the first quarter of 2005 on which we made minorimprovements and sold in June 2005 for $20.0 million.

•      Wesold four merchant buildings in the first six months of 2005 compared to twosales of merchant buildings for the same period in 2004, recognizing after taxgains of $12.4 million and $3.1 million, respectively.

 

*Investing Activities*

 

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

•      Developmentcosts totaled $68.2 million for the period June 30, 2005 compared to $63.5million for the same period in 2004.

•      Duringthe first six months of 2005, we acquired $262.7 million of real estatecompared to $45.6 million for the same period in 2004. The largest of theseacquisitions was a five building office complex in our Chicago market for$257.0 million.

•      Salesof land and depreciated property provided $70.6 million in net proceeds for theperiod ended June 30, 2005, compared to $37.2 million for the same periodin 2004. We continue to dispose of non-strategic and older properties as partof our capital recycling program to fund acquisitions and new development whileimproving the overall quality of our investment portfolio.

 

*Financing Activities*

 

Thefollowing significant items highlight fluctuations in net cash provided byfinancing activities:

•      InJanuary 2005, we retired a $65.0 million variable rate term loan.

•      InMarch 2005, we retired $100.0 million of 6.94% senior unsecured debt thatmatured in March 2005.

•      ThroughJune 30, 2005, we have had net borrowings on our $500.0 million line ofcredit of $120.0 million. These borrowings were used to retire theabove-mentioned debt and to support operations.

•      InMay 2005, we obtained a $400.0 million term loan. The proceeds from thisterm loan were used as financing for the office acquisition noted above and topay down our unsecured debt.

 

*Financial Instruments*

 

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

 

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In March 2005, weentered into $300.0 million of cash flow hedges through forward-startinginterest rate swaps to hedge interest rates on $300.0 million of estimated debtofferings in 2006. The swaps qualify for hedge accounting under SFAS 133 withany changes in fair value recorded in Accumulated Other Comprehensive Income (“OCI”).Due to the decline in interest rates, the fair value at June 30, 2005, isa liability of $19.0 million.

 

In May 2003, theFinancial Accounting Standards Board (“FASB”) issued SFAS No. 150, *Accounting for Certain Financial Instruments withCharacteristics of both Liabilities and Equity* (“SFAS 150”). SFAS150 establishes standards for classifying and measuring as liabilities certainfinancial instruments that embody obligations of the issuer and havecharacteristics of both liabilities and equity. SFAS 150 is effective for allfinancial instruments created or modified after May 31, 2003, andotherwise is effective July 1, 2003. We consolidate the operations of onejoint venture in our condensed consolidated financial statements at June 30,2005. This joint venture is partially owned by unaffiliated parties that havenon-controlling interests. SFAS 150 requires the disclosure of the estimatedsettlement value of these non-controlling interests. As of June 30, 2005,the estimated settlement value of the non-controlling interest in thisconsolidated joint venture was approximately $1.1 million as compared to thereceivable asset recorded on our books for this joint venture of $75,000.

 

**RecentAccounting Pronouncements**

 

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

 

In June 2005, theFASB ratified the consensus reached in Emerging Issues Task Force (“EITF”) No. 04-5,“Determining Whether a General Partner, or the General Partners as a Group,Controls a Limited Partnership or Similar Entity When the Limited Partners HaveCertain Rights” (“EITF” No. 04-5). EITF 04-5 is effective for all newlyformed limited partnerships after the consensus was ratified and January 2006for all existing limited partnership agreements. We have evaluated theownership structure of our existing investments in unconsolidated companies anddetermined that we do not demonstrate control over the venture as defined by EITF 04-5.

 

**Investmentsin Unconsolidated Companies**

 

We analyze ourinvestments in joint ventures under Financial Accounting Standards Board (“FASB”)Interpretation No. 46(R), *Consolidationof Variable Interest Entities*(FIN 46(R))*,*to determine if the joint venture is a variable interestentity and would require consolidation. To the extent that our joint venturesdo not qualify as variable interest entities, we further assess under theguidelines of SOP 78-9, ARB 51 and FASB 94 to determine if the venture shouldbe consolidated.

 

In 2004, we announced a50/50 joint venture agreement with a medical office developer to develophealthcare facilities. Under the terms of the agreement, we will provide theproject financing and construction services while our partner will provide thebusiness development, leasing and property management of the co-developedproperties. We evaluated this partnership under the guidelines of FIN 46(R) anddetermined that the venture meets condition 5(a) due to the fact that theventure is not sufficiently capitalized and we have no recourse to the assetsof our partner beyond the developed property.

 

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As a result, the jointventure qualifies as a variable interest entity subject to consolidation underFIN 46(R). We are the primary beneficiary as determined under FIN 46(R) andfully consolidate the joint venture.

 

At June 30, 2005,there were four properties under development with the joint venture. Theseproperties total 297,495 square feet and have an aggregate constructionin-process balance of over $6.5 million that is consolidated into our balancesheet. The joint venture intends to sell the properties upon completion.

 

We have equity interestsin unconsolidated partnerships and joint ventures that own and operate rentalproperties and hold land for development. The equity method of accounting isused for these investments in which we have the ability to exercise significantinfluence, but not control, over operating and financial policies. As a result,the assets and liabilities of these joint ventures are not included on ourbalance sheet. Our investment in unconsolidated companies represents less than5% of our total assets as of June 30, 2005. These investments provideseveral benefits to us, including increased market share and an additionalsource of capital to fund real estate projects.

 

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

 

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

 

**Item 4.  Controls andProcedures**

 

(a)  Evaluation ofDisclosure Controls and Procedures

 

We maintain disclosure controls andprocedures that are designed to ensure that information required to bedisclosed by us in the reports that we file or submit under the Securities andExchange Act of 1934 is recorded, processed, summarized and reported within thetime periods specified in the SEC’s rules and forms. These disclosurecontrols and procedures are further designed to ensure that such information isaccumulated and communicated to management, including the Chief ExecutiveOfficer and the Chief Financial Officer to allow timely decisions regardingrequired disclosure.

 

(b)  Changes in InternalControl over Financial Reporting

 

We carried out an evaluation, underthe supervision and with the participation of management, including our ChiefExecutive Officer and Chief Financial Officer, of the effectiveness of thedesign and operation of our disclosure controls and procedures pursuant toExchange Act Rule 13a-15. Based upon the foregoing, the Chief ExecutiveOfficer and the 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.

 

During the six months ended June 30,2005, there have been no changes in our internal control over financialreporting during the period covered by this report that have materiallyaffected, or are reasonably likely to materially affect, our internal controlover financial reporting.

 

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**Part II- Other Information**

 

Item 1.  Legal Proceedings

 

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 June 30, 2005, taken as a whole, will not havea material adverse effect on our liquidity, business financial condition orresults of operations.

 

Item 2.  Unregistered Sales of Equity Securities andUse of Proceeds

 

(c) IssuerPurchases of Equity Securities

 

In January 2000, the General Partner adopted ashare repurchase plan (the “Repurchase Program”) authorizing the GeneralPartner to repurchase up to $100 million shares of the General Partner’s commonstock.  In October 2001, the GeneralPartner increased the maximum expenditure authority under the Repurchase Programfrom $100 million to $250 million and on July 27, 2005 the amount wasincreased from $250 million to $750 million, as discussed in Note 12 to ourCondensed Consolidated Financial Statements.

 

Under the Repurchase Program, the General Partner mayeffect share repurchases from time to time in the open market or in privatelynegotiated transactions at management’s discretion.  The General Partner also effects sharerepurchases on an ongoing basis associated with certain employee electionsunder the General Partner’s compensation and benefit programs.

 

The following table shows the General Partner’s sharerepurchase activity for each of the three months in the quarter ended June 30,2005:

 
| ** **                     | ** ** | ** **          | ** ** | ** **         | ** ** | ** **                | ** ** | **Maximum Number**     | ** ** |
|--------------------------------|------------|---------------------|------------|--------------------|------------|---------------------------|------------|------------------------|------------|
| ** **                     | ** ** | ** **          | ** ** | ** **         | ** ** | ** **                | ** ** | **(or Approximate**    | ** ** |
| ** **                     | ** ** | ** **          | ** ** | ** **         | ** ** | **Total Number of**       | ** ** | **Dollar Value) of**   | ** ** |
| ** **                     | ** ** | ** **          | ** ** | ** **         | ** ** | **Shares Purchased as**   | ** ** | **Shares that May**    | ** ** |
| ** **                     | ** ** | **Total Number of** | ** ** | ** **         | ** ** | **Part of Publicly** | ** ** | **Yet be Purchased**   | ** ** |
| ** **                     | ** ** | **Shares**          | ** ** | **Average Price**  | ** ** | **Announced Plans or**    | ** ** | **Under the Plans or** | ** ** |
| **Month**                      | ** ** | **Purchased (1)**   | ** ** | **Paid per Share** | ** ** | **Programs**              | ** ** | **Programs (2)**       | ** ** |
| April 1  through 30, 2005 |       | 5,158               |       | $                  | 29.70      |                      | 5,158      |                   |       |   |
| May 1  through 31, 2005   |       | 9,105               |       | $                  | 31.29      |                      | 9,105      |                   |       |   |
| June 1  through 30, 2005  |       | 5,173               |       | $                  | 31.40      |                      | 5,173      |                   |       |   |
|                           |       |                |       |               |       |                      |       |                   |       |
| Total                          |       | 19,436              |       | $                  | 30.90      |                      | 19,436     |                   |       |   |

 

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(1) Includes 15,705common shares repurchased under the General Partner’s Employee Stock PurchasePlan and 3,730 common shares repurchased through a Rabbi Trust under theGeneral Partner’s Executives’ Deferred Compensation Plan.

 

(2) Thenumber of common shares that may yet be repurchased in the open market to fundshares purchased under the General Partner’s Employee Stock Purchase Plan was267,279 as of June 30, 2005.   Theapproximate dollar value of   the GeneralPartner’s common shares that may yet be purchased under the Repurchase Programwas $249.5 million as of June 30, 2005. The approximate dollar value of the General Partner’s common shares thatmay yet be purchased under the Repurchase Program was $29.5 million as of June 30,2005.

 

Item 3.  Defaults upon Senior Securities

 

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

 

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Item 4.  Submission of Matters to a Vote of SecurityHolders

 

On April 27,2005, the General Partner held its annual meeting of shareholders (the “AnnualMeeting”).  The shareholders of theGeneral Partner were asked to take action to (a) elect directors to serveon the board of directors until the General Partner’s annual meeting ofshareholders in 2006, (b) approve the General Partner’s 2005 Long-TermIncentive Plan, (c) approve certain amendments to anti-dilution provisionsof the General Partner’s previously-existing long-term incentive plans, and (d) ratifythe appointment of KPMG LLP to serve as the General Partner’s independentauditors for the fiscal year ending December 31, 2005.

 

At the Annual Meeting, the GeneralPartner’s shareholders elected each of Barrington H. Branch, Geoffrey Button,William Cavanaugh, III, Ngaire E. Cuneo, Charles R. Eitel, Dr. R.Glenn Hubbard, Dr. Martin C. Jischke, L. Ben Lytle, William O. McCoy, JohnW. Nelley, Jr., Dennis D. Oklak, Jack R. Shaw, and Robert J. Woodward, Jr.to serve as directors for a one-year term. The number of votes cast for and withheld from each of the directornominees was as follows:

 
| **NOMINEE**                   | ** ** | **FOR**       | ** ** | **WITHHELD** | ** ** |
|-------------------------------|------------|---------------|------------|--------------|------------|
| Barrington H.  Branch         |       | 119,115,254.1 |       | 1,486,359.4  |       |
| Geoffrey Button               |       | 118,757,623.8 |       | 1,843,989.6  |       |
| William  Cavanaugh III        |       | 119,089,533.9 |       | 1,512,079.5  |       |
| Ngaire E. Cuneo               |       | 117,956,790.4 |       | 2,644,822.9  |       |
| Charles R. Eitel              |       | 119,112,481.6 |       | 1,489,131.8  |       |
| Dr. R.  Glenn Hubbard    |       | 119,450,001.3 |       | 1,151,612.1  |       |
| Dr. Martin  C. Jischke   |       | 119,026,771.6 |       | 1,574,841.8  |       |
| L. Ben Lytle                  |       | 119,028,787.8 |       | 1,572,825.6  |       |
| William O. McCoy              |       | 119,509,682.4 |       | 1,091,931.0  |       |
| John W.  Nelley, Jr.     |       | 119,679,492.7 |       | 922,120.7    |       |
| Dennis D. Oklak               |       | 118,919,963.9 |       | 1,681,649.5  |       |
| Jack R. Shaw                  |       | 119,655,612.5 |       | 946,000.9    |       |
| Robert J.  Woodward, Jr. |       | 119,674,975.7 |       | 926,637.7    |       |

 

The holders of 83,504,663.6 shares of the GeneralPartner’s common stock voted **FOR**the approval of the General Partner’s 2005 Long-Term Incentive Plan, theholders of 5,297,257.0 shares voted **AGAINST**such approval, the holders of 1,079,524.7 shares ABSTAINED from voting on suchmatters, and there were 30,720,168 broker non-votes.  As a result, this proposal was approved.

 

The holders of 85,379,428.9 shares of the GeneralPartner’s common stock voted **FOR**the approval of certain amendments to anti-dilution provisions of the GeneralPartner’s previously-existing long-term incentive plans, the holders of3,268,139.2 shares voted **AGAINST**such approval, the holders of 1,233,879.2 shares ABSTAINED from voting on suchmatters, and there were 30,720,166 broker non-votes.  As a result, this proposal was approved.

 

The holders of 118,015,771.3 shares of the GeneralPartner’s common stock voted **FOR**the ratification of the appointment of KPMG LLP to serve as the General Partner’sindependent auditors for the fiscal year ending December 31, 2005, theholders of 1,895,867.3 shares voted **AGAINST**such appointment and the holders of 689,967.7 shares **ABSTAINED**from voting on such matters. As a result, thisproposal was approved.

 

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Item 5.  Other Information

 

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. 

 

Item 6.  Exhibits

 
| (a)    |   | Exhibits                                                                                                                     |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                         |
|   |   | Exhibit 11.1  Ratio of Earnings to Combined Fixed Charges and Preferred Stock  Distributions.                           |
|   |   |                                                                                                                         |
|   |   | Exhibit 11.2  Ratio of Earnings to Debt Service.                                                                        |
|   |   |                                                                                                                         |
|   |   | Exhibit 15  Letter from KPMG LLP regarding unaudited interim financial information.                                     |
|   |   |                                                                                                                         |
|   |   | Exhibit 31.1   Rule 13a-14(a) Certification  of the General Partner’s Chief Executive Officer.      |
|   |   |                                                                                                                         |
|   |   |  Exhibit 31.2  Rule 13a-14(a) Certification of  the General Partner’s Chief Financial Officer. |
|   |   |                                                                                                                         |
|   |   | Exhibit 32.1   Section 1350 Certification of the  General Partner’s Chief Executive Officer.             |
|   |   |                                                                                                                         |
|   |   | Exhibit 32.2   Section 1350 Certification of the  General Partner’s Chief Financial Officer.             |

 

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**SIGNATURES**

 

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

 

 
|                        | DUKE REALTY  LIMITED PARTNERSHIP                                                    |
|-----------------------------|-------------------------------------------------------------------------------------|
|                        |
|                        |                                                                                |
| Date:  August 15, 2005 |  /s/ Dennis  D. Oklak                                                          |   |
|                        | Dennis D. Oklak                                                                     |
|                        | Chairman and  Chief Executive Officer                                               |
|                        |           of  the General Partner |
|                        |                                                                                |
|                        |                                                                                |
|                        | /s/ Matthew A.  Cohoat                                                              |   |
|                        | Matthew A.  Cohoat                                                                  |
|                        | Executive Vice  President and                                                       |
|                        |   Chief  Financial Officer                                                |
|                        |         of  the General Partner             |
|                             |                                                                                     |  |  |

 

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