**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C.  20549**

 

**FORM 10-Q**

 

**(MarkOne)**
| **x**      | ** ** | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934**                                                                                                                                                                                                 |
|------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** ** | **For the quarterly period  ended March 31, 2008**                                                                                                                                                                                                                                            |
|       |       |                                                                                                                                                                                                                                                                                                    |
| **OR**     |
|       |       |                                                                                                                                                                                                                                                                                                    |
| **o**      | ** ** | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934**                                                                                                                                                                                                |
| ** ** | ** ** | **For the transition period from                        to                        .** |

 

**CommissionFile Number: 0-20625**

 

**DUKE REALTY LIMITED PARTNERSHIP**

(Exact Name ofRegistrant as Specified in Its Charter)

 

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

 

**Registrant’stelephone number, including area code: **(317)808-6000

 

Indicate by checkmark whether the registrant (1) has filed all reports required to be filedby Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

 

Yes  x  No  o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See definitions of“large accelerated filer,” “accelerated filer,” and “smaller reporting company”in Rule 12b-2 of the Exchange Act. (Check one):

 

| Large accelerated filer  o                     |   | Accelerated filer o          |
|------------------------------------------------|--------|-----------------------------------|
|                                           |   |                              |
| Non-accelerated filer x                        |   | Smaller reporting  company o |
| (Do not check if a  smaller reporting company) |   |                              |

 

Indicate by check mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act):

YES  o               NO  x

 

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

 

| **Class**                              | ** ** | **Outstanding  at May 9, 2008** |
|----------------------------------------|------------|--------------------------------------|
| Common Units, $.01 par  value per unit |       | 154,400,564 units                    |

 

 

----

 

**DUKEREALTY LIMITED PARTNERSHIP**

 

**INDEX**

 
| ** **                                                                                             | **Page**                                                                                                    |
|--------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------|
| **Part I  - Financial Information**                                                               |                                                                                                        |
|                                                                                                   |                                                                                                        |
| **Item  1. Financial Statements**                                                                      |                                                                                                        |
| ** **                                                                                             |                                                                                                        |   |
|                                                                                                   | Consolidated  Balance Sheets as of March 31, 2008 (Unaudited) and December 31,  2007              | 2 |
|                                                                                                   |                                                                                                        |   |
|                                                                                                   | Consolidated Statements of Operations (Unaudited) for  the three months ended March 31, 2008 and 2007  | 3 |
|                                                                                                   |                                                                                                        |   |
|                                                                                                   | Consolidated Statements of Cash Flows (Unaudited) for  the three months ended March 31, 2008 and 2007  | 4 |
|                                                                                                   |                                                                                                        |   |
|                                                                                                   | Consolidated Statement of Partners’ Equity (Unaudited)  for the three months ended March 31, 2008 | 5 |
|                                                                                                   |                                                                                                        |   |
|                                                                                                   | Notes to Consolidated Financial Statements (Unaudited)                                                      | 6-13 |
|                                                                                                   |                                                                                                        |   |
| **Item 2.Management’s  Discussion and Analysis of Financial Condition and Results of Operations** | 14-25                                                                                                       |
| ** **                                                                                             |                                                                                                        |
| **Item 3. Quantitative and Qualitative Disclosures About  Market Risk**                                | 25                                                                                                          |
| ** **                                                                                             |                                                                                                        |
| **Item 4. Controls and Procedures**                                                                    | 26                                                                                                          |
| ** **                                                                                             |                                                                                                        |
| **Part II  - Other Information**                                                                  |                                                                                                        |
|                                                                                                   |                                                                                                        |   |   |
|                                                                                                   | Item 1.                                                                                                     | Legal Proceedings | 26 |
|                                                                                                   | Item 1A.                                                                                                    | Risk Factors | 26 |
|                                                                                                   | Item 2.                                                                                                     | Unregistered  Sales of Equity Securities and Use of Proceeds | 27 |
|                                                                                                   | Item 3.                                                                                                     | Defaults Upon  Senior Securities | 27 |
|                                                                                                   | Item 4.                                                                                                     | Submission of  Matters to a Vote of Security Holders | 27 |
|                                                                                                   | Item 5.                                                                                                     | Other Information | 27 |
|                                                                                                   | Item 6.                                                                                                     | Exhibits | 28-29 |

 

----

 

**PART I- FINANCIAL INFORMATION**

**Item1.  Financial Statements**

**DUKEREALTY LIMITED PARTNERSHIP AND SUBSIDIARIES**

**ConsolidatedBalance Sheets**

**(inthousands)**

 
| ** **                                                                                  | ** ** | **March 31,** | ** **    | **December 31,** | ** ** |
|---------------------------------------------------------------------------------------------|------------|--------------------|---------------|-----------------------|------------|
| ** **                                                                                  | ** ** | **2008**           | ** **    | **2007**              | ** ** |
| ** **                                                                                  | ** ** | **(Unaudited)**    | ** **    | ** **            | ** ** |
| **ASSETS**                                                                                  | ** ** | ** **         | ** **    | ** **            | ** ** |
| Real estate investments:                                                          |       |               |          |                  |       |
| Land and  improvements                                                                      | ** ** | **$**              | **938,764**   |                  | $          | 872,372 |   |
| Buildings and  tenant improvements                                                          | ** ** | **4,849,556**      |          | 4,600,408             |       |
| Construction in  progress                                                                   | ** ** | **444,691**        |          | 412,729               |       |
| Investments in  and advances to unconsolidated companies                                    | ** ** | **665,572**        |          | 601,801               |       |
| Land held for  development                                                                  | ** ** | **836,245**        |          | 912,448               |       |
| ** **                                                                                  |       | **7,734,828**      |          | 7,399,758             |       |
| Accumulated  depreciation                                                                   | ** ** | **(1,029,862**     | **)**         | (951,375              | )          |
|                                                                                        | ** ** | ** **         |          |                  |       |
| Net real estate  investments                                                                | ** ** | **6,704,966**      |          | 6,448,383             |       |
|                                                                                        | ** ** | ** **         |          |                  |       |
| Real estate  investments and other assets held for sale                                     | ** ** | **144,077**        |          | 273,591               |       |
|                                                                                        | ** ** | ** **         |          |                  |       |
| Cash and cash  equivalents                                                                  | ** ** | **15,728**         |          | 47,046                |       |
| Accounts  receivable, net of allowance of $1,812 and $1,359                                 | ** ** | **26,672**         |          | 29,009                |       |
| Straight-line  rent receivable, net of allowance of $2,095 and $2,886                       | ** ** | **116,682**        |          | 110,737               |       |
| Receivables on  construction contracts, including retentions                                | ** ** | **70,684**         |          | 66,925                |       |
| Deferred  financing costs, net of accumulated amortization of $30,337 and $29,170           | ** ** | **53,479**         |          | 55,986                |       |
| Deferred leasing  and other costs, net of accumulated amortization of $163,576 and $150,702 | ** ** | **377,253**        |          | 374,635               |       |
| Escrow deposits  and other assets                                                           | ** ** | **250,694**        |          | 254,339               |       |
| ** **                                                                                  |       | **$**              | **7,760,235** |                  | $          | 7,660,651 |   |
| **LIABILITIES  AND PARTNERS’ EQUITY**                                                  |       |               |          |                  |       |
| ** **                                                                                  |       |               |          |                  |       |
| Indebtedness:                                                                               |       |               |          |                  |       |
| Secured debt                                                                                | ** ** | **$**              | **506,071**   |                  | $          | 524,393 |   |
| Unsecured notes                                                                             | ** ** | **3,121,000**      |          | 3,246,000             |       |
| Unsecured lines  of credit                                                                  | ** ** | **635,068**        |          | 546,067               |       |
| ** **                                                                                  |       | **4,262,139**      |          | 4,316,460             |       |
| ** **                                                                                  |       | ** **         |          |                  |       |
| Liabilities of  properties held for sale                                                    | ** ** | **3,813**          |          | 8,954                 |       |
|                                                                                        | ** ** | ** **         |          |                  |       |
| Construction  payables and amounts due subcontractors, including retentions                 | ** ** | **129,631**        |          | 142,655               |       |
| Accrued  expenses:                                                                          |       |               |          |                  |       |
| Real estate  taxes                                                                          | ** ** | **72,559**         |          | 63,796                |       |
| Interest                                                                                    | ** ** | **38,490**         |          | 54,631                |       |
| Other                                                                                       | ** ** | **28,528**         |          | 56,901                |       |
| Other  liabilities                                                                          | ** ** | **130,913**        |          | 149,172               |       |
| Tenant security  deposits and prepaid rents                                                 | ** ** | **38,085**         |          | 34,535                |       |
| Total  liabilities                                                                          | ** ** | **4,704,158**      |          | 4,827,104             |       |
|                                                                                        | ** ** | ** **         |          |                  |       |
| Minority interest                                                                           | ** ** | **2,306**          |          | 2,650                 |       |
|                                                                                        | ** ** | ** **         |          |                  |       |
| Partners’  equity:                                                                     |       |               |          |                  |       |
| General Partner                                                                             |       |               |          |                  |       |
| Common equity  (154,358 and 154,055 Common Units issued and outstanding)                    | ** ** | **1,949,350**      |          | 2,011,316             |       |
| Preferred equity  (4,176 and 2,976 Preferred Units issued and outstanding)                  | ** ** | **1,044,000**      |          | 744,000               |       |
| ** **                                                                                  |       | **2,993,350**      |          | 2,755,316             |       |
| ** **                                                                                  |       | ** **         |          |                  |       |
| Limited  Partners’ common equity                                                       | ** ** | **70,140**         |          | 76,860                |       |
| Accumulated  other comprehensive income (loss)                                              | ** ** | **(9,719**         | **)**         | (1,279                | )          |
| Total partners’  equity                                                                | ** ** | **3,053,771**      |          | 2,830,897             |       |
|                                                                                        | ** ** | ** **         |          |                  |       |
| ** **                                                                                  |       | **$**              | **7,760,235** |                  | $          | 7,660,651 |   |

 

See accompanying Notes toConsolidated Financial Statements.

 

2

----

 

**DUKE REALTY LIMITED PARTNERSHIPAND SUBSIDIARIES**

**Consolidated****Statements of Operations**

**For the Three Months Ended March 31,**

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

**(Unaudited)**

 
| ** **                                                                 | ** ** | **2008**    | ** **  | **2007**   | ** ** |
|----------------------------------------------------------------------------|------------|-------------|-------------|------------|------------|
| **RENTAL  OPERATIONS**                                                     |       |        |        |       |       |
| Revenues:                                                                  |       |        |        |       |       |
| Rental revenue  from continuing operations                                 | ** ** | **$**       | **217,802** | ** ** | $          | 202,105 |   |
| Equity in  earnings of unconsolidated companies                            | ** ** | **10,099**  | ** **  | 7,691      |       |
| ** **                                                                 |       | **227,901** | ** **  | 209,796    |       |
| Operating  expenses:                                                       |       |        | ** **  |       |       |
| Rental expenses                                                            | ** ** | **52,027**  | ** **  | 49,049     |       |
| Real estate  taxes                                                         | ** ** | **27,544**  | ** **  | 25,043     |       |
| Interest expense                                                           | ** ** | **47,534**  | ** **  | 44,408     |       |
| Depreciation and  amortization                                             | ** ** | **78,713**  | ** **  | 66,375     |       |
| ** **                                                                 |       | **205,818** | ** **  | 184,875    |       |
| Earnings from  continuing rental operations                                | ** ** | **22,083**  | ** **  | 24,921     |       |
|                                                                       | ** ** | ** **  | ** **  |       |       |
| **SERVICE  OPERATIONS**                                                    |       |        | ** **  |       |       |
| Revenues:                                                                  |       |        | ** **  |       |       |
| General  contractor gross revenue                                          | ** ** | **76,759**  | ** **  | 54,157     |       |
| General  contractor costs                                                  | ** ** | **(70,104** | **)**       | (48,688    | )          |
| Net general  contractor revenue                                            | ** ** | **6,655**   | ** **  | 5,469      |       |
| Service fee  revenue                                                       | ** ** | **7,524**   | ** **  | 6,397      |       |
| Gain on sale of  service operations properties                             | ** ** | **597**     | ** **  | 2,864      |       |
|                                                                       | ** ** | ** **  | ** **  |       |       |
| Total service  operations revenue                                          | ** ** | **14,776**  | ** **  | 14,730     |       |
|                                                                       | ** ** | ** **  | ** **  |       |       |
| Operating  expenses                                                        | ** ** | **10,363**  | ** **  | 7,796      |       |
|                                                                       | ** ** | ** **  | ** **  |       |       |
| Earnings from  service operations                                          | ** ** | **4,413**   | ** **  | 6,934      |       |
|                                                                       | ** ** | ** **  | ** **  |       |       |
| General and  administrative expense                                        | ** ** | **(12,162** | **)**       | (13,460    | )          |
|                                                                       | ** ** | ** **  | ** **  |       |       |
| Operating income                                                           | ** ** | **14,334**  | ** **  | 18,395     |       |
|                                                                       | ** ** | ** **  | ** **  |       |       |
| **OTHER  INCOME (EXPENSE)**                                                |       |        | ** **  |       |       |
| Interest and  other income, net                                            | ** ** | **3,725**   | ** **  | 2,403      |       |
| Earnings from  sale of land, net                                           | ** ** | **629**     | ** **  | 13,997     |       |
| Income from  continuing operations                                         | ** ** | **18,688**  | ** **  | 34,795     |       |
|                                                                       | ** ** | ** **  | ** **  |       |       |
| Discontinued  operations:                                                  |       |        | ** **  |       |       |
| Income (loss)  from discontinued operations                                | ** ** | **(183**    | **)**       | 2,184      |       |
| Gain on sale of  depreciable property                                      | ** ** | **1,110**   | ** **  | 51,720     |       |
| Income from  discontinued operations                                       | ** ** | **927**     | ** **  | 53,904     |       |
|                                                                       | ** ** | ** **  | ** **  |       |       |
| Net income                                                                 | ** ** | **19,615**  | ** **  | 88,699     |       |
| Distributions on  Preferred Units                                          | ** ** | **(15,306** | **)**       | (15,226    | )          |
| Net income  available for common unitholders                               | ** ** | **$**       | **4,309**   | ** ** | $          | 73,473 |   |
|                                                                       | ** ** | ** **  | ** **  |       |       |
| Basic net income  per Common Unit:                                         |       |        | ** **  |       |       |
| Continuing  operations                                                     | ** ** | **$**       | **.02**     | ** ** | $          | .13 |   |
| Discontinued  operations                                                   | ** ** | **.01**     | ** **  | .37        |       |
| Total                                                                      | ** ** | **$**       | **.03**     | ** ** | $          | .50 |   |
|                                                                       | ** ** | ** **  | ** **  |       |       |
| Diluted net  income per Common Unit:                                       |       |        | ** **  |       |       |
| Continuing  operations                                                     | ** ** | **$**       | **.02**     | ** ** | $          | .13 |   |
| Discontinued  operations                                                   | ** ** | **.01**     | ** **  | .36        |       |
| Total                                                                      | ** ** | **$**       | **.03**     | ** ** | $          | .49 |   |
|                                                                       | ** ** | ** **  | ** **  |       |       |
| Weighted average  number of Common Units outstanding                       | ** ** | **154,189** | ** **  | 146,552    |       |
| Weighted average  number of Common Units and potential dilutive securities |       | **154,596** | ** **  | 149,465    |       |

 

See accompanying Notes toConsolidated Financial Statements.

 

3

----

 

**DUKEREALTY LIMITED PARTNERSHIP AND SUBSIDIARIES**

**ConsolidatedStatements of Cash Flows**

**For thethree months ended March 31,**

**(inthousands)**

**(Unaudited)**

 
| ** **                                                                                                   | ** ** | **2008**     | ** ** | **2007**   | ** ** |
|--------------------------------------------------------------------------------------------------------------|------------|--------------|------------|------------|------------|
| Cash flows from  operating activities:                                                                       |       |         | ** ** |       |       |
| Net income                                                                                                   | ** ** | **$**        | **19,615** | ** ** | $          | 88,699 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities:                           |       |         | ** ** |       |       |
| Depreciation of  buildings and tenant improvements                                                           | ** ** | **60,850**   | ** ** | 52,143     |       |
| Amortization of  deferred leasing and other costs                                                            | ** ** | **18,271**   | ** ** | 15,596     |       |
| Amortization of  deferred financing costs                                                                    | ** ** | **3,399**    | ** ** | 2,865      |       |
| Straight-line  rent adjustment                                                                               | ** ** | **(4,638**   | **)**      | (5,773     | )          |
| Earnings from  land and depreciated property sales                                                           | ** ** | **(1,739**   | **)**      | (65,717    | )          |
| Build-for-sale  operations, net                                                                              | ** ** | **(41,775**  | **)**      | (49,989    | )          |
| Construction  contracts, net                                                                                 | ** ** | **(14,418**  | **)**      | 6,764      |       |
| Other accrued  revenues and expenses, net                                                                    | ** ** | **(33,506**  | **)**      | (31,811    | )          |
| Operating  distributions received in excess of (less than) equity in earnings from  unconsolidated companies |       | **(2,042**   | **)**      | 137        |       |
| **Net  cash provided by operating activities**                                                               | ** ** | **4,017**    | ** ** | 12,914     |       |
| ** **                                                                                                   | ** ** | ** **   | ** ** |       |       |
| Cash flows from  investing activities:                                                                       |       |         | ** ** |       |       |
| Development of real  estate investments                                                                      | ** ** | **(151,872** | **)**      | (96,588    | )          |
| Acquisition of  real estate investments and related intangible assets                                        | ** ** | **(8,701**   | **)**      | (33,628    | )          |
| Acquisition of  land held for development                                                                    | ** ** | **(14,741**  | **)**      | (34,738    | )          |
| Recurring tenant  improvements                                                                               | ** ** | **(10,803**  | **)**      | (10,333    | )          |
| Recurring  leasing costs                                                                                     | ** ** | **(6,098**   | **)**      | (7,732     | )          |
| Recurring  building improvements                                                                             | ** ** | **(967**     | **)**      | (974       | )          |
| Other deferred  leasing costs                                                                                | ** ** | **(5,939**   | **)**      | (3,664     | )          |
| Other deferred  costs and other assets                                                                       | ** ** | **(456**     | **)**      | (1,115     | )          |
| Proceeds from  land and depreciated property sales, net                                                      | ** ** | **26,684**   | ** ** | 176,726    |       |
| Capital  distributions from unconsolidated companies                                                         | ** ** | **38,753**   | ** ** | 53,500     |       |
| Capital  contributions and advances to unconsolidated companies, net                                         | ** ** | **(20,296**  | **)**      | (33,140    | )          |
| **Net  cash provided by (used for) investing activities**                                                    | ** ** | **(154,436** | **)**      | 8,314      |       |
| ** **                                                                                                   | ** ** | ** **   | ** ** |       |       |
| Cash flows from  financing activities:                                                                       |       |         | ** ** |       |       |
| Contributions  from General Partner                                                                          | ** ** | **5,801**    | ** ** | —     |       |
| Proceeds  (disbursements) from exercise of the General Partner’s stock options                          | ** ** | **112**      | ** ** | (12        | )          |
| Proceeds from  issuance of Preferred Units, net                                                              | ** ** | **290,000**  | ** ** | —     |       |
| Proceeds from  unsecured debt issuance                                                                       |       | —       | ** ** | 5,812      |       |
| Payments on  unsecured debt                                                                                  | ** ** | **(125,000** | **)**      | —     |       |
| Payments on  secured indebtedness including principal amortization                                           | ** ** | **(36,532**  | **)**      | (12,007    | )          |
| Borrowings on  lines of credit, net                                                                          | ** ** | **89,001**   | ** ** | 13,000     |       |
| Distributions to  common unitholders                                                                         | ** ** | **(74,014**  | **)**      | (69,676    | )          |
| Distributions to  preferred unitholders                                                                      | ** ** | **(15,306**  | **)**      | (15,226    | )          |
| Distributions to  minority interest, net                                                                     | ** ** | **(51**      | **)**      | —     |       |
| Cash settlement  of interest rate swaps                                                                      | ** ** | **(14,625**  | **)**      | —     | ** ** |
| Deferred  financing costs                                                                                    | ** ** | **(285**     | **)**      | (1,403     | )          |
| **Net  cash provided by (used for) financing activities**                                                    | ** ** | **119,101**  | ** ** | (79,512    | )          |
| **Net  decrease in cash and cash equivalents**                                                               | ** ** | **(31,318**  | **)**      | (58,284    | )          |
| Cash and cash  equivalents at beginning of period                                                            | ** ** | **47,046**   | ** ** | 68,154     |       |
| Cash and cash  equivalents at end of period                                                                  | ** ** | **$**        | **15,728** | ** ** | $          | 9,870 |   |
|                                                                                                         | ** ** | ** **   | ** ** |       |       |
| Other non-cash  items:                                                                                       |       |         | ** ** |       |       |
| Conversion of  Limited Partner Units to common shares of the General Partner                                 | ** ** | **$**        | **1,172**  | ** ** | $          | 65,822 |   |
| Issuance of  Limited Partner Units for acquisition                                                           | ** ** | **$**        | **—** | ** ** | $          | 11,020 |   |
| Assumption of  secured debt for real estate acquisitions                                                     | ** ** | **$**        | **18,465** | ** ** | $          | — |   |
| Contribution of  property to unconsolidated company                                                          | ** ** | **$**        | **77,158** | ** ** | $          | — |   |

 

See accompanying Notes toConsolidated Financial Statements

 

4

----

 

**DUKEREALTY LIMITED PARTNERSHIP AND SUBSIDIARIES**

**ConsolidatedStatement of Partners’ Equity**

**For thethree months ended March 31, 2008**

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

**(Unaudited)**

 
| ** **                                                               | ** ** | ** **               | ** **    | ** **         | ** ** | **Limited**   | ** ** | **Accumulated**        | ** ** | ** **  | ** ** |
|--------------------------------------------------------------------------|------------|--------------------------|---------------|--------------------|------------|---------------|------------|------------------------|------------|-------------|------------|
| ** **                                                               | ** ** | **General Partner** | ** **    | **Partners’** | ** ** | **Other**     | ** ** | ** **             | ** ** |
| ** **                                                               | ** ** | **Common**               | ** **    | **Preferred**      | ** ** | **Common**    | ** ** | **Comprehensive**      | ** ** | ** **  | ** ** |
| ** **                                                               | ** ** | **Equity**               | ** **    | **Equity**         | ** ** | **Equity**    | ** ** | **Income (Loss)** | ** ** | **Total**   | ** ** |
| **Balance  at December 31, 2007**                                   | ** ** | **$**                    | **2,011,316** | ** **         | **$**      | **744,000**   | ** ** | **$**                  | **76,860** | ** **  | **$**      | **(1,279** | **)** | **$** | **2,830,897** | ** ** |
|                                                                     |       |                     |          |               |       |          |       |                   |       |        |       |
| Comprehensive income:                                                    |       |                     |          |               |       |          |       |                   |       |        |       |
|                                                                     |       |                     |          |               |       |          |       |                   |       |        |       |
| Net income                                                               |       | 4,048                    |          | 15,306             |       | 261           |       | —                 |       | 19,615      |       |
|                                                                     |       |                     |          |               |       |          |       |                   |       |        |       |
| Losses on  derivative instruments                                        |       | —                   |          | —             |       | —        |       | (8,440                 | )          | (8,440      | )          |
|                                                                     |       |                     |          |               |       |          |       |                   |       |        |       |
| Comprehensive  income                                                    |       |                     |          |               |       |          |       |                   |       | $           | 11,175     |   |
|                                                                     |       |                     |          |               |       |          |       |                   |       |        |       |
| Acquisition of  Partnership interest for common stock of General Partner |       | 4,376                    |          | —             |       | (3,204        | )          | —                 |       | 1,172       |       |
|                                                                     |       |                     |          |               |       |          |       |                   |       |        |       |
| Issuance of  Series O Preferred Units                               |       | (10,000                  | )             | 300,000            |       | —        |       | —                 |       | 290,000     |       |
|                                                                     |       |                     |          |               |       |          |       |                   |       |        |       |
| Capital  contribution from General Partner                               |       | 5,801                    |          | —             |       | —        |       | —                 |       | 5,801       |       |
|                                                                     |       |                     |          |               |       |          |       |                   |       |        |       |
| Stock based  compensation plan activity                                  |       | 4,046                    |          | —             |       | —        |       | —                 |       | 4,046       |       |
|                                                                     |       |                     |          |               |       |          |       |                   |       |        |       |
| Distributions to  Preferred Unitholders                                  |       | —                   |          | (15,306            | )          | —        |       | —                 |       | (15,306     | )          |
|                                                                     |       |                     |          |               |       |          |       |                   |       |        |       |
| Distributions to  Partners ($.48 per Common Unit)                        |       | (70,237                  | )             | —             |       | (3,777        | )          | —                 |       | (74,014     | )          |
|                                                                     |       |                     |          |               |       |          |       |                   |       |        |       |
| **Balance  at March 31, 2008**                                      | ** ** | **$**                    | **1,949,350** | ** **         | **$**      | **1,044,000** | ** ** | **$**                  | **70,140** | ** **  | **$**      | **(9,719** | **)** | **$** | **3,053,771** | ** ** |
|                                                                     |       |                     |          |               |       |          |       |                   |       |        |       |
| **Common  Units outstanding at March 31, 2008**                     | ** ** | **146,670**              | ** **    | ** **         | ** ** | **7,688**     |       |                   |       | **154,358** |       |

 

See accompanyingNotes to Consolidated Financial Statements

 

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**DUKEREALTY LIMITED PARTNERSHIP**

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

 

**1.**             **GeneralBasis of Presentation**

 

The interim consolidatedfinancial statements included herein have been prepared by Duke Realty LimitedPartnership (the “Partnership”) without audit. The 2007 year-end consolidatedbalance sheet data included in this Form 10-Q was derived from the auditedfinancial statements referenced above, but does not include all disclosuresrequired by accounting principles generally accepted in the United States ofAmerica (“GAAP”).  The financialstatements have been prepared in accordance with GAAP 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 GAAP for complete financialstatements. In the opinion of management, all adjustments (consisting of normalrecurring adjustments) considered necessary for a fair presentation have beenincluded. GAAP requires us to make estimates and assumptions that affect thereported amounts of assets and liabilities and revenue and expenses during thereporting period. Our actual results could differ from those estimates andassumptions. These financial statements should be read in conjunction withManagement’s Discussion and Analysis of Financial Condition and Results ofOperations included herein and the consolidated financial statements and notesthereto included in our Annual Report on Form 10-K for the year ended December 31,2007.

 

The Partnershipwas formed on October 4, 1993, when Duke Realty Corporation (the “GeneralPartner”) contributed all of its properties and related assets and liabilities,along with the net proceeds from the issuance of additional shares of theGeneral Partner through an offering, to the Partnership. Simultaneously, thePartnership completed the acquisition of Duke Associates, a full-servicecommercial real estate firm operating in the Midwest. The General Partner was formedin 1985 and we believe it 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 95.0% of the common Partnershipinterest as of March 31, 2008 (“General Partner Units”). The remaining5.0% 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 Partner Units for cash. The General Partner also owns preferredpartnership interests in the Partnership (“Preferred Units”).

 

We own and operatea portfolio primarily consisting of industrial and office properties andprovide real estate services to third-party owners. We conduct our ServiceOperations (see Note 7) through Duke Realty Services LLC, Duke Realty ServicesLimited Partnership and Duke Construction Limited Partnership.  The consolidated financial statements includeour accounts and our majority-owned or controlled subsidiaries.  In this Quarterly Report on Form 10-Q(this “Report”), unless the context indicates otherwise, the terms “we,” “us”and “our” refer to the Partnership and those entities owned or controlled bythe Partnership.

 

**2**.             **NewAccounting Pronouncement**

 

Statement of FinancialAccounting Standard (“SFAS”) No.157, *FairValue Measurements* (“SFAS 157”) was effective for us on January 1,2008. SFAS 157 defines fair value, establishes a framework for measuring fairvalue, and expands disclosures about fair value measurements. SFAS 157 appliesto reported balances that are required or permitted to be measured at fairvalue under existing accounting pronouncements; accordingly, the standard doesnot require any new fair value measurements of reported balances. Based on theguidance provided by FASB Staff Position No. 157-2, *Effective Date of FASB Statement No. 157*(“FSPNo. 157-2”), we have only partially implemented the guidance promulgatedunder SFAS 157 as of January

 

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1, 2008, which in ourcircumstances only affects financial instruments. SFAS 157 will not be appliedduring 2008 to nonfinancial long lived asset groups that may be measured for animpairment assessment, reporting units measured at fair value in the first stepof the goodwill impairment test, and nonfinancial assets and nonfinancialliabilities initially measured at fair value in a business combination. We willfully apply the provisions of SFAS 157 beginning January 1, 2009 and donot expect there to be a material impact to the financial statements.

 

SFAS 157emphasized that fair value is a market-based measurement, not anentity-specific measurement.  Therefore,a fair value measurement should be determined based on the assumptions thatmarket participants would use in pricing the asset or liability.  As a basis for considering market participantassumptions in fair value measurements, SFAS 157 establishes a fair valuehierarchy that distinguishes between market participant assumptions based onmarket data obtained from sources independent of the reporting entity(observable inputs that are classified within Levels 1 and 2 of the hierarchy)and the reporting entity’s own assumptions about market participant assumptions(unobservable inputs classified within Level 3 of the hierarchy).

 

Level 1 inputsutilize quoted prices (unadjusted) in active markets for identical assets orliabilities to which we have access. Level 2 inputs are inputs other than quoted prices included in Level 1that are observable for the asset or liability, either directly or indirectly.Level 2 inputs may include quoted prices for similar assets and liabilities inactive markets, as well as inputs that are observable for the asset orliability (other than quoted prices), such as interest rates and yield curvesthat are observable at commonly quoted intervals.  Level 3 inputs are unobservable inputs forthe asset or liability, which are typically based on an entity’s ownassumptions, as there is little, if any, related market activity.  In instances where the determination of thefair value measurement is based on inputs from different levels of the fairvalue hierarchy, the level in the fair value hierarchy within which the entirefair value measurement falls is based on the lowest level input that is significantto the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fairvalue measurement in its entirety requires judgment, and considers factorsspecific to the asset or liability.

 

**3.****             Reclassifications**

 

Certain 2007balances have been reclassified to conform to the 2008 presentation.

 

**4.****             Indebtedness**

 

Our unsecuredlines of credit as of March 31, 2008 are described as follows (inthousands):

 
| ** **                                          | ** ** | **Borrowing** | ** ** | **Maturity** | ** **        | **Outstanding Balance**         | ** ** |
|-----------------------------------------------------|------------|---------------|------------|--------------|-------------------|--------------------------------------|------------|
| **Description**                                     | ** ** | **Capacity**  | ** ** | **Date**     | ** **        | **at March 31, 2008** | ** ** |
| Unsecured Line  of Credit - Partnership             |       | $             | 1,300,000  |         | January 2010 |                                 | $          | 631,000 |   |
| Unsecured Line  of Credit - Consolidated Subsidiary |       | $             | 30,000     |         | July 2011    |                                 | $          | 4,068 |   |

 

We use the Partnership’sunsecured line of credit to fund development activities, acquire additionalrental properties and provide working capital. This line of credit provides uswith an option to obtain borrowings from financial institutions thatparticipate in the line, at rates that may be lower than the stated interestrate, subject to certain restrictions. Interest rates on the amountsoutstanding on the unsecured line of credit as of March 31, 2008 rangedfrom LIBOR plus .45% to LIBOR plus .525% (ranging from 3.135% to 3.61% as of March 31,2008). Our line of credit also contains financial covenants that require us tomeet financial ratios and defined levels of performance, including thoserelated to variable rate indebtedness, consolidated net worth anddebt-to-market capitalization. As of March 31, 2008, we were in compliancewith all covenants under this line of credit.

 

7

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The consolidatedsubsidiary’s unsecured line of credit allows for borrowings up to $30.0 millionat a rate of LIBOR plus .85%  (equal to3.456% for outstanding borrowings as of March 31, 2008).  The unsecured line of credit is used to funddevelopment activities within the consolidated subsidiary.  The consolidated subsidiary’s unsecured lineof credit matures in July 2011 with a 12-month extension option.

 

In January 2008, werepaid $125.0 million of senior unsecured notes with an effective interest rateof 3.36% on their scheduled maturity date.

 

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

 

We provideproperty management, leasing, construction and other tenant related services tounconsolidated companies in which we have equity interests. For the threemonths ended March 31, 2008 and 2007, respectively, we earned from thesecompanies management fees of $1.6 million and $1.3 million, leasing fees of $657,000and $505,000 and construction and development fees of $2.8 million and $3.6million. We recorded these fees based on contractual terms that approximatemarket rates for these types of services and we have eliminated our ownershippercentage of these fees in the consolidated financial statements.

 

**6.****             Net Income Per Common Unit**

 

Basic net income per Common Unit is computed by dividing net incomeavailable for common unitholders by the weighted average number of Common Unitsoutstanding for the period. Diluted net income per Common Unit is computed bydividing net income available for common unitholders by the sum of the weightedaverage number of Common Units outstanding and any potential dilutivesecurities for the period.

 

The following table reconciles the components of basic and diluted netincome per Common Unit for the three months ended March 31, 2008 and 2007,respectively (in thousands):

 
| ** **                                                                 | ** ** | **2008**    | ** ** | **2007** | ** ** |
|----------------------------------------------------------------------------|------------|-------------|------------|----------|------------|
| Basic net income  available for common unitholders                         | ** ** | **$**       | **4,309**  |     | $          | 73,473 |   |
| Joint venture partner convertible ownership net  income (1)                |       | **—**  |       | 452      |       |
| Diluted net  income available for common unitholders                       | ** ** | **$**       | **4,309**  |     | $          | 73,925 |   |
|                                                                       |       |        |       |     |       |
| Weighted average number of Common Units outstanding                        | ** ** | **154,189** |       | 146,552  |       |
| Joint venture  partner convertible ownership interest (1)                  |       | **—**  |       | 1,138    |       |
| Dilutive units  for stock-based compensation plans (2)                     | ** ** | **407**     |       | 1,775    |       |
| Weighted average  number of Common Units and potential dilutive securities |       | **154,596** |       | 149,465  |       |

 

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(1)          One of our joint venture partners in one of our unconsolidatedcompanies has the option to convert a portion of its ownership in the jointventure to the General Partner’s common shares, which would require theissuance of additional Common Units to the General Partner.  The effect of this option on earnings per unitwas dilutive for the first quarter of 2007; therefore, conversion to CommonUnits is included in weighted average potential dilutive securities for thatquarter. This option was anti-dilutive for the first quarter of 2008.

(2)          Excludes (in thousands of units) 6,575 and 420 of anti-dilutive unitsas of March 31, 2008 and 2007, respectively. Also excludes theExchangeable Senior Notes (“Exchangeable Notes”) issued in 2006, that have ananti-dilutive effect on earnings per unit for the three-month periods ended March 31,2008 and 2007.

 

**7.****             SegmentReporting**

 

We are engaged inthree reportable operating segments, the first two of which consist of theownership and rental of office and industrial real estate investments.  The operations of our office and industrialproperties, along with our healthcare properties (our healthcare properties,and other property types which are not significant, are not separatelypresented as a reportable segment), are collectively referred to as “RentalOperations”. The third reportable segment consists of our build for saleoperations and providing various real estate services such as propertymanagement, maintenance, leasing, development and construction

 

8

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management tothird-party property owners and joint ventures (and is collectively referred toas “Service Operations”). Our reportable segments offer different products orservices and are managed separately because each segment requires differentoperating strategies and management expertise.

 

During the periodbetween the completion of development, rehabilitation or repositioning of aService Operations property and the date the property is contributed to aproperty fund or sold to a third party, the property and its associated rentalrevenues and rental expenses are included in the applicable Rental Operationssegment because the primary activity associated with the Service Operationsproperty during that period is rental activities.  Upon contribution or sale, the resulting gainor loss is part of the income of the Service Operations business segment.

 

Other revenueconsists mainly of equity in earnings of unconsolidated companies. Segment FFOinformation (FFO is defined below) is calculated by subtracting operatingexpenses attributable to the applicable segment from segment revenues.Non-segment assets consist of corporate assets including cash, deferredfinancing costs and investments in unconsolidated companies. Interest expenseand other non-property specific revenues and expenses are not allocated toindividual segments in determining our performance measure.

 

We assess andmeasure segment operating results based upon an industry performance measurereferred to as Funds From Operations (“FFO”), which management believes is auseful indicator of our operating performance. FFO is used by industry analysts and investors as a supplementaloperating performance measure of a REIT like our General Partner. FFO iscalculated in accordance with the definition that was adopted by the Board ofGovernors of the National Association of Real Estate Investment Trusts (“NAREIT”).NAREIT created FFO as a supplemental measure of REIT operating performance thatexcludes historical cost depreciation, among other items, from net incomedetermined in accordance with GAAP. FFO is a non-GAAP financial measuredeveloped by NAREIT to compare the operating performance of REITs. The mostcomparable GAAP measure is net income (loss). FFO should not be considered as a substitute for net income or any othermeasures derived in accordance with GAAP and may not be comparable to othersimilarly titled measure of other companies.

 

Historical costaccounting for real estate assets in accordance with GAAP implicitly assumesthat the value of real estate assets diminishes predictably over time.  Since real estate values instead havehistorically risen or fallen with market conditions, many industry analysts andinvestors have considered presentation of operating results for real estatecompanies that use historical cost accounting to be insufficient bythemselves.  FFO, as defined by NAREIT,represents GAAP net income (loss), excluding extraordinary items as definedunder GAAP and gains or losses from sales of previously depreciated real estateassets, plus certain non-cash items such as real estate asset depreciation andamortization, and after similar adjustments for unconsolidated partnerships andjoint ventures.

 

Managementbelieves that the use of FFO, combined with the required primary GAAPpresentations, improves the understanding of operating results of REITs amongthe investing public and makes comparisons of REIT operating results moremeaningful.  Management believes FFO is auseful measure for reviewing comparative operating and financial performance(although FFO should be reviewed in conjunction with net income which remainsthe primary measure of performance) because by excluding gains or lossesrelated to sales of previously depreciated real estate assets and excludingreal estate asset depreciation and amortization, FFO provides a usefulcomparison of the operating performance of our real estate between periods oras compared to different companies.

 

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The followingtable shows (i) the revenues and FFO for each of the reportable segmentsand (ii) a reconciliation of net income available for common unitholdersto the calculation of FFO for the three months ended March 31, 2008, and2007, respectively (in thousands):

 
| ** **                                                              | ** ** | **Three Months Ended March 31,** | ** **  |
|-------------------------------------------------------------------------|------------|------------------------------------------------------|-------------|
| ** **                                                              | ** ** | **2008**                                             | ** **  | **2007** | ** ** |
| Revenues                                                                |       |                                                 |        |   |   |
| Rental  Operations:                                                     |       |                                                 |        |   |   |
| Office                                                                  | ** ** | **$**                                                | **148,245** |   | $ | 143,826 |   |
| Industrial                                                              | ** ** | **61,316**                                           |        | 54,214 |   |
| Non-reportable Rental Operations segments                               | ** ** | **6,229**                                            |        | 1,838 |   |
| Service Operations                                                      | ** ** | **14,776**                                           |        | 14,730 |   |
| Total Segment Revenues                                                  | ** ** | **230,566**                                          |        | 214,608 |   |
| Other Revenue                                                           | ** ** | **12,111**                                           |        | 9,918 |   |
| Consolidated Revenue from  continuing  operations                       |       | **242,677**                                          |        | 224,526 |   |
| Discontinued Operations                                                 | ** ** | **974**                                              | ** **  | 11,087 |   |
| Consolidated Revenue                                                    | ** ** | **$**                                                | **243,651** | ** ** | $ | 235,613 |   |
| Funds From Operations                                                   |       |                                                 | ** **  |   |   |
| Rental  Operations:                                                     |       |                                                 | ** **  |   |   |
| Office                                                                  | ** ** | **$**                                                | **89,833**  | ** ** | $ | 86,100 |   |
| Industrial                                                              | ** ** | **45,392**                                           | ** **  | 40,667 |   |
| Non-reportable Rental Operations segments                               | ** ** | **3,683**                                            | ** **  | 1,353 |   |
| Service Operations                                                      | ** ** | **4,413**                                            | ** **  | 6,934 |   |
| Total Segment FFO                                                       | ** ** | **143,321**                                          | ** **  | 135,054 |   |
|                                                                    | ** ** | ** **                                           | ** **  |   |   |
| Non-Segment FFO:                                                        |       |                                                 | ** **  |   |   |
| Interest expense                                                        | ** ** | **(47,534**                                          | **)**       | (44,408 | ) |
| Interest and other income, net                                          | ** ** | **3,725**                                            | ** **  | 2,403 |   |
| General and  administrative expense                                     | ** ** | **(12,162**                                          | **)**       | (13,460 | ) |
| Gain on land  sales, net                                                | ** ** | **629**                                              | ** **  | 13,997 |   |
| Other  non-segment income (expense)                                     | ** ** | **(677**                                             | **)**       | (106 | ) |
| Joint venture FFO                                                       | ** ** | **16,967**                                           | ** **  | 10,698 |   |
| Distributions on  Preferred Units                                       | ** ** | **(15,306**                                          | **)**       | (15,226 | ) |
| Discontinued  operations                                                | ** ** | **225**                                              | ** **  | 3,548 |   |
| Consolidated basic FFO                                                  | ** ** | **89,188**                                           | ** **  | 92,500 |   |
| Depreciation and  amortization on continuing operations                 |       | **(78,713**                                          | **)**       | (66,375 | ) |
| Depreciation and  amortization on discontinued operations               |       | **(408**                                             | **)**       | (1,364 | ) |
| Partnership’s  share of joint venture adjustments                  | ** ** | **(6,887**                                           | **)**       | (4,968 | ) |
| Earnings from depreciated property sales  on discontinued operations    |       | **1,110**                                            | ** **  | 51,720 |   |
| Earnings from depreciated property sales – share of  joint venture |       | **19**                                               | ** **  | 1,960 |   |
|                                                                    |       | ** **                                           | ** **  |   |   |
| Net income available for common unitholders                             | ** ** | **$**                                                | **4,309**   | ** ** | $ | 73,473 |   |

 

**8.****             DiscontinuedOperations and Assets Held for Sale**

 

Theoperations of 34 buildings are currently classified as discontinued operationsfor the three-month periods ended March 31, 2008 and March 31, 2007.These 34 buildings consist of 17 industrial and 17 office properties. Of theseproperties, one was sold during the first quarter of 2008, 32 were sold during2007 and one operating property is classified as held-for-sale at March 31,2008.

 

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Thefollowing table illustrates the operations of the buildings reflected indiscontinued operations for the three months ended March 31, 2008 and2007, respectively (in thousands):

 
| ** **                                                        | ** ** | **Three Months Ended March 31,** | ** ** |
|-------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                        | ** ** | **2008**                                             | ** ** | **2007** | ** ** |
| Revenues                                                          | ** ** | **$**                                                | **974**    |   | $ | 11,087 |   |
| Expenses:                                                         |       |                                                 |       |   |   |
| Operating                                                         | ** ** | **441**                                              |       | 4,718 |   |
| Interest                                                          | ** ** | **307**                                              |       | 2,810 |   |
| Depreciation and  Amortization                                    | ** ** | **408**                                              |       | 1,364 |   |
| General and  Administrative                                       | ** ** | **1**                                                |       | 11 |   |
| Income (loss)  from discontinued operations, before gain on sales |       | **(183**                                             | **)**      | 2,184 |   |
| Gain on sale of  property                                         | ** ** | **1,110**                                            |       | 51,720 |   |
| Income from  discontinued operations                              | ** ** | **$**                                                | **927**    |   | $ | 53,904 |   |

 

At March 31,2008, we classified one property as held-for-sale and included in discontinuedoperations.  Additionally, we haveclassified seven in-service properties as held-for-sale, but have included theresults of operations of these properties in continuing operations. Thefollowing table illustrates the aggregate balance sheet information of theaforementioned property included in discontinued operations, as well as theseven held-for-sale properties whose results are included in continuingoperations, at March 31, 2008 (in thousands):

 
| ** **                       | ** ** | **Property**         | ** ** | **Properties**       | ** ** | ** **        | ** ** |
|----------------------------------|------------|----------------------|------------|----------------------|------------|-------------------|------------|
| ** **                       | ** ** | **Included in** | ** ** | **Included in** | ** ** | **Total**         | ** ** |
| ** **                       | ** ** | **Discontinued**     | ** ** | **Continuing**       | ** ** | **Held-for-Sale** | ** ** |
| ** **                       | ** ** | **Operations**       | ** ** | **Operations**       | ** ** | **Properties**    | ** ** |
| Balance Sheet:                   |       |                 |       |                 |       |              |       |
| Real estate  investments, net    |       | $                    | 11,693     |                 | $          | 122,344           |       | $ | 134,037 |   |
| Other assets                     |       | 1,287                |       | 8,753                |       | 10,040            |       |
| Total assets  held-for-sale      |       | $                    | 12,980     |                 | $          | 131,097           |       | $ | 144,077 |   |
|                             |       |                 |       |                 |       |              |       |
| Accrued expenses                 |       | $                    | 462        |                 | $          | 577               |       | $ | 1,039 |   |
| Other  liabilities               |       | —               |       | 2,774                |       | 2,774             |       |
| Total  liabilities held-for-sale |       | $                    | 462        |                 | $          | 3,351             |       | $ | 3,813 |   |

 

We had enteredinto a preliminary agreement to sell a portfolio of 14 buildings in our ClevelandOffice market and had accordingly ceased depreciation on those buildings in July 2007,as they met the criteria for held for sale accounting. As a result, we had alsoincluded the 14 buildings in discontinued operations. However, due to thepotential buyer not being able to secure financing on acceptable terms, thesale agreement was cancelled and we have determined that this portfolio nolonger meets the criteria for held for sale classification. As the result ofthis determination, the portfolio was reclassified from discontinued tocontinuing operations in the first quarter of 2008, resulting in an additional$5.3 million of depreciation expense.

 

Weallocate interest expense to discontinued operations and have included suchinterest expense in computing income from discontinued operations. Interestexpense allocable to discontinued operations includes interest on any secureddebt on properties included in discontinued operations and an allocable shareof our consolidated unsecured interest expense for unencumbered properties. Theallocation of unsecured interest expense to discontinued operations was basedupon the gross book value of the unencumbered real estate assets included indiscontinued operations  as it related tothe total gross book value of our unencumbered real estate assets.

 

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

 

TheGeneral Partner periodically accesses the public equity markets to fund thedevelopment and acquisition of additional rental properties or to pay downdebt.  The proceeds of these offeringsare contributed to us in exchange for an additional interest in thePartnership. In February 2008, the General Partner issued $300.0 millionof 8.375% Series O Cumulative Redeemable Preferred Shares from which thenet proceeds were used to reduce the outstanding balance on the Partnership’sunsecured line of credit.  The Series OCumulative Redeemable Preferred Shares have no stated maturity date althoughthey may be redeemed, at the General Partner’s option, in February 2013.

 

**10.****      FinancialInstruments**

 

We are exposed tocapital market risk, such as changes in interest rates. In order to manage thevolatility relating to interest rate risk, we may enter into interest ratehedging arrangements from time to time. We do not utilize derivative financialinstruments for trading or speculative purposes.

 

The valuation ofthese instruments is determined using widely accepted valuation techniquesincluding discounted cash flow analysis on the expected cash flows of eachderivative. This analysis reflects the contractual terms of the derivatives,including the period to maturity, and uses observable market-based inputs. Thefair values of interest rate swaps are determined using the market standardmethodology of netting the discounted future fixed cash receipts (or payments)and the discounted expected variable cash payments (or receipts). The variablecash payments (or receipts) are based on an expectation of future interestrates (forward curves) derived from observable market interest rate curves.

 

To comply with theprovisions of SFAS 157, to the extent it has been adopted for the period endingMarch 31, 2008 (see Note 2), we incorporate credit valuation adjustmentsto appropriately reflect both our own nonperformance risk and the respectivecounterparty’s nonperformance risk in the fair value measurements. In adjustingthe fair value of our derivative contracts for the effect of nonperformancerisk, we have considered the impact of netting and any applicable creditenhancements, such as collateral postings, thresholds, mutual puts andguarantees.

 

Although we havedetermined that the majority of the inputs used to value our derivatives fallwithin Level 2 of the fair value hierarchy, the credit valuation adjustmentsassociated with our derivatives utilize Level 3 inputs, such as estimates ofcurrent credit spreads to evaluate the likelihood of default by us and ourcounterparties. However, as of March 31, 2008, we have assessed thesignificance of the impact of the credit valuation adjustments on the overallvaluations of our derivative positions and have determined that the creditvaluation adjustments are not significant to the overall valuation of ourderivatives. As a result, we have determined that our derivative valuations intheir entirety are classified in Level 2 of the fair value hierarchy. We do nothave any fair value measurements using significant unobservable inputs (Level3) as of March 31, 2008.

 

In November 2007,we entered into forward-starting interest rate swaps with notional amountsappropriate to hedge interest rates on $300.0 million of anticipated debtofferings in 2008. The forward-starting swaps were appropriately designated andtested for effectiveness as cash flow hedges. In March 2008, we settledthe forward-starting swaps and made a cash payment of $14.6 million to thecounterparties. An effectiveness test was performed as of the settlement dateand it was concluded that a highly effective cash flow hedge is still in placefor the expected debt offering. Of the amount paid in settlement, approximately$700,000 was immediately reclassified to interest expense, as the result ofpartial ineffectiveness calculated at the settlement date, while $13.9 millionremains in Other Comprehensive income (“OCI”) and will be recognized throughinterest expense over the life of the hedged debt offering, which took place inMay 2008 (Note 12).

 

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In August 2005, weentered into forward-starting interest rate swaps with notional amountsappropriate to hedge interest rates on $300.0 million of anticipated debtofferings in 2007. The forward-starting swaps were appropriately designated andtested for effectiveness as cash flow hedges. In conjunction with the September 2007 issuance of $300.0 millionof senior unsecured notes, we terminated these cash flow hedges as designated.The settlement amount received of $10.7 million is being recognized to earningsthrough a reduction of interest expense over the term of the hedged cash flows.The ineffective portion of the hedge was insignificant.

 

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

 

**11.****     ****Recent Accounting Pronouncements**

 

In December 2007,the FASB issued SFAS No. 141R, *BusinessCombinations* (“SFAS 141R”) and SFAS No. 160, *Noncontrolling Interests in Consolidated FinancialStatements* –*an amendment to ARB No. 51*(“SFAS 160”). SFAS 141R and SFAS 160 require most identifiable assets,liabilities, noncontrolling interests and goodwill acquired in a businesscombination to be recorded at “full fair value” and require noncontrollinginterests (previously referred to as minority interests) to be reported as acomponent of equity, which changes the accounting for transactions withnoncontrolling interest holders. Both Statements are effective for periodsbeginning on or after December 15, 2008, and earlier adoption isprohibited. SFAS 141R will be applied to business combinations after theeffective date. SFAS 160 will be applied prospectively to all noncontrollinginterests, including any that arose before the effective date. We are currentlyevaluating the impact of adopting SFAS 141R and SFAS 160 on our results ofoperations and financial position.

 

In March 2008,the FASB issued SFAS No. 161, *Disclosuresabout Derivative Instruments and Hedging Activities – an amendment of FASBStatement No. 133* (“SFAS 161”). SFAS 161 requires enhanceddisclosures for derivative instruments and hedging activities, specifically inregard to the purpose of the derivative and how the derivative and hedgingactivities affect an entity’s financial position, financial performance andcash flows. SFAS 161 is effective for fiscal years and interim periodsbeginning after November 15, 2008 and early application is allowed.  We will apply SFAS 161 beginning in 2009.

 

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

 

*Declarationof Distributions*

 

The GeneralPartner’s board of directors declared the following distributions at its April 30,2008, regularly scheduled board meeting:

 
| ** **                        | ** ** | **Quarterly**    | ** ** | ** **           | ** **         | ** **            | ** **         |
|-----------------------------------|------------|------------------|------------|----------------------|--------------------|-----------------------|--------------------|
| **Class**                         | ** ** | **Amount/Share** | ** ** | **Record Date** | ** **         | **Payment Date** | ** **         |
| Common                            |       | $                | 0.48       |                 | May 14, 2008  |                  | May 30, 2008  |   |
| Preferred (per  depositary unit): |       |             |       |                 |               |                  |               |
| Series J                     |       | $                | 0.414063   |                 | May 16, 2008  |                  | May 30, 2008  |   |
| Series K                     |       | $                | 0.406250   |                 | May 16, 2008  |                  | May 30, 2008  |   |
| Series L                     |       | $                | 0.412500   |                 | May 16, 2008  |                  | May 30, 2008  |   |
| Series M                     |       | $                | 0.434375   |                 | June 16, 2008 |                  | June 30, 2008 |   |
| Series N                     |       | $                | 0.453125   |                 | June 16, 2008 |                  | June 30, 2008 |   |
| Series O                     |       | $                | 0.523438   |                 | June 16, 2008 |                  | June 30, 2008 |   |

 

*Issuanceof Unsecured Notes*

 

In May 2008,we issued $325.0 million of 6.25% senior unsecured notes due in May 2013.

 

13

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

 

**Cautionary Statement Regarding Forward Looking Statements**

 

Certain statements contained in or incorporated by reference into thisReport, including, without limitation, those related to our future operations,constitute “forward-looking statements” within the meaning of Section 27A ofthe Securities Act of 1933, as amended, and Section 21E of the SecuritiesExchange Act of 1934, as amended.  The words “believe,” “estimate,” “expect,”“anticipate,” “intend,” “plan,” “seek,” “may” and similar expressions orstatements regarding future periods are intended to identify forward-looking statements.

 

These forward-looking statements involve known and unknown risks,uncertainties and other important factors that could cause our actual results,performance or achievements, or industry results, to differ materially from anypredictions of future results, performance or achievementsthat we express or imply in this Report. Some of the risks, uncertainties andother important factors that may affect future results include, among others:

 

·     Changes in generaleconomic and business conditions, including performance of financial markets;

·     The General Partner’scontinued qualification as a real estate investment trust, or “REIT”, for U.S.federal income tax purposes;

·     Heightenedcompetition for tenants and potential decreases in property occupancy;

·     Potential increasesin real estate construction costs;

·     Potential changesin the financial markets and interest rates;

·     Volatility in theGeneral Partner’s stock price and trading volume;

·     Our continuingability to raise funds on favorable terms through the issuance of debt andequity in the capital markets;

·     Our ability tosuccessfully identify, acquire, develop and/or manage properties on terms thatare favorable to us;

·     Our ability to be flexiblein the development and operation of joint venture properties;

·     Our ability tosuccessfully dispose of properties on terms that are favorable to us;

·     Inherent risks inthe real estate business including, but not limited to, tenant defaults, potentialliability relating to environmental matters and liquidity of real estateinvestments; and

·     Other risks anduncertainties described herein, as well as those risks and uncertaintiesdiscussed from time to time in the Partnership’s and the General Partner’sother reports and other public filings with the Securities and ExchangeCommission (“SEC”).

 

This list of risks and uncertainties, however, is only a summary ofsome of the most important factors and is not intended to be exhaustive.Additional information regarding risk factors that may affect us is includedunder the caption “Risk Factors” in our Annual Report on Form 10-K for thefiscal year ended December 31, 2007, which we filed with the SEC on March 6,2008, and is updated by us from time to time in Quarterly Reports on Form 10-Qand other public filings.

 

14

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Although we presently believe that the plans, expectations and resultsexpressed in or suggested by the forward-looking statements are reasonable, allforward-looking statements are inherently subjective, uncertain and subject tochange, as they involve substantial risks and uncertainties beyond our control.New factors emerge from time to time, and it is not possible for us to predictthe nature, or assess the potential impact, of each new factor on our business.Given these uncertainties, we caution you not to place undue reliance on theseforward-looking statements. We undertake no obligation to update or revise anyof our forward-looking statements for events or circumstances that arise afterthe statement is made, except as otherwise may be required by law.

 

**Business Overview**

 

We are a limited partnership formed under the laws of the State ofIndiana in 1993.  We own and operate aportfolio primarily consisting of industrial and office properties and providereal estate services to third-party owners. We conduct our Service Operations through Duke Realty Services, LLC,Duke Realty Services Limited Partnership and Duke Construction Limited Partnership.As of March 31, 2008, we:

 

·                 Owned or jointlycontrolled 730 industrial, office, healthcare and retail properties (includingproperties under development), consisting of more than 122 million square feet;and

·                 Owned or jointlycontrolled approximately 7,600 acres of land with an estimated futuredevelopment potential of more than 111 million square feet of industrial,office, healthcare and retail properties.

 

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

 

·                 Property leasing;

·                 Propertymanagement;

·                 Asset management;

·                 Construction;

·                 Development; and

·                 Othertenant-related services.

 

**Key Performance Indicators**

 

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

 

***Occupancy Analysis:*** Our ability tomaintain favorable occupancy rates is a principal driver of our results ofoperations. The following table sets forth occupancy information regarding ourin-service portfolio of rental properties (excluding in-service propertiesdeveloped or acquired with the intent to sell, which are referred to as “Buildfor Sale Properties”) as of March 31, 2008 and 2007, respectively (inthousands, except percentage data):

 
| ** **     | ** ** | **Total**            | ** ** | **Percent of**             | ** ** | ** **                | ** ** | ** ** | ** ** |
|----------------|------------|----------------------|------------|---------------------------------|------------|---------------------------|------------|------------|------------|
| ** **     | ** ** | **Square Feet** | ** ** | **Total Square Feet** | ** ** | **Percent Occupied** | ** ** |
| **Type**       | ** ** | **2008**             | ** ** | **2007**                        | ** ** | **2008**                  | ** ** | **2007**   | ** ** | **2008** | ** ** | **2007** | ** ** |
| **Industrial** | ** ** | **80,779**           |       | 75,628                          | ** ** | **70.2**                  | **%**      | 69.8       | %          | **89.4** | **%** | 92.6 | % |
| **Office**     | ** ** | **32,757**           |       | 31,862                          | ** ** | **28.4**                  | **%**      | 29.4       | %          | **88.6** | **%** | 91.9 | % |
| **Other**      | ** ** | **1,613**            |       | 916                             | ** ** | **1.4**                   | **%**      | 0.8        | %          | **91.8** | **%** | 95.0 | % |
| Total          | ** ** | **115,149**          |       | 108,406                         | ** ** | **100.0**                 | **%**      | 100.0      | %          | **89.2** | **%** | 92.4 | % |

 

15

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The decrease in occupancy in the first quarter of 2008, as compared tothe first quarter of 2007, is the result of a significant increase indevelopments placed in service between the two periods, with certain of therental properties placed in service not yet being stabilized.  There are not significant differences inoccupancy between wholly owned properties and properties held by unconsolidatedsubsidiaries.

 

***Lease Expiration and Renewal:*** Our ability tomaintain and improve occupancy rates primarily depends upon our continuingability to re-lease expiring space.******The following table reflects our in-serviceportfolio lease expiration schedule by property type as of March 31, 2008.The table indicates square footage and annualized net effective rents (based onMarch 2008 rental revenue) under expiring leases (in thousands, exceptpercentage data):

 
| ** **                   | ** ** | **Total**     | ** ** | ** **               | ** ** | ** **  | ** ** | ** ** | ** ** | ** **         | ** ** | ** ** | ** ** | ** **         | ** ** |
|------------------------------|------------|---------------|------------|--------------------------|------------|-------------|------------|------------|------------|--------------------|------------|------------|------------|--------------------|------------|
| ** **                   | ** ** | **Portfolio** | ** ** | **Industrial**           | ** ** | **Office**  | ** ** | **Other**  | ** ** |
| **Year of**             | ** ** | **Square**    | ** ** | **Ann. Rent ** | ** ** | **% of**    | ** ** | **Square** | ** ** | **Ann. Rent** | ** ** | **Square** | ** ** | **Ann. Rent** | ** ** | **Square** | ** ** | **Ann. Rent** | ** ** |
| **Expiration**               | ** ** | **Feet**      | ** ** | **Revenue**              | ** ** | **Revenue** | ** ** | **Feet**   | ** ** | **Revenue**        | ** ** | **Feet**   | ** ** | **Revenue**        | ** ** | **Feet** | ** ** | **Revenue** | ** ** |
| 2008                         |       | 7,157         |       | $                        | 39,518     |        | 5          | %          | 5,502      |               | $          | 20,741     |       | 1,622              |       | $ | 18,238 |   | 33 |   | $ | 539 |   |
| 2009                         |       | 12,633        |       | 83,423                   |       | 11          | %          | 9,087      |       | 36,268             |       | 3,480      |       | 46,499             |       | 66 |   | 656 |   |
| 2010                         |       | 13,645        |       | 99,750                   |       | 14          | %          | 9,427      |       | 40,614             |       | 4,205      |       | 58,949             |       | 13 |   | 187 |   |
| 2011                         |       | 14,881        |       | 90,935                   |       | 13          | %          | 11,282     |       | 42,171             |       | 3,532      |       | 47,757             |       | 67 |   | 1,007 |   |
| 2012                         |       | 10,840        |       | 75,951                   |       | 11          | %          | 7,390      |       | 29,285             |       | 3,404      |       | 45,777             |       | 46 |   | 889 |   |
| 2013                         |       | 11,016        |       | 92,592                   |       | 13          | %          | 6,560      |       | 27,610             |       | 4,398      |       | 64,104             |       | 58 |   | 878 |   |
| 2014                         |       | 6,476         |       | 39,609                   |       | 6           | %          | 4,890      |       | 18,226             |       | 1,558      |       | 20,918             |       | 28 |   | 465 |   |
| 2015                         |       | 8,423         |       | 61,996                   |       | 9           | %          | 6,147      |       | 24,452             |       | 2,276      |       | 37,544             |       | — |   | — |   |
| 2016                         |       | 4,170         |       | 28,310                   |       | 4           | %          | 3,000      |       | 10,836             |       | 959        |       | 15,031             |       | 211 |   | 2,443 |   |
| 2017                         |       | 6,518         |       | 45,682                   |       | 6           | %          | 4,572      |       | 18,166             |       | 1,539      |       | 21,995             |       | 407 |   | 5,521 |   |
| 2018 and  Thereafter         |       | 6,949         |       | 60,937                   |       | 8           | %          | 4,349      |       | 21,592             |       | 2,046      |       | 31,664             |       | 554 |   | 7,681 |   |
|                         |       | 102,708       |       | $                        | 718,703    |        | 100        | %          | 72,206     |               | $          | 289,961    |       | 29,019             |       | $ | 408,476 |   | 1,483 |   | $ | 20,266 |   |
|                         |       |          |       |                     |       |        |       |       |       |               |       |       |       |               |       |   |   |   |   |
| Total Portfolio Square  Feet |       | 115,149       |       |                     |       |        |       | 80,779     |       |               |       | 32,757     |       |               |       | 1,613 |   |   |   |
|                         |       |          |       |                     |       |        |       |       |       |               |       |       |       |               |       |   |   |   |   |
| Percent Occupied             |       | 89.2          | %          |                     |       |        |       | 89.4       | %          |               |       | 88.6       | %          |               |       | 91.8 | % |   |   |

 

Note:  Excludes Build for SaleProperties.

 

We renewed 70.6% and 81.6% of our leases up for renewal in the threemonths ended March 31, 2008 and 2007 totaling approximately 2.7 millionand 1.9 million square feet, respectively, on which we attained 7% and 5% growthin net effective rents.

 

The average term of renewals decreased from 3.6 years in the threemonths ended March 31, 2007 to 3.2 years in the three months ended March 31,2008.

 

***Future Development:***Another source of growth in earnings is thedevelopment of additional properties. These properties should provide futureearnings through income upon sale or from Rental Operations income as they areplaced in service. We had 13.6 million square feet of property underdevelopment with total estimated costs upon completion of $1.1 billion at March 31,2008, compared to 9.1 million square feet with total costs of $1.0 billion, at March 31,2007.

 

16

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The following table summarizes our properties under development as of March 31,2008 (in thousands, except percentage data):

 
| ** **                  | ** ** | ** ** | ** ** | ** **  | ** ** | **Total**     | ** ** | ** **          | ** ** |
|-----------------------------|------------|------------|------------|-------------|------------|---------------|------------|---------------------|------------|
| **Anticipated**             | ** ** | ** ** | ** ** | ** **  | ** ** | **Estimated** | ** ** | **Anticipated**     | ** ** |
| **In-Service**              | ** ** | **Square** | ** ** | **Percent** | ** ** | **Project**   | ** ** | **Stabilized**      | ** ** |
| **Date**                    | ** ** | **Feet**   | ** ** | **Leased**  | ** ** | **Costs**     | ** ** | **Return (1)** | ** ** |
| Held for Rental  Buildings: |       |       |       |        |       |          |       |                |       |
| 2nd Quarter 2008            |       | 4,265      |       | 23          | %          | $             | 234,422    |                | 8.65       | % |
| 3rd Quarter 2008            |       | 2,010      |       | 32          | %          | 166,759       |       | 9.10                | %          |
| 4th Quarter 2008            |       | 248        |       | 34          | %          | 48,875        |       | 9.24                | %          |
| Thereafter                  |       | 758        |       | 68          | %          | 164,401       |       | 8.73                | %          |
|                        |       | 7,281      |       | 31          | %          | $             | 614,457    |                | 8.84       | % |
| Build for Sale  Properties: |       |       |       |        |       |          |       |                |       |
| 2nd Quarter 2008            |       | 1,044      |       | 100         | %          | 86,654        |       | 8.30                | %          |
| 3rd Quarter 2008            |       | 1,252      |       | 100         | %          | 78,858        |       | 8.43                | %          |
| 4th Quarter 2008            |       | 2,313      |       | 60          | %          | 87,950        |       | 7.88                | %          |
| Thereafter                  |       | 1,758      |       | 76          | %          | 197,708       |       | 8.37                | %          |
|                        |       | 6,367      |       | 79          | %          | 451,170       |       | 8.27                | %          |
| Total                       |       | 13,648     |       | 53          | %          | $             | 1,065,627  |                | 8.60       | % |

 

----

(1) Anticipated yield upon leasing 95% of the property.

 

***Acquisition and Disposition Activity:*******Gross sales proceeds related to dispositions of wholly owned held forrental properties were $18.6 million for the three months ended March 31,2008. Additionally, our share of proceeds from sales of properties withinunconsolidated joint ventures, in which we have less than a 100% interest,totaled $25.5 million for the three months ended March 31, 2008. For thethree months ended March 31, 2007, proceeds totaled $144.9 million forwholly owned held for rental properties and $5.1 million for our share ofproperty sales from unconsolidated joint ventures. We had no dispositions ofwholly owned properties developed for sale rather than rental for the three monthsended March 31, 2008, but recognized gross proceeds of $25.9 million forsuch dispositions in the same period in 2007. Although the current creditenvironment has affected certain buyers’ ability to finance acquisitions, thetiming of major transactions is the main reason for the decrease in dispositionactivity.

 

For the three months ended March 31,2008, we acquired $27.3 million of income producing properties comprised of twoindustrial real estate properties in Savannah, Georgia. In the first quarter of2007, we continued our expansion into the healthcare real estate market bycompleting the acquisition of Bremner Healthcare Real Estate, a national healthcare development and management firm. The initial consideration paid to thesellers totaled $47.1 million, and the sellers may be eligible for furthercontingent payments over three years following the acquisition date. We alsoacquired $15.4 million of undeveloped land in the three months ended March 31,2008, compared to $34.0 million in the same period in 2007.

 

**Funds From Operations**

 

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

 

17

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Historical cost accounting for real estate assets in accordance withGAAP implicitly assumes that the value of real estate assets diminishespredictably over time. Since real estate values instead have historically risenor fallen with market conditions, many industry analysts and investors haveconsidered presentation of operating results for real estate companies that usehistorical cost accounting to be insufficient by themselves. FFO, as defined byNAREIT, represents GAAP net income (loss), excluding extraordinary items asdefined under GAAP and gains or losses from sales of previously depreciatedreal estate assets, plus certain non-cash items such as real estatedepreciation and amortization, and after similar adjustments for unconsolidatedpartnerships and joint ventures.

 

Management believes that the use of FFO, combined with the requiredprimary GAAP presentations, improves the understanding of operating results ofREITs among the investing public and makes comparisons of REIT operatingresults more meaningful. Management believes FFO is a useful measure forreviewing comparative operating and financial performance (although FFO shouldbe reviewed in conjunction with net income which remains the primary measure ofperformance) because by excluding gains or losses related to sales ofpreviously depreciated real estate assets and excluding real estate assetdepreciation and amortization, FFO provides a useful comparison of theoperating performance of our real estate between periods or as compared todifferent companies.

 

The following table shows a reconciliation of net income available forcommon unitholders to the calculation of FFO for the three months ended March 31,2008 and 2007, respectively (in thousands):

 
| ** **                                                               | ** ** | **2008**   | ** ** | **2007**   | ** ** |
|--------------------------------------------------------------------------|------------|------------|------------|------------|------------|
| Net income  available for common unitholders                             | ** ** | **$**      | **4,309**  | ** ** | $          | 73,473 |   |
| Adjustments:                                                             |       |       | ** ** |       |       |
| Depreciation and  amortization                                           | ** ** | **79,121** | ** ** | 67,739     |       |
| Partnership’s  share of joint venture depreciation and amortization | ** ** | **6,887**  | ** ** | 4,968      |       |
| Earnings from  depreciable property sales – wholly owned            | ** ** | **(1,110** | **)**      | (51,720    | )          |
| Earnings from  depreciable property sales – share of joint venture  | ** ** | **(19**    | **)**      | (1,960     | )          |
| **Funds  From Operations**                                               | ** ** | **$**      | **89,188** | ** ** | $          | 92,500 |   |

 

**Results of Operations**

 

A summary of our operating results and property statistics for thethree months ended March 31, 2008 and 2007, respectively, is as follows(in thousands, except number of properties and per unit data):

 
| ** **                                                       | ** ** | **2008**     | ** **  | **2007** | ** ** |
|------------------------------------------------------------------|------------|--------------|-------------|----------|------------|
| Rental  Operations revenues from Continuing Operations           |       | **$**        | **227,901** |     | $          | 209,796 |   |
| Service  Operations revenues from Continuing Operations          |       | **14,776**   |        | 14,730   |       |
| Earnings from  Continuing Rental Operations                      | ** ** | **22,083**   |        | 24,921   |       |
| Earnings from  Continuing Service Operations                     | ** ** | **4,413**    |        | 6,934    |       |
| Operating income                                                 | ** ** | **14,334**   |        | 18,395   |       |
| Net income  available for common unitholders                     | ** ** | **$**        | **4,309**   |     | $          | 73,473 |   |
| Weighted average  Common Units outstanding                       | ** ** | **154,189**  |        | 146,552  |       |
| Weighted average  Common Units and potential dilutive securities |       | **154,596**  |        | 149,465  |       |
| Basic income per  Common Unit:                                   |       |         |        |     |       |
| Continuing  operations                                           | ** ** | **$**        | **.02**     |     | $          | .13 |   |
| Discontinued  operations                                         | ** ** | **$**        | **.01**     |     | $          | .37 |   |
| Diluted income  per Common Unit:                                 |       |         |        |     |       |
| Continuing  operations                                           | ** ** | **$**        | **.02**     |     | $          | .13 |   |
| Discontinued  operations                                         | ** ** | **$**        | **.01**     |     | $          | .36 |   |
| Number of  in-service properties at end of period                | ** ** | **698**      |        | 691      |       |
| In-service  square footage at end of period                      | ** ** | **115, 149** |        | 108,406  |       |

 

18

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**Comparison of Three Months Ended March 31,2008 to Three Months Ended March 31, 2007**

 

Rental Income From Continuing Operations

 

Overall, rental revenue from continuing operationsincreased from $202.1 million for the three months ended March 31, 2007,to $217.8 million for the same period in 2008. The following table reconcilesrental revenue from continuing operations by reportable segment to our totalreported rental revenue from continuing operations for the three months ended March 31,2008 and 2007, respectively (in thousands):

 
| ** **               | ** ** | **2008**   | ** **  | **2007** | ** ** |
|--------------------------|------------|------------|-------------|----------|------------|
| Rental Revenue:          |       |       |        |     |       |
| Office                   | ** ** | **$**      | **148,245** |     | $          | 143,826 |   |
| Industrial               | ** ** | **61,316** |        | 54,214   |       |
| Non-reportable  segments | ** ** | **8,241**  |        | 4,065    |       |
| Total                    | ** ** | **$**      | **217,802** |     | $          | 202,105 |   |

 

The following factorscontributed to these results:

 

·                  We acquired nine properties and placed 40developments in service from April 1, 2007 to March 31, 2008 thatprovided incremental revenues of $12.6 million in the first quarter of 2008, ascompared to the same period in 2007.

·                  Lease termination fees increased from$3.4 million in the first quarter of 2007 to $7.6 million in the first quarterof 2008.

 

Rental Expensesand Real Estate Taxes

 

The followingtable reconciles rental expenses and real estate taxes by reportable segment toour total reported amounts in the statements of operations for the three monthsended March 31, 2008 and 2007, respectively (in thousands):

 
| ** **               | ** ** | **2008**  | ** ** | **2007** | ** ** |
|--------------------------|------------|-----------|------------|----------|------------|
| Rental Expenses:         |       |      |       |     |       |
| Office                   | ** ** | **$**     | **40,969** |     | $          | 40,488 |   |
| Industrial               | ** ** | **8,186** |       | 7,309    |       |
| Non-reportable  segments | ** ** | **2,872** |       | 1,252    |       |
| Total                    | ** ** | **$**     | **52,027** |     | $          | 49,049 |   |
|                     |       |      |       |     |       |
| Real Estate  Taxes:      |       |      |       |     |       |
| Office                   | ** ** | **$**     | **17,443** |     | $          | 17,237 |   |
| Industrial               | ** ** | **7,738** |       | 6,239    |       |
| Non-reportable  segments | ** ** | **2,363** |       | 1,567    |       |
| Total                    | ** ** | **$**     | **27,544** |     | $          | 25,043 |   |

 

Of the overall $3.0million increase in rental expenses in the first quarter of 2008, compared tothe same period in 2007, $1.5 million was attributable to properties acquiredand developments placed in service from April 1, 2007 to March 31,2008.

 

Of the overall $2.5million increase in real estate taxes in the first quarter of 2008, compared tothe same period in 2007, $1.2 million was attributable to properties acquiredand developments placed in service from April 1, 2007 to March 31,2008.  The remaining increase in realestate taxes was driven by increases in assessments by municipal authorities inour different markets.

 

Interest Expense

 

Interest expenseincreased from $44.4 million in the first quarter of 2007 to $47.5 million inthe first quarter of 2008 primarily due to carrying higher levels of borrowingsunder the Partnership’s unsecured line of credit.  The outstanding balance increased from $330.0million at March 31, 2007 to $631.0 million at March 31, 2008.  This was somewhat offset by a reduction ininterest rates between the two periods.

 

19

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Depreciation andAmortization

 

Depreciation andamortization expense increased from $66.4 million during the three months endedMarch 31, 2007 to $78.7 million for the same period in 2008 primarily due tothe following:

 

·                  We recorded $5.8 million of additional depreciationexpense for a portfolio of properties that no longer meets the criteria forbeing classified as held for sale.

·                  Our held-for-rental asset base increased fromacquisitions and developments during 2007.

·                  We accelerated depreciation for certain assets relatedto terminated leases.

 

Service Operations

 

Service Operationsconsists primarily of sales of properties developed or acquired with the intentto sell within a short period of time and the leasing, management, constructionand development services for joint venture properties and properties owned bythird parties. These operations are heavily influenced by the current state ofthe economy, as leasing and management fees are dependent upon occupancy whileconstruction and development services rely on the expansion of businessoperations of third party property owners. Earnings from Service Operationsdecreased from $6.9 million for the three months ended March 31, 2007 to$4.4 million for the three months ended March 31, 2008, primarily as aresult of gains on the sale of two properties totaling $2.9 million in thethree months ended March 31, 2007 compared to no such sales during thethree months ended March 31, 2008.

 

General and AdministrativeExpense

 

General andadministrative expenses decreased from $13.5 million for the three months endedMarch 31, 2007 to $12.2 million for the same period in 2008. General andadministrative expenses consist of two components. The first component isdirect expenses that are not attributable to specific assets such as legalfees, audit fees, marketing costs, investor relations expenses and othercorporate overhead. The second component is the unallocated indirect costsdetermined to be unrelated to the operation of our owned properties and ServiceOperations. Those indirect costs not allocated to these operations are chargedto general and administrative expenses. While there was an increase in amountof indirect costs allocated to construction and leasing in 2008 compared to2007 due to increases in wholly-owned and third-party activity in these areas,this was partially offset by an increase in the overall pool of overhead costsin 2008 necessitated by our overall growth.

 

DiscontinuedOperations

 

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

 

Theoperations of 34 buildings are currently classified as discontinued operationsfor the three months ended March 31, 2008 and March 31, 2007. These34 buildings consist of 17 industrial and 17 office properties. As a result, weclassified net income (loss) from operations of $(183,000) and $2.2 million indiscontinued operations for the three months ended March 31, 2008 and2007, respectively.

 

Ofthese properties, one was sold during the first quarter of 2008 and 10properties were sold during the first quarter of 2007. The gains on disposal ofthese properties of $1.1 million and $51.7 million for the three months ended March 31,2008 and 2007, respectively, are also reported in discontinued operations.

 

20

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**Liquidity and Capital Resources**

 

Sources of Liquidity

 

We expect to meetour short-term liquidity requirements over the next twelve months, includingpayments of distributions, as well as recurring capital expenditures relatingto maintaining our current real estate assets, primarily through workingcapital and proceeds received from real estate dispositions. Although wehistorically have not used any other sources of funds to pay for recurringcapital expenditures on our current real estate investments, we may rely on thetemporary use of borrowings needed to fund such expenditures during periods ofhigh leasing volume.

We expect to meet long-term liquidity requirements,such as scheduled mortgage and unsecured debt maturities, propertyacquisitions, financing of development activities and other non-recurringcapital improvements, primarily through the following sources:

 

·                  issuance of additional equity, including GeneralPartner common stock and preferred equity;

·                 issuance of additional debt securities;

·                 undistributed cash provided by operating activities;and

·                 proceeds received from real estatedispositions.

 

In recognition of currenteconomic conditions, we are constantly monitoring the state of the capitalmarkets and accordingly managing our capital needs, specifically developmentexpenditures and commitments.  We willcontinue to utilize the Partnership’s $1.3 billion unsecured revolving line ofcredit to provide initial funding of new development expenditures andanticipate using multiple sources of capital including unsecured public debt,secured debt, preferred equity and private equity, as available, to meet our longterm capital needs.

 

### ***Rental Operations***

### ** **

We believe our principal source of liquidity, cashflows 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 a short time following the actual revenuerecognition.

 

We are subject torisks of decreased occupancy through market conditions, as well as tenantdefaults and bankruptcies, and potential reduction in rental rates upon renewalor re-letting of properties, each of which would result in reduced cash flowfrom operations. However, we believe that these risks may be mitigated by ourrelatively strong market presence in most of our markets and the fact that weperform in-house credit reviews and analyses on major tenants and all significantleases before they are executed.

 

*Debt and Equity Securities*

 

We use the Partnership’sline of credit to fund development activities, acquire additional rentalproperties and provide working capital.

 

At March 31,2008, the General Partner and the Partnership had on file with the SEC anautomatic shelf registration statement on Form S-3 relating to the offerand sale, from time to time, of an indeterminate amount of debtsecurities.  From time to time, we andthe General Partner expect to issue additional securities under this automaticshelf registration statement to fund development and acquisition of additionalrental properties and to fund the repayment of the credit facility and otherlong-term debt upon maturity.

 

In May 2008, weissued $325.0 million of 6.25% senior unsecured notes due in May 2013.

 

21

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The indentures (andrelated supplemental indentures) governing our outstanding series of notes alsorequire us to comply with financial ratios and other covenants regarding ouroperations.  We were in compliance withall such covenants as of March 31, 2008.

 

*Saleof Real Estate Assets*

 

We utilize salesof real estate assets as an additional source of liquidity. We pursueopportunities to sell real estate assets at favorable prices to capture valuecreated by us, as well as to improve the overall quality of our portfolio byrecycling sales proceeds into new properties with greater value creationopportunities.

 

We had entered into a preliminary agreementto sell a portfolio of 14 buildings in our Cleveland Office market inmid-2007.  In the first quarter of 2008the agreement was cancelled due to the potential buyer not being able to secure financing onacceptable terms.  It is our strategy tooperate the buildings through our Rental Operations until we are able to sellthe buildings at a favorable price.

 

Uses of Liquidity

 

Our principal uses ofliquidity include the following:

 

·                 property investments;

·                 recurring leasing/capital costs;

·                 distributions to unitholders;

·                 long-term debt maturities; and

·                 other contractual obligations.

 

*PropertyInvestment*

 

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

 

*RecurringExpenditures*

 

One of ourprincipal uses of our liquidity is to fund the recurring leasing/capitalexpenditures of our real estate investments. The following is a summary of ourrecurring capital expenditures for the three months ended March 31, 2008and 2007, respectively (in thousands):

 
| ** **                     | ** ** | **2008**  | ** ** | **2007** | ** ** |
|--------------------------------|------------|-----------|------------|----------|------------|
| Recurring tenant  improvements | ** ** | **$**     | **10,803** |     | $          | 10,333 |   |
| Recurring  leasing costs       | ** ** | **6,098** |       | 7,732    |       |
| Building  improvements         | ** ** | **967**   |       | 974      |       |
| Totals                         | ** ** | **$**     | **17,868** |     | $          | 19,039 |   |

 

*DebtMaturities*

 

Debt outstandingat March 31, 2008 totaled $4.3 billion with a weighted average interestrate of 5.48%, maturing at various dates through 2028. We had $3.1 billion ofunsecured debt, $635.1 million outstanding on our unsecured lines of credit and$506.1 million of secured debt outstanding at March 31, 2008. Scheduledprincipal amortization and maturities of such debt totaled $161.8 million forthe three months ended March 31, 2008.

 

22

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The following is asummary of the scheduled future amortization and maturities of our indebtednessat March 31, 2008 (in thousands, except percentage data):

 

| ** ** | ** ** | **Future Repayments** | ** ** | **Weighted ****Average** | ** ** |
|------------|------------|----------------------------|------------|-------------------------------|------------|
| ** ** | ** ** | **Scheduled**              | ** ** | ** **                    | ** ** | ** ** | ** ** | **Interest Rate of** | ** ** |
| **Year**   | ** ** | **Amortization**           | ** ** | **Maturities**                | ** ** | **Total** | ** ** | **Future Repayments** | ** ** |
|       |       |                       |       |                          |       |   |   |   |   |
| 2008       |       | $                          | 8,610      |                          | $          | 109,940 |   | $ | 118,550 |   | 6.79 | % |
| 2009       |       | 11,099                     |       | 275,000                       |       | 286,099 |   | 7.36 | % |
| 2010       |       | 10,809                     |       | 806,000                       |       | 816,809 |   | 3.78 | % |
| 2011       |       | 10,781                     |       | 1,037,207                     |       | 1,047,988 |   | 5.11 | % |
| 2012       |       | 8,649                      |       | 201,216                       |       | 209,865 |   | 5.89 | % |
| 2013       |       | 8,571                      |       | 150,000                       |       | 158,571 |   | 4.71 | % |
| 2014       |       | 8,661                      |       | 272,112                       |       | 280,773 |   | 6.44 | % |
| 2015       |       | 6,774                      |       | —                        |       | 6,774 |   | 6.05 | % |
| 2016       |       | 5,763                      |       | 490,900                       |       | 496,663 |   | 6.16 | % |
| 2017       |       | 4,517                      |       | 457,761                       |       | 462,278 |   | 5.94 | % |
| 2018       |       | 3,055                      |       | 300,000                       |       | 303,055 |   | 6.16 | % |
| Thereafter |       | 24,714                     |       | 50,000                        |       | 74,714 |   | 6.76 | % |
|       |       | $                          | 112,003    |                          | $          | 4,150,136 |   | $ | 4,262,139 |   | 5.48 | % |

 

Historical CashFlows

 

Cash and cashequivalents were $15.7 million and $9.9 million at March 31, 2008 and2007, respectively. The following highlights significant changes in net cashassociated with our operating, investing and financing activities (inmillions):

 

| ** **                                            | ** ** | **Three Months Ended March 31,** | ** ** |
|-------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                            | ** ** | **2008**                                             | ** ** | **2007** | ** ** |
| Net Cash  Provided by Operating Activities            |       | $                                                    | 4.0        |   | $ | 12.9 |   |
|                                                  |       |                                                 |       |   |   |
| Net Cash  Provided by (Used for) Investing Activities |       | $                                                    | (154.4     | ) | $ | 8.3 |   |
|                                                  |       |                                                 |       |   |   |
| Net Cash  Provided by (Used for) Financing Activities |       | $                                                    | 119.1      |   | $ | (79.5 | ) |

 

*OperatingActivities*

 

Cash flows fromoperating activities provide the cash necessary to meet normal operationalrequirements of our Rental Operations and Service Operations activities. Thereceipt of rental income from Rental Operations continues to provide theprimary source of our revenues and operating cash flows. In addition, wedevelop buildings with the intent to sell them at or soon after completion,which provides another significant source of operating cash flow activity.Highlights of such activity are as follows:

 

·                  During the three-month periodended March 31, 2008, we incurred Build for Sale Property development costs of $41.2 million, compared to$70.5 million for the period ended March 31, 2007. The difference isreflective of the decreased activity in our held-for-sale pipeline. Thepipeline of held-for-sale projects under construction as of March 31,2008, has anticipated costs upon completion of $451.2 million.

·                  We had no sales of Build for Sale Properties in thefirst quarter of 2008, compared to sales of two Build for Sale Properties forthe same period in 2007.  We received netproceeds of $25.4 million and recognized pre-tax gains of $2.9 million on thesales in the first quarter of 2007.

 

23

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*InvestingActivities*

 

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 cashsources and uses are as follows:

 

·                  Development costs increased to $151.9 million for thethree-month period ended March 31, 2008 from $96.6 million for the sameperiod in 2007 as the result of an increase in development activity in 2008.

·                  During the first quarter of 2008, we paid cash of $8.7million for real estate acquisitions and $14.7 million for undeveloped landacquisitions, compared to $36.1 million in real estate acquisitions and $34.7million in acquisitions of undeveloped land in the same period in 2007.

·                  Sales of land and depreciated property provided $26.7million in net cash proceeds for the three- month period ended March 31,2008, compared to $176.7 million for the same period in 2007. The first quarterof 2007 included the sale of an eight building portfolio of office propertiesin the Cleveland market for net proceeds of $139.3 million. We continue todispose of non-strategic and older properties as part of our capital recyclingprogram to fund acquisitions and new development while improving the overallquality of our investment portfolio.

·                  We received financing distributions (as the result ofthe sale of properties or refinancing) of $38.8 million from unconsolidatedcompanies in the three-month period ended March 31, 2008, compared to$53.5 million for the same period in 2007.

 

*FinancingActivities*

 

The followingitems highlight major fluctuation in net cash flow related to financingactivities in the first quarter of 2008 compared to the same period in 2007:

 

·                  In January 2008, we repaid $125.0million of senior unsecured notes with an effective interest rate of 3.36% ontheir scheduled maturity date.

·                  In February 2008, we received netproceeds of $290.0 million from the General Partner’s issuance of its Series OCumulative Redeemable Preferred Shares; the General Partner had no newpreferred equity issuances in the same period in 2007.

·                  We increased net borrowings on thePartnership’s $1.3 billion line of credit by $88.0 million and $13.0 millionfor the three months ended March 31, 2008 and 2007, respectively.

·                  In March 2008, we settled threeforward-starting swaps and made a cash payment of $14.6 million to thecounterparties.

 

*Recent Accounting Pronouncements*

 

In September 2006, the FASB issued Statement ofFinancial Accounting Standard (“SFAS”) No. 157, *Fair Value Measurements* (“SFAS 157”).  SFAS 157 defines fair value, establishes aframework for measuring fair value in accordance with GAAP and expandsdisclosure about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15,2007.  Based on the guidance provided byFASB Staff Position No. 157-2, *EffectiveDate of FASB Statement No. 157*(“FSP No. 157-2”), we haveonly partially implemented the guidance promulgated under SFAS 157 as of January 1,2008. SFAS 157 will not be applied during 2008 to nonfinancial long lived assetgroups that may be measured for an impairment assessment, reporting unitsmeasured at fair value in the first step of the goodwill impairment test, andnonfinancial assets and nonfinancial liabilities initially measured at fairvalue in a business combination. We will fully apply the provisions of SFAS 157beginning January 1, 2009 and do not expect there to be a material impactto the financial statements.

 

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In December 2007,the FASB issued SFAS No. 141R, *BusinessCombinations* (“SFAS 141R”) and SFAS No. 160, *Noncontrolling Interests in Consolidated FinancialStatements**– an amendment to ARB No. 51*(“SFAS 160”). SFAS 141R and SFAS 160 require most identifiable assets,liabilities, noncontrolling interests and goodwill acquired in a businesscombination to be recorded at “full fair value” and require noncontrollinginterests (previously referred to as minority interests) to be reported as acomponent of equity, which changes the accounting for transactions withnoncontrolling interest holders. Both Statements are effective for periodsbeginning on or after December 15, 2008, and earlier adoption isprohibited. SFAS 141R will be applied to business combinations after theeffective date. SFAS 160 will be applied prospectively to all noncontrollinginterests, including any that arose before the effective date. We are currentlyevaluating the impact of adopting SFAS 141R and SFAS 160 on our results ofoperations and financial position.

 

In March 2008,the FASB issued SFAS No. 161, *Disclosuresabout Derivative Instruments and Hedging Activities – an amendment of FASBStatement No. 133* (“SFAS 161”). SFAS 161 requires enhanceddisclosures for derivative instruments and hedging activities, specifically inregard to the purpose of the derivative and how the derivative and hedgingactivities affect an entity’s financial position, financial performance andcash flows. SFAS 161 is effective for fiscal years and interim periodsbeginning after November 15, 2008 and early application is allowed.  We will apply the disclosure requirements ofSFAS 161 beginning in 2009.

 

**Investments in Unconsolidated Companies**

 

We analyze ourinvestments in joint ventures under FASB Interpretation No. 46(R), *Consolidation of Variable Interest Entities*(“FIN 46(R)”)*,*to determine ifthe joint venture is a variable interest entity (a “VIE”, as defined by FIN46(R)) and would require consolidation. To the extent that our joint venturesdo not qualify as VIEs, we further assess under the guidelines of EmergingIssues Task Force (“EITF”) 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”); Statement of Position 78-9, *Accounting for Investments in Real Estate Ventures;*Accounting Research Bulletin No. 51*,**Consolidated Financial Statements*and SFAS No. 94, *Consolidation of AllMajority-Owned Subsidiaries,* to determine if the venture should beconsolidated.

 

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

 

**Item3.  Quantitative and QualitativeDisclosures About Market Risk**

 

Weare exposed to interest rate changes primarily as a result of our line ofcredit and long-term debt used to maintain liquidity and fund capitalexpenditures and expansion of our real estate investment portfolio andoperations. Our interest rate risk management objective is to limit the impactof interest rate changes on earnings and cash flows and to lower our overallborrowing costs. To achieve our objectives, we borrow primarily at fixed ratesand may enter into derivative financial instruments such as interest rateswaps, caps and treasury locks in order to mitigate our interest rate risk on arelated financial instrument. We do not enter into derivative or interest ratetransactions for speculative purposes.

 

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**Item4.  Controls and Procedures**

 

(a)          Evaluation of Disclosure Controls and Procedures

 

We maintaindisclosure controls and procedures that are designed to ensure that informationrequired to be disclosed by us in the reports that we file or submit under theSecurities and Exchange Act of 1934, as amended, is recorded, processed,summarized and reported within the time periods specified in the SEC’s rules andforms. These disclosure controls and procedures are further designed to ensurethat such information is accumulated and communicated to management, includingthe General Partner’s Chief Executive Officer and Principal Financial Officer,to allow timely decisions regarding required disclosure.

 

We carried out anevaluation, under the supervision and with the participation of management,including the General Partner’s Chief Executive Officer and Principal FinancialOfficer, of the effectiveness of the design and operation of our disclosurecontrols and procedures pursuant to Exchange Act Rule 13a-15 and 15d-15.Based upon the foregoing, the General Partner’s Chief Executive Officer andPrincipal Financial Officer concluded that, as of the end of the period coveredby this Report, our disclosure controls and procedures are effective in allmaterial respects.

 

(b) Changesin Internal Control Over Financial Reporting

 

During the threemonths ended March 31, 2008, there have been no changes in our internalcontrol over financial reporting during the period covered by this report thathave materially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting.

 

**Part II - Other Information**

 

**Item 1.  Legal Proceedings**

 

From time to time,we are parties to a variety of legal proceedings and claims arising in theordinary course 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 March 31, 2008, taken as a whole, will nothave a material adverse effect on our liquidity, business financial conditionor results of operations.

 

**Item 1A. Risk Factors**

 

In addition to the other informationset forth in this Report, you should carefully review and consider theinformation contained in our other reports and periodic filings that we makewith the SEC, including, without limitation the information contained under thecaption “Item 1A. Risk Factors” in our Annual Report on Form 10-K for theyear ended December 31, 2007. Those risk factors could materially affectour business, financial condition and results of operations.

 

The risks that we describe in our public filings are not the only risksthat we face.  Additional risks anduncertainties not currently known to us, or that we currently deem to beimmaterial, also may materially adversely affect our business, financialconditions and results of operations.

 

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**Item 2.  Unregistered Sales of Equity Securities andUse of Proceeds**

 

**(a) UnregisteredSales of Equity Securities**

 

None

 

**(b) Useof Proceeds**

 

None

 

**c)Issuer Purchases of Equity Securities**

 

From time to time,the General Partner may repurchase its common shares under a $750 millionrepurchase program that initially was approved by the General Partner’s boardof directors and publicly announced in October 2001 (the “RepurchaseProgram”). In July 2005, the General Partner’s board of directorsauthorized management to purchase up to $750 million of the General Partner’scommon shares pursuant to this plan. Under the Repurchase Program, the GeneralPartner also executes share repurchases on an ongoing basis associated withcertain employee elections under the General Partner’s compensation and benefitprograms.

 

The followingtable shows the General Partner’s share repurchase activity for each of thethree months in the quarter ended March 31, 2008:

 
| ** ** | ** ** | ** **           | ** ** | ** **          |       | **Total  Number of**       |       |
|------------|------------|----------------------|------------|---------------------|------------|----------------------------|------------|
|       |       | ** **           |       | ** **          |       | **Shares  Purchased as**   |       |
| ** ** | ** ** | **Total  Number of** | ** ** | ** **          | ** ** | **Part of  Publicly** | ** ** |
|       |       | **Shares**           |       | **Average  Price**  |       | **Announced  Plans or**    |       |
| **Month**  |       | **Purchased  (1)**   |       | **Paid per  Share** |       | **Programs**               |       |
| ** ** |       |                 |       |                |       | ** **                 |       |
| January    |       | 11,159               |       | $                   | 24.98      |                       | 11,159     |   |
| February   |       | —               |       | $                   | —     |                       | —     |   |
| March      |       | —               |       | $                   | —     |                       | —     |   |
|       |       |                 |       |                |       |                       |       |
| Total      |       | 11,159               |       | $                   | 24.98      |                       | 11,159     |   |

 

----

(1) All11,159 common shares repurchased represent shares of the General Partnerswapped to pay the exercise price of stock options.

 

The number of commonshares of the General Partner that may yet be repurchased in the open market tofund shares purchased under its Employee Stock Purchase Plan, as amended, was81,840 as of March 31, 2008. The approximate dollar value of common sharesof the General Partner that may yet be repurchased under the General Partner’sRepurchase Program was $361.0 million as of March 31, 2008.

 

**Item 3.  Defaults upon Senior Securities**

 

During the periodcovered by this Report, we did not default under the terms of any of ourmaterial indebtedness, nor has there been any material arrearage of dividendsor other material uncured delinquency with respect to any class of ourpreferred equity.

 

**Item 4.  Submission of Matters to a Vote of SecurityHolders**

 

None

 

**Item 5.  Other Information**

 

During the periodcovered by this Report, there was no information required to be disclosed by usin a Current Report on Form 8-K that was not so reported, nor were thereany material changes to the procedures by which our security holders mayrecommend nominees to the General Partner’s board of directors.

 

27

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**Item 6.  Exhibits**

 

**(a)****                                          Exhibits**

 
| 3.1       | Certificate of Limited  Partnership of Duke Realty Limited Partnership, dated September 17, 1993  (filed as Exhibit 3.1 to the Partnership’s Annual Report on  Form 10-K for the fiscal year ended December 31, 2006, as filed  with the SEC on March 13, 2007, File No. 000-20625, and  incorporated herein by this reference).         |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|      |                                                                                                                                                                                                                                                                                                                                                                        |
| 3.2(i)    | Second Amended and  Restated Agreement of Limited Partnership of the Partnership (filed as  Exhibit 4.1 to the Partnership’s Current Report on Form 8-K, as  filed with the SEC on July 16, 1999, File No. 000-20625, and  incorporated herein by this reference).                                                                                 |
|      |                                                                                                                                                                                                                                                                                                                                                                        |
| 3.2(ii)   | Second Amendment to the  Second Amended and Restated Agreement of Limited Partnership of the  Partnership (filed as Exhibit 10.3 to the General Partner’s Annual  Report on Form 10-K for the fiscal year ended December 31, 2001, as  filed with the SEC on March 15, 2002, File No. 001-09044, and  incorporated herein by this reference). |
|      |                                                                                                                                                                                                                                                                                                                                                                        |
| 3.2(iii)  | Third Amendment to the  Second Amended and Restated Agreement of Limited Partnership of the  Partnership (filed as Exhibit 10.4 to the General Partner’s Annual  Report on Form 10-K for the fiscal year ended December 31, 2001, as  filed with the SEC on March 15, 2002, File No. 001-09044, and  incorporated herein by this reference).  |
|      |                                                                                                                                                                                                                                                                                                                                                                        |
| 3.2(iv)   | Fourth Amendment to the  Second Amended and Restated Agreement of Limited Partnership of the  Partnership (filed as Exhibit 10.5 to the General Partner’s Annual  Report on Form 10-K for the fiscal year ended December 31, 2001, as  filed with the SEC on March 15, 2002, File No. 001-09044, and  incorporated herein by this reference). |
|      |                                                                                                                                                                                                                                                                                                                                                                        |
| 3.2(v)    | Fifth Amendment to the  Second Amended and Restated Agreement of Limited Partnership of the  Partnership (filed as Exhibit 10.6 to the General Partner’s Annual  Report on Form 10-K for the fiscal year ended December 31, 2005, as  filed with the SEC on March 7, 2006, File No. 001-09044, and  incorporated herein by this reference).   |
|      |                                                                                                                                                                                                                                                                                                                                                                        |
| 3.2(vi)   | Sixth Amendment to the  Second Amended and Restated Agreement of Limited Partnership of the  Partnership (filed as Exhibit 10.7 to the General Partner’s Annual  Report on Form 10-K for the fiscal year ended December 31, 2005, as  filed with the SEC on March 7, 2006, File No. 001-09044, and  incorporated herein by this reference).   |
|      |                                                                                                                                                                                                                                                                                                                                                                        |
| 3.2(vii)  | Seventh Amendment to  the Second Amended and Restated Agreement of Limited Partnership of the  Partnership (filed as Exhibit 10.8 to the General Partner’s Annual  Report on Form 10-K for the fiscal year ended December 31, 2005, as  filed with the SEC on March 7, 2006, File No. 001-09044, and  incorporated herein by this reference). |
|      |                                                                                                                                                                                                                                                                                                                                                                        |
| 3.2(viii) | Eighth Amendment to the  Second Amended and Restated Agreement of Limited Partnership of the  Partnership (filed as Exhibit 3.1 to the Partnership’s Current Report on  Form 8-K, as filed with the SEC on February 6, 2006, File  No. 000-20625, and incorporated herein by this reference).                                                      |

 

28

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| 3.2(ix)  | Ninth Amendment to the  Second Amended and Restated Agreement of Limited Partnership of the  Partnership (filed as Exhibit 3.1 to the Partnership’s Current Report on  Form 8-K, as filed with the SEC on July 5, 2006, and incorporated  herein by this reference).                                                                                                                                                                                                                                                                                                                                                                                                                            |
|----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 3.2(x)   | Tenth Amendment to the Second Amended and Restated  Agreement of Limited Partnership of Duke Realty Limited Partnership, dated  April 30, 2007, deleting those exhibits setting forth the rights of the  Partnership’s previously issued Series A Preferred Units, Series D  Preferred Units, Series E Preferred Units, Series F Preferred  Units, Series H Preferred Units and Series I Preferred Units,  (filed as Exhibit 3.2(x) to the Partnership’s Quarterly Report on  Form 10-Q for the quarter ended June 30, 2007, as filed with the  SEC on August 13, 2007, File No. 000-20625, and incorporated herein  by this reference). |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 3.2(xi)  | Eleventh Amendment to the Second Amended and  Restated Agreement of Limited Partnership of Duke Realty Limited Partnership,  dated April 30, 2007, deleting those exhibits setting forth the rights  of the Partnership’s previously issued Series B Preferred Units (filed  as Exhibit 3.2(xi) to the Partnership’s Annual Report on Form 10-K for the  year ended December 31, 2007, as filed with the SEC on March 6, 2008, File  No. 000-20625, and incorporated herein by this reference).                                                                                                                                                                                                 |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 3.2(xii) | Twelfth Amendment to the Second Amended and Restated  Agreement of Limited Partnership of Duke Realty Limited Partnership,  establishing the amount, terms and rights of Duke Realty Limited  Partnership’s 8.375% Series O Cumulative Redeemable Preferred Units  (filed as Exhibit 3.1 to the Partnership’s Current Report on  Form 8-K, as filed with the SEC on February 27, 2008, and  incorporated herein by this reference).                                                                                                                                                                                                                                                   |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 4.1      | Fourth Supplemental Indenture, dated as of  May 8, 2008, by and between the Partnership and The Bank of New York  Trust Company, N.A. (as successor to J.P. Morgan Trust Company, National  Association), including the form of global note evidencing the 6.25% Senior  Notes due 2013 (filed as Exhibit 4.1 to the Partnership’s Current Report on  Form 8-K dated May 5, 2008, as filed with the SEC on May 8, 2008, File No.  000-20625, and incorporated herein by this reference).                                                                                                                                                                                                                  |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.1     | Form of Letter  Agreement Regarding Executive Severance, between the General Partner and  Samuel J. O’Briant and Kevin O. Rogus (filed as Exhibit 10.1 to the  Company’s Current Report on Form 8-K, as filed with the SEC on  December 19, 2005, and incorporated herein by this reference).                                                                                                                                                                                                                                                                                                                                                                                         |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 11.1     | Statement Regarding Computation  of Earnings. **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 12.1     | Ratio of Earnings to Combined  Fixed Charges and Preferred Stock Distributions.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 12.2     | Ratio of Earnings to  Debt Service.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 31.1     | Rule 13a-14(a) Certification  of the General Partner’s Principal Executive Officer and Principal Financial  Officer.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 32.1     | Section 1350 Certification  of the General Partner’s Principal Executive Officer and Principal Financial  Officer.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

 

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* Filed herewith.

 

** Data requiredby Statement of Financial Accounting Standard No. 128, *Earnings per Share*, is provided in Note 6to the consolidated financial statements included in this report.

 

29

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**SIGNATURES**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 
|                                | DUKE REALTY LIMITED  PARTNERSHIP                                                        |
|-------------------------------------|-----------------------------------------------------------------------------------------|
|                                |                                                                                    |
|                                |                                                                                    |
| Date:  May 15,  2008 |    /s/          Dennis D.  Oklak |
|                                | Dennis D. Oklak                                                                         |
|                                | Chairman and Chief  Executive Officer                                                   |
|                                | (Principal Executive  Officer and  Principal Financial Officer) of the                  |
|                                | General Partner                                                                         |
|                                |                                                                                    |
|                                |    /s/          Mark Denien      |
|                                | Mark Denien                                                                             |
|                                | Senior Vice President,  Corporate  Controller                                           |
|                                | (Principal Accounting  Officer) of the                                                  |
|                                | General Partner                                                                         |
|                                     |                                                                                         |  |

 

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